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Confidential Treatment
EXHIBIT 10.5
AMENDED AND RESTATED
FACILITY OPERATIONS AND MAINTENANCE AGREEMENT
BETWEEN
SOUTHERN ELECTRIC INTERNATIONAL, INC.
AND
BIRCHWOOD POWER PARTNERS, L.P.
DATED AS OF MAY 18, 1994
CONTRACT NO. 6709-P-07
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TERM OF AGREEMENT . . . . . . . . . . . . . . 5
2.1 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Extension of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 5
3.1 Owner Representations and Warranties . . . . . . . . . . . . . . . . . . . 5
3.2 Operator Representations and Warranties . . . . . . . . . . . . . . . . . . 6
ARTICLE IV
COVENANTS OF OPERATOR . . . . . . . . . . . . . 7
4.1 Operator's Responsibilities Prior to Commercial
Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Operator's Responsibilities After Commercial
Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 No Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Curtailment of Facility Operations . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V
RESPONSIBILITIES OF OWNER . . . . . . . . . . . . 11
5.1 Items to be Furnished by Owner . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Owner's Representative . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI
EXPENSES AND PAYMENTS . . . . . . . . . . . . . 12
6.1 Operator's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Annual Operating Plan and Budget . . . . . . . . . . . . . . . . . . . . . 12
6.3 Payment of Operator's Expense . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 Operator's Annual Guarantees . . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Payment and Interest on Payment Delays; Disputes
Concerning Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.7 Subordination of Base Operations Fee and Net
Bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VII
LIMITATIONS ON OPERATOR'S LIABILITY . . . . . . . . . . 18
7.1 Correction of Non-Conforming Services . . . . . . . . . . . . . . . . . . . 18
7.2 Total Limitation of Operator's Liability . . . . . . . . . . . . . . . . . 18
7.3 Exclusion of Certain Damages . . . . . . . . . . . . . . . . . . . . . . . 18
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7.4 Equipment............................................... 18
7.5 Disclaimer of Warranty.................................. 19
ARTICLE VIII
TERMINATION, DEFAULTS AND REMEDIES........... 19
8.1 Termination by Either Party............................. 19
8.2 Termination by Owner for Cause.......................... 19
8.3 Additional Right of Owner to Remove Operator............ 20
8.4 Termination by Operator for Cause....................... 20
8.5 Additional Right of Operator to Resign.................. 21
ARTICLE IX
INDEMNIFICATION..................... 22
9.1 Indemnification by Operator............................. 22
9.2 Indemnification by Owner................................ 22
9.3 Survival................................................ 22
9.4 Notice and Legal Defense................................ 22
9.5 Failure to Defend Action................................ 23
ARTICLE X
INSURANCE........................ 23
10.1 Obligation to Obtain.................................... 23
10.2 Coverage Which Must Be Purchased by the Operator........ 23
10.3 Coverage Which Must Be Purchased by the Owner........... 24
10.4 Form and Content........................................ 26
10.5 Certificates, Proof of Loss............................. 26
10.6 No Limitation on Liability.............................. 27
ARTICLE XI
THIRD PARTIES...................... 27
11.1 Engagement of Third Parties............................. 27
11.2 Assignment of Rights or Obligations..................... 27
ARTICLE XII
DISPUTES........................ 27
12.1 Good Faith Resolution................................... 27
12.2 Arbitration Notice...................................... 28
12.3 Selection of Arbitrators................................ 28
12.4 Procedure............................................... 28
12.5 Binding Nature.......................................... 28
12.6 Enforceability.......................................... 28
ARTICLE XIII
GENERAL PROVISIONS................... 29
13.1 Capital Improvements.................................... 29
13.2 Notices................................................. 29
13.3 Governing Law........................................... 29
13.4 Counterparts............................................ 29
13.5 Successors and Assigns.................................. 29
13.6 Waiver.................................................. 29
13.7 Not for the Benefit of Third Parties.................... 29
13.8 Attorneys' Fees......................................... 30
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13.9 Confidentiality........................................ 30
13.10 Force Majeure.......................................... 30
13.11 Publicity Releases..................................... 31
13.12 Severability........................................... 31
13.13 Owner's and Operator's Obligations Non-recourse........ 32
13.14 Interpretation......................................... 32
13.15 Relationship of the Parties............................ 32
SCHEDULES
A - Project Agreements
B - Outline of Operating Plan and Budget
C - Operator's Services Prior to Commercial Operation
D - Operator's Services After Commercial Operation
E - Annual Guarantees
F - Reporting Requirements
G - Fee, Rebate & Bonus Schedule
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AMENDED AND RESTATED
FACILITY OPERATIONS AND MAINTENANCE AGREEMENT
This AMENDED AND RESTATED FACILITY OPERATIONS AND MAINTENANCE AGREEMENT
("Agreement"), dated as of May 18, 1994, between Southern Electric
International, Inc., a Delaware corporation, with its principal business address
in Atlanta, Georgia ("Operator"), and Birchwood Power Partners, L.P., a Delaware
limited partnership with its principal business address in Atlanta, Georgia
("Owner").
WHEREAS, Owner and Operator have heretofore entered into a Facility
Operations and Maintenance Agreement, dated as of November 12, 1993, pursuant to
which Operator has agreed to operate and maintain the SEI Birchwood Power
Facility ("Facility"), located in King George County, Virginia, on behalf of the
Owner; and
WHEREAS, Owner and Operator now wish to amend and restate the terms of
the Facility Operations and Maintenance Agreement.
NOW, THEREFORE, in consideration of the premises and their mutual
covenants set forth in this Agreement, Owner and Operator agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to other terms defined elsewhere in this
Agreement, the following terms shall have the meanings set forth below:
"Affiliate" means any person or entity which, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, a Party.
"Agreement" means this Agreement and the Schedules attached hereto, as
amended or supplemented in writing from time to time.
"Annual Guarantees" means the Operations performance guarantees set
forth in Section 6.4 and Schedule E.
"Anticipated Commercial Operations Date" means November 29, 1996, or
such earlier or later date as the Owner, upon giving reasonable advance notice,
shall designate as the date upon which Operator is to commence start-up and
mobilization services to the Facility.
"Applicable Permits" means all permits, licenses, consents and
permissions, including any renewals, extensions or amendments
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thereto, applicable to the ownership, operation or maintenance of the Facility.
"Base Operations Fee," "Bonus," and "Rebate" shall mean the payments
and rebates payable in accordance with Schedule G hereto.
"Capital Improvement" means the installation of new equipment or
upgrading of equipment or facilities not included in the Operating Plan and
Budget as part of Routine Maintenance and not performed as the result of Major
Maintenance or Force Majeure.
"Commercial Operations Date" shall have the meaning given in Section
1.5 of the Power Purchase Agreement.
"Contract Year" means the twelve (12) month calendar year beginning
January 1 and ending December 31, except that, for purposes of this Agreement,
the first Contract Year shall commence eighteen (18) months prior to the
Anticipated Commercial Operations Date, and end on the following December 31 and
the final Contract Year shall commence on January 1 and end on the twenty-fifth
(25th) anniversary of the Commercial Operations Date.
"Contractor" means the party with whom Owner has executed the Turnkey
Contract.
"Facility" means the facility designed and constructed by Contractor,
and accepted by Owner, in accordance with the Turnkey Contract.
"Financing Agreements" shall mean the loan agreement or agreements and
related documents pursuant to which Owner borrows funds for the construction and
permanent financing of the Facility, and any refinancing thereof.
"Force Majeure" means any circumstances beyond the reasonable control
of a Party experiencing delay in the performance of, or inability to perform,
its obligations hereunder by reason of the occurrence thereof, if such
circumstances are not the fault of such Party, including, but not limited to,
acts of God; unusually severe weather conditions; accident; fire; strikes or
other labor unrest; war; riots; requirements, actions or failures to act on the
part of Governmental Authorities preventing performance; inability despite due
diligence to obtain or renew Applicable Permits; change of law; or failure or
faulty design of major equipment which could not reasonably be detected through
standard quality assurance/quality control procedures; provided that, as to
Operator, Force Majeure shall not include any strike or other
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labor unrest involving Operator's or any Subcontractor's employees at the
Facility site.
"Governmental Authority" shall mean any local, state, regional or
federal administrative, legal, judicial, or executive agency, court, commission,
department or other entity, but excluding any agency, commission, department or
other such entity acting in its capacity as lender, guarantor or mortgages.
"Imprest Account" means the deposit account established by owner in
accordance with Section 6.3 hereof.
"Lender" means any entity or entities providing construction or
permanent debt financing for the Facility, or providing credit support or credit
enhancement for such construction or permanent debt financing.
"Major Maintenance" means the performance of periodic scheduled or
unscheduled maintenance of capital equipment included in the Facility required
by either of the following:
(a) Warranty service or maintenance procedures dictated by Prudent
Utility Practices or recommended by the Vendor or manufacturer
in maintenance manuals, as needed to restore or maintain the
"Demonstrated Dependable Capacity," as defined in Schedule E;
or
(b) An outage of systems or equipment has occurred or repair or
replacement of an item of capital equipment is required as a
result of Force Majeure or otherwise.
"Mobilization Date" shall mean the date, which is anticipated to occur
eighteen (18) months prior to the Anticipated Commercial Operations Date, on
which Operator shall commence implementation of the Start-Up and Mobilization
Plan in accordance with Section 4.1(f) hereof.
"Operating Plan and Budget" means the annual plan prepared by Operator
in accordance with Section 6.2(a), which shall indicate periods when the
Facility is expected to be generating electricity and periods when the Facility
is expected to be shut down for maintenance or modifications, the estimated
expenses for the Facility during each Contract Year, including an annual expense
budget, and Operator's forecast of Major Maintenance activities and the
associated costs thereof for the upcoming five Contract Year period, which plan
and budget shall contain the information required by Schedule B attached hereto.
"Power Purchase Agreement" means the Power Purchase and Operating
Agreement between SEI Birchwood, Inc. and Virginia Electric and Power Company,
effective July 13, 1990, as amended
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from time to time, which has been or will be assigned to the owner by SEI
Birchwood, Inc.
"Party" means the Operator or the Owner.
"Project Agreements" means the agreements listed in Schedule A, as
each such agreement may be amended or modified from time to time.
"Prudent Utility Practices" means the practices, methods, materials,
supplies and equipment, as changed from time to time, that are commonly used in
the electric power production industry to operate and maintain power plant
equipment or any practices, methods and acts which, in the exercise of
reasonable judgment, could have been expected to accomplish the desired result
at the lowest reasonable cost consistent with good business practices,
reliability, safety and expedition; provided that Prudent Utility Practices is
not intended to be limited to optimum practices, methods or acts to the
exclusion of all others, but rather to be a range of possible practices, methods
or acts taken or engaged in by entities that operate and maintain power plants
in the electric power production industry. Whether any particular practice,
method or act complies with Prudent Utility Practices is to be judged in light
of the facts known at the time that the particular practice, method or act was
taken or engaged in.
"Reimbursable Expenses" shall have the meaning given in Section 6.3(a)
hereof.
"Release Date" means the date on which Owner, or its designee, notifies
Operator that Contractor is nearing completion of the Facility and is ready to
commence training of Operator's personnel or otherwise requests the
participation of Operator's operations and maintenance personnel, such date to
occur at least one hundred eighty (180) days prior to the date on which
Operator's personnel are required to be made available to Owner.
"Routine Maintenance" means all of the operations and maintenance
activities required to be performed by Operator hereunder which are typically
performed on an annual basis or more frequently, but excluding any activities
that constitute Major Maintenance.
"Start-Up and Mobilization Plan" means the plan and budget agreed to by
the Parties for the period from the Mobilization Date to the Commercial
Operation Date, which shall include the staffing schedule and mobilization
budget set forth in Attachment 1 to Schedule C as it may be revised from time
to time.
