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HomeMy WebLinkAboutattachments Attachment 4 Attachment 4 EXECUTIVE SUMMARY UTAA ASSOCIATED MUNICIPAL POWER SYSTEMS PART 1. DEFINITIONS VEYO HEAT RECOVERY PROJECT March 14,2074 As used in this Executive Summary: INTRODUCTION AND OVERVIEW Contractor: the contractor under the EPC Contract, presently expected to be Ormat Nevada Inc. INTRODUCTTON EPC Contract: the Engineering, Procurement and Construction Contract to be entered This Executive Summary provides an overview of UAMPS' proposed Veyo Heat into by UAMPS and the Contractor with respect to the Project. Recovery Project and summarizes the provisions of the Power Sales Contracts and the Project Agreements. The information contained in this Executive Summary has been prepared for the Entitlement Share: each Participant's percentage entitlement to the capability of the use of prospective Participants in connection with their decision to participate in the Project by Project. entering into a Power Sales Contract with UAMPS. Host Agreement:the Host Agreement between UAMPS and Kern River. This Executive Summary has six parts: Interconnection Agreement: the agreement providing for the interconnection of the Part 1: Definitions used in the Executive Summary, Project with the transmission facilities of PacifiCorp. Part 2: A preliminary description of the Project, Kern River: Kern River Gas Transmission Company, the owner of the Kern River Pipeline. Kern River is a subsidiary of MidAmerican Energy Holdings Company. Part 3: The estimated cost of construction, the plan of financing and the projected cost of energy from the Project, Kern River Pipeline: an interstate natural gas pipeline running from Opal, Wyoming to the San Joaquin Valley near Bakersfield, California, consisting of 1,717 miles of 36-and 42-inch Part 4: Interconnection and transmission matters, diameter steel pipe. The Kern River Pipeline (a) was originally placed in service in 1992 and has been expanded several times since, (b) has a design capacity of 2.2 billion cubic feet (Bcf) per Part 5: Power Sales Contract summary,and day and (c) includes 12 compressor stations. Part 6: Summaries of the Project Agreements. Operating Agreement: the agreement (if any) providing for the operation and maintenance of al I or any portion of the Project. The descriptions and summaries contained in this Executive Summary are preliminary, broad and general, and are subject to change as the Project Agreements and the plan of financing Participants:the power purchasers under the Power Sales Contracts. for the Project are finalized. If you have any questions or require any additional information, please contact Jackie Coombs, UAMPS' Manager of Corporate and Member Services, at Power Sales Contracts: the Veyo Heat Recovery Project Power Sales Contracts between 801-214-6602 or by e-mail to jackie@uamps.com. UAMPS and the Participants. Project: the Veyo Heat Recovery Project, described in Part 2 of this Executive Summary and on Exhibit I to the Power Sales Contracts. Project Agreements: the Host Agreement, the EPC Contract, the Right-of-Way, the Operating Agreement,the Interconnection Agreement and the Transmission Agreements. Project Management Committee: the committee established under the Power Sales Contracts,consisting of one representative appointed by each of the Participants. Veyo Executive Summary 8705014/JCB/CJBP/mo -2- Attachment 4 Attachment 4 Right-of-Way: the right-of-way from the U.S. Bureau of Land Management ("BLM'� PART2. THE PROJECT covering the real estate on which the principal facilities of the Project will be located. The following is a summary description of the Project. This description is subject to Transmission Agreements: the Amended Restated Transmission Service and Operating change based upon selection of the Contractor, the negotiation of the final terms of the EPC Agreement between UAMPS and PacifiCorp, and each other transmission contract, agreement or Contract and the construction of the Project. The final Project description will be approved by tariff entered into by UAMPS or the Participant that is used or necessary for the delivery of the Project Management Committee after the Project achieves commercial operation. power and energy from the Point of Delivery to the Participant's System Point of Receipt, whether by direct transmission, displacement, exchange or otherwise. PROJECT DESCRIPTTON Veyo Compressor Station: One of the 12 compressor stations on the Kern River Pipeline, The Project consists of the construction and installation of a 7,800 kW (net) waste heat located approximately four miles West of the Town of Veyo, Utah. The Project will connect to recovered energy generation power plant at the Veyo Compressor Station on the Kern River the exhaust streams of the three Solar Mars 100 gas-fired compressor turbines at the Veyo Pipeline. Compressor Station. The principal physical components of the Project include: 1. Preliminary site work and preparation, including clearing, fencing, grading and concrete work,as well as final site work upon completion of the Project. 