HomeMy WebLinkAbout2006-12-13 Agenda Packet - Board (7) Agenda Item # 5
Public Utility District
Memorandum
To: Board of Directors
From: Peter Holzmeister
Date: December 8, 2006
Subject: DAMPS contract
Why this matter is before the Board: This is a companion item to the previous agenda
item. So I will quickly repeat what was written before. We need to secure a supply of
electric power for our customers. We have secured a power supply until April 2009. After
that, we have only a small allocation of hydroelectric under contract. We have an
opportunity to secure a low-cost base load power supply from a new generation plant in
Utah. Approval of that contract requires Board action.
History: The history provided for the previous agenda item applies here. I will not repeat it
here. But it is worth adding a few additional thoughts. I think there is general agreement
that the District needs to secure a contract to provide our base load needs. I also think
there is agreement that coal generation is all that is available. The question is whether a
market based contract for a series of short terms is preferable to a cost based contract for
a long term. It is a question of risk.
We have experience with market based contracts. They are expensive. They rely on old
coal technology. Cost based contracts are far less expensive. This contract with UAMPS
relies on new cleaner coal technology. Both options present a risk of cost increases as
coal technology advances or as regulations pertaining to coal are implemented.
A second question that has been discussed is whether there are off-ramps if we enter into
the UAMPS contract. Basic to this concern is the perceived risk that coal generation could
be rendered impractical by development of new technologies or regulations. Attached is a
report prepared by the American Public Power Association. APPA is the professional
association for public agencies like Truckee who provide electric service. APPA owns no
generation. It earns no money from coal or from any other type of power generation. Its
only purpose for existence is to help public agencies evaluate electric utility issues. It is an
unbiased organization with a commitment to the development of renewable energy
resources. This report projects that the nation's reliance on coal for electric power
generation will increase between now and 2028.
1 UAMPS Contract
Notwithstanding our assessment that coal is the major fuel for electric generation for the
long term, we also believe there are off-ramps from the UAMPS contract. Between now
and 2012 the District can continually monitor the development of base load power
generation opportunities. If attractive base load opportunities develop, we can sell our
interest in IPP-3. From 2012 to 2042 we can continue to follow the development of
technologies and coal regulations. If technologies or regulations impact coal generation it
will impact the United States as a whole. However, we believe that nothing extreme will
happen to coal generation in the short term because of the disruptions that would be felt
throughout the nation. After 2042, the debt on IPP-3 will be paid off and the participants in
the plant can easily vote to shut it down. We do not think that will happen because in 2042
the price of electricity from that plant will drop significantly.
New information: Attached is the proposed contract between the District and UAMPS for
participation in the IPP-3 project. Also attached is a draft resolution authorizing and
approving (1) a power supply resource plan; (2) the Intermountain Unit 3 Project Power
Sales Contract with UAMPS; (3) the Second Amendment to the UAMPS Agreement for
Joint and Cooperative Action; and (4) related matters.
Recommendation: I recommend that the Board adopt the resolution and approve the
contract for Truckee to receive electric power from the IPP-3 project
2 UAMPS Contract
COAL: The Primary
Fuel of the Electric
Utility Industry
August 2006
A a% 10M
P American Public Power Association
0-012006 by the American Public Power Association.
All rights reserved.
Published by the American Public Power Association,
2301 M Street, N.W., Washington, D.C. 20037-1484;
202-467-2900;fax: 202-467-2910; www.A PPAnet.or:�.
COAL: THE PRIMARY FUEL OF THE UTILITY INDUSTRY
he United States electricity industry has long relied on coal as its major fuel source
for generating electric power in the United States. Coal's domestic abundance and
low cost have made it the logical choice for most baseload generation. In the 1990s
it appeared that natural gas threatened to upset coal's dominant position, but due to a
confluence of factors, principally the increasing and volatile costs of oil and natural gas, as
well as the slow development of alternative fuels, coal looks to maintain its position as the
dominant fuel of the electric industry.
Background: Over-investment in Natural Gas
Throughout the 1990s natural-gas fired plants were built at a very rapid rate. Investors
were encouraged by natural gas's relatively low cost and greater environmental
friendliness. In addition, natural gas plants tend to have low capital costs and take less
time to build, factors which attracted many merchant generators to them. These
merchant generators were also driven by anticipated ample supplies of natural gas at low
prices and a booming economy, as well as the expectation that the implementation of
Federal Energy Regulatory Commission (FERC) Order Nos. 888, 889, and 2000 would
help open the national electric grid to more third-party competition.'
Many also expected that technological and environmental developments would spur
greater investment in the natural gas industry. In an August 1999 report, Moody's
Investors Service predicted that combined cycle combustion turbine technology and
increased investment of gas supplies would lead to a significant increase in natural gas-
fired generation. The Energy Information Administration (EIA), in its Annual Energy
Outlook for 1996, predicted that more natural gas pipeline capacity would be built in all
regions of the country by 2010.'
The restructuring of electric wholesale markets was also predicted to result in a greater
role for natural gas. In December 1995 Douglas Olesen—CEO of Battelle, a major
technology company—predicted that increased competition would lead to more
technological development in the utility industry. Much of the new technology would be
'Gary L.Hunt and Fereidoon P. Sioshansi,"Is There a Capacity Glut,and How Long Will it Last?"Electricity
Journal,August/September 2002,pp.64-65.
`'Moody's Investors Service,"Credit Outlook Stable for City-Owned Electric Utilities,but Credit Risks Will
Increase When Customer Choice of Electricity Supplier Begins,"August 1999,p.8.
'Energy Information Administration,Annual Energy Outlook 1996,January 1996,p.46.
2
clean-fired electricity, with natural gas being one of the principal components of this new
clean electricity.
But the natural gas boom petered out soon after it began. Merchant generators over-
invested in capacity and then had difficulty recovering their costs because of low power
prices. Numerous proposed plants were cancelled. The following chart shows how much
natural gas capacity was added compared with new coal-fired capacity over the past fifteen
years:
Coal and Natural Gas: Capacity additions, 1990-2005
60,000
50,000
40,000 ---T- - - - - - - - --- - --- - -- --
a Coal
■Nat Gas
� 30,000 -= _ =--
20,000 - -- -- - -- ---- - - - - -- - - -
10,000
0 1 ,Do A-'a,_ T t ��;_
T
1990 1993 1996 Year 1999 2002 2005
Source. EIA-860 data for years through 2004,and Electric Power Annual for 2005 capacity.
A second major reason for the end of the natural gas boom has been the fuel's price
volatility. As recently as January 2002, natural gas spot prices were below$2 per million
Btu. Prices have risen precipitously over the past four years, exacerbated by the severe
hurricanes of 2005, when prices reached$15.27 per million Btu at the Henry Hub in
September 2005.E Prices have since fallen back to the $6 to $7 range, but remain volatile.
Forecasts taken from EIA's Annual Energy Outlook 2000 and 2006 demonstrate how
expectations of natural gas's place in the electric industry have fallen. In the 2000 edition,
EIA forecasted that natural gas would account for 31 percent of all electricity generation
by 2020. EIA also predicted that dry gas production in 2020 would be 26.4 trillion cubic
Douglas E. Olesen,"Unprecedented Competition,Fabulous Technologies:A Whole New Ballgame for the
Energy Industry,"Electricity Journal,December 1995,pp.57-58.
Source: Energy Information Administration,NGI's (Natural Gas Intelligence) Daily Gas Price Index
(http://intelligencepress.com),as published in EIA's Natural Gas Weekly Update.
3
feet, with 9.26 trillion cubic feet being used for electric generation." In the 2006 outlook,
however, EIA forecasts that natural gas will only account for 22 percent of electric
generation in 2020, with 21.44 trillion cubic feet of dry gas production, and 7.46 trillion
cubic feet for electric production.7
In contrast, EIA's recent coal forecasts reveal an upward trend for coal. Coal currently
represents roughly half of all electricity generation in the United States. Though EIA's
2006 forecast for coal's portion of electric generation in 2020 remains largely unchanged
from its 2000 forecast (49 percent in the former, 50 percent in the latter), EIA's 2006
forecast shows coal's share of the electricity market climbing to 57% by 2030. EIA also
foresees the construction of 174 gigawatts (GW) of coal-fired generating capacity by 2030.8
The following chart shows EIA's long-term generation forecast:
Electricity Generation by Fuel, 1980-2030
4000
-�- Coal -- - -- -
3500
-�- Petroleum
3000 - Natural Gas
i -X Nuclear
s 2500 -A Renewable/Other
0 2000 --- - -- - -- - --- -- - - ---- - --- - - ---- --- -
Y
C
c 15001000
---- ---- ---- -- - - - --- - -- -- --- -- -
m
500
WK
1980 1986 1992 1998 2004 2010 2016 2022 2028
Source. EIA Annual Energy Outlook,2006
Increasing costs of other fuel types—primarily oil and natural gas—will spur this increased
coal consumption. EIA forecasts dramatic price increases for oil and natural gas, with
both fuels predicted to rise in cost by over a dollar per million Btu (in 2004 dollars) over
''Energy Information Administration,Annual Energy Outlook 2000,December 1999,p.5; 135. Dry gas
production is defined as marketed production (wet) minus extraction losses.
Energy Information Administration,Annual Energy Outlook 2006,February 2006,p. 7; 155.
"Annual Energy Outlook 2006,p. 7.
4
the next 25 years. EIA predicts natural gas prices of$6.26 and petroleum prices of$7.61
(in 2004 dollars) per million Btu in 2030. Coal prices, meanwhile, are predicted to
remain relatively flat—fluctuating between $1.40 and$1.50 per million Btu (in 2004
dollars) throughout the forecast period.9 In addition to the comparatively high prices for
natural gas, there are supply issues. Offshore drilling for oil and natural gas is relatively
constrained, although Congress is considering legislation that would expand drilling
rights. Furthermore, the existing supply was hampered by Hurricanes Rita and Katrina,
and other oil and gas assets remain vulnerable to future catastrophic storms. Faster
depletion of domestic natural gas reserves and the increasing production in more costly
recovery areas will keep upward pressure on gas prices.
The comparative costs of other fuels will have a significant impact on coal consumption.
According to EIA alternate case forecasts, if gas and oil prices do not increase as much as
predicted, then coal's share of the market could fall to 46%, but if the other prices go up
even more than the base forecast, then coal could account for as much as 64% of the
electricity generated in 2030.'o Higher oil and natural gas prices could also spur more
investment in coal-to-liquid (CTL) plants.
Coal"s Comeback
These EIA projections reflect new thinking about coal as a fuel for electric generation.
Natural gas has lost its place as the "fuel of the future," with coal rebounding to a place of
prominence. This development is all the more surprising in light of the fact that much
debate took place in the late 1990's over stranded cost recovery. Older coal plants were
expected to retire in light of the construction of new natural gas-fired plants. As a result,
regulators granted coal and nuclear plants stranded cost recovery because they were not
expected to be able to compete with the new gas-fired capacity.
Not only has natural gas not made a significant dent in coal's share of electric utility
generation, but many of these older coal plants have remained in operation. About half
of the coal plants built in 1950 or earlier that were still on line in 2001 have since been
retired, but less than ten percent of capacity built between 1951 and 1970 that was in
operation in 2001 has gone off-line.'1
All in all, the outlook for the coal industry as regards electricity is very bright. One analyst
summarizes the positive outlook for coal as follows:
Coal demand, production, and prices are high. Competitive fuel prices are higher
on a Btu equivalent basis. Utility inventories remain at record low levels, while the
economy improves and demand for electricity grows. In addition to basic supply
U Ibid.,p. 82.
"'Annual Energy Outlook, 2006,p. 102.
" Source:Energy Velocity Database as of June 2006,and Form EIA-860 data as of 2001.
5
and demand principles, the Energy Policy Act of 2005 was signed into law this
summer, creating several potential alternative use scenarios for coal.12
All of these conditions taken together are boosting confidence in and within the coal
industry. There are some mitigating factors—particularly continuing problems with
railroad transportation and supply shortages—that impair production performance. But,
overall, coal is expected to maintain its prominent position regarding electric generation.
The financial industry also has a positive attitude about coal. Moody's Investors Service
has given nine of the ten rated coal companies a stable credit outlook and one (Peabody
Energy) a positive outlook.13 Standard and Poor's believes that the combination of high
natural gas and oil prices, decreased coal production in Central Appalachia, global
economic expansion—particularly in Asia, and the construction of new coal-fired plants
all will cause coal prices to rise in the short-term. The rating agency does not think that
oil or natural gas will be able to make a dent in coal's market share. "Over the longer
term, alternative energy sources might become a factor but will not materially supplant
King Coal's dominant position as the primary source of electric power in the U.S."14
Environmental regulations are a concern, but Standard and Poor's does not think they
will severely impact the coal industry. As the chart below demonstrates, coal prices remain
consistently below those of other fuels:
Energy Prices, 1980 -2004, in 2004 dollars
35 ------
rude
30 - - � - -- - - — - �— �rt d l)
__--_- - --- —�Natural Gas
25
— - - —�Coal
20 ----_ __ -_--- —Electricity
i
15
10
E
I
f
0
1980 1984 1988 1992 1996 2000 2004
Source. EIA Annual Energy Outlook, 2006
12 Steve Fiscor,"Coal Market Momentum Converts Skeptics," Coal Age,January 2006,p.26.
13 Moody's Investors Service,"North American Coal Industry Outlook,2006,"December 2005,pp. 1-2.
"Standard&Poor's,"Why High Prices Are Not Energizing Outlooks On U.S.Coal Producers,"October 11,
2005,pp. 5-6.
6
Nuclear energy is coal's main competitor for baseload generation; however, Standard &
Poor's maintains that the risks related to nuclear power plants—for example, high capital
costs and safety concerns—mean that Wall Street investors will be more likely to invest in
coal-fired power plants. The Energy Policy Act of 2005 (EPACT) established financial
incentives for nuclear power investment, but those incentives may not be adequate to spur
investment.15
Though it was assumed electric competition would prompt greater merchant investment
while regulated utilities stepped back from investing in new generation, both regulated
utilities and merchant investors will be key players in the construction of new-coal fired
power plants. In many cases, regulated utilities are hoping to protect themselves from
volatile wholesale markets,while merchant generators hope to benefit from the "dark
spread.""' One independent power producer that has been especially aggressive in its
plans to build new coal-fired plants is NRG Energy. In June 2006 it announced its plans to
build 10,500 MW of new generating capacity over the next decade—with a mix of both
new nuclear and coal-fired plants. NRG's plans contribute to the overall total of 93 GW of
coal-fired plants being proposed as of June 2006."
This spate of development has caused some analysts to worry about a potential glut of new
coal-fired and nuclear generation, particularly if natural gas prices do not remain high.'
NRG claims its slated projects have technological advantages over other projects and says
that it will not begin projects unless it has committed 70% of all potential electric
generation through long-term contracts.' These long-term contracts ease the worries of
investors, and help to shore up the independent power producer's credit rating." In
addition to independent power producers and utilities signing long-term power
purchasing agreements, another method of ensuring a market for the plant's power is to
share with customers in the development of new generating facilities. For example, the
Plum Point Energy plant—a 665-MW coal-fired plant in Arkansas—is being financed by LS
Power Associates, with a nearly 40% stake owned by municipals and co-ops.21
15"Wall Street leery of nuclear plants,likely to favor coal,"in Electric Power Daily,March 28,2006.
16 The dark spread refers to markets where natural gas—which has a high variable price—sets the market
price and lower cost nuclear and coal-fired plants are able to receive higher revenues than their variable
costs. For example,in the New England and ERCOT region natural gas usually sets the price. Steep
increases in the price of natural gas have resulted in significant margins for coal and nuclear plants. See for
example Craig K.Shere and Lance Ettus,"The Power of the Dark Spread,"Calyon Securities,October 6,
2005.
17 National Energy Technology Laboratory,"Tracking New Coal-Fired Power Plants:Coal's Resurgence in
Electric Power Generation,"June 21,2006.
"NRG Unveils Bold Generation Plan," The Enemy Daily,June 22, 2006.
"NRG Announces Comprehensive Repowering Initiative,"NRG Energy Press Release,June 21,2006.
20 Standard&Poor's,"Will High-Yield or High-Grade Financing Fuel New U.S.Coal Power Plants"January
18,2006,p.34.
21 "Private equity,not just utilities, to build next round of plants,financiers say at conference,"Electric Utility
Week,April 10,2006.
Environmental Concerns
Though the outlook for coal is generally positive, and there are new methodologies for
burning coal more cleanly, environmental concerns may hamper infrastructural
investment and development. In addition to proposals on the federal level, such as
legislation containing carbon dioxide (CO2) caps, states are also proposing more stringent
environmental regulations. For example, Illinois Governor Rod Blagojevich has proposed
a plan that calls for coal plants to cut mercury emissions by 90% by July 2009.22 The
California legislature recently passed AB 32, which limits greenhouse gas emissions from
industrial sources.2s Also, North Carolina filed suit against the Tennessee Valley Authority,
alleging that emissions from the Authority's coal-fired plants "constitute a public nuisance
in the state."24
Despite these issues, and despite the wide-spread belief that tighter environmental
regulations are on the horizon, most analysts maintain that coal will continue to be the
dominant fuel for generation. In fact, EIA forecasts that if more stringent emission
regulations are put in place, the average capacity utilization of coal-fired plants will
increase from the current 72% to 80% in 2012 as newer, more efficient plants fitted with
emission control equipment come on line and older plants are retired. EIA also states
that coal plants fitted with emissions controls should remain competitive with natural gas-
fired plants because of the low cost of coal. Moreover, EIA forecasts that 55% of the new
coal capacity developed over the next 25 years or so will be Integrated Gasification
Combined Cycle (IGCC) plants.25
IGCC plants have the promise of environmental benefits, especially their ability to remove
"criteria pollutants" such as sulfur dioxide, nitrous oxide, and other particulate matter,26
However, questions remain about the feasibility of CO2 capture, transportation and
storage. For example, there is no demonstrated technology on a commercial basis for
IGCC plants to separate and store CO2 at a utility plant.27
Capital costs for IGCC plants are considerably higher than for conventional coal plants.
The Electric Power Research Institute (EPRI) puts the additional capital cost—in terms of
dollars per kW of generating capacity—for IGCC compared to conventional pulverized
coal at 14 percent, without considering additional costs for CO2 capture and
22"Illinois governor's plan sharply cuts mercury emissions,"Electric Power Daily,January 6,2006.
23"Schwarzenegger strikes deal on GHG bill,"Electric Power Daily,August 31,2006. Bill details can be
accessed at litter; c� ��v.le ir�l��.ca.«c,��;' ial�ibill;'as�71%��[� O001-(}050,'ab 32 hill 20060831 enrolle:d.htilil.
24"North Carolina sues TVA over emissions from 11 coal plants,"Electric Power Daily,January 31,2006.
25 Annual Energy Outlook 2006,p. 101.
2b American Public Power Association,"The Challenge of Carbon Sequestration for the Utility Sector,"
comments submitted to the National Commission on Energy Policy,November 22,2005. The report can be
accessed at tit Ili ty, inde cfrnylteiiiNiimber=1514 (APPA members only.)
2'"The Challenge of Carbon Sequestration." Also,see Taylor Moore,"Coal-Based Generation at the
Crossroads,"EPRI,journal, Summer 2005,p. 10.
8
sequestration."' The EPRI report also notes that reliability concerns associated with
gasifier operations are an issue as well. Utilities may opt to install two gasifiers in order to
improve reliability, but that would increase capital costs even further. These and other
questions have dissuaded some utilities from investing in IGCC plants. Other utilities,
such as Duke Energy and NRG Energy, are investigating the feasibility of building IGCC
plants.'
Utilities might be more apt to build these plants if the government provides financial
incentives. Some incentives are provided in the Energy Policy Act of 2005.3' Also, the
Western Governors' Association has put together a Clean and Diversified Energy Advisory
Committee to study ways in which western states can promote environmentally friendly
power plant development, in particular by building 30,000 MW of clean energy by 2015.
The committee encourages a broad portfolio of such energy including geothermal, solar,
and clean coal. Specifically regarding clean coal, the committee recommends incentives
to invest in commercially non-viable technologies, for example through tax breaks and
loan guarantees. The committee also recommends that states grant full cost recovery for
projects related to clean coal.'
Some members of the federal government have also called for greater national
encouragement of investments in clean coal. Representative Joe Barton (R-TX) —
Chairman of the House Energy and Commerce Committee—has sought funding for a
program that would retrofit old coal plants with new pollution control equipment.32
Barton has clashed with the DOE on this issue because the agency has instead called for
more funding of projects related to nuclear energy and spent fuel. The retrofit program
was authorized under the Energy Policy Act of 2005.33
The federal government has also announced the creation of the FutureGen project, which
is a cost-sharing program between the DOE and eight coal and utility companies to
construct a power plant that utilizes coal gasification and carbon sequestration.34
Although the federal government has committed financial resources to the FutureGen
`'8 Electric Power Research Institute,Financial Incentives for Deployment of IGCC:A CoalFleet Working Paper,
prepared for the Senate Committee on Energy&Natural Resources Bipartisan Coal Conference,March 10,
2005.
2""Air quality rules make IGCC attractive to some,"Electric Power Daily,May 11,2006;see also"Davido:NRG
plans several coal-fired plants in Northeast,"Electric Power Daily,December 21,2005. Also see NRG's Press
Release,June 21,2066,for a more detailed breakdown of its planned capacity development.
1311)://'www st rn in vt bli.rrkx-1il.e.�ts)x?IID=40574,.')C):Flf)=2,19994<(t
30 Energy Policy Act 2005,Title IV,Sections 402 and 412. The act authorizes DOE to provide loans for
projects producing energy from a plant using IGCC technology.
3' "Governors'advisory panel details Western energy goals,"Electric Power Daily,January 11,2006.
i1"Barton to seek clean coal program funding,blasts DOE,"Electric Power Daily,March 10, 2006.
33 Energy Policy Act 2005,Title IV,Sections 3103 and 3105.
"'"DOE,Industry Group Launch$950 Million Clean Coal Project," The Energy Daily,December 7,2005 Two
sites each in Illinois and Texas are the finalists for the project, "Illinois,Texas sites compete for FutureGen
coal plant,"Electric Power Daily,July 26,2006.
9
project, DOE's proposed Fiscal Year 2007 budget contains cuts amounting to 90% from
previous levels for other clean coal projects."
Rail Issues
Though environmental issues will pose potential problems for coal-related projects,
nothing currently plagues the industry as much as troubles with rail deliveries of coal.
Standard & Poor's puts the problem into focus:
With fewer rail companies in existence than a generation ago, existing railroads
cutting back on staff and infrastructure improvements—especially the laying of new
track and the purchase of locomotives—and increasing demand for coal, we are
witnessing a perfect storm that has created a vortex of upward pressure on
transportation costs.'6
The consolidation of the railroad industry has deeply impacted the coal and utility
industries. Since rail industry deregulation took place in 1980, the number of railroads
has shrunk from 40 to four major railroads that are responsible for over 90% of rail
traffic.' As a result many utilities are served by only one railroad, subjecting them to
"captive" rail rates. Consumers United for Rail Equity (C.U.R.E.) documents the marked
difference in rail transportation costs where competition exists and where railroads have
captive customers, as captive rates are often double those of competitive rates."
Furthermore, Glenn English, CEO of the National Rural Electric Cooperative Association,
says that railroads are making six to eight percent profits in competitive markets, while
making 300-400% profits in captive markets.39
Robert Sahr, Chairman of the South Dakota Public Utilities Commission, in testimony
before the U.S. Senate, highlighted some other major problems with rail shipments of
coal. The most serious development has been dwindling stockpiles. While the average
utility stockpile is over 30 days of supply, some utilities face critical shortages. For
example, the Big Stone Power Plant's stockpile fell to ten days in March, 2006, and
Laramie River Station in Wyoming has also faced severe shortages. Coal shortages have
forced power plants to purchase electric power on the open market. Big Stone had to
purchase power that was $20 a megawatt higher than the power the plant can produce.
35"Flat DOE Budget Boosts Renewables,Nuclear," The Energy Daily,February 7,2006.
" Standard&Poor's,"Coal And Public Power:Credit Issues With Obtaining It,"April 24,2006,p.4.
37 Testimony of the Honorable Robert K. Sahr,Chairman,South Dakota Public Utilities Commission on
Behalf of the National Association of Regulatory Utility Commissioners,before the Committee on Energy
and Natural Resources,U.S.Senate,May 25,2006, ("Sahr Testimony"),p.4.
:"'Consumers United for Rail Equity,"How Do Captive Rail Rates Compare to Competitive Rail Rates,"
August 2004. APPA is a member of C.U.R.E.
,�y"Captive rail customers urge Congress to act,"Electric Power Daily,March 10,2006.
10
These costs are then transferred to rate payers. Sahr said that rising Powder River Basin
(PRB) rail rates may cost South Dakota utility customers $7.7 million.40
In addition to hampering utilities' ability to get needed coal for existing plants, problems
with rail shipments might dissuade some from investing in new coal-fired facilities. Robert
McLennan of Tri-State Generation and Transmission Association—a rural electric
wholesale power supply cooperative—states that Tri-State is currently considering its
future resource planning, and it would prefer to use coal for new generation because of its
relatively low cost and domestic availability. But even though Tri-State is located near the
PRB, it must be assured that it can receive timely deliveries of coal to go ahead with
construction of new coal-fired generation. In his testimony before the Senate McLennan
said:
If there are continued constraints on rail lines moving out of the Powder River
Basin to other parts of the nation, there will be a significant negative impact on Tri-
State's ability to meet its service obligations in the future. If the major rail carriers
are permitted to continue their monopolistic, anti-competitive practices, the cost of
providing electricity using America's vast reserves of coal may force generators to
rely on other fuels and even to foreign suppliers. `
This last point was hammered home by MEAG Power's Steven Jackson. Jackson testified at
this same hearing that unreliable shipments have forced MEAG to look offshore for coal
supply. Ultimately, MEAG began importing coal from Indonesia in January 2006. These
deliveries will continue until the end of the year, and perhaps longer if MEAG continues
to have difficulty with domestic shipments.42 Considering that the United States has been
called the "Saudi Arabia of coal" because of the nation's estimated 250 years of coal
reserves,41 foreign imports of such an abundant domestic product come as a surprise.
High transportation costs also affect EIA's otherwise positive forecasts for coal use. EIA
compiled an alternative model for future coal production based on high rail transport
cost. According to this alternate forecast, coal consumption would decrease 16 percent by
2030 from EIA's reference case. Additionally, EIA predicts that 63 gigawatts less coal-fired
generating capacity would be built if transportation costs for coal increase by 50% from
the reference case.
Sahr Testimony at p. 10.
"Testimony of Robert"Mac"McLennan,Vice President,External Affairs,On Behalf of Tri-State Generation
and Transmission Association,Inc.before the Committee on Energy and Natural Resources,U.S.Senate,
May 25,2006.
't Testimony of Steven Jackson,Municipal Electric Authority of Georgia (MEAG Power),before the
Committee on Energy and Natural Resources,U.S. Senate,May 25,2006.
13 Testimony of Glenn English,C.E.O.,National Rural Electric Cooperative Association,before the House
Committee on Transportation&Infrastructure,Subcommittee on Railroads,April 26,2006.
''Annual Energy Outlook,p. 102.
11
Beginning in 2000, Congress permitted railroads to include fuel surcharges to make up
for the rising fuel costs of transporting coal. Utilities do not have a problem with the
concept of a surcharge, but they complain that these surcharges have become excessive.
Where these surcharges used to account for about two percent of the total freight charge,
they have climbed to 18.5 percent for coal transported from the Powder River Basin. The
utilities also claim that the fuel surcharges go to pad the railroads' profit margins rather
than covering the increasing fuel costs.45
The acrimony between railroads and utilities has been growing. Entergy Arkansas filed
suit recently against Union Pacific (UP) for failure to maintain its rail lines, a failure which
has impaired Entergy's ability to receive coal deliveries. Union Pacific has claimed force
majeure for its inability to make its promised coal deliveries in 2005, but Entergy asserts
that the railroad should be cited for negligence.` Wisconsin Electric Power, operator of
We Energies, has also joined in a suit against UP for failing to meet its delivery contracts
from 2003 to 2005 and for overcharging on the coal it did deliver.47
There has been some improvement in rail deliveries in the first half of 2006. Rail carriers
Burlington Northern Santa Fe (BNSF) and UP have expanded their capacity and will
make further additions over the next few years to allow for the transportation of an
additional 400 million short tons per year. Despite these capacity additions, space
limitations at plant sites mean that utilities will be unable to stockpile enough coal to
alleviate the risk of long disruptions.48
Because of these continued problems, utilities are lobbying Capitol Hill to require
railroads to charge more competitive rates and improve deliveries. As of May 2006 there
were bills in both the House and Senate that attempt to ensure reasonable rates. H.R.
3318 would strike down antitrust exemptions for the railroad industry, and S 919 would
require the Surface Transportation Board (STB) to institute new procedures to hear
customer complaints. S 919 also calls for the implementation of cost-based rates for rail
transportation.49
'S"Railroads abuse fuel surcharges,utilities tell STB; they want board to set standards,"Electric Utility Week,
May 15,2006.
16"Entergy sues Union Pacific over limited PRB coal deliveries,"Electric Power Daily,April 13,2006.
""Wisconsin utilities,regulators pressure rail companies on coal delivery costs,shortfalls,"Electric Utility
Week,May 1,2006.
Trygve Gaalaas,"Update on PRB Coal Transportation: Still a Hot Issue," Coal Age,June 2006,pp. 32-34.
49 Chris Holly, "Utilities Rip Railroads On Coal Deliveries;Demand Hill Action," The Energy Daily,May 26,
2006. For a text of the House bill,see http://thomas.loc.gov/cgi-
bin/query/D?c109:1:./temp/—clO9yg6RRO::For the Senate bill,see http://thomas.loc.gov/cgi-
bin/query/F?c 109:1:./temp/—c l O996hgCv:eO:
12
Conclusion
Despite the problems related to rail delivery of coal and environmental regulations, coal
still has numerous advantages over other generation choices. It is cheaper, more
abundant, and exhibits less price volatility than other standard fuel options. Development
of technologies to improve coal's environmental performance and investment in rail
transportation infrastructure are both needed to ensure that the U.S. can take full
advantage of its most abundant energy source.
y
CKEE
DONNER
Pwbl c Utility District
RESOLUTION No. 2006 - XXX
A Resolution authorizing and approving: (1) a power supply resource plan;
(2) the Intermountain Unit 3 Project Power Sales Contract with Utah
Associated Municipal Power Systems ("UAMPS"); (3) the Second
Amendment to the DAMPS Agreement for Joint and Cooperative Action;
and (4) related matters.
WHEREAS, Truckee Donner Public Utility District (the "Participant") is a member of Utah
Associated Municipal Power Systems ("UAMPS") pursuant to the provisions of the Utah
Associated Municipal Power Systems Amended and Restated Agreement for Joint and Cooperative
Action, as amended (the "Joint Action Agreement");
WHEREAS, one of the purposes of UAMPS under the Joint Action Agreement is the
acquisition and construction of electric generating, transmission and related facilities in order to
secure reliable, economic sources of electric power and energy for its members;
WHEREAS, UAMPS has proposed to participate as a joint owner in the acquisition and
construction of a coal-fired electric generating facility at the Intermountain Generating Station in
Millard County, Utah, together with related facilities and equipment (the "Project");
WHEREAS, the Board of Directors of the Participant (the "Governing Body") has reviewed
the long-term power supply resource plan (the "Power Supply Resource Plan") of the Participant
which sets forth the needs of the Participant for long-term, reliable, cost-based supplies of electric
power and energy, and identifies several resource alternatives, and has considered, among other
things, the following: (a) the economies and efficiencies of scale to be achieved through the
acquisition and construction by UAMPS of the Project for the benefit of the Participant and the
other members of UAMPS participating in the Project, (b) the need of the Participant for the electric
energy represented by its Entitlement Share in the Project to meet its current and reasonably
expected power supply requirements and to provide reserve capacity, (c) the estimated useful life of
the Project, (d) the estimated time necessary for the acquisition and construction of the Project and
the length of time in advance necessary to obtain, acquire or construct an additional or alternative
power supply, (e) the reliability and availability of the Participant's existing power supply sources,
the Project and alternative power supply sources and the cost or estimated cost thereof, (f) that the
Participant has been continuously working with UAMPS on the Project since 2002, (g) the
approximately ten (10) hours of public comment and testimony by interested rate payers and
members of the public, (h) the approximately four hundred (400) written comments and emails
submitted by interested rate payers and members of the public, of which approximately seventy-five
percent (75%) express support for the Participant to enter into the Power Sales Contract with
UAMPS and approximately twenty-five percent (25%) express opposition thereto, and (i) all such
other matters as were deemed necessary or appropriate by the Participant as a basis for and in
connection with its authorization and execution of the Power Sales Contract;
Resolution Red-lined 121206
WHEREAS, the Governing Body has also reviewed (or caused to be reviewed on its behalf)
certain descriptions and summaries of the Project, the Power Sales Contract and the Project
Agreements (as defined in the Power Sales Contract), and representatives of the Participant have
participated in discussions and conferences with UAMPS and others regarding the Project and have
received from UAMPS all requested information and materials necessary for the decision of the
Governing Body to authorize and approve the Power Sales Contract;
WHEREAS, the Participant acknowledges that the obligation of the Participant to make the
payments provided for in the Power Sales Contract will be a special obligation of the Participant and
an operating expense of the Participant's electric system, payable from the revenues and other
available funds of the electric system, and that the Participant shall be unconditionally obligated to
make the payments required under the Power Sales Contract whether or not the Project or any
portion thereof is acquired, constructed, completed, operable or operating and notwithstanding the
suspension, interruption, interference, reduction or curtailment of the output thereof for any reason
whatsoever;
WHEREAS, in connection with the Project, it is necessary and desirable for the Participant to
approve, authorize and execute the Second Amendment to the Joint Action Agreement, dated as of
November 15, 2006 (the "Second Amendment"), to provide for the continuation of the existence of
UAMPS through the date on which the Project has been removed from service and all indebtedness
of UAMPS relating to the Project has been fully paid or discharged; and
WHEREAS, the Participant now desires to authorize and approve the Power Supply Resource
Plan, the Power Sales Contract, and the Second Amendment;
Now, THEREFORE, BE IT RESOLVED by the Governing Body of Truckee Donner Public
Utiltiy District, as follows:
Section 1. Findings of Fact and Basis for Decision. The above recitals are adopted
as findings of fact and together with the complete record of documents, including those attached
hereto, plans, reports, information, testimony, written submittals, deliberations, proceedings and
hearings wherein such where considered provide the basis for the decision of the Governing Board
to adopt this Resolution.
Section 2. Approval of Power Supply Resource Plan. The Power Supply Resource Plan
of the Participant attached hereto as Annex A is hereby authorized and approved.
Section 3. Execution and Delivery of the Power Sales Contract, Participant's
Representative. (a) The Power Sales Contract, in substantially the form attached hereto as Annex B,
including an Entitlement Share representing kW of capacity (subject to adjustment as
provided in the Power Sales Contract) is hereby authorized and approved, and the President is
hereby authorized, empowered and directed to execute and deliver the Power Sales Contract on
behalf of the Participant, and the Clerk is hereby authorized, empowered and directed to attest and
countersign such execution and to affix the corporate seal of the Participant to the Power Sales
Contract, with such changes to the Power Sales Contract from the form attached hereto as Exhibit B
as shall be necessary to conform to the Participant's legal status, to complete the form of the Power
- 2 -
Sales Contract or to correct any minor irregularities or ambiguities therein and as are approved by
the Presidente, his execution thereof to constitute conclusive evidence of such approval.
(b) The appointment of Stephen Hollabaugh as the Participant's Representative to UAMPS
is hereby confirmed. Such Representative (or, in his or her absence, such alternate(s)) is hereby
delegated full authority to act on all matters that may come before the Project Management
Committee established by the Power Sales Contract, and shall be responsible for reporting regularly
to the Governing Body regarding the activities of the Project Management Committee.
Section 4. Approval of Second Amendment. The Second Amendment, in substantially the
form attached hereto as Annex C, is hereby authorized and approved, and the President is hereby
authorized, empowered and directed to execute and deliver the Second Amendment on behalf of the
Participant, and the Clerk is hereby authorized, empowered and directed to attest and countersign
such execution and to affix the corporate seal of the Participant to the Second Amendment.
Section 5. Miscellaneous; Effective Date. (a) This resolution shall be and remain
irrepealable until the expiration or termination of the Power Sales Contract in accordance with its
terms.
(b) All previous acts and resolutions in conflict with this resolution or any part hereof are
hereby repealed to the extent of such conflict.
(c) In case any provision in this resolution shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(d) This resolution shall take effect immediately upon its adoption and approval.
ADOPTED and APPROVED by the Board of Directors of the Truckee Donner Public Utility District
in a meeting duly called and held within said District on the 13th day of December, 2006.
AYES:
NOES:
ABSTAIN:
ABSENT:
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
Tim F. Taylor, President
ATTEST:
Peter L. Holzmeister, District Clerk
[SEAL]
- 3 -
ANNEX A
[Attach Power Supply Resource Plan]
Annex A-1
ANNEX B
[Attach Power Sales Contract]
Annex B-1
ANNEX C
[Attach Second Amendment to Amended and
Restated Agreement for Joint and Cooperative Action]
Annex C-1
RESOLUTION No.2006-_
A RESOLUTION AUTHORIZING AND APPROVING: (1)A POWER SUPPLY
RESOURCE PLAN; (2) THE INTERMOUNTAIN UNIT 3 PROJECT POWER
SALES CONTRACT WITH UTAH ASSOCIATED MUNICIPAL POWER
SYSTEMS ("UAMPS"); (3) THE SECOND AMENDMENT TO THE
UAMPS AGREEMENT FOR JOINT AND COOPERATIVE ACTION; AND
(4)RELATED MATTERS.
WHEREAS, Truckee Donner Public Utility District (the "Participant") is a member of
Utah Associated Municipal Power Systems ("UAMPS") pursuant to the provisions of the Utah
Associated Municipal Power Systems Amended and Restated Agreement for Joint and
Cooperative Action, as amended(the "Joint Action Agreement");
WHEREAS, one of the purposes of UAMPS under the Joint Action Agreement is the
acquisition and construction of electric generating, transmission and related facilities in order to
secure reliable, economic sources of electric power and energy for its members;
WHEREAS, UAMPS has proposed to participate as a joint owner in the acquisition and
construction of a coal-fired electric generating facility at the Intermountain Generating Station in
Millard County,Utah, together with related facilities and equipment(the "Project");
WHEREAS, the Board of Directors of the Participant (the "Governing Body") has
reviewed the long-term power supply resource plan (the "Power Supply Resource Plan") of the
Participant which sets forth the needs of the Participant for long-term, reliable, cost-based
supplies of electric power and energy, and has considered, among other things, the following: (a)
the economies and efficiencies of scale to be achieved through the acquisition and construction
by UAMPS of the Project for the benefit of the Participant and the other members of UAMPS
participating in the Project, (b) the need of the Participant for the electric energy represented by
its Entitlement Share in the Project to meet its current and reasonably expected power supply
requirements and to provide reserve capacity, (c) the estimated useful life of the Project, (d) the
estimated time necessary for the acquisition and construction of the Project and the length of time
in advance necessary to obtain, acquire or construct an additional or alternative power supply, (e)
the reliability and availability of the Participant's existing power supply sources, the Project and
alternative power supply sources and the cost or estimated cost thereof, and (f) all such other
matters as were deemed necessary or appropriate by the Participant as a basis for and in
connection with its authorization and execution of the Power Sales Contract;
WHEREAS, the Governing Body has also reviewed(or caused to be reviewed on its behalf)
certain descriptions and summaries of the Project, the Power Sales Contract and the Project
Agreements (as defined in the Power Sales Contract), and representatives of the Participant have
Resolution,12-8-06
0866665/JCB/mo
participated in discussions and conferences with UAMPS and others regarding the Project and
have received from DAMPS all requested information and materials necessary for the decision of
the Governing Body to authorize and approve the Power Sales Contract;
WHEREAS, the Participant acknowledges that the obligation of the Participant to make the
payments provided for in the Power Sales Contract will be a special obligation of the Participant
and an operating expense of the Participant's electric system, payable from the revenues and
other available funds of the electric system, and that the Participant shall be unconditionally
obligated to make the payments required under the Power Sales Contract whether or not the
Project or any portion thereof is acquired, constructed, completed, operable or operating and
notwithstanding the suspension, interruption, interference, reduction or curtailment of the output
thereof for any reason whatsoever;
WHEREAS, in connection with the Project, it is necessary and desirable for the Participant
to approve, authorize and execute the Second Amendment to the Joint Action Agreement, dated
as of November 15, 2006 (the "Second Amendment"), to provide for the continuation of the
existence of DAMPS through the date on which the Project has been removed from service and
all indebtedness of DAMPS relating to the Project has been fully paid or discharged; and
WHEREAS, the Participant now desires to authorize and approve the Power Supply
Resource Plan, the Power Sales Contract, and the Second Amendment;
Now, THEREFORE, BE IT RESOLVED by the Governing Body of Truckee Donner Public
Utiltiy District, as follows:
Section 1. Approval of Power Supply Resource Plan. The Power Supply Resource
Plan of the Participant attached hereto as Annex A is hereby authorized and approved.
Section 2. Execution and Delivery of the Power Sales Contract, Participant's
Representative. (a) The Power Sales Contract, in substantially the form attached hereto as
Annex B, including an Entitlement Share representing kW of capacity (subject to
adjustment as provided in the Power Sales Contract) is hereby authorized and approved, and the
President is hereby authorized, empowered and directed to execute and deliver the Power Sales
Contract on behalf of the Participant, and the Clerk is hereby authorized, empowered and
directed to attest and countersign such execution and to affix the corporate seal of the Participant
to the Power Sales Contract, with such changes to the Power Sales Contract from the form
attached hereto as Exhibit B as shall be necessary to conform to the Participant's legal status, to
complete the form of the Power Sales Contract or to correct any minor irregularities or
ambiguities therein and as are approved by the Presidente, his execution thereof to constitute
conclusive evidence of such approval.
(b) The appointment of Stephen Hollabaugh as the Participant's Representative to
DAMPS is hereby confirmed. Such Representative (or, in his or her absence, such alternate(s)) is
hereby delegated full authority to act on all matters that may come before the Project
Management Committee established by the Power Sales Contract, and shall be responsible for
- 2 -
reporting regularly to the Governing Body regarding the activities of the Project Management
Committee.
Section 3. Approval of Second Amendment. The Second Amendment, in substantially
the form attached hereto as Annex C, is hereby authorized and approved, and the President is
hereby authorized, empowered and directed to execute and deliver the Second Amendment on
behalf of the Participant, and the Clerk is hereby authorized, empowered and directed to attest
and countersign such execution and to affix the corporate seal of the Participant to the Second
Amendment.
Section 4. Miscellaneous; Effective Date. (a) This resolution shall be and remain
irrepealable until the expiration or termination of the Power Sales Contract in accordance with its
terms.
(b) All previous acts and resolutions in conflict with this resolution or any part hereof
are hereby repealed to the extent of such conflict.
(c) In case any provision in this resolution shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
(d) This resolution shall take effect immediately upon its adoption and approval.
- 3 -
ADOPTED AND APPROVED this 13th day of December, 2006.
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
By
President
ATTEST:
Clerk
[SEAL]
- 4 -
ANNEX A
[Attach Power Supply Resource Plan]
Annex A-1
ANNEX B
[Attach Power Sales Contract]
Annex B-1
ANNEX C
[Attach Second Amendment to Amended and
Restated Agreement for Joint and Cooperative Action]
Annex C-1
PARTICIPANT APPROVAL DRAFT
INTERMOUNTAIN UNIT 3 PROJECT
POWER SALES CONTRACT
BETWEEN
UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS
AND
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
DATED AS OF DECEMBER 1,2006
PowerS ales(Approv alCopy)
0866665/ETH/mo
TABLE OF CONTENTS
PAGE
RECITALS 1
Section 1. Definitions and Rules of Construction......................
.............................
Section 2. Term of Contract..................................................................................14
Section 3. Sale and Purchase of Entitlement Share; IPP Unit 3
Project Agreement; Adjustments to Entitlement Share.......................15
Section 4. Acquisition and Construction of the Project........................................16
Section 5. Financing of the Project.......................................................................17
Section 6. Capital Cost Payments; Calculation of Capital Cost
Payment Percentage,Debt Service Percentage and Debt
ServiceShare .......................................................................................18
Section 7. Operation, Maintenance and Management of the Project....................20
Section 8. Billing Periods, Billing and Payment...................................................23
Section 9. Scheduling of Electric Energy;Coordination with
UAMPSPool .......................................................................................25
Section 10. Point of Delivery; Transmission Contracts; Risk of Loss....................26
Section 11. Interruption or Reduction of Deliveries...............................................27
Section 12. Availability of Electric Energy............................................................27
Section13. Insurance..............................................................................................27
Section 14. Annual Budget; Accounting.................................................................28
Section 15. Information to Be Made Available......................................................29
Section 16. Additional Bonds and Refunding Bonds .............................................30
Section 17. Disposition or Termination of the Project ...........................................31
Section 18. Representations, Warranties, Covenants and Agreements
ofthe Participant..................................................................................31
Section 19. Reserve and Contingency Fund ...........................................................35
Section 20. Pledge of Payments..............................................................................35
Section 21. Default by Participant..........................................................................35
Section 22. Continuing Obligation of Participant; Right of UAMPS
to Discontinue Service.........................................................................35
Section 23. Transfer of Electric Energy or Entitlement Share
Following Default; Other Actions by DAMPS....................................36
Section 24. Other Default by Participant................................................................41
Section 25. Default by DAMPS; Dispute Resolution.............................................41
Section 26. Abandonment of Remedy....................................................................41
Section 27. Waiver of Default ................................................................................41
Section 28. Relationship to and Compliance with Other Instruments....................41
Section 29. Liability of Parties................................................................................42
Section 30. Assignment of Power Sales Contract...................................................42
Section 31. Termination or Amendment of Power Sales Contract.........................43
Section 32. Notices and Computation of Time.......................................................44
- i -
Section 33. Relationship of UAMPS and the Participant; Relationship
amongParticipants...............................................................................44
Section 34. No Recourse Against Officers, Etc. of DAMPS or
Participant............................................................................................44
Section 35. Applicable Law; Construction.............................................................45
Section 36. Severability; No Merger.......................................................................45
SCHEDULE I Schedule of Participants, Entitlement Shares, Capital Cost Payment
Percentages, Debt Service Percentages and Debt Service Shares
EXHIBIT I Description of Initial Facilities
EXHIBIT II Form of Participant's Annual Information Report
EXHIBIT III Form of Participant's Certificate
EXHIBIT IV Form of Participant's Bring-Down Certificate
EXHIBIT V Form of Opinion of Counsel to the Participant
EXHIBIT VI Form of Bring-Down Opinion of Counsel to the Participant
-ii-
INTERMOUNTAIN UNIT 3 PROJECT
POWER SALES CONTRACT
This INTERMOUNTAIN UNIT 3 PROJECT POWER SALES CONTRACT made and entered into
as of December 1, 2006 (this "Contract"), is by and between UTAH ASSOCIATED MUNICIPAL
POWER SYSTEMS, a political subdivision of the State of Utah ("UAMPS") and Truckee Donner
Public Utility District, a public utility district organized under the laws of the State of California
(the "Participant").
RECITALS:
WHEREAS, UAMPS was organized by the Members under the Act and the Joint Action
Agreement as a separate legal entity to accomplish the Members' joint and cooperative action,
including securing power supply and transmission resources for the Members' present and future
needs;
WHEREAS, UAMPS is organized as an energy services interlocal entity under the Act
with the power, among other things, to (1) own, acquire, construct, operate, and maintain one or
more facilities for the generation, transmission, and transportation of electric energy or related
fuel supplies and ownership interests in such facilities and (2) enter into contracts for the sale of
the output, services and other benefits provided by such facilities to public agencies and others
inside or outside the State of Utah;
WHEREAS, the Participant is authorized by applicable law to (1) acquire, construct, own
and operate electric generation, transmission and related facilities and ownership interests therein
and has entered into the Joint Action Agreement to provide for the joint exercise of such powers
through UAMPS and(2) enter into contracts for the purchase of electric power and energy;
WHEREAS, UAMPS proposes to own, acquire, construct and operate an undivided
ownership interest in the Intermountain Unit 3 Project, a 900 MW (net), coal-fired electric
generating facility to be located at the Intermountain Generating Station in Millard County, Utah
(the "Project"), and a description of the Initial Facilities of the Project is attached as EXHIBIT I;
WHEREAS, UAMPS will sell Electric Energy from the Project to the Participant pursuant
to this Contract and to the other Participants pursuant to Power Sales Contracts substantially
similar to this Contract;
WHEREAS, UAMPS will, at the direction of the Project Management Committee and the
Board, issue Bond Anticipation Notes or redeemable Bonds to finance all of the initial Cost of
the Project and, after the Commercial Operation Date of the Initial Facilities, will issue Bonds in
an amount sufficient, together with any Capital Cost Payments made by the Participants, to retire
such Bond Anticipation Notes or Bonds and to provide long-term financing for the Cost of the
Project, all such Bond Anticipation Notes and Bonds to be payable from a pledge of the revenues
derived by UAMPS from the operation of the Project, including the payments to be made by the
Participants under the Power Sales Contracts;
WHEREAS, in connection with its authorization of the execution, delivery and
performance by the Participant of this Contract, the governing body of the Participant has
reviewed (or caused there to be reviewed on its behalf) various descriptions and summaries of the
Project, the Project Agreements and this Contract, the Engineering Studies and Reports and the
Participant's Power Supply Resource Plan, and the governing body of the Participant has
determined that it is necessary and desirable for the Participant to enter into this Contract in order
to obtain a long-term, cost-based supply of Electric Energy by the acquisition of an Entitlement
Share pursuant to the terms and conditions of this Contract;
WHEREAS, pursuant to the Power Sales Contracts and subject to the provisions of the
Project Agreements, UAMPS will operate or cause the Project to be operated and will schedule
the Project Output for the joint and ratable benefit of all of the Participants and, in order to
maximize the benefits of the Project to the Participant and to all other Participants, the
Participant desires to authorize DAMPS to cause the Project to be operated in accordance with
Prudent Utility Practice and to take certain other actions with respect to the disposition of the
Project Output, all as provided herein; and
WHEREAS, UAMPS and the Participant are duly authorized under applicable provisions
of law, to execute, deliver and perform this Contract and their respective governing bodies have
taken all necessary actions and all Required Approvals have been obtained in order to constitute
this Contract as the legal, valid and binding obligation of the parties.
Now, THEREFORE, for and in consideration of the mutual covenants and agreements
herein contained, it is agreed by and between the parties to this Contract as follows:
Section 1. Definitions and Rules of Construction. (a) As used in this Contract and in
the recitals set out above:
"Act" means the Interlocal Cooperation Act, Title 11, Chapter 13, Utah Code Annotated
1953, as amended, and other applicable provisions of law.
"Additional Bonds" means additional Bonds from time to time issued by DAMPS
pursuant to the Financing Documents and in accordance with Section 16.
"Additional Facilities" means capital additions, betterments and replacements and other
capital items (other than the Initial Facilities) directly and functionally related to the Project,
including electric transmission, fuel supply, transportation and related facilities, additional
electric generating and related facilities located at the Project site, fuel supplies for the use of the
Project and any other facilities, improvements and properties, all as approved by the Project
Management Committee. UAMPS may own any Additional Facility by itself or may own an
undivided interest therein with others.
-2-
"Annual Budget" means the budget adopted by DAMPS for each Contract Year pursuant
to the provisions of Section 14.
"Authorized Officer of DAMPS" means the Chairman or Vice-Chairman of the Board, or
the Secretary, Treasurer, General Manager, or other officer or employee of DAMPS authorized or
having delegated authority to perform specific acts or duties under the Power Sales Contracts by
resolution duly adopted by the Board.
"Billing Period" means such period of time as shall be established from time to time by
DAMPS for the preparation, calculation and billing of the amounts payable by the Participant
hereunder.
"Board" means the Board of Directors of UAMPS or such other governing body of
DAMPS as may be established from time to time pursuant to the Joint Action Agreement and the
Act.
"Bond Anticipation Notes" means bonds, notes, commercial paper, lines of credit or
other borrowings issued or undertaken by UAMPS pursuant to the Financing Documents to
finance the Cost of the Project through the period of the acquisition and construction of the Initial
Facilities and any Additional Facilities.
"Bond Fund" means the Bond Fund created by the Financing Documents, consisting of a
Debt Service Account and a Debt Service Reserve Account.
"Bonds" means bonds, notes and other obligations issued from time to time by UAMPS
pursuant to the Financing Documents to finance all or any part of the Cost of the Project and
includes Additional Bonds and Refunding Bonds.
"By-Laws" means the Bylaws of DAMPS adopted by the Board pursuant to the Joint
Action Agreement, as such Bylaws may be supplemented and amended from time to time.
"Capital Cost" means, for purposes of calculating the Capital Cost Payment that may be
made by the Participant pursuant to Section 6, the estimated final Cost of the Initial Facilities as
determined by DAMPS, less any item of the Cost of the Initial Facilities that (1) is attributable to
debt service reserves for and costs of issuance of Long-Term Bonds or (2) is determined by the
Project Management Committee to be not allocable to Capital Cost.
"Capital Cost Payment" means a payment made to UAMPS by the Participant pursuant
to Section 6 in an amount equal to the product of Participant's Entitlement Share and the Capital
Cost of the Initial Facilities or in such lesser amount as may be permitted pursuant to
Section 6(a).
"Capital Cost Payment Percentage" means with respect to each series of Bonds, a
percentage determined by DAMPS obtained by dividing (1) the Capital Cost Payment made by
the Participant, by (2) the Capital Cost as determined and allocated to such computation by
UAMPS, all as more fully provided in Section 6.
-3-
"Commercial Operation Date" means (1) with respect to the Initial Facilities, means the
"Date of Firm Operation" as defined in the Ownership Agreement and (2) with respect to any
Additional Facilities, means the date on which such Additional Facilities are capable of
continuous firm operation, as determined under the applicable Construction Agreements.
"Commercially Reasonable" or "Commercially Reasonable Efforts" means, with respect
to any action required to be made, attempted or taken by UAMPS under this Contract, such
efforts as a reasonably prudent business would undertake, consistent with Prudent Utility
Practice, for the protection of its own interest under the conditions affecting such action,
including without limitation, the amount of notice of the need to take such action, the duration
and type of the action, the competitive environment in which such action occurs, the contractual
and legal obligations of UAMPS and the risk to UAMPS in connection with such action.
"Common Facilities Agreement" means the Common Facilities and Site Agreement by
and among the Owners, LADWP and IPA providing for the acquisition, utilization and operation
of interests in or rights to use certain existing common facilities at IGS in connection with Unit 3.
"Construction Agreements" means each contract or agreement providing for the
acquisition and construction of any part of Unit 3, the Initial Facilities or any Additional
Facilities.
"Construction, Lease, Use and Services Agreement" means the Unit 3 Construction,
Lease, Use and Services Agreement by and among the Owners, LADWP and IPA.
"Contract" means this Intermountain Unit 3 Project Power Sales Contracts dated as of
December 1, 2006 between UAMPS and the Participant and any amendments permitted pursuant
to Section 31.
"Contract Resolution" means the resolution of the Participant's governing body
approving and authorizing the execution of this Contract, in substantially the form attached to
EXHIBIT III.
"Contract Year" means the Fiscal Year, except that the first Contract Year shall begin on
the Effective Date and shall end on the last day of the then-current Fiscal Year. In the event that
DAMPS changes its Fiscal Year for accounting purposes, Contract Year shall, without further
action,be amended to conform to such Fiscal Year.
"Cost" or "Cost of the Project" means all costs and expenses paid or incurred by
UAMPS in connection with the acquisition and construction of the Project, whether prior or
subsequent to the Effective Date, including but not limited to amounts paid or payable under the
Common Facilities Agreement, the Construction Agreements and the Construction, Lease, Use
and Services Agreement and all costs and expenses incurred by UAMPS in connection with its
investigation, negotiation and review of the Project and the Project Agreements, all expenses
preliminary and incidental thereto, and the cost of planning, designing, acquiring, constructing
and placing in operation the Initial Facilities and any Additional Facilities. "Cost" or "Cost of
the Project" also includes,but is not limited to, the following:
-4-
(1) amounts payable pursuant to the Development Agreement and the
Development Coordination Agreement;
(2) payment to DAMPS or any Participant to reimburse advances and
payments made or incurred for costs preliminary or incidental to the acquisition and
construction of the Project;
(3) planning and development costs, engineering fees, contractors' fees,
fiduciaries' fees, auditors' and accountants' fees, costs of obtaining all permits and
approvals, the cost of real property, labor, materials, equipment, supplies, training and
testing costs, insurance premiums, legal, financial advisory and financing costs and
issuance costs of Bond Anticipation Notes and Bonds, costs of any litigation related to the
Project, the Project Agreements, the Power Sales Contracts or the interests and
transactions contemplated by the Project Agreements and the Power Sales Contracts,
amounts payable under the Project Agreements during or in connection with the
acquisition and construction of the Project, administrative and general costs, and all other
costs properly allocable to the acquisition and construction of the Project and placing the
same in operation;
(4) the cost of acquiring long-term supplies of coal or other fuel supplies,
including transportation facilities or capacity rights, necessary or desirable in connection
with the operation of the Project;
(5) interest on Bond Anticipation Notes and Bonds to the Commercial
Operation Date and for such additional period as may be reasonably necessary for placing
the Initial Facilities or any Additional Facilities in operation in accordance with the
provisions of the Financing Documents;
(6) the payment of principal or redemption price of and interest on Bond
Anticipation Notes;
(7) working capital and reserve requirements of the Project, including, without
limitation, amounts for deposit into the Reserve and Contingency Fund and those items
set forth in the definition of Operation and Maintenance Costs;
(8) deposits into funds and accounts established by the Financing Documents
to meet debt service reserve and renewal and replacement fund requirements and other
capitalized costs with respect to Bond Anticipation Notes and Bonds, and deposits into
any other fund or account required to be funded by the Financing Documents;
(9) all costs relating to litigation, claims or judgments not otherwise covered
by insurance and arising out of the acquisition, construction or operation of the Project;
(10) impact alleviation payments required or permitted by the Act and legally
required or permitted federal, state and local taxes or payments in lieu of such taxes
-5-
relating to the Project and incurred during the period of the acquisition or construction
thereof; and
(11) all other costs incurred by DAMPS, and properly allocable to the
acquisition and construction of the Project, including all costs financed by the issuance of
Additional Bonds.
"Debt Service Costs" means, for each Billing Period of each Contract Year, an amount
equal to the sum of:
(1) the interest accruing on Bond Anticipation Notes and Bonds during such
Billing Period, except to the extent that amounts are on deposit under the Financing
Documents to pay such interest from the proceeds of Bond Anticipation Notes or Bonds;
(2) the portion of the next due principal installment (other than any
Refundable Principal Installment) accruing on Bond Anticipation Notes and Bonds
during such Billing Period, calculated in accordance with the Financing Documents;
(3) such amounts as shall be necessary to amortize any unpaid Refundable
Principal Installment (as to the principal thereof and the interest thereon until such
principal amount is paid in full) over a period ending not later than the earlier of(a) thirty
years from the maturity date of the Refundable Principal Installment and (b) fifty years
from the first Effective Date of any Power Sales Contract;
(4) the amounts payable during such Billing Period under any Interest Rate
Contract with respect to Bond Anticipation Notes or Bonds;
(5) any amounts required by the Financing Documents to be deposited into the
Bond Fund to provide or replenish debt service reserve requirements for Bond
Anticipation Notes or Bonds;
(6) the accruing principal of and interest on any obligations subordinate to the
Bonds issued by DAMPS pursuant to the Financing Documents and amounts necessary to
provide or replenish any necessary reserves in connection with such obligations;
(7) Trustee, paying agent, escrow agent and other fiduciaries' fees and
expenses payable under the Financing Documents; fees and expenses of remarketing
agents, broker-dealers, auction agents and others providing services with respect to Bond
Anticipation Notes or Bonds; and
(8) the amounts required to be paid to maintain any credit or liquidity facilities
for and ratings on the Bonds and other costs payable by UAMPS from time to time in
connection with the Bonds;
provided, however, that as provided in Section 5, any additional interest expense on or in respect
of any Bond Anticipation Notes, Bonds or subordinate obligations that are subject to federal
-6-
income taxation may be allocated to those Participants whose legal status or use of the Project
Capability or the Project Output gives rise to "private business use" (within the meaning of the
Internal Revenue Code of 1986 and the U.S. Treasury Regulations thereunder). In the event of
such allocation, the Debt Service Costs payable by such Participants shall be increased to include
amounts sufficient to pay any such additional interest expense.
