POWER SALE, FUEL SUPPLY AND SERVICES AGREEMENT

 

“ Asset Companies ” means any affiliates of MAEM either directly or indirectly owned by Mirant Corporation, other than Mirant Mid-Atlantic, LLC, which own electric generating facilities in the United States.

 

“ Claims ” means all claims or actions, threatened or filed, whether groundless, false or fraudulent, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys’ fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement.

 

“ Collateral Costs ” means an amount determined on a monthly basis by MAEM, in good faith, as the cost incurred by MAEM or Mirant North America, LLC to post collateral in the form of cash and/or letters of credit to third parties as required under the terms of the transactions attributed to the Asset Book based on the weighted average of the borrowing rates under the senior credit facilities, senior notes and other indebtedness for borrowed money of Mirant North America, LLC.

 

“ Delivery Point ” means, with respect to Products generated by, or available from, the Generating Station, the high side of the generation step-up transformer located at the Generating Station, where it connects to the Transmission Provider’s transmission system; and, with respect to Products generated by, or available from, sources other than the Generating Station, such other point on the Transmission Provider’s transmission system as MAEM and Project Company may determine.

 

“ Direct Contracts ” has the meaning set forth in Section 4.1

 

“ Emission Allowances ” means authorizations under state or federal (as applicable) air quality regulations to emit either one ton of nitrogen oxides (“NOx”) or sulfur dioxide (“SO ₂ ”).

 

“ Event of Default ” has the meaning set forth in Section 9.1.

 

“ Expenses ” has the meaning set forth in Section 8.2.

 

“ Facility Lease Event of Default ” shall have the meaning ascribed to such term in the Participation Agreements dated as of December 18, 2000 among Mirant Mid-Atlantic, LLC and the owners of the leased assets at the Dickerson and Morgantown generating stations, Wilmington Trust Company and State Street Bank and Trust Company of Connecticut, National Association.

 

“ FERC ” means the Federal Energy Regulatory Commission, or its successor.

 

“ Force Majeure ” means an event or circumstance which prevents one Party from performing its obligations, which event or circumstance was not anticipated as of the date the transaction was agreed to, which is not within the reasonable control of, or the result of the negligence of, the claiming Party, and which, by the exercise of due diligence, the claiming Party

 

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is unable to overcome or avoid or cause to be avoided.  Force Majeure shall not be based on (i) the loss of MAEM’s markets; (ii) MAEM’s inability economically to use or resell the Product purchased hereunder; (iii) the loss or failure of Project Company’s supply; or (iv) Project Company’s ability to sell the Product at a price greater than the purchase price set forth in this Agreement.  Neither Party may raise a claim of Force Majeure based in whole or in part on curtailment by a Transmission Provider unless (i) such Party has contracted for firm transmission with a Transmission Provider for the Product to be delivered to or received at the Delivery Point and (ii) such curtailment is due to “force majeure” or “uncontrollable force” or a similar term as defined under the Transmission Provider’s tariff; provided, however, that existence of the foregoing factors shall not be sufficient to conclusively or presumptively prove the existence of a Force Majeure absent a showing of other facts and circumstances which in the aggregate with such factors establish that a Force Majeure as defined in the first sentence hereof has occurred.

 

“ Fuel ” means coal, Fuel Oil or natural gas, as applicable.

 

“ Fuel Oil ” means No. 2 fuel oil or No. 6 fuel oil (residual), as dictated by context.

 

“ Fuel Oil Delivery Point ” means the physical location at Morgantown Station where MAEM shall deliver Fuel Oil to Project Company.

 

“ Fuel Oil Index Price ” is the mean published price (in $/barrel) for 0.3%, 0.7% or 1% sulfur, as applicable, high pour Fuel Oil (No. 6 Fuel Oil) for New York Harbor cargo delivery as published in Platt’s Oilgram plus $0.25.

 

“ Fuel Oil Specifications ” has the meaning given in Section 3.4(d).

 

“ Generating Stations ” has the meaning provided in the recitals.