2. A Recovered Energy Generation System consisting of: a. Three Waste Heat Oil Heaters installed on the exhaust streams of the three Solar Mars 100 gas-fired compressor turbines located at the Veyo Compressor Station; b. A thermal oil circulation system connecting the Waste Heat Oil Heaters to the Ormat Energy Converter, including piping, valves, circulation pumps and a thermal oil storage/expansion tank; and c. An Ormat Energy Converter with a guaranteed (net) capacity of 7,800 kW, consisting of a preheater, a vaporizer/superheater, a turbine-generator, an air- cooled condenser, a recuperator, feed pumps, an emergency back-up generator, instrumentation and control and interface systems. 3. Electric interconnection facilities including a substation, a step-up transformer, control, metering and communications equipment, and improvements to the existing transmission line running to the Veyo Compressor Station. ENGTNE.ERTNG,CONSTRUCTTON AND FINANCING Engineering and Construction of Project; Schedule. Pursuant to the EPC Contract, the Contractor will provide all design, engineering, procurement, construction services necessary for the acquisition and construction of the Recovered Energy Generation System. UAMPS will be responsible for the design and construction work on the remaining components of the Project. -3 - -4- Attachment 4 Attachment 4 UAMPS is currently negotiating the terms of the EPC Contract with the Contractor. For of large equipment to construct the Project. UAMPS expects that these permits will be obtained a summary of the proposed terms of the EPC Contract, see "PART 6. PROJECT AGREEMENTS" in due course and will not impact the construction schedule for the Project. below. PROJECT CONSTRUCTION SCARDUI.F. INTERCONNECTION;RTGNT-OF-WAY;PERMITS AND APPROVALS Various factors will affect the proposed construction schedule and completion date of the Interconnection Agreement. The Project will interconnect with PacifiCorp's existing Project. 34.5 kV transmission line to the Veyo Compressor Station. UAMPS has submitted an interconnection request for the Project under PacifiCorp's Open Access Transmission Tariff. An The engineering, procurement and construction of the Project is currently estimated to initial seeping study has been performed, and PacifiCorp is now preparing a system impact study require approximately 21 months after the execution of the EPC Contract. The current draft of that will determine the transmission facilities necessary to interconnect the Project. UAMPS the EPC Contract requires UAMPS will make an initial payment to the Contractor upon expects that the system impact study will be completed by June 2014. execution of the EPC Contract to initiate equipment ordering and fabrication. The Project Management Committee will determine when to authorize the execution of the EPC Contract and BLMRighl-of-Way. A number of Project facilities will be located on a Right-of-Way to the initial payment to the Contractor. Earlier authorization would enable the Project to be placed be issued by the U.S. Bureau of Land Management. UAMPS and BLM have had preliminary in service in the second quarter of 2016, but would require payments to the Contractor prior to discussions regarding the Right-of-Way. As a federal agency, BLM is required to obtain an receipt of the Right-of-Way from BLM. If the Project Management Committee determines to environmental assessment under the National Environmental Policy Act ("NEPA'� before it can defer authorization of the EPC Contract until the Right-of-Way is issued, the Project would be grant the Right-of-Way. BLM has determined to treat the construction of the Recovered Energy placed in service between the fourth quarter of 2016 and the second quarter on 2017. The Host Generation System and the transmission interconnection facilities as connected actions under Agreement requires substantial completion of construction of the Project by June 30,2017. NEPA. As a result, UAMPS cannot submit its application for the Right-of-Way until the completion of PacifiCorp's system impact study described above(expected by June 2014). Upon PROJECT CONSULTANTS submission of UAMPS' application, the time required for completion of the environmental assessment and BLM's approval process for the Right-of-Way could range from four to twelve UAMPS has retained SWCA Environmental Consultants ("SWCA") to assist with agency months. coordination in obtaining the permits necessary for the construction and operation of the Project, including the environmental assessment required prior to BLM's issuance of the Right-of-Way Air Permits. The operation of the Project will require (a)modifications to the existing air for the Project and the development of environmental management documents for the operation quality permit for the Veyo Compressor Station under Title V of the Clean Air Act, and (b) a of the Project. new air quality permit for the Recovered Energy Generation System. The Utah Division of Air Quality is the agency responsible for these permits. UAMPS expects that these permits will be UAMPS has retained Sunrise Engineering ("Sunrise") as owner's engineer to corroborate obtained in due course and will not impact the construction schedule for the Project. Project design and work by the Contractor, and to provide construction management and related Construction and Use Permits. Construction and operation of the Project will require support services to UAMPS. building and use permits from Washington County, Utah. UAMPS expects to begin the OPERATION OF THE.PROJECT permitting process upon issuance of the Right-of-Way by BLM and as site-specific design details are determined. The permitting process with Washington County