"Debt Service Percentage" means, with respect to each Participant and as of any date of
determination, the percentage obtained by subtracting the Participant's Capital Cost Payment
Percentage from the Participant's Entitlement Share. The Participant's initial Debt Service
Percentage is set forth on SCHEDULE I.
"Debt Service Share" means, with respect to each Participant and as of any date of
determination, the actual percentage of Debt Service Costs payable by the Participant,
determined by dividing the Participant's Debt Service Percentage (expressed as a decimal) by the
sum (expressed as a decimal) of the Debt Service Percentages of all Participants, including the
Participant whose Debt Service Share is being determined. The Participant's initial Debt Service
Share is set forth on SCHEDULE I.
"Development Agreement" means the Intermountain Power Project Unit 3 Development
Agreement dated as of May 1, 2005, among the Development Participants and IPA, as
Development Manager.
"Development Coordination Agreement" means the Intermountain Power Project Unit 3
Development Coordination Agreement dated as of May 1, 2005, between the Development
Participants and IPA.
"Development Costs Share" has the meaning assigned to such term in the Development
Agreement.
"Development Participants" means DAMPS, PacifiCorp, Southern Nevada Water
Authority and the City of Glendale, California.
"Effective Date" means the date on which this Contract has been executed and delivered
by DAMPS and the Participant and all Required Approvals have been obtained.
"Electric Power" means electric power expressed in kilowatts (kW).
"Electric Energy" means electric energy expressed in kilowatt-hours (kWh).
"Engineering Studies and Reports" means the written studies, analysis and reports
provided by UAMPS to the Participant regarding the Project, the Participant's current and future
electric requirements, certain cost comparisons and other legal, engineering and environmental
matters with respect to the Project.
-7-
"Entitlement Share" means that percentage of the Project Capability shown opposite the
name of the Participant on SCHEDULE I, as the same may be adjusted pursuant to Section 3,
Section 4, Section 18 or Section 23.
"Financing Documents" means the bond resolution, indenture, trust agreement or other
instrument or instruments providing for the issuance of and the security for Bond Anticipation
Notes or Bonds and all amendments thereof and supplements thereto.
"Fiscal Year" means the annual accounting period of UAMPS as from time to time in
effect, initially a period commencing on April 1, of each calendar year and ending on March 31
of the next succeeding calendar year.
"Fuel Agent" means any entity retained pursuant to the Project Agreements or by
UAMPS to manage or facilitate the acquisition or management of fuel for the operation of the
Project or the transportation of fuel to the Project.
"Fuel Agreement" means any agreement entered into by or on behalf of UAMPS for the
acquisition, management, transportation, handling, processing or storage of fuel for the operation
of the Project.
"Full Subscription Date" means the first date on which the sum of the Entitlement
Shares of all Participants equals 100%.
"IGS" means the Intermountain Generating Station.
"Initial Facilities" means the real and personal property, facilities, structures,
improvements and equipment comprising Unit 3, as generally described on EXHIBIT I, all to the
extent of the undivided ownership interest of UAMPS therein.
"Interest Rate Contract" means any International Swap Dealers Association, Inc. (ISDA)
Master Agreement, together with the schedules and confirmations thereto, or any similar
agreement entered into by DAMPS with respect to Bonds or Bond Anticipation Notes pursuant
to the provisions of the State Money Management Act, Title 51, Chapter 7, Utah Code Annotated
1953, as amended.
"IPA" means Intermountain Power Agency, a political subdivision of the State of Utah.
"IPP Unit 3 Project Agreement" means the IPP Unit 3 Project Agreement dated as of
July 15, 2005 between UAMPS and the Participant.
"Joint Action Agreement" means the Utah Associated Municipal Power Systems
Amended and Restated Agreement for Joint and Cooperative Action dated as of February 17,
1999, as amended and supplemented from time to time.
-8-
"Joint Operating Agreement" means the Joint Operating Agreement among the Owners,
IPA and LADWP, as Joint Operating Agent, providing for the joint operation and maintenance of
Unit 3 and the existing generating units at IGS, as amended and supplemented from time to time.
"LADWP" means The City of Los Angeles, acting by and through its Department of
Water and Power.
"Long-Term Bonds" means Bonds issued by UAMPS pursuant to the last sentence of
Section 5(a). The designation of Bonds as Long-Term Bonds shall not be construed to require
any minimum term to their maturity.
"Members" means, collectively, the parties to the Joint Action Agreement.
"Month" means a calendar month.
"Non-Elected Amount" has the meaning assigned to such term in the Development
Agreement.
"NTS" means the existing transmission system commonly known as the "Northern
Transmission System" consisting of 345 kV transmission facilities extending from IGS to Mona,
Utah and 230 kV transmission facilities extending from IGS to Gonder, Nevada.
"Operating and Scheduling Procedures" means those standards, procedures and criteria
determined by UAMPS and approved by the Project Management Committee with respect to the
operation of the Project and the Project Capability and the scheduling of the Project Output
which shall, to the extent practicable, promote the efficient and economic utilization of the
Project, the Project Capability and the Project Output, consistent with Prudent Utility Practice
and the provisions of the Project Agreements, for the benefit of the Participants taken as a whole.
"Operation and Maintenance Costs" means, with respect to each Billing Period of each
Contract Year, all costs and expenses (other than Transmission Costs and Debt Service Costs)
attributable to the Project that are paid, payable, incurred or accrued by UAMPS during each
Billing Period resulting from the ownership, operation, maintenance, decommissioning and
termination of, and repairs, renewals, replacements, additions, improvements, and betterments
and modifications to, the Project, including amounts payable by UAMPS under the Joint
Operating Agreement, each Fuel Agreement and the other Project Agreements. Operation and
Maintenance Costs shall further include, without limitation, the following items of cost:
(1) any amount which UAMPS may be required during such Billing Period to
pay for the prevention or correction of any unusual loss or damage or for renewals,
replacements, repairs, additions, improvements, modifications and betterments which
arise out of or are required by the Project Agreements for which UAMPS shall be
obligated, and amounts necessary to fund or replenish reserves therefor, but only to the
extent not funded by Bonds or Capital Cost Payments;
-9-
(2) the costs of operating and maintaining the Project and of producing and
delivering Electric Power and Electric Energy therefrom during such Billing Period,
including the operation and maintenance expenses and fuel costs of the Project, fees,
expenses, incentives and other compensation payable to the Operator and any Fuel Agent,
the portion of UAMPS' administrative and general expenses allocable or directly charged
to the Project, working capital and reserves for the payment of operation and maintenance
expenses, and all other costs and expenses (but excluding depreciation) not included in
the costs specified in the other items of this definition and properly chargeable to the
Project;
(3) legally required or permitted federal, state and local taxes, including gross
receipts taxes and ad valorem taxes or payments in lieu of ad valorem taxes, in each case
related to the Project;
(4) amounts to be deposited into the Reserve and Contingency Fund
established pursuant to Section 19;
(5) legal, engineering and accounting fees and expenses, the cost of any
litigation related to the Project, the Project Agreements, the Power Sales Contracts and
the interests and transactions contemplated by the Project Agreements and the Power
Sales Contracts, the costs of technical and advisory services and the cost of all Permits
and Approvals, all to the extent allocable to the Project;
(6) the Cost of Additional Facilities, but only to the extent not paid or
financed as a portion of the Cost of the Project;
(7) all other amounts payable by UAMPS under the terms of the Joint
Operating Agreement; and
(8) the costs of, or reserves for the costs of, decommissioning or removing
from service all or any part of the Project.
"Operator" means (1) the entity acting as Joint Operating Agent under the Joint
Operating Agreement and (2) any other entity that performs all or a substantial portion of the
operation and maintenance work on the Project.
"Orphan Share" means (1) all or the affected portion of the proposed Entitlement Share
of a prospective Participant (as shown on the form of SCHEDULE I attached to the Power Sales
Contracts at the time of their approval and execution by the Participants) that fails or is unable to
execute a Power Sales Contract with an Entitlement Share equal to its proposed Entitlement
Share for any reason and (2) the Entitlement Share of a Participant whose Power Sales Contract
is terminated by the Project Management Committee upon the written request of the Participant
pursuant to Section 31(a)(2).
"Owners" means UAMPS and each other owner of an undivided interest in Unit 3
pursuant to the Ownership Agreement.
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"Ownership Agreement" means the Ownership Agreement to be entered into by the
Owners of Unit 3.
"Ownership Subscription Notice" means the offer to acquire undivided ownership
interests in Unit 3 to be given by IPA pursuant to the Development Coordination Agreement to
the Development Participants, or any comparable notice given by any entity or entities (including
UAMPS) in satisfaction of the requirements of Section 11-13-301(1) of the Act.
"Participant" is defined in the preamble of this Contract.
"Participants" means the Participant and the other entities named on SCHEDULE I.
"Participant's Representative" means (1) the officer, employee or other agent of the
Participant designated from time to time by the Participant as the Representative of the
Participant for purposes of the Joint Action Agreement, to whom all notices and other
communications to be given by UAMPS to the Participant hereunder shall be sent or (2) in the
event that the individual appointed as the Participant's Representative is absent or unavailable to
act on behalf of the Participant, the individual duly appointed or designated by the Participant as
its alternate Representative pursuant to the Joint Action Agreement.
"Permits and Approvals" means all certificates, permits, licenses, approvals, rulings,
orders or other authorizations from any federal, state or local governmental body, board or
agency having jurisdiction over UAMPS, the Project or both that are required to be obtained or
maintained for the construction, operation, maintenance or repair of the Project or any
component of it.
"Permitted Contract" means (1) a contract with a term (including all renewal options)
not longer than three years and (2) requirements-type contracts, other than requirements contracts
providing for electricity sales at wholesale, with retail consumers or other end users of electricity.
"Point of Delivery" means the point or points of physical interconnection of the Project
with the transmission facilities that are connected to IGS.
"Pooling Agreement" means, collectively, the Power Pooling Agreements between
UAMPS and the Members and certain other entities providing for the establishment and
operation of the UAMPS Pool and related matters, including all supplements and appendices
thereto.
"Power Sales Contracts" means all of the Intermountain Unit 3 Project Power Sales
Contracts dated as of December 1, 2006 between UAMPS and the Participants (including this
Contract between UAMPS and the Participant), all of which are uniform in all material respects
in their term, conditions and provisions, with the exception of the Entitlement Share, the Capital
Cost Payment Percentage, the Debt Service Percentage and the Debt Service Share for each of
the Participants and the other matters set forth in the Exhibits attached hereto.
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"Power Supply Resource Plan" means the Participant's analysis of its long-term power
supply requirements and resources, attached as Annex A to the Contract Resolution.
"Project" means the acquisition, construction, improvement and equipping of the Initial
Facilities and any Additional Facilities.
"Project Agreements" means, collectively, the Ownership Agreement, the Common
Facilities Agreement, the Construction, Lease, Use and Services Agreement, the Construction
Agreements, the Joint Operating Agreement, each Fuel Agreement and the Transmission
Agreements.
"Project Capability" means the nominal Electric Power and associated Electric Energy
which the Project is capable of producing. Project Capability initially means the aggregate
amount of Electric Power shown on SCHEDULE I and associated Electric Energy.
"Project Management Committee" means the committee of the Participants established
pursuant to Section 7.
"Project Output" means the amount of Electric Power and Electric Energy, if any, which
is actually generated by the Project in any particular hour.
"Prudent Utility Practice" means, as of any particular time, any of the practices, methods
and acts engaged in or approved by a significant portion of the electric utility industry at such
time, or which, in the exercise of reasonable judgment in light of facts known at such time, could
have been expected to accomplish the desired results at the lowest reasonable cost consistent
with good business practices, reliability, safety and expedition. Prudent Utility Practice is not
intended to be limited to the optimum practice, method or act to the exclusion of all others or to
be limited to the lowest-cost practice, method or act, but rather to be a spectrum of possible
practices, methods and acts, having due regard for manufacturers' warranties and the jurisdiction.
"Qualified Independent Engineer" means a licensed or registered engineer or firm of
such engineers acceptable to DAMPS and recognized to be qualified in matters related to electric
generation and/or transmission facilities who shall (1) not be an officer or employee of the
Participant or UAMPS and (2) not have any substantial interest with, or be under the domination
of, the Participant or DAMPS.
"Refundable Principal Installment" means any principal installment for any Bond
Anticipation Notes or Bonds designated by UAMPS pursuant to the Financing Documents as
payable from the proceeds of Capital Cost Payments or other Bond Anticipation Notes or Bonds.
"Refunding Bonds" means refunding Bonds from time to time issued by UAMPS
pursuant to the Financing Documents and in accordance with Section 16.
"Required Approvals" means all governmental, regulatory and lender approvals, consents
and authorizations required or necessary for (1) the execution, delivery and performance of this
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Contract by the Participant and (2) this Contract to be the legal, valid and binding obligation of
the Participant.
"Reserve and Contingency Fund" means the fund, if any, established pursuant to
Section 19.
"Substantial Subscription Date" means the first date on which the sum of the Entitlement
Shares of all Participants under the Power Sales Contracts equals 87%. The occurrence of the
Substantial Subscription Date shall not be affected by any subsequent event.
"System Point of Receipt" means (1) the point(s) of interconnection between the
Participant's electric utility system and the transmission facilities of the applicable control area
utility or (2) such other point(s) for the receipt by the Participant of Electric Energy from the
Project, as set forth in the Operating and Scheduling Procedures.
"Transmission Agreements" means each transmission contract, agreement or tariff
entered into by DAMPS or the Participant that is used or necessary for the delivery of Electric
Power and Electric Energy from the Point of Delivery to the Participant's System Point of
Receipt, whether by direct transmission, displacement, exchange or otherwise.
"Transmission Costs" means, for each Billing Period of each Contract Year, all capital,
operating and other costs and expenses paid, payable, incurred or accrued by DAMPS during
such Billing Period for the transmission of Electric Energy from the Project to the Participant's
System Point of Receipt pursuant to the Transmission Agreements or otherwise. The Participant
shall be responsible for the payment of Transmission Costs to UAMPS hereunder only to the
extent that UAMPS has entered into Transmission Agreements at the request of the Participant
for the transmission of Electric Energy from the Point of Delivery to the Participant's System
Point of Receipt.
"Trustee" means the bank or trust company acting as the trustee under the Financing
Documents.
"UAMPS" is defined in the preamble of this Contract. All references to UAMPS in this
Contract shall include Authorized Officers of UAMPS and their delegees acting pursuant to
specific authorization by the Board.
"UAMPS Pool" means that certain electric power pool established pursuant to the
Pooling Agreement under which UAMPS provides certain services with respect to the
scheduling, dispatch and the sale of Electric Power and Electric Energy and other matters
pursuant to the operating criteria and procedures provided for in the Pooling Agreement.
"Uncontrollable Force" means any cause, event or force beyond the control of the party
affected, including, but not restricted to failure, or threat of failure of facilities, flood, earthquake,
storm, fire, lightning, epidemic, war, terrorism, acts of a public enemy, riot, civil disturbance or
disobedience, labor dispute, labor or material shortage, sabotage, and restraint by court or public
authority and action or non-action by, or inability to obtain the necessary authorizations or
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approvals from, any governmental agency or authority, which by exercise of due diligence and
foresight such party could not reasonably have been expected to avoid and which by exercise of
due diligence it shall be unable to overcome.
"Uniform System of Accounts" means the Federal Energy Regulatory Commission
Uniform Systems of Accounts Prescribed for Public Utilities and Licensees Subject to the
Provisions of the Federal Power Act, 18 C.F.R. Part 101, as the same may be modified, amended
or supplemented from time to time or such other system of accounting as may be applicable by
law to UAMPS.
"Unit 3" means the 900 MW (net), coal-fired electric generating facility to be located at
IGS.
"Utility Contracts" means all contracts of the Participant for the purchase or sale by the
Participant of any or all of Electric Power, Electric Energy and transmission service, including
contracts pursuant to which the Participant agrees to take or pay, or take and pay, for any or all of
Electric Power, Electric Energy and transmission service, all to the extent related to the
Participant's electric system.
(b) References to Sections, Schedules and Exhibits are to the Sections of and Schedules
and Exhibits to this Contract, unless otherwise provided. Article and Section headings are
included herein for convenience of reference only and shall not constitute a part of this Contract
for any other purpose or be given any substantive effect. Any of the defined terms may, unless
the context otherwise requires, be used in the singular or the plural, depending on the reference.
The use of the word"include" or its derivations shall not be construed as language of limitation.
Section 2. Term of Contract. (a) This Contract shall be in effect on and as of the
Effective Date and will, unless this Contract is terminated pursuant to Section 31, continue until
the last to occur of the following: (1) the date on which the principal of, premium, if any, and
interest on all Bond Anticipation Notes and Bonds have been paid or sufficient funds shall have
been irrevocably set aside for the full defeasance thereof and all other obligations of UAMPS
under the Financing Documents have been paid or satisfied, all as determined in accordance with
the Financing Documents; and (2) the date on which the Project shall be taken out of service and
terminated and all decommissioning costs shall have been paid or fully funded; provided,
however, that in compliance with the Act,the term of this Contract shall not extend for more than
fifty years from the Effective Date.
(b) If the terms of the Power Sales Contracts expire as a result of the limitation stated at
the end of paragraph (a) and the operation of the Project is then continuing, UAMPS shall, to the
fullest extent then permitted by applicable law, offer to all the Participants continuing
participation in the rights and benefits of the Project in proportion to their respective Entitlement
Shares under the Power Sales Contracts. Unless otherwise agreed to by UAMPS and all of the
Participants that elect continuing participation in the Project, such future participation shall be on
substantially the same terms and conditions as provided for by the Power Sales Contracts.
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Section 3. Sale and Purchase of Entitlement Share; IPP Unit 3 Project Agreement;
Adjustments to Entitlement Share. (a) From and after the Effective Date, DAMPS shall sell to
the Participant, and the Participant shall purchase from UAMPS, the Participant's Entitlement
Share. The Participant's Entitlement Share set forth on the SCHEDULE I attached to this Contract
on its Effective Date is not less than the "entitlement share" shown opposite the Participant's
name on Appendix I to the IPP Unit 3 Project Agreement, unless the Participant has otherwise
agreed to a change. UAMPS and the Participant agree that the IPP Unit 3 Project Agreement
shall (notwithstanding the provisions of Section 2 thereof) terminate on the Effective Date of this
Contract and that all actions and the relationship of UAMPS and the Participant with respect to
the Project shall be governed by and subject to this Contract;provided that the termination of the
IPP Unit 3 Project Agreement as between UAMPS and the Participant shall not affect the term of
any other IPP Unit 3 Project Agreement.
(b) UAMPS shall give notice to the Participant of the occurrence of the Substantial
Subscription Date. From the Substantial Subscription Date to the Full Subscription Date, the
Entitlement Shares of the Participants set forth on SCHEDULE I are preliminary and subject to
adjustment in the event that there are Orphan Shares. Orphan Shares may result from (1) the
failure of one or more prospective Participants to approve and execute a Power Sales Contract
with an Entitlement Share equal to its proposed Entitlement Share, (2) the inability of one or
more prospective Participants to execute a Power Sales Contract due to a failure to obtain all
Required Approvals, or (3) other factors (which may be outside of the control of UAMPS). In
the event that Orphan Shares exist or are expected to exist as of the Substantial Subscription
Date, UAMPS shall give notice of such fact to the Project Management Committee. From and
after the Substantial Subscription Date, the Project Management Committee shall have the
authority to direct all actions to be taken with respect to the Orphan Shares to provide for a full
allocation of Project Capability. Such actions may include (x)providing for temporary or interim
allocations of Orphan Shares, (y) offering the Orphan Shares for the full term of the Power Sales
Contracts first to those Participants that elect to increase their Entitlement Shares (initially pro
rata, based upon their original Entitlement Shares, and then in such other manner as the Project
Management Committee shall determine) and second to any other qualified entity approved by
the Project Management Committee that elects to enter into a Power Sales Contract with
UAMPS and (z) requiring that the Entitlement Shares of all Participants be increased (pro rata,
based upon their original Entitlement Shares) to absorb all Orphan Shares and to cause the Full
Subscription Date to occur not less than 30 days prior to the scheduled date for the first issuance
of Bond Anticipation Notes or Bonds; provided, however, that in no event shall the increased
Entitlement Share of any Participant be greater than 115% of its Entitlement Share shown on the
SCHEDULE I attached to this Contract on its Effective Date, unless such Participant shall have
agreed in writing to the increase in its Entitlement Share. In the event that the amount of the
Orphan Shares is greater than the amount that can be absorbed pursuant to the foregoing
provisions, the Project Management Committee shall take such other actions as it deems
necessary or appropriate to enable the Full Subscription Date to occur, including making any
excess part of UAMPS' ownership interest in Unit 3 available for acquisition by any of the other
Owners or others pursuant to the Project Agreements. Promptly after the Full Subscription Date,
but in any event not later than the first issuance of Bond Anticipation Notes or Bonds, UAMPS
shall prepare and deliver to each Participant a revised SCHEDULE I that shows the Entitlement
Shares of all Participants.
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(c) In consideration of the sale of its Entitlement Share, the Participant shall, in
accordance with and subject to the provisions of Section 8, pay to UAMPS in each Billing
Period: (1) from the Effective Date to the date of the first issuance of Bond Anticipation Notes or
Bonds, the product of its Entitlement Share and all Costs of the Project associated with the
development thereof for such Billing Period, (2) the product of its Debt Service Share and all
Debt Service Costs for such Billing Period; (3) the product of its Entitlement Share and all
Operation and Maintenance Costs for such Billing Period; and (4) the Transmission Costs, if any,
incurred by UAMPS for the account of the Participant for such Billing Period. The first Billing
Period shall commence not sooner than the month in which the Effective Date occurs. Each such
payment is to be computed and made as provided in Section 8.
Section 4. Acquisition and Construction of the Project. (a) From the Effective Date of
this Contract to the Full Subscription Date, UAMPS shall continue with those development
activities with respect to the Project and Unit 3 provided for in the IPP Unit 3 Project Agreement.
Upon receipt of the Ownership Subscription Notice, UAMPS shall elect to acquire an undivided
ownership interest in Unit 3 in an amount equal to its Development Costs Share or in such other
amount as may be directed by the Project Management Committee, at the time and in the manner
required under the Development Agreement. In the event there is any Non-Elected Amount
under the Development Agreement, DAMPS shall give immediate notice to the Project
Management Committee of (1) the existence of a Non-Elected Amount, (2) the decisions that
must be made regarding the disposition of the Non-Elected Amount and (3) the date by which
such decisions must be made and, as applicable, that time is of the essence in making such
decisions. DAMPS shall take such actions with respect to the Non-Elected Amount as shall be
approved by the Project Management Committee at the time and in the manner required by the
Development Agreement. The Project Management Committee may elect to increase DAMPS'
ownership interest in Unit 3 to assume all or any part of a Non-Elected Amount only if(x) one or
more Participants elect to increase their respective Entitlement Shares or (y) another qualified
entity approved by the Project Management Committee elects to become a Participant under a
Power Sales Contract with DAMPS, in either case so as to provide for a full allocation of the
Project Capability of DAMPS' increased ownership interest in Unit 3. In such event, UAMPS
shall prepare and distribute to the Project Management Committee and the Participants a revised
SCHEDULE I showing the adjusted Entitlement Shares of all Participants and the total Project
Capability.
(b) UAMPS and the Participant acknowledge and agree that: (1) as of the Effective
Date of this Contract, various Permits and Approvals necessary for the construction and
operation of the Project may not have been obtained and certain Permits and Approvals are or
may be subject to continuing regulatory, administrative and judicial proceedings; (2) UAMPS
shall use Commercially Reasonable Efforts to cause all such Permits and Approvals to be
obtained in a timely manner and to defend all challenges thereto; (3) from and after the
Substantial Subscription Date and pending receipt of final Permits and Approvals that are not
subject to further regulatory, administrative and judicial proceedings, and in order that the
Commercial Operation Date may occur as scheduled, UAMPS will, upon the approval and at the
direction of the Project Management Committee as provided in Section 7, proceed with the
acquisition of equipment and take other actions preliminary to the construction of the Project; (4)
all preliminary Costs of the Project so incurred by UAMPS will be financed by the issuance of
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Bond Anticipation Notes or Bonds; and (5) in the event that DAMPS is unable to obtain the
required Permits and Approvals and the Board (acting upon the recommendation of the Project
Management Committee pursuant to Section 7(d)(2)) determines to terminate the Project, the
Project will not be completed and the Participant will be required to pay, among other things, its
Debt Service Share of the Debt Service Costs until all such Bond Anticipation Notes or Bonds
are fully paid and retired, all as contemplated by Section 8(g). In the event that the Project
Management Committee determines to terminate the Project in accordance with Section 31,
UAMPS will use Commercially Reasonable Efforts to obtain the greatest possible value for all
equipment and other salvageable items theretofore acquired by UAMPS and will credit any
amounts realized to the Participants in accordance with their Entitlement Shares.
(c) UAMPS shall use Commercially Reasonable Efforts consistent with and subject to
the terms and provisions of the Project Agreements to cause the Initial Facilities to be
expeditiously and economically acquired and constructed pursuant to the Construction
Agreements. Subject to the terms of the Ownership Agreement, UAMPS will cause the Owners'
Committee established thereunder to diligently defend and protect its rights under the
Construction Agreements and will enforce the contractors' obligations under such Agreements.
UAMPS shall (1) report monthly to the Project Management Committee regarding the current
status of construction of, and any changes to the estimated Commercial Operation Date and Cost
of, the Initial Facilities and(2) give prompt notice to the Project Management Committee and the
Participant of the occurrence of the Commercial Operation Date of the Initial Facilities.
(d) A general description of the Initial Facilities is attached as ExMBIT I. This
description will be revised from time to time as the components of the Initial Facilities are
designed, engineered, constructed, installed and tested. UAMPS and the Participant agree that in
no event will any such revisions alter or affect their respective rights and obligations under this
Contract.
(e) As soon as practicable after the Commercial Operation Date of the Initial Facilities,
UAMPS shall prepare a complete statement and reconciliation of the final (or substantially final)
Cost of the Initial Facilities and submit the same to the Project Management Committee for its
review and approval. In the event that a substantially final statement of the Cost of the Initial
Facilities is submitted to and approved by the Project Management Committee, UAMPS shall
provide periodic reports to the Project Management Committee regarding the Cost of the Initial
Facilities until a final statement is available for its review and approval.
(f) UAMPS may from time to time recommend the acquisition or construction of
Additional Facilities to improve or add to the Project. Any Additional Facilities shall be
approved by the Project Management Committee.
Section S. Financing of the Project. (a) UAMPS shall finance the Cost of the Initial
Facilities pursuant to a plan of financing approved by the Project Management Committee
providing for the issuance of one or more series of Bond Anticipation Notes or Bonds. Such plan
of financing shall provide that (1) any Bond Anticipation Notes shall mature not earlier than six
months after the estimated Commercial Operation Date of the Initial Facilities, (2) any Bonds
shall be subject to redemption by UAMPS at such time as shall enable UAMPS to comply with
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its obligations under Section 6 and (3) interest on all Bond Anticipation Notes and Bonds shall
be capitalized to the estimated Commercial Operation Date of the Initial Facilities and for such
additional period as shall be approved by the Project Management Committee.
(b) Following the Commercial Operation Date of the Initial Facilities, each Participant
may elect to make a Capital Cost Payment to UAMPS pursuant to Section 6, and UAMPS shall
issue Long-Term Bonds to the extent necessary and in an amount sufficient to finance that
portion of the cost of retiring any Bond Anticipation Notes or Bonds then outstanding and the
Cost of the Initial Facilities that is not funded through Capital Cost Payments. Prior to the giving
by UAMPS of the notice required by Section 6(a), the Project Management Committee shall
determine whether any additional interest expense on or in respect of any Bond Anticipation
Notes, Bonds or subordinate obligations that are scheduled to be outstanding after the
Commercial Operation Date and that are subject to federal income taxation shall be allocated to
those Participants whose legal status or use of the Project Capability or the Project Output gives
rise to "private business use" (within the meaning of the Internal Revenue Code of 1986 and the
U.S. Treasury Regulations thereunder). In the event the Project Management Committee
determines to make such allocation, the notice required by Section 6(a) shall include such
information as shall be necessary to generally inform the affected Participants of the additional
Debt Service Costs, if any, that will be payable by them in the event they elect not make a Capital
Cost Payment.
(c) In the event that Additional Facilities are undertaken, DAMPS shall issue Bond
Anticipation Notes or Additional Bonds pursuant to Section 16 to finance the Cost of such
Additional Facilities as determined by the Project Management Committee.
Section 6. Capital Cost Payments; Calculation of Capital Cost Payment Percentage,
Debt Service Percentage and Debt Service Share. (a) Following the Commercial Operation
Date and the approval by the Project Management Committee of a final (or substantially final)
statement of the Cost of the Initial Facilities, DAMPS shall give written notice to the Participant
of:
(1) its right to elect to make a Capital Cost Payment;
(2) the date (which shall be not earlier than 30 days after the date of such
notice)by which it must notify UAMPS of its election;
(3) the final (or substantially final) Cost of the Initial Facilities approved by
the Project Management Committee;
(4) UAMPS' calculation of the Capital Cost of the Initial Facilities; and
(5) the product of the Capital Cost of the Initial Facilities and the Participant's
Entitlement Share,being the maximum amount of the Participant's Capital Cost Payment.
The Participant may elect to make a partial Capital Cost Payment equal to the amount of retained
earnings or other legally available funds not derived from any external borrowing that it
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determines to apply to the Capital Cost Payment. In all other circumstances, a Participant may
elect to make a Capital Cost Payment in whole and not in part.
(b) The Participant's election to make a Capital Cost Payment shall be made by written
resolution adopted by its governing body, which resolution shall be in substantially the form
approved by the Project Management Committee. An original or certified copy of such
resolution shall be submitted to DAMPS with the Participant's notice of its election to make the
Capital Cost Payment. In the event that the Participant does not notify UAMPS of the
determination of its governing body by the date specified in the notice provided by UAMPS, the
Participant shall be deemed to have elected not to make a Capital Cost Payment.
(c) Following receipt of the Participant's election to make the Capital Cost Payment,
UAMPS will provide the Participant with notice of:
(1) the date (which shall be not earlier than 60 days after the date of such
notice)by which the Participant must make the Capital Cost Payment;
(2) instructions for the deposit of the Capital Cost Payment into a separate and
segregated special escrow account established under the Financing Documents; and
(3) a written statement of information regarding UAMPS, the Project and the
Project Agreements for the Participant's use in its offering material for any indebtedness
to be issued to finance the Capital Cost Payment.
The Capital Cost Payment shall be held and invested in accordance with the provisions of the
Financing Documents, which shall provide for the investment of the Capital Cost Payment, the
crediting of any interest earnings for the account of the Participant and the application of the
Capital Cost Payment by the Trustee upon the direction of UAMPS to retire a portion of
UAMPS' outstanding Bond Anticipation Notes and Bonds and for deposit into such funds and
accounts as may be established by the Financing Documents to finance a portion of the Cost of
the Initial Facilities. If the Participant fails to make the Capital Cost Payment as and when
required by the UAMPS' notice, it shall be deemed to have rescinded its election to make the
Capital Cost Payment.
(d) The Participant acknowledges and agrees that the amount of the Capital Cost
Payment to be made by the Participant may be based upon a substantially final estimate of the
Cost of the Initial Facilities and, in such event, will be subject to adjustment to reflect the final
Cost of the Initial Facilities as approved by the Project Management Committee. Not more than
30 days following the determination and approval of the final Cost of the Initial Facilities,
UAMPS shall render a final accounting statement to the Participant setting forth a computation
of the final Cost of the Initial Facilities (adjusted in the same manner as Capital Cost), the
amount of and interest earnings on the Capital Cost Payment and any amount payable by or
credited to the Participant in respect of the final Cost of the Initial Facilities. The Participant
agrees that it will pay any additional amount payable by it on or before the 30th day following the
date of such final accounting statement, or on such later date as may be approved by the Project
Management Committee.
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(e) After Capital Cost Payments have been made by all electing Participants, UAMPS
shall complete (or revise, as applicable) SCHEDULE I and provide a copy of the completed or
revised SCHEDULE I to each of the Participants. With respect to all Participants and at all times,
SCHEDULE I shall show that:
(1) the sum of each Participant's Capital Cost Payment Percentage and Debt
Service Percentage equals its Entitlement Share;
(2) the sum of the Capital Cost Payment Percentages and Debt Service
Percentages of all Participants equals 100%; and
(3) the sum of the Debt Service Shares of all Participants equals 100%.
DAMPS' calculation and determination of Capital Cost and the Participant's Capital Cost
Payment Percentage, Debt Service Percentage and Debt Service Share shall be conclusive and
binding upon DAMPS and the Participant.
(f) The Participant acknowledges and agrees with UAMPS that:
(1) its election to make a Capital Cost Payment shall be irrevocable and under
no circumstances whatsoever shall the Participant be entitled to a return or rebate of all or
any portion of any Capital Cost Payment, including without limitation, Uncontrollable
Force or other circumstances that result in the suspension, interruption, interference,
reduction, curtailment or termination of the Project or the Project Output;
(2) the Capital Cost Payment shall not be deemed to constitute an investment
by the Participant and the Participant shall not be entitled to any investment earnings or
rate of return on the Capital Cost Payment, except with respect to interest earnings on the
Capital Cost Payment pending its application as provided above; and
(3) any Capital Cost Payment made by the Participant shall not change or
affect DAMPS' ownership in the Project or any of the rights and obligations of UAMPS
and the Participant under this Contract, except as specifically provided herein, including
the right of DAMPS to suspend or terminate the Participant's right to receive the Electric
Energy allocable to its Entitlement Share as provided in Section 22.
Section 7. Operation, Maintenance and Management of the Project. (a) DAMPS
covenants and agrees that it will use Commercially Reasonable Efforts consistent with and
subject to the terms and provisions of the Project Agreements to operate, maintain and manage
the Project or cause the same to be operated, maintained and managed in an efficient and
economical manner pursuant to the Ownership Agreement and the Joint Operating Agreement in
accordance with Prudent Utility Practice for the joint and ratable benefit of all of the Participants.
UAMPS agrees with and covenants to the Participant that UAMPS will vigorously enforce and
defend its rights under the Project Agreements. The Participant acknowledges and agrees that
DAMPS may (as authorized by the Board acting upon the recommendation of the Project
Management Committee) from time to time enter into amendments of and supplements to any or
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all of the Project Agreements and that, except as otherwise required by Section 28(b), UAMPS
will not be required to obtain the consent or approval of the Participant in connection with any
such supplement or amendment.
(b) The Participant hereby acknowledges and agrees that, in order to promote the
efficient and economical utilization of the Project and to fully realize the benefits to the
Participants of their joint and cooperative undertaking, it is necessary and desirable that DAMPS
control the operation of the Project and schedule and utilize the Project Output in accordance
with the Operating and Scheduling Procedures provided for herein, and the Participant hereby
authorizes UAMPS to take all actions necessary or desirable in this regard.
(c) The Participants hereby establish the Project Management Committee, which shall
consist of one voting representative from each Participant (who shall be the Participant's
Representative) and shall be chaired by a Participant's Representative elected by the Project
Management Committee. Pursuant to the Contract Resolution, the Participant has delegated full
and complete authority to its Participant's Representative to act on all matters and decisions that
come before the Project Management Committee.
(d) An Authorized Officer of DAMPS shall attend all meetings of the Project
Management Committee and shall cause minutes to be kept of all such meetings. The Joint
Action Agreement and the By-Laws of UAMPS shall govern the procedures for and the voting
rights on the Project Management Committee,provided that:
(1) The Participant's Representative of any Participant that is in default
hereunder shall not be entitled to vote on any matter during the period of such default and
the consent or approval of such Participant or such Participant's Representative shall not
be required to obtain any consent or approval required hereunder during the existence of
such default or to constitute a quorum of the Project Management Committee;
(2) A unanimous vote of all Project Management Committee Representatives
shall be required on all decisions which would result in the termination of the Project; and
(3) All decisions made by the Project Management Committee shall be made
by resolution, order or other appropriate action of the Project Management Committee
and, before such resolution, order or action of the Project Management Committee shall
take effect, the same shall be ratified and approved by resolution, order or action of the
Board, acting in accordance with the Joint Action Agreement and the By-Laws of
DAMPS.
The Participants acknowledge that the Joint Action Agreement provides, among other things, that
decisions of the Board with respect to the Project shall be made only upon the recommendation
of the Project Management Committee and that weighted votes may be called for on any
recommendation or decision to be made by the Project Management Committee or the Board,
respectively, all as more fully provided in the Joint Action Agreement.
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(e) In addition to its other responsibilities under the Power Sales Contracts, the Project
Management Committee shall:
(1) review, provide advice and direction to and consult with UAMPS
regarding the Project;
(2) review, approve and provide advice and direction to UAMPS on the
Project Agreements and any modifications or amendments thereto, appoint all
representatives of UAMPS serving under the Project Agreements, approve the Operator
of Unit 3 under the Joint Operating Agreement and provide such direction to DAMPS as
shall be necessary to enable DAMPS to meet timely its obligations and responsibilities
under the Project Agreements;
(3) review and approve the plan of financing for Bond Anticipation Notes and
Bonds to be issued by DAMPS;
(4) supervise and provide direction to DAMPS during the construction of the
Project, including approval of the construction budget for the Project and approval of all
notices to proceed and notices to construct given under the Construction Agreements;
(5) review, modify, and approve or otherwise act on the quarterly estimates of
the Cost of the Project by the first day of the month prior to the beginning of each quarter;
(6) review, approve and provide advice and direction to DAMPS regarding the
declaration of the Commercial Operation Date of the Project under the Construction
Agreements;
(7) determine and declare the Project Capability upon the Commercial
Operation Date of the Initial Facilities and from time to time thereafter as its deems
necessary to reflect the actual capability of the Project;
(8) prior to the Commercial Operation Date of the Initial Facilities, review and
approve the Operating and Scheduling Procedures and the form of the appendix to the
Pooling Agreement described in Section 9(b);
(9) review and consult with UAMPS regarding the acquisition and
management of supplies of coal and any other necessary fuels for the Project and review
and approve each Fuel Agreement and any Fuel Agent to be appointed by DAMPS;
(10) review, modify and recommend the Annual Budget and any amendments
thereto to the Board;
(11) review, recommend and approve any Additional Facilities to the Board;
and
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(12) review, recommend and approve any actions or remedies to be taken by
UAMPS under Section 22 or 23.
Section 8. Billing Periods, Billing and Payment. (a) The initial Billing Period to be
used for the preparation, calculation and billing of the amounts payable by the Participant
hereunder shall be a Month. In order to promote the efficient and economic administration of the
Project, UAMPS may, at any time after the end of the initial Contract Year and from time to time
thereafter, adopt another standard period of time as the Billing Period hereunder. In addition to
the foregoing, UAMPS may, upon the approval of the Project Management Committee, from
time to time revise the billing and payment procedures provided for in this Section 8 to promote
the efficient and economic administration of the Project or to conform such billing procedures to
those utilized in connection with other projects of UAMPS. Any change in the Billing Period or
in such billing and payment shall be made in the Annual Budget provided for in Section 14 and
shall not be effective for at least 15 days after the mailing of notice of such change in the Billing
Period or in the billing and payment procedures to the Participant. At the time of the mailing of
such Annual Budget, UAMPS shall send to the Participant a revised form of paragraphs (b) and
(c) of this Section 8, which shall reflect any changes in the dates of billing and payment and the
method thereof that are necessary or desirable to make this Section 8 correspond to the new
Billing Period, such changes to become effective on the date the new Billing Period takes effect.
In no event shall any such change in the Billing Period or in the billing and payment procedures
increase the amounts payable by the Participant pursuant to this Section 8 in respect of Operation
and Maintenance Costs, Transmission Costs and Debt Service Costs.
(b) For so long as the Billing Period is a Month, on or before the 25th day after the end
of each Billing Period beginning with the first Billing Period in the first Contract Year, UAMPS
shall render to the Participant a billing statement showing the amount payable by the Participant
for such Billing Period in respect of: (1) Operation and Maintenance Costs; (2) Transmission
Costs; (3) Debt Service Costs; and (4) any other amounts, adjustments or reconciliations payable
by or credited to the Participant pursuant to this Contract or the Financing Documents and not
otherwise shown, including items of the Cost of the Project not then or not to be financed by the
issuance of Bonds or Capital Cost Payments which have theretofore been incurred or are then
due and payable by UAMPS. The Participant shall pay the total of such amounts at the time
specified in paragraph (c) of this Section 8, as the same may be revised from time to time. The
billing statement for each Billing Period shall be based, to the fullest extent practicable, upon the
actual operation of the Project during such Billing Period. To the extent that any billing
statement rendered by UAMPS shall have included any estimated amounts in respect of the
Participant's share of Operation and Maintenance Costs, Debt Service Costs or the Transmission
Costs or other costs allocable to the Participant, such estimated amounts shall be reconciled at
least once during each Contract Year with the actual operation and scheduling of the Project and
the Participant shall receive a bill or credit, as applicable, to reflect such reconciliations pursuant
to clause (4) of this paragraph(b).
(c) Payments required to be paid by the Participant to UAMPS pursuant to this Section
8 shall be due and payable to UAMPS at the principal office of UAMPS, or such other address as
UAMPS shall designate in writing to the Participant, on the 15th day following the date on which
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the billing statement was rendered or at such other time as may be established by UAMPS
pursuant to paragraph (a) above.
(d) If payment in full is not made on or before the close of business on the due date,
UAMPS shall impose a delayed payment charge on the unpaid amount due for each day overdue
at a rate equal to the lesser of one percent per month, compounded monthly, or the maximum rate
lawfully payable by the Participant; provided, however, that DAMPS, acting upon the direction
of the Board, may elect to waive such delayed payment charge (or portion thereof)but only to the
extent that any such waiver will not adversely affect the ability of UAMPS to meet its payment
obligations under the Project Agreements or the Financing Documents. If said due date is not a
business day, payment shall be made on the next following business day.
(e) In the event of any dispute as to any portion of the billing statement for such Billing
Period, the Participant shall nevertheless pay the full amount of the disputed charges when due
and shall give written notice of the dispute to UAMPS not later than the 60th day after such
billing statement was submitted. Such notice shall identify the disputed billing statement, state
the amount in dispute and set forth a full statement of the grounds for such dispute. No
adjustment shall be considered or made for disputed charges unless such notice is given by the
Participant. UAMPS shall give consideration to such dispute and shall advise the Participant
with regard to its position relative thereto within thirty (30) days following receipt of such
written notice. Upon final determination (whether by agreement or determination by the Board)
of the correct amount, any difference between such correct amount and such full amount shall be
accounted for in the billing statement next submitted to the Participant after such determination.
(f) Debt Service Costs, including any adjustments thereto, shall be determined by
DAMPS in accordance with the Financing Documents. Operation and Maintenance Costs,
including any adjustments thereto, shall be determined by DAMPS in accordance with the
applicable provisions of the Power Sales Contracts and the Project Agreements. UAMPS and the
Participant acknowledge and agree that certain categories of costs may be financed as a Cost of
the Project (and paid by the Participant as Debt Service Costs or through Capital Cost Payments)
or paid by the Participant as Operation and Maintenance Costs, as determined by the Project
Management Committee, but without duplication of any item of cost. Transmission Costs,
including any adjustments thereto, shall be determined by DAMPS in accordance with the
applicable provisions of this Contract and the Transmission Agreements. The Participant shall
pay all such amounts pursuant to this Section 8.
(g) The obligation of the Participant to make the payments for Operation and
Maintenance Costs, Transmission Costs, Debt Service Costs and other amounts payable by the
Participant pursuant to this Section 8 is a several obligation and not a joint obligation with those
of any other Participant. The obligation of the Participant to make such payments shall constitute
an obligation of the Participant and an operating expense of the Participant's electric system
payable solely from the revenues and other available funds of the electric system and shall
constitute a cost of purchased Electric Power and Electric Energy, and in no event shall the
Participant be obligated or required to levy or collect ad valorem property taxes or assessments to
meet its payment obligations under this Contract. Such payments shall be made whether or not
the Project or any portion thereof is acquired, completed, operable or operating and
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notwithstanding the suspension, interruption, interference, reduction or curtailment of the Project
Output, termination of any of the Project Agreements, loss or interruption of transmission from
the Point of Delivery or termination of any Transmission Agreement, for any reason whatsoever,
in whole or in part. The obligations of the Participant to make such payments shall not be
subject to any reduction, whether by offset, counterclaim, or otherwise, and shall not be
conditioned upon the performance by DAMPS under this or any other agreement or instrument.
(h) Subject to the provision of the Project Agreements, UAMPS shall use Commercially
Reasonable Efforts to collect or cause to be collected amounts arising from insurance proceeds,
condemnation awards, damages due from contractors, subcontractors or others and proceeds
from the sale or other disposition of surplus property, all related to the Project, and shall apply all
receipts, revenues and other moneys received by it or credited to it from the foregoing sources to
the repair, reconstruction or replacement of the Project, to the retirement or defeasance of Bonds
(in whole or in part), by purchase, redemption or other arrangements therefor, to the payment of
other costs and expenses of UAMPS in connection with the Project or to the credit, pro rata, of
the Participants, based upon their Entitlement Shares in the Project, all as provided in the
Financing Documents.
(i) In the event that the failure of a Participant to make its payments in accordance with
its Power Sales Contract shall have resulted in the application of amounts in any reserve or
working capital funds for the Project, any amounts thereafter paid to UAMPS, including delayed-
payment and interest charges, by such defaulting Participant in respect of past due payments (1)
shall be used to replenish such fund or (2) to the extent that the other Participants shall have
made up the deficiency created by such application or paid additional amounts into any such
funds, shall be credited, pro rata, on the billing statements of such other Participants in the next
Billing Period or Billing Periods as shall be appropriate.
Section 9. Scheduling of Electric Energy; Coordination with UAMPS Pool. (a) From
and after the Commercial Operation Date of the Project, the Participant shall be entitled to use
pursuant to this Section 9 the Electric Energy allocable to the Participant's Entitlement Share.
UAMPS shall schedule or cause to be scheduled such Electric Energy in accordance with the
Operating and Scheduling Procedures approved by the Project Management Committee.
UAMPS shall provide the Participant with notice of any amendment to or modification of the
Operating and Scheduling Procedures.
(b) The Participant agrees that (1) prior and as a condition to the first delivery of
Electric Energy under this Contract, it will execute and deliver to UAMPS the Pooling
Agreement and an appendix thereto (in a form approved by the Project Management Committee)
that assigns the Electric Energy allocable to the Participant's Entitlement Share to the UAMPS
Pool and (2) it will perform its obligations under and will not take any action to terminate the
Pooling Agreement and such appendix during the term of this Contract. The assignment of the
Electric Energy allocable to the Participant's Entitlement Share pursuant to the Pooling
Agreement and appendix shall be solely for operating and scheduling purposes and shall not
constitute an assignment or transfer of the Participant's right, title and interest in and to such
Electric Energy. At any time the Project is operable or operating the Participant shall not be
entitled to use in any hour Electric Energy in excess of that which is allocable to the Participant's
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Entitlement Share, unless arrangements have been made for a planned purchase of such Electric
Energy through the DAMPS Pool. Any surplus Electric Energy attributable to the Participant's
Entitlement Share shall be sold or otherwise disposed of by the Participant only in accordance
with the provisions of such appendix to the Pooling Agreement. In addition to any sales of
surplus Electric Energy requested by the Participant through the DAMPS Pool, UAMPS will
utilize Commercially Reasonable Efforts to sell, exchange or otherwise dispose of any incidental
surplus Electric Power and Electric Energy attributable to the Project for the benefit of the
Participants.
(c) Prior to the first delivery of Electric Energy under this Contract, the Participant shall
provide to UAMPS a written schedule of the Participant's available electric resources and the
order in which such resources are to be applied to meet the Participant's requirements for Electric
Power and Electric Energy. UAMPS shall verify all such resources and promptly notify the
Participant of any rejection of such resources. The Participant may revise or modify such
schedule upon written notice to DAMPS at least one business day prior to the beginning of any
Billing Period.
Section 10. Point of Delivery; Transmission Contracts; Risk of Loss. (a) The Electric
Energy allocable to the Participant's Entitlement Share shall be delivered at the Point of
Delivery. The Participant shall be responsible for, and shall pay all costs of, (1) the transmission
of Electric Energy from the Point of Delivery to its System Point of Receipt and (2) the
distribution and delivery of Electric Energy from its System Point of Receipt to its customers.
(b) Upon the request of the Participant, DAMPS will use Commercially Reasonable
Efforts to enter into one or more Transmission Agreements, or will utilize its transmission rights
under existing Transmission Agreements, to provide for transmission service for the Electric
Energy allocable to the Participant's Entitlement Share from the Point of Delivery to the
Participant's System Point of Receipt. Without limiting the generality of the foregoing, UAMPS
shall take all actions necessary to obtain, secure or make available transmission rights, service or
access across the NTS for the use and benefit of all Participants, as directed by the Project
Management Committee. Any Transmission Agreements entered into by UAMPS for or on
behalf of the Participant shall be approved by UAMPS and the Participant, and the Participant
shall pay all Transmission Costs thereunder. The Participant agrees that it shall maintain (or
cause DAMPS to maintain) during the term of this Contract, such Transmission Agreements as
shall be necessary for the firm transmission of the Electric Energy allocable to its Entitlement
Share from the Point of Delivery to its System Point of Receipt, except as may be otherwise
approved by the Project Management Committee. The Participant shall provide UAMPS with
copies of all Transmission Agreements utilized by it and with such other information regarding
its transmission arrangements as UAMPS may reasonably request.
(c) Electric Energy delivered hereunder and risk of loss shall pass from DAMPS to the
Participant at the Point of Delivery. As between the parties to this Contract, DAMPS shall be
deemed to be in exclusive control and possession of the Electric Energy delivered hereunder, and
responsible for any damage or injury caused thereby, prior to the time such Electric Energy shall
have been delivered to the Participant at the Point of Delivery. After delivery of Electric Energy
to the Participant at the Point of Delivery, the Participant shall be deemed to be in exclusive
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control and possession thereof and responsible for any injury or damage caused thereby.
UAMPS assumes all liability for and shall indemnify, defend and hold harmless the Participant
(individually) from any claims, including death of persons, arising from any act or incident
occurring when title to Electric Energy is vested in it. All costs and expenses incurred by
UAMPS under the foregoing indemnity shall constitute a Cost of the Project or an item of
Operation and Maintenance Costs, as determined by the Project Management Committee. The
Participant assumes all liability for and shall indemnify, defend and hold harmless UAMPS and
the other Participants from any claims, including death of persons, arising from any act or
incident occurring when title to Electric Energy is vested in it. It is the intent of the parties that
this indemnity be without regard to the causes thereof, including, without limitation, the
negligence of any indemnified party, whether such negligence be sole, joint or concurrent, or
active or passive or the strict liability of any indemnified party.
Section 11. Interruption or Reduction of Deliveries. The Participant acknowledges that
deliveries of Electric Energy to the Point of Delivery may be interrupted or reduced if: (a)the
Operator has determined that such interruption or reduction is necessary in case of emergencies
affecting the Project, in order to install equipment, to make repairs and replacements to, to make
investigations and inspections of, or to perform maintenance work on, the Project or otherwise
carry out its obligations as Operator under the Joint Operating Agreement; or (b) Electric Energy
from the Project is otherwise unavailable whether due to an event of Uncontrollable Force
otherwise. In order that the operation of the Participant's electric system will not be
unreasonably interrupted or interfered with, UAMPS will, to the extent necessary, use
Commercially Reasonable Efforts to make arrangements to replace the Electric Energy
attributable to the Participant's Entitlement Share through other projects of UAMPS or the
UAMPS Pool. UAMPS will also use Commercially Reasonable Efforts, consistent with the
provisions of the Project Agreements and the Power Sales Contracts, to arrange for any planned
interruption or reduction in the Project Output to be scheduled at such times that will cause the
least interference with the operation of the Participants' electric systems.
Section 12. Availability of Electric Energy. (a) Except as provided otherwise by this
Contract and subject to the provisions of the Project Agreements, Electric Energy allocable to the
Participant's Entitlement Share shall be made available in accordance with this Contract during
the term hereof;provided, however, that nondelivery of Electric Energy hereunder for any reason
whatsoever (1) shall not relieve the Participant from its obligation to make its payments under
Section 8 and (2) shall not impose any liability upon UAMPS for any direct or consequential
damages suffered by the Participant.
(b) The Participant acknowledges and agrees that deliveries of the Electric Energy
allocable to its Entitlement Share to the Point of Delivery are not firm and are contingent upon
the operation of the Project and other factors. The Participant agrees that it is solely responsible
for any firming transactions with respect its Entitlement Share.
Section 13. Insurance. DAMPS shall maintain, or during the construction of the Initial
Facilities shall cause each contractor under the Construction Agreements to maintain, in force, as
part of the Cost of the Project or Operation and Maintenance Costs, as appropriate, insurance
with responsible insurers with policies against risk or direct physical loss, damage or destruction
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of the Project, including liability insurance and employers' liability insurance, all to the extent
consistent with Prudent Utility Practice and to the extent available at reasonable cost, but in no
case less than will satisfy applicable regulatory requirements and requirements of the Financing
Documents. All such insurance may be obtained and maintained pursuant to the provisions of
the Project Agreements, provided that the Project Management Committee may direct DAMPS
to procure such additional insurance as the Project Management Committee deems necessary or
appropriate.
Section 14. Annual Budget, Accounting. (a) On or before 15 days prior to the estimated
commencement of the first Contract Year and on or before the beginning of each Contract Year
thereafter, DAMPS shall prepare and mail to the Participant an Annual Budget for the Project
recommended by the Project Management Committee and approved by the Board, based, to the
extent appropriate, on budgets received under the Project Agreements, showing an annual
estimate for the following Contract Year of (1) Operation and Maintenance Costs and Debt
Service Costs, and the Participant's share of each, and (2) the Transmission Costs payable by the
Participant. The Participant shall, to the extent and in the manner deemed appropriate by the
Participant, incorporate the estimates shown on the Annual Budget in its annual budgetary
process.
(b) At the end of each quarter during each Contract Year and at such other times as it
shall deem desirable, UAMPS shall review the Annual Budget of Operation and Maintenance
Costs and Debt Service Costs for the Contract Year. In the event such review indicates that the
Annual Budget does not or will not substantially correspond with actual receipts or expenditures,
or if at any time during such Contract Year there are or are expected to be extraordinary receipts,
credits or expenditures of costs substantially affecting Operation and Maintenance Costs and
Debt Service Costs, UAMPS shall prepare and provide to the Participant's Representative a
revised Annual Budget, recommended by the Project Management Committee and approved by
the Board, incorporating adjustments to reflect such receipts, credits or expenditures which shall
thereupon supersede the previous Annual Budget. The revised Annual Budget and any written
materials that accompany it shall specifically identify the changes from the Annual Budget that
was previously in effect.
(c) UAMPS agrees that it will, from and after the date of the acquisition by DAMPS of
the Project, keep accurate records and accounts relating to the Project, the Cost of the Project,
Capital Cost, Operation and Maintenance Costs, Transmission Costs and Debt Service Costs in
accordance with the Financing Documents and the Uniform System of Accounts, separate and
distinct from its other records and accounts; provided that UAMPS may establish revenue and
operation and maintenance funds that account for more than one project of UAMPS so long as
UAMPS shall maintain books and records adequate to show the amounts in each of such funds
allocable to each such Project. Said accounts shall be audited annually by a firm of certified
public accountants, experienced in public finance and electric utility accounting and of national
reputation, to be employed by UAMPS. A copy of each annual audit, including all written
comments and recommendations of such accountants, approved by the Members shall be
furnished by UAMPS to the Participant not later than 180 days after the end of each Contract
Year.
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Section 1 S. Information to Be Made Available. (a) DAMPS shall make available for
examination by the Participant (subject to their availability to DAMPS under the applicable
provisions of the Project Agreements):
(1) all books of accounts, records, documentation and contracts in the
possession of UAMPS relating to the operation of the Project;
(2) copies of all agreements and data in the possession of UAMPS relating to
the financing of the Project;
(3) copies of all operating and financial records and reports relating to the
Project in the possession of UAMPS;
(4) copies of policies of insurance carried pursuant to Section 13; and
(5) such other information and documents with respect to the Project as the
Participant may reasonably request from time to time.
(b) The Participant acknowledges that the ability of UAMPS to sell the Bonds depends
upon, among other things, the credit standing of the Participants and their electric systems and
that it will be necessary for UAMPS to provide certain information with respect to the
Participants and their electric systems in connection with the sale of the Bonds (whether or not
the Participant is making a Capital Cost Payment). Consequently, the Participant covenants to
and agrees with UAMPS that the Participant will, upon request, provide to UAMPS all
information with respect to the Participant and its electric system, including financial and
operating information and all contracts, documents, reports, bond resolutions and indentures, as
may be requested by UAMPS or its counsel in connection with the financing of the Project and
the issuance of the Bonds.
(c) The Participant covenants to and agrees with UAMPS that the Participant will
furnish to UAMPS (1) concurrently with its execution and delivery of this Contract and not later
than 180 days after the end of each fiscal year of the Participant thereafter, (A) a copy of the most
recent annual financial statements of the Participant and its electric enterprise fund, audited by an
independent certified public accountant or firm of such accountants, together with copies of all
management letters and written recommendations and comments submitted by the accountants
making such audit, and (B) the information and documents described in EXHIBIT II attached
hereto, and (2) such other information and documents as UAMPS may reasonably request from
time to time.
UAMPS acknowledges that disclosure to third parties of the information and documents
described in EXHIBIT II and other information provided to UAMPS by the Participant pursuant to
this paragraph (c) could cause immediate and substantial financial and commercial harm to the
Participant. UAMPS agrees to take all actions necessary on its part to classify such information
and documents as "protected records" within the meaning of the Government Records Access
and Management Act, Title 63, Chapter 2, Utah Code Annotated 1953, as amended("GRAMA").
Such classification shall be based upon, among other things, the immediate and substantial
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financial and commercial harm that would be suffered by the Participant and DAMPS as a result
of the disclosure of such information and documents to actual or potential competitors. DAMPS
agrees that it will use Commercially Reasonable Efforts, to the extent permitted by GRAMA, to
avoid disclosing to any person the commercial information contained in such information and
documents. In the event that UAMPS receives a request for disclosure of the material described
in this paragraph, UAMPS agrees that it will immediately notify the Participant and afford it an
opportunity to contest any disclosure of the same.
(d) Concurrently with its execution and delivery of this Contract, the Participant shall
deliver to UAMPS (1) a certificate, executed by the Mayor or other executive officer of the
Participant and the City Recorder, Town Clerk or Secretary of the Participant, as applicable, and
Participant's Representative, together with attached exhibits, in substantially the form attached
hereto as EXHIBIT III and (2) an opinion of counsel to the Participant, in substantially the form
attached hereto as EXHIBIT V. In connection with each issuance of Bonds by UAMPS and at
such other times as UAMPS may reasonably request, the Participant shall deliver to UAMPS (1)
a bring-down certificate executed by the Mayor or other executive officer of the Participant and
the City Recorder, Town Clerk or Secretary of the Participant, in substantially the form attached
hereto as EXHIBIT IV, and (2) a bring-down opinion of counsel to the Participant, in substantially
the form attached hereto as EXHIBIT VI.
