HomeMy WebLinkAbout6 Central Valley Project Agenda Item #
Memorandum
To: Board of Directors
From: Stephen Hollabaugh
Date: November 30, 2005
Subject: Approval of Resource 500 Development Agreement with Central Valley Project
Corporation for Long-Term Power Supply Needs of the Electric Utility
Background
Resource 500 Project
Central Valley Project Corporation (CVP Corp) is in final negotiations to purchase a 500 MW gas
fired, combined cycle power plant located in Northern California. This plant has been built with the
latest technology and was constructed only five years ago. This plant has an excellent heat rate
(approximately 7000) and preliminary due diligence indicates that the expected price of power from
the plant will be very competitive with other options available in today's energy market in California.
CVP Corp is offering to public power entities an opportunity to participate in the ownership of the
plant through firm purchase power agreements and has provided summary materials to interested
parties to determine if this project would be an appropriate addition to their resource portfolios.
Upon reviewing the materials and consideration of the current power needs of Truckee Donner
PUD, staff has concluded that this proposed project fits well into its electric resource portfolio. This
plant will provide diversity of fuel source and location and its efficiency will provide Truckee Donner
PUD with a resource that is more economic than building a smaller plant locally or contracting with
for-profit marketers for a similar type of product. The long term power supply strategy will de
discussed by staff at the Board meeting. The District is in a unique position being situated between
two markets, one to the east and one to the west. The Resource 500 project will uniquely give the
District several benefits and options within its future power supply portfolio.
Therefore, staff recommends that the Board of Directors approve participation in the Resource 500
Project for a share of up to 5 MW.
Development Agreement and Confidentiality Agreement with CVP Corp.
Further due diligence work on the project by an independent engineering firm, negotiation of final
terms of the agreement with the seller, and preparation of project agreements must be funded by
all of the interested project participants under the Project Development Agreement. In order to
participate in this project, Truckee Donner PUD will be required to pay for its proportionate share of
these Development Work costs and sign a Project Development Agreement and associated
Confidentiality Agreement with CVP Corp.
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The Project Development Agreement:
• Defines the scope of the development work and establishes the budget for the work
• Forms a Development Committee to make recommendations about the project budget,
timeline and project agreements to the CVP Corp Board
• Outlines the process by which each participant will determine whether to participate in the
project
Costs for the Development Work will not exceed $3,750 per MW. Total cost to Truckee Donner
PUD based on a maximum participation level of 5MW will be $18,750.
Approving the Development Agreement only commits the District to the $18,750 and nothing more.
We will not be obligated to the full cost of a Power Sales Agreement until and unless the board
approves it.
Project Timeline and Power Sales Agreement
The negotiations for purchase of the project is expected to take approximately four months, at
which time a final decision to participate in the project will be made by each of the Project
Development Participants. Final participation will require execution of a long-term Power Sales
Agreement which will be brought back to the Board of Directors after due diligence work under the
Development Agreement and final negotiations with the seller are completed. To assist in the
financing process, this project is expected to be transferred to a joint powers agency, the Sierra
Nevada Electric Power Authority (SNEPA). Therefore a final Power Sales Agreement (PSA) will be
executed with SNEPA. This agreement is a 30 year take-or-pay contract and will be used as the
basis for obtaining funding to purchase the project. Board of Director Approval of the Power Sales
Agreement is expected in first quarter 2006. It is expected that the financing process will take
several months after PSA's are signed, and the current timeline anticipates that project ownership
will be transferred by June, 2006 at which time energy will be available for each Resource 500
Project Participant.
Fiscal Impact
Truckee Donner PUD's share of the proposed Project Development Work costs for the Resource
500 Project should not exceed $18,750. Adequate funds are available in the 2005-06 budgets.
Upon purchase of the project, capital costs are expected to be in the range of $800 per kW to $900
per kW. These costs may be financed through the Sierra Nevada Electric Power Authority, a joint
action agency formed specifically to finance this project and secured by a take or pay Power Sales
Agreement, paid with cash on hand in the Utility Reserves or be financed with the issuance of
Electric Revenue bonds by Truckee Donner PUD. Final recommendation as to the financing
method will be brought to the City Council in conjunction with the PSA mentioned above.
Recommendation:
Staff recommends that the Board of authorize the General Manager or his designee (Assistant
General Manager) to execute the Resource 500 Development Agreement with the Central Valley
Project Corporation, or its assignee, in substantially the form attached with such changes,
insertions or omissions as may be approved by the official executing the Agreement and the
District's counsel and authorize the General Manager and/or his designee to approve any changes
in the Resource 500 Project Development Budget up to 10% without further consideration by the
Board of Directors.
Attachments: Draft Development Agreement with Central Valley Project Corporation.