"Subcontractor(s)" means those persons or companies who have a contract
with Operator for the performance of any part of the
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operations and maintenance services to be performed by Operator hereunder.
"Term" means the initial term of this Agreement as specified in Section
2.1, plus any extended term determined pursuant to Section 2.2.
"Turnkey Contract" means the Engineering, Procurement and Construction
Agreement between Owner and the Contractor.
"Vendor(s)" means those persons or companies who supply materials or
equipment to Operator or any Subcontractor for the Facility.
"Virginia Power" means Virginia Electric and Power Co.
ARTICLE II
TERM OF AGREEMENT
2.1 Initial Term. This Agreement shall be effective from the date set
forth above and, unless earlier terminated in accordance with the terms of
Article VIII, shall continue for a period of twenty-five (25) years from the
Commercial Operations Date, subject to extension in accordance with this Article
II.
2.2 Extension of Term. If the Power Purchase Agreement is extended in
accordance with Article 5 thereof, the Parties will endeavor to extend this
Agreement, with mutually satisfactory terms and conditions, for a period equal
to the Power Purchase Agreement extension period, provided that any such
extension and the terms and conditions thereof are agreed to by the Parties no
later than one (1) year prior to the expiration of the initial Term of this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Owner Representations and Warranties. Owner hereby represents and
warrants to Operator as follows:
(a) Organization and Existence. Owner is a limited partnership,
duly organized, validly existing and in good standing under the laws
of the State of Delaware and has sufficient partnership power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder and to carry on its business as it is now being
conducted and as it is contemplated hereunder to be conducted in
the future.
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(b) Due Authorization. The execution, delivery and
performance of this Agreement by Owner has been duly and effectively
authorized by all requisite partnership action. This Agreement has been
duly and effectively executed and delivered by Owner and constitutes
the legal, valid and binding obligation of Owner, enforceable against
Owner in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the rights of creditors generally and by general principles
of equity.
(c) Litigation. There is no action, suit, claim, proceeding
or investigation pending or, to Owner's knowledge, threatened against
Owner by or before any Governmental Authority having jurisdiction over
owner or its properties which, if adversely determined, would have a
material adverse effect upon Owner's ability to enter into and perform
its obligations and consummate the transactions contemplated by this
Agreement. Owner is not subject to any outstanding judgment, order,
writ, injunction or decree of any Governmental Authority having
jurisdiction over owner or its properties which would materially and
adversely affect its ability to enter into and perform its obligations
under this Agreement.
(d) No Material Violation, No Material Impairment. There is
no provision of Owner's limited partnership agreement or certificate of
limited partnership, nor any existing statute, law, regulation, nor any
note, bond, resolution, indenture, agreement or instrument to which
Owner is a party and which is enforceable against Owner which would be
violated by or which would impair Owner's entry into this Agreement or
the performance by Owner of its obligations hereunder in accordance
with the terms hereof or the consummation of the transactions
contemplated hereby in accordance with the terms hereof.
(e) Approvals. All approvals and consents, including,
without limitation, all approvals and consents of Governmental
Authorities necessary for Owner to enter into this Agreement, to
perform its obligation hereunder and to consummate the transactions
contemplated hereby have been received and are in full force and
effect.
3.2 Operator Representations and Warranties. Operator hereby
represents and warrants to Owner as follows:
(a) Organization and Existence. Operator is a
corporation, duly organized, validly existing and in good standing
under the laws of the State of Delaware and has sufficient corporate
power and authority to execute and deliver this Agreement and to
perform its obligations
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hereunder and to carry on its business as it is now being
conducted and as it is contemplated hereunder to be conducted
in the future.
(b) Due Authorization. The execution, delivery and
performance of this Agreement by Operator has been duly and
effectively authorized by all requisite corporate action. This
Agreement has been duly and effectively executed and delivered
by Operator and constitutes the legal, valid and binding
obligation of Operator, enforceable against Operator in
accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the rights or creditors generally and by general
principles of equity.
(c) Litigation. There is no action, suit, claim,
proceeding or investigation pending or, to Operator's
knowledge, threatened against Operator by or before any
Governmental Authority having jurisdiction over Operator or its
properties which, if adversely determined, would have a
material adverse effect upon Operator's ability to enter into
and perform its obligations under this Agreement. Operator is
not subject to any outstanding judgment, order, writ,
injunction or decree of any Governmental Authority having
jurisdiction over Operator or its properties which would
materially and adversely affect its ability to enter into and
perform its obligations under this Agreement.
(d) No Material Violation, No Material Impairment.
There is no provision of Operator's charter or bylaws, nor any
existing statute, law, regulation, nor any material note, bond,
resolution, indenture, agreement or instrument to which
Operator is a party and which is enforceable against Operator
which would be violated by or which would impair Operator's
entry into this Agreement or the performance by Operator of its
obligations hereunder in accordance with the terms hereof.
(e) Approval. All approvals and consents,
including, without limitation, all approvals and consents of
Governmental Authorities, necessary for Operator to enter into
this Agreement, and to perform its obligations hereunder have
been received and are in full force and effect.
ARTICLE IV
COVENANTS OF OPERATOR
4.1 Operator's Responsibilities Prior to Commercial
Operation. Prior to the Commercial Operations Date, Operator
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shall perform the services set forth in this Section 4.1 and the additional
services set forth in Schedule C.
(a) Review of Facility Design. Operator shall review and comment
on the Facility design regarding matters of operability and maintainability.
This review shall not constitute any acceptance of liability or the creation of
any warranty on the part of Operator with respect to the engineering, design or
construction of the Facility. Operator's design review will begin immediately
following execution of this Agreement and will continue until the final design
and construction for the Facility are completed. To conduct the review, Operator
shall have access to all plans, specifications, drawings of machinery and
equipment layout. Owner shall advise Operator of any design or specification
change within fifteen (15) days of the change.
(b) Appointment of Facility Manager. Operator shall designate a
Facility manager approximately eighteen (18) months prior to the Anticipated
Commercial Operations Date. The Facility manager shall supervise the performance
of Operator's duties and have authorization to act on behalf of Operator.
Operator may replace the Facility manager from time to time with the consent of
the Owner (which shall not be unreasonably withheld). Operator shall replace the
Facility manager for cause upon Owner's request specifying the reason for such
replacement.
(c) Personnel. Operator shall provide the services of operations
and maintenance personnel listed in Attachment 1 to Schedule C, in accordance
with the schedule set forth in Schedule C. Such personnel will participate in
training (if any) provided by the Contractor pursuant on the Turnkey Contract,
and, if requested by the Contractor, will support start-up activities and
testing of the Facility under the Contractor's control and supervision.
Operator shall have no liability or responsibility for acts or omissions of
operations and maintenance personnel acting under Contractor's control and
supervision.
(d) Operation of Equipment and Systems. After Owner and Contractor,
with Operator's concurrence, have determined that equipment and systems are
complete and safe to operate, Operator shall operate and maintain each system
within the Facility on behalf of the Owner.
(e) Operating Manual. No later than one hundred eighty (180) days
after receiving operating manuals prepared by Contractor, Operator will submit
for Owner's approval an operating manual containing procedures and schedules to
be followed in providing operations and maintenance services hereunder.
(f) Mobilization Period. Upon the Mobilization Date, Operator shall
implement the Start-Up and Mobilization Plan, with
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such changes or modifications as Owner shall have approved. During this period,
Operator shall interface and provide operating support to the Contractor,
including without limitation start-up support. Operator shall provide personnel
to participate in the initial training from the Contractor within one hundred
eighty (180) days of the Release Date in accordance with the staffing schedule
set forth on Attachment 1 to Schedule C hereto.
(g) Permits: Licenses, Etc. Operator shall assist owner in
obtaining all Applicable Permits, in each case on or before the dates on which
such Applicable Permits are required to be obtained, and thereafter shall use
its best efforts to maintain all such Applicable Permits in full force and
effect.
4.2 Operator's Responsibilities After Commercial Operation. On
and after the Commercial Operations Date, Operator shall provide the services in
this Section 4.2 and the additional services set forth in Schedule D.
(a) Operation and Maintenance Services. Operator shall
provide operation and maintenance services in connection with the Facility as
follows:
(i) Operator shall operate the Facility in accordance with
Prudent Utility Practices, manufacturers' specifications and
warranties (to the extent consistent with Prudent Utility
Practices), the current operating manual prepared by operator
and approved by Owner, and Applicable Permits, and shall use
its best efforts to comply with all applicable laws, rules and
regulations and the Project Agreements;
(ii) Operator shall provide the services of the operations
and maintenance personnel listed in Attachment 1 to Schedule B;
(iii) Operator shall perform Routine Maintenance;
(iv) Operator shall procure in accordance with the
Operating Plan and Budget and for the account of Owner
services, materials, equipment, chemicals and supplies
necessary or appropriate for the operation and maintenance of
the Facility. Operator shall obtain from all Vendors such
indemnities, warranties and guarantees as are commercially
available on reasonable terms;
(v) Operator shall assist Owner in Owner's efforts to
cause compliance with applicable federal, state and local laws,
rules and regulations and all Applicable Permits; and
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(vi) Operator shall administer all Project Agreements (to
the extent associated with the operations and maintenance of
the Facility), and contracts for Major Maintenance and Capital
Improvements.
(b) Generation. Operator shall attempt to maximize the
Facility's generation of electrical energy and shall provide maintenance in a
cost effective manner to prevent deterioration of the Facility, normal wear and
tear excepted. Such efforts shall necessarily be limited by the operating life,
capacity and maintenance life of the Facility, by Prudent Utility Practices, by
the reasonableness of the cost of an activity compared to the expected benefit
of such activity, by the requirements of this Agreement, the Project Agreements,
all applicable laws, rules and regulations and by Applicable Permits.
(c) Reports. Operator shall prepare and maintain the
records and reports specified in Schedule F. Owner shall have the right, during
normal business hours and with twenty-four (24) hours notice, to inspect
Operator's books and records relating to the Facility, and to cause an audit
thereof at its own expense. Copies of all records and reports shall be retained
by Operator for at least five (5) years after preparation.
(d) Meetings with Owner and Lender. Operator will meet
and consult with Owner and Lender or their respective representatives regarding
the operations and maintenance of the Facility, as reasonably requested by
Owner or Lender. Owner or Owner's representative shall have the right to be
present at any meeting with Operator that may be requested by Lender.
(e) Waste Handling. Operator, as Owner's agent, shall
arrange for the handling and proper preparation for disposal of all wastes
produced by the Facility, including all hazardous wastes produced by the
Facility, provided that Owner or Owner's representative shall be responsible for
selection of the site for disposal of all hazardous wastes produced by the
Facility and shall sign all required manifests and shipping forms as the
generator of such wastes.
(f) Sale of Used Equipment. Operator shall, as agent for
Owner, undertake to sell equipment that is no longer used or useful in the
operations of the Facility and for which a replacement has been obtained. The
terms of any such sale shall be subject to Owner's prior approval.
4.3 No Obligations. Operator shall not be responsible for any
obligations of Owner, including, without limitation, obligations to make any
payments pursuant to or otherwise comply with any Project Agreement or any other
agreement to which owner is or may be a party, nor shall Operator have any
obligations with respect to the decommissioning or costs of decommissioning
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of the Facility, including remediation of the Facility site and dismantling and
disposal of equipment.
4.4 Curtailment of Facility Operations.
(a) Operator, through its Facility manager or otherwise,
shall have the right to curtail or to shut down the Facility if such curtailment
or shut down is necessary in order to fulfill its obligations under this
Agreement, to protect the Facility from any potential material damage or in
order to comply with Prudent Utility Practices, Applicable Permits, or
applicable laws, provided however, that Operator shall not be relieved of its
obligations to Owner if the necessity for curtailing or shutting down the
Facility in order to comply with the foregoing is the result of Operator's
action or inaction.