Section 16. Additional Bonds and Refunding Bonds. (a) Additional Bond Anticipation
Notes and Additional Bonds may be sold and issued by UAMPS in accordance with the
provisions of the Financing Documents at any time and from time to time for the purpose of
paying the Cost of the Project, including the cost of any Additional Facilities. UAMPS may
incur other obligations pursuant to the Financing Documents to achieve purposes deemed
beneficial to the Project.
(b) Any Additional Bonds shall be secured by the pledge made pursuant to the
Financing Documents of the payments required to be made by the Participant under Section 8, as
such payments may be increased and extended by reason of the issuance of Additional Bonds,
and of other revenues of UAMPS attributable to the Project. Additional Bonds may be issued in
amounts sufficient to pay the full amount of such costs and to provide such reserves as may be
determined by UAMPS to be reasonably necessary. Any Additional Bonds issued in accordance
with the provisions of this Section 16 may rank on a parity as to the security provided by the
Power Sales Contracts with all Bonds previously issued.
(c) In the event that Additional Facilities are financed by the issuance of Additional
Bonds, the Project Management Committee shall determine whether to make a capital cost
payment option available to the Participants and if so, the procedures therefore.
(d) In the event Debt Service Costs may be reduced by the refunding of any Bonds then
outstanding or in the event it shall otherwise be advantageous, in the opinion of UAMPS, to
refund any Bonds, UAMPS may issue and sell Refunding Bonds in accordance with the
Financing Documents. Any such Refunding Bonds may be secured by the pledge made pursuant
to the Financing Documents of the payments required to be made by the Participant under
Section 8 and of other revenues of UAMPS attributable to the Project. Any Refunding Bonds
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issued in accordance with the provisions of this Section 16 and secured by the pledge of such
payments and such revenues may rank on a parity as to the security afforded by the provisions of
this Contract with all Bonds theretofore issued pursuant to and secured in accordance with the
provisions of the Power Sales Contracts.
Section 17. Disposition or Termination of the Project. Except as provided in Section
23(d) and this Section 17, UAMPS shall not sell, lease or otherwise dispose of the Project or any
substantial part of the Project without the consent of all of the Participants. Subject to the
provisions of the Financing Documents, this Section 17 shall not prohibit a merger or
consolidation or sale of all or substantially all of the property of UAMPS. Subject to the
applicable provisions of the Project Agreements, if the Project shall be terminated, UAMPS shall
use Commercially Reasonable Efforts to cause the Project to be economically salvaged,
discontinued, disposed of or sold in whole or in part. UAMPS shall make accounting statements
for each Billing Period to the Participant of all costs associated therewith. Such accounting
statements shall continue for such Billing Periods until the Project has been salvaged,
discontinued or finally disposed of, at which time a final accounting statement with respect
thereto shall be made by UAMPS at the earliest reasonable time. The costs of salvage,
discontinuance or disposition shall include, but shall not be limited to, all accrued costs and
liabilities resulting from the acquisition, construction, operation (including cost of fuel),
maintenance of and renewals and replacements to the Project.
Section 18. Representations, Warranties, Covenants and Agreements of the Participant.
(a) The Participant represents and warrants to UAMPS as follows:
(1) The Participant is a public utility district, duly created and validly existing
under the laws of the State of California, and has the corporate power and authority to
enter into and perform its obligations under this Contract.
(2) In connection with its consideration of and its determination to enter into
this Contract, the Participant reviewed, evaluated and approved its Power Supply
Resource Plan and determined that it required a long-term baseload supply of Electric
Power and Electric Energy at least equal to the Electric Power and Electric Energy
represented by its Entitlement Share.
(3) The execution, delivery, and performance by the Participant of this
Contract have been duly authorized by the governing body of the Participant and do not
and will not require, subsequent to the execution of this Contract by the Participant, any
consent or approval of the governing body or any officers of the Participant.
(4) All Required Approvals have been obtained.
(5) This Contract is the legal, valid, and binding obligation of the Participant,
enforceable in accordance with its terms.
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(6) As of the date of this Contract, there is no pending or, to the Participant's
knowledge, threatened action or proceeding affecting the Participant which purports to
affect the legality, validity, or enforceability of this Contract.
(b) The Participant covenants and agrees with DAMPS as follows:
(1) Maintenance of Rates. The Participant shall establish, maintain, revise,
charge and collect rates for electric service rendered by it to its customers so that such
rates shall provide revenues which, together with other funds reasonably estimated to be
available, will be sufficient to meet the Participant's obligations to UAMPS under this
Contract, to pay all other operating expenses of the Participant's electric system and to
provide revenues sufficient to pay all obligations of the Participant payable from, or
constituting a charge or lien on, the revenues of its electric system and, to the extent being
paid from the revenues of its electric system, all general obligation bonds of the
Participant now or hereafter outstanding.
(2) Maintenance of Revenues. The Participant shall at all times comply with
all terms, covenants and provisions of all Utility Contracts to which it is a party. The
Participant shall promptly collect all charges due for electric utility services supplied by it
as the same become due. The Participant shall at all times maintain and shall exercise
Commercially Reasonable Efforts to enforce its rights against any person, customer or
other entity that does not pay such charges when due.
The Participant shall not hereafter (A) enter into any contract pursuant to which the
Participant will be obligated to take or pay for Electric Power and Electric Energy or for
transmission service furnished to the Participant, in either case on a basis substantially
similar to the provisions contained in Section 8(g), or (B) grant any new franchise for
competing electric service within its service area, except upon 90 days' prior notice to
DAMPS and delivery to UAMPS of a certificate and report from a Qualified Independent
Engineer and a written determination by the governing body of the Participant, in each
case to the effect that the performance by the Participant of its obligations under such
contract or the granting of such franchise, as applicable, will not adversely affect the
ability of the Participant to meet its obligations under this Contract. The provisions of
this paragraph shall not apply to (X) any contract between the Participant and DAMPS or
(Y) any franchises or similar arrangements required by law.
To the extent permitted by law, the Participant shall vigorously defend and enforce its
exclusive right to provide electric distribution services within its service area.
(3) Sale or Assignment of Electric System or Power Sales Contract. During
the term of this Contract, the Participant shall not sell, lease or otherwise dispose of all or
substantially all of its electric system, except upon compliance with the following
provisions respecting the transfer or assignment of its Entitlement Share.
The Participant shall not assign or transfer all or any part of its Entitlement Share or any
or all of its interests under this Contract, except upon one hundred twenty (120) days'
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prior written notice to UAMPS and compliance with the provisions set forth below.
Within thirty days after receipt of such notice from the Participant (and if such notice
indicates that the Participant proposes to assign its Entitlement Share), DAMPS shall
notify all of the other Participants of the proposed assignment or transfer by the
Participant of all or part of its Entitlement Share. Each of the other Participants shall
have the option of acquiring all or any portion of the Entitlement Share that is proposed to
be assigned or transferred and shall notify UAMPS of its exercise of such option within
forty-five days of its receipt of the notice from UAMPS referred to in the preceding
sentence. In the event that two or more of the other Participants shall exercise their
options with respect to the Entitlement Share that is proposed to be assigned or
transferred in amounts which exceed the total Entitlement Share proposed to be assigned,
UAMPS shall, to the extent necessary, make a pro rata allocation of the such Entitlement
Share among the Participants which have exercised their options, based upon the existing
Entitlement Shares of the requesting Participants. In the event that less than all of such
Entitlement Share shall be acquired by other Participants, UAMPS shall notify the other
Members of UAMPS of the proposed assignment of an Entitlement Share and shall
provide such Members with an opportunity to acquire the remaining portion of the
Participant's Entitlement Share.
In the event that less than all of the Entitlement Share proposed to be transferred or
assigned is to be acquired by other Participants or other Members of UAMPS, the
Participant may proceed to transfer or assign its Entitlement Share and its rights under
this Contract upon satisfaction of the following conditions: (A) at the sole option of
UAMPS either (i) the purchaser or assignee shall assume all obligations of the Participant
under this Contract in such a manner as shall assure UAMPS to its sole satisfaction that
the Participant's Entitlement Share to be purchased hereunder and the amounts to be paid
therefor will not be reduced, and if and to the extent deemed necessary by UAMPS in its
sole discretion to reflect such assignment and assumption, UAMPS and such purchaser or
assignee shall enter into an agreement supplemental to this Contract to clarify the terms
upon which the Participant's Entitlement Share is to be sold hereunder by UAMPS to
such purchaser or assignee; or (ii) such purchaser or assignee shall enter into a new
contract with UAMPS for the purchase of the Participant's Entitlement Share at a price
and on terms which UAMPS in its sole discretion determines not to be less beneficial to it
and the other Participants than this Contract; (B) the senior debt, if any, of such
purchaser, assignee or lessee, if such purchaser, assignee or lessee is not a Participant
shall be rated by at least "Baa2" by Moody's Investors Service or "BBB" by Standard &
Poor's Credit Market Services; (C) UAMPS shall by resolution determine that such sale,
lease or other disposition will not adversely affect UAMPS, the other Participants or the
security for the payment of Bonds; and (D) UAMPS shall have received an opinion of
nationally recognized bond counsel to the effect that such sale, assignment or disposition
will not by itself adversely affect the tax exempt status of interest on any of the Bonds
(theretofore issued or thereafter to be issued as tax exempt obligations). UAMPS shall
make the determinations required by this subparagraph (3) within one hundred twenty
(120) days of receipt by UAMPS of the notice referred to in the first sentence of this
subparagraph and shall provide a written copy of such determinations to the Participant.
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In the event any sale, lease or other disposition is permitted pursuant to this subparagraph
(3), UAMPS may require as additional security to assure the flow of revenues under this
Contract, and the transferring and assigning Participant shall provide or cause to be
provided the funds necessary to establish, an escrow deposit equivalent to the sum of(X)
the product of the Participant's Debt Service Share (expressed as a decimal) and Debt
Service Costs plus (Y) the product of the Participant's Entitlement Share and the sum of
the estimated Operation and Maintenance Costs and Transmission Costs, in each case for
such period of time as shall be determined by the Project Management Committee.
(4) Prudent Utility Practice. The Participant shall, in accordance with
Prudent Utility Practice, (A) at all times operate its electric system and the business
thereof in an efficient manner, (B) maintain its electric system in good repair, working
order and condition, and (C) from time to time make all necessary and proper repairs,
renewals, replacements, additions, betterments and improvements with respect to the
electric system, so that at all times the business thereof shall be properly conducted.
(5) Operating Expenses. UAMPS and the Participant intend that the
payments to be made by the Participant to UAMPS pursuant to this Contract (A) will be
payable as an operating expense of the Participant's electric system and a cost of
purchased electric power and energy and (B) will be payable (together with all other
operating expenses) as a first charge on the revenues derived from the operation of its
electric system. The Participant covenants to and agrees with UAMPS that it will include
the annual payments required to be made by it under this Contract as a cost of purchased
electric power and energy as an operating expense in the annual operating budget of its
electric system and in any resolution, ordinance or indenture providing for future
borrowings for the Participant's electric system.
(6) Tax Status. (A) The Participant shall not use or permit to be used any of
the Electric Energy acquired under this Contract or operate its system in any manner or
for any purpose or take or omit to take any action which could, either alone or in
conjunction with any other similar actions by the Participant or other Participants, result
in loss of the exclusion from gross income for federal income tax purposes of the interest
on any Bond or Bonds theretofore issued or thereafter issuable by UAMPS as tax exempt
obligations pursuant to the provisions of the Internal Revenue Code of 1986, as amended,
and applicable regulations and rulings thereunder.
(B) At the time of execution of this Contract the Participant has no contracts
(and has no current expectation of entering into any contracts) to provide electric service
to any entity that is not a state or local government, except for Permitted Contracts and
such contracts as may be listed on EXHIBIT III hereto. At least thirty (30) days prior to
entering into any such contract, the Participant shall notify UAMPS of its intent to enter
into such contract and provide copies of such contract to UAMPS. Within thirty (30)
days after receipt of such notice, UAMPS shall advise the Participant as to whether, in the
opinion of counsel of recognized standing in the field of law relating to municipal bonds
selected by UAMPS, such contract would result in a violation of the covenant in clause
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(A) above. The cost of such opinion and other reports necessary in connection therewith
shall be borne by the Participant.
Section 19. Reserve and Contingency Fund. (a) In addition to various funds and
accounts established under the Financing Documents, UAMPS may establish an additional fund
with respect to the Project known as the "Reserve and Contingency Fund" to be funded, held and
applied as provided herein. Amounts on deposit in the Reserve and Contingency Fund may be
used to pay or provide reserves for unusual or extraordinary Operation and Maintenance Costs of
the Project, renewals, repairs, replacements, additions or betterments of or to any items included
in the Project, the cost of any Additional Facilities or the cost of or reserves for decommissioning
and termination of the Project.
(b) The Project Management Committee may direct DAMPS to include in the Annual
Budget adopted pursuant to Section 14 an amount for deposit into the Reserve and Contingency
Fund. This amount may represent either an appropriation of excess revenues from the operation
of the Project during the preceding Fiscal Year or amounts to be billed to and collected from the
Participants as an item of Operation and Maintenance Costs during the Fiscal Year covered by
the Annual Budget.
Section 20. Pledge of Payments. All payments required to be made by the Participant
pursuant to the provisions of Section 8, together with other revenues of UAMPS attributable to
the Project may be pledged by UAMPS pursuant to the Financing Documents to secure the
payment of Bond Anticipation Notes and Bonds.
Section 21. Default by Participant. Each of the following shall constitute a"default"by
the Participant under this Contract:
(a) failure of the Participant to make to DAMPS any of the payments for
which provision is made in this Contract within five business days after the due date of
any such payment; or
(b) failure by the Participant to observe any of the covenants, agreements or
obligations on its part contained herein and failure to remedy the same for a period of
sixty days after written notice thereof, specifying such failure and requiring the same to
be remedied, shall have been given by or on behalf of DAMPS; or
(c) bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, including without limitation proceedings under Title 11, Chapter 9, United
States Code or other proceedings for relief under any federal or state bankruptcy law or
similar law for the relief of debtors, are instituted by or against the Participant and, if
instituted against the Participant, said proceedings are consented to or are not dismissed
within thirty days after such institution.
Section 22. Continuing Obligation of Participant; Right of UAMPS to Discontinue
Service. (a) In the event of any default referred to in Section 21, the Participant shall not be
relieved of its liability for payment of any amounts in default or its failure to observe its
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covenants, agreements and obligations hereunder and UAMPS shall have the right to recover
from the Participant any amount in default. In enforcement of any such right of recovery,
UAMPS may bring any suit, action, or proceeding in law or in equity, including mandamus and
action for specific performance, as may be necessary or appropriate to enforce any covenant,
agreement or obligation of the Participant hereunder or the obligation of the Participant to make
any payment for which provision is made in this Contract.
(b) In addition to proceeding with its rights against a defaulting Participant pursuant to
paragraph (a) above, UAMPS may, upon not less than thirty days' written notice from UAMPS
to the defaulting Participant, suspend or terminate the Participant's right to receive the Electric
Energy allocable to its Entitlement Share under this Contract. In connection with its
determination to suspend or terminate a defaulting Participant's right to receive the Electric
Energy allocable to its Entitlement Share, UAMPS shall take into account, among such other
matters as UAMPS in its sole discretion shall deem relevant, the amounts and due dates of its
payment obligations under the Project Agreements and the Financing Documents and the funds
and revenues available to UAMPS to enable it to meet its obligations thereunder. Any such
suspension or termination of the Participant's right to receive the Electric Energy allocable to its
Entitlement Share under this Contract shall not, however, terminate, reduce or modify the
Participant's obligations and liabilities hereunder.
(c) In the event that UAMPS has suspended (but not terminated) a defaulting
Participant's right to receive the Electric Energy allocable to its Entitlement Share, such
Participant may restore its right to receive such Electric Energy by (1) taking all actions on its
part necessary to cure or remedy the default, (2) paying all amounts necessary to compensate the
nondefaulting Participants and UAMPS for costs and losses incurred by them as a result of such
default, and (3) taking such other action and paying such amounts, including prepaying or
posting security for the Participant's future obligations under the Power Sales Contract, as may
be reasonably required by the Project Management Committee.
Section 23. Transfer of Electric Energy or Entitlement Share Following Default; Other
Actions by DAMPS. UAMPS and the Participant acknowledge that a default by any of the
Participants under its Power Sales Contract could reduce the revenues available to DAMPS
which are necessary in order for UAMPS to meet its obligations under the Project Agreements
and the Financing Documents on a timely basis. In the event of an insufficiency of revenues and
an inability on the part of UAMPS to meet its obligations under the Project Agreements and the
Financing Documents on a timely basis, the ability of UAMPS to deliver Electric Energy from
the Project and the interests of all of the Participants will be materially and adversely affected.
The provisions of this Section 23 are intended to provide a means to assure the sufficiency of
revenues to UAMPS following a default by a Participant under its Power Sales Contract. The
Participants agree that the provisions of this Section 23 are reasonable and necessary in order for
them to achieve the benefits of their joint and cooperative undertaking with respect to the Project.
(a) In the event of a default by any Participant with a Debt Service Share of 0.0000
(zero) and suspension or termination of the Participant's right to receive the Electric Energy
allocable to its Entitlement Share pursuant to Section 22 of such Participant's Power Sales
Contract, but only if the Project has not been terminated, UAMPS shall offer the right to
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purchase and receive the Electric Energy attributable to the defaulting Participant's Entitlement
Share to all of the nondefaulting Participants. Any Participant accepting such offer shall be
obligated to pay the Operation and Maintenance Costs allocable to the defaulting Participant's
Entitlement Share. In the event that two or more of the nondefaulting Participants elect to accept
an aggregate amount of Electric Energy that exceeds the Electric Energy allocable to the
defaulting Participant's Entitlement Share, then the right to receive the Electric Energy allocable
to the defaulting Participant's Entitlement Share shall be allocated among them pro rata, based
upon their then-current Entitlement Shares.
(b) In the event of a default by any Participant with a Debt Service Share greater than
0.0000 (zero) and suspension or termination of the Participant's right to receive the Electric
Energy allocable to its Entitlement Share pursuant to Section 22 of such Participant's Power
Sales Contract, but only if the Project has not been terminated, UAMPS and the nondefaulting
Participants shall take the following actions in the order set forth below:
(1) UAMPS shall immediately make a mandatory allocation of the defaulting
Participant's Entitlement Share among all of the nondefaulting Participants, pro rata on
the basis of their then-current Entitlement Shares, which shall remain in effect only until
the completion of the procedures provided for in this paragraph (b). UAMPS shall
provide written notice to the nondefaulting Participants of the mandatory allocation of the
defaulting Participant's Entitlement Share which notice shall (A) set forth the date of the
mandatory allocation, (B) include a revised SCHEDULE I showing the increased
Entitlement Shares and (to the extent applicable) the revised Capital Cost Payment
Percentages, Debt Service Percentages and Debt Service Shares of the nondefaulting
Participants as a result of such allocation, (C) direct each of the nondefaulting
Participants to make an election pursuant to subparagraph (2)below, and(D) set forth the
date by which each of the nondefaulting Participants must notify UAMPS of its election
pursuant to subparagraph (2) below. Such mandatory allocation of the defaulting
Participant's Entitlement Share and the increased Entitlement Shares and the revised
Capital Cost Payment Percentages, Debt Service Percentages and Debt Service Shares of
the nondefaulting Participants as a result of such allocation (as shown on the revised
SCHEDULE I prepared by UAMPS) shall remain in effect until the completion of the
procedures provided for in this paragraph (A). During such period, each of the
nondefaulting Participants shall have all of the rights, benefits, obligations and
responsibilities associated with its increased Entitlement Share and its revised Capital
Cost Payment Percentage, Debt Service Percentage and Debt Service Share as a result of
such allocation.
(2) Within sixty days after the allocation of the defaulting Participant's
Entitlement Share provided for in subparagraph (1) above, each of the nondefaulting
Participants shall notify UAMPS in writing of its election of one of the following options:
(A) to retain that portion of the defaulting Participant's Entitlement Share allocated to
such nondefaulting Participant pursuant to subparagraph (1) above and the additional
amount, if any, of the defaulting Participant's Entitlement Share that such nondefaulting
Participant elects to acquire from any other nondefaulting Participant that may elect to
retain less than all of the defaulting Participant's Entitlement Share allocated to it
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pursuant to subparagraph (1) above; or(B) to retain none or less than all of the defaulting
Participant's Entitlement Share allocated to the Participant pursuant to subparagraph (1)
above. Any Participant that shall have elected to retain all of that portion of the
defaulting Participant's Entitlement Share allocated to it pursuant to subparagraph (1)
above shall be deemed to have fully satisfied its obligations to UAMPS under this Section
23 and shall not thereafter be required to accept any additional allocation of the defaulting
Participant's Entitlement Share.
(3) Within thirty days after its receipt of the elections of all nondefaulting
Participants pursuant to subparagraph (2) above, DAMPS shall determine whether the
nondefaulting Participants have elected to retain all of the Entitlement Share of the
defaulting Participants pursuant to subparagraph (2). In the event that any of the
Participants shall have elected to retain less than all of its allocation of the defaulting
Participant's Entitlement Share, UAMPS shall proportionally reallocate the remaining
amount of the defaulting Participant's Entitlement Share among those nondefaulting
Participants that have requested additional amounts of the defaulting Participant's
Entitlement Share pursuant to clause (A) of subparagraph (2) above. To the extent
necessary to provide for a complete reallocation of the defaulting Participant's
Entitlement Share, UAMPS shall next reallocate any remaining portion of the defaulting
Participant's Entitlement Share among those Participants that did not elect to retain all of
their initial allocations of such Entitlement Share pursuant to subparagraph (2) above,
with there being reallocated to each such Participant the unallocated portion of the
defaulting Participant's Entitlement Share that is equal to the quotient that is obtained by
dividing the product of the unallocated portion of the defaulting Participant's Entitlement
Share and the nondefaulting Participant's Entitlement Share by the sum of the
Entitlement Shares of all of such nondefaulting Participants. In no event shall any
reallocation of a defaulting Participant's Entitlement Share, or the total of all mandatory
reallocations of Entitlement Shares in the event of two or more Participant defaults under
the Power Sales Contracts, cause any nondefaulting Participant's Entitlement Share to
increase by more than 25% over its Entitlement Share as set forth on SCHEDULE I on the
Full Subscription Date, as such Entitlement Share may have previously been (x) adjusted
pursuant to Section 4(a) or (y) increased upon the Participants' election pursuant to
Section 18(b)(3). In the event that this limitation affects any of the nondefaulting
Participants to which a mandatory reallocation is being made, UAMPS shall
proportionally reduce the mandatory reallocations to all other nondefaulting Participants.
(4) UAMPS shall, at the time of each allocation or reallocation of a defaulting
Participant's Entitlement Share pursuant to this paragraph (b), proportionally allocate or
reallocate, as the case may be, the Capital Cost Payment Percentage and the Debt Service
Percentage of the defaulting Participant to the nondefaulting Participants which receive
an allocation or reallocation of the defaulting Participant's Entitlement Share. The
Capital Cost Payment Percentage and the Debt Service Percentage of the defaulting
Participant shall be allocated to each of such nondefaulting Participants in respective
amounts equal to the quotient that is obtained by dividing the product of the defaulting
Participant's Capital Cost Payment Percentage or Debt Service Percentage, as the case
may be, and the nondefaulting Participant's Entitlement Share by the sum of the
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Entitlement Shares of all of the nondefaulting Participants to which such allocation or
reallocation is being made, with the Capital Cost Payment Percentage, Debt Service
Percentage and all Entitlement Shares being expressed as decimals for purposes of such.
computation. The standards set forth in Section 6(b) shall apply to the foregoing
computations.
(5) UAMPS shall deliver, promptly after making the determinations and
reallocations required by this paragraph (b), a notice to the nondefaulting Participants
which notice shall (A) set forth the reallocation of the defaulting Participant's Entitlement
Share made by UAMPS pursuant to subparagraph (3) above, and the effective date of
such reallocation, (B) set forth the amount, if any, of the Entitlement Share of the
defaulting Participant that has been mandatorily reallocated to nondefaulting Participants
that did not elect to retain or acquire the same, and (C) include a revised SCHEDULE I
showing the revised Entitlement Shares, Capital Cost Payment Percentages, Debt Service
Percentages and Debt Service Shares, respectively, of the nondefaulting Participants as a
result of the reallocation provided for under subparagraph (3) above. The Entitlement
Shares, Capital Cost Payment Percentages, Debt Service Percentages and Debt Service
Shares shown on such revised SCHEDULE I shall thereafter be the Entitlement Shares,
Capital Cost Payment Percentages, Debt Service Percentages and Debt Service Shares of
the nondefaulting Participants; provided, however, that if less than all of the defaulting
Participant's Entitlement Share shall have been optionally retained or accepted pursuant
to this paragraph (b), such revised Entitlement Shares, Capital Cost Payment Percentages,
Debt Service Percentages and Debt Service Shares shall remain in effect until the
completion of the procedures provided for in this Section 23.
(6) Any portion of the Entitlement Share of a defaulting Participant
transferred pursuant to this paragraph (b) to a nondefaulting Participant shall become a
part of and shall be added to the Entitlement Share of each transferee Participant, and
from and after the date of such transfer the transferee Participant shall be obligated to pay
for its increased Entitlement Share pursuant to the terms and provisions of this Contract.
The defaulting Participant shall remain liable to UAMPS and the other Participants for
costs incurred and damages suffered by them in connection with the actions taken with
respect to the defaulting Participant's Entitlement Share provided for in this Section 23.
(c) In the event that any portion of a defaulting Participant's Entitlement Share shall
have been mandatorily reallocated to nondefaulting Participants pursuant to paragraph (b)(3)
above or in the event that the procedures set forth in paragraph result in the reallocation of less
than all of a defaulting Participant's Entitlement Share, UAMPS shall use Commercially
Reasonable Efforts to sell or dispose of all or any part of the defaulting Participant's Entitlement
Share as follows and in the following order:
(1) UAMPS shall first seek to sell all or any part of the defaulting
Participant's Entitlement Share on terms and conditions comparable to those contained in
the Power Sales Contracts; and
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(2) UAMPS shall then seek to sell all or any part of such portion of the
defaulting Participant's Entitlement Share or the Electric Energy associated therewith on
the best obtainable terms and conditions.
Subject to the provisions of the Financing Documents, no sale, transfer or other disposition of all
or a part of an Entitlement Share shall be made pursuant to this paragraph (c) if such sale,
transfer or disposition will adversely affect the exclusion from gross income for federal income
tax purposes of the interest on any of the Bonds issued as tax exempt obligations.
(d) In the event that UAMPS is unable to sell or dispose of any portion of the defaulting
Participant's Entitlement Share pursuant to paragraph (c) above within 180 days of commencing
Commercially Reasonable Efforts so to do and the Project Management Committee and the
Board determine that the inability to sell or dispose of the defaulting Participant's Entitlement
Share will materially and adversely affect the ability of the nondefaulting Participants to meet
their obligations under the Power Sales Contracts or the ability of UAMPS to meet its obligations
under the Project Agreements and the Financing Documents, then UAMPS shall take such
actions as it deems necessary to ensure the continuing sufficiency of funds and revenues
necessary to meet its obligations under the Project Agreements and the Financing Documents.
Such actions may include (1) a sale of all or any portion of the defaulting Participant's
Entitlement Share or the Electric Energy associated therewith or(2) a sale of all or any portion of
the Project that is allocable to the defaulting Participant's Entitlement Share, in either case on
such terms and conditions as UAMPS deems to be in the best interest of UAMPS and the
nondefaulting Participants.
(e) In connection with any action taken by it pursuant to this Section 23, UAMPS shall
obtain an opinion of nationally recognized bond counsel addressing whether such action has an
adverse effect on the exclusion of interest on the Bonds from gross income for federal income tax
purposes and the actions required to remediate such adverse effect pursuant to the provisions of
the Internal Revenue Code and U.S. Treasury Regulations thereunder. UAMPS shall exercise
Commercially Reasonable Efforts to implement such remedial actions. The Participant
acknowledges that such remedial actions may require UAMPS to pay additional interest on the
Bonds or penalties and that the Debt Service Costs payable by the Participant pursuant to Section
8 will increase correspondingly. The Participant agrees to pay its Debt Service Share of such
increased Debt Service Costs pursuant to the provisions of this Contract.
(f) In connection with any action taken by it pursuant to this Section 23, UAMPS shall
take into account the proceeds realized or the revenues to be received from such sale or
disposition and shall, to the extent necessary, make adjustments to the Entitlement Share, Capital
Cost Payment Percentage, Debt Service Percentage and Debt Service Share of each of the
nondefaulting Participants to reflect such sale or disposition and to ensure the receipt of revenues
sufficient to enable UAMPS to meet its obligations under the Project Agreements and the
Financing Documents. The Participant acknowledges that such adjustments may, under certain
circumstances, result in a change in the Participant's share of Operation and Maintenance Costs
and Debt Service Costs without a corresponding change in the Participant's Entitlement Share.
Upon the completion of the procedures provided for in this Section 23, UAMPS shall prepare
and send to each of the Participants a final revised SCHEDULE I, setting forth the Entitlement
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Shares, the Capital Cost Payment Percentages, Debt Service Percentages and Debt Service
Shares, respectively, of the nondefaulting Participants reflecting the procedures and actions taken
pursuant to this Section 23.
Section 24. Other Default by Participant. In the event of a failure of the Participant to
observe, keep and perform any of the covenants, agreements or obligations on its part contained
in this Contract, DAMPS may, in addition to its other rights hereunder, bring any suit, action, or
proceeding in law or in equity, including mandamus, injunction and action for specific
performance, as may be necessary or appropriate to enforce any covenant, agreement or
obligation of this Contract against the Participant.
Section 25. Default by DAMPS; Dispute Resolution. (a) In the event of any default by
DAMPS under any covenant, agreement or obligation of this Contract, the Participant's sole
remedy for such default shall be limited to mandamus, injunction, action for specific
performance or any other available equitable remedy as may be necessary or appropriate and in
no event shall the Participant withhold or offset any payment owed to DAMPS hereunder.
(b) Prior to and as a condition to the filing of any action with respect to this Contract
under paragraph (a) above, the Participant shall first submit the dispute or matter in question to
the Project Management Committee for mediation by giving notice in writing to DAMPS and the
Chair of the Project Management Committee describing the dispute or matter and the issue or
issues to be resolved. The Participant agrees to participate fully and in good faith in all
mediation proceedings of the Project Management Committee. In the event that the Project
Management Committee is unable to resolve or mediate such dispute or matter within 120 days
after UAMPS has received written notice of the dispute, the Participant shall have the right to
initiate such proceedings as it may deem necessary pursuant to paragraph(a).
Section 26. Abandonment of Remedy. In case any proceeding taken on account of any
default shall have been discontinued or abandoned for any reason, the parties to such proceedings
shall be restored to their former positions and rights hereunder, respectively, and all rights,
remedies, powers and duties of UAMPS and the Participant shall continue as though no such
proceedings had been taken.
Section 27. Waiver of Default. Any waiver at any time by either UAMPS or the
Participant of its rights with respect to any default of the other party hereto, or with respect to any
other matter arising in connection with this Contract, shall not be a waiver with respect to any
subsequent default, right or matter.
Section 28. Relationship to and Compliance with Other Instruments. (a) It is
recognized by the parties hereto that DAMPS, in undertaking, or causing to be undertaken, the
planning, financing, construction, acquisition, operation and maintenance of the Project, must
comply with the requirements of the Financing Documents, the Project Agreements and all
Permits and Approvals necessary therefor, and it is therefore agreed that this Contract is made
subject to the terms and provisions of the Financing Documents, the Project Agreements and all
such Permits and Approvals.
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(b) UAMPS covenants and agrees that it will use Commercially Reasonable Efforts for
the benefit of the Participant to comply in all material respects with all terms, conditions and
covenants applicable to it contained in the Financing Documents, the Project Agreements and all
Permits and Approvals, and that it will not, without the consent of the Participant, enter into any
amendment or modification of the Financing Documents or the Project Agreements which will
change the Participant's Entitlement Share or which will materially and adversely affect the
rights and obligations of the Participant hereunder.
Section 29. Liability of Parties. UAMPS and the Participant shall assume full
responsibility and liability for the maintenance and operation of their respective properties and
each shall, to the extent permitted by law, indemnify and save harmless the other from all
liability and expense on account of any and all damages, claims, or actions, including injury to or
death of persons arising from any act or accident in connection with the installation, presence,
maintenance and operation of the property and equipment of the indemnifying party and not
caused in whole or in part by the negligence of the other party;provided that any liability which
is incurred by UAMPS through the acquisition, construction, operation and maintenance of the
Project or pursuant to the Project Agreements and not covered, or not covered sufficiently, by
insurance shall be paid solely from the revenues of UAMPS hereunder, and any payments made
by UAMPS to satisfy such liability shall, except to the extent paid from proceeds of Bonds or
Capital Cost Payments, become part of Operation and Maintenance Costs.
Section 30. Assignment of Power Sales Contract. (a) This Contract shall inure to the
benefit of and shall be binding upon the respective successors and assigns of the parties to this
Contract;provided, however, that neither this Contract nor any interest herein shall be transferred
or assigned by either party hereto except as follows:
(1) UAMPS may assign its interests under this Contract or all or any portion
of the amounts payable by the Participant hereunder pursuant to the Financing Documents
as described in paragraph(b)below;
(2) UAMPS may sell, transfer or reallocate all or any portion of the
Participant's Entitlement Share following a default by the Participant and a
discontinuance of service as provided in Section 23;
(3) after such point in time as all Bonds issued under the Financing
Documents have been paid or deemed to have been paid as provided in the Financing
Documents, UAMPS may, upon the approval of the Project Management Committee,
assign this Contract and pledge the amounts payable by the Participant hereunder;
(4) the Participant shall assign the Electric Energy allocable to the
Participant's Entitlement Share to the UAMPS Pool as provided in Section 9(b); and
(5) the Participant may assign or transfer all or any portion of its Entitlement
Share or its interests under this Contract only as provided in Section 18(b)(3).
-42-
(b) The Participant acknowledges and agrees that UAMPS may assign and pledge to the
Trustee designated in the Financing Documents all or any portion of its right, title, and interest in
and to the payments to be made to UAMPS under the provisions of this Contract, as security for
the payment of the principal (including sinking fund installments) of, premium, if any, an
interest on Bond Anticipation Notes and Bonds and, upon such assignment and pledge, DAMPS
may grant to the Trustee any rights and remedies herein provided to DAMPS, and thereupon any
reference herein to DAMPS shall be deemed, with the necessary changes in detail, to include the
Trustee which on behalf of and together with the owners from time to time of the Bonds shall be
third party beneficiaries of the covenants and agreements of the Participant herein contained.
(c) The Participant acknowledges and agrees that it may not pledge, assign, encumber
or transfer its interests under this Contract to secure any financing undertaken by or for it to fund
any Capital Cost Payment to DAMPS.
Section 31. Termination or Amendment of Power Sales Contract. (a) This Contract
shall not be terminated by either party under any circumstances, whether based upon the default
of the other party under this Contract or any other instrument or otherwise except as specifically
provided in this Contract. This Contract shall terminate on a date established by the Project
Management Committee upon its determination (1) upon any early termination of the
Development Agreement pursuant to Section 16.1 thereof, (2) not less than 30 days prior to the
scheduled date for the first issuance of Bonds or Bond Anticipation Notes upon a written request
of the Participant stating that arrangements for transmission of the Electric Power and Electric
Energy attributable to the Participant's Entitlement Share from the Point of Delivery to its
System Point of Receipt are not available, (3) if no Bond Anticipation Notes or Bonds are issued
by (June 1, 20081 or (4) upon early termination of the Common Facilities Agreement, the
Construction, Lease, Use and Service Agreement and the Ownership Agreement in accordance
with their respective terms; provided, however, that any such termination date of this Contract
shall not occur until the later of (x) the date on which DAMPS shall have made a final
accounting for, and shall have recovered from the Participants, all Costs of the Project previously
incurred and (y) the date on which the principal of and interest on all Bond Anticipation Notes
and Bonds have been fully paid or provision for such payment has been made.
(b) This Contract shall not be amended, modified, or otherwise altered in any manner
that will adversely affect the security for the Bonds afforded by the provisions of this Contract.
So long as any of the Bonds are outstanding or until adequate provisions for the payment thereof
have been made in accordance with the provisions of the Financing Documents, this Contract
shall not be amended, modified, or otherwise altered in any manner which will reduce the
payments pledged as security for the Bonds or extend the time of such payments provided herein
or which will in any manner impair or adversely affect the rights of the owners from time to time
of the Bonds. For the avoidance of doubt, any actions taken by DAMPS or the Participant under
or pursuant to this Contract that are required or permitted by this Contract shall not be deemed to
constitute an amendment, modification or alteration of this Contract within the meaning of this
paragraph.
(c) No Power Sales Contract entered into between DAMPS and another Participant may
be amended so as to provide terms and conditions that are substantially and materially different
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from those contained in this Contract except upon written notice to and written consent or waiver
by each of the other Participants, and upon similar amendment being made to the Power Sales
Contracts of any other Participants requesting such amendment after receipt by such Participants
of notice of such amendment.
(d) In connection with any revision or amendment of the billing procedures provided for
in Section 8 or of any of the Exhibits attached hereto, UAMPS shall promptly provide a copy of
the revision or amendment to the Participant.
Section 32. Notices and Computation of Time. (a) All notices, demands and other
communications made pursuant to this Contract (each, a "Notice") may be sent by facsimile,
electronic mail, other mutually acceptable electronic means, a nationally recognized overnight
courier service, first class mail or hand delivery. Notice shall be given when received by the
addressee, unless received on a day that is not a Business Day or received after 5:00 p.m.
(receiving party's local time) on a Business Day, in which case Notice shall be deemed to have
been received on the next following Business Day. In the absence of proof of the actual receipt
date, the following presumptions will apply: (i) Notice sent by facsimile or electronic mail shall
be deemed to have been received upon the sending party's receipt of electronic confirmation of
successful transmission; (ii) Notice sent by overnight mail or courier shall be deemed to have
been received on the next Business Day after it was sent or such earlier time as is confirmed by
the receiving party; and(iii) Notice sent by first class mail shall be deemed to have been received
five Business Days after mailing.
(b) All Notices shall be sent by DAMPS to the business address, facsimile address or e-
mail address of the Participant's Representative. All Notices shall be sent by the Participant to
the business address, facsimile address or designated e-mail address of DAMPS. Either party
may change its Notice address(es)by Notice to the other party.
Section 33. Relationship of VAMPS and the Participant; Relationship among
Participants. (a) This Contract is not intended to create, nor shall it be deemed to create, any
relationship between DAMPS and the Participant other than that of independent parties
contracting with one another for the purpose of effectuating the provisions of this Contract.
(b) The covenants, obligations, liabilities, rights and benefits of the Participant under
this Contract are individual and not joint and several, or collective, with those of any other
Participant. Other than giving effect to the joint and cooperative action of UAMPS on behalf of
the Participants, the Power Sales Contracts shall not be construed to create an association, joint
venture, trust or partnership, or to impose a trust or partnership covenant, obligation or liability
on, between or among the Participant and any one or more of the Participants. No Participant
shall be or be deemed to be under the control of, nor shall any Participant control or be deemed
to control, any or all of the other Participants or the Participants as a group. No Participant shall
be bound by the actions of any other Participant, nor shall any Participant be deemed to be the
agent of any other Participant or have the right to bind any other Participant.
Section 34. No Recourse Against Officers, Etc. of UAMPS or Participant. No member
of the governing body, nor any officer or employee of UAMPS or the Participant shall be
-44-
individually or personally liable for any payment under this Contract or be subject to any
personal liability or accountability by reason of the execution of this Contract; provided,
however, that this Section shall not relieve any officer or employee of UAMPS or the Participant
from the performance of any official duty imposed by law.
Section 35. Applicable Law; Construction. This Contract is made under and shall be
governed by the law of the State of Utah; provided, however, that if the Participant is organized
or created pursuant to the laws of another state, then the authority of the Participant to execute
and perform its obligations under this Contract shall be determined under the laws of such state.
Section 36. Severability; No Merger. (a) If any section, paragraph, clause or provision
of this Contract shall be finally adjudicated by a court of competent jurisdiction to be invalid, the
remainder of this Contract shall remain in full force and effect as though such section, paragraph,
clause or provision or any part thereof so adjudicated to be invalid had not been included herein.
(b) This Contract constitutes the entire and complete agreement of UAMPS and the
Participant in respect of the Project and shall not be nor shall it be deemed to be modified,
amended or superseded by any other agreement or contract between UAMPS and the Participant
in respect of any other project or subject.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed by
their proper officers respectively, being thereunto duly authorized, and their respective corporate
seals to be hereto affixed, as of the day, month and year first above written.
[Signature page follows.]
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TRUCKEE DONNER PUBLIC UTILITY DISTRICT
By:
President
[SEAL]
ATTEST AND COUNTERSIGN
By:
Clerk
Date of Execution and
Delivery:
Approved as to proper form and
compliance with applicable law:
By:
Attorney for Participant
UTAH ASSOCIATED MUNICIPAL POWER
SYSTEMS
By:
Chairman
[SEAL]
ATTEST AND COUNTERSIGN
By:
Secretary
Date of Execution and
Delivery:
Approved as to proper form and
compliance with applicable law:
By:
Attorney for DAMPS
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SCHEDULE I
SCHEDULE OF PARTICIPANTS,ENTITLEMENT SHARES,
CAPITAL COST PAYMENT PERCENTAGES,DEBT SERVICE PERCENTAGES
AND DEBT SERVICE SHARES
PRELIMINARY AND SUBJECT TO ADJUSTMENT AS PROVIDED
IN THE POWER SALES CONTRACT
CAPITAL COST DEBT
ENTITLEMENT PAYMENT SERVICE DEBT SERVICE
PARTICIPANT KW SHARE PERCENTAGE' PERCENTAGE' SHARE}
Beaver 2,000 0.4444%
Blanding 3,000 0.6667%
Boulder 20,000 4.4444%
Bountiful 15,000 3.3333%
Eagle Mountain 10,000 2.2222%
Enterprise 300 0.0667%
Ephraim 3,000 0.6667%
Fairview 500 0.1111%
Fallon 25,000 5.5556%
Heber 6,000 1.3333%
Hildale 3,000 0.6667%
Hurricane 16,000 3.5556%
Hyrum 5,000 1.1111%
IDEA* 38,400 8.5333%
Idaho Falls 25,000 5.5556%
Kaysville 6,000 1.3333%
Lehi 30,000 6.6667%
Lincoln 15,000 3.3333%
Logan 20,000 4.4444%
Monroe 500 0.1111%
Mt .Pleasant 400 0.0889%
Murray 26,000 5.7778%
Oak City 400 0.0889%
Overton 25,000 5.5556%
Paragonah 200 0.0444%
Parowan 1,000 0.2222%
Payson 15,000 3.3333%
Price 5,000 1.1111%
Santa Clara 3,700 0.8222%
SI-1
CAPITAL COST DEBT
ENTITLEMENT PAYMENT SERVICE DEBT SERVICE
PARTICIPANT KW SHARE PERCENTAGE} PERCENTAGE' SHARE'
Spring City 500 0.1111%
Springville 25,000 5.5556%
Strawberry 7,000 1.5556%
Truckee-Donner 24,100 5.3556%
Valley Electric 50,000 11.1111%
Washington 15,000 3.3333%
Weber Basin 8,000 1.7778%
TOTAL 450,000 100.0000%
t Capital Cost Payment Percentage, Debt Service Percentage and Debt Service Shares will be calculated by UAMPS
and this Schedule I will be completed as provided in Section 6(e) of the Power Sales Contract. From the Effective
Date to the date a Capital Cost Payment is made by the Participant, the Participant's Capital Cost Payment
Percentage is 0.0000(zero)and its Debt Service Percentage and Debt Service Share are each equal to its Entitlement
Share.
* The expected participating members of IDEA include Burley,Lower Valley,Raft River,Rupert and United,and any
other distribution utility that elects to succeed to the Entitlement Shares of the expected participating members.
SI-2
EXHIBIT I
DESCRIPTION OF THE INITIAL FACILITIES
The Initial Facilities of the Project consist of the acquisition and construction of, and the
undivided ownership interest of DAMPS in, the following properties, facilities, machinery,
equipment, rights and interests:
1. Real Property. The real property and interests in real property at the IGS site
necessary for the construction and operation of Unit 3 will be made available and/or conveyed to
the Owners pursuant to the Common Facilities Agreement and the Construction Lease, Use and
Services Agreement.
2. Joint Common Facilities. Pursuant to the Common Facilities Agreement, each of
the Owners will acquire an undivided ownership interest in certain of the existing common
facilities located at IGS, as such facilities will be improved and expanded in connection with the
construction of Unit 3 ("Joint Common Facilities"). The ownership interests of the Owners in
the Joint Common Facilities will total 33.3% and IPA will own the remaining 66.7%. The Joint
Common Facilities include the existing facilities for: fuel transportation, handling and analysis;
limestone handling and preparation; water supply and treatment; ash handling and disposal;
,
sludge handling, conditioning and disposal; and certain buildings, equipment and miscellaneous
items. The improvements and additions to the existing common facilities that will be and rtaken
n and
as a part of Unit 3 include the fuel transportation and handling, water supply, ash handling
control room facilities described below.
3. Generating Unit. One super-critical, pulverized coal fueled, steam generator using a
single boiler/single steam turbine configuration producing 900 MW (net) under nominal
temperature conditions. The generating unit will be designed to accommodate different fuel
sources and mixtures and for operation as a base load plant at maximum continuous rating, with
load following, low load and shift cycling.
Principal components of the boiler will include a wall furnace, superheater, reheater,
economizer, convection pass, pulverizers, low NOx burners, fans, air preheater, flues and ducts,
steam soot blowers, piping and valves. The coal burner, igniter configurations and combustion
control systems will be designed to provide high combustion efficiency and to control production
of NOX in the flue gas. The steam turbine will be a single, 3,600 rpm, extraction condensing,
reheat type using a nominal 3,700 psia, 1,050 °F throttle steam, 1,100 °F reheat steam and eight
stages of steam extraction for feedwater heating.
The net plant output of 900 MW and the base net plant heat rate will be guaranteed by the
EPC Contractor, which will be required to conduct an ASME PTC-based plant performance test
to demonstrate satisfaction of these guarantees while in compliance with applicable emissions
limits.
I-1
Auxiliary facilities and equipment for the generating unit include main and reheat steam
systems, condensate and feedwater systems, cooling towers, a circulating water system, steam
condenser, an auxiliary closed cooling water system, electrical interconnection facilities to the
existing IGS switchyard, emergency and backup power systems, metering, instrumentation and
control systems, and all other systems, facilities and equipment necessary for the operation of
Unit 3.
4. Water Supply and Treatment Facilities. Water supply will be provided for Unit 3
under a long-term (50-year, with two 20-year renewals) water lease from IPA pursuant to the
Common Facilities Agreement. Unit 3 will include all facilities necessary for interconnection to
the existing water treatment facility and additions to the existing pumping and demineralization
systems.
5. Emission and Environmental Controls. The emission and environmental controls
for Unit 3 include a selective catalytic reduction (SCR) system for control of NOX emissions, a
baghouse for control of particulate (PM10) and mercury emissions, and a wet flue gas
desulphurization system for control of SO2 emissions. The emissions control systems will be
designed to meet the specific emission limits applicable to Unit 3 and to accommodate the future
addition of an activated carbon injection system for enhanced mercury capture.
6. Fuel Transportation and Handling Facilities. Fuel transportation facilities include
a new 91-car unit train. Fuel handling facilities will modify and expand the existing Unit 1 and 2
fuel delivery, storage and reclaim systems for unit train and truck delivered fuel sufficient for the
operation of Unit 3.
7. Limestone Handling Facilities. Limestone handling facilities to modify and expand
the existing Unit 1 and 2 limestone handling system, including one additional storage and
distribution process stream.
8. Ash Handling Facilities. Fly ash and bottom ash removal systems will provide for
long-term disposal of ash at the existing on-site ash fields. The bottom ash handling system for
Unit 3 will collect ash from the steam generator, the economizer hopper and the pulverizers for
disposal into the existing Unit 1 and 2 ash ponds. The fly ash handling system will collect ash
from the baghouse for pneumatic transport to storage.
9. Wastewater Facilities. Unit 3 will include collection, pretreatment and related
systems and equipment to connect to the existing wastewater treatment facilities at IGS.
The foregoing description is preliminary, broad in scope and general in terms. The
design of Unit 3 will be finalized and optimized by the Owners and the contractor under the
principal Construction Contract. DAMPS and the Participant acknowledge and agree that this
description will be revised by UAMPS upon the approval of the Project Management Committee
to reflect the actual components comprising the Initial Facilities upon the Commercial
Operation Date, and will be updated thereafter as necessary. No revisions to this description
shall affect the rights and obligations of UAMPS and the Participant under the Power Sales
Contract.
I-2
Exhibit II
.
DistrictPublic Utility
System Description
Truckee Donner Public Utility District
Stephen Hollabaugh
Calendar Year 2006
Truckee Donner Public Utility District (Truckee Donner) is a public utility district of the state of
California engaged in the transmission, distribution, sale and delivery of electric power and energy.
The District is a transmission-dependent utility located high on the Eastern slope of the Sierra
Nevada, within Sierra Pacific's control area, and is not interconnected with any other utility. During
the Fiscal Year ended December 31, 2005, the Electric System served 12,684 customers, comprised
of 10,905 residential customers, and 1779 commercial and other customers. During such period, the
Electric System supplied 136,338,872 kWh of energy and had a peak demand of 31,179 kW.
Truckee Donner is a network transmission service customer under the currently effective joint
Sierra/NPC GATT. Truckee uses this network service to import into and transport across Sierra's grid
all of the power necessary to serve Truckee's load.
Truckee Donner electric service territory is comprised of approximately 44 square miles in
eastern Nevada County and approximately 1.5 square miles in adjacent Placer County. The Electric
System serves the vast majority of the service area of the District and has more than 202 miles of
12.47 W distribution lines, including about 67 miles of underground distribution cables. The number
of employees in the electric department is thirty seven (37). (Includes sum of shared employees' time
in other district departments to determine equivalent full-time employees.)
NUMBER OF ELECTRICAL CUSTOMERS
AND TYPE OF LOAD SERVED
Truckee Donner Public Utility District
As of September 2006
TYPE OF CUSTOMER NUMBER OF CUSTOMERS
Residential 11,238
60
Commercial 1,0
Industrial 0
A ricultural and Pum in 0
Military0
Other 31
TOTAL 12,929
II-1
NNER
TRUCKEE DO
Public Utility District
Truckee Donner Public Utility District
Calendar Year 2005
CUSTOMER SALES BY CLASS
Total sales to our customers was 136.338,872 kWh during the calendar year 2005.
Revenues from energy sales to your customers was $17,541,092 during the calendar year
2005.
KWH SALES REVENUES $
Residential 70,072,056 $9,171,599
Commercial 66,018,260 $8,369,493
Industrial 0 $0
Agricultural 0 $0
Other 248,556 $0
TOTAL 136,338,872 $17,541,092
GENERATION
PRODUCED FOR SYSTEM LOAD
GENERATING UNIT PRODUCTION
#1 #2 #3 #4
kW kWh kW kWh kW kWh kW kWh
Jul
August
September
October
November
December
anuary
February
March
April
May
June
TOTAL
SYSTEM PEAK INCLUDING LOAD
COVERED BY OWN GENERATION
kW kW
July January
August February
September March
October Aril
November May
December June
II-3
Public Utility District
FIVE LARGEST CUSTOMERS BY LOAD
Calendar Year 2005
12 Months
Customer Type of Business KWH Sold Electrical Billings
Truckee Donner PUD Water Department* Water Utility 11,070,472 $1,375,255
Tahoe Truckee Sanitation Agency* Sewer Plant 6,512,309 $688,153
Tahoe Forest Hospital* Hospital 4,244,638 $472,640
Truckee Tahoe Unified School District* Education 2,862,168 $358,062
Safeway Stores Inc Grocery Store 2,122,200 $218,748
* Denotes that this customer has multiple meters and service locations and the KWH
Sold and the Electrical Billings are a sum of these meter locations.
Il - 4
EXHIBIT III
CERTIFICATE OF PARTICIPANT
STATE OF CALIFORNIA
COUNTY OF NEVADA
The undersigned hereby certify that they are the President and Clerk of Truckee Donner
Public Utility District (the "Participant"), a member of Utah Associated Municipal Power
Systems ("UAMPS"), and that as such they are authorized to execute this Certificate on behalf of
the Participant and hereby certify as follows:
1. This Certificate has been executed in connection with the Intermountain Unit 3
Project Power Sales Contract, dated as of December 1, 2006 (the "Power Sales Contract"),
between the Participant and DAMPS.
2. (a) The Participant is a public utility district, duly created and validly existing
under the laws of the State of California, and is governed by a Board of Directors (the
"Governing Body") composed of five members.
3. Attached hereto as Exhibit A is a true, complete and correct copy of the Power Sales
Contract. Attached hereto as Exhibit B is a true and correct copy of excerpts from the minutes of
a regular public meeting of the Governing Body held on November 15, 2006, including a
resolution adopted at such meeting authorizing the execution and delivery of the Power Sales
Contract and related matters (the "Contract Resolution"). The Contract Resolution is in full
force and effect and has not been amended, modified, repealed or supplemented.
4. The names of the President, the members of the Governing Body, the Clerk and
Attorney, together with the dates of commencement and expiration of the term of office of
the[Executive Officer] and the members of the Governing Body, are as follows:
III-1
NAME OFFICE DATE OF COMMENCEMENT DATE OF EXPIRATION
OR CURRENT TERM OF CURRENT TERM
Joe Aguera Director December 3, 2004 December 5, 2008
J. Ron Hemig Director December 1, 2006 December 3, 2010
Patricia Sutton Director December 1, 2006 December 3, 2010
Tim F. Taylor Director December 3, 2004 December 5, 2008
William L Thomason Director December 3, 2004 December 5, 2008
5. In accordance with all open meeting requirements of state law applicable to the
Participant, the [Secretary/Clerk/Recorder] of the Participant gave public notice of the meeting of
the Governing Body at which the Contract Resolution was adopted, as well as any required
notice of the Governing Body's annual meeting schedule.
6. (a) No referendum petition was filed with the Participant or any of its officers
seeking to refer the Contract Resolution to the electors of the Participant in accordance with the
provisions of state law; and (b) no litigation has been instituted, is pending or has been
threatened to require a referendum election on the Contract Resolution.
7. The Participant now owns and operates a local electric utility system (the "System")
and furnishes electric energy to all persons desiring such service within its service area. The
electric energy to be provided by its Entitlement Share in the Project (each as defined in the
Power Sales Contract) will be used by the Participant to provide electric service within its service
area. There is attached hereto as Exhibit C a true, correct and complete copy of the rates, fees
and charges now in effect for the electric services provided by the System.
8. By resolutions heretofore duly adopted by the Governing Body, the Participant has
duly authorized, executed and delivered the Utah Associated Municipal Power Systems
Amended and Restated Agreement for Joint and Cooperative Action dated as of February 17,
1999 and all amendments thereof and supplements thereto (the "UAMPS Joint Action
Agreement") and that certain Power Pooling Agreement (the "Pooling Agreement") between the
Participant and DAMPS relating to the power pool administered by DAMPS for the benefit of its
members (the "DAMPS Power Pool") and the DAMPS Joint Action Agreement and the Pooling
Agreement constitute the legal, valid and binding agreements of the Participant.
9. «Rep» has been duly appointed by the Governing Body as the representative of the
Participant to UAMPS.
10. Prior to the adoption of the Contract Resolution and the execution of the Power
Sales Contract, the Governing Body determined the needs of the Participant for electric power
and energy based on engineering studies and reports and considered, among other things, the
following: (a) the economies and efficiencies of scale to be achieved through the acquisition and
construction by UAMPS of the Project for the benefit of the Participant and the other members of
III-2
DAMPS participating in the Project, (b) the need of the Participant for the electric energy
represented by its Entitlement Share in the Project to meet its current and reasonably expected
power supply requirements and to provide reserve capacity, (c) the estimated useful life of the
Project, (d) the estimated time necessary for the acquisition and construction of the Project and
the length of time in advance necessary to obtain, acquire or construct an additional or alternative
power supply, (e) the reliability and availability of the Participant's existing power supply
sources, the Project and alternative power supply sources and the cost or estimated cost thereof,
and (f) all such other matters as were deemed necessary or appropriate by the Participant as a
basis for and in connection with its authorization and execution of the Power Sales Contract.
11. Except as listed on Exhibit D, the Participant has no outstanding bonds, notes or
other evidences of indebtedness, or agreements to take or pay for power and energy, payable
from any revenues of the System, other than the Power Sales Contract.
12. The payments to be made by the Participant to DAMPS under the Power Sales
Contract will constitute operating expenses of the System and a cost of purchased electric energy.
13. There is no action, suit, proceeding, inquiry or investigation by or before any court,
governmental agency, public board or administrative body pending or, to the best of our
knowledge threatened, against the Participant which (a) challenges, contests or questions the due
and regular adoption of the Contract Resolution or the validity thereof affects or seeks to
prohibit, restrain or enjoin the Participant from complying with the obligations contained in the
Power Sales Contract, including the payment obligations to UAMPS contained therein, (b) in any
way affects or questions the validity or enforceability of the DAMPS Joint Action Agreement or
the Power Sales Contract, nor, to the best of our knowledge, is there any basis therefor, (c)
challenges or affects the corporate existence of the Participant or the titles of its officers to their
respective offices, (d) seeks to prohibit, restrain or enjoin the collection of revenues from the
System to be used to make payments to UAMPS under the Power Sales Contract, or (e) involves
any of the property or assets of the Participant which involves the possibility of any judgment or
liability, not fully covered by insurance, which may result in any material adverse change in the
business, properties, assets or in the condition,financial or otherwise, of the System.
14. (a) The payments to be made to DAMPS by the Participant pursuant to the
Power Sales Contract will not be, directly or indirectly (i) secured by any interest in(A) property
used or to be used in a trade or business carried on by any person other than a state or local
governmental unit or (B) payments in respect of such property, or (ii) derived from payments
(whether or not by or to the Participant), in respect of property, or borrowed money, used or to be
used in a trade or business carried on by any person other than a state or local governmental unit.
(b) No user of the System will use the System on any basis other than the same basis as
the general public; and no person other than a state or local governmental unit will be a user of
the System as a result of (i) ownership, or (ii) actual or beneficial use pursuant to a lease or a
management or incentive payment contract, or(iii) any other similar arrangement.
15. The information provided by the Participant to UAMPS pursuant to Section 15(b)
and (c) of the Power Sales Contract and attached as EXHIBIT II thereto with respect to the
III-3
Participant and the System is true, correct and complete. The Participant has duly authorized
UAMPS to use such information in connection with the preparation of an official statement of
UAMPS with respect to the bonds to be issued to provide financing for the initial costs of
acquisition and construction of the Project and to provide such information to interested parties.
Dated:
[PARTICIPANT]
By
[Executive Officer]
By
[Clerk/Recorder/Secretary]
[Seal]
III-4
EXHIBIT A
[Attach Copy of Power Sales Contract]
A-1
EXHIBIT B
[Form of Contract Resolution]
RESOLUTION No.2006-_
A RESOLUTION AUTHORIZING AND APPROVING: (1) A POWER
SUPPLY RESOURCE PLAN; (2) THE INTERMOUNTAIN UNIT 3
PROJECT POWER SALES CONTRACT WITH UTAH ASSOCIATED
MUNICIPAL POWER SYSTEMS ("UAMPS"); (3) [THE UTAH
ASSOCIATED MUNICIPAL POWER SYSTEMS AGREEMENT FOR
JOINT AND COOPERATIVE ACTION, THE FIRST AMENDMENT
THERETO AND THE SECOND AMENDMENT THERETO/THE SECOND
AMENDMENT TO THE UAMPS AGREEMENT FOR JOINT AND
COOPERATIVE ACTION];AND(4)RELATED MATTERS.
