Exhibit 10.9
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AGREEMENT
THIS AGREEMENT, dated as of July 13, 2001 (the "Effective Date"), by
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and among ZOND WINDSYSTEM PARTNERS, LTD., SERIES 85-C ("QF") and Pacific Gas
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and Electric Company ("PG&E"). QF and PG&E are sometimes referred to herein as
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the "Parties."
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WITNESSETH
WHEREAS, QF and PG&E are Parties to power purchase agreement for
PG&E's purchase of power from QF's project identified by PG&E Log No. 01W017
("PPA");
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WHEREAS, starting on February 1, 2001 (the "Initial Default Date"),
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PG&E failed to pay the full amount due to QF under the PPA for deliveries of
energy and capacity for the period between December 1, 2000 and April 6, 2001;
WHEREAS, the amount of payables for QF are set forth in Attachment A
hereto for a total amount of Six Hundred Sixty Six Thousand Six Hundred Twenty
Six dollars ($666,626), excluding interest thereon (the "Prepetition
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Payables");
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WHEREAS, PG&E asserted that its failure to make certain of the
Prepetition Payables was excused based on a claim of force majeure and QF
protested PG&E's assertion of such a force majeure and QF continues to dispute
such assertions of PG&E's claim of force majeure;
WHEREAS, PG&E filed a Chapter 11 bankruptcy petition pursuant to
Title 11 United States Codes ss.ss. 101 et seq. ("Bankruptcy Code") in the
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United States Bankruptcy Court for the Northern District of California, San
Francisco Division (the "Bankruptcy Court") on April 6, 2001;
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WHEREAS, on June 13, 2001, the California Public Utilities Commission
(the "CPUC") issued Decision No. 01-06-015 whereby Qualifying Facilities under
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Standard Offer Contracts with PG&E may request that their contracts be
modified to replace the energy pricing term with a five-year average fixed
price of 5.37 cents/kwh, as proposed in the March 23, 2001 comments of the
Independent Energy Producers referred to in CPUC Decision No. 01-06-015;
WHEREAS, QF notified PG&E of its desire to modify the PPA pursuant to
CPUC Decision No. 01-06-015;
NOW THEREFORE, in consideration of the premises described above and
the terms and conditions set forth below, the Parties hereby agree as follows:
1. Acceptance of the CPUC Five-Year Fixed Energy Price Option. Upon entry
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of a Bankruptcy Court order authorizing the assumption of the PPA as specified
in Section 2 of this Agreement, PG&E and QF shall amend the PPA to replace the
energy price term (PG&E's "full short-run avoided costs" or "full short-run
avoided operating costs," as the case may be) for the lesser of the term of the
PPA or five years with the applicable energy prices as specified in Attachment
B to this Agreement. These amended energy prices become effective on July 16,
2001, at 00:00 PPT. No provision of the PPA other than the energy pricing term
is or shall be deemed to be modified, amended, waived or otherwise affected by
this Agreement and except as so modified hereby, the PPA remains in full force
and effect and is hereby ratified and confirmed in all respects. The Parties
agree to reasonably cooperate and contest any challenge in any CPUC proceeding
that seeks to alter or modify the energy pricing terms set forth in Attachment B
to this Agreement, including, but not limited to, any challenge to the
reasonableness of PG&E having entered into this Agreement. If, despite such
cooperation and contest, a CPUC decision that alters or modifies the pricing
terms in Attachment B to this Agreement becomes final and nonappealable, the
Parties shall in good faith renegotiate the pricing terms in Attachment B to
this Agreement, solely on a prospective basis, to preserve a five-year annual
average fixed price of 5.37 cents/kwh, as proposed in the March 23, 2001
comments of the Independent Energy Producers referred to in Decision No.
01-06-015. By no later than July 13, 2001, the Parties shall execute an
amendment to the PPA consistent with the terms of this Section 1.