 

“ Good Utility Practices ” mean any of the practices, methods or acts engaged in or approved by a significant portion of the electric energy industry with respect to similar facilities during the relevant time period which in each case, in the exercise of reasonable judgment in light of the facts known or that should have been known at the time a decision was made, could have been expected to accomplish the desired result at reasonable cost consistent with good business practices, reliability, safety, law, regulation, environmental protection and expedition.  Good Utility Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather to delineate the acceptable practices, methods or acts generally accepted in such industry.

 

“ Gross Revenues ” has the meaning provided in Section 8.2.

 

“ Implementation Order ” means the Implementing Order Regarding Transfer of Letters of Credit, Guarantees and Certain Collateral Securing Trading Obligations Transferred Pursuant to the Plan, dated December 9, 2005, issued by the United States Bankruptcy Court for the Northern District of Texas, Forth Worth Division in the chapter 11 cases of Mirant Corporation and its

 

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affiliated debtors, styled as In re Mirant Corporation, et al. , Chapter 11 Case No. 03-46590 (DML) Jointly Administered.

 

“ Interest Rate ” means, for any date, two percent (2%) over the per annum rate of interest equal to the prime lending rate as may from time to time be published in the Wall Street Journal under “Money Rates”; provided that the Interest Rate shall never exceed the maximum interest rate permitted by applicable law.

 

“ ISO ” means PJM Interconnection, LLC, or its successor.

 

“ ISO FERC Tariff ” means the Open Access Transmission and Energy Markets Tariff for the Midwest Independent Transmission System Operator, Inc. dated March 1, 2005, as amended from time to time, as on file with and approved by the FERC.

 

“ MIRMA Asset Book ” has the meaning set forth in Section 5.1.

 

“ Morgantown Station ” means the Morgantown Generating Station located in Charles County, Maryland.

 

“ Net Market Revenues ” has the meaning set forth in Section 8.2.

 

“ Oak Mountain Agreement ” means the Solid Synthetic Fuel Sales Agreement dated April 15, 2002 between Project Company and Oak Mountain Products, LLC.

 

“ Offer ” has the meaning set forth in Section 2.2(a).

 

“ Party ” means any of MAEM or Project Company.  In the context where MAEM is referenced as a “Party,” a reference to the “other Party” shall mean Project Company.  In the context where Project Company is referenced as a “Party,” a reference to the “other Party” shall mean MAEM.  References to “either Party” or the “Parties” shall have comparable meanings.

 

“ Plan ” means the Amended and Restated Second Amended Joint Chapter 11 Plan of Reorganization for Mirant Corporation and its Affiliated Debtors, dated September 30, 2005, confirmed by the United States Bankruptcy Court for the Northern District of Texas, Forth Worth Division, on December 9, 2005, in the chapter 11 cases of Mirant Corporation and its affiliated debtors, styled as In re Mirant Corporation, et al. , Chapter 11 Case No. 03-46590 (DML) Jointly Administered.

 

“ Products ” means electric capacity, energy, ancillary services and/or other related products which are or may become commercially recognized in the ISO markets during the term of this Agreement.

 

“ Project Company ” has the meaning set forth in this first paragraph of this Agreement.

 

“ Purchased Power ” has the meaning set forth in Section 4.2.

 

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“ Scheduling ” or “ Schedule ” means the acts of MAEM and/or its designated representatives of notifying, requesting and confirming to its counterparties and their designated representatives (including, but not limited to, the ISO or any Transmission Provider) the quantity and type of Products to be delivered on any given day or days during the period of delivery at a specified Delivery Point.

 

“ Service Fee ” has the meaning set forth in Section 8.1.

 

“ Third Party Contract ” has the meaning set forth in Section 2.2(b).

 

“ Transmission Providers ” means the entity or entities transmitting Products on behalf of Project Company or MAEM to or from the Delivery Point including, but not limited to, the ISO or a regional transmission organization.

 

“ Transportation Providers ” means the entity or entities transporting Fuel on behalf of Project Company or MAEM to or from the Generating Stations.

 

ARTICLE 2.

