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EXHIBIT 10.48
POWER PURCHASE AGREEMENT
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TABLE OF CONTENTS
PAGE
---- Article 1 DEFINITIONS..................................................................................... 2
Article 2 DESCRIPTION OF THE FACILITY..................................................................... 23
2.1 Summary Description...................................................................... 23
2.2 Site ................................................................................... 23
2.3 Interconnection Point.................................................................... 24
2.4 Design and Construction of the Facility.................................................. 24
2.5 Technical Specifications .............................................................. 24
2.6 Contract Capacity........................................................................ 25
2.7 Performance Requirements................................................................. 28
2.8 Fuels.................................................................................... 28
Article 3 OBLIGATION TO PURCHASE.......................................................................... 29
3.1 Term .................................................................................... 29
3.2 Sale and Purchase of Energy and Capacity................................................. 29
(A) Energy........................................................................... 29
(B) Capacity......................................................................... 30
(C) Backup and Maintenance Power..................................................... 31
3.3 Operation of the Facility................................................................ 31
3.4 Seller's Required Approvals.............................................................. 33
3.5 Contract Certification or Approval....................................................... 34
3.6 Phillips Steam Agreement................................................................. 38
Article 4 MILESTONES AND SCHEDULE......................................................................... 40
4.1 Proposed Commercial Operation Dates...................................................... 40
4.2 Recourse for Delays...................................................................... 40
4.3 Proposed Milestone Dates................................................................. 41
(A) EPC Contract .................................................................... 41
(B) Site Acquisition ................................................................ 41
(C) Financial Closing ............................................................... 44
(D) Construction Commitment.......................................................... 44
(E) Set Generating Equipment......................................................... 44
(F) Set HRSGs........................................................................ 44
4.4 Certain Milestone Matters................................................................ 44
(A) Notification .................................................................... 44
(B) Milestone Deadline Dates......................................................... 44
4.5 Construction Schedule and Proposed Contractor Milestone Dates ........................... 44
4.6 Southwestern Rights During Construction.................................................. 45
4.7 Conditions to Combustion Turbine Commercial Operation Date .............................. 45
4.8 Conditions to Cogeneration Commercial Operation Date..................................... 47
Article 5 PAYMENT AND BILLINGS............................................................................ 49
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5.1 General Terms and Conditions............................................................. 49
5.2 Capacity Payments........................................................................ 49
5.3 Fixed O&M Payment........................................................................ 51
5.4 Energy Payments.......................................................................... 51
5.5 Variable O&M Payment..................................................................... 53
5.6 Seller Charge............................................................................ 53
5.7 Start Payments........................................................................... 53
5.8 Pre-Commercial Operation Energy.......................................................... 53
5.9 Manner of Payment........................................................................ 53
(A) Payments ........................................................................ 53
(B) Statement ....................................................................... 53
(C) Late Charges..................................................................... 54
(D) Billing Disputes................................................................. 55
5.10 Pro-rated Months......................................................................... 55
Article 6 DAMAGES AND SECURITY FUND....................................................................... 56
6.1 Establishment of Completion Security Fund................................................ 56
6.2 Damages Prior to Commercial Operation.................................................... 59
(A) Delay Damages................................................................... 59
(B) Damages for Termination Prior to Commercial Operation .......................... 60
6.3 Damages for Shortfalls in Capacity....................................................... 61
(A)...................................................................................... 61
(B)...................................................................................... 62
(C)...................................................................................... 62
(D) Persistent Shortfalls............................................................ 62
6.4 Damage and Other Payments from Completion Security Fund and/or by Direct Billing......... 63
6.5 Additional Security...................................................................... 64
6.6 Equity Contribution...................................................................... 66
6.7 Indebtedness: Restrictions on Refinancing and Additional Indebtedness.................... 66
Article 7 BUY-OUT AND FACILITY PURCHASE OPTIONS........................................................... 69
7.1 Termination for Southwestern's Convenience During Initial Term .......................... 69
(A) Termination Payment.............................................................. 69
(B) Information and Notice........................................................... 70