2. Conditioned on Assumption. The effectiveness of the PPA amendment
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contemplated in Section 1 of this Agreement is contingent upon assumption of
the PPA in accordance with the procedures described below:
a. PG&E and QF shall use their respective best efforts to enter into
a Stipulation Regarding Assumption of the PPA ("Stipulation") that
shall be filed in the Bankruptcy Court specifying the terms of
this Agreement;
b. PG&E shall use its best efforts to file and serve a Motion for
Bankruptcy Court Approval of the Stipulation ("Motion"); and
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c. The Bankruptcy Court must grant the Motion and authorize PG&E's
assumption of the PPA effective as of August 15, 2001.
3. Full Payment. In connection with PG&E's assumption of the PPA, PG&E
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agrees to pay to QF the Prepetition Payables, including all interest thereon at
the Interest Rate (as defined in Section 4), which shall accrue and be added to
the outstanding balance of the Prepetition Payables and which shall constitute
an administrative expense (the "Cure Amount") on the sooner of the following
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(the "Due Date"): (i) the date on which an order converting the PG&E Chapter 11
case to a Chapter 7 case is final and all appeals have been concluded; (ii) the
date on which an order dismissing the PG&E Chapter 11 case is entered and with
no stay having been timely; or (iii) the "Plan Effective Date" (as such term is
defined in the plan of reorganization as confirmed in the PG&E Chapter 11 case,
the "Plan"), all as part of its administrative priority cure obligations
pursuant to sections 365, 1129 and 503(b)(1)(A) of the Bankruptcy Code. There is
no "Cure Amount" other than as defined in this Section 3. In the event that the
Plan Effective Date does not occur on or before July 15, 2003, PG&E will
commence to pay QF on July 15, 2003, and thereafter monthly on the 15th day of
each month, a sum equal to two percent (2%) of the total Cure Amount, excluding
any accrued but unpaid interest thereon, until the sooner of the occurrence of
the Due Date or July 15, 2005, at which time all remaining Cure Amounts
including all accrued but
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unpaid interest will be paid in full under (iii) above, or will be payable
under (i) and (ii) above. Interest shall continue to accrue on the then
outstanding amounts until paid. PG&E agrees that QF shall receive the benefit
of the terms of any agreement between PG&E and any other party to the
Bankruptcy case which provides such party with terms that are better with
respect to the timing of payments of the Cure Amount than afforded QF under
this Agreement.
4. Interest. Interest shall accrue on the Prepetition Payables from their
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respective due dates until paid, at a rate (the "Interest Rate") to be
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negotiated in good faith by the Parties. If the Parties do not agree on the
Interest Rate prior to the Plan Effective Date, the Interest Rate shall be
determined in accordance with the terms of the Plan, if any, or by the
Bankruptcy Court as part of the plan confirmation process. If no plan is
confirmed or if PG&E's bankruptcy case is dismissed or converted to Chapter 7,
then the Bankruptcy Court shall determine the Interest Rate. If the Bankruptcy
Court declines to exercise jurisdiction over the determination of the Interest
Rate, the Parties reserve all rights to pursue their appropriate remedies. The
Parties agree that interest shall accrue and the Interest Rate shall be
determined as set forth herein but each of the Parties reserves all of its
respective rights as to the appropriate Interest Rate and to the capitalization
or compounding thereof in any proposed plan or in connection with any other
determination of the Interest Rate by the Bankruptcy Court. Specifically, though
not exclusively, QF reserves the right to dispute any Interest Rate set forth in
a proposed plan and preserves the right to assert that the claim of QF is
impaired under the proposed plan as a result of such proposed Interest Rate.
5. Waiver of Pecuniary Loss Damages. QF waives its right to assert
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claims to recover "Pecuniary loss" damages in connection with assumption of
the PPA pursuant to Bankruptcy Code section 365(b)(1)(B). This waiver shall
not diminish or affect QF's right to payment of the Prepetition Payables or
the Cure Amount, or to recover interest thereon; nor shall this waiver affect
the determination of the Interest Rate.
6. Waiver of Right to Pre-Assumption Claim. QF waives its right to
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assert claims to receive the difference between the market price and the
contract price for energy and capacity delivered to PG&E from and after April
6, 2001 through July 13, 2001, the effective date that PG&E assumes the PPA,
pursuant to Bankruptcy Code sections 365 and 503(b).