PRODUCT SALES

 

2.1                                  Intercompany Product Sales .

 

(a)                                   Transactions .  With the exception of any Direct Contracts as described in Section 4.1, Project Company shall sell and deliver, and MAEM shall purchase and receive, or cause to be received, at the Delivery Point, all Products generated by, and/or available from, the Generating Stations.  MAEM shall resell such Products as described in Section 2.2.  MAEM shall pay Net Market Revenues to Project Company, on a monthly basis, for all Products purchased by MAEM hereunder.  In selling Products generated by, or available from, the Generating Stations, MAEM shall attempt to maximize Net Market Revenues for Project Company.

 

(b)                                  Transmission and Scheduling .  Project Company shall be responsible for delivery of Products to the Delivery Point.  MAEM shall arrange and be responsible for transmission service at and from the Delivery Point.  MAEM shall serve as Scheduling agent on behalf of Project Company to Schedule and deliver Products with respect to all transaction involving the Generating Stations.

 

(c)                                   Title, Risk of Loss and Indemnity . The following provision shall apply to all transactions involving the Generating Stations except for Direct Contracts as described in Section 4.1.  As between the Parties, Project Company shall be deemed to be in exclusive possession and control (and be responsible for any damages or injury caused thereby) of the Products prior to delivery thereof at the Delivery Point, and MAEM shall be deemed to be in exclusive possession and control (and be responsible for any damages or injury caused thereby) of the Products at and after delivery thereof at the Delivery Point.  Project Company warrants that it will deliver to MAEM all Products free and clear of all liens, claims and encumbrances arising prior to delivery thereof at the Delivery Point.  Title to and risk of loss related to delivered Products shall transfer

 

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from Project Company to MAEM at the Delivery Point.  Each Party shall indemnify, defend and hold harmless each other Party from any Claims arising from any act or incident occurring during the period when possession, control and title to Products is vested or deemed to be vested in the indemnifying Party, except to the extent such Claims arise from such other Party’s breach of this Agreement or its gross negligence or willful misconduct.

 

2.2                                  Resale of Products by MAEM .

 

(a)                                   Offers .  MAEM may re-sell the Products purchased from Project Company by submitting offers to sell the Products in the day-ahead and/or real-time markets administered by the ISO (“Offers”).

 

(b)                            Third Party Contracts .  In addition to submitting Offers, MAEM may resell the Products purchased from Project Company by entering into bilateral contracts, forward sales, financial transactions (including but not limited to, hedges, swaps, contracts for differences and options), tolling agreements, power purchase agreements and other transactions (“Third Party Contracts”).

 

(c)                                   Costs and Revenues .  All costs and revenues associated with Offers and Third Party Contracts will be charged, or paid, to Project Company as such costs and revenues are actually incurred or received by MAEM, as further described in the calculation of Net Market Revenues pursuant to Section 8.2.

 

(d)                                  Strategies .  MAEM’s strategies with respect to all Offers, Third Party Contracts and all Scheduling activities shall be consistent with:

 

(i)                                      the operating parameters and limitations of the Generating Stations, as provided by Project Company to MAEM;

 

(ii)                                   the limitations imposed by any transmission service reservations for the purpose of transmitting Power from the Generating Stations;

 

(iii)                                Project Company’s scheduled maintenance plans, as agreed to between the Parties;

 

(iv)                               the availability of the Generating Stations (including Fuel handling and storage facilities), as communicated by Project Company to MAEM;

 

(v)                                  the ISO FERC Tariff and other ISO rules and procedures in effect from time to time;

 

(vi)                               applicable requirements of any Transmission Provider and/or Transportation Provider;

 

(vii)                            Fuel availability;

 

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(viii)                         Good Utility Practices;

 

(ix)                                 any environmental limitations applicable to the Generating Stations; and

 

(x)                                    operating protocols agreed to from time to time by the Parties.

 

ARTICLE 3.

FUEL SERVICES

 

3.1                                  All Requirements Fuel Supply and Delivery .  With the exception of any Direct Contracts as described in Section 4.1, MAEM shall procure and supply to Project Company on an exclusive basis all Fuel required by the Generating Stations in accordance with Good Utility Practices and the terms and conditions of this Agreement.