(b) The Parties agree that if Virginia Power reasonably
determines and notifies operator that a condition exists which may have a
material adverse physical impact on the electric system or the equipment of
Virginia Power's customers and which, in Virginia Power's sole judgment,
requires a change in electricity deliveries by Operator, then Operator shall
immediately suspend or reduce electricity deliveries as requested by Virginia
Power upon oral notice or written notice, as appropriate, to the extent required
to eliminate such adverse impact, whether or not Owner has also received a copy
of such notice.
(c) The Parties agree that if Virginia Power requests
Owner to delay construction and/or commencement of commercial operations of the
Facility, Owner may, by giving written notice to Operator, delay or suspend
Operator's performance under this Agreement.
ARTICLE V
RESPONSIBILITIES OF OWNER
5.1 Items to be Furnished by Owner. Owner shall furnish to
Operator, at Owner's expense, the information, services, materials and other
items described below in this Section 5.1. All such items shall be made
available at such times and in such manner as may be required for the
expeditious and orderly performance of the services by Operator.
(a) Project Agreements. Owner shall deliver to Operator
full and complete copies of the Project Agreements and shall promptly provide
all amendments, modifications or revisions of any such agreements.
(b) Permits and Licenses. Owner shall, with Operator's
assistance, as provided in Section 4.1(g), obtain and
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maintain all Applicable Permits (including renewals or updates thereof) and
shall deliver to Operator copies of all Applicable Permits together with all
renewals or amendments thereof.
(c) Fuel, Utilities, Other Services, etc. Owner shall
provide, at its expense, all fuel necessary for the operation of the Facility,
all necessary utilities, including standby electric power and water, and provide
for disposal of fly ash, bottom ash and hazardous materials produced by or
purchased for the operations and maintenance of the Facility.
(d) Contractor's Operating Manual. Owner shall deliver or
cause Contractor to deliver to Operator operating manuals containing equipment
descriptions and equipment operations and maintenance instructions for all
equipment necessary to operate the Facility.
5.2 Access. Owner shall provide Operator and its agents, employees,
Subcontractors and Vendors full access to, and rights of access to and use of,
the Facility.
5.3 Owner's Representative. On or before the Release Date, Owner
shall appoint a representative who shall be authorized to act on behalf of
Owner, with whom Operator may consult, and whose instructions, requests and
decisions will be binding on Owner as to all matters pertaining to this
Agreement. All communications, requirements and instructions given to the
Owner's representative shall have the same effect as if given to Owner. In no
case will the decisions of Owner's representative be binding on Operator where,
in the opinion of Operator, any such decision could cause injury or damage to
personnel or equipment.
5.4 Taxes. Owner shall pay all real and personal property taxes and
any assessments levied against or in connection with the Facility or the
Facility site and all sales and use taxes on items to be provided by Owner
hereunder.
ARTICLE VI
EXPENSES AND PAYMENTS
6.1 Operator's Fee. Owner shall pay Operator, in consideration of
Operator's performance of its obligations under this Agreement, the fees and
bonuses set forth in Schedule G.
6.2 Annual Operating Plan and Budget.
(a) Preparation and Approval. Operator shall prepare and
submit for Owner's approval at least one hundred fifty (150) days in advance of
the beginning of each Contract Year a proposed Operating Plan and Budget for
such Contract Year containing the information required by Schedule B, except
that the initial
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operating Plan and Budget shall be submitted for Owner's approval no later than
one hundred fifty (150) days prior to the Anticipated Commercial Operations Date
and shall cover the period from the Anticipated Commercial Operations Date
through December 31, 1997. The annual operating budget shall be in the form of
Attachment 1 to Schedule B. No later than sixty (60) days after receipt of the
proposed Operating Plan and Budget, Owner shall notify Operator in writing of
Owner's acceptance or disapproval thereof, and, if Owner disapproves of the
proposed Operating Plan and Budget, or any part thereof, shall state the basis
for its objection and suggest appropriate changes. The Parties shall proceed in
good faith to resolve any objections to the proposed Operating Plan and Budget
made by the Owner before the beginning of the next Contract Year. If the Parties
are unable to resolve any such objections to the proposed Operating Plan and
Budget before the beginning of the next Contract Year, then the interim annual
operating budget ("Interim Budget") for such Contract Year shall be equal to the
annual operating budget approved as a part of the Operating Plan and Budget for
the preceding Contract Year, except that (i) the "Labor Expense," "Maintenance
Expense," and "Operating Expense" categories (as such categories appear on
Attachment 1 to Schedule B hereto) shall be escalated in accordance with the
United States Producer Price Index (not to exceed five percent in any year), and
(ii) any expenditures for Major Maintenance and any increases in costs
attributable to additions to plant personnel approved by Owner shall be
reimbursed in full. Such Interim Budget shall be the basis for determining the
bonus or rebates payable under Section 6.4 until such time as an Operating Plan
and Budget is agreed upon. Operator shall operate and maintain the Facility on
the basis set forth in the approved Operating Plan and Budget. If, during any
Contract Year, Operator believes that a significant variance will occur between
the total actual expenses of operating the Facility and the total expenses
budgeted in the approved annual operating budget, Operator shall promptly notify
Owner of such belief and advise Owner of the necessary revisions to the annual
operating budget and the reasons for these revisions; provided that the
foregoing is not intended to require such revision on a line item basis. The
Parties shall proceed in good faith to revise the Operating Plan and Budget in
such manner for the balance of such Contract Year.
(b) Amendments. In addition to the foregoing, Owner,
subject to obtaining the consent of the Lender if and to the extent required by
the Financing Agreements, shall approve changes or amendments to the approved
Operating Plan and Budget in any Contract Year as required to provide for
changes in Facility operations and reimbursement to Operator of all increased
operations and maintenance expenses and for appropriate adjustments to Schedules
in connection with any of the following:
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(i) The execution of new Project Agreements or
amendments, modifications or replacements of
Project Agreements;
(ii) Any failure of Owner to perform its material
obligations under this Agreement in a timely
manner;
(iii) The occurrence or continuation of any event
of Force Majeure or of an event described in
Section 4.4; or
(iv) Changes or additions to the services to be
rendered by Operator pursuant to this
Agreement or any amendment hereof.
6.3 Payment of Operator's Expenses. Owner shall pay, or reimburse
Operator for, all Reimbursable Expenses incurred by or on behalf of Operator in
connection with the performance of services under this Agreement.
(a) Reimbursable Expenses. Reimbursable Expenses shall
include all expenses incurred or paid by Operator in connection with the
performance of its obligations under this Agreement, including, without
limitation, in connection with providing the services specified in Article IV
and Schedules C and D, that have been included in the Start-Up and Mobilization
Plan or Operating Plan and Budget (or Interim Budget), as the case may be, as
either such plan may be amended in accordance with this Agreement; all costs of
clarifier sludge disposal, pyrites disposal costs, and other waste disposal
costs including hazardous wastes; all un-budgeted or unplanned spare or
replacement parts costs including but not limited to major turbine parts such as
nozzles, blades, casings, auxiliary parts, control and stop valve parts; motors;
pumps, rotating elements or volutes, and fans or fan wheels; hydraulic couplings
or torque converters, transformers; air heater baskets; SCR catalyst; control
components, including, without limitation, computer cards, transmitters, valve
actuators, and valve motor operators; valves; safety relief valves; pulverizer
parts; filter bags for the baghouse; HVAC units; demineralizer resins; air
compressors; boiler parts, including, without limitation, headers and tube banks
or pendants; and all legal or other expenses incurred by Operator on the Owner's
behalf and at the Owner's request that relate to the Facility, to the
enforcement of Project Agreements and other rights of the Owner and/or Operator,
to complying with all applicable laws, or to obtaining, renewing or complying
with Applicable Permits. The term Reimbursable Expenses does not include
Operator's home office, general and administrative, and technical support
expenses in excess of budgeted amounts; travel expenses of Operator's employees
which are not for the benefit of the Facility; or legal expenses of the Operator
that do not
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relate to the Facility or to actions of the Operator that are contemplated
under the Agreement.
(b) Payments From Imprest Account. Owner shall establish
and maintain an escrowed bank account in a bank approved in advance by operator
(the "Imprest Account") from which Operator shall have the unrestricted
authority to draw funds for payment of Reimbursable Expenses. Owner shall
deposit funds into the Imprest Account on the first business day of each month
during the Term hereof based on the amounts set forth in the Start-Up and
Mobilization Plan or Operating Plan and Budget (or Interim Budget) then in
effect. If funds remain in the Imprest Account at the end of any month, the
amount thereof shall be credited against the amount to be deposited therein on
the first business day of the following month. Once Owner has deposited funds
into the Imprest Account, Owner may not withdraw the funds without Operator's
prior written consent. Within fifteen (15) business days following the end of
each calendar month during the Term of this Agreement, Operator shall submit to
owner invoices and other documentation to support the amount of any draws from
the Imprest Account made during the immediately preceding calendar month for
payment of Reimbursable Expenses.
(c) Payment of Other Reimbursable Expenses. If
insufficient funds are available in the Imprest Account to cover any
Reimbursable Expenses, or if operator incurs and pays Reimbursable Expenses that
are not budgeted, then Owner shall pay the amount thereof directly to Operator
in cash or certified funds within thirty (30) days of receipt of Operator's
invoice for such payment, together with supporting documentation.
6.4 Operator's Annual Guarantees.
(a) Annual Guarantees. Operator guarantees that the
Facility will meet the Annual Guarantees set forth on Schedule E.
(b) Adjustments to Annual Guarantees. Upon "Substantial
Completion" (as that term is defined in the Turnkey Contract), Operator may
propose an adjustment to any or to all of the Annual Guarantees based upon (i)
the results of the "Performance Test" (as defined in the Turnkey Contract), or
(ii) workmanship defects attributable to the Contractor which materially and
adversely affect Operator's ability to operate the Facility at agreed upon
performance levels. In the latter case, Operator shall have the burden of
demonstrating that the Facility is not capable of meeting any or all of the
Annual Guarantees set forth in Schedule E. In addition, appropriate equitable
adjustments shall be made to any or all of the Annual Guarantees in any Contract
Year in which there occurs any of the following:
(A) Disapproval by Owner of the Operator's proposed
annual Operating Plan and Budget, including,
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without limitation, the Major Maintenance plans and
inventory levels;
(B) Any event of Force Majeure, including, without
limitation, any material change in Applicable Permits,
or any event described in Section 4.4 hereof;
(C) Any other material act or omission of the Owner (other
than as a result of any of the foregoing) in the
performance of its obligations under this Agreement;
or
(D) Any delay in the repair or replacement of a major
component of the Facility or delay or acceleration of
a scheduled or unscheduled outage of the Facility
which has been directed or approved by the Owner, if,
as a result thereof, Operator's ability to meet any of
the Annual Guarantees is adversely affected.
The Parties shall proceed in good faith to make appropriate equitable
adjustments in the Annual Guarantees. If the Parties are unable to resolve any
dispute within sixty (60) days of the date on which Operator notifies Owner of
any requested adjustment to the Annual Guarantees, such dispute shall be
resolved in accordance with the procedures in Article XII.
(c) Rebates. Subject to the limitation of Section 7.2, if
the Operator fails to meet the Annual Guarantees in any Contract Year (other
than as a result of events or circumstances requiring adjustments to such Annual
Guarantees under subsection (b), above), Operator shall pay to Owner, as a
rebate and not as a penalty, a payment calculated in accordance with the
formulas set forth in Schedule G. Owner and Operator acknowledge and agree that
the amounts so calculated are reasonable, considering the actual reduction in
the value of the Facility that Owner will sustain in the event of Operator's
failure to meet any of the Annual Guarantees. The payment of such rebates shall
be Operator's sole liability or responsibility for failure to achieve the Annual
Guarantees in any Contract Year.