is expected to take from three UAMPS may perform the general operation and maintenance work on the Project with its to six months,and has been incorporated into Project timelines. own employees or may contract with a third party for these services. The operations plan for the Additional Permits. Additional permits expected to be required in connection with the Project will be approved by the Project Management Committee. Project include: a storm water pollution prevention plan and a storm water discharge permit under the Clean Water Act (Utah Division of Water Quality) will be required in connection with the construction of the Project; a wastewater discharge permit and a spill prevention containment control plan (Utah Division of Water Quality); and a Section 404 dredge and fill permit (US Army Corps of Engineers) may be required for the construction of the interconnection facilities as the existing transmission line crosses an ephemeral creek. Additional road permits may be required by Washington County and Utah Department of Transportation to facilitate the transport -5 - - 6- Attachment 4 Attachment 4 PART 3. COST OF CONSTRUCTION,PLAN OF FINANCE AND COST OF ENERGY SOURCES OF FUNDS ESTrMATF.D COST OF CONSTRUCTTON Bond Proceeds] $37,598,018 Participant Capital Contributionsl Based upon its review and analysis of the Project, UAMPS presently estimates that the TOTAL SOURCES $37,598,018 total cost of construction of the Project will be approximately$31.3 million. The following table summarizes the estimated costs of construction of the Project: USES of FUNDS Deposit to Construction Fund'` $31,441,465 EPC Contract $24,294,000 Debt Service Reserve3 2,657,521 Substation and Interconnection 3,498,570 Capitalized Interest4 2,960,844 Engineering,Environmental and Development 723,230 Costs of Issuances 538,188 Contingency* 728,820 1,296,845 Sales Taxes TOTAT.USES $37,598,018 Misc. Costs(Host reimbursement, insurance, legal) 90U00 1 The amount of Bonds to be issued will be reduced by any Capital Contributions made by the Participants. 2 Estimated cost of construction and contingency. TOTAT.COSTS OF CONSTRUCTION $31,441,465 3 Equal to the maximum annual debt service on the Bonds. 4 interest on the Bonds to the expected Commercial Operation Date of the Project PLAN OF FINANCTNG 5 includes Underwriter's Discount,legal,financial advisor and other costs of issuance. UAMPS is in the process of developing a plan of financing for the Project. The primary PROJECTED COST OF ENERGY alternatives for the plan of financing include (a) the issuance of long-term Bonds in the full amount necessary to finance the cost of construction of the Project prior to the beginning of UAMPS has modeled the projected costs of energy from the Project. The model makes a construction and (b) a construction loan agreement from a bank that would fund some or all of number of assumptions regarding the Project and its operations, including: the costs of construction which would then be refinanced by the issuance of long-term Bonds. UAMPS will work with its financial advisor and bankers to develop financing alternatives that the Project will have a total generating capacity of 7,800 kW, the expected could reduce the overall cost of financing for the Project. The plan of financing for the Project capacity factor of the Project will be 85%,and the initial annual energy production will be determined by the Project Management Committee. of the Project will be 58,079,000 kWh and will decline at an annual rate of 0.50%, The following table shows the estimated sources and uses of funds in connection with the the costs of construction and plan of financing of the Project will be as shown financing of the Project, assuming the issuance of long-term Bonds in the full amount necessary above, to finance the cost of construction of the Project prior to the beginning of construction: • the Bonds will be issued in 2014, will have a level debt service schedule to a final maturity date in 2039, and will bear interest at fixed interest rates that produce an estimated average rate of 4.35%, • a waste heat fee will be payable to Kern River at the rate of 0.69¢/kWh, and • the annual operation and maintenance costs of the Project will be $503,800, and wi I I escalate at an annual rate of 2.00%. Based upon these assumptions, UAMPS currently projects that the initial price of energy from the Project to the Participant will be approximately 6.192¢/kWh, and will increase gradually,producing an average rate of 6.8200/kWh over the term of the Bonds. w Legislation was enacted in the 2014 general session of the Utah Legislature(SB 242)that,if signed by the Governor,may provide an sales tax exemption for some of the costs of the construction of the Project. UAMPS believes that the assumptions used in projecting the cost of energy from the Project are reasonable for purposes of this Executive Summary. However, no assurance can be -7- - 8- Attachment 4 Attachment 4 given that these assumptions will prove to be correct and different facts could affect the projected PART 4. TRANSMISSION OF PROJECT POWER AND ENERGY cost of energy from the Project. UAMPS has conducted sensitivity analyses for various changed circumstances. INTERCONNECTTON UAMPS expects to update the information and assumptions summarized above as the The Project will be interconnected to PacifiCorp's transmission system at the Project site. development