WHEREAS, (the "Participant") [is/desires to become] a member of
Utah Associated Municipal Power Systems ("UAMPS") pursuant to the provisions of the Utah
Associated Municipal Power Systems Amended and Restated Agreement for Joint and
Cooperative Action, as amended(the "Joint Action Agreement");
WHEREAS, one of the purposes of UAMPS under the Joint Action Agreement is the
acquisition and construction of electric generating, transmission and related facilities in order to
secure reliable, economic sources of electric power and energy for its members;
WHEREAS, UAMPS has proposed to participate as a joint owner in the acquisition and
construction of a coal-fired electric generating facility at the Intermountain Generating Station in
Millard County, Utah, together with related facilities and equipment(the "Project");
WHEREAS, the of the Participant (the "Governing Body") has reviewed the
long-term power supply resource plan (the "Power Supply Resource Plan") of the Participant
which sets forth the needs of the Participant for long-term, reliable, cost-based supplies of
electric power and energy, and has considered, among other things, the following: (a) the
economies and efficiencies of scale to be achieved through the acquisition and construction by
UAMPS of the Project for the benefit of the Participant and the other members of UAMPS
participating in the Project, (b) the need of the Participant for the electric energy represented by
its Entitlement Share in the Project to meet its current and reasonably expected power supply
requirements and to provide reserve capacity, (c) the estimated useful life of the Project, (d) the
estimated time necessary for the acquisition and construction of the Project and the length of time
in advance necessary to obtain, acquire or construct an additional or alternative power supply, (e)
the reliability and availability of the Participant's existing power supply sources, the Project and
alternative power supply sources and the cost or estimated cost thereof, and (f) all such other
B-1
matters as were deemed necessary or appropriate by the Participant as a basis for and in
connection with its authorization and execution of the Power Sales Contract;
WHEREAS, the Governing Body has also reviewed (or caused to be reviewed on its
behalf) certain descriptions and summaries of the Project, the Power Sales Contract and the
Project Agreements (as defined in the Power Sales Contract), and representatives of the
Participant have participated in discussions and conferences with DAMPS and others regarding
the Project and have received from DAMPS all requested information and materials necessary
for the decision of the Governing Body to authorize and approve the Power Sales Contract;
WHEREAS, the Participant acknowledges that the obligation of the Participant to make the
payments provided for in the Power Sales Contract will be a special obligation of the Participant
and an operating expense of the Participant's electric system, payable from the revenues and
other available funds of the electric system, and that the Participant shall be unconditionally
obligated to make the payments required under the Power Sales Contract whether or not
the
Project or any portion thereof is acquired, constructed, completed, operable or operating and
notwithstanding the suspension, interruption, interference, reduction or curtailment of the output
thereof for any reason whatsoever;
WHEREAS, in connection with the Project, it is necessary and desirable for the Participant
to approve, authorize and execute [the Utah Associated Municipal Power Systems Agreement for
Joint and Cooperative Action dated February 17, 1999 (the "Joint Action Agreement"), the First
Amendment thereto dated September 21, 2005 (the "First Amendment") and the Second
Amendment thereto dated as of November 159 2006 (the "Second Amendment")/the Second
Amendment dated as of November 15, 2006 (the "Second Amendment") to the Joint Action
Agreement] to provide for the [Participant to become a Member of UAMPS and for the]
continuation of the existence of DAMPS through the date on which the Project has been removed
from service and all indebtedness of UAMPS relating to the Project has been fully paid or
discharged; and
WHEREAS, the Participant now desires to authorize and approve the Power Supply
Resource Plan, the Power Sales Contract and [Joint Action Agreement, the First Amendment
and] the Second Amendment;
Now, THEREFORE, BE IT RESOLVED by the Governing Body of , as
follows:
Section 1. Approval of Power Supply Resource Plan. The Power Supply Resource
Plan of the Participant attached hereto as Annex A is hereby authorized and approved.
Section 2. Execution and Delivery of the Power Sales Contract; Participant's
Representative. (a) The Power Sales Contract, in substantially the form attached hereto as
Annex B, including an Entitlement Share representing kW of capacity (subject to
adjustment as provided in the Power Sales Contract) is hereby authorized and approved, and the
[Executive Officer] is hereby authorized, empowered and directed to execute and deliver the
Power Sales Contract on behalf of the Participant, and the [Clerk/Recorder/Secretary] is hereby
B-2
authorized, empowered and directed to attest and countersign such execution and to affix the
corporate seal of the Participant to the Power Sales Contract, with such changes to the Power
Sales Contract from the form attached hereto as Exhibit B as shall be necessary to conform to the
Participant's legal status, to complete the form of the Power Sales Contract or to correct any
minor irregularities or ambiguities therein and as are approved by the [Executive Officer], his
execution thereof to constitute conclusive evidence of such approval.
(b) The appointment of as the Participant's Representative to DAMPS and
of and as alternate Representatives is hereby confirmed. Such
Representative (or, in his or her absence, such alternate(s)) is hereby delegated full authority to
act on all matters that may come before the Project Management Committee established by the
Power Sales Contract, and shall be responsible for reporting regularly to the Governing Body
regarding the activities of the Project Management Committee.
Section 3. Approval of [Joint Action Agreement/First Amendment/Second
Amendment]. The [Joint Action Agreement/First Amendment/Second Amendment], in
substantially the form(s) attached hereto as Annex C is hereby authorized and approved, and the
[Executive Officer] is hereby authorized, empowered and directed to execute and deliver the
Second Amendment on behalf of the Participant, and the [Clerk/Recorder/Secretary] is hereby
authorized, empowered and directed to attest and countersign such execution and to affix the
corporate seal of the Participant to the Second Amendment.
Section 4. Miscellaneous; Effective Date. (a) This resolution shall be and remain
irrepealable until the expiration or termination of the Power Sales Contract in accordance with its
terms.
(b) All previous acts and resolutions in conflict with this resolution or any part hereof
are hereby repealed to the extent of such conflict.
(c) In case any provision in this resolution shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
(d) This resolution shall take effect immediately upon its adoption and approval.
B-3
ADOPTED AND APPROVED this _day of 92006.
[PARTICIPANT]
By
ATTEST:
[Secretary/Clerk/Recorder]
[SEAL]
B-4
AxxEx A
[Attach Power Supply Resource Plan]
BA-1
i
Truckee Donner PUD Integrated
Resource Plan
From a Renewable Portfolio Standard Perspective
November 29t"7 2006
District Board meeting
TDPUD Daily Load Shape
40.000
x
,Y.
-
>
35.000
n 30,000 -------------
25,aaa F
20,000 �M1
15,000
- F
e
a
T
_
10,000
5,000
<
-
E
g <
f
U �, w
l V m IrIr m co f- co G7 O (N m Ic:r Ln co 1-- OQ 4} CD
_ _ _ _ _ _ _ _ = W W W W W W W W W W W W W W W
2 2 2 2 2 = 2 2 2 2 = = 2 = 2
Hour of the Day
— —Max --*—Yearly Aveage ■ RPS 15% RPS 25% RPS 20%
Integrated Resource Plan —
2012 Resource Alternatives
• Alternative 1 : RPS goal of 15% emission free
• Alternative 2 : RPS goal of 25% emission free
• Alternative 3 : RPS goal of 20% emission free
• Alternative 4 : Market (similar to current contract)
Alternative 1 : RPS goal of
15 % emission free
• Resources
- Coal : 1 8MW 90% Capacity Factor
- Wind : 4 MW 33% Capacity Factor
- Market/ Natural Gas: 4 MW $7/mmBtu Gas at
8200 Heat Rate ( Btu/kwh ) , 95% Capacity
Factor
- WAPA Allocation ( Hydro) 75% of wet year,
- Stampede (Small Hydro) Historical average
(about 5500 MWh)
Truckee-Donner Energy Load & Resources
450,000
Alternative 1 (RPS 15%)
400,000 -- - - —-
Energy Load (MWh)
- -
350,000
300,000 - -- - --
mm IPP 3
250,000 -
-m -3% Growth'
200,000 - - _ _
o
150,000 - --- - —�—2/o Growth'
100,000 -- -*-No Growth
50,000 - -
—♦—Energy
o History
O N Nt CO CO O N 'fit CO CIO O N CO C)O O CN CO 00 O
O O O O O r- r— N N N N N M CV') cM M CM 'Cr
O O O O O O O O O O O O O O O O O O O O O
N N N N N CN N CN N N N N N N N N N N CN N N
Year 11/15/2006
i
Truckee-Donner Peak Load & Resources
60 — -
Alternative 1 (RIPS 15%)
Capacity MW -- -
40 - - -- - - - -- - - - -- -- -- - -- - -
-�-2% GrowthAIIII
30 --- - - - - -- - - -
1% Growth'
i
20 -- - -
-*-No Growth
i
10 -- - - -
-4-Avg
Monthly
0 Peak
O CN CO 00 O N d' CO 00 O CN CO 00 O N �fi CO 00 O History
O O O O O r- �-- r- r- r- N N N N N M CO CO CO M �
O O O O O O O O O O O O O O O O O O O O O ---
N N N N N CN N CN N N N N N N CN N CN N N N N
Year 11/15/2006
Tru
ckee Donner Forecasted Average Load and Average Resources
30,000
25,000 -- - ---- - - -- --
20,000
. . OOOP
.-- Natural Gas
0 Stampede pede
15,000
- _ -_ WAPA
C Wind j
C
I,
® oaI
10,000 -
Load Frest
5,000
0 !- - - - -
fULU
Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar-
12 12 12 12 12 12 12 12 12 13 13 13
Month
Alternative 1 : RPS goal of
15 % emission free
• Summary:
— Total Cost is $8 ,472 , 970 4,,115 .47 per M 1h
— Renewal Portfolio Standard
• Goal 15% Emission free by 2012
• This mix of resources offers approx. 16.5%
Emission free in 2012 — Goal met
Alternative 2 :
RPS goal of 25 % emission free
is Resources
— Coal : 11 MW 90% Capacity Factor
— Wind : 13 MW 33% Capacity FactorMarket/
Natural Gas: 13 MW $7/mmBtu Gas at 8200
Heat Rate ( Btu/kwh ), 95% Capacity Factor
— WAPA Allocation ( Hydro) 75% of wet year
— Stampede (Small Hydro) Historical average
(about 5500 MWh )
F
f
t
l
1
Truckee-Donner Energy Load & Resources
450,000
400,000 Alternative 2 (RPS 25%0)
- - - - - - - -
Energy Load (MWh)
350,000 -- - - - - - -- - - -- - - - - - -- - -
300,000 - - — - - - -- -- - -- - - - �- - -
mm IPP 3
2501000 -- - -- --- - - --- - - - -- - - -- -- - -
-�-3% Growth]
200,000 — - - - - - — - -- - -- - -- - - --- - - - - j
' o
150,000 - - -- - - - - - —♦—2/o Growth
100,000 - -- - - - - - - - - - - - -
-�-No Growth
50,000
Ener
—�- 9Y
o History
O N � C0 CO O N Cfl CX3 O CV d' Cfl a0 O N 'Ct CO 00 p
O O O O O �- r- r- r- r- N N CN N N m M C7 M M
O O O O O O O O O O O O O O O O O O O O O
CN N CN N N CN N N N N N N N N N N N CN N N N
Year 11/15/2006
Truckee-Donner Peak Load & Resources
60
Alternative 2 (RPS 25%)
Capacity MW
50
IPP 3
40 2% Growthll
1% Growthl,
20
-�No Growth
10
Avg
Monthly
0 Peak
O N CO 00 O N CO 00 CDN � Cfl CO CDN � CD 00O History
O O O O O r N N N N N M M CO M Cn
O O O O O O O O O O O O O O O O O O O O O
N N N N N N N N N N N N N N N N N N N N N
Year 11/15/2006
Truckee Donner Forecasted Average Load and Average Resources
30,000 --
25,000 -- - - - -
20,000
Natural Gas
777
I .rti..r r i
u 0 Sta m ped e
_ WAPA
15,000 - -- - -
0 Wind
® Coal
10,000 -
1 Load Frest �
II I
5,000
Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar-
12 12 12 12 12 12 12 12 12 13 13 13
Month
Alternative 2 :
RPS goal of 25 % emission free
• Summary
— Total Cost is $ 10 ,273, 899 or $55 - 13 per MWh
— Renewal Portfolio Standard
• Goal 25% Emission free by 2012,
• This mix of resources offers approx. 28.9%
Emission free in 2012 — Goal met
Alternative 3 :
RPS goal of 20 % emission free
• Resources
- Coal : 1 5MW 90% Capacity Factor
- Wind : 8 MW 33% Capacity Factor
- Market/ Natural Gas: 8 MW $7/mmBtu Gas at
8200 Heat Rate ( Btu/kwh ) , 95% Capacity
Factor
- WAPA Allocation ( Hydro) 75% of wet year
- Stampede (Small Hydro) Historical average
(about 5500 MWh )
Truckee-Donner Energy Load & Resources
450,000
4001000 Alternative 3 (RPS 20%)
Energy Load (MWh)
350,000 -- - - - -- - -- -- - - ---
mm IPP 3
250,000 - --- -
- -3% Growth'
200,000 - -- - - --- --
150,000
0
Growth,,
-- _ - - - - 2� /o ,I
100,000 - - - -- - - -*-No Growth
-
50,000 ----- -
—�Energy
o History
O cV CO 00 O N CO CO O CN CO 00 CO m O
O O O O O r— N N N N N CM M M m CM
O O O O O O O O O O O O O O O O O O O O O
N N N CN N N CN N N N N N N N N CN N N N N N
Year 11/15/2006
Truckee-Donner Peak Load & Resources
60
Alternative 3 (RIPS 20%)
Capacity MW
50 - - _ - -- - --- - - - -
-- �—2% Growth
49
30 -
- - -
1% Growthj
As m
20 _ - - --
No Growth
10 - -- - - - - - -
— Avg
Monthly
o Peak
O N _.r CO 00 O N '� C0 00 O CN CO 00 O CN Cfl 00 O History
O O O O O T r— CN N N N N M c'7 CO CO M
O O O O O O O O O O O O O O O O O O O O O
N N N CN N CN N N N N N N N N N CN N N N CN N
Year 11/15/2006
f
f
Truckee
uc ee Donner
o ner Forecasted
Average Load and
d Average Resources
iI
30,000
II II,
25,000
20,000 .
,f ® Natural Gas
0100
r � Stampede
i
j 15,000
WAPA
0 Wind
Coal
10,0007 - -- - - -
Load Frest
5,000 - - -
0 --
Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar-
12 12 12 12 12 12 12 12 12 13 13 13
Month
Alternative 3 :
RPS goal of 20 % emission free
• Summary:
- Total Cost is $9 , 233 ,491 or $49 . 55 per MWh
- Renewal Portfolio Standard
• Goal 20% Emission free by 2012,
• This mix of resources offers approx. 22 .69%
Emission free in 2012 - Goal met
Alternative 4 :
Market ( similar to current contract)
• Resources
- Market similar to current Contract
- WAPA Allocation ( Hydro) 75% of wet year
- Stampede (Small Hydro) Historical average
(about 5500 MWh )
• Summary
- Total Cost is about $ 13,058 , 056 or $70 . 1 per
MWh
- Very little additional room left for Alternative
resources
Integrated Resource Plan
Summary— Possible Resource Mixes
Alternative 1 : RPS goal of 15% emission free
— Total Cost is $8,472,970 or $45.47 per MWh
— Renewal Portfolio Standard
• Goal 15% Emission free by 2012
• This mix of resources offers approx. 16.5% Emission free in 2012 — Goal met
• Alternative 2: RPS goal of 25% emission free
— Total Cost is $10,273,899 or $55.13 per MWh
— Renewal Portfolio Standard
• Goal 25% by 20127
• This mix of resources offers approx. 28.9% Emission free in 2012 — Goal met
• Alternative 3: RPS goal of 20% emission free
— Total Cost is $9,233,491 or $49.55 per MWh
— Renewal Portfolio Standard
• Goal 20% by 20127
• This mix of resources offers approx. 22.69% Emission free in 2012 — Goal met
• Alternative 4: Market (similar to current contract)
— Total Cost is about $13,058,056 or about $70.1 per MWh
— Very little additional room left for Alternative resources
Comparison Summary
Purchased Power Costs Only
Today Alt 1 Alt 2 Alt 3 Alt 4
2006 RIPS 15% RIPS 25% RIPS 20% Market
Total Cost $8,0597465 $87472,970 $1072737899 $972337491 $137058705E
Cost $49-95/MWh $45.47/MWh $55-13/MWh $49.55/MWh $70.1/MWh
$/MWh
RIPS Goal 15% 25% 20%
Goal Met Yes Yes Yes
Retail -3.4% 4.0% About 15.2%
Inc from Same
Today
ANNEX B
[Attach Power Sales Contract]
BB-1
ANNEx C
SECOND AMENDMENT TO
AMENDED AND RESTATED AGREEMENT
FOR JOINT AND COOPERATIVE ACTION
This Second Amendment to Amended and Restated Agreement for Joint and Cooperative
Action, dated as of November 15, 2006 (this "Second Amendment"), is entered into pursuant to
the Utah Interlocal Cooperation Act, Title 11, Chapter 13, Utah Code Annotated 1953, as
amended, among the parties to the Amended and Restated Agreement for Joint and Cooperative
Action, dated as of February 17, 1999, as amended by a First Amendment to Amended and
Restated Agreement for Joint and Cooperative Action, dated as of September 15, 2005
(collectively, the "Original Agreement").
Section 1. Section 1.2 of the Original Agreement is amended as follows:
1.2 Director means each Member Representative elected or deemed elected as
a Director. Only those Member Representatives who represent Public Agencies may be
elected or deemed elected as a Director. Alternate Member Representatives shall not be
entitled to act as a Director in the event of the absence or unavailability of a Director.
Section 2. The second sentence of Section 1.7 of the Original Agreement is amended
as follows:
Each Member shall appoint one Member Representative and may appoint up to two
alternate Member Representatives.
Section 3. Section 2.1 of the Original Agreement is amended as follows:
2.1 The parties to this Joint Action Agreement hereby ratify and confirm the
creation, pursuant to the Act, of a separate legal entity as a political subdivision of the
State of Utah and as an "energy services interlocal entity" within the meaning of the Act,
known as UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS, to accomplish the purposes
of their joint and/or cooperative action as set forth herein and as provided for in the Act.
Section 4. Section 3.1 of the Original Agreement is amended as follows:
3.1 The term of this Joint Action Agreement shall extend until the latest to
occur of:
(a) 50 years after the effective date of the latest amendment or
supplement to this Joint Action Agreement;
(b) five years after DAMPS has fully paid or otherwise discharged all
of its indebtedness;
BC-1
(c) five years after DAMPS has abandoned, decommissioned, or
conveyed or transferred all of its interest in its facilities and improvements; or
(d) five years after the facilities and improvements of UAMPS are no
longer useful in providing the service, output, product, or other benefit of the
facilities and improvements.
Section 5. Section 11.1 of the Original Agreement is amended as follows:
11.1 The Board shall consist of the Member Representatives participating in
each Project, which Member Representatives shall represent a Public Agency and shall be
elected or deemed elected as Directors as provided in this Section 11. The total number
of Directors of the Board shall not be less than two, nor greater than the total number of
Members and Equity Members. Directors shall be elected or deemed elected by the
Member Representatives participating in each Project as follows:
(a) One Director for every participant in the Project if there are eleven
or fewer participants in the Project; or
(b) If there are more than eleven participants in a Project, each of the
four participants that have the greatest percentage entitlement share to the benefits
of the Project shall automatically have their Member Representative deemed
elected as Directors, and the other participants shall elect seven additional
Directors from among the other Project participants. Directors deemed elected
from the four participants that have the greatest percentage entitlement shares
shall serve only for so long as the participant the represent has one of the four
greatest percentage entitlement shares to the benefits of the Project. Entitlement
share percentages shall be determined annually; and
(c) Election of the Board shall comply with Section 11-13-206(2) of
the Act notwithstanding anything in this Section or this Joint Action Agreement to
the contrary.
Section 6. The first sentence of Section 11.9 of the Original Agreement is amended as
follows:
The Members acknowledge and agree that the protection afforded to the Members under
the Governmental Immunity Act of Utah, Title 63, Chapter 30d, Utah Code Annotated
1953, as amended, shall be extended to UAMPS and its Member Representatives,
officers, and employees pursuant to Section 11-13-222 of the Act.
Section 7. The first sentence of Section 14.1 of the Original Agreement is amended as
follows:
In furtherance of the purposes set forth in this Joint Action Agreement, UAMPS shall
have all powers conferred upon DAMPS as a separate legal entity pursuant to the Act,
BC-2
including the powers granted to interlocal entities and energy services interlocal entities,
as set forth in Section 11-13-204 of the Act, and all powers possessed by the Members
under the laws of the State of Utah with respect to electric utility undertakings, which
powers are hereby delegated to UAMPS as contemplated by the Act.
Section 8. Section 14.1(e) of the Original Agreement is amended as follows:
(e) exercise all powers conferred upon the Members by the Electric Power
Facilities Act, Title 54, Chapter 9, Utah Code Annotated 1953, as amended (or any
similar or successor statute);
Section 9. The last sentence of Section 18.1 of the Original Agreement is amended as
follows:
Such amendment shall become effective upon the execution by the party whose signing
accomplishes approval by at least three-fourths of the Equity Members, the approval by
an authorized attorney as required by applicable law and as set forth in Section 20,
publication of the amendment as may be required by applicable law, and the filing of the
amendment with the keepers of records of each of the Members, as required by Section
11-13-209 of the Act.
Section 10. Following the execution of this Second Amendment, UAMPS shall prepare
and distribute to the Members a revised Appendix A to the Original Agreement.
IN WITNESS WHEREOF, the undersigned Member of UAMPS has caused this Second
Amendment to be executed and attested by its duly authorized officers.
DATED as of this day of 92006.
[MEMBER]
By
[Title]
ATTEST:
[Title]
This Second Amendment as executed is hereby approved as being in proper form and compatible
with the laws of the State of Utah
Authorized Attorney
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APPENDIX A
BC-4
EXHIBIT C
[Attach Copy of Resolution or Ordinance Establishing Rates]
C-1
PublicTRUCKEE DONNER
Act
Ordinance No. 2006 - 04
AMENDING THE ELECTRIC RETAIL RATES
WHEREAS District staff has prepared a budget for District operation for 2006; and
WHEREAS, on January 4, 2006 a public hearing was held to receive comments from the public
concerning the 2006 budget; and
WHEREAS the budget for 2006 recommends that electric retail rates be increased to cover
increases in the costs of providing District services; and
WHEREAS on January 4,2006 a public hearing was held to receive public comments on proposed
rate increases;
NOW, THEREFORE, BE IT ENACTED by the Board of Directors of the Truckee Donner Public
Utility District as follows:
Section 1. Effective 30 days from the date this ordinance is adopted the following monthly electric
rates shall be effective.
Domestic Electric Rates: Permanent Residents
Rate P 10
Customer Charge: per month $6.13
Energy Charge per kilowatt-hour $0.120
Domestic Electric Rates: Non-Permanent Residents
Rate S 10
Customer Charge: per month $6.13
Energy Charge per kilowatt-hour $0.137
Small Commercial Rates
Rate 15
Customer Charge: per month $11.89
Energy Charge per kilowatt-hour $0.144
Medium Commercial Rates
Rate 20
Customer Charge: per month $118.69
Energy Charge per kilowatt-hour $0.0852
Demand Charge per kilowatt of demand $11.67
Ordinance 2006-04 1
Large Commercial Rates
Rate 25
Customer Charge: per month $520.62
Energy Charge per kilowatt-hour $0.0877
Demand Charge per kilowatt of demand $11.15
Section 2. If no protest is made pursuant to Public Utilities Code Section 16078, then this
ordinance shall be effective thirty days after adoption by the board of directors of the District.
Section 3. The Clerk of the District shall immediately cause a copy of this ordinance to be
published in a newspaper of general circulation and posted in three places within the District.
Section 4. The provisions of other Ordinances shall remain if effect to the extent that they do not
conflict with this ordinance.
PASSED AND ADOPTED by the Board of Directors of the Truckee Donner Public Utility District at a
meeting duly called and held within the District on the first day of February 2006 by the following roll
call vote:
AYES: Directors Aguera, Hemig, Sutton, Taylor and Thomason
NOES: None
ABSENT: None
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
By
J. Ron Hemig, President of the Board
ATTEST:
Peter L. Holzmeister, Clerk of the Board
Ordinance 2006-04 2
Public Utility District
Truckee Donner Public Utility District
Retail Rates
As of
March 2006 March 2005 January 2004
Domestic Electric Rates: Permanent Residents
Rate P 10
Customer Charge: per month $6.13 $5.84 $5.00
Energy Charge per kilowatt-hour $0.120 $0.114 $0.114
Domestic Electric Rates: Non-Permanent Residents
Rate S 10
Customer Charge: per month $6.13 $5.84 $5.00
Energy Charge per kilowatt-hour $0.137 $0.130 $0.130
Small Commercial Rates:Commercial Customers with monthly demand of less than 50 kilowatts
Rate 15
Customer Charge: per month $11.89 $11.32 $9.70
Energy Charge per kilowatt-hour $0.144 $0.137 $0.137
Medium Commercial Rates:Commercial Customers with monthly demand greater than 50 kW and less than 200 kW
Rate 20
Customer Charge: per month $118.69 $113.04 $96.85
Energy Charge per kilowatt-hour $0.0852 $0.0811 $0.811
Demand Charge per kilowatt of demand $11.67 $11.11 $11.11
Large Commercial Rates:Commercial Customers with monthly demand greater than 200 kilowatts
Rate 25
Customer Charge: per month $520.62 $495.83 $425.00
Energy Charge per kilowatt-hour $0.877 $0.0835 $0.0835
Demand Charge per kilowatt of demand $11.15 $10.62 $10.62
EXHIBIT D
[Attach Schedule of Bonds, Notes, Contracts, Etc.]
(a) The Truckee Donner Public Utility District Revenue Certificates of
Participation, Series 2003, $16,930,000, Series 2003A and $9,335,000, Series 2003B;
(b) The Constellation Power Source Power Purchase and Sale Agreement
Confirmation Letter, dated March 7, 2003, between Truckee Donner Public Utility
District and Constellation Power Source, Inc.;
(c) The United States Department of Energy Western Area Power
Administration Sierra Nevada Region, Custom Product Contract for Variable Resource
Service with Truckee Donner Public Utility District, Contract 04-SNR-00731, dated
August 13, 2004;
(d) The Master Firm Power Supply Agreement for the Shaped Capacity and
Energy Transaction Schedule, Agreement dated December 21, 2005, between UAMPS
Pool and DAMPS Firm and Truckee Donner Public Utility District.
(e) The Service Agreement for Network Integration Transmission Service,
dated September 13, 1999, between Sierra Pacific Power Company and Truckee Donner
Public Utility District.
EXHIBIT D
[Attach Schedule of Bonds, Notes, Contracts, Etc.]
[(a) list outstanding bond issues of the Participant secured by the revenues of
the System;
(b) the Power Sales Contract, dated as of June 1, 1982 as amended, between
UAMPS and the Participant, relating to the Hunter Steam Electric Generating Unit No. II;
(c) the Power Sales Contract, dated as of September 28, 1978, as amended,
between Intermountain Power Agency ("IPA") and the Participant, relating to the
Intermountain Power Project;
(d) the Lay-Off Power Purchase Contract, dated as of February 1, 1983,
among Utah Power & Light Company, IPA and the Participant, relating to the
Intermountain Power Project;
(e) the Transmission Service Contract for the Western Colorado-Bonanza
Transmission Project and the Bonanza-Mona Transmission Project, dated as of
January 20, 1989, between UAMPS and the Participant;
(f) the Transmission Service Agreement for the Central-St. George 138 kV
Transmission Project, dated July , 1989 as amended and supplemented, between
UAMPS and the Participant;
(g) the San Juan Project Power Sales Contract, dated as of July 1, 1993,
between UAMPS and the Participant;
(h) the Master Firm Power Sales Agreement, dated as of June 16, 1999 and
Transaction Schedule No. 1 thereunder, between UAMPS and the Participant; and
(i) the Payson Power Project Power Sales Contract, dated as of June 1, 2002,
between UAMPS and the Participant].
D-1
EXHIBIT IV
BRING DOWN CERTIFICATE OF THE PARTICIPANT
STATE OF )
COUNTY OF«COUNTY» )
The undersigned hereby certify that they are the [Executive Officer] and
[Clerk/Recorder/Secretary] of (the "Participant"), a member of Utah
Associated Municipal Power Systems ("UAMPS"), and that as such they are authorized to
execute this Certificate on behalf of the Participant and hereby certify as follows:
1. This certificate has been executed in connection with the issuance by UAMPS of its
Intermountain Unit 3 Project Revenue Bonds, Series (the "Bonds") [or additional
series of Bonds, as applicable], as more fully described in the Official Statement of UAMPS
dated (the "Official Statement")prepared in connection with the offering and sale
of the Bonds.
2. In connection with the execution of the Intermountain Unit 3 Project Power Sales
Contract dated as of December 1, 2006 between the Participant and UAMPS, the undersigned
executed and delivered a certificate dated (the "Power Sales Contract
Certificate"). The undersigned hereby reaffirm the statements made in the Power Sales Contract
Certificate [(other than the statements made in paragraph 4, the last sentence of paragraph 7, and
paragraphs 9, 12 and 16)] as though made on the date hereof in the form they were rendered in
the Power Sales Contract Certificate.
3. The undersigned have reviewed the statements and information relating to the
Participant and its electric system contained in the Official Statement under the caption "THE
PARTICIPANTS" and such statements and information, as of the date of the Official Statement and
as of the date hereof, are true and correct in all material respects and did not and do not contain
any untrue statement of a material fact or omit to state a material fact necessary in order to make
such statements, in light of the circumstances under which they were made, not misleading.
Dated this day of
[PARTICIPANT]
By
Its
[SEAL]
By
Its
IV-1
EXHIBIT V
Utah Associated Municipal Power Systems
2825 East Cottonwood Parkway, Suite 200
Salt Lake City, Utah 84121
Ladies and Gentlemen:
I have acted as counsel to (the "Participant") as a purchaser of electric
energy under the Intermountain Unit 3 Project Power Sales Contract, dated as of December 1,
2006 (the "Power Sales Contract"), between the Participant and Utah Associated Municipal
Power Systems ("UAMPS") and in connection with the matters referred to herein. Pursuant to
the Power Sales Contract, UAMPS will, for the benefit of the Participant and certain other
members of UAMPS that have executed Power Sales Contracts with UAMPS, exercise
Commercially Reasonable Efforts to expeditiously and economically acquire and construct the
Project. Capitalized terms used and not defined herein have the meanings assigned to such terms
in the Power Sales Contract.
As such counsel I have examined (i) those documents relating to the existence,
organization and operation of the Participant and its electric system (the "System"), (ii) all
resolutions and proceedings of the Participant relating to the due authorization, execution and
delivery by the Participant of the Power Sales Contract, (iii) an executed counterpart of the
Power Sales Contract, and(iv) such other documents, information, facts and matters of law as are
necessary for me to render the opinions contained herein.
Based upon the foregoing, I am of the opinion that:
[1. The Participant is a [municipal corporation and/or political subdivision of the State
of (the "State"), duly created and validly existing under the laws of the State and
duly qualified to own, operate and furnish electric service through the System.]
[1. The Participant is a , duly created, organized and existing under the
laws of the State of (the "State"), and duly qualified to own, operate and furnish
electric service through the System.]
2. The Participant has full legal right, power and authority to enter into the Power
Sales Contract and to carry out and consummate all of the transactions contemplated thereby, and
the Participant has complied with the provisions of applicable law which would be a condition
precedent to entering into the Power Sales Contract or carrying out and consummating such
transactions.
V-1
3. No approval, consent or authorization of any governmental or public agency,
authority, commission or person of the Power Sales Contract or of the Participant's participation
in the transactions contemplated thereby is required for the execution and delivery by the
Participant of the Power Sales Contract or the performance by the Participant of its obligations
thereunder, [other than the approval/consent of the [Public Service Commission of the State of
/RUS/CFS], which approval/consent has been obtained by the Participant] .
4. By resolution duly adopted on , the Power Sales Contract has been duly
authorized, executed and delivered by the Participant and constitutes the legal, valid and binding
obligation of the Participant, whether or not the Project or any portion thereof is acquired,
completed, operable or operating and notwithstanding the suspension, interruption, interference,
reduction or curtailment of the output of the Project, or any termination of any of the Project
Agreements, in whole or in part for any reason whatsoever, is enforceable under the present law
of the State in accordance with its terms; except that the rights and remedies set forth therein may
be limited by any applicable bankruptcy, insolvency, moratorium, reorganization or other laws
affecting creditors' rights generally or usual equity principles in the event equitable remedies
should be sought.
5. The Participant has, with respect to all meetings held in connection with the
authorization of the Power Sales Contract, been in compliance all open and public meeting laws
of the State.
6. The authorization, execution and delivery of the Power Sales Contract and
compliance with the provisions thereof will not conflict with or constitute a breach of, or default
under, any instrument relating to the organization, existence or operation of the Participant, any
commitment, agreement, indenture, bond, note, resolution or other instrument to which the
Participant is a party or by which it or its property is bound or affected, or any ruling, regulation,
ordinance, judgment, order or decree to which the Participant (or any of its officers in their
respective capacities as such) is subject or any provision of the laws of the State relating to the
Participant and its affairs.
7. There is no action, suit, proceeding, inquiry or investigation at law or in equity, or
before any court, public board or body, pending or, to my knowledge, threatened against or
affecting the Participant or any entity affiliated with the Participant or any of its officers in their
respective capacities as such (nor to the best of my knowledge is there any basis therefor), which
challenges the creation, organization or existence of the Participant or the titles of its officers to
their respective offices or which questions the powers of the Participant referred to in paragraph
2 above or the validity of the proceedings taken by the Participant in connection with the
authorization, execution or delivery of the Power Sales Contract, or wherein any unfavorable
decision, ruling or finding would adversely affect the transactions contemplated by the Power
Sales Contract or which, in any way, would adversely affect the validity or enforceability of the
Power Sales Contract, and there is no litigation pending or, to the best of my knowledge,
threatened against the Participant or involving any of the business, affairs, property or assets of
the System which involves the possibility of any judgment or liability, not fully covered by
insurance, which may result in any material adverse change in the business, affairs, properties,
assets or in the condition, financial or otherwise, of the System.
V-2
8. The obligations of the Participant to make payments to UAMPS under the Power
Sales Contract shall constitute an obligation of the Participant payable as an operating expense of
the System solely from the revenues and other available funds of such electric system. Such
payments shall constitute a cost of purchased electric energy and an operating expense of the
System. The application of the revenues and other available funds of the System to make such
payments to UAMPS is not subject to any prior lien, encumbrance or restriction.
9. The rates charged by the Participant for System services to customers located within
the corporate boundaries of the Participant are not subject to regulation by any authority of the
State or the United States and have been duly and validly adopted by the Participant and are
legally enforceable in accordance with the laws of the State of Utah.
10. The Participant has lawful authority to own the System and to fix and collect rates,
fees and other charges in connection with such System.
11. The Participant has good and merchantable title to the System as it now exists.
12. Except for those portions of the System which are laid in, on or under public roads,
highways, streets or alleys which have been heretofore dedicated to the public for road, highway,
street or alley purposes and which have actually been in use for such purpose for more than five
years past, the principal operating properties of the System are located either on land of the
Participant as to which the Participant has good and merchantable fee simple title or as to which
the Participant has acquired good and valid permanent easements, rights-of-way, licenses or
permits not terminable by action of any party without the consent of the Participant sufficient to
permit the Participant to maintain and operate the System.
13. The Participant has obtained all necessary permits, licenses and approvals required
by law, whether state or federal, to be obtained by the Participant in connection with the
operation of the System, and such permits, licenses and approvals are in full force and effect.
14. There is no present unsatisfied judgment heretofore rendered against the Participant
constituting or which will constitute a lien on any part of the System.
15. There are no contracts, laws, regulations, court orders or consent decrees that will
restrict the ability of the Participant to comply with its covenants regarding rates for System
services set forth in the Power Sales Contract.
16. The Participant has duly authorized, executed and delivered the Joint Action
Agreement [and the Pooling Agreement] and each such agreement constitutes the legal, valid and
binding obligation of the Participant enforceable against the Participant in accordance with its
terms.
V-3
Respectfully submitted,
V-4
EXHIBIT VI
Utah Associated Municipal Power Systems
2825 East Cottonwood Parkway, Suite 200
Salt Lake City, Utah 84121
Dear Sirs:
I have acted as counsel to (the "Participant") in connection with the
execution by the Participant of the Intermountain Unit 3 Project Power Sales Contract dated as of
1, 2006 (the "Power Sales Contract") between the Participant and Utah Associated
Municipal Power Systems ("UAMPS") I have been advised that UAMPS has made arrangements
for the issuance and sale of the date hereof of its Intermountain Unit 3 Project Revenue Bonds,
Series (the "Bonds").
In connection with the execution and delivery by the Participant of the Power Sales
Contract, I rendered to UAMPS an approving legal opinion, dated (the "Prior
Opinion"), with respect to the Participant. In connection with the issuance and sale by UAMPS
of the Bonds, I hereby reaffirm the Prior Opinion, as though it was dated the date hereof, in the
form it was so rendered on
In addition to the foregoing, I have examined (i) the material describing the Participant
and its electric system contained under the caption "THE PARTICIPANTS — " in
the Official Statement, dated (together with any supplements or amendments thereto
as of the date hereof, the "Official Statement") of UAMPS relating to the Bonds and (ii) such
other documents, information, facts and matters of law as are necessary for me to render the
following opinion. Based upon the foregoing, I am of the opinion that the statements and
information with respect to the Participant and its electric system in the Official Statement under
the section entitled "THE PARTICIPANTS — " are true and correct in all
material respects as of the date of the Official Statement and as of the date hereof, and no facts
have come to my attention which would lead me to believe that, as of the date of the Official
Statement and as of the date hereof, the statements in the Official Statement under such caption
contained or contain any untrue statement of a material fact or omitted to state or omit to state
any material fact necessary in order to make such statements, in the light of the circumstances
under which they were made, not misleading.
VI-1
I hereby authorize the reference to this opinion and to the Prior Opinion set forth under
the caption, "APPROVAL OF LEGAL PROCEEDINGS," in the Official Statement. I hereby further
authorize Chapman and Cutler LLP, bond counsel, and , as representative of
the underwriters of the Bonds, to rely on the Prior Opinion and on this opinion in each case as
though addressed to them.
Respectfully submitted,
VI-2
December 8, 2006
INTERMOUNTAIN POWER PROJECT UNIT 3
DESCRIPTIONS OF THE PROJECT AND CERTAIN TRANSMISSION MATTERS,
AND EXECUTIVE SUMMARY OF THE POWER SALES CONTRACT
AND THE PROJECT AGREEMENTS
This Description and Executive Summary is being provided to the Participants to assist
them in their review and analysis of the Project in connection with their decision to enter into the
Power Sales Contract with DAMPS.
PART 1: DEFINITIONS
Throughout this Description and Executive Summary, the following defined terms are
used:
"Common Facilities Agreement" means the Common Facilities Agreement to be entered
into by IPA and the Owners.
"Construction Lease Agreement" means the Construction Lease, Use and Services
Agreement to be entered into by IPA and the Owners.
"Development Agreement", means the Intermountain Power Project Unit 3 Development
Agreement, dated as of May 1, 2005 among IPA (as Development Manager), UAMPS,
PacifiCorp Energy (a division of PacifiCorp), Southern Nevada Water Authority and the City of
Glendale, California
"IPA" means Intermountain Power Agency.
"Joint Operating Agreement" means the Joint Operating Agreement to be entered into by
IPA and the Owners.
"Los Angeles" means The City of Los Angeles acting by and through its Department of
Water and Power.
"Owners" means the co-owners of Unit 3. The co-owners are presently expected to be
UAMPS, PacifiCorp Energy (a division of PacifiCorp), Southern Nevada Water Authority and
the City of Glendale, California.
"Ownership Agreement" means the Ownership Agreement to be entered into by the
Owners of Unit 3. A summary of the Ownership Agreement appears in Part 5.
"Participant" means one of the municipal or cooperative utilities entering into a Power
Sales Contract with UAMPS, and "Participants" means all of the municipal or cooperative
utilities entering into the Power Sales Contracts.
ExecSumm(l2-7)
0866665/JCB/mo
"Power Sales Contracts" means the Intermountain Unit 3 Project Power Sales Contracts
between UAMPS and the Participants.
"Project" means DAMPS' undivided ownership interest in Unit 3.
"UAMPS" means Utah Associated Municipal Power Systems.
"Unit 3" means the proposed third generating unit to be constructed at the Intermountain
Generating Station and the undivided interest of the Owners in the Joint Common Facilities.
Capitalized terms used and not otherwise defined in these Executive Summaries have the
meanings assigned to them in the Power Sales Contracts or the applicable Project Agreement.
- 2 -
PART 2: THE PROJECT
The following is a summary description of Unit 3.
UNIT 3 FACILITIES
Unit 3 will be super-critical, pulverized coal fueled, steam generating unit capable of
producing approximately 900 MW (net) of electric power and associated energy. Unit 3 will be
constructed at IGS on a parcel of land to be conveyed to the Owners.
Please refer to the more detailed description of Unit 3 that is attached as Exhibit A to the
Power Sales Contract.
OWNERSHIP
UAMPS has previously entered into the Development Agreement and the Development
Coordination Agreement. These Agreements provide for the development of Unit 3 and give
UAMPS the right to become the owner of an undivided 50% interest in Unit 3. The final
ownership interests of UAMPS and the other Owners of Unit 3 are subject to adjustment as
provided in the Development Agreement. It is possible that UAMPS' ownership interest in Unit
3 could be greater or lesser than 50%, but its ownership interest must match the total capacity
sold to the Participants under the Power Sales Contracts.
ENGINEERING
In its capacity as Development Manager, IPA has retained Cummins & Barnard as their
engineer for Unit 3. Cummins & Barnard is a nationally-recognized engineering firm with
extensive experience in the design and construction of coal-fired generating units similar to Unit
3. The responsibilities of Cummins & Barnard include . {I need a copy of
the IPA/C&B contract to describe the C&B responsibilities.}
UAMPS has separately retained Burns and Roe Enterprises, Inc. as its independent
engineer for the Project. Burns and Roe will be responsible for reviewing the work of Cummins
& Barnard and preparing reports for UAMPS' use in connection with the Project.
CONSTRUCTION AND SCHEDULE
Unit 3 will be constructed under an engineering, procurement and construction ("EPC")
contract with an experienced and reputable contractor. The EPC contractor will be responsible
for the design and construction of Unit 3. The EPC contract will be a fixed price contract that
will require the contractor to complete construction of Unit 3 by a specified date. The EPC
contractor will also guarantee the generating capacity of Unit 3 (900 MW net), its heat rate and
compliance with applicable permits and approvals.
- 3 -
UAMPS and the other prospective Owners of Unit 3 are now in the process of soliciting
proposals from prospective EPC contractors. It is expected that the EPC contractor will be
selected in the first quarter of 2007.
The present schedule for construction of Unit 3 calls for commencement of construction
as early as the third quarter of 2007 and as late as the second quarter of 2008, and completion
and commercial operation in the second quarter of 2012. Various factors could affect the
proposed construction schedule and completion date for Unit 3.
PERMITS AND APPROVALS
The Executive Secretary of the Utah Air Quality Board (the "Board") issued an
Approval Order on October 15, 2004 permitting the construction of Unit 3. The Executive
Secretary of the Board has confirmed his agreement that the current design of Unit 3 with a
supercritical (rather than a subcritical) boiler is equivalent technology under the conditions of the
Approval Order.
At the time the Approval Order was under consideration by the Board, the Utah Chapter
of the Sierra Club and the Grand Canyon Trust (the "Intervenors") petitioned to intervene in the
proceedings before the Board and contest the legality of the Approval Order. The Utah Air
Quality Board denied their petition to intervene on the ground that they lacked legal standing to
contest the Approval Order. The Intervenors appealed the Board's denial of intervention to the
Utah courts. On November 21, 2006, the Utah Supreme Court ruled that the Intervenors do have
the requisite standing and directed the Board to allow them to intervene in the proceedings on the
Approval Order. At this time, it is impossible to assess the outcome of the continued
proceedings before the Board on the Approval Order or the ultimate impact of the Court's
decision on the Unit 3.
To date, the Approval Order has remained in effect and has not been stayed during the
ongoing legal proceedings. Under its terms, the Approval Order will be subject to review by the
Executive Secretary of the Board on April 8, 2008, to determine if a continuous program of
construction on Unit 3 is proceeding in accordance with the Approval Order and applicable law.
Prior to operation of Unit 3, an operating permit will need to be obtained from the
Executive Secretary of the Board. In addition, various other permits and approvals will be
required for the construction and operation of Unit 3.
COAL SUPPLY
DAMPS is in the process of developing a fuel procurement plan for the Project. It is
anticipated that the majority of the coal that UAMPS will require for the Project will be
purchased under long-term contracts or acquired through ownership interests in coal properties.
The projected cost of coal used in the projected cost of energy from the Project is $2.01/MMBtu
in 2012 dollars. [Probably need a sentence or two on transportation.]
- 4 -
PROJECT OPERATIONS
Please refer to the Executive Summaries of the Project Agreements (Part 5 below) for
summaries of the proposed contractual arrangements for Project operations.
PROJECTED CONSTRUCTION COSTS AND COST OF ENERGY
Attached as EXHIBIT A to this Description and Project Summary is information regarding
the projected construction, financing and operating costs of the Project.
OTHER
[Consider any additional information that should be included in this summary.]
- 5 -
PART 3: TRANSMISSION OF PROJECT POWER AND ENERGY
The following is a summary description of various transmission arrangements and
matters for the delivery of electricity from the Project to the Participants' electric distribution
systems.
The Participants will take delivery of electricity from the Project over two or three
separately owned transmission systems which will require transmission service contracts with
each transmission provider. Transmission costs are estimated using current rates and are subject
to change by 2012. A summary of the transmission service from each transmission provider is as
follows:
TRANSMISSION FROM UNIT 3 TO MONA AND GONDER
Unit 3 will be interconnected to the Northern Transmission System ("NTS"), which is
owned by IPA and operated by Los Angeles. All of the Participants will require transmission
across the NTS.
The NTS consists of two (2) 345 kV circuits from the Intermountain Generating Station
Switchyard ("Switchyard") to Mona, Utah, where they are interconnected to the transmission
facilities of PacifiCorp, Deseret Generation & Transmission Co-operative, UAMPS and Utah
Municipal Power Agency, and one (1) 230 kV circuit to Gonder, Nevada, where it is
interconnected with Sierra Pacific transmission facilities. According to the Western Electricity
Coordinating Council ("WECC"), the ratings of the 345 kV lines are 1,400 MW West to East
and 1,200 MW East to West. The rating of the 230 kV line is based on the simultaneous rating
of another 230 kV line between Pavant, Utah and Gonder and is currently 220 MW East to West
and 117 MW West to East. The NTS is in the Los Angeles control area and surplus transmission
is marketed through its OASIS.
In order to acquire the transmission rights on the NTS, UAMPS has filed a transmission
request with Los Angeles for long term firm point to point transmission rights from the
Switchyard to Mona and Gonder based on the current Participant subscription amounts. The
request has been acknowledged by Los Angeles, but it has not yet offered a service schedule or
advised UAMPS of a need for a System Impact Study.
Transmission service on the NTS will be at the Los Angeles tariff rate. Currently the rate
is $3.89 per kW-month (or about $5.80 per MWh at the anticipated load factor of Unit 3) and
line losses of 4.8%. UAMPS will pursue having Los Angeles develop a rate specific to the NTS
rather than one based on its network cost of service, which UAMPS estimates should be
approximately$0.95 per MWh.
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TRANSMISSION FROM MONA TO POINTS OF DELIVERY ON THE PACIFICORP SYSTEM
UAMPS has a network transmission agreement with PacifiCorp that will provide network
service to Participants connected to the PacifiCorp transmission system in Utah and Southeast
Idaho. All such Participants but two are currently Points of Delivery on the network
transmission agreement. PacifiCorp has been advised of the two Participants that need to be
added to the network agreement. Under Section 31.2 of the network transmission agreement,
UAMPS may add Points of Delivery upon reasonable notice to PacifiCorp and as these are
existing loads on the PacifiCorp system, UAMPS does not anticipate any issues with PacifiCorp.
Transmission service charges on the UAMPS network transmission agreement is
currently $1.718 per kW-month and 4.48% line losses. Currently, DAMPS charges $3.25 per
MWh to its Members to cover this transmission service.
TRANSMISSION FROM GONDER TO POINTS OF DELIVERY ON THE SIERRA PACIFIC SYSTEM
The two Participants on the Sierra Pacific transmission system both have network
transmission agreements with Sierra Pacific with Gonder as the Point of Receipt. Unit 3 will
replace the current resources used by these Participants and no changes to the transmission
service are contemplated.
Transmission service charges on the Sierra Pacific transmission system are currently
$2.88 per kW-month. Currently, the approximate MWh cost is $4.30 per MWh and 2.34% line
losses.
TRANSMISSION FROM MONA TO POINTS OF DELIVERY ON THE IDAHO POWER SYSTEM
For Participants interconnected to the Idaho Power transmission system, DAMPS has
applied to PacifiCorp for Point-to-Point transmission service from Mona to Borah-Brady, the
point of interconnection between PacifiCorp and Idaho Power. PacifiCorp has provisionally
granted this transmission request. PacifiCorp currently has multiple requests that will affect the
firm granting of this service and is in the process outlined under its Open Access Transmission
Tariff("OA77') for these other requests. PacifiCorp has advised that it should know the status
of the other requests and their effect on the DAMPS request by the first quarter of 2007.
Point-to-Point transmission service on the PacifiCorp system is currently $2.025 per kW-
month or about$3.02 per MWh and 4.48% line losses.
For transmission service from Borah-Brady to the Participants in the Idaho Power
Control Area, DAMPS and the Participants are in discussions with Bonneville Power
Administration about adding the Unit 3 resource at Borah-Brady as a new Point of Receipt on
their existing network transmission service agreement with Idaho Power.
Transmission service on the Idaho Power transmission system is based on each network
customers load ratio share of the system revenue requirement. Idaho Power's current revenue
requirement is $6,026,405. Currently, the approximate MWh cost is $2.9465 per MWh and
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3.6% line losses. If this transmission service is acquired through Bonneville Power
Administration ("BPA"), the Participants will be charged by BPA under their OATT network
rates, which are approximately $2.409 MWh.
TRANSMISSION FROM MONA TO POINTS OF DELIVERY ON THE NEVADA POWER SYSTEM
For Participants interconnected to the Nevada Power transmission system, DAMPS has
applied to PacifiCorp for Point-to-Point transmission service from Mona to the Nevada — Utah
Border ("NUB"), the point of interconnection between PacifiCorp and Nevada Power.
PacifiCorp has determined that a new line will need to be built for this service and UAMPS has
funded a Facilities Study for this transmission request. PacifiCorp and UAMPS had previously
completed a transmission study for network loads in southern Utah, which also resulted in the
need for this new line, albeit a few years later, so it is anticipated that the line will be built for the
benefit of the network as well as the Point-to-Point transmission service.
Since new transmission facilities are needed for this transmission service as well as the
PacifiCorp network, it is anticipated that the rates will be the PacifiCorp Point-to-Point rate,
currently$2.025 per kW-month or about$3.02 per MWh and 4.48% line losses.
For transmission service from NUB to the Nevada Power Control Area Participants,
UAMPS has a Point-to-Point transmission request with Nevada Power from NUB to Mead,
where the Participants either have current Points of Delivery or have existing transmission
agreements to take the power from Mead to their Points of Delivery. This request is currently in
the System Impact Study stage under the Nevada Power GATT.
UAMPS has also on the behalf of one of the Nevada Power Control Area Participants,
submitted a Point-to-Point transmission request from Gonder to Mead. This service would be
over a transmission line currently being studied by Nevada Power.
Both of these transmission services are currently anticipated to be Point-to-Point
transmission service. Nevada Power's current transmission rates are $1.40 per kW-month or
about$2.09 per MWh and 1.32% line losses.
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PART 4: THE POWER SALES CONTRACTS
The following provides a summary description the basic terms and provisions of the
Power Sales Contracts between DAMPS and its the Participants. This Executive Summary does
not summarize and describe all of the provisions of the Power Sales Contracts, and Participants
should refer to the complete Power Sales Contract for further details.
THE PROJECT
The Project consists of DAMPS' undivided ownership interest in Unit 3. A summary
description of the properties, facilities, systems and equipment that comprise the Project is
attached to the Power Sales Contract as ExHIBIT I.
SALE OF OUTPUT
UAMPS will sell all of the generating capacity of the Project under the Power Sales
Contracts with the Participants.
TERM
Each of the Power Sales Contracts will have a term that extends to the later of (a) the
final payment of the Bonds and (b) the date the Project is taken out of service, provided,
however, that the term shall not exceed 50 years. If the Power Sales Contracts expire as a result
of the 50-year limitation (imposed by the Interlocal Cooperation Act), the Participants will have
the right to renew their Power Sales Contracts on substantially the same terms.
The Project Management Committee may also determine to terminate the Power Sales
Contracts (1) upon early termination of the Development Agreement or certain Project
Agreements, (2) if no Bond Anticipation Notes or Bonds are issued by June 1, 2008, and(3) with
respect to any Participant, upon a written request of the Participant stating that transmission
arrangements are not available to the Participant and a determination made by the Project
Management Committee before the first financing for the Project. In this event, the payment
obligations of the Participants will be limited to their pro rata shares of any un-funded costs,
expenses and liabilities incurred by DAMPS in connection with the Project.
ENTITLEMENT SHARES
Under the Power Sales Contracts, each Participant will acquire an Entitlement Share in
the Project.
Each Entitlement Share is a contractual right to receive a specific percent of the available
output of the Project and a contractual obligation to take or pay for a corresponding percent of all
of the costs of the ownership, financing and operation of the Project.
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DAMPS will give notice to the Participants of the occurrence of the date on which the
sum of the Entitlement Shares of all Participants under the Power Sales Contracts equals 87%
(the "Substantial Subscription Date"). From the Substantial Subscription Date to the Full
Subscription Date, the Entitlement Shares set forth in the Power Sales Contract are preliminary
and subject to adjustment in the event that there are Orphan Shares resulting from the failure of a
Participant to execute a Power Sales Contract with an Entitlement Share equal to the proposed
Entitlement Share set forth in the IPP Unit 3 Project Agreement.
In the event that Orphan Shares will exist as of the Substantial Subscription Date,
UAMPS will notify the Project Management Committee, which will direct all actions to be taken
with respect to the Orphan Shares to provide for a full allocation of Project Capability, including
(i) providing for temporary allocations of Orphan Shares, (ii) offering the Orphan Shares to
Participants and other qualifying entities on a voluntary basis, and (iii) requiring that the
Entitlement Shares of all Participants be increased (pro rata, based upon their original
Entitlement Shares) to absorb all Orphan Shares and to cause full subscription to occur at least
30 days before Bond Anticipation Notes or Bonds are issued; provided, however, that the
increased Entitlement Share of any Participant will not be greater than 115% of its Entitlement
Share set forth in its Power Sales Contract on the Effective Date without the Participant's
consent.
FINANCING
UAMPS will issue its Bond Anticipation Notes and Bonds under a trust indenture (the
"Indenture") to finance the cost of acquiring the Project and to fund (1) capitalized interest to
the Commercial Operation Date of the Project, (2) debt service reserves, (3) reserves for capital
improvements and replacements, and (4) costs of issuance. The Bonds may be issued with fixed
or variable interest rates. Interest on part of the Bond Anticipation Notes and Bonds will be tax
exempt, with the balance bearing taxable interest.
The initial Bond Anticipation Notes or Bonds will mature no earlier than six months after
the estimated Commercial Operation Date. Following the date of Commercial Operation, each
Participant may elect to make a Capital Cost Payment to DAMPS, as described below under
"PARTICIPANT'S OPTION TO MAKE A CAPITAL COST PAYMENT," and DAMPS will issue long-term
Bonds to retire the portion of Bond Anticipation Notes that is not funded through Capital Cost
Payments.
Additional Bonds may be issued under the Indenture as parity or subordinated obligations
to pay future capital costs associated with the Project. Refunding Bonds may be issued by
UAMPS to reduce debt service costs or to achieve other objectives.
SECURITY
The Bonds will be secured by a pledge of all of the revenues produced by the operation
of the Project, including the amounts paid under the Power Sales Contracts.
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The Bonds will be special obligations of UAMPS and will have no claim on any of the
revenues or assets of UAMPS from its other projects. The Bonds will not be debts or obligations
of the Participants.
The Project will not be mortgaged to secure the Bonds.
PARTICIPANT'S OPTION TO MAKE A CAPITAL COST PAYMENT
In lieu of having DAMPS issue long-term Bonds to finance the cost of acquiring the
portion of the Project and retiring its Entitlement Share of the Bond Anticipation Notes or Bonds
issued to provide construction financing, each Participant will be given the option in its Power
Sales Contract to make a Capital Cost Payment to prepay all of the capital and debt service costs
of the Initial Facilities that would otherwise be payable by the Participant under the Power Sales
Contract (or, if the Participant's Capital Cost Payment is funded with retained earnings or other
legally available moneys not derived from any borrowing by the Participant, to prepay a portion
of such costs). Each Capital Cost Payment made by a Participant will be used by DAMPS to pay
a portion of the cost construction of the Project, and UAMPS will not issue long-term Bonds to
finance the portion of the cost of construction that is paid out of Capital Cost Payments.
Following the Commercial Operation Date, UAMPS will give at least 30 days' written
notice to the Participants of their right to elect to make a Capital Cost Payment and the amount of
their Capital Cost Payments. Each Participant that has elected to make a Capital Cost Payment
will be required to deposit the payment in escrow with the trustee for the Bonds.
PRICE
The Entitlement Share will be sold at cost. Each Participant will pay its proportionate
share (the ratio of its Entitlement Share to the sum of all Entitlement Shares) of all of the costs of
the Project, including:
• Operation and maintenance expenses, including all amounts paid
to the operator of the Project, taxes, insurance, etc.;
• Fuel costs;
• Debt service on the Bond Anticipation Notes or Bonds issued to
finance the costs of the Project (except that Participants that make a Capital Cost
Payment to DAMPS will pay debt service costs incurred with respect to the Bond
Anticipation Notes issued to finance the costs of the Project through the period of the
acquisition and construction of the Project, but will have no obligation to pay for debt
service costs on other Bonds issued to finance the cost of the Initial Facilities, except in
the event of a reallocation of a defaulting Participant's Entitlement Share);
• Costs of capital improvements, replacements and additions; and
• All other costs incurred in connection with the Project.
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Costs will be allocated equally to all Entitlement Shares, except that (a) debt service costs on the
Bonds (other than Bond Anticipation Notes) issued to finance the Initial Facilities will be
allocated only to those Participants that do not make Capital Cost Payments, and (b) each
Participant will pay all Transmission Costs allocable to the transmission of Project output from
the Point of Delivery to the Participant's system. The amounts paid by the Participants will be
sufficient to enable UAMPS to pay all of the costs of the ownership, operation and financing of
the Project.
BILLINGS AND PAYMENTS
Billings and payments will be made not less often than monthly. All payments will be
made on a "take-or-pay" basis (i.e., "Come Heck or High Water") and are not subject to
counterclaim, offset or reduction for any reason.
The payment obligations of Participants under the Power Sales Contracts are several and
not joint.
PROJECT MANAGEMENT COMMITTEE
A Project Management Committee (the "PMC") for the Project will be established under
the Power Sales Contracts and the UAMPS Joint Action Agreement. The PMC will function in
the same manner as the project management committees for UAMPS' other projects. The PMC
will recommend decisions on the Project to the UAMPS Board of Directors.
ANNUAL OPERATING BUDGETS
UAMPS will develop, and the PMC and the Board of Directors will approve, annual
operating budgets for the Project that will cover all of the costs of the Project (see "PRICE"
above). The annual operating budget will be the basis for the monthly billings and payments for
the Project. The annual operating budget may be revised from time to time as necessary to
reflect the actual costs of the Project.
PROJECT OPERATIONS
UAMPS will contract with third parties for the operation and maintenance of the Project
and the acquisition and management of fuel supplies necessary for Project operations. Initially,
the City of Los Angeles, acting through its Department of Water and Power, will operate 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.