6.5 Payment and Interest on Payment Delays; Disputes Concerning
Payments. Except as otherwise provided herein, Owner shall pay all amounts owing
to Operator under this Agreement within thirty (30) days after the date of
Owner's receipt of an invoice therefor. Any such amounts which are not paid
within such thirty (30) day period shall accrue interest at the prime commercial
lending rate announced from time to time by The Chase Manhattan Bank, N.A., at
its principal office, presently located at 1 Chase Manhattan Plaza, New York,
New York 10081 on the date on which payment was due, plus two (2) percentage
points.
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Interest at the rate defined above shall be computed monthly and prorated daily
from the time such obligation arises. Should Owner dispute any portion of the
amount invoiced, the undisputed portion of such amount shall be paid within the
time stated above, and, at the same time, Owner shall advise Operator in writing
of the disputed portion. Any disputes over payments shall be resolved in
accordance with the procedures set forth in Article XII. The Parties shall
continue to perform under this Agreement during the period in which any such
disputes are being resolved.
6.6 Taxes. The amounts payable to Operator hereunder are exclusive
of any sales, use, service, excise, property, or other federal, state or local
tax levied on the price, delivery or performance of the Operator's obligations
under this Agreement. Owner shall reimburse Operator for all such taxes required
to be paid by Operator (other than income taxes payable on operator's net
income).
6.7 Subordination of Base Operations Fee and Net Bonus. If, on any
date following the Commercial Operations Date on which a payment of the Base
Operations Fee or of the net amount of any Bonus (as defined in Schedule G
hereto) is required hereunder to be made, Owner does not have available to it
under the terms of the Financing Agreements funds in an amount sufficient to
make such payment due to Owner's obligation to pay all other operating costs of
the Facility, Major Maintenance expenses, interest, principal and fees and other
amounts then due to the lenders under the Financing Agreements, and to make
deposits into the repair and maintenance account required by the Financing
Agreements, then Owner may defer payment to Operator of the Base Operations Fee
or net amount of any Bonus (together with interest on any such deferred
payments) in the amount by which any such payment exceeds the funds then so
available to the Owner, and Owner's failure to pay such Base Operations Fee or
net amount of any Bonus as a result of such deferral shall not be deemed a
default hereunder. Any such deferred portion of the Monthly Base Operations Fee
or net Bonus (collectively, a "Deferred Payment") shall become an obligation of
Owner to Operator that is subordinated to payment of Owner's senior secured
indebtedness in accordance with the subordination terms included in and made a
part of the applicable Financing Agreements. Each Deferred Payment shall accrue
interest until paid at the prime commercial lending rate specified in Section
6.5 hereof, plus three (3) percentage points per annum, with such interest being
payable as and when permitted under the security deposit agreement which is part
of the Financing Agreements. If, during any period in which there shall remain
outstanding and unpaid any Deferred Payment, Operator shall become obligated to
pay any Rebate (as defined in Schedule G), the amount of such Deferred Payment,
and interest accrued thereon, shall be credited against the amount of such
Rebate. The terms of this Section 6.7 shall not apply to any
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other amounts that may be or become due and payable to Operator under the terms
of this Agreement, including without limitation any reimbursement of
Reimbursable Expenses or indemnification payments.
ARTICLE VII
LIMITATIONS ON OPERATOR'S LIABILITY
7.1 Correction of Non-Conforming Services. Except as otherwise
provided in Section 6.4, Operator's sole liability for non-conforming services
shall be limited to the correction of such non-conforming services in accordance
with this Agreement, provided any claim by Owner asserting such non-conforming
services is made within twelve (12) months following performance of the service
with respect to which such claim is made.
7.2 Total Limitation of Operator's Liability. It is the intention
and agreement of the Parties hereto that Operator's total liability to Owner for
payment of damages, rebates, indemnities, or any other payments arising under
this Agreement or as a result of Operator's performance hereunder, whether by
reason of acts and omissions of Operator (or alleged against Operator),
including, without limitation, liability for breach of covenant or warranty
hereunder, or liability based on contract (including any obligation hereunder to
indemnify), tort (including negligence and gross negligence), strict liability,
or any other cause or form of action whatsoever, shall be limited in any
Contract Year to an amount equal to the Base Operations Fee for such Contract
Year. In the event that any particular application of any of the limitations of
liability contained in this Section 7.2 should be finally adjudicated to be void
as a violation of public policy, then such limitation of liability shall not
apply with respect to such application to the extent (but only to the extent)
required in order for such limitation of liability not to be void as a violation
of such public policy, and such limitations of liability shall remain in full
force and effect with respect to all other applications to the fullest extent
permitted by law.
7.3 Exclusion of Certain Damages. Neither Owner nor Operator shall
be liable to the other, whether arising out of contract, tort (including
negligence), strict liability or any other cause or form of action whatsoever,
for any special, incidental, or consequential loss or damage of any nature,
including, without limitation, loss of anticipated profits, loss by reason of
Facility shutdown, non-operation or increased expense of operation, loss of
revenue or loss of use of capital or revenue.
7.4 Equipment. Owner acknowledges that Operator is not a
manufacturer or vendor of equipment and agrees that Operator
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shall not be liable to Owner for any damage, liability, judgment, settlement,
penalty, cost, fine or expense, including without limitation attorneys' fees,
court costs and other expenses of litigation, incurred by or imposed against
Owner by reason of or in connection with any act or omission of any Vendor
whether in contract, warranty, tort (including negligence), strict liability or
any other cause or form of action whatsoever.
7.5 Disclaimer of Warranty. EXCEPT AS PROVIDED IN SECTION 6.4,
OPERATOR, FOR ITSELF, ALL OF ITS AFFILIATES AND THE SUCCESSORS AND ASSIGNS OF
EACH OF THEN, MAKES NO WARRANTIES OR GUARANTEES, EXPRESSED OR IMPLIED, WRITTEN
OR ORAL, RELATING TO ITS SERVICES, AND OPERATOR DISCLAIMS ALL IMPLIED WARRANTIES
OR WARRANTIES IMPOSED BY LAW (INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE AND ALL WARRANTIES OF COURSE OF DEALING OR USAGE OF
TRADE) WHETHER CONCERNING ANY SERVICES OF, OR ANY EQUIPMENT, MATERIALS, SUPPLIES
OR OTHER GOODS INSTALLED, USED, OPERATED, REPAIRED AND/OR APPROVED BY OPERATOR.
ARTICLE VIII
TERMINATION, DEFAULTS AND REMEDIES
8.1 Termination by Either Party. This Agreement may be terminated
by either Party upon thirty (30) days' written notice in the event of (i) the
total destruction or other complete loss of the Facility, or condemnation of
such a substantial portion of the Facility or Facility site that the remainder
is not sufficient to permit the operation of the Facility on a commercially
feasible basis, provided that Operator may not terminate this Agreement on
account of any such destruction or loss if Owner notifies Operator of its
intention to rebuild or restore the Facility from the proceeds of insurance or
otherwise within twelve (12) months following the occurrence of any such
destruction or loss; or (ii) the existence of an event of Force Majeure
substantially preventing performance hereunder by either Party occurs and
continues for more than eighteen (18) months. In the event of termination under
this Section 8.1, Operator shall be compensated under Article VI for all
services provided hereunder prior to termination and for all costs and expenses
of demobilization.
8.2 Termination by Owner for Cause. Owner may terminate this
Agreement upon written notice to Operator in the event Operator is adjudged a
bankrupt or insolvent, or makes a general assignment for the benefit of its
creditors, or if a trustee or receiver is appointed for Operator or for any of
its property, or if it files a petition seeking protection under any debtor's
act or to reorganize under bankruptcy or similar laws. In addition, Owner may
terminate this Agreement upon thirty (30) days written notice to Operator in the
event of a material breach by Operator
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(other than a failure to achieve the Annual Guarantees, which shall be governed
by Sections 6.4 and 8.3) of any material provision of this Agreement, if
Operator does not cure such breach within thirty (30) days of the receipt of
written notice thereof from Owner; provided, however, that Operator shall have
such additional period of time as is reasonably necessary to correct or cure
such breach, not to exceed ninety (90) additional days without the consent of
the Owner, if Operator commences and diligently pursues a cure within such
thirty (30) day period, the breach or the conditions giving rise to it are not
reasonably susceptible to correction or cure within such thirty (30) day period,
and the Owner is not, as a result of the continuation thereof, in breach of any
material provision of any Project Agreement to which it is a party which cannot
be cured within the additional time period provided to Operator to cure such
breach under this Agreement. In the event of a termination under this Section
8.2, Operator shall be compensated under Article VI for all services provided by
Operator prior to termination.
8.3 Additional Right of Owner to Remove Operator. If Operator shall
fail to perform hereunder in accordance with Prudent Utility Practices and, as a
result thereof, shall fail to meet the Annual Guarantees, as such Annual
Guarantees may be adjusted from time to time in accordance with Section 6.4(b)
hereof, for two (2) consecutive years or for five (5) years in the aggregate,
and, as a direct result thereof, the Owner incurs or suffers a loss or reduction
in revenues that is greater than 125% of the aggregate amount of rebates paid by
Operator in respect of its failure to meet such Annual Guarantees in those
years, Owner may remove Operator by providing written notice of removal to
Operator at least one hundred twenty (120) days prior to the effective date of
such removal (which notice shall be irrevocable) as specified in such notice,
and, on the date of such removal, Southern Electric International, Inc. shall
cease to be the Operator hereunder; provided, however, that any purported
removal of Operator by Owner pursuant to this Section 8.3 shall not be effective
unless it has been consented to by the Lenders. Upon the removal of Operator
hereunder, Operator shall have no further rights, obligations, responsibilities
or liabilities under this Agreement other than those which by the express terms
of this Agreement are to survive the termination of this Agreement. In the event
Operator is removed under this Section 8.3, Operator shall be entitled to
receive compensation under Article VI for all services provided hereunder prior
to the effectiveness of such removal, and, in addition, Operator shall be
entitled to receive reimbursement for all costs and expenses of demobilization.
8.4 Termination by Operator for Cause. Operator may terminate this
Agreement in the event of a material breach by Owner of any provision of this
Agreement, if Owner does not cure such breach within thirty (30) days of the
receipt of written
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notice thereof from Operator; provided, however, that except in the case of a
payment default, so long as Owner is diligently pursuing a cure of such breach,
Owner shall have such additional period of time, not to exceed ninety (90) days
without the consent of the Operator, as is reasonably necessary to correct or
cure such breach if Owner commences a cure within such thirty (30) day period
and the breach or the conditions giving rise to it are not reasonably
susceptible to correction or cure within such thirty (30) day period. In the
event of termination under this Section 8.4, Operator shall be entitled, in
addition to any other rights or remedies available to Operator at law or in
equity, to receive compensation under Article VI for all services provided
hereunder prior to termination and reimbursement of all Reimbursable Costs and
of all other costs and expenses of demobilization.
8.5 Additional Right of Operator to Resign. Operator may resign
during the Term hereof by giving Owner at least thirty (30) days' prior written
notice upon the occurrence of either of the following:
(a) Owner shall refuse to accept or shall disapprove Operator's
proposed Operating Plan and Budget, following good faith efforts on the part of
the Parties to resolve Owner's objections thereto in accordance with the
procedures specified in Section 6.2(a) hereof, for any two (2) consecutive
Contract Years or for any five (5) Contract Years in total; or
(b) Affiliates of The Southern Company, a Delaware corporation,
shall cease to own at least (i) a 50% general partnership interest in the Owner
and (ii) a 35% economic interest in the Owner and the Facility, other than as a
result of a transfer of interests by such Affiliates in violation of the
Financing Agreements.