of the Project progresses. Prospective participants are encouraged to check the UAMPS' collaboration portal for updated information and to contact UAMPS for current TRANSMTSSTON FROM VF.YO TO POINTS OF RECF.TPT ON THE PACTRCORP SYSTEM information. UAMPS has a network transmission agreement with PacifiCorp that will provide network service to Participants connected to the PacifiCorp transmission system in Utah. All Utah Participants are currently points of delivery on the network transmission agreement. Transmission service charges for the Project will include (a) a low voltage transmission charge ($0.75 per kW-month) and line losses (3.56%), due to the 34.5 kV interconnection voltage, and (b) a network transmission charge ($2.15469 per kW-month) and line losses (4.26%). For fiscal 2015,UAMPS will charge its members a bundled rate of 0.4810 per kWh for low voltage and network transmission service. There will be an additional charge for spinning and non-spinning reserve ancillary services. UAMPS currently charges $0.0730 per kWh for these services. TRANSMTSSTON FROM VEYO TO POINTS OF RECEIPT ON THE NV ENERGY SYSTEM For Participants connected to the NV Energy transmission system, UAMPS' network transmission agreement with PacifiCorp will be used for transmission from Veyo to NV Energy's transmission system at Gonder,Nevada. Transmission from Gonder to these Participants' points of receipt will be made under their transmission agreements with NV Energy. Transmission service charges from Gonder to points of delivery on the NV Energy will be determined under Participant's transmission arrangements with NV Energy. - 9- - 10 - Attachment 4 Attachment 4 PART 5. TFIE POWER SALES CONTRACTS SECURrr'Y FOR BONDS The following provides a summary of the basic terms and provisions ofthe Power Sales The Bonds will be secured by a pledge of all of the revenues produced by the operation of Contracts between UAMPS and its the Participants, but does not describe all ofthe provisions of the Project, including the amounts paid under the Power Sales Contracts. The Bonds will be the Power Sales Contracts. Participants should refer to the text ofthe Power Sales Contracts for special obligations of UAMPS and will have no claim on any of the revenues or assets of their complete provisions. UAMPS from its other projects. The Bonds will not be debts or obligations of the Participants. THF,PROJECT PARTTCrPANT'S OPTION TO MAKE A CAPITAL CONTRTBUTTON A summary description of the properties that comprise the Project will be attached to the Prior to DAMPS' issuance of Bonds to finance the cost of construction, each Participant Power Sales Contract as EXMBrr I. has the option (but not an obligation) to make a Capital Contribution to UAMPS. Capital Contributions will be used by UAMPS to pay the costs of construction of the Project, and the SALT OF OUTPUT AND ENvrRoNMF,NTAT,ATTRTBums amount of Bonds UAMPS issues will be reduced by the amount of Capital Contributions made by the Participants. UAMPS will sell all of the capability and Environmental Attributes (if any) from the Project to the Participants pursuant to the Power Sales Contracts. UAMPS will provide 30 days' written notice to the Participants of their right to elect to make a Capital Contribution and the amount of their Capital Contributions. A Participant's TF,RM election to make a Capital Contribution must be made by a written resolution adopted by its governing body. Each Participant that has elected to make a Capital Contribution will be Each of the Power Sales Contracts shall become effective upon the receipt by UAMPS of required to deposit the payment in a segregated escrow account established under the financing executed Power Sales Contracts and authorizing resolutions from Participants with Entitlement documents for the Bonds. Shares totaling at least 90%. The Project Management Committee will determine whether to make a capital Each of the Power Sales Contracts will have a tens that extends to the later of(a) the contribution option available to the Participants in connection with the issuance of additional final payment of the Bonds and (b) the date the Project and any Additional Facilities are taken Bonds. out of service. PRTCR ENTm,FmFNT SHARES The Entitlement Share will be sold at cost. Each Participant will pay its proportionate Under the Power Sales Contracts, each Participant will acquire an Entitlement Share in share (the ratio of its Entitlement Share to the sum of all Entitlement Shares) of all of the costs of the Project. the Project, including: Each Entitlement Share is a contractual right to receive a specific percentage of the amounts payable by UAMPS under the Project Agreements; Project capability and Environmental Attributes and a contractual obligation to take or pay for a corresponding percentage of all of the costs of the development, ownership, financing and other operation and maintenance expenses of the Project, and working operation of the Project. capital charges; FINANCING Debt Service Costs with respect to Bonds issued to finance the costs of the Project; UAMPS will use its best efforts to issue Bonds to finance the cost of construction of the Project, reduced by the amount of any Capital Contributions made by Participants. Additional costs of capital improvements, replacements and additions to the Project, Bonds may be issued as parity or subordinated obligations to pay future