(C) Consummation..................................................................... 70
(D) Transfer and Release............................................................. 71
7.2 Buyout Option............................................................................ 72
7.3 Right to Purchase Facility at End of Term................................................ 74
7.4 First Right of Refusal: Sale of Seller's Interest........................................ 74
7.5 Disclaimer of Liability for Losses and Damages........................................... 76
Article 8 INTERCONNECTION FACILITIES AND METERING......................................................... 77
8.1 Interconnection Facilities............................................................... 77
8.2 Metering Devices......................................................................... 78
8.3 Adjustment for Inaccurate Meters......................................................... 80
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8.4 Communication Equipment.................................................................. 82
8.5 Protective Systems....................................................................... 82
Article 9 OPERATION AND MAINTENANCE REQUIREMENTS.......................................................... 83
9.1............................................................................................... 83
(A) General ......................................................................... 83
(B) Fuel ............................................................................ 83
9.2 Operating Committee and Operating Procedures............................................. 84
9.3 Maintenance Schedule..................................................................... 85
9.4 Facility Operation....................................................................... 86
9.5 Dispatch................................................................................. 86
9.6 Non-Dispatchable Capacity and Energy..................................................... 87
9.7 Certification of Operation and Maintenance............................................... 87
9.8 Outage Reporting......................................................................... 90
Article 10 DEFAULT AND TERMINATION........................................................................ 91
10.1 Notice of Default........................................................................ 91
10.2 Events of Default of Seller.............................................................. 91
10.3 Project Lender Right to Cure Default of Seller........................................... 94
10.4 Events of Default of Southwestern........................................................ 94
10.5 Termination.............................................................................. 96
10.6 Operation by Southwestern Following Event of Default by Seller .......................... 96
Article 11 FORCE MAJEURE.................................................................................. 101
11.1 Definition of Force Majeure.............................................................. 101
11.2 Applicability of Force Majeure........................................................... 102
11.3 Limitations on Effect of Force Majeure................................................... 102
11.4 Fixed Payments Affected by Force Majeure................................................. 103
11.5 Delivery Excuse.......................................................................... 104
11.6 Steam Host Force Majeure; Steam Delivery Reduction....................................... 105
Article 12 REPRESENTATIONS AND WARRANTIES................................................................. 108
12.1 Seller's Representations and Warranties.................................................. 108
12.2 Southwestern Representations and Warranties.............................................. 110
12.3 Information to Financiers, Stockholders, and Governmental Authorities.................... 112
12.4 Confidentiality.......................................................................... 112
Article 13 INSURANCE AND INDEMNITY........................................................................ 114
13.1 Seller's Insurance Coverages............................................................. 114
13.2 Evidence and Scope of Insurance.......................................................... 114
13.3 Term and Modification of Insurance....................................................... 115
13.4 indemnification.......................................................................... 117
Article 14 REGULATORY JURISDICTION AND COMPLIANCE......................................................... 120
14.1 Governmental jurisdiction and Regulatory Compliance...................................... 120
14.2 Provision of Support..................................................................... 120
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14.3 Regulatory Disallowance.................................................................. 121
14.4 Contest of Regulatory Disallowances ..................................................... 122
14.5 Compliance with Law...................................................................... 123
14.6 Seller's Disclosures .................................................................... 124
Article 15 ASSIGNMENT..................................................................................... 125
15.1.............................................................................................. 125
15.2.............................................................................................. 126
15.3.............................................................................................. 126
15.4.............................................................................................. 126
15.5.............................................................................................. 126
15.6... ........................................................................................ 126
Article 16 CONTRACT ADMINISTRATION........................................................................ 127
16.1 Notices in Writing....................................................................... 127
16.2 Representative for Notice................................................................ 127
16.3 Notice Address for Southwestern.......................................................... 127
16.4 Notice Address for Seller................................................................ 128
16.5 Authority of Representatives............................................................. 128
16.6 Operating Records ....................................................................... 128
16.7 Operating Log ........................................................................... 129