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Project output will be delivered to the Participants at the point of physical interconnection
of the Project with the transmission facilities that are connected to the Intermountain Generating
Station. 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 and the
distribution and delivery of output from its System Point of Receipt to its customers.
CAPITAL REPLACEMENTS, IMPROVEMENTS AND ADDITIONS
The PMC and the Board of Directors will have authority to make capital replacements
and improvements to the Project and to determine whether to expense or capitalize and finance
the cost of capital items. In the event that Additional Facilities are financed by the issuance of
Additional Bonds, the Project Management Committee will determine whether to make a capital
cost payment option available to the Participants.
DEFAULTS AND REMEDIES
Upon a default by any Participant, DAMPS 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
and to pay the debt service on the Bonds. Among other things, DAMPS is authorized to
terminate a defaulting Participant's Entitlement Share and to make a mandatory reallocation of
such Entitlement Share to the other Participants.
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PART 5: THE PROJECT AGREEMENTS
The following provides a summary description of the basic terms and provisions of the
principal Project Agreements providing for the acquisition, construction and operation of Unit 3.
These Project Agreements are (i) the Ownership Agreement, (ii) the Common Facilities
Agreement, (iii) the Construction Lease Agreement and(iv) the Joint Operating Agreement. The
Ownership Agreement will be entered into by DAMPS and the other Owners of Unit 3. The
Owners and IPA are all parties to the Common Facilities Agreement, the Construction Lease
Agreement and the Joint Operating Agreement.
Each of the Project Agreements is presently in draft form and subject to continuing
negotiations by the parties. Approval of each Project Agreement by the UAMPS Unit 3 Project
Management Committee is required before its execution. This Executive Summary does not
summarize and describe all of the provisions of the Project Agreements and Participants should
refer to the complete copies of the Project Agreements for further details.
THE OWNERSHIP AGREEMENT
OWNERSHIP AND PERCENTAGE SHARE
Each Owner will own its percentage Ownership Interest as a tenant in common in the
Unit 3. Each Owner's Percentage Share determines the amount of Capacity available to such
Owner, as well as such Owner's share of the costs for Construction Work, Capital
Improvements, Operating Expenses and Administrative Functions.
OPERATING COMMITTEE
The Owners will form an Owners Committee that will be responsible for, and will have
the exclusive authority to carry out, all decisions regarding constructing, equipping, designing,
operating, maintaining and administering Unit 3. Each Owner will appoint one representative
(and one alternate) to the Owners Committee. Any action of the Owners Committee must be
taken at a meeting that is attended by a majority of the representatives and must be approved by
both (i) a majority of the representatives, and (ii) 67% of the Percentage Shares, except as
otherwise provided. The Owners Committee will, among other duties, appoint and supervise the
Owners Project Representative and the Operating Agent, adopt a Fuel Plan, approve annual
budgets, obtain and maintain governmental approvals and schedule delivery of Capacity.
CONSTRUCTION COSTS
Each month during the Construction Work, the Owners Committee will issue an invoice
to the Owners stating the amount required to be deposited into the Operating Account for
payment of Construction Costs, which payment will be due on or before the tenth day of the
succeeding month. If circumstances require, the Owners Committee will notify the Owners that
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additional funds are required to be deposited into the Operating Account for the payment of
Construction Costs.
SCHEDULING CAPACITY
Each Owner will schedule its Percentage Share of the Net Energy Generation subject to
Planned Outages, Operating Emergencies or other restrictions as determined by the Operating
Agent. Each Owner is obligated to take delivery of its Percentage Share of the Minimum
Generating Capability. Each Owner will schedule and deliver to the High Voltage Switchyard
its Percentage Share of the Testing and Start-Up Capacity and Energy as necessary. Each Owner
will provide its share of Ancillary Services, including spinning reserves, for its Percentage Share
of the Available Generating Capability.
CAPITAL IMPROVEMENTS
Each Owner will pay its Percentage Share of the costs incurred for Capital Improvements
as provided in the Owners Committee's annual capital expenditures budget, subject to increases
for certain extraordinary capital requirements. Upon the adoption of an annual capital
expenditures budget, the Owners Committee will submit to the Owners a forecast of cash flow
requirements for each authorized Capital Improvement.
OPERATING EXPENSES
Each month, each Owner will advance its share of Operating Funds as shown on the
estimated billing for the next month's cost of Operating Work and Capital Improvements. Any
disputed billings will be paid and then protested as provided in the Ownership Agreement.
LIENS
No Owners will be permitted to create any Lien on the Unit 3 other than:
• a Permitted Lien secured by an Owner's Ownership Interest;
• Liens for taxes not yet due;
• certain mechanics' or materialmen's liens or other similar Liens arising in the
ordinary course of business; and
• certain other Liens expressly permitted under the Project Agreements.
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RESTRICTIONS ON TRANSFER
No Owner may Transfer any portion of its Ownership Interest without the prior written
consent of the Owners Committee except for the following Permitted Transfers:
• a Transfer pursuant to foreclosure of a Permitted Lien;
• a Transfer to an Affiliate, provided that such Affiliate is Creditworthy;
• a Transfer to a joint action agency created by an interlocal agreement of
which Owner is a member or participant;
• a Transfer to another Owner that is not in default of its obligations under the
Ownership Agreement;
• a Transfer to any Creditworthy Person.
RIGHT OF FIRST REFUSAL
For any Permitted Transfer, the other Owners will have a 90-day right of first refusal to
purchase the Ownership Interest on the same terms as offered to a third party.
INSURANCE AND CASUALTY
The Ownership Agreement specifies the types and amounts of insurance to be maintained
by the Owners Committee and procedures for repair.and replacement in the event of damage to
the Unit 3. Following any damages to or destruction of Unit 3, Owners choosing not to
participate in the reconstruction will receive their Percentage Interest of the salvage value of Unit
3.
DEFAULTS AND REMEDIES
In the event any Owner is in Default, the Non-Defaulting Owners have the right to sell or
use the Defaulting Owner's Capacity. If the default continues for 90 days, the Non-Defaulting
Owners have the right to terminate or sell the Defaulting Owner's Ownership Interest.
INDEMNIFICATION
Each Owner agrees to indemnify the other Owners for any Individual Owner Liability
incurred by the indemnifying Owner, including Willful Actions, Liens and Personal Taxes.
Other liabilities will be Shared Liabilities of the Unit 3 and allocated among the Owners in
accordance with their Percentage Interests.
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TERMINATION
The Ownership Agreement will terminate on the date mutually agreed to by the Owners
Committee. All costs associated with retirement of Unit 3 will be allocated in accordance with
each Owner's respective Percentage Share.
COMMON FACILITIES AGREEMENT
UNIT 3 SITE
The Owners agree to purchase from IPA fee title to the parcel of land constituting the site
of Unit 3, subject to certain nonexclusive rights of IPA. The Owners will acquire undivided
ownership interests in the Unit 3 site, as tenants in common, in accordance with their percentage
ownership interests in Unit 3.
EXISTING COMMON FACILITIES
IPA will sell to the Owners (in proportion to their ownership interests in Unit 3) an
undivided interest in the Existing Common Facilities (including land, buildings, improvements,
facilities, equipment, rolling stock and personal property) of the Intermountain Power Project.
The Existing Common Facilities will be used in the operation, maintenance, repair, replacement
and improvement of Unit 3 in common with Units 1 and 2. The Owners and IPA will have
agreed on the value of the Existing Common Facilities as of the Effective Date, which will
determine the Joint Common Facilities Purchase Price. IPA will be responsible for any
replacement or additions to the Existing Common Facilities prior to the Closing Date (i.e., the
completion of Unit 3), and the values will be adjusted accordingly. The listed values of the
Existing Common Facilities (with some exceptions) will escalate at the rate of 2.25% per annum
until the Closing Date.
REQUIRED COMMON FACILITIES ADDITIONS AND IMPROVEMENTS
Other land, buildings, improvements, facilities and equipment will be acquired and/or
added to the Existing Common Facilities during construction to provide the necessary capability
for the service and support of Unit 3 in common with the service and support of Units 1 and 2.
Such Required Common Facilities Additions and Improvements will be acquired, constructed, or
added at the expense of the Owners. IPA and the Owners will share joint common ownership of
the Required Common Facilities Additions and Improvements (with appropriate adjustments and
credits being made to the Joint Common Facilities Purchase Price).
JOINT COMMON FACILITIES
The Existing Common Facilities and the Required Common Facilities Additions and
Improvements constitute the Joint Common Facilities. Any additions or improvements of the
Joint Common Facilities subsequent to the Closing Date will become part of the Joint Common
Facilities. IPA will own 66 2/3% of the Joint Common Facilities and the Owners will own the
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remaining 33 1/3% in accordance with their ownership interests in Unit 3. IPA will retain title to
all other real property and facilities, including the Intermountain Generation Station, the
Southern Transmission System, and the Northern Transmission System. Various access
easements are also described. Payment to IPA for the Joint Common Facilities will be made in
three installments: first, upon start of construction of Unit 3; second, twenty-four months after
start of construction; and finally, on the Closing Date, which will be immediately prior to the
commercial operation of Unit 3.
WATER LEASE
IPA will to lease to the Owners (in proportion to the Joint Common Facilities
Percentages) water rights for a term of 50 years with two successive 20-year renewal options.
The rent for the initial term will be prepaid as part of the Joint Common Facilities Purchase
Price.
SEVERAL OBLIGATIONS
The obligations of the Owners to make payments under the Common Facilities
Agreement are several and not joint and are proportionate to each Owner's ownership interest in
Unit 3.
INSURANCE
Prior to the Closing Date, IPA will maintain with respect to the Joint Common Facilities
all risk property insurance, general liability insurance, property damage insurance and other
insurance as provided for in the IPP Agreements and consistent with Prudent Utility Practice.
Proceeds of such insurance will be applied as provided for in the IPP Agreements. After the
Closing Date, IPA and the Owners will maintain insurance with respect to the Joint Common
Facilities as provided in the Joint Operating Agreement.
TAXES
After the Closing Date, IPA and the Owners will each separately report and otherwise be
responsible for the payment of all property taxes, payments or fees in lieu of taxes and impact
alleviation or mitigation payments with respect to their respective undivided ownership interests
in the Joint Common Facilities or gross receipts. The Owners are responsible for payment of all
sales and transfer taxes and recording fees, if any, incurred in connection with the transfer of the
real or personal property under the Common Facilities Agreement.
COVENANTS AGAINST LIENS
Prior to the Closing Date, IPA will not allow any unsatisfied liens on the Joint Common
Facilities except for ordinary course mechanics liens not yet due or being contested. Neither IPA
nor the Owners will allow any unsatisfied lien on their respective ownership interests in the Joint
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Common Facilities except as permitted by the Common Facilities Agreement, the Unit 3
Construction Lease and Agreement or the Joint Operating Agreement.
RETIREMENT OF UNITS
Upon the retirement from service and decommissioning of Units 1 and 2 while Unit 3
continues in operation, IPA is required to restore the Units 1 and 2 site and sell to the Owners
IPA's remaining rights in the Joint Common Facilities (other than IPA's water rights constituting
Joint Common Facilities) for salvage value as determined by a Decommissioning Consultant.
Similar procedures are described for the decommissioning of Unit 3, with the Owners selling
their remaining rights in the Joint Common Facilities to IPA.
DEFAULT AND REMEDIES
Failure by IPA or the Owners to meet their payments or other obligations under the
Common Facilities Agreement will constitute a default, in which case IPA can terminate the
Common Facilities Agreement. The Owners and IPA have the right to enforce any other legal
remedies but there is no alternative dispute resolution procedure specified.
TRANSFER OR ASSIGNMENT
Any Owner's rights in the Common Facilities Agreement are subject to certain transfer
restrictions, but an Owner may transfer its interest in the Common Facilities Agreement to the
following:
• any trustee or secured party, as security for bonds or other indebtedness of
such Owner, and such trustee or secured party may sell such security in
foreclosure proceedings, possess or take control or cause a receiver to be
appointed with respect thereto; or
• any corporation or other entity merging with, or acquiring all or substantially
all of the property of, the Owner.
OBLIGATIONS OF IPA AND Los ANGELES
The Owners acknowledge that IPA and Los Angeles have independent obligations and
responsibilities with respect to the Intermountain Power Project and to the IPP Power Purchasers
and that nothing in the Common Facilities Agreement will be interpreted as preventing IPA and
Los Angeles from exercising their rights or fulfilling their duties under the IPP Agreements and
related agreements.
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TERM
The Common Facilities Agreement remains in effect until such time as Unit 3, or Units 1
and 2, have been decommissioned and all sales and payments associated with such
decommissioning have been made.
CONSTRUCTION LEASE AGREEMENT
PURPOSE
The purpose of the Construction Lease Agreement is to lease and to obtain rights to use
certain portions of the IPP Site and certain buildings, structures, infrastructure, property,
improvements, equipment, facilities and entitlements for the purposes of the construction and
installation of Unit 3 and to obtain certain utility and other services necessary for the
construction and installation of Unit 3.
TERM
The term of the Construction Lease Agreement shall continue until the projected Unit 3
completion date, unless extended as necessary to take into account any Uncontrollable Forces.
The Construction Lease Agreement may also be terminated earlier in the event of completion of
Unit 3 or abandonment of construction of Unit 3.
LEASE OF REAL AND PERSONAL PROPERTY
The Exhibits to the Construction Lease Agreement describe the real and personal
property, buildings, infrastructure, improvements, equipment, vehicles and other property to be
leased to the Owners for the construction of Unit 3 under the Construction Lease Agreement and
the applicable rental rates.
NON-EXCLUSIVE LICENSES
The Exhibits to the Construction Lease Agreement describe the property, contract rights,
permits governmental approvals and other intangible property to be licensed to the Owners for
the construction of Unit 3 and the applicable fees and charges. Owners will have the right to use
up to one-third of the capability of the Joint Common Facilities as required for testing and start-
up of Unit 3 and the Commercial Operation.
GRANT OF EASEMENTS
IPA grants to the Owners temporary non-exclusive easements across the IPP Site for
conduits and facilities for necessary utilities and for access to Unit 3 Construction Properties and
Facilities. IPA reserves for itself utility easements and access easements for the benefit of Units
1 and 2.
- 20 -
PARTICIPATION OF IPA AND Los ANGELES
Owners agree to keep IPA, Los Angeles and IPSC fully informed of their plans and
actions pertaining to the licensing, construction, installation, testing, start-up and Commercial
Operation of Unit 3. IPA, Los Angeles and IPSC will be notified and permitted to attend all
meetings with third parties and to provide input and objections to activities, plans or proposals
that could have a material adverse effect on any IPP Facilities or on the IPP Power Purchasers.
PLANS AND SPECIFICATIONS
Owners agree to provide copies of the Unit 3 Plans and Specifications to IPA and Los
Angeles. IPA and Los Angeles will have the right to approve the Unit 3 Plans and Specifications
and to object if they are not in compliance with the requirements of the Construction Lease
Agreement.
COMPLETION OF UNIT 3
Owners agree to proceed with the licensing, construction, installation, testing and start-up
and the Commercial Operation of Unit 3 with reasonable diligence and in accordance with
Prudent Utility Practice so as to complete such activities, including site restoration, not later than
, 20_ [date yet to be determined], unless prevented by Uncontrollable
Forces.
DESIGN AND CONSTRUCTION;SWITCHYARD ADDITIONS
Unit 3 will be designed, constructed and installed so that its operation will be compatible
with the operation of Units 1 and 2 and the other IPP Facilities and will permit the common and
coordinated operation of the three Units in accordance with Prudent Utility Practice. The
Owners agree to pay for a consulting firm to study the sufficiency of the capability of the
existing IPP switchyard facilities and the compliance thereof with the reliability standards of the
Western Electric Coordinating Council in accommodating the power flows associated with Unit
3 as well as Units 1 and 2. Any required upgrade will be funded as Required Common Facilities
Additions and Improvements under the Common Facilities Agreement.
LIABILITY FOR IPA INCREASED COSTS
If any activities related to Unit 3 require any modification of or addition to Units 1 or 2 or
other IPP Facilities not otherwise provided for in the Construction Lease Agreement or result in
an increase in the costs of Units 1 and 2 or any other IPP Facilities, or result in the reduced
availability of the output of Units 1 and 2, the Owners will reimburse IPA or IPP Power
Purchasers.
- 21 -
WATER SERVICE
IPA, Los Angeles and/or IPSC will furnish water, electricity, telephone, garbage, fire,
hazmat and other services to meet the requirements for the licensing, construction, installation,
testing and start-up and the Commercial Operation of Unit 3. The Owners shall pay for such
services in accordance with the rate schedules in the Construction Lease Agreement.
INSURANCE
The Construction Lease Agreement describes the amounts and types of insurance that
must be maintained by the Owners.
INDEMNIFICATION
Unit 3 Owner Participants agree to indemnify IPA, Los Angeles and IPSC and their
respective employees and agents, for all liabilities as a result of:
• the design, licensing, construction, installation, testing, start-up or
Commercial Operation of Unit 3, including activities related or incidental
thereto, undertaken under the Construction Lease and Agreement;
• the use, possession, condition, operation, maintenance or management of the
Unit 3 Construction Properties and Facilities;
• any violation of laws, covenants, restrictions, easements or conditions
affecting the Unit 3 Construction Properties and Facilities; or
• any failure on the part of the Unit 3 Owner Participants or any contractor or
employee of any Unit 3 Owner Participant to perform or comply with any of
the provisions contained in the Construction Lease and Agreement.
• from any and all mechanics', laborers', materialmen's liens or other liens
filed or arising from the design, licensing, construction, installation, testing,
start-up or Commercial Operation of Unit 3.
EVENTS OF DEFAULT
Failure by the Owners to meet their payments or other obligations under the Construction
Lease Agreement will constitute an Event of Default in which case IPA or Los Angeles can
terminate the Construction Lease Agreement.
CONFIDENTIAL INFORMATION
The disclosure of Unit 3 Confidential Information and IPP Confidential Information is
restricted.
- 22 -
DISPUTE RESOLUTION
Any Disputed Matter will initially be determined by a Project Consultant appointed by
the parties to settle the dispute in compliance with the Construction Lease Agreement and
consistent with Prudent Utility Practice. Each party will be obligated to comply with the
recommendations of the Project Consultant unless it determines that such recommendation
would violate applicable law, cause a breach of the IPP Agreements, endanger the safe operation
of Units 1 or 2 or any other IPP Facility or the safety of construction, installation work, testing,
start-up or Commercial Operation of Unit 3, as applicable. The costs of the Project Consultant
will be paid for solely by the Owners. Either party may challenge the determination of the
Project Consultant by judicial action.
TRANSFER OR ASSIGNMENT
Any Owner's rights in the Construction Lease Agreement are subject to certain transfer
restrictions but an Owner may transfer its interest in the Construction Lease Agreement to the
following:
• any trustee or secured party, as security for bonds or other indebtedness of
such Owner, and such trustee or secured party may sell such security in
foreclosure proceedings, possess or take control thereof or cause a receiver to
be appointed with respect thereto; or
• any corporation or other entity merging with, or acquiring all or substantially
all of the property of, the Owner;
provided that such transaction (i) also transfers all of the Owner's Ownership Interest in Unit 3
and(ii) does not affect the federal tax exempt status of interest on the IPA Bonds.
SEVERAL OBLIGATIONS
The obligations of the Owners to make payments under the Construction Lease
Agreement are several and not joint and will be proportionate to each Owner's Percentage
Interest.
JOINT OPERATING AGREEMENT
JOINT PROJECT AGENT;JOINT OPERATING AGENT
IPA is appointed as the Joint Project Agent. Los Angeles is appointed as the Joint
Operating Agent. IPSC, at the direction of the Joint Operating Agent, will perform substantially
the same responsibilities with respect to Unit 3 as it performs and carries out with respect to
Units 1 and 2, including the Joint Agency Services.
- 23 -
JOINT OPERATING COMMITTEE
The Joint Operating Committee will consist of(i) seven members designated by IPA and
the IPP Coordinating Committee, including members representing IPP Power Purchasers with
IPP Generation Entitlement Shares totaling at least 60%, and (ii) three members designated by
the Unit 3 Owners Committee, including members representing Owners with Unit 3 Ownership
Shares totaling at least 60%. Action by the Joint Operating Committee will be taken by a vote of
80% of all the members of the Joint Operating Committee with each member having one vote,
provided that such vote shall include the approval vote of members representing (a) IPP Power
Purchasers with at least 60% of IPP Generation Entitlement Shares and (b) Owners with at least
60% of Unit 3 Ownership Shares. The responsibilities of the Joint Operating Committee will
include approving the Common Operating Budget and any Common Facilities Capital
Improvement Budget and approving policies and guidelines relating to the Common Coal
Stockpile, the Common Operating Services, the Unit 3 Discrete Operating Services and Units I
and 2 Discrete Operating Services.
COMMON OPERATING SERVICES BY JOINT OPERATING AGENT AND IPSC
The Joint Operating Agent will have responsibility for performing, or causing IPSC to
perform, on behalf of IPA and the Owners in accordance with Prudent Utility Practice all
Common Operating Services, including the management, administration, control, operation,
maintenance, scheduling of maintenance and other outages, scheduling and delivery of
generation output, and the repair, replacement, renewal and improvement of Unit 3 and the Joint
Common Facilities.
UNIT 3 DISCRETIONARY OPERATING SERVICES
IPA, in its capacity as the Joint Project Agent, will have responsibility for performing in
accordance with Prudent Utility Practice certain Unit 3 Discrete Operating Services, including
administration services in connection with Utah taxes and payments in lieu of taxes, providing
public relations and legislative support services and arranging for services of auditors,
consultants and legal counsel. Los Angeles, in its capacity as the Joint Operating Agent, shall
have the responsibility for performing, or causing IPSC to perform, in accordance with Prudent
Utility Practice the Unit 3 Discrete Operating Services, other than those to be performed by the
Joint Project Agent
ENTITLEMENT TO AVAILABLE OUTPUT, SCHEDULING AND DISPATCHING
Each Owner will be entitled to schedule Capacity and Energy from Unit 3 up to an
amount equal to its Unit 3 Ownership Share of the Available Generating Capability. The
Capacity and Energy of Unit 3 will be scheduled by each Owner with the Joint Operating Agent,
subject to scheduled outages, planned interruptions or shutdowns of Unit 3 or the Joint Common
Facilities for safety, reliability or integrity requirements thereof and to Operating Contingencies.
Each Owner must schedule Capacity and Energy up to its Unit 3 Ownership Share of the Unit 3
Minimum Generating Capability during ramp-up and ramp-down of Unit 3.
- 24 -
COMMON COAL STOCKPILE; OWNERSHIP;COSTS
The Common Coal Stockpile will be owned proportionately by IPA and each of the
Owners, as tenants in common. Coal Accounts are established for the purpose of measuring the
parties' respective Coal Accounts in terms of BTU. The Unit 3 Coal Procurement Agent shall
negotiate, and each of the Unit 3 Coal Procurement Agency Participants will enter into, contracts
as recommended by the Unit 3 Coal Procurement Agent for the procurement, transportation and
delivery of the coal supply for the Common Coal Stockpile. The Joint Operating Agent shall
provide the Coal Administration Services for all the coal procured, transported and delivered.
The Coal Procurement and Transportation Costs with respect to Unit 3 will be allocated
among such Unit 3 Coal Procurement Agency Participants in proportion to the amount of Energy
delivered to the Unit 3 Coal Procurement Agency Participants. The Owners have the option to
establish a Unit 3 Separate Coal Stockpile.
OPERATING COSTS BUDGET AND ALLOCATION
The Common Operating Budget will be approved (after any changes by IPA and the IPP
Coordinating Committee) by the Unit 3 Owners Committee. Common Fixed Operating Costs
will be allocated between IPA and the Owners in the ratio that the Rated Capacity of Units 1 and
2 bears to the Rated Capacity of Unit 3. Common Variable Operating Costs will be allocated
between IPA and the Owners collectively, in the ratio that the amount of Energy generated
during such month by Units 1 and 2 (including General Service Requirements) bears to the
amount of Energy generated during such month by Unit 3 (including General Service
Requirements).
The Unit 3 Operating Budget will be approved by the Unit 3 Owners Committee. Unit 3
Allocated Common Fixed Operating Costs and Unit 3 Discrete Fixed Operating Costs will be
allocated among each of the Owners in proportion to their respective Unit 3 Ownership Shares.
Unit 3 Allocated Common Variable Operating Costs and Unit 3 Discrete Variable Operating
Costs will be allocated to each Owner in proportion to the amount of the net Energy delivered to
such Owner.
COMMON FACILITIES CAPITAL IMPROVEMENT COSTS BUDGET AND ALLOCATION
The Common Facilities Capital Improvement Budget will be approved (after any changes
by IPA and the IPP Coordinating Committee) by the Unit 3 Owners Committee. Common
Facilities Capital Improvement Costs will be allocated between IPA and the Owners collectively,
in the ratio that the Rated Capacity of Units 1 and 2 bears to the Rated Capacity of Unit 3. The
Unit 3 Capital Improvement Budget will be approved by the Unit 3 Owners Committee. Unit 3
Capital Improvement Costs will be allocated to each Owner in proportion to its Unit 3
Ownership Shares.
- 25 -
COMMON AUXILIARY SERVICES
The Joint Operating Agent will provide security, fire, hazmat, telephone, medical and
other services for Unit 3 and the Joint Common Facilities, as well as for Units 1 and 2 and the
other IPP Facilities.
TAXES
All Taxes and Impositions with respect to the Joint Common Facilities and any Capital
Improvements will be paid by IPA and the Owners in accordance with their respective ownership
interests. All Taxes and Impositions with respect to Unit 3 and any Capital Improvements will
be paid by each of the Owners in accordance with the Unit 3 Ownership Agreement.
INSURANCE
The Joint Operating Agreement describes the amounts and types of insurance that must
be maintained by the IPA and the Owners for the Joint Common Facilities and Unit 3.
PERMITS AND APPROVALS
All costs of maintaining compliance with environmental laws and regulations and with
permits and approvals, will be Common Operating Costs or Unit 3 Discrete Operating Costs, as
applicable, or Common Facilities Capital Improvement Costs or Unit 3 Capital Improvement
Costs, as applicable, under the Joint Operating Agreement. Each Owner will be entitled to a pro
rata share of allowances or emission credits with respect to compliance of Unit 3 stack
emissions.
INDEMNIFICATION
IPA and the Owners agree to indemnify the Joint Project Agent, the Joint Operating
Agent and IPSC, and the IPP Operating Agent from liabilities related to Unit 3 other than those
resulting from gross negligence or intentional wrongdoing by such parties.
RIGHTS AND REMEDIES
Upon any Event of Default, any party may exercise any right that may be available under
applicable law to enforce the Joint Operating Agreement. Other rights and remedies of parties in
the Event of Default will be similar to the rights and remedies under the Ownership Agreement.
RETIREMENT AND DECOMMISSIONING
Upon the retirement from service and decommissioning of both Units 1 and 2 while Unit
3 continues in operation, IPA is required to restore the Units 1 and 2 site(exclusive of the sites of
the Joint Common Facilities) and sell to the Owners IPA's remaining rights in the Joint Common
Facilities (other than IPA's water rights constituting Joint Common Facilities) for salvage value
- 26 -
as determined by a Decommissioning Consultant. Similar procedures are described for the
decommissioning of Unit 3, with the Owners selling their remaining rights in the Joint Common
Facilities to IPA.
TRANSFER OR ASSIGNMENT
Any rights of IPA or the Owner under the Joint Operating Agreement are subject to
certain transfer restrictions but an Owner or IPA may transfer its interest in the Joint Operating
Agreement to the following:
• any trustee or secured party, as security for bonds or other indebtedness, and
such trustee or secured party may sell such security in foreclosure
proceedings, possess or take control or cause a receiver to be appointed with
respect thereto; or
• any corporation or other entity merging with, or acquiring all or substantially
all of the property of, the Owner or IPA, as applicable.
SEVERAL OBLIGATIONS
The obligations of the Owners to make payments under the Joint Operating Agreement
are several and not joint and will be proportionate to each Owner's Ownership Shares in Unit 3.
OBLIGATIONS OF IPA AND Los ANGELES
The parties acknowledge that IPA and Los Angeles have obligations and responsibilities
with respect to the Intermountain Power Project and to the IPP Power Purchasers and that
nothing in the Joint Operating Agreement will be interpreted as preventing IPA and Los Angeles
from exercising their rights or fulfilling their duties under the IPP Agreements and related
agreements.
DISPUTE RESOLUTION
Any Disputed Matter will initially be submitted to the Joint Operating Committee for
review. If the matter is not resolved, the parties will appoint a Project Consultant to settle the
dispute in compliance with the Joint Operating Agreement and consistent with Prudent Utility
Practice. Each party will be obligated to comply with the recommendations of the Project
Consultant. The costs of the Project Consultant will be Common Fixed Operating Costs. Either
party may challenge the determination of the Project Consultant by judicial action.
TERM OF AGREEMENT
The Joint Operating Agreement will remain in effect until the decommissioning of Units
1 and 2, or of Unit 3.
- 27 -
December 8, 2006
EXHIBIT A
INTERMOUNTAIN POWER PROJECT UNIT 3
PROJECTED CONSTRUCTION AND FINANCING COSTS AND COST OF ENERGY
CLAIM OF BUSINESS CONFIDENTIALITY
Pursuant to Sections 63-2-304(2) and 63-2-308(1) of the Utah Government Records
Access and Management Act ("GRAMA"), UAMPS hereby asserts a claim of business
confidentiality with respect to the following information regarding the projected construction
cost of and the projected cost of power from the Project. This claim of business confidentiality is
based upon the current solicitation by UAMPS and the other prospective Owners of an EPC
contractor for Unit 3, and the forthcoming negotiations between the Owners and the selected
EPC contractor regarding the construction price under the EPC contract. Public disclosure of the
projected costs of Unit 3 will materially and adversely affect the price obtained by UAMPS and
the other Owners in the EPC solicitation and negotiation process and will result in an unfair
competitive injury to UAMPS.
Prospective Participants under the Power Sales Contracts that are subject to GRAMA are
requested to classify this document as a "protected record" within the meaning of GRAMA.
Prospective Participants that are not subject to GRAMA, but are subject to public records laws of
another state, are requested to classify or protect this document to the fullest extent permitted by
applicable state law. Prospective Participants that are not subject to GRAMA or the public
records laws of another state are required to keep this document confidential.
Prospective Participants may provide copies of this document to their attorneys, advisors
and consultants, however any person receiving this document shall be bound by the foregoing
claim of business confidentiality. Any Participant or person receiving a request for disclosure of
this document must contact UAMPS' public records officer, Jackie Coombs, prior to any
disclosure. Each Participant and other person receiving this document acknowledges and agrees
to be bound by the foregoing provisions.
- 1 -
ESTIMATED CONSTRUCTION COSTS
Based upon the work of UAMPS and the other prospective Owners of Unit 3, the work of
Cummins & Barnard and the review of Burns and Roe, the estimated cost of construction of
Unit 3 is $2.11 billion. Assuming that UAMPS executes the Ownership Agreement as a 50%
owner of Unit 3, UAMPS' share of estimated construction costs is approximately $1.05 billion,
excluding costs of interest during construction, bond reserves and financing (see "BOND SIZING"
below for estimates of these costs). Attached hereto as ANNEX 1 is a memorandum of Burns and
Roe summarizing its review of the estimated construction costs of Unit 3.
FINANCING ASSUMPTIONS
The following table shows certain assumptions regarding the terms of UAMPS' financing
for its share of the estimated construction costs of Unit 3.
Percent of Fixed Rate Debt 80.0%
Percent of Variable Rate Debt 20.0%
Interest Rate on Fixed Rate Bonds 5.0%
Interest Rate on Variable Rate Bonds 4.0%1
Reinvestment Rate for Long-Term Investments 5.0%
Reinvestment Rate for Short-Term Investments 4.0%
Final Bond Maturity 35 years
For purposes of the estimated construction costs shown above and the projected bond
sizing and projected cost of energy shown below, it has also been assumed that construction of
Unit 3 will commence in the early summer of 2007 and that the construction period will extend
for approximately 50 months to a commercial operation date in 2011. It has also been assumed
that UAMPS will issue all of its variable rate bonds in a single issuance in June 2007 and all of
its fixed rate bonds in a single issuance in June 2008.
1 Variable Interest Rate Bonds estimated to bear interest at Bond Market Association (BMA) Municipal
Bond Index+52 basis points.
BOND SIZING
The following table shows the calculation of the principal amount of bonds to be issued
by UAMPS to finance the Project, net of estimated investment income. The amounts shown are
in thousands of dollars (000).
UNIT 32 THE PROJECTS
Construction Costs $2,109,500 $1,054,750
Interest During Construction4 454,140 227,070
Debt Service Reserves 139,385 69,693
Financing Expenses6 68,213 341)107
Investment Income (142,963) (71,482)
Total Bonds $2.628,275 $1,314,138
2 This column shows the projected total bond sizing for all of Unit 3 assuming that all of the Owners finance
under the same assumptions as UAMPS.
3 This column shows the projected total bond sizing for the Project, assuming UAMPS elects to acquire a
50%ownership interest in Unit 3.
4 Interest on all bonds funded to 6 months past estimated commercial operation date.
5 Debt Service Reserve funded at Maximum Annual Debt Service on Fixed Rate Bonds.
6 Includes estimated bond insurance premium; underwriters' discount; engineering, legal and financial
advisory fees and other costs of issuance.
PROJECTED COST OF ENERGY
The following table shows the projected cost of electric energy from Unit 3. All dollar amounts are in thousands (000).
FISCAL YEAR ENDING MARCH 31,
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Costs:
Debt Service(net)7 $161,481 $161,477 $161,483 $161,483 $161,479 $161,483 $161,482 $161,483 $161,485 $161,480
Operations&Maintenance8 43,056 44,132 45,236 46,367 47,526 48,714 49,932 51,180 52,459 53,771
Renewals&Replacements 6,416 6,544 6,675 6,809 6,945 7,084 7,225 7,370 7,517 7,668
Taxes 12,556 12,054 11,572 11,109 10,665 10,238 9,828 9,435 9,058 8,696
Administrative&General 9,000 9,225 9,456 9,692 9,934 10,183 10,437 10,698 10,966 11,240
Subtotal 232,509 233,433 234,421 235,459 236,549 237,701 238,905 240,166 241,486 242,854
Fuel9 134,695 141,038 148,029 155,472 163,110 171,330 178,838 183,175 187,511 192,042
Total $367,204 $3741471 $382,450 $390 931 $399,658 $409,031 $417,743 $423,341 $428,997 $434,897
Generation(MWh)10 7,095,600 7,095,600 7,095,600 7,095,600 7,095,600 7,095,600 7,095,600 7,095,600 7,095,600 7,095,600
Unit Costs:
Power Cost($/MWh) 51.75 52.78 53.90 55.09 56.32 57.65 58.87 59.66 60.46 61.29
Power Cost in 2006$($/MWh) 39.68 39.23 38.86 38.56 38.29 38.09 37.82 37.26 36.72 36.22
Fuel Cost($/MWh) 18.98 19.88 20.86 21.91 22.99 24.15 25.20 25.82 26.43 27.06
7 Projected Debt Service Costs (i) are net of estimated investment earnings on available fund balances and an assumed investment rate of 4%, and (ii)
assume that each Owner of Unit 3 finances under the same assumptions as UAMPS. Since each Owner is responsible for its own financing costs,the use
of different financing structures by other Owners will not affect UAMPS'debt service costs.
8 Operation and Maintenance costs are assumed to escalate at 2.5%annually.
9 Fuel costs are based on estimated average fuel costs of$2.01/MMBtu in 2012,escalating at approximately 2.4%annually.
10 Generation is based on an assumed capacity factor of 90%.
e
ASSUMPTIONS AND RISKS
The projected construction costs and projected cost of energy of the Project are based
upon a number of estimates and assumptions regarding various matters, including the actual
contract price under EPC contract, the proposed construction and draw schedule, future interest
rates and other matters. These assumptions and estimates have been presented to the Project
Management Committee, and DAMPS believes that they are reasonable for the purposes of this
Executive Summary. While these assumptions and estimates are believed to be reasonable as of
the date of this document, it is probable that certain assumptions and estimates will change over
time.
Certain of these estimates and assumptions include commercially-sensitive information,
particularly with regard to the estimated construction cost of Unit 3 and the current solicitation of
the EPC contractor. If you require additional information regarding these estimates and
projections, please contact DAMPS.
The ability of UAMPS to proceed successfully with the acquisition, construction,
completion and operation of the Project is subject to a number of factors beyond the control of
DAMPS. These factors include (but are not limited to):
• the approval and execution of Power Sales Contracts by a substantial number of the
prospective Participants, and the performance by each Participant of its obligations under
the Power Sales Contract;
• the successful negotiation and completion of the Project Agreements, their execution by
each of the parties thereto and the performance by these parties of their obligations under
the Project Agreements;
• the ability of UAMPS and the other prospective Owners of Unit 3 to engage an EPC
contractor and to negotiate an acceptable EPC contract;
• the ability of UAMPS and the other prospective Owners of Unit 3 to obtain and defend all
regulatory permits and approvals necessary for the construction and operation of Unit 3;
• the performance by the EPC contractor of its obligations under the EPC contract, the
completion of Unit 3 meeting all of the EPC contractor's performance guarantees and the
ability of the EPC contractor to pay liquidated damages for any failure of Unit 3 to meet
these performance guarantees;
• increasing costs for labor and materials for the construction of Unit 3 and the effect of
inflationary pressures in the economy;
• changes in federal and state law and environmental regulations limiting greenhouse gas
emissions or affecting coal-fired power plants generally or Unit 3 specifically;
- 5 -
• the ability of UAMPS and each other prospective Owner to finance its respective share of
the costs of construction of Unit 3;
• the development and implementation by UAMPS of a successful fuel supply acquisition
program for the Project;
• the ability of DAMPS and the Participants to successfully complete all transmission
arrangements necessary for the transmission of electricity from the Project to the
Participants' respective distribution systems;
• changes, developments and potential disruptions in the wholesale electric markets in the
western U.S.; and
• other factors that may be outside the control of DAMPS, any Participant or any Owner of
Unit 3.
Any of the above factors could have a material and adverse effect on UAMPS' ability to acquire,
construct, complete and operate the Project, the projected commercial operation date of the
Project, the projected construction costs of the Project and the projected cost of energy from the
Project.
- 6 -
ANNEX 1
Independent Engineering Review
of
Capital Cost Estimate
for
Intermountain Power Pro'ect Unit 3 (IPP3)
Delta UtX
Prepared For
Utah Associated Municipal Power Systems (DAMPS)
Salt Lake City, Utah
November 13, 2006
Burns and Roe Enterprises, Inc
800 Kinderkamack Road
Oradell, New Jersey 07649
0
1. Introduction and Summary
Burns and Roe Enterprises, Inc. has reviewed capital cost estimates for the proposed
Intermountain Power Project Unit 3 (IPP 3). The following specific documents were reviewed:
• Cummins & Barnard EPC Cost Estimate Summary dated August 16, 2006
• PacifiCorp IPP 3 Cost Estimate, Revision 11 dated November 10, 2006
The current total EPC Project Cost developed by DAMPS and PacifiCorp is $1,453 million or
$1,615/kW, excluding escalation. This does not include the cost of common facilities and site of
$184.5 million, bringing the adjusted EPC cost up to $1,815/kW. The total project budget,
including Owner's Cost, escalation and interest during construction is $2,438 million or
$2,709/kW.
In general Burns and Roe considers that the total project budget of$2,438 million is reasonable
for a coal project that will be constructed for 2012 operation.
2. Specific Comments
Burns and Roe reviewed a breakdown of the EPC Cost Estimate prepared by Cummins &
Barnard. This estimate was prepared prior to adjustments in the EPC Cost and total project
budget that are reflected in the IPP Cost Estimate(Rev. 11) cited above. The following
comments on the C&B Cost Estimate Summary are provided to assist in adjusting the C&B
Summary to the revised EPC Cost:
Major Equipment(Totals were provided for the Boiler Island, Air Quality Control Systems
(AQCS) and BOP Mechanical Equipment)
a. The cost of$ 170 million for the Boiler Island (Steam Generator) is reasonable.
b. The cost of$107 million for the AQCS equipment appears low. We suggest a value of
about $130 million be used. We assume this includes the fabric filter, wet Flue Gas
Desulfurization(FGD), Selective Catalytic Reduction(SCR) and provisions for Activated
Carbon Injection(ACI).
c. The Balance of Plant Mechanical Equipment cost of$ 56 million includes $ 52 million
for the steam turbine generator(STG). The STG cost appears low. We suggest a value
of$60 million for the STG and $65 million total for this category.
d. The cost of$ 26.5 million for the chimney appears reasonable.
Labor Costs
a. C&B has identified a labor productivity factor of 1.02. The productivity factor is the
adjustment applied to unit man-hours for specific construction activities. We assume the
reference point used is Gulf States U.S. The productivity estimates that can be inferred
1
from the summary estimate (e.g., man-hours/yard of concrete) appear to confirm this
assumption.
b. Burns and Roe would recommend a productivity factor of 1.3 for this site. This would
increase the direct contractor man-hours from 3.952 million to 5.036 million and increase
the direct labor cost from$255 million to $325 million.
Bulk Quantities
a. The quantities provided for structural steel and large bore pipe appear reasonable.
b. The quantities for concrete and small bore piping appear low,but we have not
investigated the foundation design or shared facilities that can impact these numbers.
c. The cable tray quantity is lower and the conduit quantity much higher than we would
expect. This could reflect a different philosophy on routing of cabling. The use of more
conduit would tend to increase the cost of cable installation.
Indirect and Owner's Costs
a. The C&B total cost for project management, construction management, procurement and
engineering appears reasonable although we would use a lower engineering cost and
higher PM/CM cost.
b. It is noted that the EPC Cost developed by UAMPS and PacifCorp excludes escalation.
Escalation is added on the bottom line to cover both EPC and Owner's cost at a rate of
14.5%. This rate is considered reasonable for a project to go into commercial operation
in 2012.
c. The PacifiCorp total project estimate includes an Owner's Contingency of 5.0% applied
to the total EPC cost. This is considered reasonable at this stage of the project design.
3. Discussion
It is well known to the IPP 3 owner participants that there has been a rapid increase in the capital
cost of U.S. based coal fired power plants. There are a number of key market conditions that are
influencing this cost increase. These include:
a. Material costs for steel, copper, concrete, and alloy metals have escalated
dramatically over the last 3 years. Trend curves are provided at the end of this report. It
is noted that if steel prices go up by 10%, the impact is relatively small in the construction
bulk cost. The real impact is in the equipment supply and how the manufacturer is
affected in terms of price, source and delivery schedule.
b. There are fewer manufacturers in business than there were in the early 1990s as a
result of industry consolidation over the 1990s. Fabrication capacity has been
significantly reduced particularly in the US. As demand increases, we would expect that
after the initial profit taking, suppliers may reactivate old capacity or add new. But the
industry, as always, is going to lag by about 2-5 years making sure the boom is real before
heavy investments are made. As a result of manufacturing capacity shortfalls and
competitive pricing pressures, more equipment will be sourced from overseas. This leads
to higher shipping and insurance costs.
C. Contractors are being very selective as to which projects they will bid and the
terms under which they would work. Note that many contractors available in the 1990s
are gone as a result of taking too much risk in doing EPC work in combined cycle
projects. The remaining contractors are much more cautious relative to risk and some are
taking advantage of the market to recoup losses accrued in the 1990s by using higher
profit margins.
d. The U.S. construction labor market is having difficulty accommodating the
simultaneous construction of several major large generation projects in the U.S. In
addition there are more scrubber, SCR, and other environmental retrofits taking place
throughout the country. The number of qualified and experienced craftsmen in each of
the labor trades has declined significantly and the average age of the construction
tradesman has increased without a meaningful apprenticeship program to replace the
large number of power generation construction workers that will be retiring in the next
10- 15 years.
e. Construction productivity is being negatively impacted by the skill set
requirements for construction labor needed on new major power generation construction
projects. Examples are the increased requirements for welding of high alloy materials
(P22 and P91 steels) where recent industry experience on large coal fired generation
projects indicate that weld reject rates can be as high as 14%. Another example is the
heavy rigging and lifting activities associated with the installation of prefabricated and/or
preassembled building or equipment modules.
4. Conclusions
Current market conditions and equipment and construction pricing being experienced on
coal fired projects in construction indicate that a conservative value should be used for the EPC
capital cost. The updated EPC Cost and Total Project Cost Estimate developed by UAMPS and
PacifiCorp reflect this approach. The total project budget of $2,438 million is considered
reasonable.
4
r
DRAFT OF 4II2/06
UNIT 3 CONSTRUCTION LEASE,USE AND
SERVICES AGREEMENT
BY AND AMONG
INTERMOUNTAIN POWER AGENCY
THE CITY OF LOS ANGELES
ACTING BY AND THROUGH
THE DEPARTMENT OF WATER AND POWER
AS IPP PROJECT MANAGER AND
OPERATING AGENT
AND
THE UNIT 3 OWNER PARTICIPANTS
REFERRED TO HEREIN
Dated as of ,200_
'560995 0.7
TABLE OF CONTENTS
(continued)
Page
Section 7.2 Unit 3 Plans and Specifications.........................................................26
Section 7.3 Completion of Unit 3.........................................................................26
ARTICLE VIII CONSTRUCTION ACTIVITIES; OWNERSHIP OF UNIT 3
LEASEHOLD IMPROVEMENT............................................................27
Section 8.1 Use of Unit 3 Construction Properties and Facilities.........................27
Section 8.2 Design and Construction; Switchyard Additions...............................28
Section 8.3 Licenses, Permits and Approvals.......................................................29
Section8.4 No Warranties....................................................................................29
Section8.5 Right of Entry ....................................................................................30
Section 8.6 Hazardous Materials..........................................................................31
Section 8.7 Liability for Activities........................................................................ 31
Section 8.8 Environmental Compliance...............................................................32
Section 8.9 As Built Plans and Specifications......................................................33
Section 8.10 The Unit 3 Leasehold Improvement Owned by the Unit 3
Owner Participants.............................................................................33
ARTICLE IX ELECTRIC,WATER AND OTHER SERVICES .................................. 34
Section 9.1 Electric Service..................................................................................34
Section 9.2 Water Service.....................................................................................35
Section 9.3 Other Services....................................................................................36
ARTICLEX INSURANCE...........................................................................................38
Section10.1 In General...........................................................................................39
Section 1.0.2 General Liability Insurance................................................................40
Section 10.3 Auto Liability Insurance....................................................................40
Section 10.4 Workers' Compensation and Employers' Liability Insurance...........40
Section 10.5 Aircraft Liability Insurance................................................................41
Section 10.6 Pollution Legal Liability Insurance ...................................................41
Section 10.7 Professional Liability Insurance ........................................................41
Section 10.8 Other Insurance..................................................................................42
.ARTICLE XI TAXES AND OTHER IMPOSITIONS..................................................43
Section 11.1 Payment of Taxes and Impositions....................................................43
Section11.2 Exemptions........................................................................................44
566N50.7 -ii-
TABLE OF CONTENTS
(continued)
Page
ARTICLE XIX DISPUTE RESOLUTION.......................................................................57
Section 19.1 Settlement By Project Consultant......................................................57
Section 19.2 Effectiveness of Settlement................................................................58
Section19.3 Prohibitions........................................................................................58
Section 19.4 Costs and Expenses............................................................................59
Section 19.5 No Waiver of Right to Judicial Action..............................................59
ARTICLE XX REPRESENTATIONS AND WARRANTIES........................................60
Section 20.1 Representations and Warranties of the Parties...................................60
ARTICLE XXI SUCCESSORS AND ASSIGNS.............................................................62
Section 2 1.1 Transfer or Assignment........................................I.............................62
Section 21.2 Affect on Tax Exempt Status of IPA Bonds......................................64
ARTICLE XXII PAYMENT OBLIGATIONS AND DETERMINATIONS OF
UNIT 3 OWNER PARTICIPANTS........................................................64
Section 22.1 Several Obligations............................................................................65
Section 22.2 Determinations...................................................................................65
ARTICLE XXIII COOPERATION.....................................................................................66
Section 23.1 Cooperation Among the Parties.........................................................66
ARTICLE XXIV OBLIGATIONS UNDER IPP AGREEMENTS.....................................66
Section 24.1 Obligations of IPA and Los Angeles.................................................66
ARTICLE XXV PERFORMANCE UNDER IPP AGREEMENTS ..................................67
Section 25.1 Performance by IPP Project Manager and Operating Agent;
Liability..............................................................................................67
Section 25.2 Performance by Intermountain Power Service Corporation..............68
ARTICLEXXVI NOTICES.................................................................................................68
Section26.1 Notices...............................................................................................68
Section 26.2 Change in Designation.......................................................................69
ARTICLE XXVII GOVERNING LAW................................................................................69
Section 27.1 Governing Law ..................................................................................69
ARTICLE XXVIII FURTHER ASSURANCES ....................................................................70
Section 28.1 Further Assurances.............................................................................70
ARTICLE XXIX NO IMPLIED WAIVER.......................................................................... 70
45069950.7 -iv-
UNIT 3 CONSTRUCTION LEASE,USE AND SERVICES AGREEMENT
This Unit 3 Constriction Lease, Use and Services Agreement, dated as of
, 200.y..._, by and among INTERMOUNTAIN POWER AGENCY (``IPA"),
a political subdivision of the State of Utah organized and existing under the Interlocal
Cooperation Act constituting Title 11, Chapter 13 of the Utah Code Annotated, 1953, as
amended, THE CITY OF LOS ANGELES, a municipal corporation organized and existing
under the Charter of the City of Los Angeles and the laws of the State of California, acting by
and through the DEPARTMENT OF WATER AND POWER ("LOS ANGELES"), in its
capacity as Project Manager and Operating Agent of the INTERMOUNTAIN POWER
PROJECT ("IPP"), [INSERT NAMES OF UNIT 3 OWNER PARTICIPANTS] (collectively
referred to herein as the "Unit 3 Owner Participants",and IPA, Los Angeles and each of the Unit
3 Owner Participants are referred to herein individually as a "Party" and collectively as
"Parties") is made with reference to the following:
RECITALS
IPA owns and operates IPP, which consists of two coal-fired steam-electric generating
units, switchyard facilities and other related improvements, properties, equipment and facilities
("Units 1 and 2" as defined herein), and other facilities, located on a site (the "IPP Site") near
Lynndyl, in Millard County, Utah, together with transmission systems, including all additions
thereto and renewals and replacements thereof hereafter constructed or acquired.
All of the capacity and output of the Intermountain Power Project have been sold by IPA
to 36 entities (collectively, the "1PP Power Purchasers") pursuant to separate power sales
45669950.7 -1-
Project or impair or adversely affect the rights or security of the holders of bonds or other
indebtedness of IPA ("IPA Bonds" as defined herein), and have further determined that the
acquisition and use by the Unit 3 Owner Participants of interests in certain Intermountain Power
Project common facilities and the coordinated operation of Unit 3 with Units 1 and 2 will be
beneficial to and in the best interests of IPA and the IPP Power Purchasers.
IPA has also determined that this Agreement and the conveyance, granting or assignment
of the leases, licenses, easements and other rights with respect to the Intermountain Power
Project under this Agreement does not and will not have any adverse effect on the federal tax
exempt status of the IPA Bonds, or if there be any such adverse effect, it has been remediated in
accordance with the Internal Revenue Code and regulations thereunder or provision acceptable to
IPA has been made for such remediation.
IPA, the IPP Coordinating Committee, Los Angeles and the Unit 3 Owner Participants
have approved the terms and conditions of this Agreement.
THEREFORE, in consideration of the terms of this Agreement and the mutual
covenants and agreements hereinafter set forth, it is agreed by and among the Parties as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Section 1.1 De nitions
4506N50.7 -3-
"Hazardous Materials"means any pollutant, contaminant, dangerous or toxic substance,
hazardous or extremely hazardous waste, liquid, industrial or other waste or agent that is
regulated by a governmental agency in connection with the protection of the environment or
human safety or health.
"IPA Bonds" means the bonds and other indebtedness now outstanding and hereafter
issued by IPA to finance or refinance the Intermountain Power Project.
"IPP"means the Intermountain Power Project.
"IPP Agreements"means the IPP Power Sales Contracts, the IPP Amended and Restated
CM and O Agreement, the Power Supply Revenue Bond Resolution, adopted by IPA on
September 28, 1978, as heretofore and as it may be hereafter amended and supplemented, and
any other bond resolution, indenture, loan agreement, trust agreement or other instrument
pursuant to which IPA Bonds shall be issued or secured.
"IPP Confidential Information" means all information and materials pertaining to IPP
that IPA or Los Angeles shall designate as confidential in a written notice to the Unit 3 Owners
Committee and each Unit 3 Owner Participant, so long as (i) IPA and/or Los Angeles have made
reasonable efforts to maintain the confidentiality thereof, (ii) such information or materials are
not public information, and (iii) such information or materials have not been obtained
independently by the Unit 3 Owners Committee or any Unit 3 Owner Participant from a source
that is lawfully entitled to disclose the same
4566 950.; -5-
(i) utility, access and other easements and rights of way, restrictions, encumbrances
and exceptions which do not materially interfere with or materially impair the licensing,
construction, installation, testing or start-up of Unit 3;
(ii) all existing liens, charges, encumbrances, easements, encroachments, restrictions,
concessions, conditions and other matters of record;
(iii) all rights and reservations of IPA as set forth in the Construction Lease and
Agreement, and all ownership interests, leaseholds, easements, licenses, covenants, conditions,
restrictions and all other rights and interests in and to or in any way pertaining to the Unit 3 Site,
the Joint Common Facilities and other properties at the IPP Site that are provided by or pursuant
to the Common Facilities and Site Agreement and the Joint Operating Agreement;
(iv) any mechanic's, laborer's, materialman's, supplier's or vendor's lien if payment
is not yet due or if such lien is being contested;
(v) any liens for taxes, assessments, payments or fees in lieu of taxes or impact
alleviation and mitigation payments not yet due or being contested by appropriate proceedings so
long as such proceedings do not involve a material risk of the sale, forfeiture or loss of the
properties subjected to such lien or liens;
(vi) any liens, defects or irregularities of title that normally exist with respect to
properties similar in character to the IPP Site and which do not materially adversely interfere
with or materially impair the licensing, construction, installation, testing or start-up of Unit 3;
(vii) zoning laws and similar restrictions, and any reservations, restrictions, conditions
or limitations generally mandated by governmental authorities; and
45669950.7 -7-
"Unit 3"means the coal-fired generating unit and related facilities and appurtenances, as
described in Exhibit A-1, to be constructed and installed on the Unit 3 Site in accordance with
the Unit 3 Plans and Specifications.
"Unit 3 Confidential Information" means all information and materials pertaining to
Unit 3 that the Unit 3 Owners Committee shall designate as confidential in a written notice to
IPA and Los Angeles, so long as (i) the Unit 3 Owner Participants have made reasonable efforts
to maintain the confidentiality thereof, (ii) such information or materials are not public
information,and.(iii)such information or materials have not been obtained independently by IPA
or Los Angeles from a source that is lawfully entitled to disclose the same.
"Unit 3 Construction Properties and Facilities"means (i) Unit 3 being constructed and
installed on the Unit 3 Site, and (ii) the leasehold estates, licenses, properties, easements and
other rights and interests conveyed, transferred, granted and assigned under and pursuant to
Articles 111, IV, V and VI in connection with the licensing, construction, installation, testing and
start-up and the Commercial Operation of Unit 3 and the activities related and incidental thereto,
as provided in the Construction Lease and Agreement.
"Unit 3 Owners Committee" means the committee so designated that is established
pursuant to the Unit 3 Ownership Agreement.
"Unit 3 Ownership Agreement" means the Unit 3 Ownership Agreement, dated as of
, 240 , by and among the Unit 3 Owner Participants, as the same may be hereafter
amended or supplemented from time to time.
45669950.7 -9-
(iii) the headings, subheadings and table of contents in the
Construction Lease and Agreement are solely for convenience of reference and shall not
constitute a part of the Construction Lease and Agreement nor shall they affect the
meaning, construction or effect of any provision thereof;
(iv) except as otherwise expressly provided, reference to any
agreement or contract means such agreement or contract as amended, modified or
supplemented from time to time in accordance with the applicable provisions thereof;
(v) except as otherwise expressly provided, a reference to a law
includes any amendment or modification to such law and any rules or regulations issued
thereunder or any law enacted in substitution or replacement therefor; and
(vi) references to "including" or"include' shall mean including
without limiting the generality of any description preceding such term and for purposes
hereof the rule of ejusdem generis shall not be applicable to limit a general statement,
followed by or referable to an enumeration of specific matters, to matters similar to those
specifically mentioned.
Each of the Parties and its counsel have reviewed the Construction Lease and Agreement
and the usual rule of construction that any ambiguities are to be resolved against the drafting
party shall be inapplicable in the construction and interpretation of the Construction Lease and
Agreement.
ARTICLE ii
AGREEMENT TERM
45669950.7 -11-
Section 2.2 Early Termination
The Construction Lease and Agreement shall be terminated early upon the occurrence of:
(a) notification to IPA and Los Angeles by the Unit 3 Owner Participants of the
completion of the licensing, construction, installation, testing and start-up and the Commercial
Operation of Unit 3 and compliance in full with the provisions of the Construction Lease and
Agreement;
(b) abandonment or permanent discontinuance of the licensing, construction,
installation, testing and start-up and the Commercial Operation of Unit 3 as provided in Article
XV; or
(c) exercise of the remedy to terminate the Construction Lease and Agreement in the
case of a continuance of an Event of Default of the Unit 3 Owner Participants as provided in
Section 16.2.
Section 2.3 Termination of Certain Leases and Other Interests
Upon Conveyance of Joint Common Facilities
Upon the conveyance, transfer, granting and assignment under the Common Facilities
and Site Agreement of the Unit 3 Site and the undivided ownership interests and other rights in
and to the real and personal properties with respect to the Joint Common Facilities, the lease of
the Unit 3 Site and the leases, licenses and other rights to the use of the Joint Common Facilities,
together with easements with respect to the Unit 3 Site and the Joint Common Facilities, all as
provided by the Construction Lease and Agreement, shall forthwith terminate and all rights and
interests therein and thereto under the Construction Lease and Agreement shall be deemed
surrendered, delivered and released to IPA, but the remaining real and personal property leases
4566995o.7 -13-
shall provide that the Unit 3 Owner Participants or any contractor thereof shall have reserved the
right to dismantle, remove and take away any buildings, structures, infrastructure or other
improvements constructed or installed as provided in Section 3.1(c), then the determination of
IPA or Los Angeles as to such dismantling, demolishing, removal or clearance of such buildings,
structures, infrastructure or other improvements shall be inapplicable so long as the Unit 3
Owner Participants or such contractor, as applicable, shall exercise such reserved right in a
timely manner and pay all costs and expenses in connection therewith. Upon completion of such
restoration of the Unit 3 Construction Properties and Facilities the Unit 3 Owner Participants
shall surrender, deliver and release to IPA all such properties in good order and condition and the
Construction Lease and Agreement, unless earlier terminated, shall forthwith be terminated and
no longer be of any force and effect. The obligations and liabilities of the Unit 3 Owner
Participants arising under the provisions of this Section 2.4 shall survive the expiration of the
term of the Construction Lease and Agreement as set forth in Section 2.1 or, if extended, the
expiration of the term of such extension.
ARTICLE III
CONSTRUCTION LEASES—REAL PROPERTY
Section 3.1 Leases of Real Property
Upon the terms and conditions set forth in the Construction Lease and Agreement IPA
hereby delivers and leases to the Unit 3 Owner Participants and the Unit 3 Owner Participants
hereby accept and lease from IPA for the term of the Construction Lease and Agreement and any
extension thereof as provided for in Section 2.1, unless earlier terminated as provided in Section
2.2, certain real property located at the IPP Site as set forth below; and the Unit 3 Owner
45669950.7 -15-
(d) The tracts and parcels of land, together with all the rights, privileges and
appurtenances belonging or otherwise pertaining thereto, being more particularly delineated and
described in Exhibit D-1, including the existing buildings, structures, infrastructure and other
improvements thereon to be reconstructed, renovated or demolished in accordance with the
provisions of the Unit 3 Plans and Specifications specified in Exhibit D-2, at the cost and
expense of the Unit 3 Owner Participants, all as described and set forth in Exhibit D-2, and the
schedules of the rental payments therefor and certain terms and conditions pertaining thereto, all
as set forth in Exhibit D-3.