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AGREEMENT
FOR
FINANCING OF DEVELOPMENT ACTIVITIES FOR
PURCHASE OF RESOURCE 500 PROJECT
Dated as of December_, 2005
TABLE OF CONTENTS
Page
SECTION 1. PRIOR DEVELOPMENT WORK .........................................................2
SECTION 2. CONFIDENTIALITY AGREEMENT .....................................................2
SECTION 3. DEVELOPMENT WORK......................................................................2
SECTION 4. ORGANIZATION OF THE DEVELOPMENT COMMITTEE .................4
SECTION 4.1 PARTICIPATION ENTITLEMENTS; REPRESENTATIVES;
CHAIR.......................................................................................4
SECTION 4.2 MEETING SCHEDULES...........................................................5
SECTION 4.3 QUORUM DEFINED ...................................................I.............5
SECTIONAA VOTING RIGHTS......................................................................5
SECTION 5. POWERS, DUTIES AND RESPONSIBILITIES OF THE
DEVELOPMENT COMMITTEE ...........................................................6
SECTION 6. FINANCIAL COMMITMENTS ..............................................................6
SECTION 7. CASH ADVANCES, INVOICING AND WORKING CAPITAL FUND....6
SECTION 7.1 PAYMENT OF INVOICES.........................................................7
SECTION.7.2 WORKING CAPITAL FUND......................................................7
SECTION 8. LIMITED RIGHTS TO ENTER INTO POWER SALES AGREEMENT.8
SECTION 8.1 DISCRETION — DEVELOPMENT PARTICIPANTS' OPTION
TO ACQUIRE PROJECT CAPACITY AND ENERGY...............8
SECTION 8.2 INCREASE IN PURCHASES....................................................8
SECTION 8.3 EFFECT OF TAKING LESS THAN FULL PARTICIPATION
ENTITLEMENT PERCENTAGE................................................8
SECTION 9. CONDITIONAL REPAYMENT TO PARTICIPANTS ............................9
SECTION10. TERM...................................................................................................9
SECTION 11. ASSIGNMENT BY CVP CORP..........................................................10
SECTION 12. FAILURE TO MAKE PAYMENTS; ADJUSTMENT OF
PARTICIPATION ENTITLEMENT PERCENTAGES..........................10
SECTION 13. NONPARTICIPATION IN DEVELOPMENT WORK BUDGET
INCREASES ......................................................................................10
SECTION14. MISCELLANEOUS.............................................................................11
EXHIBIT A CONFIDENTIALITY AGREEMENT ...................................................13
EXHIBIT B DEVELOPMENT WORK DRAFT BUDGET ......................................14
EXHIBIT C DEVELOPMENT WORK SCHEDULE AND MILESTONES...............15
AGREEMENT
FOR
FINANCING OF DEVELOPMENT ACTIVITIES FOR
PURCHASE OF RESOURCE 500 PROJECT
This Agreement, dated as of , 2005, by and among Central
Valley Project Corporation, a California nonprofit public benefit corporation, ("CVP
Corp"), and each of the entities which execute this Agreement (the "Development
Participants" or individually "Development Participant"),
WITNESS:
WHEREAS, CVP Corp has the opportunity to purchase a 500 MW gas-fired
power plant in Northern California, together with related facilities and equipment,
commonly referred to as the Resource 500 Project (the "Project"); and
WHEREAS, the Development Participants have indicated a preliminary interest
in possibly acquiring capacity and energy of the Project from CVP Corp, subject to the
closing of the sale of the Project; and
WHEREAS, it is anticipated that CVP Corp will assign or transfer its rights and
obligations with respect to the purchase of the Project and the Project agreements to a
new joint powers agency of the State of California called Sierra Nevada Electric Power
Authority ("SNEPA") prior to expiration of this Agreement; and
WHEREAS, upon such assignment references herein to CVP Corp shall refer to
SNEPA; and
WHEREAS, the Development Participants have agreed to advance funds to CVP
Corp in order to permit CVP Corp to undertake the due diligence and Project agreement
preparation necessary to permit CVP Corp to purchase the Project (as more fully set
forth in Section 3, the "Development Work"); and
WHEREAS, CVP Corp desires to undertake the Development Work, to make the
information and documents produced by the Development Work available to the
Development Participants, and to provide an option to each Development Participant
not in default hereunder an opportunity to acquire right to the capacity and energy of the
Project (subject to CVP Corp's acquisition of the Project), all on the terms and
conditions set forth herein; and
WHEREAS, the current estimate of the cost of the Development Work is
$1,575,000; and
WHEREAS, the Development Participants desire to have access to the
Development Work in order to determine whether to enter into an agreement to acquire
a portion of the capacity and energy of the Project and obtain the right to subscribe to a
portion of the capacity and energy of the Project if the Project is acquired by CVP Corp;
and
WHEREAS, the subscription to a portion of the capacity and energy of the
Project by a Development Participant will be accomplished by such Development
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Participant entering into a "take-or-pay", power sales agreement (a "Power Sales
Agreement") with CVP Corp, the terms of which will be developed as a Project
agreement included in the Development Work; and
WHEREAS, to acquire the aforementioned access to information and documents
and the right to subscribe to a portion of the capacity and energy of the Project, the
Development Participants are willing to make cash advances as herein provided which
advances will be used to pay the costs of the Development Work; and
WHEREAS, the advances of the Development Participants will be reimbursed
only on the terms and conditions set forth in this Agreement;
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Prior Development Work. (a) The Sacramento Municipal Utilities
District ("SMUD"), the City of Redding Electric Utility ("Redding") and the Northern
California Power Agency ("NCPA") have made advances to CVP Corp of $100,000 to
fund the initial study and due diligence costs related to the purchase of the Project.
These entities shall be reimbursed for these advances in accordance with Section 9 of
this Agreement.
(b) In addition, CVP Corp, SMUD, Redding and NCPA and the
Development Participants may incur significant staff time in the performance of future
Development Work in lieu of hiring outside consultants. Development Participants
agree that reasonable staff costs associated with Development Work shall be
reimbursed as provided in Section 9 of this Agreement. It is understood that these
internal costs will not be reimbursed if CVP Corp does not complete the purchase of the
Project for any reason, including but not limited to the inability to finance the cost of
purchasing the Project. It is further understood by the Development Participants that
the successful financing of CVP Corp's purchase of the Project is dependent, in large
part, upon credit worthy entities entering into the Power Sales Agreement for all of the
capacity and energy of the Project.