Operator's resignation under this Section 8.5 shall not be effective until
Operator has been replaced by an operator acceptable to Owner of good reputation
in the operation and maintenance of power production facilities similar to the
Facility. Upon receipt of notice from Operator of its intention to resign
hereunder, Owner shall promptly and diligently use its best efforts to locate
and retain a replacement operator meeting the above standard as expeditiously as
is practicable. Notwithstanding the foregoing, if Owner fails to replace
Operator with an operator acceptable to Owner within one hundred eighty (180)
days after the date of such notice, Operator's resignation shall then be
effective. Upon the effectiveness of Operator's resignation hereunder, Operator
shall have no further rights, obligations, responsibilities or liabilities under
this Agreement other than those which by the express terms of this Agreement are
to survive the termination of this Agreement. In the event Operator resigns
under this Section 8.5 Operator shall be
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entitled to receive compensation under Article VI for all services provided
hereunder prior to the effectiveness of such resignation, and, in addition, if
such resignation is for cause, in addition to any other rights or remedies
available to Operator at law or in equity, Operator shall be entitled to receive
reimbursement for all costs and expenses of demobilization.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Operator. Subject to the limitation of Section
7.2, Operator shall indemnify, save harmless and defend Owner and Owner's
directors, officers, agents, employees, successors and assigns of each of them
(the "Owner's Indemnified Parties"), from and against any and all losses,
costs, damages, injuries, liabilities, claims, demands, fines, penalties,
interest and causes of action, including without limitation reasonable
attorneys' fees (collectively, a "Loss"), directly or indirectly arising out of,
resulting from or related to this Agreement, including without limitation any
damage to or destruction of property of, or death of or bodily injury to,
persons arising out of or in connection with any acts or omissions of operator
or its agents or employees that involve gross negligence or wilful misconduct.
9.2 Indemnification by Owner. Owner shall indemnify, save harmless and
defend Operator and Operator's Affiliates, and their respective directors,
officers, agents, employees, successors and assigns ("Operator's Indemnified
Parties") from and against any Loss directly or indirectly arising out of or
relating to the acts or omissions of Owner or any person employed or engaged by
Owner, or to the services to be performed by Operator hereunder, but only to the
extent any such Loss was not caused by Operator's or any of Operator's
Indemnified Parties' negligence or wilful misconduct. Owner shall also
indemnify, save harmless and defend Operator's Indemnified Parties from and
against all fines and clean-up costs levied against Operator or the Facility as
a result of Operator's performance of waste handling services under Section
4.2(e) hereof, except to the extent that any such fines and clean-up costs are
the result of Operator's gross negligence or wilful misconduct.
9.3 Survival. The duty of either Party to indemnify under this Article
IX will continue in full force and effect, notwithstanding the expiration or
termination of this Agreement, with respect to any claim or action based on acts
or conditions which occurred prior to such termination.
9.4 Notice and Legal Defense. Promptly after receipt by a person
entitled to indemnification under Section 9.1 or 9.2 of any claim or notice of
the commencement of any action
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administrative or legal proceeding, or investigation as to which the indemnity
provided may apply, such person shall notify the indemnifying Party in writing
of such fact. The indemnifying Party shall assume on behalf of the indemnified
person and conduct with due diligence and in good faith the defense thereof with
counsel reasonably satisfactory to the indemnified person; provided that if the
defendants in any such action include the indemnifying Party and the indemnified
person shall have reasonably concluded that there may be legal defenses
available to it which are different from or additional to, or inconsistent with,
those available to indemnifying Party, the indemnified person shall have the
right to select separate counsel to participate in the defense of such action on
its own behalf at the indemnifying Party's expense.
9.5 Failure to Defend Action. If any claim, action, proceeding or
investigation arises as to which the indemnity provided for in Section 9.1 or
9.2 hereof may apply, and the indemnifying Party fails to assume the defense of
such claim, action, proceeding or investigation, then the indemnified person may
at the indemnifying Party's expense contest (or, with the prior written consent
of the indemnifying Party, settle) such claim.
ARTICLE X
INSURANCE
10.1 Obligation to Obtain. The Parties each agree to obtain and
maintain insurance of the types, in the amounts, and otherwise in accordance
with the provisions of this Article X. The Parties agree to coordinate their
insurance acquisition efforts with respect to the Facility, the services to be
provided and the requirements of any Lender under any Financing Agreements to
avoid duplication of coverage, minimize premiums and ensure that the amounts
payable under the policies required hereunder are not reduced by the existence
of additional policies not required hereunder. The Parties further agree to
provide all information required by any of the Parties in carrying out the
requirements of this Article X, including copies of all Project Agreements and
documents which relate to the purchase and maintenance of insurance coverage on
the Facility and/or the Owner and/or to the Operator. All insurance policies
shall also contain any other provisions necessary to comply with the
requirements of the Power Purchase Agreement and with any other written
requirements of the Owner.
10.2 Coverage Which Must be Purchased by the Operator. Subject to the
foregoing, Operator shall obtain prior to the Mobilization Date the following
insurance, and shall name the Owner as named insured under the policies
specified in paragraphs (b), (c) and (d) of this Section 10.2. All premiums and
other
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expenses associated with such insurance shall be Reimbursable Expenses. In
addition, Owner shall reimburse Operator for all payments made by Operator under
such policies within the deductible limits thereof, except to be extent that any
such payment is required as a result of Operator's gross negligence or wilful
misconduct.
(a) Workers' Compensation Insurance. Workers' compensation
insurance, in accordance with Virginia law, on all persons employed by
Operator in conjunction with its performance of the duties under this
Agreement with statutorily required limits, including "All States"
Endorsement; and Employer's Liability insurance with limits of not less
than $1,000,000.00 each person and $1,000,000.00 each person and
aggregate for injury by disease.
(b) Automobile Liability Insurance. Automobile liability
insurance, including but not limited to, coverage for owned, non-owned
and hired automobiles with limits of not less than $5,000,000.00 per
occurrence and containing no-fault insurance provisions as required
under Virginia law, covering automobiles used by the Operator or its
agents in connection with Facility operations.
(c) Comprehensive General Liability Insurance. Comprehensive
general liability insurance policy covering personal injury and
property damage to third parties and covering liability for damage to
property of third parties in the care, custody and control of Owner,
Operator and/or their respective employees and subcontractors in
connection with operations at the Facility. The coverage referred to
herein shall be provided either in a single policy or through a
combination of policies. Such policy or policies may have personal
injury deductible and property damage deductibles of not more than
$500,000.00 per event or occurrence and shall have a limit of not less
than $1,000,000.00 per occurrence, or such greater deductibles as may
be agreed to by the Owner. Comprehensive general liability insurance
policies shall contain a Broad Form Property Damage Endorsement and
shall also insure contractual liability for all written, oral and
implied contracts, including this Agreement.
(d) Umbrella Liability Insurance. Umbrella liability insurance
increasing the limits and coverages of that insurance required in
paragraphs (b) and (c) hereof with a limit of not less than
$10,000,000.00 per event or occurrence.
10.3 Coverage Which Must be Purchased by the Owner. Subject to the
foregoing Sections 10.1 and 10.2, Owner shall obtain and maintain at its
expense, as of the dates set forth below, the
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following insurance, and shall name the Operator as an additional insured under
the policies specified in paragraphs (b) and (c), below. Owner shall bear
responsibility for all deductibles under Section 10.3, except as provided in
paragraph (c), below
(a) Workers' Compensation Insurance. Workers' Compensation
insurance, in accordance with Virginia law, on all persons employed by
Owner in conjunction with its performance of its duties under this
Agreement with statutorily required limits, including "All States"
endorsement, and Employers' Liability insurance with limits of not less
than $1,000,000.00 each person for injury by accident, and
$1,000,000.00 each person and aggregate for injury by disease.
(b) Automobile Liability Insurance. Automobile Liability
Insurance, including but not limited to, coverage for owned, non-owned
and hired automobiles with limits of not less than $1,000,000 per
occurrence and containing no-fault insurance provisions as required
under Virginia law, covering automobiles used by the Owner or its
agents in connection with Facility operations.
(c) All Risk Physical Damage/Business Interruption Insurance.
"All-Risk" physical damage insurance, including coverage for the perils
of earthquake and flood with limits equal to the full replacement cost
of all real and personal property of the Facility (or such other amount
as may be required by Lenders under the terms of any Financing
Agreement). Earthquake, windstorm, and flood perils may be insured for
sub-limits lower than the limit required for other "All-Risk" perils,
if full replacement cost limits for these perils are not available or
cannot be purchased on a commercially reasonable basis, but in no case
shall flood, windstorm, and earthquake perils be insured for limits of
less than $5,000,000.00 per event or occurrence. Deductibles for
"All-Risk" perils shall not be in excess of $500,000.00 per event or
occurrence. Deductibles for earthquake and flood perils shall not be in
excess of five (5) percent of the total insured values of the Facility
per event or occurrence. Subject to the limitation in Section 7.2,
Operator shall bear responsibility for the deductible limits of any
physical damage losses arising solely from Operator's gross negligence
or wilful misconduct. For all other losses, Owner shall bear
responsibility for such deductible amounts. Such limitations shall only
be exceeded with the prior written consent of the other Party to this
Agreement. In conjunction with such physical damage insurance, Owner
shall also purchase business interruption insurance covering Owner's
net income and continuing fixed operating expenses in the case of a
loss with an indemnity period of no less than twelve (12) months and a
deductible
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no greater than sixty (60) days. All insurance amounts, deductibles,
terms and conditions are subject to their availability at commercially
reasonable terms.
10.4 Form and Content. All insurance policies with respect to coverage
maintained by either Operator or Owner pursuant to this Article X shall:
(a) Be placed with insurance companies rate "A+" or better
(and a minimum size rating of IX by Best's Insurance Guide and Key
Ratings (or an equivalent rating by another nationally recognized
insurance rating agency of similar standing if Best's Insurance Guide
and Key Ratings shall no longer be published) or other insurance
companies of recognized responsibility satisfactory to the Owner's
Lenders.
(b) State that it is primary, or excess only with respect to
the specified primary policy provided by the same Party for such
coverage, and not excess or contributing with respect to any other
insurance (or self-insurance available to Owner, Operator or other
named insured and that all provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate
policy covering each named insured under each such policy.
(c) Provide that there will be no recourse against the named
insured (other than the Party obtaining such policy) for the payment of
premiums, additional premiums or assessments, it being understood that
these are obligations of the Party providing such insurance pursuant to
this Agreement.
(d) With respect to the insurance described in this Article X,
where appropriate, waive any right of subrogation of the insurers
thereunder against Owner, Operator, or the Lenders under any Financing
Agreements and the officers, directors and employees of each of them,
and any right of the insurers to any set-off or counterclaim or any
other deduction, whether by attachment or otherwise, in respect of any
liability of any such person insured under such policy.
(e) Provide that it may not be canceled, non-renewed or
materially changed without giving Owner, Operator, other named or
additional insureds, and the Lenders under any of Owner's Financing
Agreements sixty (60) days prior written notification thereof.
10.5 Certificates, Proof of Loss. On or before the required date for
the insurance to be provided hereunder, each Party shall furnish certificates of
insurance to the other Party evidencing the insurance required of such Party
pursuant to this
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Agreement. The Party maintaining each insurance hereunder shall make all proofs
of loss under each such policy and shall take all other action reasonably
required to ensure collection from insurers for any loss under each such policy.
10.6 No Limitation on Liability. The provision of any insurance
hereunder shall not be construed to limit or expand the liability of either
Party hereto under this Agreement.
ARTICLE XI
THIRD PARTIES
11.1 Engagement of Third Parties. Except as otherwise provided herein,
Operator may engage such persons, corporations or other entities, including
Affiliates of Operator, as it deems advisable for the purpose of performing or
carrying out any of the obligations of Operator under this Agreement, provided
that Operator shall remain responsible for all obligations under this Agreement,
and further provided that Operator shall not subcontract all or substantially
all of its obligations under this Agreement without the prior written consent of
Owner and Lender, which consent shall not be unreasonably withheld or delayed.