(e) The areas and space of existing buildings and structures delineated and described
in Exhibit E-1, including the additions thereto and reconstruction or renovations thereof in
accordance with the provisions of the Unit 3 Plans and Specifications specified in Exhibit E-2, at
the cost and expense of the Unit 3 Owner Participants, all as described and set forth in Exhibit E-
2, and the schedules of the rental payments therefor and certain terms and conditions pertaining
thereto, all as set forth in Exhibit E-3.
Section 3.2 Abatement of Rental
In the event of any damage or destruction (other than that caused by the Unit 3 Owner
Participants or any of their officers, employees, agents or contractors) (i) of any building,
structure, infrastructure or other improvement(or the delineated area or space thereof), leased as
provided in Section 3.1(b), (c), (d)or(e) above, the rental with respect thereto shall be abated for
any period during which by reason of such damage or destruction there is a substantial
interference with the use and occupancy thereof, or (ii) of any portion of any such building,
structure, infrastructure or other improvement (or such delineated area or space thereof), the
rental with respect to such building, structure, infrastructure or other improvement (or such area
4560950.7 -17-
with respect thereto and any modifications of or additions to the terms and conditions pertaining
thereto, and the applicable Exhibit shall be revised accordingly.
ARTICLE IV
CONSTRUCTION LEASES—PERSONAL PROPERTY
Section 4.1 Leases of Personal Prog fM
Upon the terms and conditions set forth in the Construction Lease and Agreement IPA
hereby leases to the Unit 3 Owner Participants and the Unit 3 Owner Participants hereby accept
and lease from IPA for the term of the Construction Lease and Agreement and any extension
thereof as provided for in Section 2.1, unless earlier terminated as provided in Section 2.2, the
items of equipment, apparatus and other facilities and the vehicles, all as delineated and
described in Exhibit F-1, and the Unit 3 Owner Participants agree to pay IPA rent for the lease of
such equipment, apparatus and other facilities and vehicles in the amounts and on the dates
during such term or extension thereof in accordance with the respective rental schedules therefor
as set forth in Exhibit F-2, and in addition to the terms and provisions of the Construction Lease
and Agreement, such leaseholds shall be subject to the terms and conditions pertaining thereto as
also provided in Exhibit F-2.
Section 4.2 Abatement of Rental
In the event of any damage or destruction (other than that caused by the Unit 3 Owner
Participants or any of their officers, employees, agents or contractors) of any item of equipment,
apparatus or other facilities or any vehicle as described in Section 4.1., the rental with respect
thereto shall be abated during any period in which by reason of such damage or destruction there
d566"50.7 -19-
Upon the terms and conditions set forth in the Construction Lease and Agreement IPA
hereby grants non-exclusive licenses to the Unit 3 Owner Participants and the Unit 3 Owner
Participants hereby accept the non-exclusive licenses from IPA for the term of the Construction
Lease and Agreement and any extension thereof as provided for in Section 2.1., unless earlier
terminated as provided in Section 2.2, for the use of certain properties at the IPP Site (other than
any use or services with respect to any properties that are provided for under Section 9.3), as set
forth below, and the Unit 3 Owner Participants agree to pay to IPA fees and charges for such
licenses in the amounts and on the dates during such term and any extension thereof in
accordance with the respective schedules of fees and charges set forth below, and, in addition to
the terms and provisions of the Construction Lease and Agreement, such licenses granted hereby
shall be subject to the terms and conditions pertaining thereto provided below, as follows:
(a) The land, buildings, structures and facilities as delineated and described in
Exhibit G-1. and the schedules of fees and charges therefor, as set forth in Exhibit G-2, and such
licenses granted hereby shall be subject to the terms and conditions pertaining thereto as also
provided in Exhibit G-2.
(b) The equipment, apparatus, machinery and other facilities and the vehicles as
delineated and described in Exhibit H-1 and the schedule of the fees and charges therefor and
certain terms and conditions as to the operation and scheduling of the operation or use thereof
and other matters pertaining thereto, all as set forth in Exhibit H-2.
Section 5.2 Rights and Assignments
Upon the terms and conditions set forth in the Construction Lease and Agreement IPA
hereby grants and assigns to the Unit 3 Owner Participants non-exclusive rights to the use of and
456614950? -21-
modified to provide for additions thereto and exclusions and releases therefrom, together with
any revisions to the applicable schedules of fees and charges therefor, and any modifications of
or additions to the terms and conditions pertaining thereto, and the applicable Exhibit shall be
revised accordingly.
ARTICLE VI
EASEMENTS
Section 6.1 Grant by IPA of Easements
Upon the terms and conditions set forth in the Construction Lease and Agreement, IPA
hereby grants and conveys to the Unit 3 Owner Participants and the Unit 3 Owner Participants
hereby accept from IPA for the term of the Construction Lease and Agreement and any extension
thereof as provided for in Section 2.1. unless earlier terminated as provided in Section 2.2
temporary non-exclusive easements over, under and across the IPP Site, as set forth below:
(a) Easements for conduits and facilities for electric, water and sanitary and storm
sewers, telephone and other communications and such other utilities, all as delineated and
described in Exhibit K-1.
(b) Rights of way and other easements for ingress and egress with respect to Unit 3
Construction Properties and Facilities as delineated and described in Exhibit K-2.
Section 6.2 Easements Reserved by IPA
IPA hereby reserves from the leasehold estates, licenses and rights and interests
conveyed, transferred, granted and assigned pursuant to Articles 111, IV and V, the rights of way,
easements for electric, water, sewer, telephone and other utility lines, wires, poles, pipes,
45669950.7 -23-
PARTICIPATION RIGHTS;
APPROVAL OF PLANS AND SPECIFICATIONS;
COMPLETION OF UNIT 3
Section 7.1 Participation of IPA.and Los Anizeles
With respect to each of the matters listed in subsections (a) through (d) of this Section
7.1, the Unit 3 Owner Participants shall (i) keep, or cause to be kept, each of IPA, Los Angeles
and IPSC fully informed, on a current basis, of their plans, strategies and actions pertaining to
the licensing, construction, installation,testing, start-up and Commercial Operation of Unit 3, (ii)
permit IPA, Los Angeles and IPSC to attend all meetings with third parties in which the Unit 3
Owners Committee, any Unit 3 Owner Participant, or any authorized officer, representative or
agent acting on behalf of the Unit 3 Owners Committee or any Unit 3 Owner Participant will
participate, (iii) provide IPA, Los Angeles and IPSC reasonable advance notice of all such
meetings, and(iv) take into consideration any and all input IPA, Los Angeles or IPSC may have
with respect to such matters. IPA or Los Angeles may object to any aspect of the activities,
plans or proposals in connection with any such matter and, so long as such objection is based
upon a determination by IPA or Los Angeles that the activity, proposal or plan could have a
material adverse effect on any IPP Facilities or on the IPP Power Purchasers, in their capacities
as such, neither the Unit 3 Owners Committee nor any Unit 3 Owner Participant or any
authorized officer, representative or agent thereof shall proceed in such matter until the objection
of IPA or Los Angeles is resolved to its reasonable satisfaction. Such matters shall include each
of the following:
(a) The application for and obtaining of all permits, licenses or approvals relating to
Unit 3, or any amendment to or modification of any existing permit, license or approval with
as«9950.7 _)5_
The Unit 3 Owner Participants shall proceed with the licensing, construction, installation,
testing and start-up and the Commercial Operation of Unit 3, at their sole cost and expense, in
accordance with the Unit 3 Plans and Specifications, with reasonable diligence and in accordance
with Prudent Utility Practice so as to complete such licensing, construction, installation, testing
and start-up of Unit 3 and the Commercial Operation thereof, including site restoration as
provided in Section 2.4, not later than , 20_.,., unless prevented by
Uncontrollable Forces. In the case of a failure to complete such licensing, construction,
installation, testing and start-up of Unit 3 and the Commercial Operation thereof, including such
site restoration, by such date by reason of any Uncontrollable Forces, completion of such
licensing, construction, installation, testing and start-up of Unit 3 and the Commercial Operation
thereof, including such site restoration, shall take place within such period following
20,, as shall be equal to the aggregate of the time delays of such
licensing, construction, installation, testing and start-up of Unit 3 and the Commercial Operation
thereof, including such site restoration,due to such Uncontrollable Forces.
ARTICLE VIII
CONSTRUCTION ACTIVITIES;
OWNERSHIP OF UNIT 3 LEASEHOLD IMPROVEMENT
Section 8.1 Use of Unit 3 Construction Properties and Facilities
The Unit 3 Owner Participants shall use the Unit 3 Construction Properties and Facilities
only for the licensing, construction, installation, testing and start-up and the Commercial
Operation of Unit 3, including site restoration and activities related and incidental thereto, all as
provided in the Construction Lease and Agreement.
=1W9950.7 -27-
the power flows of Unit 3 in addition to those of Units l and 2. It is agreed by the Parties that
any such addition or modifications shall be deemed to be Required Common Facilities Additions
and Improvements (as defined in the Common Facilities and Site Agreement) and shall be
installed and constructed and paid for as provided in Section 3.2 of the Common Facilities and
Site Agreement and ownership interests therein shall be sold, conveyed and transferred and shall
be otherwise governed by and in accordance with the provisions of the Common Facilities and
Site Agreement applicable to Common Facilities Additions (as so defined) and Joint Common
Facilities.
Section 8.3 Licenses, Permits and Agerovals
The Unit 3 Owner Participants shall use their best efforts to seek and obtain all licenses,
permits, regulatory approvals and other rights necessary for the design, licensing, construction,
installation, testing and start-up of Unit 3 and the Commercial Operation thereof. A list of the
licenses, permits and regulatory approvals for Unit 3 obtained prior to the Effective Date of the
Construction Lease and Agreement is set forth in Exhibit M.
Section 8.4 No Warranties
The Unit 3 Owner Participants acknowledge that they have inspected the Unit 3
Construction Properties and Facilities prior to the Effective Date and agree to accept the same
"as is", without representation or warranty, expressed or implied in fact or in law, by IPA or Los
Angeles, and without recourse to IPA or Los Angeles (or any of their respective officers,
employees or agents), as to the nature, condition or usability thereof, or the uses to which the
Unit 3 Construction Properties and Facilities or any part thereof are to be put. Neither IPA nor
Los Angeles makes any warranty or representation or accepts any liability or responsibility with
respect to or for the adequacy, efficiency or suitability of, or defects in, the Unit 3 Plans and
45669950.7 -29-
representatives and agents in order to provide information and respond to inquiries concerning
matters under the Construction Lease and Agreement.
Section 8.6 Hazardous Materials
No Hazardous Materials shall be used, stored, released, handled, produced or installed in
or around, or transported to or from, Unit 3 Construction Properties and Facilities, except as
permitted by and in accordance with applicable laws and regulations of governmental agencies.
In the event of a breach of this provision, IPA and Los Angeles shall each, in addition to all its
rights and remedies under the Construction Lease and Agreement and pursuant to applicable law,
have the right to remove at the sole cost and expense of the Unit 3 Owner Participants, or the
right to require the Unit 3 Owner Participants to remove, any such Hazardous Materials from the
Unit 3 Construction Properties and Facilities in the manner provided by applicable law for such
removal. The obligations and liabilities of the Unit 3 Owner Participants and the rights of IPA
and Los Angeles arising under the provisions of this Section 8.6 shall survive any termination or
expiration of the term or any extended term of the Construction Lease and Agreement.
Section 8.7 Liability for Activities
In the event any activities in connection with the design, licensing, construction,
installation,testing or start-up or the Commercial Operation of Unit 3, including activities related
or incidental thereto, other than those pursuant to the Unit 3 Plans and Specifications approved
by IPA and Los Angeles (or as to which approval was unreasonably withheld) as provided in
Section 7.2 or otherwise permitted under the Construction Lease and Agreement, shall require
any modification of or addition to Units I or 2 or other IPP Facilities not otherwise provided for
in the Construction Lease and Agreement or result in an increase in the operation, maintenance
or other costs of Units I and 2 or any other IPP Facilities, or result in an increase in the cost of
4 6699sa7 -31-
testing, start-up and Commercial Operation of Unit 3. The Unit 3 Owner Participants shall also
cause such contractors and engineers to carry out their own duties and responsibilities with
respect to Unit 3 for permitting and other environmental compliance and shall in this connection
coordinate with Los Angeles and IPSC in the development of risk management and other
emergency planning programs as required under applicable environmental and safety laws,
regulations and orders.
Section 8.9 As Built Plans and Specifications
Upon completion of the licensing, construction, installation, testing and start-up of Unit
3, the Unit 3 Owner Participants shall furnish or cause to be furnished to IPA and Los Angeles,
promptly following the issuance thereof, copies of all appropriate documentation, including, but
not limited to, "as built" Unit 3 Plans and Specifications, certificates of occupancy and all other
licenses, approvals, authorizations, permits and certificates evidencing, among other things, that
the licensing, construction, installation, testing and start-up and the Commercial Operation of
Unit 3, including site restoration, has been performed and completed in accordance with the Unit
3 Plans and Specifications and all applicable laws and regulations.
Section 8.10 The Unit 3 Leasehold Improvement Owned by the Unit 3 Owner
Participants
Unit 3 as constructed and installed on the Unit 3 Site shall constitute a leasehold
improvement that shall be owned by, and fee title as to which shall vest in, the Unit 3 Owner
Participants and Unit 3 shall otherwise be subject to the terms and provisions of the Construction
Lease and Agreement.
45669950.7 -33-
electric service, other than pursuant to Section 9.1(b) above, arranged by the Unit 3 Owner
Participants. In the event that IPA and Los Angeles shall agree to provide or cause IPSC to
provide black start service or any other electric service (other than pursuant to (b) above) from
the net generation of Units 1 and 2, arrangements satisfactory to IPA and Los Angeles shall be
made by the Unit 3 Owner Participants for the return of such capacity and energy at the IPP
switchyard or at such other interconnection as shall be agreeable to IPA and Los Angeles.
Section 9.2 Water Service
IPA and Los Angeles shall furnish or cause IPSC to furnish to the Unit 3 Owner
Participants water service, consisting of both potable and non-potable water, to meet the
requirements for the licensing, construction, installation, testing and start-up and the Commercial
Operation of Unit 3, including activities relating and incidental thereto,as follows:
(a) Los Angeles shall install or cause IPSC to install, at the sole cost and expense of
the Unit 3 Owner Participants, water meters and related facilities so that all water furnished shall
be metered to provide for proper measurement and accounting for water use. At the request of
the Unit 3 Owner Participants Loss Angeles will furnish or cause IPSC to furnish demineralized
water for use in the Unit 3 boiler blow-down;
(b) The Unit 3 Owner Participants shall pay IPA for water service , including for the
treatment and supply of demineralized water, in accordance with the rate schedules set forth in
Exhibit O;
(c) Los Angeles shall develop and submit to the Unit 3 Owner Participants for their
approval, which approval shall not be unreasonably withheld, metering and accounting protocols
4566"50.7 -35-
(c) The use of the existing landfill at the IPP Site shall be made available for the
disposal of construction waste associated with the construction and installation of Unit 3
including all supporting and related activities. Los Angeles shall furnish the Unit 3 Owner
Participants with protocols and procedures pertaining to the location and methods of disposal of
such waste, along with the cost-based charges payable by the Unit 3 Owner Participants for such
use and service. Upon the Commercial Operation of Unit 3, appropriate arrangements shall be
made by IPA and Los Angeles for the conveyance and transfer to the Unit 3 Owner Participants
of the portion of such landfill as shall consist primarily of construction waste from Unit 3
construction.
(d) The services of the existing IPP fire brigade, together with ambulance services,
shall be provided for the Unit 3 Construction Properties and Facilities in addition to the IPP
Facilities, provided that no representation or warranty is or shall be made as to the adequacy of
the capabilities of any such existing services for the purpose of the Unit 3 Construction
Properties and Facilities or any activities thereon. Los Angeles shall prescribe the charges for
such services which charges shall be cost-based and payable by the Unit 3 Owner Participants.
(e) The existing IPP Hazmat response and mitigation service with respect to
Hazardous Materials shall be provided for the Unit 3 Construction Properties and Facilities in
addition to the IPP Facilities, provided that no representation or warranty shall be made as to the
adequacy of the capabilities of any such service for the purposes of the Unit 3 Construction
Properties or Facilities or any activities thereon. Los Angeles shall prescribe the charges for
such service which charges shall be cost-based and payable by the Unit 3 Owner Participants.
4566'950.7 -37-
Section 10.1 In General
The Unit 3 Owner Participants, at their sole cost and expense, shall at all times maintain
or cause to be maintained the insurance required by this Article X (other than insurance required
to be provided as set forth in Section 10.8)with nationally recognized insurers or sureties eligible
to do business in the State of Utah that are acceptable to IPA and Los Angeles. All policies of
such insurance (other than workman"s compensation and employer's liability insurance) shall
name IPA, Los Angeles and IPSC and their respective members, boards, officers, employees and
agents as additional insureds (the "Additional Insureds") as their respective interests may appear
and shall provide that the insurers or sureties waive all claims for premiums from and any rights
of setoff, counterclaim, deduction or subrogation against the Additional Insureds. Evidence of
such insurance coverage from the insurers or sureties in form and content acceptable to IPA and
Los Angeles shall be furnished by the Unit 3 Owner Participants to IPA, Los Angeles and IPSC
and shall provide that the coverage and other protections thereunder may not be cancelled or
changed without at least 30 days prior notice to the Additional. Insureds. The policy deductibles
and any insurance retention(other than with respect to workman's compensation and employer's
liability insurance) with respect to any such insurance coverage shall be acceptable to IPA and
Los Angeles. All such insurance shall be primary and any insurance carried by any of the
Additional Insureds shall be deemed to be non-contributory and excess for all purposes of the
Construction Lease and Agreement. Each policy of such insurance (other than workman's
compensation and employer's liability insurance) shall contain a Severability of Interest and
Cross Liability clause that applies such insurance separately to the Unit 3 Owner Participants and
each Additional Insured, as well as a Contractual Liability Endorsement that extends the
insurance coverage thereunder to apply to the liability assumed by the Unit 3 Owner Participants
under the Construction Lease and Agreement.
45609950.r -39-
however, that, if the Unit 3 Owner Participants shall be eligible therefor under applicable law,
such worker's compensation and employer's liability exposure may be self-insured, but only if
IPA, Los Angeles and IPSC are furnished with appropriate documentation from the State of Utah
governmental agency having jurisdiction certifying such self-insurance participation.
Section 10.5 Aircraft Liability Insurance
The Unit 3 Owner Participants shall provide aircraft liability insurance which shall
include coverage for liability arising out of the use of owned, chartered or any other aircraft in
connection with the construction, installation,testing, start-up and Commercial Operation of Unit
3 and the activities related and incidental thereto, undertaken under the Construction Lease and
Agreement. Such insurance shall provide coverage in an amount not less than $100 million
combined single limit per occurrence, and shall include coverage for acts of terrorism.
Section 10.6 Pollution Legal Liability Insurance
The Unit 3 Owner Participants shall provide pollution legal liability insurance insuring
against loss or liability with respect to any spill or release of any Hazardous Material or with
respect to any other pollution incident occurring as a result of or arising by reason of the design,
construction, installation, testing, start-up or Commercial Operation of Unit 3 or any activity
related or incidental thereto, undertaken under the Construction Lease and Agreement. Such
pollution legal liability insurance shall provide coverage in an amount not less than$1.00 million
combined single limit per occurrence and shall include coverage for acts of terrorism.
Section 10.7 Professional Liability Insurance
The Unit 3 Owner Participants shall provide professional liability insurance insuring
against liability resulting from professional errors and omissions arising by reason of or incident
45669950.7 -41-
(B) waiver by the insurer of all rights of subrogation against the
insureds and their boards, members, officers, employees and agents; and
(C) coverage providing adequate limits to assure the highest value of
the aggregate amount of construction equipment on the IPP Site at any
time.
(b) All such insurance shall be primary so that any other insurance policy of any of
the insureds which may be applicable shall be excess and non-contributing in the event of any
loss with respect to Unit 3 or the Joint Common Facilities arising by reason of or incident to the
design, licensing, construction, installation, testing, startup or Commercial Operation of Unit 3
and such coverage shall have a full waiver of subrogation in favor of the insureds.
(c) Evidence of such insurance coverage from the insurers or sureties in form and
content acceptable to IPA and Los Angeles shall be furnished by the Unit 3 Owner Participants
to IPA, Los Angeles and IPSC. Such insurance coverages and the other terms and conditions of
each of the policies of such insurance may not be cancelled or changed without at least 34 days
prior notice to IPA and Los Angeles and any such cancellation or change shall be subject to the
approval of IPA and Los Angeles as above provided.
ARTICLE XI
TAXES AND OTHER IMPOSITIONS
Section 11.1. Payment of Taxes and Impositions
45669950,7 -43-
Section 12.1 Indemni 3_Owner Particfi _ ipants
In addition to any other indemnification provisions in the Construction Lease and
Agreement the Unit 3 Owner Participants shall indemnify and save IPA, Los Angeles and IPSC
and their respective members, officers, employees and agents harmless from and against, and
shall reimburse IPA, Los Angeles and IPSC, as applicable, and their respective members,
officers, employees and agents, for all losses, liabilities, obligations, damages, fines, penalties,
claims, demands, costs, expenses and judgments, including reasonable attorneys' fees and
disbursements, of any kind or nature (including all costs, expenses and liability for
environmental investigations, monitoring, containment, abatement, removal, repair, cleanup,
restoration, remediation, response, penalties and fines arising from the violation of any local,
regional, state or federal environmental laws or regulations whether founded in tort, contract or
otherwise), arising as a result of or by reason of any of the following:
(a) The design, licensing, construction, installation, testing, start-up or Commercial
Operation of Unit 3, including activities related or incidental thereto, undertaken under the
Construction Lease and Agreement;
(b) The use, possession, condition, operation, maintenance or management of the
Unit 3 Construction Properties and Facilities;
(c) Any violation of laws, covenants, restrictions, easements or conditions affecting
the Unit 3 Constriction Properties and Facilities; or
45669950.7 0.7 -45-
design, construction, installation, testing, start-up or Commercial Operation of Unit 3 or any
activities related or incidental thereto,undertaken under the Construction Lease and Agreement.
Section 12.4 Survival of Provisions
The obligations and liabilities of the Unit 3 Owner Participants arising under the
provisions of this Article shall survive any termination or expiration of the term or any extended
term of the Construction Lease and Agreement as provided for by Section 2.1.
ARTICLE XIII
COMPLIANCE WITH LAWS
Section 13.1 Compliance with respect to Construction Properties and Facilities
The Unit 3 Owner Participants will, at their sole cost and expense, comply with all laws,
rules. ordinances, regulations, orders, decrees and requirements (collectively "Laws") of duly
constituted governmental authorities, commissions and courts, applicable to the Unit 3
Construction Properties and Facilities or to the design, licensing, construction, installation,
testing and start-up and the Commercial Operation of Unit 3, including activities relating or
incidental thereto, and will not use or permit the use of the Unit 3 Construction Properties and
Facilities for any unlawful purpose or in violation of any Laws or government permits, licenses,
authorizations or approvals applying to or affecting the Unit 3 Construction Properties and
Facilities, or suffer any action to be taken or any condition to exist with respect to the Unit 3
Construction Properties and Facilities which may constitute a public or private nuisance.
a5669950.7 -47-
ARTICLE XV
ABANDONMENT OR DISCONTINUANCE OF CONSTRUCTION;
TERMINATION OF AGREEMENT
Section 15.1 Restoration of Properties
In the event the design, licensing, construction, installation, testing, start-up or
Commercial Operation of Unit 3 shall be abandoned or permanently discontinued or the
Construction Lease and Agreement shall be terminated due to an Event of Default by the Unit 3
Owner Participants, the Unit 3 Owner Participants shall, except to the extent IPA and Los
Angeles shall otherwise agree in writing, to be obligated, at their sole cost and expense, to
proceed with reasonable expedition to restore the Unit 3 Construction Properties and Facilities to
the state and condition thereof existing on the Effective Date, including, without limitation,
causing the dismantling, demolition, removal and salvaging of all buildings, structures,
infrastructure or other improvements or equipment, apparatus and facilities erected, placed or
located thereon in connection with the construction, installation, testing or start-up or the
Commercial Operation of Unit 3, including activities related or incidental thereto, and the
clearance and disposal of all materials and debris resulting from such construction and
installation, and shall surrender and deliver to IPA all such properties in good order and
condition free and clear of all liens and encumbrances other than those existing on the Effective
Date or Permitted Encumbrances; provided that, except as provided in the next sentence, the
buildings, structures, infrastructure and other improvements constructed or installed as provided
in Section 3.1(c) or the existing buildings, structures, infrastructure and other improvements
45669950.7 -49-
If the Unit 3 Owner Participants do not comply with their obligations under Section 15.1
above and are in default of such performance for a period exceeding 120 days, IPA and Los
Angeles, or either of them, may at their or its option, as applicable, upon 30 days notice enter in
or upon the Unit 3 Construction.Properties and Facilities and proceed to restore the same and the
Unit 3 Owner Participants shall indemnify IPA and/or Los Angeles, as applicable, for any and all
costs incurred by them or by it for such restoration.
Section 15.4 Rights and Remedies
Any rights or remedies exercised by IPA or Los Angeles under this Article XV shall be in
addition to, and not in substitution for, any and all other rights and remedies that IPA or Los
Angeles shall be entitled to under the Construction Lease and Agreement or pursuant to
applicable law.
Section 15.5 Survival of Provisions
The obligations and liabilities of the Unit 3 Owner Participants arising under the
provisions of this Article XV shall survive any termination of the Construction Lease and
Agreement.
ARTICLE XVI
DEFAULT BY UNIT 3 OWNER PARTICIPANTS
Section 16.1 Events of Default
Each of the following events shall constitute an Event of Default with respect to the Unit
3 Owner Participants:
45669950.7 -51-
Upon the occurrence and continuance of any Event of Default, IPA or Los Angeles at any
time may give written notice to the Unit 3 Owner Participants stating that the Construction Lease
and Agreement and the leases, licenses, easements and other rights created under the
Construction Lease and Agreement shall terminate on the date specified in such notice, which
shall be at least 10 days after the giving of such notice, and on the date specified in such notice,
if such Event of Default shall be continuing, the Construction Lease and Agreement and the term
thereof and each and every lease, license and other right conveyed, granted, transferred or
assigned under the Construction Lease and Agreement shall absolutely cease and terminate with
the same force and effect as though the date of expiration of the term of the Construction Lease
and Agreement shall have occurred; provided, however, that such termination shall not relieve
the Unit 3 Owner Participants of their liability and obligation with respect to the restoration of
the Unit 3 Construction Properties and Facilities as provided in Article XV or their other
liabilities and obligations that under the terms of the Construction Lease and Agreement survive
such termination, all of which liabilities and obligations shall survive any such termination.
Section 16.3 Other Riplits and Remedies
IPA or Los Angeles, in the case of the occurrence and continuance of any Event of
Default may exercise any other right or remedy, including an action for specific performance,
which may be available under applicable law to enforce the Construction Lease and Agreement
and to recover any loss, damage or cost, including all attorneys' fees and disbursements and
court and collection costs, incurred by IPA or Los Angeles by reason of such Event of Default.
Section 16.4 Remedies Cumulative
No remedy available to IPA or Los Angeles is intended to be exclusive of any other
remedy available to IPA or Los Angeles, but every such remedy shall be cumulative and may be
45669A50.7 -5 3-
could not be cured within said 90 days, within a reasonable period after the date of such notice so
long as IPA or Los Angeles are diligently pursuing a cure.
Section 17.2 Rights and Remedies
Upon the occurrence and continuance of any Event of Default by IPA or Los Angeles,the
Unit 3 Owner Participants may exercise any right or remedy, including an action for specific
performance, which may be available under applicable law to enforce the Construction Lease
and Agreement against IPA or Los Angeles and to recover from IPA any loss, damage or costs,
including attorneys' fees and disbursements and court and collection costs, incurred by the Unit
3 Owner Participants by reason of such Event of Default.
Section 17.3 Remedies Cumulative
No remedy available to the Unit 3 Owner Participants is intended to be exclusive of any
other remedy available to the Unit 3 Owner Participants, but every such remedy shall be
cumulative and may be exercised by the Unit 3 Owner Participants from time to time and as
often as may be deemed expedient, except where the exercise of any one of such remedies
precludes its further exercise or the exercise of any other remedy. No delay or failure by the
Unit 3 Owner Participants to exercise any remedy shall impair the right of the Unit 3 Owner
Participants to exercise any such remedy or be construed to be a waiver of their right to exercise
any remedy or a waiver of any default by IPA or Los Angeles.
ARTICLE XVIII
CONFIDENTIAL INFORMATION
45669950.7 -55-
appropriate protective order or waive compliance with the confidentiality terms of this Article
XVIII, and (ii) cooperate fully with IPA and Los Angeles to seek whatever order or assurance is
necessary to ensure that confidential treatment will be accorded to the IPP Confidential
Information
ARTICLE XIX
DISPUTE RESOLUTION
Section 19.1 Settlement By Proiect Consultant
If the Parties cannot agree on any matter arising out of or relating to a payment or other
performance under the Construction Lease and Agreement, including any proposal that may be
made by any of the Parties (the "Disputed Matter"), a Project Consultant shall be appointed by
the Parties to settle the dispute. In the absence of agreement as to the selection of a Project
Consultant, any Party may request the American Arbitration Association to appoint the Project
Consultant. The Project Consultant shall proceed as follows:
(a) it shall consider all written arguments and factual materials which have been
submitted to it by the Parties (or by counsel to a Party if the Party is represented by counsel)
within 30 days following its appointment; and
(b) as promptly as possible thereafter, it shall make a written determination as to
whether the Disputed Matter referred to it is or is not in compliance with the Construction Lease
and Agreement and would or would not be consistent with Prudent Utility Practice; and
45669950.7 -57-
(c) IPA or Los Angeles deems that such determination or recommendation would
violate any law or any regulatory or other governmental requirements applicable to the
Intermountain Power Project or contravene or cause a breach of or default under the IPP
Agreements;or
(d) The Unit 3 Owner Participants deem that such determination or recommendation
would violate any regulatory or other governmental requirements applicable to the licensing,
construction, installation, testing or start-up or the Commercial Operation of Unit 3 or any
activities related or incidental thereto.
Section 19.4 Costs and Expenses
The costs of employing the Project Consultant shall be borne and paid for solely by the
Unit 3 Owner Participants. Each Party shall be responsible for paying the fees and expenses of
any counsel representing it with respect to the proceedings in connection with a Disputed Matter
under the provisions of this Article XIX.
Section 19.5 No Waiver of Rizht to judicial Action
The above provisions for dispute resolution shall in no event be construed to constitute a
waiver or surrender by any Party of its right to any judicial action to enforce the provisions of the
Construction Lease and Agreement or its rights under the Construction Lease and Agreement or
under applicable law, and any determination or recommendation by the Project Consultant shall
not be binding on any Party if contested in a judicial proceeding. However, in the event of any
judicial proceedings by a Party on account of a Disputed Matter, the Parties shall proceed in
accordance with the provisions for dispute resolution with a Project Consultant until the
Disputed Matter has been determined by final judicial action. In the event of referral of a
45669950.7 -59-
(c) Neither the execution or delivery by it of the Construction Lease and Agreement
nor its compliance with any of the terms and provisions thereof(A) contravenes any applicable
law, order, writ, judgment, injunction, termination or award applicable to it or any of its
respective properties or assets, (B) conflicts with, breaches or contravenes the provisions of its
enabling legislation, organizational documents or any indenture, mortgage, bond resolution,
contract or other instrument to which it is a party or by which it is bound, or (C) results in a
condition or event that constitutes (or that, upon notice or lapse of time or both would constitute)
a default or event of default under any indenture, mortgage, bond resolution, contract or other
instrument to which it is a party or by which it is bound;
(d) No authorization, consent, approval or other action by, and no notice to or other
filings with, any governmental or regulatory authority is required for its authorization of, or is
required in connection with, its execution, delivery and performance of, the Construction Lease
and Agreement, except for any that it has obtained; and
(e) There are no actions, suits or proceedings at law or in equity by or before any
court or administrative body or agency now pending or, to the best of its knowledge after due
inquiry, threatened, against or affecting it or any of its properties or rights before any court or
administrative body or agency which could reasonably be expected to materially adversely affect
its right or ability to perform its obligations under the Construction Lease and Agreement, or
which questions or challenges the validity of the Construction Lease and Agreement or any
action taken or to be taken by it pursuant to the Construction Lease and Agreement or in
connection with the transactions contemplated by the Construction Lease and Agreement.
45669950.7 -61-
(a) any trustee or secured party, as security for bonds or other indebtedness of such
Unit 3 Owner Participant, and such trustee or secured party may, if so empowered, sell or
otherwise realize upon such security in foreclosure or other similar proceedings, possess or take
control thereof or cause a receiver to be appointed with respect thereto and otherwise succeed to
all rights, title and interest and assume the obligations of such Unit 3 Owner Participant under
the Construction Lease and Agreement, provided, however, in no event shall such Unit 3 Owner
Participant be relieved from its obligations under the Construction Lease and Agreement;
(b) any corporation or other entity acquiring all or substantially all the property of the
Unit 3 Owner Participant making the mortgage, conveyance, transfer or assignment, provided
that the Unit 3 Owner Participant shall not be relieved of its obligations under the Construction
Lease and Agreement unless the instrument of such mortgage, conveyance, transfer or
assignment shall so specify and the prior consents of the other Parties shall be obtained; or
(c) any corporation or other entity into which or with which such Party making the
mortgage, conveyance, transfer or assignment shall be merged or consolidated.
Notwithstanding the foregoing, no Unit 3 Owner Participant may convey, mortgage,
transfer or assign its rights and interest in and to the leasehold estates, conveyances, licenses or
any other rights or interests under the Construction Lease and Agreement, unless such Unit 3
Owner Participant shall at the same time convey, transfer or assign such percentage of its
ownership interest in Unit 3 in accordance with the Unit 3 Ownership Agreement as shall equal
the percentage of such leasehold estates, licenses and other rights and interests under the
Construction Lease and Agreement conveyed, transferred, mortgaged or assigned by such Unit 3
Owner Participant to such transferee or assignee. In the case of any mortgage or other transfer or
45609950.7 -63-
PAYMENT OBLIGATIONS Aa'\iD DETERMINATIONS
OF UNIT 3 OWNER PARTICIPANTS
Section 22.1 Several Oblizations
The obligations of the Unit 3 Owner Participants to make payments under the
Construction Lease and Agreement shall be several and not joint, and the Unit 3 Owner
Participants shall be obligated on the same basis and such obligations shall be payable to IPA [in
the same manner and in accordance with the same terms and conditions as shall apply under the
Unit 3 Ownership Agreement to the payment by the Unit 3 Owner Participants of construction
costs of Unit 3. [The foregoing is subject to revision following a review of the Unit 3
Ownership Agreement]. The payment obligations of the Unit 3 Owner Participants,
respectively, shall be in the same proportion as their respective ownership interests in Unit 3 as
set forth in Exhibit P.
Section 22.2 Determinations
Whenever pursuant to the provisions of the Construction Lease and Agreement the Unit 3
Owner Participants are to make any determination, grant any approval or consent, or otherwise
direct any action, such determination, grant of approval or consent or direction of action shall be
controlled by the Unit 3 Owner Participants owning % or more of the undivided ownership
interests in Unit 3 and decided pursuant to action of the Unit 3 Owners' Committee under and
pursuant to the terms of the Unit 3 Ownership Agreement. [The foregoing is subject to
revision following a review of the Unit 3 Ownership Agreement].
456691�50.7 -65-
that IPA's and Los Angeles' performance of such obligations, duties and responsibilities under
the IPP Agreements and their observance of the rights and interests of the IPP Power Purchasers
and the other parties thereunder and of the terms and provisions of the IPP Agreements shall not
be deemed to contravene or to constitute a conflict of interest or a breach or default by either of
them under the Construction Lease and Agreement. Nothing in the Construction Lease and
Agreement shall be construed as requiring either IPA or Los Angeles to take, or cause the taking
of, any action in violation of, or to prevent IPA or Los Angeles from exercising, or causing the
exercise of, any of its rights under, the IPP Agreements, or that would impair the rights of, or
have any other adverse consequences to, any IPP Power Purchaser under the IPP Agreements.
ARTICLE XXV
PERFORMANCE UNDER IPP AGREEMENTS
Section 25.1 Per armance by IPP Project Iffanager and 0peraggg Agent,Liability
It is recognized by the Parties that pursuant to the IPP Amended and Restated CM and 0
Agreement Los Angeles acts in its capacity as the Project Manager and Operating Agent of IPP
and as such Los Angeles is responsible, among other things, for negotiating, contracting for and
administering IPP to the extent provided in the IPP Amended & Restated CM and O Agreement,
and that Los Angeles is a Party to the Construction Lease and Agreement in its capacity as such
Project Manager and Operating Agent. Accordingly, notwithstanding anything in the
Construction Lease and Agreement to the contrary, as a Party under the Construction Lease and
Agreement, performance by Los Angeles under the Construction Lease and Agreement shall be
45669950,7 -67-
Y
Any notice, demand, request, consent or other communication permitted or required by
the Construction Lease and Agreement shall be in writing and shall be deemed properly served,
given, or made if delivered in person or sent by registered or certified mail, postage prepaid, or
by facsimile or other electronic transmission to the applicable Party at the address set forth
below:
[TO BE PROVIDED]
Section 26.2 Chan-ce in Desiknation
Any Party may, at any time, by written notice to the other Parties, designate a different
address or a different person for the receipt of notices under the Construction Lease and
Agreement
ARTICLE XXVII
GOVERNING LAW
Section 27.1 Governing Law
The Construction Lease and Agreement shall be interpreted, governed by and construed
under the laws of the State of Utah, provided that the laws of the State under which a Party was
created or organized shall determine the authority of such Party to execute and perform its
obligations under the Construction Lease and Agreement.
45669950.7 -69-
Section 30.1 Severability
In the event that any provision of the Construction Lease and Agreement shall be
determined to be invalid or unenforceable in any respect, such.determination shall not affect any
other provision of the Construction Lease and Agreement, which shall remain in full force and
effect.
ARTICLE XXXI
INDEPENDENT DECISIONS
Section 31.1 Independent Decisions of Parties
Each Party hereby represents and agrees as follows:
(a) It is acting for its own account, has been represented by attorneys selected by it in
connection with the negotiation and execution of the Construction Lease and Agreement, and has
made its own independent decision to enter into the Construction Lease and Agreement and as
to whether the Construction Lease and Agreement is appropriate or proper for it based upon its
own judgment and upon advice from such attorneys and other advisers as it has deemed
necessary;
(b) It is not relying on any communication (written or oral) of any other Party as
advice or a recommendation to enter into the Construction Lease and Agreement or as any
assurance or guarantee as to the results of the Construction Lease and Agreement; it being
4566W5o.7 -71-
or more of the Parties. Each Party shall be individually responsible for its own covenants,
obligations and liabilities under the Construction Lease and Agreement.
ARTICLE XXXIII
EXHIBITS
Section 33.1 Exhibits
Each Exhibit attached hereto shall be deemed to be incorporated into and be a part of the
Construction Lease and Agreement. Any revision of an Exhibit pursuant to the Construction
Lease and Agreement shall replace the previous applicable Exhibit and shall be deemed to be
incorporated into and become a part of the Construction Lease and Agreement.
ARTICLE XXXIV
COUNTERPARTS
Section 34.1 Counterparts
The Construction Lease and Agreement may be executed simultaneously in two or more
counterparts, each which shall be deemed an original but all of which together shall constitute
one and the same instrument.
45661950.7 -73-
DRAFT OF APRIL 10,2006
COMMON FACILITIES AND SITE AGREEMENT
BY AND AMONG
INTERMOUNTAIN POWER AGENCY
THE CITY OF LOS ANGELES
ACTING BY AND THROUGH
THE DEPARTMENT OF WATER AND POWER
AS IPP PROJECT MANAGER AND
OPERATING AGENT
AND
THE UNIT 3 OWNER PARTICIPANTS
REFERRED TO HEREIN
Dated as of ,200T
456 "4 t 2.8
TABLE OF CONTENTS
(continued)
Page
Section 6.2 Collective Action by Unit 3 Owner Participants ...............................28
ARTICLE VII ADDITIONAL FACILITIES AT IPP SITE..................................................28
Section 7.1 Additional IPA Generation or Transmission Facilities......................28
Section 7.2 Additions to and Modifications of Existing Facilities.......................29
Section 7.3 Instruments of Conveyance................................................................29
ARTICLE VIII EFFECT ON TAX EXEMPT STATUS OF IPA BONDS............................29
Section 8.1 No Adverse Effect on Tax Exempt Status.........................................29
Section 8.2 Remediation to Protect Tax Exempt Status.......................................30
ARTICLE IX DAMAGE OR DESTRUCTION OF JOINT COMMON FACILITIES.......31
Section 9.1 Damage or Destruction On or Subsequent to the Closing Date.........31
ARTICLEX INSURANCE.................................................................................................32
Section 10.1 Insurance Prior to Closing Date.........................................................32
Section 10.2 Insurance On or After Closing Date..................................................32
ARTICLEXI TAXES...........................................................................................................32
Section 11.1 Imposition of Taxes, Payments or Fees in Lieu of Taxes and
Impact Alleviation or Mitigation Payments......................................32
Section11.2 Exemptions........................................................................................33
Section 11.3 Other Taxes and Fees.........................................................................33
ARTICLE XII COVENANT AGAINST LIENS AND ENCUMBRANCES.......................33
Section 12.1 Prior to Closing Date.............................. ........................................34
Section 12.2 On or After Closing Date...................................................................34
ARTICLE XIII COVENANTS RUNNING WITH THE LAND............................................34
Section 13.1 Covenants and Obligations, Binding Effect ......................................34
ARTICLE XIV UNCONTROLLABLE FORCES..................................................................35
Section 14.1 Uncontrollable Forces........................................................................35
ARTICLE XV CLAIMS AND LITIGATION.......................................................................36
Section 15.1 Claims and Litigation.........................................................................36
ARTICLE XVI RETIREMENT FROM SERVICE................................................................36
Section 16.1 Retirement of Units 1 and 2...............................................................36
Section 16.2 Retirement of Unit 3 ..........................................................................37
ARTICLE XVII HAZARDOUS MATERIALS.......................................................................38
356227411 s -ii--
TABLE OF CONTENTS
(continued)
Page
Section 27.4 Independent Decisions of Parties.......................................................49
Section 27.5 Relationship of Parties; No Partnership.............................................50
Section27.6 Exhibits..............................................................................................50
Section27.7 Counterparts.......................................................................................50
EXHIBIT A Description of Unit 3........................................................................................................A-1
EXHIBIT B Ownership Interests of Unit 3 Owner Participants...........................................................B-1
EXHIBIT C Existing Common Facilities.............................................................................................C-1
EXHIBIT D Required Common Facilities Additions and Improvements............................................D-1
EXHIBIT E Joint Common Facilities..................................................................................................E-t
EXHIBIT F Form of Unit 3 Site Warranty Deed.................................................................................F-I
EXHIBIT G Joint Common Facilities Percentages...............................................................................G-1
EXHIBIT H Form of Joint Common Facilities Bill of Sale............................................. ..................H-1
EXHIBIT i Form of Joint Common Facilities Warranty Deed for Deeds]..........................................I-1
EXHIBIT J Description of the Property of Intermountain Power Project Facilities.............................J-1
Excepted from Conveyance
EXHIBIT K Form of Water Lease Agreement....................................................................................K-1
-1V-
current transmission line from the IGS Switchyard to the Gonder Switchyard near Ely, Nevada (the
"Northern Transmission System").
The Intermountain Generating Station was originally designed to include four 750 MW
generating units. In 1.982, it was downsized to consist of two generating units each with a nominal ratings
of 750 MW. Before the Intermountain Generating Station was downsized, certain rights, properties,
facilities and appurtenances were acquired and/or constructed as part of the Intermountain Power Project
in excess of those required to support the two generating units. Both generating units have since been
upgraded so that each now has a rated capacity of 900 MW net of station use ("Units I and 2"as defined
herein).
IPA has financed and refinanced the acquisition and construction of the Intermountain Power
Project through the issuance of its bonds and subordinated indebtedness (such bonds and subordinated
indebtedness, together with any bonds or other indebtedness hereafter issued to finance or refinance the
Intermountain Power Project, are herein referred to as the "IPA Bonds") under a bond resolution adopted
by IPA on September 28, 1978 entitled"Power Supply Revenue Bond Resolution"(as heretofore and as
may hereafter be amended and supplemented, the"IPA Bond Resolution").
All of the capacity and output of the Intermountain Power Project have been sold by IPA to 36
entities (collectively, the "IPP Power Purchasers") pursuant to separate power sales contracts between
IPA and each such IPP Power Purchaser(which power sales contracts,as heretofore and as may hereafter
be amended, are referred to herein as the "IPP Power Sales Contracts"). In accordance with the IPP
Power Sales Contracts Los Angeles is appointed pursuant to the IPP Construction Management and
Operating Agreement (as amended and as it may hereafter be amended, the "IPP Amended and Restated
CM&O Agreement"),as the Project Manager and Operating Agent for the Intermountain Power Project.
Pursuant to the provisions of Section 36.1 of the IPP Power Sales Contracts, it is recognized by
IPA and each of the Power Purchasers that the Intermountain Power Project consists of certain rights,
modifications thereof,could be used or useful in the operation of Unit 3 in common with the operation of
Units 1. and 2, and the Parties have agreed upon values or estimates of values thereof, subject to
adjustment as provided in the Common Facilities Agreement
The Unit 3 Owner Participants desire to acquire from IPA certain ownership interests and other
rights and interests in such lands, improvements to land, facilities,equipment, water supply, rolling stock
and other personal property,both tangible and intangible, in connection with the operation of Unit 3 at the
IPP Site, and IPA desires to make the same available to the Unit 3 Owner Participants for such purpose
upon the terms and conditions set forth in the Common Facilities Agreement.
IPA and the IPP Coordinating Committee have determined that the use by the Unit 3 Owner
Participants of such ownership interests and other rights and interests in such lands, improvements to
land, facilities,equipment, water supply, rolling stock and other personal property in connection with the
operation of Unit 3 as provided in and subject to the terms and conditions of the Common Facilities
Agreement is desirable and in the best interests of IPA and the Power Purchasers; and IPA, Los Angeles
and the IPP Coordinating Committee have determined that the agreed upon values or estimates of values
as set forth in the Common Facilities Agreement represent fair value therefor, subject to adjustment as
provided in the Common Facilities Agreement.
IPA has also determined that the sale, transfer, conveyance and assignment of the ownership
interests and other rights and interests in and to the lands, improvements to land, facilities, equipment,
water supply, rolling stock and other personal property, both tangible and intangible,to the Unit 3 Owner
Participants, as provided in the Common Facilities Agreement, will not interfere with or impede the
operation of or of any construction with respect to Units I and 2 or any other facility of the Intermountain
Power Project or in any manner impair or adversely affect the rights or security of the holders of IPA
Bonds.
45627412A -4-
"Commercial Operation Date" means, with respect to Unit 3, the date on which Unit 3 is
declared by or on behalf of the Unit 3 Owner Participants to be commercially operable as a reliable source
of electric capacity and energy in accordance with Prudent Utility Practice.
"Construction Lease and Agreement" means the Construction Lease, Use and Services
Agreement, dated as of , 200�, by and among IPA, Los Angeles and each Unit 3 Owner
Participant.
"Decommissioning Consultant" means an independent engineering or consulting firm with a
recognized national reputation for skill and experience in the decommissioning and retirement from
service of coal-fired electric power plants.
"Effective Date"means the date on which this Common Facilities Agreement becomes effective
in accordance with Section 24.1.
"Escalation Rate"means an annual rate of 2.2%.
"Existing Common Facilities" means the real and personal property constituting Existing
Common Facilities as provided in Section 3.1.
'`Future Common Facilities" means additions to or improvements of the Joint Common
Facilities as provided in Section 3.4.
"Hazardous ,Materials" means any pollutant, contaminant, dangerous or toxic substance,
hazardous or extremely hazardous waste, 1 iquid, industrial or other waste or agent that is regulated by a
governmental agency in connection with the protection of the environment or human safety or health.
"IPP Agreements"means the IPP Power Sales Contracts, the IPP Amended and Restated CM&O
Agreement and the IPA Bond Resolution.
4w2,41 2.s -6-
methods or acts engaged in or approved by a significant portion of the electrical utility industry prior
thereto) known at the time the decision was made, would have been expected to accomplish the desired
result at the lowest reasonable cost consistent with good business practices, reliability, safety and
expedition, taking into account the fact that Prudent Utility Practice is not intended to be limited to the
optimum practice, the desired result, methods or act to the exclusion of all others, but rather to a
spectrum of possible practices, methods or acts which could have been expected to accomplish the desired
result at the lowest reasonable cost consistent with reliability, safety and expedition. Prudent Utility
Practice includes due regard for manufacturers' warranties and requirements of governmental agencies of
competent jurisdiction.
"Required Common Facilities Additions and Improvements" means the real and personal
property constituting the Required Additions and Improvements as provided in Section 3.2.
"Units I and 2"means the two generating units of he Intermountain Power Project located at the
IPP Site, each with a rated net capacity of 900 MW, together with all facilities, appurtenances, rights,
interests and other properties, whether tangible or intangible, now or hereafter associated therewith or
with the renewal,addition, modification or replacement thereof.
"Unit 3"means the generating unit to be constructed on the Unit 3 Site and described pursuant to
Section 2.1, together with all facilities, appurtenances, rights, interests and other properties, whether
tangible or intangible, associated therewith or with any renewals, additions, modifications or
replacements thereof.
"Unit 3 Construction Lease and Agreement" means the Unit 3 Construction Lease, Use and
Services Agreement dated as of , 200 , by and among IPA, Los Angeles and each of the
Unit 3 Owner Participants,as the same may be hereafter amended.
456271E2A -�-
(vi) except as otherwise expressly provided, a reference to a law
includes any amendment or modification: to such law and any rules or regulations issued
thereunder or any law enacted in substitution or replacement therefor;and
(vii) references to "including" shall mean including without limiting
the generality of any description preceding such term and for purposes hereof the rule of ejw0em
generis shall not be applicable to limit a general statement, followed by or referable to an
enumeration of specific matters,to matters similar to those specifically mentioned.
Each of the Parties and its counsel have reviewed the Common Facilities .Agreement and the
usual rule of construction that any ambiguities are to be resolved against the drafting party shall be
inapplicable in the construction and interpretation of the Common Facilities Agreement.
ARTICLE II
UNIT 3
Section 2.1 Desgd tion of Unit 3
Unit 3 shall be owned by the Unit 3 Owner Participants and located at the IPP Site. It shall
consist of a 900 MW(net)coal-fired electric generating unit and related facilities,equipment, rights and
interests,and other properties whether tangible or intangible,as more fully described in Exhibit A(which
shall be revised as necessary to reflect any modifications made from time to time with respect to Unit 3 as
provided in Section 2.3).
Section 2.2 Unit 3 Site
Subject to the terms and conditions of the Common Facilities Agreement, IPA agrees to sell,
transfer, convey and grant to the Unit 3 Owner Participants and the Unit 3 Owner Participants agree to
purchase as provided in Article V from IPA. fee title to that tract or parcel of land located at the lPP Site
and described in and to be conveyed by Special Warranty Deed as provided in Section 4.1, such tract or
4-%27412.8 -10-
ARTICLE III
COMMON FACILITIES
Section 3.1 Existing Common Facilities
(a) As Initially Determined. IPA, Los Angeles and the Unit 3 Owner Participants have each
determined that the land, buildings and other improvements to land and real property, facilities,
equipment, water supply, rolling stock and other personal property and rights and interests therein,
whether tangible or intangible, of the Intermountain Power Project as set forth in Exhibit C,together with
any replacements, reconstruction or renewals thereof or additions or improvements thereto as provided in
Section 3.1(b), shall constitute the Existing Common Facilities which shall be. used in the operation,
maintenance, repair, replacement and improvement of Unit 3 in common with Units I and 2. The Parties
have also agreed on the values of the Existing Common Facilities as of the Effective Date as set forth in
Exhibit C,subject to adjustment as provided in Section 3.1(b).
(b) Replacements. Reronstniction and Renewals;Additions and Improvements. The Existing
Common Facilities shall be replaced, reconstructed and renewed and additions or improvements thereto
acquired, constructed, installed or added (other than Required Common Facilities Additions and
Improvements provided pursuant to Section 3.2)as follows:
(1) any item or part of the Existing Common Facilities shall be
replaced, reconstructed or renewed prior to the Closing Date as a result of damage or destruction
thereof or as otherwise necessary in the reasonable judgment of Los Angeles to maintain the
Existing Common Facilities or any part thereof in good operating condition pursuant to the IPP
Agreements; or
(ii) any addition or improvement to the Existing Common Facilities
shall be acquired, constructed, installed or supplied after the Effective Date and prior to the
4%-4t'R -12-
------------
Section 3.1(d)), exclusive of the Water Rights set forth in VIII of Exhibit C, shall be escalated at the
Escalation Rate from the Effective Date to the Closing Date. Notwithstanding anything herein to the
contrary, there shall be no escalation of the costs of the Required Common Facilities Additions and
Improvements or the values of any adjustments of Existing Common Facilities provided for pursuant to
Section 3.1(c).
Section 3.2 Required Common„Faci?ities 'ons and Improvements
(a) In General. IPA, Los Angeles and each of the Unit 3 Owner Participants agrees that the
land,buildings and other improvements to land and the real property, facilities and equipment constituting
Required Common Facilities Additions and Improvements as set forth in Exhibit D must be acquired,
constructed, installed or added to the Existing Common Facilities in order to provide the necessary
capability for the service and support of Unit 3 in common with the service and support of Units 1 and 2.
Such Required Common Facilities Additions and Improvements shall be acquired, constructed, installed
or added to the Existing Common Facilities by and at the cost and expense of the Unit 3 Owner
Participants.
(b) Transfer and Assignment by Unit 3 Owner Participants. Any rights and interests of the
Unit 3 Owner Participants in and to the Required Common Facilities Additions and Improvements shalt
be conveyed, transferred and assigned to IPA prior to the sale, transfer, conveyance, granting and
assignment of the rights and interests in the Joint Common Facilities to the Unit 3 Owner Participants
pursuant to Article IV.
Section 3.3 Joint Common Facilities
(a) In General. The Existing Common Facilities as augmented by the Required Common
Facilities Additions and Improvements shall constitute the Joint Common Facilities and Exhibit E shall be
revised to reflect and include the Required Common Facilities Additions and Improvements and any
replacements, reconstruction and renewal of and any additions and improvements to the Existing
45627411A -14-
completion thereof. Any Future Common Facilities shall be paid for as provided in the Joint Operating
Agreement. Such deeds,bills of sale, licenses and other instruments of transfer and assignment shall be
provided by the appropriate Party or Parties so as to vest the title, rights and interests in and to such
Future Common Facilities as necessary for the same to constitute Joint Common Facilities as provided in
the Common Facilities Agreement.
ARTICLE IV
CONVEYANCE OF UNIT 3 SITE AND RIGHTS AND INTERESTS
IN AND TO JOINT COMMON FACILITIES
Section 4.1 Conveyance o f Unit 3 Site
Subject to the terms and conditions of the Common Facilities Agreement, IPA shall sell and
convey to the Unit 3 Owner Participants by Special Warranty Deed in substantially the form set forth in
Exhibit F(which shall be revised as necessary to reflect and include any revisions thereto agreed to by the
Parties)and the Unit 3 Owner Participants shall purchase as provided in Article V good and marketable
fee title, as tenants in common, in accordance with their respective ownership interests in the Unit 3 Site
as provided in Section 2.2. As set forth therein,such Deed shall except and reserve to IPA from such sale
and conveyance a non-exclusive easement in, upon, over, under,through and across the properties of the
Unit 3 Site for the benefit of Units 1 and 2 but for use and exercise only for such limited purposes as set
forth in such Deed, together with a non-exclusive easement for ingress and egress to and from and over
and across the Unit 3 Site for the use of the aforesaid easement; provided that no exercise or use of such
easement rights shall interfere(except with the approval of the Unit 3 Owner Participants, which approval
shall not be unreasonably withheld) with the use of Unit 3 for any of the purposes thereof. Delivery of
such Deed by IPA shall be accompanied by such other instruments of conveyance, as shall be necessary
or appropriate,to evidence the vesting in the Unit 3 Owner Participants of title as aforesaid.
45627,41 a.s -16-
the facilities, equipment, water supply, rolling stock and other personal property and rights and interests
therein, whether tangible or intangible,constituting Joint Common Facilities(other than those set forth in
paragraphs (b), (c), (d), (e) and (f) which shall be sold, transferred, granted, conveyed, licensed and
assigned as provided in such paragraphs), in accordance with and as described in a bill of sale, license and
assignment or instrument of transfer, all substantially in the forms set forth in Exhibit H(which shall be
revised as necessary to reflect and include any applicable revisions to Exhibit E). Delivery of such bill of
sale, license and assignment or instrument of transfer by IPA shall be accompanied by such other
instruments of transfer, as shall be necessary or appropriate, to evidence the vesting in the Unit 3 Owner
Participants of ownership interests,rights and interests and title as aforesaid.
(b) Certain Real Prooe►•ty. Subject to the terms and conditions of the Common Facilities
Agreement, IPA shall sell, transfer, grant and convey to the Unit 3 Owner Participants and the Unit 3
Owner Participants shall purchase as provided in Article V good and marketable title, as tenants in
common, in accordance with their respective Joint Common Facilities Percentages, undivided ownership
interests in all the tracts and parcels of land and buildings and other improvements and interests in and to
land and other real property and appurtenances on which are located the Joint Common Facilities (other
than those Joint Common Facilities set forth in paragraphs(c) and(d) of this Section 4.3 which shall be
sold, transferred, granted and conveyed as provided in such paragraphs). Such land, buildings,
improvements and interests in and to land and other real property shall constitute and are included as Joint
Common Facilities,and such sale,transfer,grant and conveyance thereof shall be by and as described in a
Special Warranty Deed for Deeds] which shall be substantially in the form set forth in Exhibit I (which
shall be revised as necessary to reflect and include any revisions of Exhibit E). As set forth therein, such
Deed for Deeds] shall except and exclude from such sale, transfer, grant and conveyance the land and
appurtenances that constitute the Unit 3 Site. In addition such Deed for Deeds] shall:
0) except and reserve to IPA from such sale, transfer, grant and
conveyance a non-exclusive easement in, upon, over, under, through and across the properties
45627412.8 -18-
Section 4.3(b)(ii) above and described in Exhibit J for the benefit of Unit 3 but for use and
exercise only for such limited purposes as set forth in such form of Deed for Deeds], together
with a non-exclusive easement for ingress and egress to and from and over and across such
properties described in Exhibit J for the use of the aforesaid easement; provided that no exercise
or use of such easement rights shall interfere with or impede(except with the reasonable approval
of IPA and Los Angeles)the use of such properties described in Exhibit J for any of the purposes
thereof,and
(iv) except and reserve from such sale and conveyance the right of
IPA, which shall run with the land, to develop and locate Additional IPA Facilities at or on the
properties described in Exhibit I to the extent and in the manner as provided in Article VII.
Delivery of such Deed for Deeds) by IPA shall be accompanied by such other instruments of conveyance,
as shall be necessary or appropriate, to evidence the vesting in the Unit 3 Owner Participants of title as
aforesaid.
(c) tVater Lease. IPA agrees to lease to the Unit 3 Owner Participants and the Unit 3 Owner
Participants agree to lease from IPA undivided rights and interests, in accordance with their respective
Joint Common Facilities Percentages, in the water available (other than such water in the amount of
that is used for the Southern Transmission System converter station at the IPP Site)
derived from IPA's water rights and water shares of stock in the five mutual irrigation companies,
including IPA's ground water rights from its production wells at the IPP Site, as provided in .-article V.