costs of the Project. and reserves for such costs,approved by the Project Management Committee;and Refunding Bonds may be issued by UAMPS to reduce debt service costs or to achieve other objectives. all other costs incurred in connection with the Project. ll - 12- Attachment 4 Attachment 4 Costs will be allocated proportionately to all Entitlement Shares, except that the CAPrrAi.RFPi,ACFMFNTS,IMPROVEMENTS AND ADDITIONS allocation of Debt Service Costs on the Bonds will be adjusted to reflect Capital Contributions made by any Participants. Each Participant will pay also pay the Transmission Costs for the The Project Management Committee will have authority to approve capital replacements, transmission of Project output from the Point of Delivery to the Participant's system. The improvements and additions to the Project and to determine whether to expense or capitalize and amounts paid by the Participants will be sufficient to enable UAMPS to pay all of the costs of the finance the cost of capital items. In the event that such items are financed by the issuance of ownership, operation and financing of the Project. Bonds, the Project Management Committee will determine whether to make a capital contribution option available to the Participants. BIT.T,TNGS AND PAYMENTS ADDmoNAT,FACTT,TTMS Billings and payments will be made monthly. All payments will be made on a "take-or- pay"basis (Le., regardless of whether the Project is operable, operating, damaged or destroyed in UAMPS may from time to time recommend the acquisition and construction of whole or in part) and are not subject to counterclaim, offset or reduction for any reason. Additional Facilities to improve or add to the Project. All Additional Facilities require the approval of the Project Management Committee. Additional generating units may be undertaken The payment obligations of Participants under the Power Sales Contracts are several and as Additional Facilities or as a separate phase of the Project If undertaken as a separate phase, not joint. each Participant may elect to participate in additional generating facilities under a supplement to its Power Sales Contract or under a supplemental agreement, as determined by the Project PROJECT MANAGEMENT CGMMITTF,F Management Committee. Separate phases will not constitute a part of the Project and Participants not electing to participate in such separate phases will not be responsible to pay the The Project Management Committee will function in the same manner as the project costs of such separate phases. management committees for DAMPS' other projects, and pursuant to the provisions of UAMPS' Joint Action Agreement and Bylaws that govern project management committees. The Project DEFAULTS AND RF,MF,DTF,S;STF,P-UP OF NON-DEFATJT.TING PARTICIPANTS Management Committee will recommend decisions on the Project to the UAMPS Board of Directors. Upon a default by any Participant, UAMPS is authorized to exercise various remedies in order to ensure that it will have sufficient revenues to meet its obligations as owner of the Project ANNUAT,BUDGFTS and to pay the debt service on the Bonds. Among other things, UAMPS is authorized to terminate a defaulting Participant's Entitlement Share and to make a mandatory reallocation of UAMPS will develop, and the Project Management Committee and the Board of such Entitlement Share to the other Participants. No Participant's original Entitlement Share (as Directors will approve, annual budgets for the Project that will cover all of the costs of the adjusted to reflect any voluntary assignments of Entitlement Shares previously accepted by the Project (see "PRTCF" above). The annual budget will be the basis for the monthly billings and Participant) may be increased by more than 25% as a result of all permanent mandatory payments for the Project. The annual budget may be revised from time to time as necessary to reallocations of defaulting Participants' Entitlement Shares. reflect the actual costs of the Project. PROJECT OUTPUT Each Participant will assign the output attributable to its Entitlement Share to the UAMPS Power Pool for operating and scheduling purposes. Under the Power Sales Contract Project output will be delivered to each Participants at the Point of Delivery (the point of interconnection between the Project and the transmission grid). Each Participant will be responsible for, and shall pay all costs of, the transmission of Project output from the Point of Delivery to the Participant's System Point of Receipt. 13 _ - 14- Attachment 4 Attachment 4 PART 6. TAE PROJECT AGREEMENTS design and construct and operate the Project so that exhaust back-pressure to the Veyo Compressor Station gas turbines will not exceed the pre-Project levels and add new The following provides a summary description of the basic terms and provisions of the tapping in the exhaust system to measure back-pressure,and principal Project Agreements providing for the acquisition, construction and operation of the Project and the Project. coordinate with Kern River all construction work for the interconnection of the Project with the Veyo Compressor Station. The Project Agreements are presently in draft form and subject to continuing negotiations by the parties. Approval by the Project Management Committee of each Project The Project design must satisfy the specifications and standards set forth in the Host Agreement Agreement is