7. Payment of Post-Assumption Obligations. PG&E shall pay in full any
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and all post-assumption obligations due under the PPA on such dates, at such
times, and under the PPA, pursuant to Bankruptcy Code section 365. Such
obligations shall be afforded administrative priority status under Bankruptcy
Code section 503. Good faith disputes regarding the amounts to be paid to QF
under the PPA for post-assumption deliveries of energy and capacity shall not
be deemed a breach of this Agreement.
8. Reservation of Rights. Neither this Agreement nor PG&E's
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assumption of the PPA in the manner contemplated herein shall modify, waive,
or otherwise prejudice either Party's rights and obligations with respect to
any proceedings before the CPUC, the Federal Energy Regulatory Commission and
the courts, relating to the energy price to be paid pursuant to the PPA for
the period prior to PG&E's assumption of the PPA provided herein, including,
but not limited to, PG&E's pending Emergency Motion for Stay of D.99-11-025 to
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End True-Up for Switching QFs, filed January 10, 2001 in CPUC proceeding
R.99-11-022, and petitions for rehearing, enforcement actions, and judicial
challenges to CPUC Decision No. 01-03-067 and the dispute between the Parties
with respect to the statement, computation and payment for electricity sold
and delivered pursuant to the PPA during the period from January 1 through
January 18, 2001. However, QF hereby waives any claim for payment from PG&E
based on any QF assertion of economic hardship, other than that as set forth
in the PPA and this Agreement or as has otherwise already been approved for
the QF by the Bankruptcy Court and accrued before July 31, 2001.
9. Further Assurances. QF and PG&E shall take all necessary action to
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implement the terms and conditions contemplated herein, including but not
limited to executing the amendment contemplated in Section 1 of this Agreement
and preparing any documentation and taking any actions necessary to implement
Section 2 of this Agreement and approving, executing and delivering this
Agreement.
10. Descriptive Headings. The descriptive headings of this Agreement
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are inserted for convenience of reference only and do not constitute a part of
this Agreement. All references to sections, attachments, or exhibits are to
the sections, attachments or exhibits of this Agreement.
11. Expenses. Each Party shall pay its own expenses, professional fees
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and other costs connected with or associated with the negotiation and
execution of this Agreement. In the event any Party breaches this Agreement,
the breaching Party shall pay all costs and expenses (including attorneys'
fees and expenses) incurred by the other Party or Parties in connection with
or arising out of such breach.
12. Governing Law. This Agreement is made and entered into in the
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State of California, and shall in all respects be interpreted and governed
under the laws of California, without regard to principles of conflicts of
law.
13. Entire Agreement. This Agreement, and all attachments hereto,
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sets forth the entire agreement between the Parties relating to the acceptance
by QF of the CPUC five-year fixed energy price option set forth in CPUC
Decision No. 01-06-015, assumption by PG&E of the PPA and the payment of the
Cure Amount and supercedes and replaces any prior understanding,
correspondence, commitments or agreement, whether oral or written concerning
the subject matters of this Agreement. Any modification or amendment to this
Agreement must be in writing and must be signed and dated by the Parties, and
must explicitly state that it is intended to be an amendment to or
modification of this Agreement.
14. Binding Agreement. This Agreement shall be binding upon and inure
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to the benefit of the successors and assigns of the Parties hereto.
15. Construction of Agreement. Counsel for the respective Parties
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have reviewed and participated in the drafting of this Agreement.
Consequently, the principle of construction of contracts that ambiguities
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shall be resolved against the drafter shall not be used or applied in the
interpretation of this Agreement.
16. Representations. Each Party hereby represents and warrants to
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each of the other Parties that (a) the execution of this Agreement has been
duly authorized by all necessary corporate, shareholder and similar actions;
(b) this Agreement has been duly executed and delivered and constitutes the
legal valid and binding obligation of such Party, enforceable against such
Party is in accordance with its terms; and (c) the execution and delivery of
this Agreement and the performance by such Party of its obligations hereunder
do not and will not conflict with, contravene or breach, and law, judgment,
order or material contract applicable to or binding on such Party or any of
its properties or assets.