11.2 Assignment of Rights or Obligations. Neither Party shall assign
all or any of the rights or obligations under this Agreement without the prior
written consent of the other Party, and any assignment in violation of this
Section 11.2 shall be null and void. Notwithstanding the foregoing, Southern
Electric International, Inc. shall have the right to assign its interest under
this Agreement to an Affiliate and to subcontract certain of its obligations to
third parties (whether Affiliates or otherwise), provided that no such
assignment or subcontract shall relieve Southern Electric International, Inc. of
its obligations hereunder.
ARTICLE XII
DISPUTES
12.1 Good Faith Resolution. The Parties agree to make a diligent, good
faith attempt to resolve all disputes. If the representatives of the Parties are
unable to resolve a dispute within fifteen (15) days after notice from one Party
to the other, such dispute shall be submitted promptly to the chief executive
officers of the Parties, who shall meet, in person or by telephone, not later
than fourteen (14) days after the date such dispute was submitted to them. In
the event that the officers cannot resolve the dispute within sixty (60) days
after the matter is submitted to them, then, unless otherwise agreed, such
dispute shall be submitted to arbitration.
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12.2 Arbitration Notice. If a Party elects to submit a dispute to
arbitration, such Party shall serve an arbitration notice on the other Party.
The arbitration notice shall contain a detailed description of the dispute,
including the amount involved, the position of the Party serving the notice, the
remedy sought and the name of one (1) independent arbitrator. Within twenty (20)
days after receipt of an arbitration notice, the receiving Party shall send a
notice to the other Party containing a detailed response to the claim giving the
position of the Party and the remedy sought, and an acceptance of the arbitrator
designated in the arbitration notice or a designation of a second arbitrator.
12.3 Selection of Arbitrators. If the Parties agree to a single
arbitrator, the arbitration shall be decided by such arbitrator. If the Parties
each designate an arbitrator, the arbitrators designated by the Parties shall
designate a third arbitrator within ten (10) days after the date of the notice
in response to the arbitration notice, and the arbitration shall be decided by
the three arbitrators. In the event the two arbitrators cannot or do not select
a third independent arbitrator within ten (10) days of such second notice,
either Party may apply to the American Arbitration Association for the purpose
of appointing any person listed with the American Arbitration Association as the
third independent arbitrator.
12.4 Procedure. A hearing shall be held by the arbitrators within sixty
(60) days following designation of the arbitrators and a resolution of the
matter submitted shall be rendered within thirty (30) days after the hearing.
The arbitration shall be conducted pursuant to the Commercial Arbitration rules
of the American Arbitration Association or such other additional procedures
agreed to by the Parties; provided, however, that the Parties shall have the
right to engage in reasonable discovery of documents involved in the dispute.
All arbitration hearings shall be held in Atlanta, Georgia. Nothing contained
herein shall limit the right of either Party, conferred elsewhere in this
Agreement, to obtain documents from the other Party.
12.5 Binding Nature. The arbitration shall be final and binding on the
Parties and not subject to any appeal. The costs of arbitration and all expenses
related thereto, including, without limitation, each Party's attorneys' fees,
shall be borne and paid by the nonprevailing Party; provided that if a Party is
nonprevailing only in part, such Party shall bear the expenses in proportion to
the extent to which it is nonprevailing.
12.6 Enforceability. The foregoing agreement to arbitrate shall be
specifically enforceable, the award rendered by the arbitrators shall be final
and judgment may be entered upon it
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in accordance with applicable law in any court having jurisdiction thereof.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Capital Improvements. All Capital Improvements shall be made only
upon approval of Owner. Operator shall not perform any Capital Improvement
unless Owner and Operator agree upon the terms and conditions under which
operator is to perform the Capital Improvement, including time of performance
and cost.
13.2 Notices. Any notice required or permitted under this Agreement
shall be in writing and shall be valid and sufficient if delivered personally or
mailed by registered or certified mail, postage prepaid or delivered by courier
service, addressed to the Party's address shown below or to such other address
as a Party may designate by prior written notice given in accordance with this
provisions to the other Party:
If to Operator: Southern Electric International, Inc.
900 Ashwood Parkway, Suite 300
Atlanta, Georgia 30338
Attention: Vice President - Power Supply
If to Owner: Birchwood Power Partner, L.P.
c/o SEI Birchwood Inc.
900 Ashwood Parkway, Suite 300
Atlanta, Georgia 30338
Attention: Project Manager
13.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Georgia.
13.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors and
permitted assigns.
13.6 Waiver. The waiver of any breach of any term or condition of this
Agreement shall not be deemed a waiver of any other or subsequent breach,
whether of like or different nature.
13.7 Not for the Benefit of Third Parties. This Agreement and each and
every provision thereof is for the exclusive benefit of the Parties and, to the
extent specifically provided, for the
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benefit of the Lender, and not for the benefit of any other third party.
13.8 Attorneys' Fees. Notwithstanding any other provision of this
Agreement, if any action or proceeding is brought by either Party to remedy a
breach of this Agreement or to enforce any of its provisions, the prevailing
Party shall be entitled, in addition to any other relief granted in such action
or proceeding, to receive reasonable attorneys' fees, disbursements and court
costs.
13.9 Confidentiality. Operator shall hold in confidence, and shall use
only in connection with the operation and maintenance of the Facility, any and
All Proprietary Information disclosed to Operator for a period of three (3)
years after the termination of this Agreement; provided, however, that Operator
may disclose Proprietary Information (i) to its and its Affiliates' officers,
directors, employees and agents in connection with the performance of services
hereunder, and (ii) as necessary to comply with laws, rules, regulations and
orders of Governmental Authorities. For the purposes of this Section 13.9, the
term "Proprietary Information" shall mean all financial, technical and
operations and maintenance information which Operator, directly or indirectly,
acquires from the Owner, and shall also include any other information which
Owner expressly designates in writing to be confidential. However, Proprietary
Information shall exclude information falling into any of the following
categories:
(a) Information that, at the time of disclosure, is in the public
domain;
(b) Information that, after disclosure, enters the public domain
other than by breach of this Agreement;
(c) Information that, prior to disclosure hereunder, was in the
Operator's possession, either without limitation on disclosure
to others or subsequently becoming free of such limitations;
(d) Information obtained by the Operator from a third party having
an independent right to disclose this information; and
(e) Information that is available through independent research
without the use of or access to the Proprietary Information
acquired from the Owner.
13.10 Force Majeure. If either Party is rendered wholly or partially
unable to perform or is delayed in performing its obligations under this
Agreement because of the occurrence and existence of an event of Force Majeure,
that Party will be
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excused from whatever performance is affected by such event of Force Majeure to
the extent and for the time so affected, except that Owner shall not be excused
from its obligations to make timely payments hereunder; provided that:
(a) The non-performing Party gives the other Party notice
describing the particulars of the occurrence within
seventy-two (72) hours thereafter, including an estimate of
its expected duration and probable impact on the performance
of such Party's obligations hereunder, and continues to
furnish timely, regular reports with respect thereto during
the continuation of the event of Force Majeure;
(b) The suspension or delay of performance shall be of no greater
scope and of no longer duration than is reasonably required by
the event of Force Majeure;
(c) No liability of either Party which arose before the occurrence
of the event of Force Majeure causing the suspension or delay
of performance shall be excused as a result of the occurrence;
(d) The non-performing Party shall mitigate or limit damages to
the other Party;
(e) The non-performing Party shall use its best efforts to
continue to perform such of its obligations hereunder as are
not affected by the event of Force Majeure and to correct or
cure the event or condition giving rise to the event of Force
Majeure; and
(f) When the non-performing Party is able to resume performance of
its obligations under this Agreement, that Party shall give
the other Party written notice to that effect and shall
promptly resume performance hereunder.
13.11 Publicity Release. Operator shall not issue any press or
publicity release or any advertisement, or publish any information concerning
the Facility without the express written consent of Owner; provided, however,
that in the event of unusual circumstances or emergency when, in Operator's
judgment, a public statement or press release should be made and Owner's written
consent cannot be timely obtained, Operator through the Facility manager or his
designee shall be permitted to make public statements and/or press releases
which in its judgment are necessary and proper and shall promptly notify Owner
of all such statements and releases.
13.12 Severability. Should any Article or Section or any part of any
Section hereof for any reason be declared invalid or
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unenforceable by final and unappealable order of any court of competent
jurisdiction, the remaining portions of this Agreement shall remain in full
force and effect, and the Parties hereto shall immediately renegotiate in good
faith the Article or Section or part of any Section declared invalid or
unenforceable so as to eliminate such invalidity or unenforceability.
13.13 Owner's and Operator's Obligations Non-recourse. The Parties
acknowledge that the Owner and Operator each has entered into this Agreement
entirely on its own behalf, and in no manner on behalf of its Affiliates, and
that neither Owner nor Operator shall have any recourse against any of the
other's Affiliates, partners, joint venturers, officers, directors, successors
or assigns for any reason whatsoever, except with respect to any guarantee that
may be executed by any such Affiliate.
13.14 Interpretation. This Agreement sets forth the full and complete
agreement of the Parties relating to the subject matter hereof and supersedes
all prior agreements and representations. The Article and Section headings have
been provided for convenience of reference only and shall not affect the meaning
or construction of any provision of this Agreement. In the event of any conflict
or inconsistency between any provision contained in the Articles of this
Agreement and any Schedule hereto, the provision contained in the Articles shall
govern.
13.15 Relationship of the Parties. Nothing in this Agreement shall be
deemed to constitute either party hereto a partner, agent (except as
specifically provided in paragraphs (e) and (f) of Section 4.2 hereof) or legal
representative of the other party, or to create a fiduciary relationship between
the parties. Operator is and shall remain an independent contractor in the
performance of this Agreement, maintaining complete control of its personnel,
workers, subcontractors and operations required for performance of its
obligations hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective duly authorized representatives on this 18th day
of May, 1994.
SOUTHERN ELECTRIC INTERNATIONAL, INC.
By /s/ R. E. Leggett
----------------------------------
Name: R. E. Leggett
Title: Vice-President, Power Supply
BIRCHWOOD POWER PARTNERS, L.P.,
a Delaware limited partnership
By: SEI Birchwood, Inc., a General
Partner
By /s/ Mark S. Lynch
----------------------------------
Name: Mark S. Lynch
Title: Vice President
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SCHEDULE A
PROJECT AGREEMENTS
The Power Purchase Agreement
The Turnkey Contract
Ash Management Services Agreement between Owner and J.T.M. Industries, Inc.
Any Financing Agreement
Steam Sales Agreement between Birchwood Power Partners, L.P. and
Dominion Growers of Fredericksburg Incorporated.
Interface Operating Procedures as developed per the above Power Purchase
Agreement in Section 4.5.
Voltage Schedule as developed per the above Power Purchase Agreement in
Section 4.5.
Fuel Supply Contracts
Fuel Transportation Contract
Interconnection Agreement
Pyrites Disposal Contract
Hazardous Waste Disposal Contract
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SCHEDULE B
OUTLINE OF OPERATING PLAN AND BUDGET
1.0 Operations & Maintenance Budget
1.1 Station Labor Expenses
1.2 Routine Maintenance Expenses Other Than Station Labor
1.3 Equipment Expenses Other Than Station Labor
1.4 Operating Expenses Other Than Station Labor
1.5 Administrative Expenses Other Than Station Labor
1.6 Insurance Expenses
1.7 Inventory Levels and Expenses
1.8 Annual Outage Expenses Other Than Station Labor
1.9 Major Maintenance Expenses Other Than Station Labor and Escrow
Account Analysis (5 year projection)
1.10 Capital Expenses (5 year projection)
1.11 Operator Insurance Expenses
2.0 Schedule Outage Work Plan
3.0 Staffing Plan
4.0 Projected Generation
5.0 Projected Fuel Consumption
6.0 Projected Flash, Bottom Ash, and Pyrites To Be Generated
7.0 Other Non-Operations and Maintenance Expenses
ATTACHMENT 1. Form of Annual Operating Budget.