(c) Development Work shall not include the activities of the
Development Committee (as hereinafter defined) for which all Development Participants
will incur internal staff costs. Such activities shall include, but not be limited to, review
of Development Work and Development Work product, preparation and attendance at
Development Committee meetings, and negotiations with other Development
Participants.
Section 2. Confidentiality Agreement. Because of the sensitive nature of
negotiations with the seller of the Project, each Development Participant shall,
concurrently with its execution and delivery of this Agreement, deliver a Confidentiality
Agreement in the form of Exhibit A attached hereto.
Section 3. Development Work. CVP Corp agrees to undertake and perform
the Development Work, to take into consideration the recommendations of the
Development Committee with respect to the Development Work and to make all reports,
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recommendations and information resulting from the Development Work available to the
Development Committee for distribution to the Development Participants.
The Development Work to be undertaken by the CVP Corp pursuant to this Agreement
shall include all activities determined to be necessary or desirable by CVP Corp in
connection with the performance of due diligence for the purchase of the Project and
the preparation of Project agreements including the form of the Power Sales Agreement
and the contract of purchase for the Project (the "Purchase Agreement'). The initial
Development Work budget and schedule set forth in Exhibits B and C of this Agreement
are examples of the types of activities contemplated as Development Work. These
activities may be modified or revised from time to time by CVP Corp after consideration
of any recommendations made by the Development Committee and are provided as
examples only. Without limiting the generality of the foregoing, the Development Work
shall include:
1. previous activities for due diligence and other studies or activities
expended by parties specified in Section 1 of this Agreement,
2. all activities necessary or advisable to maintain milestone completion
dates, including incurring costs to facilitate the timely purchase of the Project and
related rights and services,
3. the development of a definitive budget and schedule for the purchase of
the Project,
4. the development of a definitive budget and schedule for the initial
operation of the Project after acquisition by CVP Corp, including working capital, fuel
requirements and reserves,
5. obtaining necessary permits and approvals for the purchase and operation
of the Project,
6. performance of engineering due diligence reviews related to the Project,
7. the preparation and negotiation of definitive Project agreements, including
the Power Sales Agreement and the Purchase Agreement,
8. legal, financial advisory and tax support services, including bond counsel
consultation,
9. administrative support, fiscal management, invoicing and related services
necessary or desirable in connection with this Agreement and the Development Work
and
10. the performance of all other activities related to the acquisition, permitting,
operation and financing of the Project as determined by CVP Corp which are consistent
with the intent of this Agreement.
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Performance of the above activities may be conducted by Development Participant
internal staff, outside consultants or others. It is expected that reasonable internal staff
work expended on Development Work that could be performed by an outside consultant
will be accumulated and billed to the Project, along with applicable overheads. These
costs are subject to reimbursement only as provided in Section 9.
Section 4. Organization of the Development Committee. In order to permit the
Development Participants to make recommendations to CVP Corp with respect to the
scope, performance, management and direction of the Development Work, and to
secure the effective cooperation and interchange of information among the
Development Participants in connection with various administrative, technical, legal,
contractual and other matters that may arise from time to time in connection with the
Development Work, a committee of Development Participants (the "Development
Committee") is hereby established under this Agreement. The Development Committee
shall consist of representatives appointed by the Development Participants as provided
in Section 4.1.
Section 4.1 Participation Entitlements: Representatives: Chair. (a) One
purpose of this Agreement is to provide each Development Participant the option, at its
election and in its sole discretion, to participate in the Project by executing a Power
Sales Agreement with SNEPA pursuant to which the Development Participant will be
entitled to a portion of the capacity and energy of the Project if CVP Corp is successful
in acquiring the Project. For purposes of this Agreement, a Development Participant's
participation in the Project will consist of its Participation Entitlement (as defined below)
and any additional participation which the Development Participant elects to include in a
Power Sales Agreement (or a supplement thereto) as a result of other Development
Participants not electing to participate in the Project or electing to participate at less
than the full amount of their Participation Entitlement.
Each Development Participant's Participation Entitlement may be expressed as a
percentage (the "Participation Entitlement Percentage") of one hundred percent and/or
a number of megawatts of capacity of the Project. A Development Participant's
Participation Entitlement Percentage shall equal that percentage which its commitment
(which is not in default) to make cash advances to the Working Capital Fund (as
hereinafter defined), exclusive of any interest paid on delinquent advances, bears to the
sum of the budget for Development Work (the "Development Work Budget") which is
currently set at $1,575,000. A Development Participant's participation in the Project
expressed in megawatts shall be the Development Participant's Participation
Entitlement Percentage times five hundred twenty-five (525) megawatts ("Participation
Entitlement"). The Development Participants acknowledge that neither CVP Corp nor
SNEPA is guaranteeing any level of performance or output from the Project and that the
Power Sales Agreement will provide that each entity executing the Power Sales
Agreement will be entitled to a percentage of the actual output of the Project and not a
specific number of megawatts of capacity or megawatt hours of energy.
