CONSTRUCTION AND OWNERSHIP AGREEMENT

Exhibit 10.10

CONSTRUCTION AND OWNERSHIP

AGREEMENT

INDEX

CONSTRUCTION AND OWNERSHIP

AGREEMENT

THIS AGREEMENT, made as of the 30th day of July 1971, by and between THE MONTANA POWER COMPANY, a Montana corporation, hereinafter referred to as "Montana" and PUGET SOUND POWER & LIGHT COMPANY, a Washington corporation, hereinafter referred to as "Puget".

WITNESSETH:

WHEREAS, the parties desire to establish the terms and conditions relating to their ownership, as tenants in common, and the planning, financing, acquisition, construction, operation and maintenance of the Colstrip Steam Electric Generating Project and related facilities, as hereinafter defined;

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein stated and the performance thereof, all as hereinafter set forth, the parties hereto mutually agree as follows:

1.            Definitions

(a)           "Project."  Project means the coal-fired thermal generating plant, consisting of two units, each of 350 megawatt nominal rating and related facilities as described in Exhibit "A" attached hereto and the necessary real property, property rights, including access easements and appurtenances, as described in Exhibit "B" hereto, located near Colstrip, Montana.

(b)           "Project Agreements" means this Agreement together with the following agreements:

(c)           "Owners" shall mean Montana and Puget or their successor or assigns.

(d)           "Ownership Agreement" shall mean this Agreement.

2.            Ownership of Project

Subject to the terms and conditions hereinafter set forth, ownership of the Project shall be as follows:

(a)           The Project other than coal shall be owned by the parties hereto as tenants in common, with each party's respective undivided interests being in the following percentages:

Such percentages are hereafter referred to as the "Ownership Percentages".  Each Owner shall be entitled to schedule and take an amount of generation up to but not to exceed its Ownership Percentage of the Project's net generating capability.

(b)           All of the respective covenants and agreements set forth and contained in the Project Agreements are incorporated herein by this reference and shall bind and shall be and become the respective obligations of each Owner, its successors and assigns.  It is the specific intention of this provision that, except for the parties' mutual Waiver of Right to Partition as set forth in subsection 15(b) of this Ownership Agreement, all of the covenants and conditions of all of the Project Agreements shall be personal to the parties and not covenants running with the land and shall be binding upon any party which acquires any rights, title or interest of any Owner of the Project in, to and under the Project Agreements, pursuant to subsections (b) through (e) of Section 16.

3.            Design, Engineering and Construction Management

Montana has entered into a Contract for Engineering, Procurement and Construction with Bechtel Corporation, (hereinafter "Bechtel Contract") dated January 23, 1970.  Puget became a party to said contract as of July 30, 1971.  Unless otherwise agreed, Montana and Puget will retain on a continuous basis, the Bechtel Corporation or some other construction engineer or engineering firm of national reputation recognized for knowledge, skill and experience in the design and construction managements of electrical generating facilities until the parties mutually agree that the Project has been completed.

4.            Construction

(a)           The Project shall be constructed at the lowest reasonable cost and in a prudent and skillful manner in accord both with standards prevailing in the utility industry for projects of a similar size and nature and with applicable laws and final orders or regulations of regulatory agencies having jurisdiction and substantially in accordance with the description set forth in the attached Exhibit "A".  The Project shall substantially conform to designs, plans, specifications and construction schedules which have been or will be made available to the parties as such are available.  It is intended that the contracts for purchase of equipment and construction of the Project shall be scheduled so as to provide for a date of initial test and operation of the Project, presently scheduled for May 1, 1975, for the first unit and May 1, 1976, for the second unit and for the commercial operation of the first unit of the Project not later than July 1, 1975, and for the completion and commercial operation of the second unit of the Project not later than July 1, 1976.

(b)           Any agreements, purchase contracts and orders entered into by Montana in its own name providing for the purchase of materials, equipment and services for the Project are hereby dedicated to the Project and ratified by Puget.  Montana, with reasonable expedition as agent for itself and Puget, shall enter into additional contracts for such purposes as well as contracts for the construction of the Project; Montana will continue as agent for itself and Puget to incur obligations and make expenditures relating to the engineering and other services necessary for continued Project planning and engineering.

(c)           With the assistance of Puget, Montana on its own behalf as to its own interest and as agent for Puget shall supervise and perform engineering and other services in connection with the engineering and construction of the Project.  Montana shall consult with Puget prior to making major decisions involving the design and other engineering, purchasing, subcontracting and construction of the Project.

(d)           As soon as practical after the execution of this Agreement, Montana shall submit to Puget an estimate of total cost and a schedule setting forth the estimated costs of constructing and completing the Project separately by months.  Montana shall thereafter submit quarterly revisions of such schedule to Puget, together with a summary report of the Construction Costs accumulated to date and other pertinent data including, when requested, copies of construction contracts, purchase orders and other agreements relating to construction progress.

(e)           Montana will maintain, or cause to be maintained separately, appropriate documentation and records of all Project expenditures and charges made and incurred by Montana, together with all other charges, payments and any expenses or receipts relating to Project construction.  Such records of Montana shall be made available for inspection by Puget at all reasonable times.

(f)           Puget authorizes and directs Montana to schedule deliveries of appropriate quantities of coal and other fuel to permit testing of the first and second units of the Project as each said unit becomes ready therefor.  Montana shall appropriately record coal and other fuel used for such purposes and furnish a copy of such record to Puget.  Montana will schedule generation from testing to the Owners according to their respective Ownership Percentages.