Such water shall constitute Joint Common Facilities and shall be leased under and pursuant to a Water
Lease Agreement entered into by IPA with the Unit 3 Owner Participants which shall be substantially in
the form set forth in Exhibit K (which shall be revised as necessary to include any changes approved by
the Parties). The term of such Water Lease Agreement shall be 50 years with two successive 20 year
renewal options of the Unit 3 Owner Participants, subject, however,to early termination thereof upon the
456173113 -20-
(f} Inciden" Revenue. IPA agrees that the Unit 3 Owner Participants shall have rights to
share (based on their respective Joint Common Facilities Percentages) in any revenue from third parties
derived from incidental use or operation of any of the Joint Common Facilities.
(g) Liens, Encumbrances and Conditions and Restrictions as to Use. The ownership
interests and rights and interests shall be sold, transferred, granted,conveyed and assigned as provided in
this Section 4.3 by IPA so as to vest good and marketable title in the Unit 3 Owner Participants free and
clear of all liens, encumbrances and conditions and restrictions as to use, except those set forth in
applicable deeds, bills of sale, licenses, instruments of transfer, assignment or conveyance thereof, or in
the Joint Operating Agreement.
Section 4.4 "As Is"Conveyance
THE OWNERSHIP INTEREST OF IPA IN THE UNIT 3 SITE AND THE OWNERSHIP
INTERESTS AND OTHER RIGHTS AND INTERESTS OF IPA IN AND TO THE JOINT COMMON
FACILITIES TO BE SOLD,TRANSFERRED, GRANTED, CONVEYED, LEASED AND ASSIGNED
TO THE UNIT 3 OWNER PARTICIPANTS AS PROVIDED IN SECTIONS 4.1,4.2 AND 4.3 ARE TO
BE SOLD, TRANSFERRED, GRANTED, CONVEYED, LEASED AND ASSIGNED "AS IS" AND
"WHERE IS". IPA WILL MAKE NO REPRESENTATION OR WARRANTY WHATSOEVER
EXPRESSED, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY AS TO THE VALUE, QUANTITY, CONDITION,
SALABILITY, OBSOLESCENCE, :MERCHANTABILITY, FITNESS OR SUITABILITY FOR USE
OR WORKING ORDER OF THE JOINT COMMON FACILITIES. THE UNIT 3 OWNER
PARTICIPANTS ARE WILLING TO PURCHASE SUCH OWNERSHIP INTERESTS AND OTHER
RIGHTS AND INTERESTS IN AND TO THE JOINT CONL MON FACILITIES '`AS IS" AND
"WHERE IS" AND IN ACCORDANCE WITH THE COMMON FACILITIES AGREEMENT. The
provisions of this Section 4.4 shall govern over any conflicting provisions of the Common Facilities
Agreement or any other instrument. Notwithstanding the foregoing, each of the Unit 3 Owner
45627412_8 -22-
(a) Acquisition of Joint Common Facilities Rights and Interests. Subject to the simultaneous
purchase of the Unit 3 Site as provided in Section 5.1 and fulfillment of the conditions to Closing as
provided in Section 5.3, the Unit 3 Owner Participants shall acquire and purchase the ownership interests
and other rights and interests in and to the Joint Common Facilities sold, transferred, conveyed, leased
and assigned as provided under Section 4.3 and pay the Joint Common Facilities Purchase Price therefor
as provided in paragraph(b)of this Section 5.2.
(b) Payment of Installments of Purchase Price. Payments to IPA of the Joint Common
Facilities Purchase Price for the ownership interests and other rights and interest in the Joint Common
Facilities shall be made by the Unit 3 Owner Participants in immediately available funds and in
installments as follows:
(i) $ by the date of the start of construction of Unit
3 at the IPP Site; and
GO $ by the first day of the 24 h calendar month
following the calendar month in which the start of construction of Unit 3 at the IPP Site shalt
occur;and
(iii) an amount equal to the balance of the Joint Common Facilities
Purchase Price (which includes the credit for the actual costs to the Unit 3 Owner Participants of
the Required Common Facilities Additions and Improvements)shall be paid at the Closing.
Any taxes and payments in lieu of taxes applicable to the Joint Common Facilities shall be apportioned as
between IPA and the Unit 3 Owner Participants as of the Closing bate.
(0 Escrowed Funds. The amounts paid to IPA prior to the Closing Date as set forth in
paragraph (b)(i) and (it) of this Section 5.2 shall be held in escrow by IPA and deposited in an escrow
account under an escrow agreement with a bank selected by IPA. The terms and provisions of the escrow
45627,4124 -24-
each Party shall furnish to each of the other Parties an opinion of
counsel for such Party, dated the date of the Closing, to the effect that (a) such Party is duly
created or organized and validly existing and in good standing under the laws of the State of its
incorporation and has the right and authority to execute and deliver the Common Facilities
Agreement and to perform its obligations thereunder;(b)the execution,delivery and performance
by such Party of the Common Facilities Agreement have been duly authorized by all necessary
action by such Party, and do not and will not contravene the provisions of any law or any
governmental rule, regulation or order applicable to such Party or its properties, and do not and
will not contravene the provisions of,or constitute a default under,any indenture, mortgage,bond
resolution, contract or other instrument to which such Party is a party or by which such Party is
bound, (c) all requisite governmental and regulatory approvals and consents required for the
execution and delivery by such Party of the Common Facilities Agreement and the performance
by such Party of its obligations under the Common Facilities Agreement, have been obtained and
the Common Facilities Agreement constitutes the legal, valid and binding obligation of such
Party enforceable in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws effecting the enforcement of creditors'
rights generally and general equitable principles;and(d)there are no actions,suits or proceedings
pending or, to the best knowledge of such counsel (having made diligent inquiry with respect
thereto), threatened against or affecting such Party or any of its properties or rights before any
court or administrative body or agency which might materially adversely affect the right or ability
of such Party to perform its obligations under the Common Facilities Agreement, or which
questions or challenges the validity of the Common Facilities Agreement or any action taken or to
be taken by such Party pursuant to the Common Facilities Agreement or in connection with
transactions contemplated by the Common Facilities Agreement;and
-26-
obligated on the same basis and such obligations shall be payable to EPA in the same manner and in
accordance with the same terms and conditions as apply under the Unit 3 Ownership Agreement to the
payment by the Unit 3 Owner Participants of construction costs of Unit 3. [The foregoing is subject to
revision following a review of the Unit 3 Ownership Agreement]. Except as otherwise provided by
Section 8.2,the respective payment obligations of the Unit 3 Owner Participants, respectively,shall be in
the same proportion as their respective ownership interests in Unit 3 as set forth in Exhibit B.
Section 6.2 Collective Action by Unit 3 Owner Pardeinants
Whenever pursuant to the provisions of the Common Facilities Agreement the Unit 3 Owner
Participants are to make any determination, grant any approval or consent,or otherwise direct any action,
such determination, grant of approval or consent or direction of action shall be controlled by the Unit 3
Owner Participants owning % or more of the undivided ownership interests in Unit 3 and decided
pursuant to action of the Unit 3 Owners' Committee under and pursuant to the terms of the Unit 3
Ownership Agreement. [The foregoing is subject to revision following a review of the Unit 3
Ownership Agreement].
ARTICLE VII
ADDITIONAL FACILITIES AT IPP SITE
Section 7.1 Additional IPA Generation or Transmission Facilities
Notwithstanding anything to the contrary in the Common Facilities Agreement, EPA shall have
the right to cause the installation, construction or improvement and the operation at the IPP Site of any
additional electric generating unit or units and electric transmission facilities, including all appurtenances;
provided that the same shall not interfere (except with the approval of the Unit 3 Owner Participants,
4,627412.8 -28-
exemption from Federal income taxes of the interest paid, or to be paid, on IPA Bonds. Accordingly, in
the event that IPA shall determine that entering into or performance under the Common Facilities
Agreement, the Unit 3 Construction Lease and Agreement or the Joint Operating Agreement will result in
an adverse effect on the Federal tax exempt status of interest on IPA Bonds, provision reasonably
acceptable to IPA shall be made as provided in Section 8.2 for the remediation of such adverse effect on
the tax exempt status on the IPA Bonds in accordance with the Internal Revenue Code and regulations
thereunder. Such determination by IPA shall take into account the application by IPA in accordance with
and as determined pursuant to the IPP Agreements of the proceeds of the sale of the Unit 3 Site and the
sale or lease of the ownership interests and other rights and interests under the Common Facilities
Agreement, the rent, fees and other amounts payable to IPA under the Unit 3 Construction Lease and
Agreement and the payments and amounts payable to or for the benefit of IPA under the Joint Operating
Agreement.
Section 8.2 Remediadon to Protect Tax Exempt Status
The Unit 3 Owner Participants recognize that upon a determination by IPA that an adverse effect
on the tax exempt status of IPA Bonds will result as provided in Section 8.1, IPA is required under the
[PP Agreements to provide for the remediation of such adverse effect on the tax exempt status of IPA
Bonds. The Parties agree that in such event the Unit 3 Owner Participant or Unit 3 Owner Participants
whose participation or action results in such adverse effect on the tax exempt status of IPA Bonds shall
forthwith make provision reasonably acceptable to IPA for the payment of any and all additional debt
service and other amounts with respect to IPA Bonds,together with other costs and expenses, incurred or
to become payable by IPA due to such remediation. Payment thereof shall be in such amount and made
in such manner so that IPA shall be fully indemnified and held harmless from any and all additional debt
service and other amounts, costs and expenses arising from such remediation. If two or more Unit 3
Owner Participants shall be responsible for such adverse effect on the tax exempt status of IPA Bonds,
unless such Unit 3 Owner Participants agree otherwise, each such Unit 3 Owner Participant shall
456 2'.J 12A -3Q-
ARTICLE X
INSURANCE
Section 14.1 Insurance Prior toClosing-Date
At all times prior to the Closing Date IPA shall maintain or cause to be maintained with respect to
the Joint Common Facilities all risk property insurance,general liability insurance with respect to third
party personal injury and property damage and such other insurance in amounts and with such insurers as
provided for in the IPP Agreements and consistent with Prudent Utility Practice. Proceeds of such
insurance shall be applied as provided for in the IPP Agreements.
Section 10.2 Insurance On or After Closing Date
At all times on and after the Closing Date IPA and the Unit 3 Owner Participants shall procure
and maintain or cause to be procured and maintained insurance with respect to the Joint Common
Facilities,all as provided in the Joint Operating Agreement.
ARTICLE Xi
T i,XES
Section 11.1 Imposition of,Taxes, Payments or Fees in Lieu, of Taxes and Impact
ALleviato�itigation Payments
From and after the Closing Date,IPA and the Unit 3 Owner Participants shall each separately
report,file returns with respect to and otherwise be responsible for the payment of all property taxes,
assessments,payments or fees in lieu of taxes and impact alleviation or mitigation payments with respect
to their respective undivided ownership interests in the Joint Common Facilities or gross receipts
therefrom. Each of them shall use its best efforts to have any taxing or other governmental authority
-32-
COVENANT AGAINST LIENS
AND ENCUMBRANCES
Section 12.1 Prior to Closinr Date
Prior to the Closing Date IPA shall not suffer any 1 ien on the Joint Common Facilities to exist
unsatisfied(other than liens for taxes,assessments or payments in lieu of taxes not yet delinquent,and
contractors' liens,for workman's compensation awards and liens for labor and material not yet
perfected);provided,however,that IPA shall not be required to pay or discharge any such lien as long as
it shall be contesting the same or the lawfulness or validity thereof, if such contest shall operate during its
pendency to prevent the collection or enforcement of such lien so contested.
Section 12.2 On or After Closing Date
Neither IPA nor the Unit 3 Owner Participants shall suffer any unsatisfied lien or any
encumbrance with respect to their respective ownership interests in the Joint Common Facilities to be
created or remain in effect on,against or otherwise affecting the Joint Common Facilities except those
permitted by the Common Facilities Agreement,the Unit 3 Construction Lease and Agreement or the
Joint Operating Agreement.
ARTICLE XIII
COVENANTS RUNNING WITH THE LAND
Section 13.1 Covenants and Obligations:Bindinr Effect
All of the covenants and obligations of any of the Parties shall be covenants and obligations
running with such Party's respective ownership interests and other rights and interests in the Joint
Common Facilities and shall be for the benefit of the respective rights and interests of the Parties and their
4562174118 -34-
failure of any governmental agency to timely act. Nothing contained herein shall be construed so as to
require a Party to settle any strike or labor dispute in which it may be involved.
(b) Removal of[Incontrollable Force. Any Party rendered unable to fulfill any obligation by
reason of uncontrollable forces shall exercise due diligence to remove such inability with all reasonable
dispatch and shall take reasonable steps to mitigate any damages incurred by it during the period when
such uncontrollable force resulted in such inability.
ARTICLE XV
CLAIMS AND LITIGATION
Section IS.1 Claims and Utz*ation
Each of the Parties shall notify the other Parties of any claim, demand or right of action asserted
or any action, suit or proceeding threatened or instituted against it which arises out of its undivided
ownership interest or other rights or interests in the Joint Common Facilities or the operation thereof or
involves in whole or in material part the interpretation or performance of the Common Facilities
Agreement
ARTICLE XVI
RETIREMENT FROM SERVICE
Section 16.1 Retirement of J nits 1 and 2
4S62741_.8 -36-
estimated salvage value shall be determined by a Decommissioning Consultant selected by the Unit 3
Owner Participants and reasonably acceptable to IPA and Los Angeles. If IPA,Los Angeles and the Unit
3 Owner Participants are not able to agree on a selection of a Decommissioning Consultant, the Parties
agree that such selection shall be made pursuant to the dispute resolution procedures set forth in the Joint
Operating Agreement.
ARTICLE XVII
HAZARDOUS MATERIALS
Section 17.1 Hazardous Materials
The liabilities of IPA and the Unit 3 Owner Participants, respectively, and the indemnification
obligations and other rights, responsibilities and obligations of such Parties, with respect to Hazardous
Materials at the IPP Site shall be determined under and in accordance with the terms and provisions of the
Unit 3 Construction Lease and Agreement and the Joint Operating Agreement,as applicable.
ARTICLE XVIII
DEFAULT
Section 18.1 Default by Unit 3 Owner Participant
(a) Demand,Lor Payment or Performance. Upon the failure of any Unit 3 Owner Participant
to make any payment when due under the Common Facilities Agreement or to perform or cause to be
performed any other obligation to be performed pursuant to the terms and provisions of the Common
Facilities agreement, IPA or Los Angeles may make written demand upon such Unit 3 Owner Participant
for such payment or performance and concurrently deliver copies of the demand to all other Parties.
4%2? 12.x -38-
Section 18.2 Way by IPA
(a) Demand for Payment or Performance. Upon the failure of IPA to make any payment
when due under the Common Facilities Agreement or upon the failure of EPA or Los Angeles to perform
or cause to be performed any other obligation to be performed by it pursuant to the terms and provisions
of the Common Facilities Agreement, the Unit 3 Owner Participants or any of them may make written
demand upon IPA for such payment or performance. Copies of such demand shall be concurrently
delivered to all other Parties.
(b) Payment Default. In the case of the failure of IPA to make any payment when due under
the Common Facilities Agreement and such failure is not cured within ten days from the date of demand
made pursuant to Section 19.2(a), such failure shall constitute a default of IPA at the expiration of such
ten day period.
(c) Failure of Performance. In the case of a failure of IPA or Los Angeles to perform any
obligation under the Common Facilities Agreement other than to make payments when due thereunder
and such failure is not cured within thirty days from the date of demand made pursuant to Section 18.2(a)
or, if such failure could not be cured within said thirty days, within a reasonable period after the date of
such demand so long as IPA or Los Angeles is diligently pursuing a cure, such failure shall constitute a
default of IPA at the expiration of such thirty day period or longer period,as applicable.
(d) Remedies. Upon the occurrence and continuance of any default by IPA arising from a
failure of payment or performance under the Common Facilities Agreement, the Unit 3 Owner
Participants may take any action at law or in equity, including an action for specific performance, to
enforce the Common Facilities Agreement against IPA and to recover from IPA any loss, damage or
costs, including attorneys' fees and disbursements and court and collection costs incurred by reason of
such default.
Section 18.3 Exercise of Remedies by a Party
456 4123 -40-
(iii) neither the execution or delivery by it of the Common Facilities
Agreement nor its compliance with any of the terms and provisions thereof(A) contravenes any
applicable law, order, writ,judgment, injunction, decree, determination or award applicable to it
or any of its respective properties or assets, (B) conflicts with, breaches or contravenes the
provisions of its enabling legislation, organizational documents or any indenture, mortgage,bond
resolution, contract or other instrument to which it is a party or by which it is bound, or (C)
results in a condition or event that constitutes(or that, upon notice or lapse of time or both would
constitute) a default or event of default under any indenture, mortgage, bond resolution, contract
or other instrument to which it is a party or by which it is bound;
(iv) no authorization, consent, approval or other action by, and no
notice to or other filings with, any governmental or regulatory authority is required for its
authorization of,or is required in connection with, its execution,delivery and performance of,the
Common Facilities Agreement,except for any that it has obtained; and
(v) there are no actions,suits or proceedings at law or in equity by or
before any governmental or judicial body now pending or, to the best of its knowledge after due
inquiry, threatened, against or affecting it or any of its properties or rights before any court or
administrative body or agency which could reasonably be expected to materially adversely affect
its right or ability to perform its obligations under the Common Facilities Agreement, or which
questions or challenges the validity of the Common Facilities Agreement or any action taken or to
be taken by it pursuant to the Common Facilities Agreement or in connection with the
transactions contemplated by the Common Facilities Agreement.
ARTICLE XX
TRANSFERS AND ASSIGNMENTS
4562741IS -42-
Section 20.2 Adverse Effeet on Tax Exempt Status_oL IPA Bonds
Notwithstanding Section 20.1, no conveyance, assignment or transfer, including, without
limitation, any conveyance, transfer or assignment pursuant to a foreclosure sale or other exercise of
remedies upon a default, shall be permitted if IPA shall determine that such conveyance, transfer or
assignment will result in an adverse effect on the Federal tax exempt status of interest on the IPA Bonds
unless such adverse effect shall be remediated in accordance with the Internal Revenue Code and
regulations thereunder or provision reasonably acceptable to IPA shall be made for such remediation and
IPA shall be fully indemnified and held harmless from any and all additional debt service and other
amounts,costs and expenses associated with such remediation.
ARTICLE XXI
IPP AGREEMENTS
Section 21.1 Obligaadyns of 1 P.A and Los Angeles
The Parties recognize that IPA is the owner of the Intermountain Power Project and Los Angeles
serves as the Project Manager and Operating Agent thereof and as parties to the IPP Agreements each of
them has obligations, duties and responsibilities with respect to the Intermountain Power Project and to
the IPP Power Purchasers and other parties under the IPP Agreements. Accordingly, it is understood and
agreed by the Parties that 1PA's and Los Angeles' performance of such obligations, duties and
responsibilities under the IPP Agreements and their observance of the rights and interests of the IPP
Power Purchasers and the other parties thereto and of the terms and provisions of the IPP Agreements
shall not be deemed to contravene or to constitute a conflict of interest or a breach or default by either of
them under the Common Facilities Agreement. Nothing in the Common Facilities Agreement shall be
construed as requiring either IPA or Los Angeles to take,or cause the taking of,any action in violation of,
or to prevent IPA or Los Angeles from exercising, or causing the exercise of, any of its rights under, the
The Parties shall use their best commercial efforts to obtain any requisite judicial, governmental,
regulatory and other approvals necessary for the consummation of the transactions contemplated by the
Common Facilities Agreement.
ARTICLE XXIII
CONFIDENTIAL IN"FORIkIATION
Section 23.1 IPP Cvn entW In f motion
The Unit 3 Owner Participants and each of them will keep confidential and not use, reveal,
provide or transfer to any third party any IPP Confidential Information it obtains or has obtained except as
permitted under the Unit 3 Construction Lease and Agreement or the Joint Operating Agreement or to the
extent that disclosure to a third party is required by law. Prior to disclosing IPP Confidential Information
to a third party where such disclosure is required by law,the Unit 3 Owner Participants shall (i) promptly
notify EPA in writing of the existence, terms and circumstances of such requirement so that IPA may seek
an appropriate protective order or waive compliance with the confidentiality terms of the Common
Facilities Agreement, and (ii) cooperate fully with IPA to seek whatever order or assurance is necessary
to ensure that confidential treatment will be accorded to the IPP Confidential Information.
ARTICLE XXIV
TERM
Section 24.1 Effective Date and Term
This Common Facilities Agreement shall become effective as of the date first above written when
it has been duly executed and delivered on behalf of each of the Parties and the Common Facilities
Agreement shall remain in full force and effect until such time as Unit 3 or Units I and 2 have been
decommissioned and retired from service as provided in Article XVI of the Common Facilities
456273 i'.3 46-
Any Party may,at any time, by written notice to the other Parties,designate a different address or
a different person for the receipt of notices under the Common Facilities Agreement.
ARTICLE XXVI
GOVERNING LAW
Section 26.1 Governing Law
The Common Facilities Agreement shall be interpreted, governed by and construed under the
laws of the State of Utah, provided that the laws of the State under which a Party was created or
organized shall determine the authority of such Party to execute and perform its obligations under the
Common Facilities Agreement.
ARTICLE XXVII
MISCELLNEOUS
Section 27.1 Further Assurances
Each Party will execute and.deliver such instruments, documents and assurances, or take such
further action, upon the reasonable request of another Party, as may be necessary or appropriate (i) to
carry out the intent and purpose of the Common Facilities Agreement,00 to protect any of the rights and
remedies provided or intended to be provided by the Common Facilities Agreement, or (iii) to effect a
change in an Exhibit required or intended to be made by the Common Facilities Agreement..
Section 27.2 No Implied Waiver
Any waiver at any time by any Party of its rights with respect to a default or any other matter
arising in connection with the Common Facilities Agreement shall not be deemed a waiver with respect to
any subsequent default or matter.
Section 27.3 Severability
45827412 S -48-
(iv) it is not acting as a fiduciary for any other Party in respect of the
Common Facilities Agreement.
Section 27.5 Relationship of Parties:No Partnership
The covenants, obligations and liabilities of the Common Facilities Agreement are several and
not joint or collective and nothing in the Common Facilities Agreement contained shall be construed to
create an association, joint venture, trust, partnership or other legal entity or to impose a trust or
partnership obligation or liability on or with regard to any one or more of the Parties. Each Party shall be
individually responsible for its own covenants, obligations and liabilities under the Common Facilities
Agreement.
Section 27.6 Exhibits
Each Exhibit shall be incorporated into and be a part of this Common Facilities Agreement. Los
Angeles shall be responsible for preparing and distributing to the other Parties periodically but not later
than the end of each calendar year and prior to the Closing Date each revision of Exhibits C. D, E, F, H,1,
J and K, and the Unit 3 Owner Participants shall be responsible for causing the preparation and
distribution to the other Parties of each revision of Exhibits A, B,and G, all such revisions of Exhibits to
be prepared as provided for in the Common Facilities Agreement. Each such revised Exhibit shall replace
the previous applicable Exhibit and shall be incorporated into and become a part of the Common
Facilities Agreement.
Section 27.7 Counterparts
This Common Facilities Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original but all of which together shall constitute one and the same
instrument.
3562'412.8 -50-
EXHIBIT A
DESCRIPTION OF UNIT 3
-1
EXHIBIT C_
EXISTING COMMON FACILITIES
t
Values of Existing Fair Value for Unit 3's
Description of ExistingCommon Facilities Share of Existing
common Facilities Common Facilities
i
$65.9900,000 -_ ______ $21 966,667
1. Fuel Transport ___.._.__ ------ - -
Railcar Service Center ----T----
i. Service Center Railway
ii. General Construction --- ----
iii. Rail Car Mover
iv. Spot Car Repair Equipment
v. Switch Locomotive --
i j
Three Railcar Sets �-
I
On-Site Railway Loop Track and other S urs _�_�..
I
$91,75-9 000 f $30,586,333 T
_11. Fuel Handling �—
Coal Transfer Buildings 1,2,314. _ -- -
{
Crusher Building 1 -----
k
Coal Unloading Building _ _
Thaw Shed ---- - j
Conveyor 6 Drive Buildin
Coat Sam �-
Railcar Unloading System ' -
Railcar Track Scale Weighing Systems
a
Coal Truck Unloadin -
Coal Truck Weighing Systems.and Building
Coal Stackout S stem ;
Coal Reclaim System and Facilit+
Fuel Oil Truck Unloading Facilit
Fuel Oil Storage Tanks
I
I
Fuel Oil Distribution System ----- -+—
Dust Control Systems _--------- — '
i
111. Fuel_Analysis --
Fuel Lab and Ana�is Equipment __ ---
As-Received Fuel Sampling Systems(Railcar and Trucks _
_ _ ----r-
Railcar identification and Weighing Systems - I
4%2741'S C-1
EXHIBIT C
i
Fair Value for Unit 3's
Description of Existing Common Facilities t Values of Existing Share of Existing
P g Common Facilities Common Facilities
_
Settling Basin Reclaim Pumping System
Recovered Water Pumping System
IX. Water Treatment: — I $1,053,000 $351,000
Water Treatment Building,___ -
Water Treatment Facility(Control Building)
Water Supply Pumps
Solids Contact Units _
SCU Surge Tanks
Lime Silos _
Soda Ash Silo
Soda Ash Feed and Preparation Systems
Lime Slaker Systems '
Coagulant Storage&Feed Systems
Pretreatment Sludge,Thickener System —
Sodium H hlorite Feed System_
i
Cycle Makeup Feed Tank '
Cycle Makeup Treatment Systems
De-mineralized Water Storage Tanks
De-mineralized Water Transfer System I
Water Analysis Lab and Equipment
F �
Circulating Water Treatment System
X. Ash Handling $24,143,000 $8,047,667
Ash Water Recycle Pump Station&Piping f _
Flyash Silos
Ash Fluidizing Systems
E
XI. Sludge Handling _
Sludge Conveyors
Sludge Emergency Stackout Facility #
Sludge Stackout Facility
S 1 ud e Landfill
Dust Collector Systems
XII. Sludge Conditioning_____
C-3
EXHIBIT C
Values of Existing
I
Fair Value for Unit Ts
�Descri tion of Existin Common Facilities g Share of Existing
p $ Common Facilities Common Facilities
r
_Computer Server Equi ment ------
Personal &S2ecific Task Computers ----.-
Telephones&Cabling _ -
PBX Telephone Switch
Fax Equipment -
Network Printers
Plant Paging and Emergency Communications Systems
Materials Mg System Software
XVI. Electrical 1 $5,800,000 $1 933 333
Emerge Generation S stems A,B&C
I
Emer enc Generation Buildin
Secondary Unit Substations
f
i. Unit 6.9 kV switch ear- 1. tie breaker in each unit switch ear
Intermountain Switchyard Facilities
L Station Service Rack(Banks K&L) i
ii. Construction Power Distribution Centers(3 ea.)
Hi. 345kV Rack
- f 4 940 IX30 $1,W 667
Xti IL Reservoirs $ f
Wastewater Holding Basin -
Settft Basin
I
Eva ration Ponds 1 thru 6 '
{
Coal Pile Run-off Basin
Ash Water Recycle Basin ` ---
Bottom Ash Basins thru 3
Raw Water Reservoir ---I-----
Combustion B -Products Landfill Overflow Basin
XVIII. Rollins Stock
Coal_Dozers(2 ea.)
Coal Scra r l ea.) -
Front Loader f 1 ea.) F — --
1
Water Trucks(2 ea.)
l S-Wheel Dump Trucks(.3 ea.)
C-5
EYHIBIT C
Description of Existing Common Facilities Values of Existing Fair Value for Unit 3`s
Common Facilities Share of Existing
Common Facilities
i
r
Permitted Landfills(Sanitary and Combustion By-Products) - �
Sewage Treatment Facility and Equipment -
Warehouse Inventory
_S are Parts
New Training Simulator and other Training Programs --
_ -
XXI. Operational Etriciency/GoodwilUDevelopment Fee
$82,413,000 $27.471,000
O ratin Cost Reductions
Design Cost Savings Based on ExistingLayouts
Im act Mitigation Payments
Environmental Impact Study
i
Sitin outing Study - -- '
Permits/A
its/Approval -
Coordination Between Demon Engineer and Environmental Consultant
Owner Cost Savings
O rating Agent Cost Savings
i
TOTAL:
Votes: ------ -------_----------
1. Values of Existing Common Facilities are subject to adjustment as
_I
provided in Article III of the Common Facilities Agreement.
'. All buildings includes ace conditioning, lighting, ---�
g p g, g g,power, plumbing
and furnishings.
J
1562741'.8 C-7
S
l.XHlIIIT I)
c
E
E
Description of Existing Common Facilities Description of Required Common Facilities
Additions and Improvements
E �
New fly ash silo and crosstie with existing two silos will he provided with Unit 3.
l'Iy tsh Silos
C'russtie will allow transfer of Unit 1 of 2 t]y ash to the new silo,ill case one of the two
__ existing silos is out of service.
V. Intermountain S%itch and Facilities __�__......._._.____`._--_.._____�_ _._____.__.._.._.___
'The additions or trio dittcations,if any,to the switehyard to be iusta#!ed ur .....0 as
provided in Scctic�n 8.2 of the Unit 3 Construction Lease and A reen)etyt._ �� ��___•
VI._.__ C411111nt►n Control Room(located in(control
The eyuipnient,facilities and ii-Wifications to be installed to provide tncm tar the dtSj�aEeh,
f ttorin and control of Unit 3 �.
...__.._..._ �Yi ttfitt lull.
NOTES
I. At the C'lusutg ttic costs ut each of the atx)ve Required Common
Facilities Additions and Itupro►vc,nc,its will be added to the Existing
Cortrnurn Facility to which it relates iind the Unit 3 Owner
Participants will receive a credit against the purchase price for such
CxOsts,all as )rovidcd in Sectio►►t S.2(h).
a'+r►??-rl'is
D-2
k
EXHIBIT E
Description of Joint Common Facilities
ECoal 5tackout.System._�._____._.___..�...._..,_.._�._........._._................_........_r...........�..�......�..�_._�..
Coal Reclaim System andFacility
Fuel Oil Truck Unloading Facilq
Fuel Oil.Storage Tanks
Fuel Oil Distribution System
Dust Control Systems
Ill. .._...__..Fuel,Anajyais
Fuel Lab and Analysis Equipment
As-Received Fuel Saml�flg Systems(Railcar and Truck)
»Railcar Identification and Weighing
S ste.►ns
Property at the Generating Station site consisting of the sites of the
Joint Coninion Facilities but excluding the Unit 3 Site
V�__._^Limestone Har►dling�._.�._.�_...___.___...__...,�.�..,.__..1.��..F�.�..-�.M�.�.�.�
Limestone Truck Unloading Building
Limestone Lj nloading System
LimestoneStorage Silo Y�..____..._._�..�..._.__...-..__.-......_._.__._.._....�_......_..w_....__..__...�.�_.._..
Limestone Reclaim System. .._._ ,�..�.,._�.._._...__.._.,_..._._..,�._.--•._..._....W.�_..._..w..,__..
LimestoneConveyo._._._s. .�...,.�..._...____,_.�....�...m..._.._..._.__.-__....__....-.._.._._.-_____._..w__._.,_
Limstone Eme rgency Reclaim S stets
4tio27412 x E_-)
FAIiIB1T h
p�
1
pi
3
6
Description of Juilit Common Facilities
CollsCi'Uctlorl Water,_....._._._......._._.__..____......_...........�..__�....�__w.._._.�._...___--..... �._._M.....
Tank _
Fire/Service Water Stogie Tanks
S�rvice Water Distribution System
_-.._...._._...._.____._..._..__..._...,.__....,_.�w..___....
Settling_# _Reclaim Pumping
Recovered WaterWFuinSystem
IX. Water Treatment:
Water Treatment Building
Water Treatment Facility(Control Building) W ��
Water_Supl __..�_ .,._. - _._.... . ...
Solids Contact Units�
SCUSine Tanks�.....__.._._..__._.___....___--__.w..__..._.._..�._...._..._._�,....._...___.._.._.._.�.....___�..M._
Lime Silas _
SodaAsh Silo `--.. .�_..�,_. .-._..,..__.�...�.._.._....._..._....._.__.�w._..�_�_M._...�.__......_. ,..
Soda Ash Feed and Preparation_.._.�. .._..__.._._......�,.�......._._.._. r___.._._.._._._...�..._._,.._...
Lime Slaker S sternsIL
Pretrcatmwnt Slud 4`l'hickener��,_�.�
S Ste-r!y
Sodium H Pochlorite Feed System
X !e Makeu reed Tank
� e Makei�'Treatment S sterns
De-mineralized Water Storage Tanks
De-mineralized Water Transfer nsfer System
Water Analysis Lab and Equipment
�� ���-........._....._.�....-.�_....._
E-4
N.
X
1
EXH BIT E
Description of Joint Common Facilities
Thickerwr.Feed Pumps,Recc Cie PunI S,Filter Feed Pumps
S!�e Vuum Filters
Po! mer Addition Systems
Slud scl F} aslt Pu tmill Mixing Systems
Dust Collection Systems __..�._�,�..._�......._.._..._._..._._�......._....__.___...�_._.�_......_.....,._.._
Xlll...._.. wWrehousi> � ._ �__�..._��
Main W:uehouse Nocated in GSB Structure) m T M whw-M1
Construction Warehouses } thru 4_...^
Lulx•Oil Storm
Paint&Solvent S�Buildi��
Salvar4 E.valuatio B din � ....�.`.__.....__..�...,�_......_.......�._...._..�......_._._._.._.__._.__.._
. _ .� .... ............�-..�_,...,...,.....__ _._
XIV. CommEu (See Note I Below) _._._.__�...__�..... ...._.
Utititj�Services Building��. ,.__.....__.�.....�..�_..__._ti�__.__-.w.........._.�_,_.w....._.___
AdministrationBuilding,�___..____._.._.,...._...._...____.._._...._�...._._._._,___....�,_.�.__..._-.v..�
Construction Mann emc�nt Office;Buildii �
SiteServices Buildingy..._.�._..____...��._.._._._._......,._......___..__....___._........____.__..�.....�
Conyllon Control Room(located in Control Building)
:Bulk_Storage Building �.._....._._.__�_.__._._._.M..._......r............. .._.�... .,..�..__...__..__.�.��.
_Genera) Services Buildi_i��._..�.. ._____........._.._._...._....____._._.......�..__.w._...__..___._.._..._...._.
Weld Testine Facility
E-6
EXHIBIT E
Description of Joint Common Facilities
ii, Construction Power Distribution Centers(3 ea.)
-—--------
Rack
XVIL Reservoirs
Wastewater
Settli Basin
._Eva )ration Ponds I thru 6
Coal Pile Run-off Basin
Asti Water Recycle Basin �_...,�___Y _.�_. _.. ,.y �_w ._ .�_..M___
Bottom Ash Basins I thru 3
Raw Water Reservoir
Combustion By-Products Landfill Overflow Basin
XVIII. Rolling Stock
Coal Dozers(2 ea.)
Coal 5r.r er-0 ea.)
Front Loader(I ea.)
Water Trucks(2 ea.)
18-Wheel Dump Trucks(3 ea.)
'� »-_._.__ �..^_..--_,=_ _u..
4-axle-PT-irailers(3 ea.)
90-ton Mobile Crane
28-ton Mobile Crane
Grader, 14 ft.
4%274128 E-8
i4 x
N;
EXHIBIT E
i
Description of Joint Common Facilities
ivy Fire Water Pumps
_.�.__,..m.,_ ..�.__..�.�_�__......._� __,_... .. __.. ...
Concrete-Lined Drainage Ditches ___..._..._-.. ..._.._._,_...._.._.�_T._�......t_..__._ _,.._.._.
Potable Water Systems
k di^o c•n Storage and Delivery Ssten.� MY^........._.___.....�__-_ ....... ._ _.
AuxiliaryBoilei�S�tems.._._..___......._..�,.-....._w__.._._�_......_._..__......_.-..._.�_..._�.,_..__..�.._......_
Vehicle Fuel Dispensy�Station
Site Road Construction
_Construction Gate Structure
Draina�_»and Site Work -_�.."_,.___._.._�._.,._._...�.........�.....,_.._,_-...._.._.�_..___.�,�._..�..__.__
Site Fencing +Security Fencin�.....�...�1....�.��M_.�...__.._..�........_..�___,�..._..�_.�_.._.
FirstAid Clinic _._.mm-.-....��._._.�w._.__.._.�_.__...__....._..__._._....._._._
Permitted Landfills(Sanitary and Combustion By-Products)
Sewage Treatment.Facili�tand Equii�ci�t -
WarehouseInventor...__......_._�._.�..______.�..._.._.__._.... __.�._..,�....__.._..._�.._....,-....__..,..
Spare Parts
New'I'rairiin Simulator and other Training Programs
XXh_t?1erational *TiiciencvlC:ewdwilUDevtlo meat Fc�c
O �ratin Cost Reductions
Coat Savings Based on Existing Layouts _..__._
[Impact Mitigation Payments
L'-10
EXHIBIT F
FORM-OF UNIT 3 SITE SPECIAL WARRANTY DEED
t
r EXHIBIT H
FORMS OF JOINT COMMON FACILITIES BILL OF SALE,LICENSE
.AND ASSIGNMENT OR INSTRUMENT OF TRANSFER
4io"741 a H-t
°r
EXHIBIT J
RESERVATION OF THE PROPERTY OF
INTERMOUNTAIN POWER PROJECT
45h27412 1 J-I
Intermountain Power Project
Unit Three Development Coordination Agreement
Dated as of May 1, 2005
Among
Intermountain Power Agency
and each of the Development Participants
set forth in Exhibit A hereto
De<oord0n.doc
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TABLE OF COIN IEN S
Pape
ARTICLEI DEFINITIONS ..........................................................................................................2
Section1.1 Definitions............................................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES;PERFORMANCE BY
UNIT I AND 2 OPERATING AGENT....................................... 7
...................
Section 2.1 Representations and Warranties of Development Participants............7
Section 2.2 Representations and Warranties of IPA...............................................7
Section 2.3 Performance by Unit 1 and 2 Operating Agent ...................................8
ARTICLE III DEVELOPMENT RIGHTS AND ASSISTANCE AND COOPERATION
OF IPA AND UNIT 1 AND 2 OPERATING AGENT...................................
Section 3.1 Development Participants; Exclusive Development Rights................8
Section 3.2 Cooperation...................
Section 3.3 Subscription Notice.................................................... 10
... ............
Section 3.4 Assignment of Steering Committee Work Product ........................... 10
Section3.5 Limitations......................................................................................... l I
Section 3.6 Payment of Expenses of IPA and the Unit I and 2 Operating
Agent.................................................................................................. I 1
ARTICLE IV IPA AND UNIT I AND 2 OPERATING AGENT PARTICIPATION IN
DEVELOPMENTWORK............................................................................. I I
Section 4.1 Development Committee Meetings ................................................... I I
Section 4.2 Development Committee Information
Section 4.3 Development Committee Activities........................
Section 4.4 IPA Development Contract................................................................ 13
Section 4.5 IPA Financial and Financing Services............................................... 13
Section 4.6 Certain Items Requiring IPA Approval ............................................. 13
ARTICLE V ADDITIONAL COVENANTS OF DEVELOPMENT PARTICIPANTS............ 14
Section 5.1 Covenants of the Development Participants...................................... 14
Section 5.2 IPA Rights to Development Work..................................................... 16
ARTICLE VI ACCESS TO INFORMATION............................................................................ 16
Section 6.1 Confidential Information. .................................................................. 16
Section 6.2 Use of Work Product ............................................................ ... 18
ARTICLE VII ENDEMNIFICATION; LIMITATION OF LIABILITY; SURVIVAL.............. 15
DevCoordCln.doc
1
9169679 v;S
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1
Intermountain Power Project
Unit Three Development Coordination Agreement
This Unit Three Development Coordination Agreement, dated May 1, 2005 (this
"Agreement'), is by and among Intermountain Power Agency ("TPA") in its capacity as owner
of the Intermountain Power Project ("IPP"), and each Development Participant set forth in
Exhibit A hereto, as it may be modified from time to time in accordance with this Agreement.
Capitalized terms used but not defined in this Agreement shall have the meanings given to them
in the Intermountain Power Project Unit Three Development Agreement, dated of even date
herewith (the "Development Agreement'), to which the Development Participants and IPA, in its
capacity as Development Manager and not as owner of IPP, are parties.
Recitals
]PA is the owner of IPP, which consists of Units 1 and 2, related transmission
facilities and various rights,titles and interests in and to other tangible and intangible property.
The Department of Water and Power of the City of Los Angeles (the
"Department") serves as the Unit I and 2 Operating Agent.
]PP was originally designed to include four generating units for a total project
design capacity of 3000 MW. For a variety of reasons, the IPP was scaled back in 1983 to
consist of Units 1 and 2 only. Before the IPP was scaled back, certain rights, property, facilities
and appurtenances were acquired and/or constructed as a part of IPP in excess of those required
to support Units I and 2. The Unit I and 2 Power Sales Contracts and the IPA Bond Resolution
provide that IPA may, under certain conditions specified therein, sell, lease or otherwise make
available Common Facilities for the construction or operation of other generating units at the IPP
Site.
Pursuant to the Study Agreement, the Steering Committee, consisting of a
representative of each of the Study Participants, was established. The Steering Committee has
conducted studies and taken preliminary actions incorporated in the Steering Committee Work
Product with regard to the possible construction of Unit 3, which would incorporate portions of
the Common Facilities and has recommended that further development of Unit 3 be pursued to
determine whether Unit 3 should go forward to the construction stage and to prepare for
construction if it does go forward.
The Development Agreement establishes the Development Committee for the
purposes of, among other things, directing and supervising Development Work, which, in
general, consists of feasibility and planning work beyond that included in the Steering
Committee 'Work Product. Pursuant to the Development Agreement, each Development
Participant has reserved or will reserve certain rights to participate as an owner in Unit 3.
IPA, as owner of IPP, and the Unit 1 and 2 Operating Agent, have certain
contractual and legal obligations with respect to IPP that require them to be integrally involved
in various aspects of the Development Work and the Unit 3 Project. Additionally, the
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the performance of ministerial tasks or the providing pf labor or manpower to apply or
implement the foregoing after it has been made available for the use of the Development
Committee.
"Department"has the meaning set forth in the Recitals.
"Development Agreement"has the meaning set forth in the Heading.
"Development Coordination Agreement Effective Date" means the date set forth
in the Heading, provided that the Development Agreement shall become effective on such date
in accordance with its terms.
"Development Manager"means the entity then serving as Development Manager
under the Development Agreement, and in the case of IPA acting in its capacity as Development
Manager, it shall be acting in such capacity as an independent contractor and not as the owner of
IPP or a party to the 1PP Agreements.
"Development Participant Confidential Information" means information and
materials pertaining to a Development Participant that such Development Participant designates
as confidential by describing such information or materials on Schedule I of this Agreement, as
in effect from time to time, so long as (i) such Development Participant has made reasonable
efforts to maintain the confidentiality thereof, (ii) such information or materials are not public
information through the action of the Development Participant, and (iii) such information or
materials have not been obtained independently by IPA from a source that is lawfully entitled to
disclose the same. Any Development Participant may, from time to time, revise Schedule I to
include descriptions of additional information or materials owned or provided by it to IPA. A
Development Participant may revise Schedule 1 to remove the description of any information or
materials owned or provided by it set forth therein. Upon the providing of each such revised
Schedule I by a Development Participant to the Development Manager and to IPA, such revised
Schedule I shall replace, for all purposes of this Agreement, the Schedule I previously in effect.
"Development Participant Entity"has the meaning set forth in Section 5.1(b).
"Development Participants" means, as of any particular time the Initial
Development Participants and the Future Development Participants, as then set forth in Exhibit
A hereto (as modified from time to time as provided in this Agreement).
"Development Period" means the period beginning on the Development
Coordination Agreement Effective Date and ending on the date the Development Agreement
terminates pursuant to Section 16.1 thereof.
"Developrent Mork Product" means all documents, materials, schematics,
drawings, reports or other information on any type of Media generated, compiled or created in
connection with the Development Work.
"Future Development Participant" means any Development Participant that
executes and delivers the Development Agreement pursuant to the terms hereof after the
Development Coordination Agreement Effective Date.
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"IPP Facility" includes any and all real roperty and personal property that
constitutes IPP or any portion thereof.
"IPP Parrici,pants"means each entity that is a party to a Unit 1 and 2 Power Sales
Contract with IPA as of the Effective Date.
"IPP Site"means any and all locations at which any IPP Facility is located.
"IPSC' means Intermountain Power Service Corporation, a Utah non-profit
corporation that provides personnel to operate and maintain IPP.
"Laws" means any and all constitutional provisions, statutes, regulations, rules,
ordinances, resolutions, orders and requirements, including, without limitation, the provisions of
the Utah Government Records Access and Management Act and the regulations and
requirements applicable to any public or investor owned utility or other Development
Participant, including, without limitation regulations and requirements of the Utah Public Service
Commission, of any Governmental Entity having jurisdiction over all or part of the Unit 3
Project or the activities or functions of any of the Parties to this Agreement.
"Media" means all techniques, means and mechanisms for storing, preserving,
memorializing or displaying information, including, without limitation, documents, notes,
papers, magnetic tape, disks, ready access memory, recordings, photographs and other media of
any type or nature.
"Party"or "Parties"has the meaning set forth in the Recitals.
"Permit" means any permit, license, consent, approval or authorization of or
issued by any Governmental Entity.
"Person" means a natural person, corporation, partnership, limited liability
company,trust, association, Governmental Entity or any other person or entity.
"Possessing Party" has the meaning set forth in the definition of "Strategic
Confidential Information."
"Qualified Electric Entity" means any Governmental Entity or any corporation,
partnership, limited liability company, trust or association, including any wholly owned
subsidiary (which subsidiary may be a corporation, partnership, limited liability company, trust
or association) of any such entity whose financial obligations are guaranteed by its parent entity,
that, in each case, (i)provides electric services at wholesale or retail, (ii) has been assigned, or in
the case of such a wholly owned subsidiary whose financial obligations are so guaranteed, its
guaranteeing parent entity has been assigned, a long-term senior debt rating of, or has
outstanding debt obligations rated (without regard to any credit enhancement) at least, "$aal"by
Moody's Investors Service or "BBB+" by Standard & Poor's Credit Market-Services, or the
creditworthiness of which is otherwise approved by IPA, which approval shall not be
unreasonably withheld and shall be based on IPA's reasonable judgment as to the financial
ability of such Person to pay its share as a Unit 3 Participant of the future capital and operating
payment obligations that will become payable to IPA by the Unit 3 Participants as estimated by
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"Augmented Development Costs Share" "Interlocal Act"
"Category 1 Study Expenses ;""Joint O eratin Agreement"
"Category 2 Study Ex Tenses" ""Project Agreements"
"Common Facilities" "Steering Committee"
"Common Facilities Agreement" "Steering Committee Work Product"
"Construction Management and "Study Agreement"
Operating Agreement" "Study Participants"'
"Development Committee" "Subscription Notice"
""Development Contract" "DAMPS"
'Development Contractor" "Unit 1 and 2 Operating Agent'
"Development Costs Share" "Unit 1 and 2 Power Sales Contracts"
"'Development Costs Limit" "Unit 3"
"Development Manager" "Unit 3 Participants"
"Development Work" "Units 1 and 2"
Article H
Representations and `Warranties; Performance by Unit 1 and 2 Operating Agent
Section 2.1 Representations and Warranties of Development Participants. Each of the
representations and warranties of the Development Participants pursuant to Section 16.3 of the
Development Agreement are incorporated herein by this reference and are hereby restated and
remade by each Development Participant to and for the benefit of IPA and the Unit 1 and 2
Operating Agent. In each instance in which a Development Participant has made a
representation or warranty in Section 16.3 of the Development Agreement that specifically
references the Development Agreement, such representation or warranty shall be deemed, for
purposes of this Agreement, to specifically reference this Agreement as well.
Section 2.2 Representations and Warranties of IPA. IPA hereby represents and
warrants to each Development Participant that, as of the Effective Date, each of the following is
true and correct in all material respects and is not materially misleading:
(a) It is duly organized and validly existing and has full power and authority
to enter into this Agreement and to fully perform its duties and obligations hereunder.
(b) Its execution, delivery and performance of this Agreement have been duly
authorized and approved by all requisite action of its board of directors and by all other Persons
to the extent the approval of such body, council, commission, board, authority or Person is
required by applicable Law or the IPP Agreements or in order for the representation and
warranty set forth in the immediately following subsection (c)to be true and correct.
(c) This Agreement constitutes its legal, valid and binding obligation,
enforceable against it in accordance with the tenns hereof, subject to the effects of bankruptcy,
insolvency and other statutes or rules of law affecting creditors' rights generally and by general
equitable principles.
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(b) Provide, or cause to be provided, to the Development Participants
reasonable access to all documents and records in the possession or control of IPA, the Unit 1
and 2 Operating Agent or IPSC with respect to the plannin� design, construction or operation of
Units 1 and 2.
(c) Provide, or cause to be provided, to the Development Participants
reasonable access to and the cooperation and assistance of the respective staffs of IPA,the Unit 1
and 2 Operating Agent and IPSC to assist the Development Participants in the conduct of
Development Work; provided, however, such cooperation and assistance shall: (i) be subject to
the time requirements of such staffs to perform their ordinary duties and obligations to IPA, the
Unit I and 2 Operating Agent and IPSC, as applicable; (ii) be reasonable as to the time and days
upon which, and the places at which, such cooperation and assistance is given; (iii) not require
IPA, the Unit 1 and 2 Operating Agent, any Development Participant or IPSC to divulge
Strategic Confidential Information; (iv) not include any activities, work or assistance that is the
subject of or is to be provided under any Development Contract; and (v) not be required to the
extent it is outside the scope of Cooperation Work.
(d) Provide the Development Participants and each Development Contractor
access (the "'Access Rights') to any IPP Facility for the purpose of conducting, at the
Development Participants' expense, engineering and environmental studies and preparing
physical plans and specifications in connection with the Unit 3 Project. The exercise of the
Access Rights shall be at the sole risk of the Development Participants and Development
Contractor, and, in using such Access Rights, each of them shall waive all claims that it may
acquire against IPA or the Unit I and 2 Operating Agent as a result of any damage or injury that
it may suffer in connection with the exercise of such Access Rights. In addition, the
Development Participants shall provide to IPA and the Unit I and 2 Operating Agent, at the
request of either, a waiver, in form and substance reasonably acceptable to IPA and the Unit 1
and 2 Operating Agent, pursuant to which each Person accessing any IPP Facility pursuant to
this Section 3.2(d)waives all claims which he, she or it may acquire against IPA, the Unit 1 and
2 Operating Agent or IPSC in connection therewith.
(e) Provide support and assistance to the Development Participants in
providing information with respect to the Unit 3 Project, and the future development thereof, to
potential participants and Governmental Entities having jurisdiction or oversight with respect
thereto.
(f) Cause the appropriate IPA and Unit I and 2 Operating Agent personnel to
attend meetings of the Development Committee held at times and places that shall be reasonably
agreeable to such personnel or to participate by telephone conferencing at times reasonably
agreeable to such personnel.
(g) Provide such other assistance and support to the Development Committee
and any Development Contractors as may be reasonably necessary to expedite and facilitate the
performance and completion of the Development Work.
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Section 3.5 Limitations. The Parties acknov--Iedge and agree that the proposed
development of Unit 3 will be a substantial and challenginglundertaking and that no assurance
can be given by any Party that the Unit 3 Project will be detennined to be feasible or that it will
proceed to construction, completion and commercial operation. The Parties further acknowledge
and agree that while they will each use their best efforts and will negotiate to reach agreement on
the terms and provisions of the Project Agreements,nothing in this Agreement obligates any
Party or the Unit 1 and 2 Operating Agent to enter into or approve any Project Agreement or
otherwise take any action that it determines is contrary to its, or its rate payers',best interests or
its legal or contractual duties or obligations. In particular, the Development Participants
acknowledge and agree that (i) all agreements, responsibilities and undertakings of IPA and the
Unit 1 and 2 Operating Agent under this Agreement are and shall be subject to their existing
obligations and responsibilities under the existing IPP Agreements and(ii)neither IPA nor the
Unit I and 2 Operating Agent is obligated to take any action that is inconsistent with its existing
obligations under the IPP Agreements or which it reasonably determines will have a material
adverse effect upon IPP or the IPP Participants.
Section 3.6 Payment of Expenses of IPA and the Unit I and 2 Operating Agent.
Except as otherwise set forth in this Agreement, IPA,the IPP Coordinating Committee and the
Unit 1 and 2 Operating Agent (subject to its right to reimbursement from IPA under the
Construction Management and Operating Agreement) shall each pay their own expenses in
performing their duties and obligations, or exercising their rights, under this Agreement. The
Development Committee, however, shall,within 30 days after receiving an invoice therefor,
reimburse or cause the Development Manager to reimburse IPA,the IPP Coordinating
Committee, the Unit I and 2 Operating Agent and IPSC for expenses incurred by it in connection
with any of the following:
(a) Any fee or charge that may be imposed upon it by any third party
contractor for the release or providing of any information or the providing of any assistance
requested by or on behalf of the Development Committee; and
(b) Expenses for travel of IPA, Unit l and 2 Operating Agent or IPSC
personnel requested by or on behalf of the Development Committee so that such personnel may
meet with or assist any Development Contractor in connection with the Development Work.
Article IV
IPA and Unit 1 and 2 Operating Agent Participation
in Development Work
Section 4.1 Development Committee Aleetil7gs. The Development Committee shall
cause the Chair of the Development Committee to give IPA and the Unit I and 2 Operating
Agent written notice of each meeting of the Development Committee at the same time and in the
came manner as notices of such meetings are given to the members of the Development
Committee. IPA and the Unit I and 2 Operating A L)ent shall be entitled to attend, either in
person or by telephone conferencing, all Development Committee meetings and to participate
therein as a non-voting participant. The Development Participants shall consider, in good faith,
any and all input IPA or the Unit I and 2 Operating Agent may provide at or in connection with
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(b) The preparation, proposal and lobbying of any and all federal, state or
local legislation necessary or desirable in connection with tfie Unit 3 Project.
(c) All substantial community and public relations activities, including the
issuance of press releases, material meetings with state and local community off cials and leaders
and the negotiation of all community impact alleviation agreements and payments with respect to
the Unit 3 Project..
(d) The proposal, negotiation and consummation of all agreements or
arrangements with respect to taxes or fees in lieu of taxes with respect to the Unit 3 Project.
(e) The formulation of physical plans and specifications for the Unit 3 Project.
(f) The formulation and establishment of the payment obligation structure for
the Unit 3 Project.
Section 4.4 IPA Development Contract. It is the intention of the Parties that EPA be
provided the opportunity to serve as a Development Contractor under the Development
Agreement for the purposes of providing, if needed,various accounting,management and
administrative services. The Development Committee shall negotiate, in good faith, a
Development Contract with IPA for such purposes. As such a Development Contractor, it is
understood that IPA shall be acting as an independent contractor and not in its capacity as the
owner of IPP and shall not incur any liabilities payable from IPP revenues or funds. Any
Development Contract retaining IPA as a Development Contractor is subject to Section 5.3 and
Section 16.13 of the Development Agreement.
Section 4.5 IPA Financial and Financing Services. IPA has developed considerable
expertise in capital markets transactions from its experience since 1981 in financing the costs of
Units 1 and 2. IPA desires to make this expertise available to the Development Committee in
connection with the financing of the costs of Unit 3. During the term of this Agreement, the
Development Committee shall investigate, and negotiate and consult with IPA regarding,the
various financial or financing services that could be provided by IPA to facilitate and achieve the
lowest practicable costs for the financing of the costs of Unit 3.
Section 4.6 Certain Items Requiring IPA approval. IPA shall have the right to
approve any matter regarding material designs, specifications, configurations,plans, construction
methods and schedules and other similar matters with respect to the Unit 3 Project or the
construction of Unit 3 which would or may have, in the reasonable judgment of IPA or the Unit
1 and 2 Operating Agent; a material adverse affect on any IPP Facility, including, without
limitation,Units 1 and 2. Each such approval, if given, shall be given within a reasonable time
after IPA obtains or is provided the necessary information to enable it to make a reasonable
decision of whether or not to approve such matter. If such approval is withheld, IPA and the
Development Committee shall cooperate to make mutually acceptable modifications to the
matter in issue. Nothing in this Section 4.6 shall be construed as otherwise limiting the rights of
IPA, the IPP Coordinating Committee or the Unit 1 and 2 Operating Agent in matters described
in Section 3.5 or Section 4.3 of this Agreement.
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Development Committee or Development Manager, as applicable, are retaining the contractor,
and that neither IPA nor the Unit l and 2 Operating Agent shall have any duty or obligation with
respect to any amounts that may become due and payable"to any such Development Participant
Entity.
(h) Within five days after providing any notice referenced in clause (g) to
provide a copy thereof to IPA and the Unit 1 and 2 Operating Agent.
(i) Obtain and maintain in force, and to cause each Development Participant
Entity to obtain and maintain in force,in connection with all activities at or in the vicinity of any
EPP Facility, commercial general liability insurance with minimum policy limits of at least
$1,000,000.00 per occurrence, which insurance shall be in forms and with insurers acceptable to
IPA and the Unit I and 2 Operating Agent, in their reasonable discretion.
0) Without the prior written consent of IPA (which consent shall not be
unreasonably withheld), not file any application or make any request for any Permit relating to or
in connection with the Unit 3 Project, or to modify or supplement any existing Permit relating to
Units 1 and 2.
(k) Not cause or allow any amendment, modification or supplement to the
Development Agreement, or written or express waiver of any right or remedy of any party
thereunder without first providing IPA a copy of the proposed amendment modification,
supplement or waiver and providing it a reasonable time period to review and disapprove the
same; provided, however, no such disapproval shall be given unless the item for which such
disapproval is given would adversely affect, or may have an adverse effect on, any right or
protection IPA or the Unit I and 2 Operating Agent may have under the Development
Agreement or have a material adverse affect on any IPP Facility, including Units I and 2.; and
further provided that if any such disapproval is given, IPA and the Development Committee shall
cooperate, in good faith, to make the necessary modifications to the matter that is disapproved so
that such matter is mutually acceptable.
(1) Not allow any Person to become a Development Participant or a Unit 3
Participant, or to succeed, whether by assignment or otherwise, to any interest of any
Development Participant or Unit 3 Participant, under the Development Agreement, unless such
Person shall then be a Qualified Electric Entity(unless IPA gives its written consent otherwise).
(m) Before the IPA/Unit I and 2 Operating Agent Project Documents are
executed and delivered, obtain the written approval of IPA of the scope and nature of the Unit 3
Project as determined by the Development Committee.
(n) Negotiate in good faith for the consummation of the definitive Common
Facilities Agreement, Joint Operating Agreement and all other IPAfUnit I and 2 Operating
Agent Project Documents that are reasonably necessary for the Development Participants who
become Unit 3 Participants to undertake the Unit 3 Project. No party to this Agreement shall be
required to enter into any such agreement or document unless all such agreements and
documents are in form and substance acceptable to such party. Without limiting the generality of
the foregoing, IPA shall not enter into the definitive Common Facilities Agreement or the Joint
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Development Committee. Prior to disclosing IPP Confidential Information to a third party where
such disclosure is required by Law, the Development Participant subject to such requirement
shall (A) promptly notify IPA in writing of the existence, terms and circumstances of such
requirement so IPA may seek any appropriate protective order or waive compliance with the
confidentiality terms of this Agreement; and (B) cooperate fully with IPA to seek whatever order
or assurance is necessary to ensure that confidential treatment will be accorded to the IPP
Confidential Information.