required before its execution. This Executive Summary does not summarize or and UAMPS submit to Kern River, for review and approval, construction plans prior to describe all of the provisions of the Project Agreements and Participants should refer to the construction commencement. UAMPS (or the EPC contractor) must submit monthly written copies of such agreements, as available, or contact UAMPS for further details. reports to Kern River. Tr,HosTAGREEnvarr Kern River's responsibilities include, generally, cooperation and coordination with UAMPS. For example, Kern River must cooperate with UAMPS in obtaining a BLM grant for The Host Agreement provides the terms for (i) UAMPS to construct and operate the the Project site and other Project permits, provide for reasonable coordination of the shutdown of Project at Kern River's Veyo Compressor Station and (ii) Kern River to sell waste heat from the each of the Veyo Compressor Station natural gas turbines for a period of no more than 72 hours Veyo Compressor Station to UAMPS for use in the Project. to interconnect the Project with the Veyo Compressor Station, provide access to the Kern River site, provide relevant drawings, manuals and other information (including environmental impact Term. The initial term of the Host Agreement begins upon its execution and ends twenty assessments) relating to Kem River's facilities and perform backpressure and other testing. years after commercial operation of the Project,provided that commercial operation shall be not later than June 30, 2017. UAMPS has the option to extend the Host Agreement for up to three Provision of Waste Heat. Commencing on the commissioning phase of the Project, Kern renewal terms of five years each upon 180 days' notice. River agrees to provide all of the waste heat produced during any period of time that any of the three existing Veyo Compressor Station natural gas turbines are operating for use by the Project. Either party may terminate the Host Agreement in the event that either (i) UAMPS has not received all required Project permits on or before June 1, 2015; (ii) UAMPS has not entered Kern River agrees that it will notify UAMPS of planned maintenance outages and will, into the EPC Contract on or before August 1, 2015 (which shall provide for Substantial when practical and using commercially reasonable efforts, notify UAMPS of unplanned Completion to occur on or before June 30, 2017) or (iii) Substantial Completion does not occur interruptions of the Veyo Compressor Stations. on or before June 30, 2017. UAMPS has the right to terminate the Host Agreement for additional reasons, including convenience (subject to payment of a specified termination Kern River has no obligation to (a) deliver any specified or minimum quantity of waste payment), inability to procure permits or interconnect the Project or procure required insurance. heat to UAMPS or(b) operate its facilities for the purpose of making waste heat available for the Project. Also, Kern River has no obligation to retain the turbine equipment at the Veyo Project Construction. Under the Host Agreement UAMPS is responsible to finance, Compressor Station as installed and configured on the Project commercial operation date, and design, engineer, procure, furnish, install, construct, start up, commission and test the Project in may convert,modify,uprate, add or remove any or all of the turbine equipment. accordance with Good Construction Practices. The Host Agreement sets forth various specific responsibilities required of DAMPS in connection with the construction of the Project, including Operation and Maintenance of Project. UAMPS is responsible for the repair, operation various activities that require coordination with, and in some cases approval by, Kern River. For and maintenance of the Project. Access across Kern River's site will be controlled by Kern example,UAMPS must: River. Modifications, removals and additions, if any, to the Project require approvals by Kern River in accordance with the terms of the Host Agreement. UAMPS is required to mitigate, and • manage the process of obtaining a modified Kern River air permit in consultation with shall be responsible for any damage or loss or revenue that results from,any material interference Kern River, by the Project with Kern River's facilities or its certificate(s) of public convenience and necessity issued by FERC, or any material cost increase to Kern River to operate its facilities caused by the • conduct clearing and excavation and related activities per Kern River's construction Project. UAMPS has no obligation to operate the Project to generate electricity. specifications, Payment. Commencing upon the commercial operation date, UAMPS must pay to Kern River a waste heat fee no later than twenty (20) days following a production month. The waste heat fee is equal to 0.69¢ per kWh of net electrical energy produced by the Project. UAMPS - 15 - - 16 - Attachment 4 Attachment 4 shall make a minimum payment of$100,000 per year to Kern River, if UAMPS determines for Indemnification. UAMPS indemnifies Kern River against various liabilities and claims, economic reasons not to generate energy. If UAMPS renews the Host Agreement for additional suits, demands and other proceedings, including environmental liabilities and liens against Kern 5-year renewal terms,the waste heat fee is subject to re-negotiation. River's facilities, arising