17. Execution by Counterparts. This Agreement may be executed in
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separate counterparts, each of which when executed shall be an original, but
all of which taken together, shall constitute one and the same instrument.
18. Bankruptcy Court Approval. This Agreement is subject to
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Bankruptcy Court approval. If such approval has not been given by July 27,
2001, this Agreement shall be deemed a nullity.
IN WITNESS WHEREOF, this Agreement has been duly executed by or on
behalf of QF and PG&E as of the Effective Date.
Zond Windsystem Partners, Ltd., Pacific Gas and Electric Company,
Series 85-C a California corporation
a California Corporation
By: Zond Windsystems Management
Corporation V, its General Partner
By: /s/ John A. Lamb By: /s/ [Illegible]
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ATTACHMENT A
Calculated
Dec'00 Jan'01 Feb'01 Mar'01 Apr 1-6 Outstanding A/R
Legal Entity Log Number Outstanding Outstanding Outstanding Outstanding Outstanding at 4/6/01
A/R A/R A/R A/R A/R
Due 02/02/018 Due 03/05/01* Due 04/03/01* Due 05/04/01* Due 04/17/01*
Zond Wid Systems
Partners LTD 01W017 $46,359 $104,645 $136,575 $307,803 71,293 $666,626
Attachment B
Pacific Gas and Electric Company
FIXED ENERGY PRICES FOR QUALIFYING FACILITIES UNDER D.01-06-015(1)
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Effective through December 31, 2001
Starting 2001 TOU
Energy 2001 TOU SRAC TF 2001 TOU Energy
Value Hours Base(2) Factor(3) Price(4)
$/kwh $/kwh
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(a) (b) (c) (d) (e) = a*d
Allocation of Annual Fixed Price to Seasons: Without Time-of-Use Metering:
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Period A - Summer 0.053700 4,417 0.018748 0.879 0.047181
Period B - Winter 0.053700 4,343 0.023973 1.123 0.060330
Annual Average 0.053700 8,760 0.021338 0.053700
Allocation of Seasonal Prices to TOU Periods:
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Period A - Summer With Time-of-Use Metering:
Peak 0.047181 774 1.065 0.050248
Partial-Peak 0.047181 903 1.022 0.048219
Off-Peak 0.047181 2,003 0.985 0.046465
Super Off-Peak 0.047181 737 0.946 0.044633
Period B - Winter
Peak - - - -
Partial-Peak 0.060330 1,612 1.032 0.062261
Off-Peak 0.060330 2,008 0.992 0.059866
Super Off-Peak 0.060330 723 0.950 0.057314
1. These energy prices are derived solely for purposes of implementing
the five-year fixed energy price (5.37 cents/kwh) option in CPUC
Decision (D.) 01-06-015. These prices will be reallocated annually
using appropriate TOU calendar hours.
2. SRAC TF Base values reflect the seasonal allocation factors currently
specified in PG&E's SRAC Transition Formula, as adopted by the CPUC
in D.96-12-028. Seasonal values reflect the Base SRAC energy prices
adopted in D.96-12-028. The annual average value shown derives from
weighting the seasonal values by TOU period hours.
3. TOU factors allocate the fixed annual energy price for seasons, and
seasonal values for time-of-use periods. Seasonal TOU factors are
derived from the ratio of the seasonal SRAC TF Base values to the
average annual value shown. Intraseasonal TOU factors are as adopted
in D.96-12-028 (as corrected in CPUC D.97-01-027). Off-peak period
values are calculated using seasonal period hours for the applicable
year, per the following:
Period A (May 1 - October 31) Period B (November 1 - April 30)
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[Total Summer hours - (1.065 * Summer [Total Winter hours - (1.032 * Winter Partial-
Peak hours) - (1.022 * Summer Partial Peak hours) Peak hours) - (0.950 * Winter Super Off-Peak
- (0.946 * Summer Super Off-Peak hours)]/Summer hours)]/Winter Off-Peak hours.
Off-Peak hours.
4. TOU energy price is the product of the starting energy value and the
TOU factor. Energy prices shown do not include applicable line loss
adjustments. Line loss adjustments will be determined in accordance
with CPUC D.01-01-007.