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SCHEDULE C
OPERATOR'S SERVICES PRIOR TO COMMERCIAL OPERATION
1. GENERAL OPERATOR REQUIREMENTS
1.1 Cost Accounting System - Operator shall establish a Cost and Budget
Accounting System that Operator will implement for Facility operations.
This program must be in place ninety (90) days prior to the Anticipated
Commercial Operations Date.
1.2 Spare Parts Program - Operator shall review the recommended spare parts
lists prepared by Contractor and make recommendations to Owner
concerning spare parts inventory and procurement. Operator shall make
recommendations to Owner concerning stocking levels for consumable
materials and stores stock.
1.3 Office and Shop Furnishings and Equipment - Operator shall recommend to
Owner office, shop and maintenance furnishings and equipment. Upon
approval by Owner, Operator shall purchase, receive, inventory, and
install such furnishings and equipment.
1.4 Operational Programs - Operator shall develop and submit to Owner
for approval complete administration, operation and maintenance
programs and procedures, including without limitation the interface
operating procedures and voltage schedules referred to in Sections 4.5
and 4.6 of the Power Purchase Agreement, and similar interface
procedures with fuel suppliers and governmental authorities. These
programs and procedures must be in place ninety (90) days prior to the
Anticipated Commercial Operations Date.
1.5 Facility Turnover - The Facility will be turned over to the Operator
on the earlier to occur of (i) "Minimum Performance Acceptance," and
(ii) "Substantial Completion," determined in accordance with the
Turnkey Contract. The Operator will provide labor to work under
Contractor's supervision and direction prior to and following the
Commercial Operations Date, as requested by Contractor. Operator shall
assist Owner in system walkdown to create punchlists and shall witness
tests. Operator shall provide Owner with a written report of observed
deficiencies or indicate acceptability of systems for operation.
Operator will provide Contractor access to the site after turnover to
complete punch list items and construction demobilization and other
contractually required activities.
1.6 Manual Review - Operator shall review and comment on the adequacy
of the operating manuals, the system descriptions and vendor operation
and maintenance manuals supplied by Contractor.
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1.7 Design Review - Operator shall review and comment on the design
documents prepared and submitted by Contractor on matters relating to
the operation and maintenance of the Facility.
1.8 Site Drawings - Operator shall review drawing lists and define which
drawings are required at the job site. Such drawings shall be provided
to Operator by Owner and Operator shall prepare and maintain a file of
drawings at the job site.
ATTACHMENT 1. Attachment 1 sets forth the mobilization period budget and
staffing schedule agreed to by the Parties as of the date of this Agreement.
Appropriate adjustments shall be made to Attachment 1 if, by reason of any of
the events specified in Section 6.2(b), the staffing schedule or expenses of
mobilization shall change. Operator shall promptly notify Owner of any such
change and advise Owner of any necessary revisions. The Parties shall proceed in
good faith to revise the Start-Up and Mobilization Plan. Any disputes shall be
resolved in accordance with the procedures set forth in Article XII.
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SCHEDULE D
OPERATOR'S SERVICES AFTER COMMERCIAL OPERATION
1.0 GENERAL OPERATOR REQUIREMENTS
After the Commercial Operations Date, Operator shall assume care, custody and
control of the Facility. Without limiting the terms of the Agreement, Operator
shall provide the following services:
1.1 Staff the Facility 24 hours a day, 365 days, or 366 days as
appropriate, a year to perform the services and provide training of all
personnel in accordance with the standards set forth in the Agreement.
1.2 Comply with the Power Purchase Agreement, including without
limitations, the dispatch provisions thereof. Operator shall provide
operating interface with the utility's operations center and provide
operating reports required by the Power Purchase Agreement.
1.3 Implement an administrative program for establishing specific
operating goals for each functional Facility area, for managing
resources to minimize personnel turnover, and for qualifying personnel
to operate and maintain the Facility (including the basis for
qualification of personnel).
1.4 Implement the program developed during the pre-operational phase, as
approved by Owner, for communicating and interfacing with the utility,
Owner, fuel suppliers, ash disposal contractor, governmental
authorities and contractors.
1.5 Operate the Facility according to procedures established during the
pre-operational phase and monitor, evaluate, and propose revisions to
such procedures from time to time.
1.6 Required Programs.
1.6.1 The Facility operations program will include:
Monitoring Facility Performance
Shift Routines/Operating Practices
Operation and Control of Equipment
Water and Waste Water Management
Chemistry Control
Training Programs
Operating Qualification
Operating Procedures
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1.6.2 The maintenance program will include:
Performance of Routine and Scheduled Maintenance Activities
Performance of Emergency Corrective Maintenance Activities
Implementation of An Automated Work Order Control System
Implementation of A Maintenance Planning
Implementation of Maintenance Procedures
Implementation of a Preventative Maintenance Program
Implementation of a Predictive Maintenance Program
Implementation of Safety Goals
Preparation of budgets for major maintenance
Management and coordination of equipment suppliers and other
subcontractors
1.6.3 The materials management program will include:
Procuring Materials and Tools
Warehousing
Maintaining Proper Inventory Levels and Control
Renewal of Inventories
Storage Maintenance
Staging of Materials
1.7 Implement a performance testing program for maintaining the Facility
and equipment at the optimum performance levels.
1.8 Implement a security program for maintaining the Facility in a secure
and protected environment.
1.9 Implement a housekeeping/cleanliness program which provides:
Hazardous Material Control
Grounds/Building Maintenance
Material Condition Inspections
1.10 Implement a problem assessment program which provides methods for
determining the cause of Facility failures and means of prevention.
1.11 Implement a records management program for maintaining documentation
of Facility performance as required under the Agreement, system
problems logged by system and/or equipment number.
1.12 Conduct a Facility safety program which provides:
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Clearance and Tagging Procedures
Safety Monitoring
Safety Meetings
Accident Prevention Program
Accident Reporting
1.13 Execute reporting systems for Facility performance to Owner and others
as required.
1.14 Conduct a permit compliance program.
1.15 Provide Owner with documentation and other assistance and site
coordination required for Contractor warranty administration.
1.16 Provide Owner with invoice quantity verification on matters reported to
Owner.
1.17 Assist Owner with its community relations program, at Owner's request.
1.18 Procure replacements for all spare parts used by Operator, in order to
maintain the initial inventory of spare parts provided by Owner, and
procure lubricants and other consumables. Prepare annual inventory
reports of tools, spare parts and consumables.
1.19 Prepare the annual Operating Plan and Budget.
1.20 Specify and contract for outside services such as engineering
consulting, major equipment maintenance, and modification work as
specified in the annual Operating Plan and Budget or as otherwise
approved by Owner.
1.21 Prepare all notices and reports required under this Agreement.
1.22 Procure and maintain insurance coverages in accordance with this
Agreement.
1.23 Read metering devices and send notices of steam delivered, as
required under the Steam Sales Agreement, and comply with all other
requirements of Owner under the Steam Sales Agreement.
1.24 Receipt, unloading, storage and accounting for fuel inventories,
including coal and No. 2 diesel fuel.
1.25 Storage, loading for shipment and accounting for all ash disposal under
the Ash Management Services Contract.
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SCHEDULE E
ANNUAL GUARANTEES
1.0 Dependable Capacity Guarantee.
Operator guarantees that the Facility will meet or exceed the
Dependable Capacity level determined in accordance with Article II of the Power
Purchase Agreement. If the Operator fails to meet or exceed the Power Purchase
Agreement Dependable Capacity level, Operator agrees to pay Owner a rebate as
described in Schedule G.
2.0 Heat Rate Guarantee.
Operator guarantees the Facility will be operated to attain a net
operating heat rate value equal to the value represented on the corrected
input/output curve developed for the Facility by the Operator, with the
assistance of the Contractor, as contemplated in Appendix G to the Turnkey
Contract, and approved by Owner prior to the Commercial Operations Date,
adjusted by the applicable Heat Rate Degradation Factors listed below (the
"Guaranteed Heat Rate"). On or prior to the Commercial Operations Date, Owner
and Operator will agree to use the Degradation Factors that are appropriate for
a five year or six year major maintenance cycle, and will resolve any dispute
with respect to the appropriate Degradation Factors in accordance with the
procedures set forth in Article XII. (The annual Guaranteed Heat Rate for
purposes of this Agreement will be calculated using the input/output curve
specified above integrated hourly consistent with the Power Purchase Agreement
over the Contract Year for all hours that the Facility is at or above 32% of the
Power Purchase Agreement Dependable Capacity rating.)
For purposes of this Agreement, the actual net operating heat rate will
be calculated using the actual measured fuel consumption, the weighted calorific
value of the coal delivered to the plant bunkers during the subject Contract
Year, and the measured net generation in kWh (corrected for process steam flow)
for all hours the Facility is at or above 32% of the Power Purchase Agreement
Dependable Capacity rating.
A bonus will be paid to the Operator by the Owner in accordance with
Schedule G when the net operating heat rate is below the Guaranteed Heat Rate by
an amount in excess of 25 btu/kWh and a rebate will be paid to the Owner by the
Operator when the net operating heat rate is above the Guaranteed Heat Rate by
an amount in excess of 25 btu/kWh. It is agreed that the value of one (1)
btu/kWh/year based on a fuel price of $[xxx] per million btu as of July 1990 is
$[xxx]. It is also agreed that the value of one (1) btu/kWh/year will be
adjusted on an annual basis by a factor equal to the adjustment to the
4
- ------------
[xxx] These portions of this exhibit have been omitted and filed separately
with the Commission pursuant to a request for confidential treatment.
46
Base Fuel Compensation Price determined in accordance with Article 10 of the
Power Purchase Agreement.
Following the completion of one (1) calendar year of operation, the
Operator may request adjustment of the Guaranteed Heat Rate curve based on the
correlation of the actual net operating heat rate and the Guaranteed Heat Rate.
Operator must provide information to Owner supporting the Operator's request for
adjustment of the Guaranteed Heat Rate curve. Owner shall in good faith respond
to such request within thirty (30) calendar days. If the Owner fails to approve
such request for adjustment of the Guaranteed Heat Rate curve, the matter shall
be resolved in accordance with Article XII of this Agreement.
Heat Rate Degradation Factors
(Five Year Major Maintenance Cycle)
Contract Degradation Contract Degradation
Year Factor Year Factor
1 1.0130 14 1.0287
2 1.0164 15 1.0308
3 1.0199 16 1.0250
4 1.0197 17 1.0280
5 1.0218 18 1.0310
6 1.0193 19 1.0315
7 1.0207 20 1.0337
8 1.0237 21 1.0302
9 1.0258 22 1.0309
10 1.0257 23 1.0339
11 1.0222 24 1.0360
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12 1.0252 25 1.0388
13 1.0265
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Heat Rate Degradation Factors
(Six Year Major Maintenance Cycle)
Contract Degradation Contract Degradation
Year Factor Year Factor
1 1.0130 14 1.0259
2 1.0164 15 1.0289
3 1.0199 16 1.0287
4 1.0197 17 1.0308
5 1.0218 18 1.0330
6 1.0240 19 1.0269
7 1.0188 20 1.0299
8 1.0218 21 1.0329
9 1.0249 22 1.0327
10 1.0247 23 1.0349
11 1.0268 24 1.0370
12 1.0290 25 1.0398
13 1.0229
3.0 Demonstrated Capacity Guarantee.
Beginning with the first Dependable Capacity Demonstration Period
following the Initial Dependable Capacity Summer Demonstration Period and the
Initial Dependable Capacity Winter Demonstration Period, as such terms are
defined in the Power Purchase Agreement, the Operator guarantees the Facility
will demonstrate a Dependable Capacity
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equal to or greater than the capacity demonstrated during the previous
Dependable Capacity Summer Demonstration Period and the previous Dependable
Capacity Winter Demonstration Period. The Dependable Capacity Rating can be
adjusted up or down by mutual agreement between the Owner and Operator. If
either party desires to adjust the Summer or Winter Dependable Capacity Rating
of the Facility, the party desiring the change must notify the other party sixty
(60) days prior to the next Dependable Capacity Demonstration Period stating the
desired Dependable Capacity Rating and the reasons for the requested adjustment.