(b) Each Development Participant with 20 MW or more of
Participation Entitlement shall appoint one representative to the Development
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Committee and shall designate such representative within 10 days after its execution
and delivery of this Agreement by giving notice to the Chair of the Development
Committee (as defined below) of such designation. Development Participants with less
than 20 MW of Participation Entitlement may aggregate their Participation Entitlements
and appoint one representative for the total aggregated amount of Participation
Entitlement, with a minimum Participation Entitlement of 20 MW. The Chair shall be
responsible for distribution of representative information to all Development Committee
members. Each Development Participant (or aggregated Development Participants of
at least 20 MWs) may also designate an alternate to act as its representative in the
absence of the regular representative, and such notice shall be given in the same
manner as for the regular representative.
(c) The Development Committee shall be chaired by a
representative of CVP Corp (the "Chair") and while the Chair may participate, he/she
will have no voting rights on the Development Committee. The Chair shall be
responsible for calling and presiding over all regular and special meetings of the
Development Committee and shall cause minutes of all meetings of the Development
Committee to be kept. Such records shall be available upon request by any
Development Participant.
Section 4.2 Meeting Schedules. Due to the expected short time frame
for the acquisition of the Project by CVP Corp, no specific meeting schedules shall be
established for the Development Committee. The Development Committee will meet on
an as needed basis in order for the Development Work to proceed on the expected
timeframe. The Development Committee may meet in any location and may hold
meetings in person or via conference call as necessary.
Section 4.3 Quorum Defined. The presence of either a majority of the
representatives of the Development Committee, or of Development Committee
representatives then having a combined Participation Entitlement Percentage of at least
65% shall constitute a quorum for the purpose of Development Committee action.
Section 4.4 Voting Rights. Voting by representatives of Development
Participants will be by Participation Entitlement Percentage with 65% or more
affirmative vote necessary to carry the action.
Any decision related to the Development Work taken by the affirmative vote of
representatives of Development Participants holding less than 65% of Participation
Entitlement Percentage can be reviewed and revised if a Development Participant
holding any Participation Entitlement Percentage gives notice of intention to seek such
review and revision to each other Development Participant within 48 hours after
receiving written notice of such action. If such notice of intention is so given, any action
taken specified in the notice shall be nullified, unless Development Committee
representatives holding at least 65% of the total Participation Entitlement Percentage
vote in favor thereof at a regular or specially called meeting of the Development
Committee. If the notice of intention concerned a failure to act, such action shall
nevertheless be taken if the Development Committee representatives holding at least
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65% of the total Participation Entitlement Percentage vote in favor thereof at a regular
or specially called meeting of the Development Committee.
Section 5. Powers. Duties and Responsibilities of the Development
Committee. The Development Committee shall monitor the continuation of the
Development Work, make the information and documents produced by the
Development Work available to the Development Participants, provide a liaison among
the Development Participants and CVP Corp with respect to Development Work, and
make such recommendations to CVP Corp with respect to the Development Work
Budget as the Development Committee deems advisable, including recommendations
on the form of all Project agreements included in the Development Work and on any
other activities deemed necessary or desirable to complete Development Work and to
otherwise accomplish the purposes of this Agreement.
Section 6. Financial Commitments. As set forth in Exhibit B hereto, the
Development Work Budget is $1,575,000. Each Development Participant agrees, by
executing this Agreement, to a financial commitment hereunder for its respective
Participation Entitlement Percentage of a total of $1,575,000 in accordance with Section
7 through Section 7.2. The Development Participants acknowledge that the
Participation Entitlement Percentages are subject to automatic adjustment pursuant to
Section 12 and to adjustments based on the decisions of the affected Development
Participant pursuant to Section 13. No Development Participant has any obligation
hereunder to fund a Development Work Budget increase but each Development
Participant acknowledges that a failure to fund its Participation Entitlement Percentage
of any such increase may result in a reduction of its Participation Entitlement
Percentage by virtue of the funding of the increase not paid by such Development
Participant by another Development Participant or other entity in accordance with
Section 13.
The Development Work Budget may be increased from time to time by CVP Corp but
only after the Development Committee has been given an opportunity to review and
make a recommendation with respect to each such increase. Upon approval of a
Development Work Budget increase by CVP Corp, each Development Participant shall,
within 30 days of receiving notice of such increase, either pay its Participation
Entitlement Percentage of such increase or notify CVP Corp of its determination not to
make such a payment. Failure by a Development Participant to pay its Participation
Entitlement Percentage of any increase in the Development Work Budget within the
time provided in this Section 6 will constitute notice by such Development Participant of
its determination not to make such payment.
Section 7. Cash Advances, Invoicing and Working Capital Fund. Each
Development Participant hereby agrees to pay or advance to CVP Corp $3,000 per MW
of requested participation in the Project as set forth on the Development Participant's
Signature Page to this Agreement. Upon execution of this Agreement, 50% of this total
amount (e.g. 25 MW x $3,000 x 50%) shall become due and payable to CVP Corp
within 10 business days of receipt of an invoice and the remainder (the "Balance Due")
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shall be paid in accordance with Section 7.1. All such advances shall be deposited in
the Working Capital Fund described in Section 7.2 of this Agreement.
The above $3,000 per MW of participation may be increased by CVP Corp to no more
than $3,750 per MW if less than 500 MW of the Project Participation is subscribed to by
Development Participants.
Section 7.1 Payment of Invoices. (a) CVP Corp shall make demands
for payment of the unpaid Balance Due from each Development Participant in
accordance with subsection (b) of this Section 7.1 by sending an invoice for the amount
then due. Payments shall be made to CVP Corp at their corporate headquarters, 180
Cirby Way, Roseville, CA 95678. Any part of such invoice which remains unpaid for
twenty days after its billing date shall bear interest from such twentieth day at the
reference rate of the Bank of America, N.A. then in effect, plus two percent, computed
on a daily basis, until paid. Interest so earned shall not change any Development
Participant's Participation Entitlement Percentage and shall be deposited in the Working
Capital Fund.