16.8 Billing and Payment Records.............................................................. 129
16.9 Financial Reports of Seller.............................................................. 129
16.10 Retention Period ........................................................................ 129
16.11 Examination of Records................................................................... 129
16.12 Dispute Resolution....................................................................... 130
(A) ..................................................................................... 130
(B) ..................................................................................... 130
(C) Arbitration...................................................................... 130
(1) Notice to Arbitrate .................................................... 131
(2) Selection of Arbitrators ............................................... 131
(3) Discovery .............................................................. 131
(4) Hearing Process ........................................................ 132
(5).............................................................................. 133
(6) Decision ............................................................... 133
(7) Venue .................................................................. 133
(8) Governing Rules for Arbitration......................................... 133
(9) Costs .................................................................. 134
(10) Scope of Arbitrators' Authority......................................... 134
Article 17 MISCELLANEOUS.................................................................................. 135
17.1 Waiver .................................................................................. 135
17.2 Access to Facility....................................................................... 135
17.3 Governing Law ........................................................................... 135
17.4 Taxes ................................................................................... 135
17.5 Disclaimer of Third Party Beneficiary Rights............................................. 137
17.6 Relationship of the Parties.............................................................. 137
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17.7 Survival of Obligations.................................................................. 137
17.8 Severability............................................................................. 138
17.9 Non-Endorsement.......................................................................... 138
17.10 Entire Agreement; Amendments............................................................. 138
17.11 Binding Effect........................................................................... 139
17.12 Headings................................................................................. 139
17.13 Counterparts............................................................................. 139
17.14 No Personal Liability.................................................................... 139
17.15 Limitation of Damages.................................................................... 139
Article 18 STEAM HOST LOSS................................................................................ 141
18.1 Loss Of Steam Host....................................................................... 141
18.2 Steam Host Escrow Accounts During Initial Term .......................................... 144
Attachment A
Facility Components and Equipment Listing
Attachment B
Site
Schedule C-1
Establishment of Net Capability
Schedule C-2
SPP Criteria Procedures for Establishing Capability Ratings
Attachment D
Attachment E
Attachment F
Pricing Provisions and Related Schedules
Schedule F-1
Capacity Price
Schedule F-2
Fixed O&M Price
Schedule F-3
Variable O&M Price
Schedule F-4
Guaranteed Heat Rates
Schedule F-5
Start-up Price
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Schedule F-6
Adjusted Non-Firm Energy Cost
Schedule G-1
DELAY DAMAGES
Combustion Turbine Commercial Operation Delay
Schedule G-2
DELAY DAMAGES
Cogeneration Commercial Operation Delay
Attachment H
Operating Procedures
Attachment I
Insurance Coverage
Attachment J
Facility Construction Milestones
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POWER PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 23rd day of May, 1997, by and between Borger Energy Associates, L.P. ("Seller"), a Delaware limited partnership with a principal place of business at Amarillo, Texas, and Southwestern Public Service Company ("Southwestern"), a New Mexico corporation with headquarters in Amarillo, Texas (with Southwestern or Seller sometimes referred to hereinafter as "Party" and Southwestern and Seller sometimes referred to collectively as "Parties"), and is effective as of this date.
WHEREAS, Seller agrees to construct and will own and operate an electric generating plant to be located near Borger, Texas, designed to have a capacity rating of approximately 216 megawatts, as more fully described in Section 2.1, identified as "the Facility "; and
WHEREAS, Seller desires to sell electric energy and capacity to Southwestern and Southwestern desires to buy the same from the Seller; and
WHEREAS, Seller has responded to Southwestern's Request for Proposals issued September 15, 1995, as amended, by which Southwestern requested proposals for supply-side resources and Southwestern has accepted Seller's offer on the terms and conditions set forth in this Agreement;
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NOW THEREFORE, in consideration of the mutual covenants herein contained, the sufficiency and adequacy of which are hereby acknowledged, the Parties agree to the following:
ARTICLE 1
DEFINITIONS
The capitalized terms listed in this Article 1 shall have the meanings set forth below whenever such capitalized terms appear in this Agreement, whether in the singular or the plural or in the present or past tense. Terms not listed in Article 1 shall have meanings as commonly used in Good Utility Practice or the English language, as appropriate.
"AAA" means the American Arbitration Association or any successor organization.
"Actual Capacity" shall mean, for any given point in time, the net electrical capacity that can be generated by the Facility and delivered to the Interconnection Point.
"Adjusted Non-Firm Energy Cost" means Southwestern's hourly adjusted average avoided energy cost computed in accordance with the PUCT regulation P.U.C. SUBST. R. 23.66(g) in effect on the date of this Agreement as set forth in Schedule F-6.
"AEGIS" means Associated Electric and Gas Insurance Services and all of its affiliates and subsidiaries authorized by law to underwrite and provide insurance and all of their successors.
"Agreement" means this Agreement between Seller and Southwestern, including Attachments A to J and their associated Schedules.