out of or resulting from the Project, including work to construct the Project and its operation and maintenance. Kern River indemnifies UAMPS against certain In the case of any outage of one or more of the turbine units at the Veyo Compressor liabilities and claims, suits, demands and other proceedings, including environmental-related Station as a direct or indirect result of the Project (including outages that will be necessary in liabilities and liens on the Project or Project site arising from or related to the Veyo Compressor order to facilitate installation of the Project), UAMPS must compensate Kern River for any Station or Kern River's activities. "revenue impairment" caused by a decrease in gas transported on Kern River's system as a result of each outage. Kern River will calculate the "revenue impairment" by calculating a net rate (to Limitations on Liability;Force Majeure. Kern River is not liable to UAMPS for indirect, be not less than $0.06 Dth/d) that is applied to the projected lost daily transportation quantity. consequential, punitive or other similar damages. Each parry's obligations under the Host The reimbursement amount to Kern River will be reduced or eliminated if Kern River has any Agreement shall be suspended to the extent a Force Majeure Event prevents performance. operationally available capacity at the end of Kern River's daily scheduling cycle. During any such outages, UAMPS also must reimburse Kern River for any reservation demand charge Dispute Resolution. In the event a dispute arises with respect to the Host Agreement,the credits Kern River provides its shippers. parties' appointed representatives will meet. If they cannot resolve the issue within specified timeframes, the parties' respective officers will meet to discuss the issue. If they cannot resolve UAMPS must reimburse Kern River for any direct costs that are incurred in connection the issue, either party may request nonbinding mediation (except in the case of "Technical with the Project and Kern River will invoice UAMPS on a monthly basis for such costs. Disputes",with respect to which Kern River may make a final determination). UAMPS must also bear other costs associated with the Project, including, for example, fees for maintenance of access roads. Kern River has ongoing inspection rights, and UAMPS is Tr.EPC CONTRACT responsible for the costs of inspection. UAMPS will enter into the EPC Contract with the Contractor to design, engineer, Representations and Warranties. Each party makes standard representations and acquire, construct, commission, test and deliver the Recovered Energy Generation System on a warranties in the Host Agreement. UAMPS makes certain representations and warranties with lump sum turnkey basis. regard to the Power Sales Contracts, including that UAMPS will duly enforce the obligations of the Participants under the Power Sales Contracts. Scope of Contractor's Work; Warranty. Under the EPC Contract, the Contractor will perform generally all necessary and incidental work to bring the recovered energy generation Insurance. Each of UAMPS, any O&M provider (after commercial operation) and Kern facility to full completion and operation, such that the Recovered Energy Generation System may River are required to maintain specified types and amounts of insurance and deliver certificates be operated as a fully-integrated project. The work will be completed in accordance with a of insurance. UAMPS is required to maintain builders all risk insurance, commercial general project schedule with specified milestones and completion dates. The Contractor may be liability insurance, automobile liability insurance, workers' compensation insurance, excess required to pay damages in the event an item is not completed by its guaranteed completion date, liability insurance($92 million/occurrence) and pollution liability insurance. and the amount of such damages may be limited. Confidential Information. Each of UAMPS and Kern River may not disclose information It is expected that the Contractor will provide a two-year warranty with respect to the obtained from the other or use such information for any purpose other than performance of the turbines, heat exchangers, air coolers and generator and a one-year warranty with respect to the Host Agreement. Certain information may, however, be disclosed to officers, employees, other work to be performed under the EPC Contract,with certain exclusions. members, investment bankers, lenders and consultants who have a legal duty to maintain the confidentiality of such information. Performance Testing. Prior to substantial completion, the Contractor is required to conduct a range of tests to confirm mechanical completion and the performance of the Recovered Default. Events of default (by either party) are typical and include, for example, the Energy Generation System. The performance tests include a trip test, a reliability test, a capacity failure to pay when due any undisputed payment; failure to comply with any other material test and back-pressure tests. The Contractor is required to take remedial actions to correct provision of the Host Agreement; bankruptcy and other insolvency-type related events; and performance test failures. The EPC Contract will establish various testing protocols and abandonment by UAMPS of the Project and abandonment by Kern River of the Veyo procedures. Compressor Station and