(b) CVP Corp may fix and schedule the payment of the Balance
Due of each Development Participant into any number of payments (but not less than
two nor more than three), and the dates on which such payments will be made (which
shall be no later than six months after the effective date of this Agreement), and each
Development Participant agrees to make such payments as provided in subsection (a)
of this Section 7.1. Each Development Participant shall have the right to prepay its
unpaid Balance Due by giving CVP Corp not less than ten days notice of such
prepayment.
(c) Except with respect to a refusal to pay increases in the
Development Work Budget made in strict conformity with Section 6, no Development
Participant may avoid the obligation to pay amounts due from it under this Agreement
for any reason, including any reduction in its Participation Entitlement Percentage, and
such obligation shall be unconditional and not subject of setoff or other reduction;
provided, however, that each Development Participant is obligated to make all such
payments only from the applicable utility revenues or reserves or, in the case of a
Development Participant which is a joint powers agency or other form of entity, from
unencumbered funds legally available for such purpose.
Section 7.2 Working Capital Fund. All funds advanced by the
Development Participants pursuant to this Agreement shall be deposited in the
Resource 500 Working Capital Fund (the "Working Capital Fund") which shall be held
by CVP Corp. Amounts in the Working Capital Fund shall be applied by CVP Corp
towards the cost of Development Work under this Agreement and, except as provided in
Section 9, not for any other purpose. A periodic reporting of expenditures, activities and
balance of the Working Capital Fund shall be provided to the Development Committee
by CVP Corp.
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Section 8. Limited Rights to Enter Into Power Sales Agreement.
Section 8.1 Discretion - Development Participants' Option to Acquire
Project Capacity and Energy. In consideration of the payments provided for in Section
7 of this Agreement, each Development Participant which is not then in default
hereunder shall have an exclusive option to enter into a Power Sales Agreement for all
or any portion of its Participation Entitlement Percentage of Project capacity and energy,
which right shall be subject to CVP Corp acquiring title to the Project.
Section 8.2 Increase in Purchases. A Development Participant
executing and delivering a Power Sales Agreement in accordance with Section 8.3 can,
pursuant to a supplement to its Power Sales Agreement, purchase more than its
Participation Entitlement Percentage of the capacity and energy of the Project if
additional capacity and energy are made available by reason of the nondelivery of an
executed Power Sales Agreement by one or more Development Participants or the
execution and delivery of the Power Sales Agreement by one or more Development
Participants for less than the full Participation Entitlement Percentages of such
Development Participants. Such available capacity and energy shall first be offered on
a pro rata basis to those Development Participants which have delivered executed
Power Sales Agreement for all of their Participation Entitlement Percentages. If
Development Participants so entitled do not wish to contract for all the available
capacity and energy of the Project, the remaining available capacity and energy shall be
disposed of as determined by CVP Corp after consideration of any timely
recommendations received from the Development Committee.
Section 8.3 Effect of Taking Less Than Full Participation Entitlement
Percentage. (a) CVP Corp shall establish the terms and provisions of the Power Sales
Agreement for rights to capacity and energy from the Project as part of the
Development Work. CVP Corp shall also establish the date by which the Power Sales
Agreement must be executed by Development Participants and delivered to CVP Corp
if they are to participate in the Project. Such date shall not be less than 30 days after
delivery of the Power Sales Agreement in final form (except for the shares of Project
capacity and energy to be taken by each entity executing the Power Sales Agreement).
To be effective, the delivery of an executed counterpart of the Power Sales Agreement
must be accompanied by an opinion of counsel acceptable to CVP Corp as to the
validity and binding effect on the Development Participant of the Power Sales
Agreement and in the form attached to the Power Sales Agreement.
(b) Failure by a Development Participant to execute and deliver
the Power Sales Agreement for any of its Participation Entitlement Percentage pursuant
to Section 8.3(a) will be an irrevocable decision on the part of that Development
Participant not to exercise the rights given to such Development Participant in Section 8
hereof to acquire rights to the capacity and energy of the Project through the Power
Sales Agreement. Execution and delivery of the Power Sales Agreement pursuant to
Section 8.3(a) by a Development Participant for less than its total Participation
Entitlement Percentage will be an irrevocable decision on the part of that Development
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Participant not to participate in the Project in excess of the percentage of Project
capacity and energy set forth in its delivered Power Sales Agreement.
(c) CVP Corp will attempt to enter into supplements to the
executed Power Sales Agreements or to enter into other agreements for the Project
capacity and energy not covered by executed Power Sales Agreements, subject to the
allocation of such capacity and energy as set forth in Section 8.2. The procedure for
processing supplements to executed Power Sales Agreements shall be consistent with
those prescribed immediately above in this Section 8.3 with respect to the original
Power Sales Agreements. Failure to return an executed supplement to an executed
Power Sales Agreement for any additional Project capacity and energy within the
prescribed period is an irrevocable decision not to purchase such additional capacity
and energy.