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"Appraisal Procedure" shall mean a procedure whereby two independent appraisers, one chosen by Southwestern and one by Seller, shall mutually agree upon the determinations then the subject of appraisal. Southwestern or Seller, as the case may be, shall deliver a written notice to the other appointing its appraiser within fifteen (15) days after receipt from the other of a written notice appointing its appraiser. If within sixty (60) days after appointment of the two appraisers they are unable to agree upon the amount in question, a third independent appraiser shall be chosen within ten (10) days thereafter by the mutual consent of such first two appraisers or, if such first two appraisers fail to agree upon the appointment of a third appraiser, such appointment shall be made by the AAA, and shall be a disinterested Person qualified in the matter to be determined. The three appraisers shall make the determination in accordance with the rules of the AAA, and such determination shall be binding and conclusive on Southwestern and Seller. Each Party shall pay the costs of its own appraiser and shall share equally in the costs, if any, of a third appraiser.
"Automatic Generation Control," or "AGC," means the automatic regulation within predetermined limits of the power output of electric generators within a prescribed geographic area in response to changes in system load, system frequency, tie-line interchange, or the relation of these to each other, so as to maintain the scheduled system frequency or the established interchange with other geographic areas or both. This regulation is accomplished by pulses sent (or successor technology) through communication links between the Southwestern System Control Center dispatch computer and each generator equipped for such control to change load on the generator.
"Availability Factor" or "AF " means, for a given period of time, the hours during which the Facility was available for operation divided by the total hours during such
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given period of time, expressed as a three-place decimal, as computed in accordance with the following equation:
AF = [PH - (SIGMA(n) EDH(i) )] /PH
(i)=1
Where:
PH = The number of hours in the period of determination
exclusive of the equivalent number of hours for which
the Facility was not available due to Excused Outage.
EDH(1) = The equivalent derated or outage hours during hour
"i." If during hour "i" no derate or outage occurs,
or if such derate or outage was an Excused Outage,
then for such hour "i, " the EDH is equal to zero.
For other hours, the EDH is computed as follows:
EDH(1) = SD(i)/UAC(i), where:
SD(i) = The size of the derate below UAC during
hour "i" to the extent that such derate is
not an Excused Outage. During hours in
which the entire Facility is out of service
for reasons other than an Excused Outage,
SD(i) shall equal UAC(i).
UAC(i) = The unimpaired Actual Capacity of the
Facility during hour "i" assuming that no
derate or outage of the Facility occurred.
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"Cogeneration Commercial Operation" means that the Facility shall have met all of the conditions specified in Section 4.8.
"Cogeneration Commercial Operation Date" means the first day the Facility achieves Cogeneration Commercial Operation.
"Cogeneration Commercial Operation Deadline Date" means the date twelve (12) months after the Proposed Cogeneration Commercial Operation Date.
"Cogeneration Contract Capacity" means the electrical capacity of the Facility, in whole MW, determined by the most recent Capacity Test, or Capacity Retest, which Seller shall provide and Southwestern shall receive during Phase II in accordance with the terms of this Agreement.
"Combustion Turbine Commercial Operation" means that the Facility shall have met all of the conditions specified in Section 4.7.
"Combustion Turbine Commercial Operation Date" means the first day the Facility achieves Combustion Turbine Commercial Operation.
"Combustion Turbine Commercial Operation Deadline Date" means the date twelve (12) months after the Proposed Combustion Turbine Commercial Operation Date.
"Combustion Turbine Contract Capacity" means the electrical capacity of the Facility, in whole MW, determined by the most recent Capacity Test or Capacity Retest, which Seller shall provide and Southwestern shall receive during Phase I in accordance with the terms of this Agreement.
"Commission(s)" means any of the state or federal regulatory agencies having jurisdiction over Southwestern.
"Committed CT Capacity" means the minimum Capacity expected to be delivered by Seller during Phase I and is equal to 192 MW.
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i = The summation index for the number of PH
hours in the period of determination.
n = The total number of PH hours in the period
of determination.
"Btu" means British thermal unit of heat quantity.
"Buyout Price" shall have the meaning set forth in Section 7.2.
"Capacity" means the amount of net power output of the Facility that can be delivered to the Interconnection Point and measured in whole MW.
"Capacity Payment" means the Payment for Contract Capacity as set forth in Section 5.2.
"Capacity Test" means the test performed in accordance with Section 2.6(C) to determine the Contract Capacity of the Facility.
"Capacity Retest" means the test performed in accordance with Section 2.6(D) to redetermine the Contract Capacity of the Facility.