(g)           Surplus commodities, materials, equipment and the other personal property resulting from construction of the Project shall be disposed of in accordance with Section XVI(b) of the Operating Agreement.

5.            Construction Cost

Construction Cost of the Project shall consist of payments made and obligations incurred by either party in connection with the construction, installation and acquisition of the Project, other than interest during construction, for:

(a)           All costs of preliminary investigation in the Colstrip-Nichols area, land and land acquisition, water development, development labor and other costs, design, engineering, contractors' fees, construction labor, materials and supplies, operator and other personnel training, testing, preparation of Operation and Maintenance Manuals, and all other costs properly allocable to Construction Costs.  Any net receipts relating to construction shall be credited against Construction Costs;

(b)           All costs of insurance obtained pursuant to paragraph 9 hereof, and applicable to the period of construction;

(c)           All costs relating to injuries and damage claims which may be payable and paid arising out of the construction of the Project less proceeds of insurance maintained under paragraph 9 hereof or under the Bechtel Contract;

(d)           All federal, state or local taxes imposed upon the Project during the construction period but excluding state and federal net income taxes levied upon income derived by the Owners during said period;

(e)           The cost of all services performed and materials furnished by Montana and Puget directly applicable to Project construction including:

(f)           No administration and general expenses will be allocated to the Project during construction as all applicable overhead costs will be included with the direct costs charged to the Project under subsection (e) above.

6.            Payment of Cost of Project

(a)           Montana and Puget shall share Construction Costs according to their respective Ownership Percentages.  Notwithstanding completion of the Project, each Owner shall remain liable for any claims arising out of the construction of the Project and shall be entitled to any refunds, repayments, settlements or other credits with such claims and credits divided according to their respective Ownership Percentage share.

(b)           Montana shall submit to Puget a detailed accounting of all Construction Costs and receipts through June 30, 1972 and Puget shall submit such an accounting to Montana.  Within fifteen (15) days after receipt of Montana's accounting, Puget shall make an initial advance to Montana equal to one-half (1/2) of the difference between Montana's statement and Puget's statement, subject to later verification and acceptance of said accountings.  Montana's accounting shall include such carrying costs as are mutually agreed by the Owners.

(c)           From and after the date hereof, not later than the 20th day of each month, Montana will notify Puget of the estimated sums required for disbursements on account of the construction of the Project during the succeeding calendar month.

(d)           Montana will continue to process and pay Construction Costs on the Project in its usual manner.  Montana and Puget will establish a system of advances mutually agreeable to both parties to provide Montana with funds to cover Puget's share of Project's cost.

7.            Accounting and Reports

(a)           Montana shall at all times maintain and appropriately preserve separate books of account containing detailed entries of all items of cost and receipts applicable to the construction of the Project.  Accounting for all of such costs shall be in accordance with customary practices in the electric utility industry and the basic records and documents shall be made available to Puget for inspection at all reasonable times.  Montana shall furnish to Puget upon request, photocopies of all construction contracts and purchase orders and of all accounting entries and vouchers in such detail as may be necessary in order that each Owner may properly record its percentage of the Construction Cost of the Project on such Owner's own books and records.

(b)           Montana shall furnish to Puget monthly Construction Costs and progress reports and such other reports as may from time to time reasonably be requested by Puget.  At the request of Puget, Montana shall provide certificates signed by a responsible officer of Montana or an individual designated by him for such signature setting forth the status of Project Construction costs and application of funds.  The certificate shall be in such form and contain such information as is reasonably requested by Puget.

(c)           Montana's books and records relating to Project Construction Costs shall be open to inspection by Puget or any independent auditors nominated by them.  Either party may request an independent audit of such Project costs at any time during construction and at the completion thereof, the cost of which shall be a Construction Cost.  The records shall also be made available on written request by any of the companies to independent auditors and representatives of any regulatory body or taxing authority having jurisdiction for inspection, copying, audit or other proper business requirements.

8.            Licenses and Permits

Upon the expiration of any licenses or permits required for the ownership, construction, maintenance, or operation of the Project or in the event new such licenses or permits shall be required, the Owners as tenants in common agree to file timely applications for the same as may be necessary or appropriate, such licenses or permits to be held as tenants in common in accord with each parties' respective Ownership Percentage.

9.            Insurance

(a)           The Owners shall procure at the earliest practicable time and thereafter maintain in effect at all times hereinafter provided, to the extent available at reasonable cost and in accord with standards prevailing in the utility industry for projects of similar size and nature, adequate insurance coverage of the Project with responsible insurers, with each Owner as a named assured and with losses payable to the respective Owners for their benefit as their respective interests may appear, to protect and insure against:

(b)           The premium costs for insurance coverages until the completion of construction shall be a Construction Cost of the Project, and shall thereafter be an operating expense and shall be borne by the Owners in their respective percentage interests.

(c)           To the extent permitted by its insurance policies, each Owner waives any rights of subrogation against the other Owner, its agents and employees, for losses, costs, damages or expenses arising out of the construction, operation, maintenance, reconstruction or repair of the Project.

10.            Owners' Committee

(a)           As a means of securing effective cooperation, interchange of information and management of the property owned as tenants in common, on a prompt and orderly basis in connection with various administrative and technical problems which may arise from time to time under the terms and conditions of the Project Agreements, the Owners hereby establish an Owner's Committee.

(b)           Each Owner shall notify the other Owner promptly of the designation of its representative on the Owners' Committee and of any subsequent change in its designation.  Either of the Owners may, by written notice to the other Owner, designate an alternate or substitute to act as its representative, to act on the Committee in the absence of the regular member of the Committee, or to act on specified occasions or with respect to specified matters.

(c)   &nb