Section 9. Conditional Repayment to Participants. All payments and
advances made heretofore, and those hereafter made pursuant to Sections 1 and 7 of
this Agreement, excluding interest paid on delinquent payments, shall be repaid to each
of the Development Participants or entities specified in Section 1 out of the proceeds of
the first issuance of the Project bonds, notes or other evidences of indebtedness issued
to provide permanent (and not interim) financing for the Project ("Bonds") which can
provide therefore after providing for all of the purchase price of the Project, all
requirements of the proceedings and documents relating to the issuance of the Bonds
and the purchase of the Project by CVP Corp, and all amounts deemed necessary by
CVP Corp for the initial operation of the Project, including working capital, reserves and
provisions for fuel for the Project. Such reimbursements shall be made within 60 days
following the sale of any Project Bonds satisfying the conditions of the immediately
preceding sentence and shall include interest computed monthly at a rate equivalent to
the end of the month reference rate of the Bank of America, N.A. Any interest due
under Section 7 of this Agreement and unpaid shall be deducted from the repayment. If
CVP Corp determines to purchase the Project, but is not successful in closing the
purchase, including without limitation the failure to obtain financing therefore, there shall
be no reimbursement except out of any moneys remaining in the Working Capital Fund
which shall be applied pro rata based on cash advances by the Development
Participants and the other entities specified in Section 1(a).
Section 10. Term. This Agreement shall take effect as of December 15, 2005,
but only if Development Participants holding 400 MWs or more of Participation
Entitlements in the Project have delivered executed counterparts of this Agreement to
CVP Corp by such date. If Development Participants holding 400 MWs or more of
Participation Entitlements in the Project have not delivered executed counterparts of this
Agreement to CVP Corp by such date, CVP Corp may establish a later date for the
delivery of the required executed counterparts of this Agreement, but not later than July
1, 2006, to permit CVP Corp to obtain counterparts of this Agreement executed by
Development Participants holding 400 MWs or more of Participation Entitlements. This
Agreement shall be superseded by the Power Sales Agreement, except that section 9
of this Agreement shall remain in effect until such obligations have been fully performed.
Changes may be made in this Section 10, except as to the continued effectiveness of
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Section 9, with the approval of CVP Corp and all Development Participants which have
executed this Agreement. Notwithstanding the foregoing, CVP Corp shall have the
right, in its sole discretion, to terminate this Agreement at any time, in which case, any
funds remaining in the Working Capital Fund, after payment of any outstanding liabilities
for expenses authorized under this Agreement shall be reimbursed in accordance with
Section 9.
Section 11. Assignment by CVP Corp. CVP Corp retains the right to assign this
Agreement and any other Project related agreements to SNEPA. Development
Participants hereby consent to such assignment and upon notification in writing by CVP
Corp, each such Development Participant will make all payments under this Agreement
directly to the assignee.
If CVP Corp makes an assignment pursuant to this section, it shall transfer all of its
rights and duties under this Agreement to SNEPA, however the rights and duties of the
Development Participants shall remain the same as provided in this Agreement. Upon
such assignment, duties under this Agreement relating to CVP Corp shall be transferred
to SNEPA provided SNEPA executes an assignment of this Agreement agreeing to be
bound hereby.
Section 12. Failure to Make Payments; Adiustment of Participation Entitlement
Percentages. Upon failure of any Development Participant to make any payment under
this Agreement the Participation Entitlement Percentage of each non-defaulting
Development Participant shall be automatically increased pro rata with that of the other
non-defaulting Development Participants by the amount of advances remaining to be
paid by the defaulting Development Participant, and the defaulting Development
Participant's Percentage Participation shall (but only for purposes of computing the
respective Participation Entitlement Percentage of the non-defaulting Development
Participant) be reduced correspondingly; provided that the sum of all such increases for
any non-defaulting Development Participant shall not exceed without written consent of
such non-defaulting Development Participant an accumulated maximum of 25% of the
non-defaulting Development Participant's original Participation Entitlement Percentage.
If the Development Participant fails or refuses to pay any amounts due to CVP Corp, the
fact that other Development Participants increase their obligations to make such
payments shall not relieve the defaulting Development Participant of its liability for such
payments and any Development Participant increasing such obligation shall have a right
of recovery from the defaulting Development Participant to the extent of such respective
increase.
Section 13. Nonvarticipation in Development Work Budget Increases. If at any
time following the execution of this Agreement, there is an increase in the Development
Work Budget, each Development Participant may refuse to pay its Participation
Entitlement Percentage of such increase and reduce its Participation Entitlement
Percentage in the Project. Such refusal shall not affect any obligations of such
Development Participant therefore made or thereafter made under this Agreement. To
effect such refusal, the Development Participant shall give CVP Corp written notice of
10
such refusal to fund within thirty (30) days of the receipt of the notice by them of the
increase of the Development Work Budget. In the event of a refusal of one or more
Development Participants to fund their share of an increase in the Development Work
Budget, CVP Corp shall convene a meeting of the Development Committee as soon as
possible to discuss the potential assumption by the other Development Participants of
the available Participation Entitlement.
Section 14. Miscellaneous.
(a) The headings of the various Sections of this Agreement are
for convenience only and do not constitute a part of this Agreement.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of California with respect to contracts executed
and to be performed in said State.
(c) This Agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof and supersedes all other understanding
and agreements, whether written or oral, of the parties with respect to the subject matter
hereof.
(d) If any provision of this Agreement, or its application to a set
of circumstances, shall be held illegal or unenforceable by a court of competent
jurisdiction, then such provision (or its application to such circumstances) shall be
considered severed from this Agreement and the remaining provisions of this
Agreement, and the application of this Agreement to other circumstances, shall not be
affected thereby.