"Catastrophic Equipment Failure" means a sudden unexpected failure of Seller's equipment which (1) substantially reduces or eliminates the capability of the Facility to produce Capacity and Energy, and (2) is beyond the reasonable control of Seller and could not have been avoided by appropriate design, manufacturing, construction, operating, or maintenance practices, in accordance with Good Utility Practice. Catastrophic Equipment Failure does not include failure of Seller's equipment caused by, or arising from, a mechanical or equipment breakdown attributable to wear and tear normally experienced in power generation materials and equipment and their assembly and operation.
"Ceiling Price" shall have the meaning set forth in Section 7.2.
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"Committed Cogeneration Capacity" means the minimum Capacity expected to be delivered by Seller during Phase II and is equal to 216 MW, unless adjusted pursuant to Section 6.3(D).
"Completion Security Fund" means the fund maintained by the Seller as provided for in Section 6.1.
"Construction Finance Closing Date" means the date Seller achieves Financial Closing.
"Contract Capacity" means Combustion Turbine Contract Capacity during Phase I and Cogeneration Contract Capacity during Phase II.
"Contract Interest Rate" means a rate of interest per annum (computed on the basis of a year of three hundred sixty-five (365) days) equal to the lower of (a) the interest rate specified in 18 C.F.R. Section 35.19a(a)(2)(iii)(A) as the same may be changed from time to time plus one percent (1 %) per annum or, if no longer published, another mutually agreed similar rate, or (b) the maximum rate permitted by law.
"Contract Year" means each twelve (12) months that begins on the day after the Cogeneration Commercial Operation Date or its anniversary.
"Contractor Milestone Dates" shall have the meaning set forth in Section 4.5.
"Correction Period" shall have the meaning set forth in Section 9.7(B).
"Cumulative Extended Term Bonus" shall mean the sum of the amounts paid to Seller during each month of the Extended Term under Sections 5.2(C)(ii) or 5.2(C)(iv)(b) that exceed the Capacity Payment that otherwise would have been paid Seller for such month but for the application of such Sections.
"Cumulative Initial Term Bonus" shall mean the sum of the amounts paid to Seller during each month of the Initial Term under Sections 5.2(C)(ii) or 5.2(C)(iv)(b) that
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exceed the Capacity Payment that otherwise would have been paid Seller for such month but for the application of such Sections.
"Debt Base Case Proforma" shall mean the base case financial proforma for the Seller as accepted and used by the Senior Lender as of the Construction Finance Closing Date.
"Delivery Excuse" shall have the meaning set forth in Section 11.5.
"Discharge Notice" means the notice provided by Southwestern to Seller in accordance with Section 3.5.
"Discharge Notice Date" means the date Southwestern provides the Discharge Notice to Seller.
"Dispatch" means the schedule and control by Southwestern, directly or indirectly, manually or automatically, of the generation of the Facility in order to increase or decrease the electrical energy delivered from the Facility to the Interconnection Point, as determined solely by Southwestern.
"Early Termination Date" shall have the meaning set forth in Article 7.
"Emergency" means a condition or situation that, in the sole judgment of either Southwestern or SPP, affects or will affect Southwestern's ability, or the ability of any member of SPP, to maintain safe, adequate, and continuous electric service.
"Energy" means the amount of electrical output of the Facility delivered to the Interconnection Point and measured in whole MWh.
"Energy Payment" means the Payment for Energy, as set forth in Section 5.4.
"Environmental Contamination" means the presence of hazardous wastes, hazardous substances, hazardous materials, toxic substances, hazardous air, and other hazardous pollutants, and toxic pollutants, as those terms are used in the Resource
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Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Hazardous Materials Transportation Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Oil Pollution and Hazardous Substances Control Act, and any other and all other applicable federal, state, and local laws and regulations as amended, at such levels or quantities or location, or of such form or character, to be in violation of said federal, state, and local laws and regulations.
"EPC Contract" means the contract between Seller and the EPC Contractor for engineering, procurement, and construction of the Facility.
"EPC Contractor" means the Person that Seller contracts with for engineering, procurement, and construction of the Facility.
"Estimated Phase II Actual Capacity" means the maximum Capacity expected to be delivered by Seller during Phase II and is equal to 239 MW.
"Event of Default" means an event as defined in Article 10 that confers a contractual right upon a Party to terminate the Agreement.
"EWG" means an exempt wholesale generator pursuant to 15 U.S.C. Section 79z-5a.
"Existing Taxes" shall have the meaning set forth in Section 17.4.
"Excused Outage" means a derate or outage of the Facility caused by Force Majeure or Delivery Excuse.
"Extended Term" shall have the meaning set forth in Section 3.1.
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