(b) If any Development Participant, inadvertently or otherwise, makes an
unauthorized disclosure of IPP Confidential Information to a third party, the violating
Development Participant shall immediately take reasonable action to recover the improperly
disclosed IPP Confidential Information, execute a retroactive protective agreement with the
unauthorized third party if possible, and immediately notify IPA about the unauthorized
.disclosure_ and the corrective measures taken. The Parties agree that monetary damages are
inadequate for any breach involving an unauthorized disclosure when IPA reasonably believe(s)
it will suffer material harm from the unauthorized disclosure. If IPA reasonably believe(s) that it
will suffer material harm from the unauthorized disclosure, and the corrective measures taken by
the violating Development Participant are inadequate to mitigate this harm, the Parties agree that
IPA shall be entitled to prompt injunctive relief. The Parties' other legal and equitable remedies
and defenses remain unchanged by this provision except that each Party specifically agrees that
any damages shall be limited to direct actual damages and in no event shall such damages
include any indirect, consequential,or punitive damages.
(c) IPA will keep confidential and not use, reveal, provide or transfer to any
third party any Unit 3 Confidential Information or Development Participant Confidential
Information it obtains or has obtained except to the extent disclosure to a third party is necessary
to perform its duties and obligations under this Agreement or the IPP Agreements, or to the
extent that disclosure to a third party is required by Law. Prior to disclosing Unit 3 Confidential
Information or Development Participant Confidential Information to any third party (except
where the disclosure is required by Law), IPA shall notify the Development Committee or, in the
case of Development Participant Confidential Information, the affected Development Participant,
of such proposed disclosure and shall cause the third party to whom such disclosure is to be
made to execute, for the benefit of the affected Development Participant or Participants, a
confidentiality agreement with respect to such Information in form and substance reasonably
satisfactory to the Development Committee or, in the case of Development Participant
Confidential Information, reasonably satisfactory to the affected Development Participant. A
copy of each such confidentiality agreement shall be promptly provided by IPA to the
Development Committee or the affected Development Participant, as the case may be. Prior to
disclosing Unit 3 Confidential Information or Development Participant Confidential Information
to a third party where such disclosure is required by Law, IPA and/or the Unit 1 and 2 Operating
Agent subject to such requirement shall (A) promptly notify the Development Committee, or in
the case of Development Participant Confidential Information, the affected Development
Participant, in writing of the existence, terms and circumstances of such requirement so the
Development Committee or affected Development Participant may seek any appropriate
Protective order or waive compliance with the confidentiality terms of this Agreement; and (B)
cooperate fully with the Development Committee or affected Development Participant to seek
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a litigation reserve which shall be funded by the Development Participants, the amount of which
shall take into account the Development Costs Limit established by the Development Agreement
on the payment obligations of the Development Participants. The obligations of the
Development Participants under this Section 7.1 shall not require them to pay amounts in excess
of the amount of such litigation reserve.
Section 7.2 Limitation of Liability and Inden7nifli cation of Parties. Except for a breach
arising from a Party's failure to make any payment it is required to make under this Agreement
or as provided in Section 7.3,below,no Party hereto nor the Unit 1 and 2 Operating Agent,nor
IPSC, nor any of their respective officers, employees or agents shall be liable for damages to any
other Party for any act or failure to act, whether by negligence or otherwise, arising out of or
pertinent to this Agreement.
Section 7.3 Exclusions. The provisions set forth in Section 7.2 shall apply to all types
of claims or actions including,but not limited to, claims or actions based on contract, tort, patent
or trademark, except that such provisions shall not relieve any Party or its officers, employees or
agents from Iiability for direct damages resulting from acts of intentional wrongdoing or acts of
gross negligence. For purposes of this Section 7.3, direct damages shall include, in addition to
any other elements of damage included in such tenor under applicable Law, any profit received
by a Party as a result of its intentional wrongdoing or gross negligence,but otherwise shall not
include loss of profits or revenues or any other indirect, special, incidental or consequential
damages.
Section 7.4 Insurance. The provisions of this Article VU shall not be construed so as
to relieve any insurer of its obligation to pay any insurance proceeds in accordance with the
terms and conditions of any insurance policy.
Section 7.5 Responsibility of Individual Development Participants. The obligations of
the Development Participants to make any payment to IPA or the Unit 1 and 2 Operating Agent
or to any third party on behalf of IPA or the Unit 1 and 2 Operating Agent shall constitute the
several obligations of each Development Participant, with each Development Participant being
liable only for the portion of such payment obligation that corresponds to its Development Cost
Share(or its Augmented Development Cost Share during the Transition Period, if applicable).
Notwithstanding any other provision of this Agreement, no Development Participant shall be
liable for any obligation under this Agreement arising after it shall no longer be a Development
Participant under the terms of the Development Agreement or in excess of its pro rata share of
the Development Costs Limit, as set forth in the Development Agreement.
Section 7.6 Survival Clause. The following shall survive the termination of this
Agreement: (i) all claims; causes of action,rights and remedies that may arise in favor of any
Party as the result of any breach or default on the part of any other Party; (ii) any provision of
this Agreement governing, related to or applicable to any such claim, cause of action,right or
remedy; and (iii) Section 3.6 and Articles VI and VII of this Agreement.
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Section 8.7 Notices. (a) Any notice, dema d or request provided for in this
Agreement shall be in writing and shall be deemed properly,served, given, or made if delivered
in person or sent by registered or certified mail,postage pre�aid, or by facsimile or other
electronic transmission to the applicable Party at the address set forth below its signature hereto.
(b) Any Party may, at any time, by written notice to the other Parties,
designate different persons or different addresses for the giving of notices hereunder.
Section 8.8 Headings Not Binding. The headings and captions in this Agreement are
for convenience only and in no way define, limit or describe the scope or intent of any provisions
or sections of this Agreement.
Section 8.9 Severabilioy. If any provision of this Agreement shall be determined to be
invalid.or.unenforceable in any respect, such determination shall not affect any other provision
hereof, which shall remain in full force and effect.
Section 8.10 Governing Law. This Agreement shall be interpreted, governed by and
construed under the laws of the State of Utah,provided that the laves of the State under which a
Party was created, shall determine the authority of such Party to execute and perform its
obligations under this Agreement.
Section 8.11 Independent Decision of Parties. (i) Each Party is acting for its own
account,has been represented by attorneys selected by it in connection with the negotiation and
execution of this Agreement, and has made its own independent decision to enter into this
Agreement and as to whether this Agreement is appropriate or proper for it based upon its own
judgment and upon advice from such attorneys and other advisers as it has deemed necessary, (ii)
such Party is not relying on any communication (written or oral) of any other Party as advice or
as a recommendation to enter into this Agreement; it being understood that information and
explanations related to the terms and conditions of this Agreement shall not be considered advice
or a recommendation to enter into this Agreement, (iii)no communication(written or oral)
received by a Party from any other Party shall be deemed to be an assurance or guarantee as to
the expected results of this Agreement, (iv) such Party is capable of assessing the merits of and
understanding(on its own behalf or through independent professional advice), and understands
and accepts, the terms, conditions and risks of this Agreement and it is also capable of assuming,
and assumes, the risks of this Agreement, and (v) none of the Parties is acting as a fiduciary for
or an adviser to any other Party in respect of this Agreement.
Section 8.12 Opinions of Counsel and Other Documentation. The execution and
delivery of this Agreement, including any counterpart hereof, by each Development Participant
shall be accompanied by an opinion of counsel in form and substance satisfactory, and
addressed, to IPA,together with such other evidences and documentation as IPA shall
reasonably request.
Section 8.13 IPP Agreements. Nothing in this A oreement shall be construed as
changing, waiving or otherwise affecting any rights or obligations of any party to any of the EPP
Agreements.
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In Witness Whereof, the Parties have taus d this Agreement to be executed by
their respective authorized signatories, all as of the date firs written above.
INTERMOUNTAIN POWER AGENCY
By:
Reed T. Searle,General Manager
Address: 10653 South River Front
Parkway Suite 120
South Jordan,Utah 84095
Attention: General Manager
Telephone: (801) 938-1333
Facsimile: (801)938-1330
UTAH ASSOCIATED MUNICIPAL POWER SYSTEMS
By:
-...... ." - a,-, - -
Print Name: D u Was O. Hunter
Title: General ana er
Date: May 9. 2005
Address: 2825 East Cottonwood Parkway, Suite 200
Salt Lake City, Utah 84121
Attention: General Manager
Telephone: (801)566-3938
Facsimile: (801)561-2687
SEMPRA GENERATION
By:
Print Name:
Title:
Date:
Address: 101 Ash Street HQ14D
San Diego, California 92101-3017
Attention:
Telephone:
Facsimile:
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EXHIBIT A
DEVELOPAJENT PARTIC PAINTS
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1. Assignment and Transfer of Steering Co mittee Work. Subject to the terms
and conditions of the Development Coordination Agreement and the conditions set forth in
Section 1.1 below, IPA and UAIMPS hereby assign and transfer all of their right, title and interest
in and to the Steering Committee Work Product to the Development Participants, including,
without limitation,Persons who become Development Participants afler the effective date of this
Bill of Sale and Assignment, as tenants in common with each other Development Participant in
proportion to their respective Development Cost Shares (as in effect from time to time).
1.1 Conditions to Assignment.
1.1.1 Automatic Re-Transfer of Steering Committee Work to Il'A.
Notwithstanding the provisions of Section I above and in addition to any other conditions set
forth in the Development Coordination Agreement, all right, title and interest in and to the
Steering Committee Work shall immediately and automatically revert to and become vested in
and transferred, assigned and delivered to TPA without the payment by IPA of any consideration
if (i) the Development Agreement terminates other than pursuant to Section 16.1(b)thereof; (ii)
the Development Agreement having terminated pursuant to Section 16.1(b) thereof, the
construction of Unit 3 does not thereafter commence within the time period contemplated by the
Project Agreements; (iii) the construction of Unit 3 having commenced, such construction is
thereafter permanently abandoned prior to the completion of Unit 3; or (iv) the Development
Participants fail to pay to the Study Participants the Category 1 Study Expenses or the Category
2 Study Expenses in accordance with the terms of the Development Coordination Agreement and
the Development Agreement.
1.1.2 Prohibition against Assignments or Resales. The Development
Participants shall not assign or resell the Steering Committee Work Product (or any portion
thereof) to any Person that is not a Development Participant at the time of such assignment or
resale.
1.1.3 Reservation of Non-Exclusive Rom. Each Study Participant
individually hereby reserves and retains the non-exclusive right to use and apply, and to keep or
retain copies of Media containing, Steering Committee Work Product.
1.1.4 Adjustment or Termination of Rights. If the Development Costs
Share of any Development Participant is increased or decreased in accordance with the terms and
conditions of the Development Agreement, the proportional interest of such Development
Participant in and to the Steering Committee Work Product shall automatically be adjusted to
correspond to such Development Participant's revised Development Costs Share. If any Person
that obtained any right, title or interest in or to the Steering Committee Work Product under this
Bill of Sale and Assignment ceases to be a Development Participant, then such right, title and
interest held be such Person shall automatically terminate as of the date such Person ceases to be
a Development Participant.
2. No Representations. None of the Study Participants makes any representation or
warranty of any type or nature with respect to the Steering Committee Work Product, and each
Study Participant hereby disclaims any and all representations and warranties with respect to the
accuracy, veracity, completeness or usefulness of the Steering Committee Work Product. The
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SCHEDULE 1
DEVELOPMENT PARTICIPANT CONFID tNTIAL INFORMATION
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SCHEDULE 3
UNIT 3 CONFIDENTIAL INF TWATION
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INTERMOUNTAIN POWER PROJECT UNIT 3
OWNERSHIP AGREEMENT
AMONG
AS OWNERS
ERS
2006
TABLE OF CONTENTS
Page
Ownership Agrt Aug 4.doc
INTERMOUNTAIN POWER PROJECT
UNIT 3
OWNERSHIP AGREEMENT
THIS OWNERSHIP AGREEMENT (the "Ownership Agreement" or this "Agreement")
is entered into effective as of , 2007 by and among ,
and (collectively, the "Owners" or "Parties" and
each an"Owner"or"Party").
RECITALS:
A. The Development Committee has determined: [Items required to end
Development Agreement].
B. The Owners have entered into the Project Agreements [List an abstract of each
Agreement] [,Authority of Owners].
C. [Relationship between Owners].
D. The Parties desire to constrict [describe Construction Lease and Agreement].
E. Operate the Project [describe the authority i.e. state statue].
F. Purchase fuel [describe nature of plan].
G. General welfare of the Project. [Accounting,dispute resolution, audit].
In consideration of the mutual covenants set forth herein, the Owners agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1 The following terms, when initially capitalized and used in this
Ownership Agreement and in the Appendices attached hereto, either in the singular or
plural form,shall have the meanings specified:
1.1.1 "Accounting Practice": Generally accepted accounting principles in
accordance with the FERC Accounts.
1.1.2 "Affiliates": For any Person, any other Person directly or indirectly
controlling, directly or indirectly controlled by, or under direct or indirect common control with,
such Person. As used in this definition, the term "`control," "controlling"or"controlled by" shall
mean the possession, directly or indirectly, of the power either to (a) vote 10% or more of the
securities or interests having ordinary voting power for the election of directors (or other
comparable controlling body) of such Person or (b) direct or cause the direction of the
management, decisions or policies of the controlled Person, whether by statute, ordinance
ownership, by contract or otherwise.
1.1.15 "Date of Firm Operation". The first date that the Operating Committee
determines the Project to be reliable as a source of Capacity and Energy and can reasonably be
expected to operate steadily at any level of Capacity greater than Minimum Generating
Capability up to its Unit Rating.
1.1.16 "Debt": For any Person (a) indebtedness for borrowed money; (b)
obligations evidenced by bonds, debentures, notes or other similar instruments; (c) amounts due
under Project Agreements, (d) obligations under capitalized or operating leases, (e) obligations
for direct or indirect guarantees in respect of, and obligations to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of, indebtedness or obligation of another
Person; (f) all obligations under interest rate or currency protection agreements or other hedging
instruments; (g) all obligations to purchase securities (or other property) which arise out of or in
connection with the sale of the same or substantially similar securities (or property); (h) all
deferred obligations of such Person to reimburse any bank or other Person in respect of amounts
paid or advanced under a letter of credit or other instrument; and (i) indebtedness or obligations
of others of the kinds referred to in clauses (a) through (h) secured by any Lien on or in respect
of such Person's Ownership Interest.
1.1.17 "Default": As defined in Section 13.1.
1.1.18 "Default Purchase Price": As defined in Section 13.2.3.
1.1.19 "Defaulting Owner": As defined in Section 13.2.
1.1.20 "Deficiency Amount": As defined in Section 13.2.1.
1.1.21 "'Dispute": As defined in Section 15.1.1.
1.1.22 "Energy": The use of the Capacity over time, expressed in megawatts per
hour("MWh").
1.1.23 "Facility": The three coal-fired electric generating units, and power plant
complex located near Delta, Utah, consisting of the Project, the existing generating units known
as "Unit 1"and"Unit 2," and the Common Facilities for those units and the Project.
1.1.24 "FERC Accounts": The Federal Energy Regulatory Commission's
"Uniform System of Accounts Prescribed for Public Utilities and Licenses" in effect as of the
date of this Ownership Agreement and as such may be amended from time to time.
1.1.25 "Final Completion Report": A complete listing and description of the
Construction Work along with the Construction Costs and a listing of each Owner's contribution
to Construction Costs.
1.1.26 "Fixed Operating Costs": All Operating Costs that are not classified as
Variable Operating Costs.
1.1.27 "Fuel"': The quantities of coal, coal products, oil, oil products, gas, gas
products and other fuels required for the production of Energy by the Project.
3
1.1.39 "Maximum Generating Capability": The maximum Capacity and Energy
level at which the Project may be reliably operated and maintained in service, as measured at its
main generator output terminals, for sustained periods of time and under conditions existing from
time to time.
1.1.40 "Minimum Generating Capability": The minimum Capacity and Energy
level at which the Project may be reliably operated and maintained in service as measured at its
main generation output terminals for sustained periods of time and under conditions existing
from time to time, without the augmentation of other fuels besides coal.
1.1.41 "Net Energy Generation": The Energy generated over any period of time
by the Project, measured at its main generator output terminals, less the General Service
Requirements.
1.1.42 `'Non-Defaulting Owner": As defined in Section 13.2.
1.1.43 "Operating Account": Any bank account or accounts selected and
established by the Operating Committee to receive and disburse Operating Funds.
1.1.44 "Operating Agent": The Person, initially LADWP, appointed as the Joint
Operating Agent under the Joint Operating Agreement, and any other Person subsequently
appointed by the Operating Committee to be responsible for the performance of Operating Work
and for making Capital Improvements.
1.1.45 "QMrating Committee": The committee established pursuant to Section 4.
1.1.46 "Operating_Costs": All payments made and obligations incurred for or in
connection with the performance of Operating Work, including (i)any tax or a payment in lieu
thereof levied against an Owner in behalf of all of the Owners pursuant to Section 10,'(ii)all
costs reserved for Operating Work, and (iii) all. Fuel expenses, but. excluding all such costs
included in Construction Costs or in the costs of Capital improvements .
1.1.47 "Operatingr,Emer„eencv": An unplanned event or circumstance that
reduces or may reduce the availability of Capacity or Energy by the Project.
1,1.48 "Operating Funds": Monies advanced for Construction Work, Operating
Work, Capital Improvements and for all other payments due hereunder by or on behalf of the
Owners all in accordance with this Ownership Agreement and the other Project Documents.
1.1.49 "Operating Insurance": Policies of insurance to be procured and
maintained,or caused to be procured and maintained, in accordance with Section 11.
1.1.50 "Operating Work": All work required to operate and maintain the Project
in service. Operating Work shall include, but not be limited to, all engineering activities,
contract management, purchasing Materials and Supplies, equipment, Fuel, repairs, supervision,
employment, training, expediting, inspection, accounting, testing, protection, operation,
management, retirement, equipment reconstruction, and maintenance activities associated with
the Project, including (1)any work undertaken by the Operating Agent pursuant to the Joint
5
1.1.62 "Project": The Project as described in Appendix A, including the
Common Facilities.
1.1.63 "Project Agreements": This Ownership Agreement, the Construction
Agreements, the Joint Operating Agreement, the Common Facilities Agreement, the
Construction Lease Agreement and any agreements between the Owners or any of them and any
third party for the purchase or lease of any property, land or land rights or water rights for the
Project, and any other agreements as the Owners agree to designate as Project Agreements in
Appendix G.
1.1.64 "Projject Budget": The initial budget setting forth the Construction Costs
anticipated as of the date of this Agreement to be incurred through the Date of Firm Operation as
shown on Appendix D, which Project Budget may be amended from time to time by the
Operating Committee. The final Construction Costs will be set forth in the Final Completion
Report.
1.1.65 `'Project Manager": The Person, initially , appointed as the Project
Manager under the Construction Agreements, and any other Person subsequently appointed by
the Operating Committee to be responsible for the performance of Construction Work.
1.1.66 "Shared Liability": Liability of one or more Owners for Claims by anyone
other than an Owner, whether or not resulting from the negligence of such Owner(s), its
directors, officers, employees or any other Person whose negligence could be imputed to such
Owner(s), arising out of, resulting from or in any way connected with (i) the performance or
nonperformance of the Construction Work or the Operating Work; (ii) from the design or
construction of the Project or the Capital Improvements; or (iii) the use, operation or ownership
of the Project, provided that Work Liability will not include a liability for any Willful Action.
1.1.67 "Testing and Start-Up Capacity and Energy": The amount of Capacity
and Energy required for the purposes of testing of any component or system of the Project
associated with the initial start-up of the Project or any start-up after any outage of the Project as
determined by the Operating Committee.
1.1.68 "Transfer": To directly or indirectly sell, assign, transfer, pledge, lease.
mortgage or otherwise encumber, whether voluntarily, involuntarily or by operations of law. The
terms "Transferring", "Transferred",and"Transferee"shall have corresponding meanings.
1.1.69 "Uncontrollable Force": As defined in Section 19.
1.1.70 "Unit Rating": The effective Available Generating Capability as
determined from time to time by the Operating Committee to reflect changes in the Project. The
initial Unit Rating shall be 950 MW.
1.1.71 "Variable Operating Costs": All Operating Costs that increase or decrease
in a direct relation to (a) the amount of Energy generated, such as charges for water, water
treatment and reactant or (b) the amount of Fuel combusted to generate such Energy, together
with any other Operating Costs that so fluctuate and are designated from time to time as Variable
7
ARTICLE 3. OWNERS' REPRESENTATIONS,WARRANTIES AND COVENANTS
Section 3.1 Representations and Warranties. Each Owner represents and
warrants to the other Owners as follows:
3.1.1 It is duly organized, validly existing and in good standing under the laws
of its jurisdiction of formation with all requisite power and authority to enter into the Project
Agreements and to perform its obligations thereunder.
3.1.2 The Project Agreements constitutes the legal, valid and binding
obligations of such Owner enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting or relating to enforcement of creditors'
rights generally and general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).
3.1.3 No consents or approvals are required from any Person for such Owner to
enter into the Project Agreements except those consents and approvals that have been obtained.
All requisite action on the part of such Owner necessary for the authorization, execution and
delivery of the Project Agreements and the consummation of the transactions contemplated
thereby has been duly taken.
3.1.4 The execution and delivery of the Project Agreements by such Owner and
the consummation of the transactions contemplated hereby by such Owner do not conflict with
or contravene the provisions of its organizational documents or any agreement or instrument by
which it or its properties are bound or any law, rule, regulation, order or decree to which it or its
properties are subject.Covenants. Each Owner hereby covenants and agrees that it shall:
3.2.1 Cooperate and negotiate in good faith and proceed with diligence to cause
the Operating Committee to administer, finance, enforce and/or perform the Construction Work,
Operating Work and Capital Improvements so as to comply with the Project Agreements in a
manner consistent with generally accepted practices in the electric utility industry.
3.2.2 Comply with all obligations of the Owners under the Project Agreements.
3.2.3 Be bound by the decisions of the Operating Committee and (i) promptly
execute any documents, perform or not perform any actions, and pay any amount duly approved
or required by the Operating Committee pursuant to Section S.
3.2.4 Comply with(i) any and all laws or regulations applicable to the Project or
to such Owner's Ownership Interest in the Project and (ii)the terms and conditions of any
contract, permit or license relating to the Project.
3.2.5 Not suffer any Liens related to such Owner's Ownership Interest to remain
unsatisfied against the Project other than as provided in Section 9.1.
3.2.6 Provide immediate notice to the other Owners of (i) any alleged Lien on
the Project or the Owner's Ownership Interest other than a Permitted Lien; (ii) any pending or
9
tools, Materials and Supplies necessary for the performance of the Operating Work and Capital
Improvements.
4.2.5 Provide supervision of the Operating Agent as to progress, performance
and completion of Operating.Work and Capital Improvements.
4.2.6 Develop procedures for the review and auditing of costs of Operating
Work and Capital Improvements consistent with the provisions of the Project Agreements and
Accounting Practice and develop procedures for making forecasts and requests for funds
pursuant to this Ownership Agreement.
4.2.7 Establish an Operating Account and expend the Operating Funds
advanced in accordance with the terms and conditions of the Project Agreements.
4.2.8 Keep and maintain such records of monies received and expended,
obligations incurred, credits accrued, all written statistical and administrative reports, accounting
records, budgets, information and other records relating to Construction Work, Operating Work
and Capital Improvements and the funding thereof and agreements entered into for the
performance of Construction Work, Operating Work and Capital Improvements as may be
necessary or useful in carrying out Project Agreements or required to permit an audit of the
Construction Work, Operating Work and Capital Improvements, and make such records
available for inspection by any Owner at all reasonable times.
4.2.9 Apply for and obtain the issuance, modification, extension or renewal of,
and monitor compliance with, all governmental approvals relating to the Project or any portion
thereof and supervise and ensure compliance with any and all laws applicable to the Project and
the performance of Construction Work, Operating Work and Capital Improvements, including
the establishment of any required environmental compliance program through the Joint
Operating Agreement.
4.2.10 Arrange for the placement and maintenance of Operating Insurance and
present, adjust, settle and prosecute all Claims against insurers and indentnitors providing
Operating Insurance or indemnities in respect of any loss of or damage to any property of the
Project or liability of any Owner to third parties.
4.2.11 Review, discuss, act upon and resolve disputes between and among the
Owners arising under the Project Agreements in accordance with Section 15.
4.2.12 Subject to the other provisions of this Ownership Agreement, investigate,
defend and settle Claims against any Owner arising out of or attributable to the past or future
performance or nonperformance of the obligations and duties of any Owner under or pursuant to
the Project Agreements, including but not limited to any Claim resulting from death or injury to
persons or damage to property, when said Claims are not covered by valid and collectible
Operating Insurance and prosecute Claims against any third party for any costs, losses and
damages incurred in connection with such Claims.
4.2.13 Establish a quality assurance program to be followed in the Operating
Work and Capital Improvements, including without limitation in---service inspections and other
11
(i) The analysis of the expenditures caused by an Operating
Emergency.
(j) The written statement of operating policies, criteria,
practices and procedures to be followed to optimize the acquisition and use relating to (i) Fuel
supplies for normal operations, (ii) Fuel inventories and stockpiles, and (iii) Fuel Operating
Plans.
4.2.20 Audit or cause to be audited the books and records of the Project Manager,
the Operating Agent, and any other Owner or third party relevant to the performance of
Construction Work,Operating Work and Capital Improvements.
4.2.21 Adopt such rules of order, bylaws and policy statements and directives
which are consistent with this Agreement and as it considers necessary or appropriate for the
conduct of its business and the exercise of its powers, including provision for telephonic
meetings, actions without a meeting, and proxies.
4.2.22 Perform all such other functions and duties as may be authorized, required
or contemplated by the Project Agreements.
Section 4.3 Standing and Ad Hoc Committees. The Operating Committee shall
have the right to establish standing or ad hoc committees. The authority and duties of any
such committee shall be set forth by resolution of the Operating Committee and shall be
subject to the provisions of the Project Agreements.
Section 4.4 Chairman: Committee Action. The chairman of the Operating
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Committee shall be elected yearly by the representatives of the Operating Committee and
shall be responsible for calling meetings and establishing agendas for the Operating
Committee. Any action or determination of the Operating Committee, or standing or ad
hoc committee, shall be taken only at a noticed meeting that is attended by a majority of
the representatives (or, in the absence of any representative, the alternate) and must be
approved by both (i) a majority of the representatives or alternates, per capita, and (ii) a
majority of the Percentage Shares,except as otherwise provided herein.
Section 4.5 Minutes and Records. The Operating Committee, or standing or ad
hoc committees shall keep written minutes and records of all meetings, and all actions,
agreements or determinations made by it,each signed by a member of such committee.
Section 4.6 No Authority. Neither the Operating Committee nor any standing or
ad hoc committee shall have authority to modify any of the terms, covenants or conditions
of the Project Agreements.
Section 4.7 Disagreements. If the Operating Committee fails to agree while
performing the functions and duties delegated to it in the Project Agreements, then such
disagreement shall be referred to a higher authority within each Owner's organization
before proceeding to arbitration as provided for in Section 15.
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Owners stating the amount required to be deposited into the Operating Account for
payments of Construction Costs due on or before the tenth day of the succeeding month
and each Owner shall pay the total amount invoiced to it in accordance with Section 8.3.To
the extent funds are available in the Operating Account, the Operating Committee shall
pay or cause the Project Manager to pay all Construction Costs due and payable under
Construction Agreements. If circumstances require, the Operating Committee or the
Project Manager shall notify the Owners that additional funds are required to be deposited
into the Operating Account for the payment of Construction. Costs and promptly furnish
copies of relevant invoices, supporting materials and such other information as the
Operating Committee or any Owners may require to understand the need for additional
funds. The Owners shall pay such additional invoices promptly in accordance with Section
8.3. The Owners hereby acknowledge and approve (i) the costs and expenditures incurred
by the Owners prior to the date of this Ownership Agreement as shown on Appendix D and
(ii)the acquisition costs under the Common Facilities Agreement, all of which will be part
of the Construction Costs. OPERATING REQUIREMENTS
Section 6.1 Post Firm Operations. At all times after the Date of Firm Operation,
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each Owner shall own as its separate property and not in common with the other Owners,
and shall be entitled to schedule for its account, Capacity and Energy equal to its
Percentage Share of the Net Energy Generation.
Section 6.2 Reserves. Each Owner shall be obligated to provide its own electric
reserve requirements as determined by the Operating Committee, including spinning
reserves,for the product of its Percentage Share and the Available Generating Capability.
Section 6.3 Minimum Generating„ Capability. At all times, except during
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Operating Emergencies or Planned Outages,each Owner shall be obligated to take delivery
of its Percentage Share of the Net Energy Generation of the Minimum Generating
Capability. Any Owner who fails to schedule delivery of such share of the Minimum
Generating Capability shall be responsible for all incremental costs incurred by the other
Owners to the extent directly resulting from such failure. A failure to satisfy its minimum
scheduling requirements shall not reduce the defaulting Owner's obligation to pay its
proportionate share of all Fined Operating Costs.
Section 6.4 Owner Schedules. Each Owner agrees to schedule for its account as
determined by the Operating Committee and the Joint Operating Agreement, its
Percentage Share of the General Service Requirements during any period that the Project
is operated. No Owner may utilize the Capacity, Energy or report operating reserves
(spinning or nonspinning) of another Owner, without the express written consent of such
other Owner.
Section 6.5 Curtailments. The Capacity of the Project shall be subject to Planned
Outages, Operating Emergencies or other restrictions as determined by the Operating
Agent, the Operating Committee or imposed by any regulatory authority having
jurisdiction over the Project. In the event of partial failure or limitation of the Capacity of
the Project, the Owners shall only be entitled to their Percentage Shares of the Capacity
available based on their Percentage Shares. The Owners shall, if necessary, revise their
[5
ARTICLE 7. CAPITAL IMPROVEMENTS
Section 7.1 Need for Capital Improvements. The Owners recognize and agree
that, from time to time, it may be legally or operationally necessary or desirable to make
Capital Improvements. All Capital Improvements shall be described in a supplement to
this Agreement executed in recordable form.
Section 7.2 Inc`lusion in Budget. Except as provided in Section 7.3, all Capital
Improvements shall be included in an annual capital expenditures budget. After such
budget has been approved by the Operating Committee, each Owner shall be obligated to
pay when due the costs incurred for such Capital. Improvements in proportion to its
Percentage Share; provided, however, that if the Capital Improvement relates to a Project
upgrade or is intended solely to provide an additional economic advantage to less than all
of the Owners, then an Owner may, no later than the adoption of the budget containing
such Capital Improvement, notify the Operating Committee of its intent not to participate
in such Capital Improvements whereupon the Operating Committee may, without the vote
thereon by any Owner electing not to participate in the funding of a Capital Improvement,
equitably adjust the nonparticipating and participating Owners' Percentage Shares to
reflect 100% of the Project upgrade Capital Improvement being assigned to the
participating Owners.
Section 7.3 Exclusions to Budget Inclusion. The Operating Committee may
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authorize Capital Improvements not included in the annual capital expenditures budget
provided that such Capital Improvements are required to comply with any lawful order,
rule or regulation of a regulatory agency or if the cost of any such Capital Improvements is
less than $1,000,000 in the aggregate, and the annual capital expenditures budget shall be
deemed duly amended by such action. All other Capital Improvements not included in the
annual capital expenditures budget may only be authorized upon a unanimous vote of the
Operating Committee.
Section 7.4 Forecast of Costs. Upon the adoption of an annual capital
expenditures budget, the Operating Committee shall submit to the Owners a forecast of
cash flow requirements for each authorized Capital Improvement. Such forecast shall set
forth such cash requirements for each monthly period commencing on the first day in
which costs for such Capital Improvements shall become due. Such forecast shall be
revised and furnished to each Owner every month thereafter until completion of the
Capital Improvement.
Section 7.5 Disposal of Property Property retired from service, whether
considered original construction or Capital Improvements,shall be disposed of on the best
available terms as soon as practicable consistent with the criteria and guidelines approved
by the Operating Committee provided that (1)at the time of such disposal, it shall have
been determined by the Operating Committee that such property is no longer used or
useful for the Project,(ii)disposal of such property shall only be on an"as is"basis without
any representation or warranty as to quality, condition or fitness for any purpose and
(iii)proceeds, if any, received therefrom shall be credited or distributed to the Owners in
proportion to their Percentage Shares.
17
or permit any Lien upon the Project (or any portion thereof), other than the following
Liens:
(a) Permitted Liens;
(b) Liens expressly permitted under the Project Documents;
(c) Liens for taxes which are either not yet due or are the
subject of a good faith contest approved by the Operating Committee (as to which bonds or
reserves in an amount sufficient to pay the underlying obligation of such Lien shall have been
obtained and remain in effect);
(d) defects, easements, rights of way, restrictions,
irregularities, encumbrances (other than for Debt) and clouds on title and statutory liens that do
not materially impair the value or use of the property affected;
(e) deposits or pledges of funds or investment securities
securing the performance of bids, equipment leases or contracts in amounts approved by the
Operating Committee; and
(f) mechanics', workmen's, materialmen's, suppliers',
construction or other similar Liens arising in the ordinary course of business or incident to the
construction, operation, maintenance, repair, restoration or improvement of the Project for
obligations which are not yet due or which are the subject of a good faith contest approved by the
Operating Committee or the Operating Agent, and as to which, bonds or reserves in an amount
sufficient to pay the underlying obligation of such Liens shall have been obtained and remain in
effect.
Section 9.2 Permitted Liens. Each Owner shall have the right at any time to
create a Permitted Lien to an Owner Lender. Any Owner Lender may, without need for
the prior written consent of any other Owner, succeed to and acquire all the rights, titles
and interests of such Owner in the Ownership Interest,and may take over possession of or
foreclose upon said property, rights, titles and interests of such Owner; provided that such
Owner Lender agrees in writing to assume and be obligated fully to perform and discharge
all of the obligations of such Owner under this agreement and any other Project
Agreements.
Section 9.3 Rights of Transfer. Except for Permitted Transfers, no Owner may
directly or indirectly Transfer all or any portion of its Ownership Interest without the
prior written Consent of the Operating Committee. No consent of the Operating
Committee or any other Owner shall be required for any of the following Transfers (each,
a"Permitted Transfer"):
9.3.1 A Transfer pursuant to Permitted Lien;
9.3.2 A Transfer by an Owner of some or all of its Ownership Interest to one or
more of its Affiliates, provided that such Affiliate(s)are Creditworthy.
19
associated rights, obligations and interests of the Transferring Owner in and to the Project
and the Project Agreements. Nothing contained in this Ownership Agreement shall (i)
prohibit any merger,consolidation or other reorganization of an Owner,or any issuance or
transfer of any securities or interest of an Owner or(ii) be construed to permit any transfer
or other action that is prohibited or limited by any provision of any other agreement
among all or some of the Owners and/or third parties, which provisions shall be controlling
as among the parties to such agreements in accordance with their terms.
Section 9.6 Involuntary Transfer. In the event of any Involuntary Transfer, the
non-Transferring Owners shall have the Option described in Section 9.3, provided that (i)
the Purchase Price shall be the fair market value of the applicable Ownership Interest
determined pursuant to Section 13.2 (or as otherwise determined pursuant to court order)
and (ii) the Option Period shall: commence on the date that all non-Transferring Owners
have received written notice of the proposed Involuntary Transfer, which Option Period
will be extended by the time necessary to determine the fair market value.
Section 9.7 Estoppel Certificate. In connection with any Permitted Transfer,
upon request, each Owner agrees to execute and deliver to the other Owners an estoppel
certificate intended to be relied upon by the receiving Owner or a Transferee stating (a)
whether this Agreement is unmodified and is in full force and effect(or, if there have been
modifications that this Agreement is in full force and effect as modified and stating the
modifications) and (b) to the knowledge of the Owner issuing the certificate, whether there
are any defaults by any Owner (and specifying each such default as to which such Owner
has knowledge).
Section 9.8 Transfer Wr, 'tom. If any Owner transfers or assigns any of its rights,
title or interest in and to the Project in compliance with Article 9 and other terms and
conditions of this Ownership Agreement, the Owners and any Transferee shall.jointly
make, execute and deliver a supplement to this Ownership Agreement and the other
Project Agreements in recordable form which shall describe, with such particularity and
detail as determined by the Operating Committee, the rights, titles and interests of each
Owner and any Transferee following such Transfer.
ARTICLE 10. TAXES
Section 10.1 Liability for Taxes. All net income taxes, franchise taxes, gross
receipts taxes, sales taxes or excise taxes assessed against each Owner or relating to the
Project or any taxes relating to the Capacity,Energy or other attributes to which an Owner
is entitled or any assets of an Owner other than the Project (collectively "Personal Taxes")
shall be the responsibility of each Owner so assessed. Each Owner may contest the validity
or amount of any Personal Taxes, provided that the contested Personal Taxes shall not
remain unpaid for such length of time as shall permit any part or all of the Project to be
sold or foreclosed or any interest of any Owner to be subject to a Lien for the nonpayment
of the same.
Section 10.2 Establishment of Apportionment Procedures. All taxes (other than
Personal Taxes) shall be Operating Expenses, which shall be shared and borne by the
�l
11.1.6 (Business Interruption Insurance. Business interruption insurance
covering 100% of continuing normal Project operating expenses, payroll and debt service for a
period of 12 months for a loss caused by physical damage resulting from an insured peril.
Coverage will be written with industry standard deductibles for the specified insured perils.
Coverage will also include contingent business interruption and extra expense, subject to
industry standard sublimits and deductibles. ]
11.1.7 [Pollution Insurance. Pollution insurance with a minimum limit of
$ for each occurrence and in the aggregate, including first party clean up expenses
and third party Claims for bodily injury,property damage and clean up expenses.]
Section 11.2 Other. Except as otherwise directed by the Operating Committee, the
following provisions shall apply to Operating Insurance.
1.1.2.1 Additional Insureds. Each Owner shall be named an additional insured,
individually and jointly with the other Owners, on all policies of Operating Insurance, and the
policies of Operating Insurance shall carry cross—liability endorsements and shall be given the
same advance notice of cancellation or material change. Property insurance procured will
contain language that binds the insurer to pay replacement costs on the basis that the Project is
being rebuilt without regard to ownership change after the loss.
11.2.2 Deductibles. Any deductibles shall be apportioned among the Owners on
the basis of their Percentage Shares.
11.2.3 Primary Insurance. Operating insurance policies shall be primary
insurance for all purposes and shall be so endorsed. Any other insurance carried by an Owner
individually shall not participate with Operating Insurance as to any loss or claim for which valid
and collectible Operating Insurance shall apply. Such other insurance shall apply solely as to the
individual interest of the Owner carrying such other insurance; provided, however, that each
Owner shall accept any reasonably restrictive endorsement to its separate insurance policies as
may be required by an insurer as a condition precedent to the issuance of a policy of Operating
Insurance.
11.2.4 Interested Party: At the direction of the Operating Committee, any party
furnishing. services, materials,, parts or equipment in connection with the planning, design,
engineering, construction, maintenance, operation or use of the Project may be named as an
insured as its interest may appear in any of the Operating Insurance policies, and the Operating
Committee may waive on behalf of each Owner its right of recovery against any such party for
insured loss of or damage to any property covered by Operating Insurance, provided that no such
waiver shall impair the right to recover any sums otherwise payable to any Owner under the
Operating Insurance.
Section 11.3 Choice of Insurers. The Operating Committee shall procure
Operating Insurance from such insurers or underwriters, including stock companies,
mutual funds and pools or groups of insurers or underwriters, provided that any policy,
which obligates any Owner to pay any assessment,shall not be obtained unless such Owner
has agreed. in writing to undertake such obligation.
23
13.1.1 The failure by an Owner to pay, when due, any payment required under
the Project Agreements if such failure is not remedied within ten days after written notice of such
failure is given to such Owner by a Non-Defaulting Owner or the Operating Committee
("Payment Default");
13.1.2 The failure by an Owner to keep, observe or perform any of the other
material terms, covenants or agreements contained in the Project Agreements if any such failure
is not remedied within 30 days after notice from any Non-Defaulting Owner or the Operating:
Committee, or, if the nature of a default is not susceptible to cure within such 30 day period, the
failure by the Defaulting Owner to commence such cure within such 30 day period and prosecute
diligently the cure of such default to completion within such additional period as may be
reasonably required to cure such default, but in no event more than 120 days after receipt of
notice of default;or
13.1.3 An Insolvency Event shall exist with respect to an Owner, in which event
no actual notice of default shall be required but shall instead be deemed given automatically
upon the occurrence of such Insolvency Event.
Section 13.2 Remedies. In the event any Owner is in Default hereunder (the
"Defaulting Owner"),any Owners not then in Default(the"Non-Defaulting Owners")shall
have available to them all remedies, legal and equitable, including (i) those available in
order to enforce payment of any such amount or performance or observance of any such
covenant, condition, or agreement under the Project Agreements and (ii) the specific
remedies set forth in this Section 13.2.
13.2.1 In the event of a Payment Default, any of the Non-Defaulting Owners
may, but shall not be required to, advance to the Operating Account all or part of the amount
owed by the Defaulting Owner (the "Deficiency Amount"). A Deficiency Amount will accrue
interest at the rate of 10% per annum from the day such Deficiency Amount is due until.the date
repaid by the Defaulting Owner. The Deficiency Amount shall be an obligation of the
Defaulting Owner and the advances by the other Owners shall not relieve the Defaulting Owner
of its obligations with respect thereto. Any Non-Defaulting Owner providing an advance may
enforce and recover from the Defaulting Owner the Deficiency Amount and upon such recovery
reimburse any other Owners that made an advance including the interest component thereof
and/or deposit the balance recovered amount in the Operating Account. All Owners making
advances will be entitled to receive, and to sell to Owners or third parties, a share of the
Capacity, scheduled Energy or other attributes to which the Defaulting Owner would be
otherwise entitled until the repayment in full of (i)the Deficiency Amount, (ii)any increased
costs incurred by the advancing Owners as a consequence of such Default and (iii) interest
thereon. The proceeds of such sales (less the reasonable cost incurred in making such sales)
shall be deposited in the Operating Account for application to the amounts owed by the
Defaulting Owner, including the Deficiency Amount and the repayment of any advances (plus
accrued interest and costs) made by other Owners. The amount of Capacity, scheduled Energy or
other attributes available to such advancing Owners shall be determined by the Operating
Committee acting on a vote of the Non-Defaulting Owners. During the period of Default, the
Defaulting Owner shall be responsible to pay all Fixed Operating Costs and Variable Operating
?5
effect the transactions contemplated by this Section. If termination occurs prior to the Date of
Firm Operation, the "Default Purchase Price" shall be an amount equal to 85% of the sum of all
amounts paid through the date of purchase by the Defaulting Owner as Construction Costs less
00 the amounts secured by Liens thereon, it being agreed that this amount is a reasonable
measure of the fair market value prior to the Date of Firm Operation, which amount, if such
termination shall be for a portion but not all of the Ownership Interest of the Defaulting Owner,
shall be multiplied by the fraction, the numerator of which is the terminated Ownership Interest
(expressed as a Percentage Share) and the denominator of which is the Percentage Share of the
Defaulting Owner prior to the termination. if termination occurs after the Date of Firm
Operation, the Default Purchase Price shall be the fair market value of such terminated
Ownership Interest, determined in accordance with Section 13.2.3(a), less the amounts secured
by Lien thereon, minus an amount equal to 15% of the fair market value, as liquidated damages
and not as a penalty, to reflect the fact that actual damages resulting from the Default are difficult
or impossible to calculate with reasonable certainty. Any Non-Defaulting Owner that has an
outstanding advance in respect of a Deficiency Amount owing may, at its option, set off the
amount of such advance (plus accrued interest and costs). against any portion of the Default
Purchase Price payable by it or require that such advance (plus accrued interest and costs) be
paid in full from a portion of the Default Purchase Price payable by the other Owners before any
amount thereof is paid to the Defaulting Owner.
(a) The acquiring Owners and the Defaulting Owner each shall
designate a qualified appraiser within 15 days from the determination of the Operating
Committee to terminate the applicable Ownership Interest. A qualified appraiser shall be an
appraiser with at least five years' experience in the appraisal of properties similar to the Project.
Each of the two appraisers shall be directed to determine the fair market value component of the
Default Purchase Price within 30 days of his or her appointment and to notify the Owners of his
or her determination. If the lower of the two determinations is not less than 95% of the higher of
the two determinations, then the fair market value shall be the average of the two determinations.
If the lower of the two determinations is less than 95% of the higher of the two determinations,
then the two appraisers shall, within 15 days thereafter, appoint a third appraiser with similar
qualifications(who shall not have performed any work for any Owner within the five year period
prior to his appointment) and shall each furnish to such appraiser a written report of his or her
respective determination. Within 30 days of such appointment, the third appraiser shall select
the fair market value of one or the other of the original appraisers and shall notify each Owner of
such determination, which shall be binding upon the Owners. The third appraiser must select
one of the two appraisals and shall not have the right to establish a different fair market value
determination. The acquiring Owners and the Defaulting Owner shall bear the cost of the
appraiser appointed by them,and they shall share equally the cost of the third appraiser.
(b) Within 60 days of receiving the final determination of fair
market value as provided in Section 13.2.3(a), the acquiring Owners shall either (i)notify the
Defaulting Owner that they no longer desire to purchase the Ownership Interest of the Defaulting
Owner, in which case the Non-Defaulting Owners may elect to exercise any remedies provided
for under this Article 13 in respect of the Default or(ii)pay to the Defaulting Owner the Default
Purchase Price. Concurrent with the payment of the Default Purchase Price, the Defaulting
Owner shall deliver such instruments of transfer of title and assignment as are reasonably
requested by the acquiring Owners; provided, however, that no representations shall be required
27
placed on the Ownership Interest or other property of an indemnified Owner, (d) the
Owner Financings of such Owner, and (e) the sale or disposal of the Non-Defaulting
Owner's Capacity, scheduled Energy and other attributes to which it is entitled; provided,
however,that Third Party Liability does not include(x) the votes or actions of an Owner in
the exercise of its rights and obligations under this Agreement (including actions taken: by
its representative or alternate on the Operating Committee) or (y) the actions of the
Operating Committee, a Project Manager or Operating Agent. Any Third Party Liability
indemnified against pursuant to this Section shall be net of any proceeds of any Operating
Insurance.
Section 14.2 Contribution of Owners. In the event that any Owner involuntarily
and not based on its Willful Actions incurs a Shared Liability, the Owner(s) that has
incurred the Shared Liability shall promptly notify the Operating Committee and the other
Owners, and the other Owners shall be liable to the Owner(s) that incurred such Shared
Liability for the amount necessary so that such Shared Liability will be shared on the basis
of the Percentage Shares and shall pay such amount within ten days of demand therefor,
provided, however, that nothing in this Section shall alter an Owner's indemnity
obligations under Section 14.1. No Owner shall have the right to settle or compromise any
Claim with respect to a Shared Liability without the prior written consent of the Operating
Committee.
Section 14.3 No Co nsequential Damages. No Owner shall be liable to any other
Owner under any circumstances for any special, indirect, exemplar, punitive, incidental or
consequential loss or damage(including damages or claims in the nature of loss of revenue,
income, profits or investment opportunities). This Section shall have no effect on the
Owners' indemnity obligations under Section 14.1 for a Third Party Liability.
ARTICLE 15. DISPUTE RESOLUTION
Section 15.1 Dispute Resolution. In the event of any Claim between or among the
Owners related to or arising under any of the Project Agreements (a"Dispute"), including
a Dispute relating to the validity, interpretation, implementation, termination, cancellation
or enforcement of any of the Project Agreements, any Owner may, by written notice to the
other Owners, refer the Dispute to senior management of the Owners for resolution. For
purposes of this Section, senior management shall mean an individual not involved in day-
to-day performance under this Agreement but who has decision-making authority to
resolve the Dispute. Within 20 days after delivery of any such notice by an Owner,
representatives of senior management of each of the Owners shall meet at a mutually
agreed upon time and place to attempt, with diligence and in good faith, to resolve and
settle such Dispute. Should a mutual resolution not be obtained,or should no meeting take
place within such 20 day period, then any Owner may, by written notice to the other
Owners, commence arbitration as provided in Section 15.3; provided, however, with
respect to any technical dispute, the Owner seeking resolution of such Dispute shall invoke
the arbitration provisions of Section 15.2, as the exclusive method of resolving such
technical dispute. The Operating Committee shall make the final decision as to whether a
Dispute is a "technical dispute," provided that in no event may a Default under Section
13.1.1 or 13.1.2 be considered a technical dispute.
29
provided. The arbitrators selected by the representatives shall take equal turns striking
names from the list of arbitrators furnished by the American Arbitration Association until
the last name remaining on said list shall be the additional arbitrator. All arbitrators shall
be persons skilled and experienced in the field which gives rise to the Dispute, and no
person shall be eligible for appointment as an arbitrator who is an affiliate, officer or
employee of any of the Parties to the Dispute or is otherwise interested in the matter to be
arbitrated.
Section 15.5 Applicable Rules for Arbitration. Except as otherwise provided in
this Article 15,the arbitration shall be governed by the rules and practices of the American
Arbitration Association (or the rules and practices of a similar organization if the
American Arbitration Association should not at that time exist) from time to time in force,
except that if such rules and practices, shall conflict with mandatory provisions of
applicable state or federal law, as the case may be, then such applicable state or federal
laws shall govern.
Section 15.6 Application of Arbitration Remedy. Included in the issues that may
be submitted to arbitration pursuant to this Article 15 is the issue of whether the. right to
arbitrate a particular Dispute is permitted under the Project Agreements. If such issue is
submitted,it shall be resolved before the Dispute is heard.
Section 15.7 Evidence and Submittals. The arbitrators shall examine the notices as
provided for in Section 15.3 and hear evidence submitted by the respective Owners as
requested by the arbitrators.
Section 15.8 Findings of the Arbitrators. The award of the arbitrators shall
contain findings relative to the materiality of the default, the period of time within which
the defaulting party must remedy the default or commence remedial action, and the
remedies that may be exercised by the Non—Defaulting Owners in the event the default is
not remedied within such period of time. The Non—Defaulting Owners may, in submitting
a Dispute to arbitration, request that the arbitrators determine what additional remedies
may be reasonably necessary or required under the circumstances which give rise to the
Dispute including but not limited to the conditions under which the Project may be
operated economically and efficiently during periods when the defaulting Owner's right to
receive its Percentage Share of the Available Generating Capability is suspended or request
that the Operating Committee address that issue.
Section 15.9 Specific Enforceability for Arbitration. This Agreement to arbitrate
shall be specifically enforceable, and the award and findings of a majority of the
arbitrators shall be final and binding upon the Owners. Any award may be filed with the
clerk of any court having jurisdiction over the Owners, or any of them, against whom the
award is rendered,and,upon such filing,such award,to the extent permitted by the laws of
the jurisdiction in which said award is filed, shall be specifically enforceable or shall form
the basis of a declaratory judgment or other similar relief.
Section 15.10 Costs and Fees. The fees and expenses of arbitrators shall be shared
by the Owners based upon their Percentage Shares, unless the decision of the arbitrators
31
16.3.3 The rights and interests of any Owner in any real, personal, tangible or
intangible property or assets or rights therein of the Project or all Owners, which is not
distributed to the Owners on or before the termination date.
16.3.4 Any Owner's pro rata share, equal to its Percentage Share, of any liability
in excess of any fund or reserve established on or prior to the termination date.
Section 16.4 Costs of Termination. All costs(less salvage credits, if any) associated
with retirement of the Project or portions thereof including dismantling, demolishing, and
removing equipment, facilities, and structures (including the cost of transportation and
handling incidental thereto); security; maintenance; disposing of debris; and any site work
necessary to lawfully and responsibly effect such retirement and the costs of any
remediation,site restoration or monitoring shall constitute Operating Costs.
ARTICLE 17. WAIVER OF PARTITION
Section 17.1 Non-Partitionment. Each Owner hereby irrevocably waives any
rights which it may have to partition any component of the Project, whether by
partitionment in kind or by sale and division of the proceeds,and further agrees that it will
not resort to any action in law or in equity to partition any component of the Project,and it
waives the benefits of all laws that may now or hereafter authorize such partition for a
term which shall be conterminous with the Project Agreements. The provisions of this
Article 17 shall be binding upon and inure to the benefit of the Owners, their respective
successors and assigns, including lenders and their respective successors and assigns, and
shall run with the land. Each Owner agrees to insert a similar covenant in any contract
with any Person (other than another Owner), that acquires all or any portion of its
Ownership Interest or that provides Owner Financing, which covenant will be enforceable
by any Owner or by the Operating Committee,,
ARTICLE 18. CONFIDENTIALITY
Section 18.1 Confidential Information. As a result of the transactions
contemplated hereby, the Owners may (1) disclose to each other certain financial data and
reports, employee information, business plans, contracts, product development plans and
marketing plans concerning their business and operations.that may not be generally known
to the public and(ii) receive information relating to the operations of the Project hereunder
that may be deemed confidential information by the Operating Committee, all of which
shalt be"Confidential Information." Each Owner shall maintain Confidential Information
in the strictest of confidence and shall not disclose such Confidential Information to any
Person, for any purpose whatsoever, except as specifically permitted by the Project
Agreements,or as specifically authorized by the disclosing Party in writing. Every detail of
the Confidential Information shall be deemed confidential unless and until it can be shown
it has become public information, which shall mean:
18.1.1 Public disclosure as required by law (including by statute, operation of
subpoena, governmental investigation, court compelled disclosure or other compelled legal
process).
33
Section 20.2 Relationship of Owners. The covenants, obligations and liabilities of
the Owners under this.Agreement are several and not joint or collective. Each Owner shall
be individually responsible for its own covenants, obligations and liabilities as herein
.provided.. No Owner or group of Owners shall be under the control of or shall be deemed
to control any other Owner or the Owners as a group. No Owner shall be the agent of or
have a right or power to bind any other Owner without its express written consent, except
as expressly provided in the Project Agreements. Neither the execution of the Project
Documents, nor the consummation of the transactions contemplated thereunder, shall
create or constitute a partnership,joint venture,trust, limited liability company,corporate
or any other form of business organization or arrangement among the Owners. Except as
is expressly agreed to in writing in the Project Agreements, no Owner(or any of its agents,
officers or employees) shall be an agent or employee of another Owner, nor shall an Owner
(or any of its agents, officers or employees) have any power to assume or create any
obligation on behalf of the other Owners. In their relations with each other under the
Project Agreements,the Owners shall not be considered fiduciaries,but rather shall be free
to act on an arm's length basis in accordance with their own respective self-interest. No
Owner shall be precluded from engaging in any activities similar to those to be conducted
by the other Owners in respect of the Project or any activities incidental or related thereto.
Section 20.3 Further Assurances, Each Owner agrees, upon request by the other
Owners, to make, execute and deliver any and all documents reasonably required to
implement the purposes of the Project Agreements.
Section 20.4 Tax Exempt Status. It is the intent of the Owners that the Operating
WYWiI.MIWi1�WW-W
Committee, any Project Manager and Operating Agent not take any action (a) that would
result in private use within the meaning of Section 141 of the Internal Revenue Code of
1986, as amended, (b)to sell, transfer or exchange Energy, Capacity or any other attribute
from the Project or credits arising therefrom if such sale would jeopardize the tax-exempt
status of any Non-Defaulting Owner or any tax-exempt debt instrument issued by or on
behalf of such a Non-Defaulting Owner, or (c) would jeopardize the tax-exempt status of
any Owner under Section 501(c)(12)of the Code.
Section 20.5 Independent„Terms. Each term, covenant and condition of this
Ownership Agreement and the other Project Agreements is deemed to be an independent
term, covenant and condition,and the obligation of any Owner to perform any or all of the
terms, covenants and conditions to be kept and performed by it is not dependent on the
performance by the other Owners of any or all of the terms,covenants and conditions to be
kept and performed by them.
Section 20.6 Invalidity. In the event that any of the terms, covenants or conditions
of this Ownership Agreement or any of the other Project Agreements, or the application of
any such term, covenant or condition, shall be held invalid as to any Person or
circumstance by any court having jurisdiction, all other terms, covenants or conditions of
such agreements and their application shall not be affected thereby, but shall remain in
force and effect.
35
21.1.5
21.1.6
21.1.7
21.1.8
Section 21.2 Routine Communications. Communications of a routine nature,
including requests for funds and related matters, shall be given in such manner as the
Operating Committee shall determine.
Section 21.3 Notice of Address Change. ,any Owner may, at any time, by written
notice to all other Owners, designate different or additional persons or different addresses
for the giving of notices hereunder.
37
By:
Its:
By:
Its:
INSERT NOTARY BLOCKS HERE
39
APPENDIX B
COSTS OF OPERATING WORK AND CAPITAL INMPROVE MNTS
[TO BE INSERTED]
APPENDIX D
PROJECT BUDGET
[TO BE INSERTED]
Y
APPENDIX F
GENERATION ENTITLEMENT SHARES
[TO BE INSERTED]
DEC-13-2006 17:08 BUSINESS SERVICES
916 654 4404 P.02/03
ARNOLD SCHWARZENEGGER,Gavema
STATE OF CALIFORNIA-THE RESOURCES AGENCY --
CALIFORNIA ENERGY COMMISSION
1515 NINTH STREET
SACRAMENTO,CA 96814 S12
www.energy.ce.gov
December 13, 2006
Mr. J. Ron Hemig
Board President
Truckee Donner Public Utility District
11570 Donner Pass Road
Truckee, CA 961-61
Dear Mr. Hemig:
The five Commissioners of the California Energy Commission have directed me to write
and express their serious concern regarding a potential action of the Truckee Donner
Public Utility District. We are all troubled that your upcoming vote to sign a fifty-years
contract to purchase electric generation will not meet the new CO2 emission stands
in California.
From my Commission's vantage point, your potential action to sign such a contract
contradicts the State of California's policy to reduce carbon emissions from power
generation and is in direct conflict with the Governor's greenhouse gas reduction goals.
In its 2005 Integrated Energy Policy Report, the Energy Commission recommended a
greenhouse gas performance standard for power procurement by all of the state s utilities. Specifically, the Energy Commission recommended a standard set no higher
than emission levels from new combined-cycle natural gas plants.
Following the Energy Commission's action and in response to concerns about the
effects of global climate change, the California Legislature passed and the Governor
signed Senate Bill 1368 (Chapter 598, Statutes of 2006). This statute directs the
Energy Commission, in consultation with the California Public Utilities Commission and
the California Air Resources Board, to:
"establish a greenhouse gases emission performance standard [EPS1 for all
baseload generation of local publicly owned electric utilities at a rate of emissions
of greenhouse gases that is no higher than the rate of emissions of greenhouse
gases for combined-cycle natural gas baseload generation."
Under this new state law, local publicly owned utilities will not be allowed to enter into a
long-term financial commitment unless any baseload generation supplied under the
long-term financial commitment compiles with the greenhouse gases emission
performance standard established by the Energy Commission. A rulemaking to
establish this standard is underway at the Energy Commission, and the regulations are
expected to be in effect by June 2007.
DEC-13-2006 17:08
BUSINESS SERUICES 916 654 4404 P.03/03
Mr. J. Ron Hemig
December 13, 2006
Page 2
Your potential action will likely be construed as.an effort to circumvent this new law. As
a consequence, it could incite those involved in our rulemaking process to argue
vehemently against showing any regulatory flexibility that the law might allow for all
locally-owned municipal electric utilities, particularly with regard to compliance and
result
enforcement. Furthermore, you may also want to consider that your action c the
in significantly higher energy costs from carbon penalties that may be imposed by
California Air Resources Board in its implementation of Assembly Bill 32.
My Commission strongly urges your recognition of these issues as you consider your
potential action. We are willing and able to assist you in finding a path that allows your
organization to meet future electricity needs, consistent with prevailing state.policy and
law. We urge you to join your fellow California municipal utility districts and work with us
toward a reliable California electricity future that provides an improved environment for
our children.
Sinc ly
B. . 5 .EVINS
Executive Director
Cc: Board Members, Truckee Donner Public Utility District
TOTAL P.03
DEC-13-2006 17:08 BUSINESS SERVICES
916 654 4404 P.01/03
CALIFORNIA ENERGY COMMISSION
llExecutive Office
1516 Ninth Street
Sacrarnento,CA 95814
(916) 654-4996 Office
(916) 654,4475 FAX
TO: ' FROM: ---
FAX.
PAGES: --
PHONE: DATE. hpu, qx 6
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