If the Operator fails to meet or exceed the Demonstrated Dependable Capacity
Guarantee, the Operator agrees to pay the Owner a rebate as outlined in Schedule
G.
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50
SCHEDULE F
REPORTING REQUIREMENTS
Monthly Fuel Burn Report, as defined in the Power Purchase Agreement Section
6.17.
Daily Operations Report, as defined in the Power Purchase Agreement Section 7.1.
Maintenance Schedule, as defined in the Power Purchase Agreement Section 7.2.
Operating Log, as defined in the Power Purchase Agreement Section 7.4(b).
NERC GADS Reports, as defined in the Power Purchase Agreement Section 7.4(d).
Plant Performance Report, which will be prepared monthly and will include data
about plant current performance against the plan goals as well as significant
operating events.
Major Maintenance Reports, which will be prepared for each scheduled outage and
include all equipment inspection and maintenance performed during the outage.
They will have as attachments, reports prepared by outside contractors engaged
for the outage.
Unit Trip Reports, which will be prepared for each unscheduled outage and
include explanations of the reason for the trip and corrective actions taken to
repair equipment as well as any actions taken to prevent a similar trip.
Completed Work Orders, which will be kept on site and include details of the
reason for the generation of the work order and the actions taken to correct the
source of the work order.
Administration Report, reporting accounting, human resource, and warehousing
activities.
Reports and data required to be prepared, maintained, and filed under terms of
Applicable Permits.
1
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SCHEDULE G
FEE, REBATE & BONUS SCHEDULE
1.1 Base Operations Fee. Commencing on the last day of each month after the
Mobilization Date, and on the last day of each month thereafter through the
Commercial Operations Date, Owner shall pay Operator a Base Operations Fee of
$[xxx] per month. Commencing on the last day of the calendar quarter in which
the Commercial Operations Date shall occur, and on the last day of each calendar
quarter thereafter, Owner shall pay Operator a Base Operations Fee calculated at
the rate of $[xxx] per month. The Base Operations Fee for the purpose of
determining Rebates and Bonus will be defined as the monthly Base Operations Fee
multiplied by twelve (12). Payments of the Base Operations Fee for any month or
quarter, as applicable, shall be pro-rated for the actual number of days elapsed
in such month or quarter.
1.2 Escalation of Base Operations Fee. The Base Operations Fee shall be adjusted
based on the Gross National Product Implicit Price Deflator on an annual basis
and such adjustments shall become effective on January 1 of each Contract Year
during the Term hereof. Should this index be discontinued, an index specified by
the appropriate government agency as the replacement index, if any, shall be
used. If no replacement index is specified, a new index which most accurately
reflects changes for the applicable cost component shall be substituted by
mutual agreement of the Parties.
1.3 Dependable Capacity Rebate. Operator agrees to rebate to the Owner any
amount that the Dependable Capacity Payments to the Owner are reduced as a
result of the Facility's failure to meet the Power Purchase Agreement Guaranteed
Dependable Capacity rating after adjustments are made including "Non-Reduction
Amounts" for the current year and utilization of "Credits" from the
"Availability Bank." (Details of the Dependable Capacity Reduction Formula are
contained in Article 10, Paragraph 15 of the Power Purchase Agreement.) The
total amount of the Rebate for the Facility's failure to meet the Power Purchase
Agreement Guaranteed Dependable Capacity rating after adjustments is limited to
thirty-three percent (33%) of the annual Base Operations Fee. Dependable
Capacity Rebates will be due fifteen (15) days after receipt of documentation
from Owner indicating that Owner has experienced a reduction in capacity
payments in accordance with the Power Purchase Agreement.
1.4 Dependable Capacity Bonus. No bonus shall be paid for exceeding the
Guaranteed Dependable Capacity rating of the Facility.
1.5 Operating Heat Rate Rebate. Beginning on March 31, 1998 and on each March 31
thereafter, Operator agrees to pay Owner a rebate equal to $[xxx] per Btu/kWh
multiplied by the Net Output Factor as defined by NERC for each Btu that the
annual net operating heat rate for the previous Contract Year was greater than
25 btu/kWh above the Guaranteed Annual Heat Rate as defined in Schedule E. An
example of the Heat Rate Rebate calculation is contained in Section 2.1 of this
Schedule G. (Note: The $[xxx] per Btu/kWh factor shall
1
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[xxx] These portions of this exhibit have been omitted and filed separately
with the Commission pursuant to a request for confidential treatment.
52
be adjusted on an annual basis by a factor equal to the fuel adjustment clause
as defined in the Power Purchase Agreement). The Operating Heat Rate Rebate is
limited to an amount equal to thirty-three percent (33%) of the annual Base
Operations Fee.
1.6 Operating Heat Rate Bonus. Beginning on March 31, 1998 and on each March 31
thereafter, Owner agrees to pay Operator a bonus equal to $[xxx] per Btu/kWh
multiplied by the Net Output Factor as defined by NERC for each Btu that the
annual net operating heat rate for the previous Contract Year was less than 25
btu/kWh below the Guaranteed Annual Heat Rate as defined Schedule E. An example
of the Heat Rate Bonus calculation is contained in Section 2.2 of this Schedule
G. (Note: The $[xxx] per Btu/kWh factor in the formula shall be adjusted on an
annual basis by a factor equal to the fuel adjustment clause as defined in the
Power Purchase Agreement). The Operating Heat Rate Bonus is not limited to any
specific percentage of the Base Operations Fee.
1.7 Demonstrated Capacity Rebate. Beginning with the first Dependable Capacity
Demonstration following the Initial Dependable Capacity Demonstration, Operator
agrees to rebate to Owner an amount equal to the Capacity Purchase Price
specified in the Power Purchase Agreement, expressed as $/KW per month, or a
prorated amount as appropriate for every KW that the Demonstrated Capacity for
the current Summer Period and/or Winter Period is less than the previous year's
corresponding Demonstrated Capacity. Demonstrated Capacity Rebates will be due
on the last day of each calendar quarter and payable by the fifteenth (15th).
The Demonstrated Capacity Rebate for any given year is limited to an amount
equal to thirty-three percent (33%) of the annual Base Operations fee. An
example of this calculation is contained in Section 2.3 of this Schedule G.
1.8 Demonstrated Capacity Bonus. No bonus will be paid for exceeding the
previous year's Summer or Winter Demonstrated Capacity.
1.9 Example Dependable Capacity Rebate Calculations. See Article 10 of the Power
Purchase Agreement.
2
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[xxx] These portions of this exhibit have been omitted and filed separately
with the Commission pursuant to a request for confidential treatment.
53
2.1 Example of Operating Heat Rate Rebate.
Assumptions
Net Electrical Output for Contract Year: 1,576,000,000 kWh
Load Profile for Contract Year: 6,000 hours at 200 MW
2,000 hours at 150 MW
760 hours at 100 MW
Note: This would be done for every hour for the Contract Year.
Guaranteed Heat Rate Curve: (EXAMPLE CURVE ONLY)
[xxx/xxx = (xxxxxxxxxx) / xx) + (xxxxxx(xxxx) +]
[(xxx(xx) x xx)]
Fuel Consumption for Contract Year: [xxx]
(Fuel Consumption to Be Defined As Coal
Consumed When Facility Is At Or Above 32%
of the Facility Dependable Capacity Rating.)
Calculations:
Guaranteed Heat Rate; (Guaranteed Heat Rate Curve)
200,000 KW = > [xxx = ]
150,000 KW = > [xxx = ]
76,000 KW = > [xxx = ]
Note: This would be done for every hour of the Contract Year.
Guaranteed fuel consumption integrated over Contract Year:
(6,000 x 200,000 x [xxx + ]
(2,000 x 150,000 x [xxx + ]
( 760 x 100,000 x [xxx = xxx]
Note: This would be done for every hour of the Contract Year.
Guaranteed Heat Rate integrated over Contract Year:
[xxx / xxx = xxx]
Operating Heat Rate: [xxx / xxx = xxx]
Heat Rate Deviation: [xxx - xxx = xxx - xxx = xxx]
3
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[xxx] These portions of this exhibit have been omitted and filed separately
with the Commission pursuant to a request for confidential treatment.
54
Operating Heat Rate Rebate: [xxx x xxx x xxx xxx = xxx]
4
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[xxx] These portions of this exhibit have been omitted and filed separately
with the Commission pursuant to a request for confidential treatment.
55
2.2 Example of Operating Heat Rate Bonus.
Assumptions
Net Electrical Output for Contract Year: 1,576,000,000 kWh
Load Profile for Contract Year: 6,000 hours at 200 MW
2,000 hours at 150 MW
760 hours at 100 MW
Note: This would be done for every hour for the Contract Year.
Power Purchase Agreement Heat Rate Curve:
[xxx/xxx (xxx / xxx) + xxx + ]
[xxx x xxx]
Fuel Consumption for Contract Year: [xxx]
(Fuel Consumption To Be Defined As Coal
Consumed When Facility Is At Or Above 32%
of the Facility Dependable Capacity Rating.)
Calculations:
Guaranteed Heat Rate at load points, using Tested Heat Rate Curve:
200,000 KW - > [xxx =]
150,000 KW = > [xxx =]
76,000 KW = > [xxx =]
Note: This would be done for every hour of the Contract Year.
Guaranteed fuel consumption integrated over Contract Year:
(6,000 x 200,000 x [xxx +]
(2,000 x 150,000 x [xxx +]
( 760 x 100,000 x [xxx = xxx]
Note: This would be done for every hour of the Contract Year.
Guaranteed Heat Rate integrated over Contract Year:
[xxx / xxx = xxx]
Operating Heat Rate: [xxx / xxx = xxx]
Heat Rate Deviation: [xxx - xxx = xxx - xxx = xxx]
Operating Heat Rate Rebate: [xxx x xxx x xxx = xxx]
5
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[xxx] These portions of this exhibit have been omitted and filed separately
with the Commission pursuant to a request for confidential treatment.
56
bonus due the Partnership from the Operator. The Bonus
for Heat Rate is not limited to any percentage of the Annual
Base Operations Fee.
Note: The Heat Rate Rebate and Bonus will be adjusted annually by a factor
equal to the Fuel Adjustment Clause as defined in the Power Purchase
Agreement.
6
57
2.3 Example of Demonstrated Capacity Rebate Calculation.
Assumptions: Facility demonstrates Summer Dependable Capacity of 222.2 MW and
a Winter Dependable Capacity rating of 217.8 MW during the
initial Demonstration Periods. During the next Demonstration
Period, Facility demonstrates a Summer Dependable Capacity of
220.2 MW and a Winter Dependable Capacity rating of 217.8 MW.
Calculations: Initial Winter Demonstrated Dependable Capacity = 217.8 MW
Subsequent Winter Demonstrated Dependable Capacity = -217.8 MW
--------
0.0 MW
No Rebate Due For "Winter Period"
Initial Summer Demonstrated Dependable Capacity = 222.2 MW
Subsequent Summer Demonstrated Dependable Capacity = -220.2 MW
--------
2.0 MW
2 MW x 1000KW x $20.8570 = $41,714 per month or a prorated amount based
on 730 hours in a month for all months during
the "Summer Period"
7