related real property; subject to specified cure periods (as applicable). Upon such an event of default, the non-defaulting parry may terminate the Host Agreement; Substantial Completion. The Contractor shall certify the substantial completion of the withhold payments due under the Host Agreement, set-off obligations owed and/or suspend Recovered Energy Generation System when: performance;and pursue any other remedies available. - 17- 18_ Attachment 4 Attachment 4 • the Recovered Energy Generation System can be operated in a safe and efficient manner security for the performance of Contractor's obligations under the EPC Contract. The retained in accordance with the drawing and specifications,applicable laws, regulations, amounts will be fully released upon final completion of all work under the EPC Contract by the Contractor. • the performance tests have been successfully passed and approved by UAMPS and the net deliverable capacity equals or exceeds the guaranteed minimum capacity, provided that Default and Termination. The EPC Contract specifies events that constitute a default by there is a capacity deficiency at the time of substantial completion, then the Contractor either party, including, with respect to the Contractor, a material breach by it under the EPC shall have paid the applicable Liquidated Damages, Contract and, with respect to UAMPS, the failure to make payment when due (in each case, subject to specified cure periods). In the event of a Contractor default, UAMPS may terminate • the Recovered Energy Generation System is capable of generating electricity to the the EPC Contract and take possession and use of various equipment located at the job site for the electrical grid, purpose of completing the remaining work, subject to the terms and conditions provided in the EPC Contract. In the event of a default by UAMPS, the Contractor may suspend service and/or • the Recovered Energy Generation System has received all certificates and governmental terminate the EPC Contract, in which case the Contractor shall be entitled to a termination authorizations required for the commencement of operation to be provided by the payment as specified in the EPC Contract. Contractor, It is possible the EPC Contract may also terminate as a consequence of, among other • all quality assurance documentation has been provided to UAMPS in accordance with the things, an event of force majeure, upon satisfaction of the procedures and payment of a quality control and quality assurance plan, termination payment as described in the EPC Contract. • the Contractor has provided all training required under the EPC Contract, Miscellaneous Provisions. The EPC Contract contains provisions,among others,relating to indemnification, limitations on liability of the Contractor, limitations on assignment of the • the Contractor and UAMPS have agreed to a list of punchlist items, including the EPC Contract and dispute resolution. estimated cost of, and schedule for,completion thereof, and THE,OPERATING AGREEMENT • the Recovered Energy Generation System has been properly constructed with no defects, and all work has been installed, insulated and protected where required for such UAMPS expects to enter into an Operating Agreement to provide for the general day-to- operation, correctly adjusted, tested and commissioned, is mechanically, electrically and day operation and management of the Project. The terms of the Operating Agreement and the structurally sound as set forth in the drawings and specifications. identity of the operator will be approved by the Project Management Committee. Guaranteed Capacity. The Contractor guarantees that the Recovered Energy Generation THE,INTFRCONNEMON AGREEMENT System will have a net capacity of 7,800 kW at specified design point conditions. The EPC Contract requires to take remedial actions or, in certain circumstances, to pay liquidate damages The Interconnection Agreement will be the standard form Interconnection Agreement if the Recovered Energy Generation System fails to meet this capacity guarantee. If the net under PacifiCorp's GATT. deliverable capacity of the Recovered Energy Generation System exceeds 7,800 kW, as determined by the final capacity tests under the EPC Contract, UAMPS agrees to pay a UAMPS will be responsible to pay for all facilities and equipment needed for the performance bonus to the Contractor at a rate of$1700/kW of additional capacity. interconnection and its own operating expenses. The Interconnection Agreement will have an initial term of 10 years, and automatically renews for successive one-year terms after the Contract Price. UAMPS will be responsible to pay the Contractor a specified single expiration of the initial term. dollar amount, to be set forth in the EPC Contract. Such contract price may be adjusted to account for, possibly among other things, scope of work changes from time to time under the EPC Contract. In addition to the contract price, UAMPS may be responsible to pay other costs, such as interest on delayed payments, sales tax reimbursement, costs associated with indemnification and a termination payment in the event the EPC Contract is terminated by UAMPS without cause,as authorized by the EPC Contract. The contract price will be payable from time to time pursuant to a payment schedule provided in the EPC Contract. A percentage of each payment may be withheld as retainage, as _ 19_ _20_