(e) References herein to Sections shall be to the particular
Sections of this Agreement unless otherwise expressly indicated or indicated by the
context in which such reference is made.
(f) This Agreement may be executed by the parties in any
number of counterparts but all such counterparts shall constitute but one and the same
agreement among the parties.
IN WITNESS WHEREOF, each Development Participant has caused this Agreement to
be executed by one of its duly authorized officers in accordance with the authorization
of its governing body, and CVP Corp has caused this Agreement to be executed by the
Chairman of its Board of Directors in accordance with the authorization of its Board of
Directors.
11
CENTRAL VALLEY PROJECT NAME OF DEVELOPMENT PARTICIPANT
CORPORATION
By:
Chairman, Board of Directors
Participation Entitlement Percentage:
Number of Megawatts: MW
By:
Title:
12
EXHIBIT A
CONFIDENTIALITY AGREEMENT
13
EXHIBIT B
DEVELOPMENT WORK DRAFT BUDGET
Due Diligence Work $300,000
Drafting of Formal Offer and Purchase
Agreements 775,000
Development of Internal Project Agreements 300,000
Contingency at 15% 200,000
Total Development Work Budget $1,575,000
Note: Line items shown above are for illustrative purposes only. Transfer of funds
between line items may occur as necessary for completion of the project.
* This draft budget does not include costs related to obtaining financing for this project
which are expected to be paid from proceeds of the Project Bonds.
14
EXHIBIT C
Development Work Schedule and Milestones
15
CONFIDENTIALITY AND
NON-DISCLOSURE AGREEMENT
THIS CONFIDENTIALITY AND NONDISCLOSURE AGREEMENT("Agreement")
is entered into as of by and between CENTRAL VALLEY PROJECT
CORPORATION, a California Nonprofit Public Benefit Corporation, with its principal
executive offices at 180 Cirby Way Roseville,California 95678-6420("CVP Corporation")
and the undersigned("PARTICIPANT"),referred to collectively as"Parties"and individually as
"Party."
RECITALS
A. CVP Corporation has the opportunity to purchase from aconfidential seller("Seller")a 500
MW gas-fired power plant in Northern California, together with related facilities and
equipment, commonly referred to as the Resource 500 Project(the"Project");
B. The Participant has indicated a preliminary interest in possibly acquiring capacity and energy
of the Project from CVP Corporation,subject to the closing of the sale of the Project to CVP
Corporation;
C. The Parties desire to exchange certain proprietary or confidential information for the purpose
of discussion of the Project (the "Proposed Transaction"); and
B. The Parties are willing to provide such information for such purpose in accordance with the
terms hereof.
NOW,THEREFORE, the Parties do hereby mutually agree as follows:
I. Definitions.
a. "Confidential Information" shall mean all confidential or proprietary written,
recorded, electronic or oral information or data (including without limitation
research, developmental, engineering, manufacturing, technical, marketing, sales,
financial, operating, performance, cost, business and process information or data,
trade secrets,discoveries, ideas, designs,data, source code, object code, processes,
computer programs, developments, flow diagrams, know-how, and computer
programming and other software and software techniques) provided(whether such
confidentiality or proprietary status is indicated orally or,whether or not the specific
words"confidential"or"proprietary"are used)to a Party(the"Receiving Party")by
a Party(the"Disclosing Party")in the course of the exchange of such information or
data among the Parties. Notwithstanding the foregoing, any such foregoing
confidential or proprietary information of Seller, including the identity of Seller, if
authorized to be disclosed to a Party, shall constitute Confidential Information
hereunder, whether or not Seller is joined as a Party hereto. Without limiting the
aforesaid, the existence of discussions between the Parties regarding the Proposed
Transaction shall constitute Confidential Information hereunder.
b. "PARTICIPANT" shall include any of PARTICIPANT'S subsidiaries or affiliates.
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DOCSPN W C585412
C. "CVP CORPORATION" shall include any of CVP Corporation's subsidiaries or
affiliates.
d. "Person"shall be broadly interpreted to include,without limitation,any corporation,
company, partnership, other entity or individual.
e. "Representatives" shall mean as to any Person, its directors, officers, employees,
agents and advisors(including,without limitation,financial advisors,attorneys and
accountants).
2. Confidentiality and Non-Use. In consideration of each Party's providing Confidential
Information, the Parties agree as follows:
a. The Receiving Party shall hold confidential and not disclose to any Person,without
the prior written consent of the Disclosing Party,all Confidential Information and any
information about the Proposed Transaction,or the terms or conditions or any other
facts relating thereto, including, without limitation, the fact that discussions are
taking place with respect thereto or the status thereof, or the fact that Confidential
Information has been made available to the Receiving Party or its Representatives;
provided, however, that the Receiving Party may disclose such Confidential
Information to its Representatives who are actively and directly participating in its
evaluation of the Proposed Transaction or who otherwise need to know the
Confidential Information for the purpose of evaluating the Proposed Transaction;
b. The Receiving Party shall cause all its Representatives to observe the terms of this
Agreement and shall be responsible for any breach of the terms of this Agreement by
it or its Representatives; and
C. The Receiving Party shall return or destroy all Confidential Information(including all
copies thereof) within 30 days of receipt of a written request therefor.
In addition to the foregoing,the Receiving Party will not use the Confidential Information(a)
in any way detrimental to the Disclosing Party's shareholders or members or (b) for any
purpose other than in connection with the Proposed Transaction.
3. Exceptions to the Confidentiality and Non-Use Oblieations. The obligations imposed by
Section 2 hereof shall not apply,or shall cease to apply,to any Confidential Information if or
when,but only to the extent that, such Confidential Information:
a. was known to the Receiving Party prior to the receipt of the Confidential
Information; or
b. was, or becomes through no breach of the Receiving Party's obligations hereunder,
known to the public; or
C. becomes known to the Receiving Party from sources other than the Disclosing Party
under circumstances not involving any breach of any confidentiality obligation; or
d. is independently developed by the Receiving Party, as evidenced by the written
records thereof.
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DOCSPNW 1:58541.2
It shall not be a breach of the confidentiality obligations hereof for a Receiving Party to
disclose Confidential Information where, but only to the extent that, such disclosure is
required by law or applicable legal process,provided in such case the Receiving Party shall(i)
give the earliest notice possible to the Disclosing Party that such disclosure is or may be
required and (ii) cooperate in protecting such confidential or proprietary nature of the
Confidential Information which must so be disclosed.
4. No Further Agreements Hereunder. No Party nor any parent, subsidiary or affiliate thereof.
shall be under any obligation to enter into any further agreements with the any signatory
hereto or its parents, subsidiaries or affiliates of any nature whatsoever as a result of this
Agreement. The Parties shall be free at all times to hold negotiations or enter into agreements
with any other persons whatsoever(including with respect to projects under discussion by the
Parties hereto) in addition to or in lieu of the discussions hereunder and any such activities
shall not be a breach of this Agreement or any obligations owed to the other Party hereunder.
Each Party hereto reserves the right,in its sole discretion,to decline and make,to retract or to
reject at any time any proposal which has not yet become legally binding by execution of a
written agreement between the Parties with respect thereto or with respect to any further
agreements or business arrangements with the other Party hereto, its parents, subsidiaries or
affiliates and to terminate all further discussions and negotiations.
5. No Representations and Warranties. Each of the Parties make no representation or warranties,
express or implied,of any kind to the other Party with respect to the Confidential Information,
including without limitation with respect to the accuracy or completeness thereof. Any
representations or warranties shall be made thereby, if at all, only in definitive written
agreements that may be entered into hereafter.
6. Termination;Duration of Obligations. Unless sooner terminated by mutual written agreement
of the Parties,this Agreement and the obligations hereunder shall terminate on December 3 L
2008.
7. Entire Agreement. This Agreement represents the entire understanding and agreement of the
Parties relating to the subject matter hereof and supersedes all prior communications,
agreements and understandings between the Parties relating to the subject matter hereof.
8. Waivers• Amendments Assignment; Counterparts. This Agreement may not be modified,
amended or waived except by a written instrument duly executed by the Parties. No failure or
delay by any Party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right,power or privilege hereunder. CVP Corporation
retains the right to assign this Agreement and any other Project related agreements to Sierra
Nevada Electric Power Authority ("SNEPA"). Participant hereby consents to such
assignment by CVP Corporation. If CVP Corporation makes an assignment pursuant to this
section, it shall transfer all of its rights and duties under this Agreement to SNEPA,however
the rights and duties of the Participant shall remain the same as provided in this Agreement.
Upon such assignment, duties under this Agreement relating to CVP Corporation shall be
transferred to SNEPA. Setter may join as party to this Agreement by executing a counterpart
signature page hereto and upon such joinder be deemed a Party hereto. Notwithstanding such
joinder, Seller shall be considered a third party beneficiary of this Agreement. Except as
provided herein, this Agreement may not be assigned by any Party without the prior written
consent of the other Parties and shall be binding on,and inure to the benefit of,the respective
successors and permitted assigns of the Parties. This Agreement may be signed in two or
more counterpart originals,each of which shall constitute an original document.
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DOCSPN W I58541.2
9. Governing Law; Disputes. This Agreement is made subject to and shall be construed
under the laws of the State of California, without giving effect to its principles or rules
regarding conflicts of laws, and that the state and federal courts situated in the State of
California shall have exclusive jurisdiction to resolve any disputes with respect to this
Agreement or the Confidential Information with each Party irrevocably consenting to the
jurisdiction thereof for any actions, suits or proceedings arising out of or relating to this
Agreement or the Confidential Information, and each Party irrevocably waives its rights to
jury trials with respect thereto. In the event of any litigation hereunder,the prevailing Party
shall be entitled to costs and reasonable attorney's fees.
10. Remedies. Without prejudice to the rights and remedies otherwise available to any Party,
each Party shall be entitled to equitable relief by way of injunction or otherwise if the
Receiving Party or any of its Representatives breach or threaten to breach any of the
provisions of this Agreement and the Receiving Parry shall not plead in defense thereto that
there would be an adequate remedy at law.
11. Non-Publicity. All media releases, public announcements and other disclosures by any Party
relating to this Agreement or the subject matter hereof, including promotional or marketing
material, but excluding announcements intended solely for internal distribution or to meet
legal or regulatory requirements, shall be coordinated with and approved by the other Parry
prior to release. In addition,the Receiving Party shall refrain from removing,overprinting or
defacing any notices of copyright, trademark, logo or other proprietary identifications or
notices of confidentiality from any originals or copies of the Disclosing Party's Confidential
Information.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by their
respective authorized representatives as of the date first written above.
PARTICIPANT CENTRAL VALLEY PROJECT
CORPORATION
By: By:
Name: Name:
Title: Title:
Date: Date:
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DOCSPM1`wt:58541.2