 

3.2                                  Reimbursement for Fuel .  Project Company shall reimburse MAEM for all Fuel delivered to the Generating Stations as follows:

 

(a)                                   Fuel consisting of natural gas shall be reimbursed at the market price of such gas, including transportation charges, on the delivery date.

 

(b)                                  Fuel consisting of coal shall be reimbursed at MAEM’s cost plus delivery charges and other fees and expenses incurred by MAEM in connection with the delivery of such coal.

 

(c)                                   Residual Fuel Oil delivered to Project Company shall be reimbursed at the Fuel Oil Index Price on the day the Fuel Oil is consumed by the Generating Station.  No. 2 Fuel Oil delivered to Project Company (including the costs of transportation) shall be reimbursed at MAEM’s actual cost.

 

3.3                                  Fuel Hedges and Trading Activities .  MAEM has entered into or will enter into Fuel hedges and trading activities (including, but not limited to, physical and financial hedges, swaps and options) in connection with MAEM’s Fuel supply obligations pursuant to Section 3.1 hereof.  The costs and revenues associated with such Fuel hedging and trading activities will be attributed to the Asset Book and charged to or paid to Project Company, as such costs and revenues are actually incurred or received by MAEM (as is further described in Section 8.2).

 

3.4                                  Transportation and Scheduling .  Except as otherwise provided in any Direct Contracts, MAEM shall arrange and be responsible for transportation service to deliver Fuel to the Generating Stations and shall schedule or arrange for scheduling services with its Transportation Providers to deliver Fuel to the Generating Stations.

 

3.5                                  Fuel Oil Supply to the Morgantown Station .

 

(a)                                   Measurement of and Title to Residual Fuel Oil Inventory .  MAEM shall have title to all residual Fuel Oil inventory at the Morgantown Station until such residual Fuel Oil is delivered to the input flange of each unit at the Morgantown Station.

 

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(b)                                  Transfer of Title to Residual Fuel Oil at Termination .  Upon termination of this Agreement, MAEM shall transfer and sell to Project Company and Project Company shall purchase, take title to and pay MAEM for residual Fuel Oil inventories at the Morgantown Station, as measured at midnight on the date of transfer.  The purchase price owed by Project Company to MAEM for the on-hand residual Fuel Oil inventories shall be based on the Fuel Oil Index Price on the date of transfer and shall be payable within three (3) business days after such date of transfer.  Project Company shall also pay the Fuel Oil Index Price as of the transfer date for any residual Fuel Oil scheduled for delivery in accordance with the terms and provisions of this Agreement prior to the date of termination and actually delivered after the date of termination.

 

(c)                                   Transfer of Title to No. 2 Fuel Oil .  MAEM shall be deemed to be in possession of and have title to the No. 2 Fuel Oil prior to the Fuel Oil Delivery Point.  Possession of and title to No. 2 Fuel Oil will transfer to the Project Company at the Fuel Oil Delivery Point.

 

(d)                                  Fuel Oil Specifications and Testing .

 

(i)                                      Fuel Oil supplied by MAEM to the Fuel Oil Delivery Point shall be of a quality meeting or better than the specifications for Fuel Oil provided by Project Company from time to time (“Fuel Oil Specifications”).  Project Company and MAEM shall each notify one another of any material failure of Fuel Oil to comply with the Fuel Specifications as soon as any Party becomes aware of same.

 

(ii)                                   MAEM, at its own expense, shall arrange for testing of Fuel Oil on the water and testing associated with any blending activities initiated by MAEM.  Project Company shall be responsible for routine tests performed prior to transferring Fuel Oil between tanks and prior to burning Fuel Oil.

 

(e)                                   Failure of Fuel Oil to Materially Conform to Fuel Specifications .

 

(i)                                      If Fuel Oil tendered for delivery under this Agreement to the Fuel Oil Delivery Point fails for any reason to materially conform to the Fuel Oil Specifications, Project Company may refuse all or any part of such Fuel Oil (giving MAEM the reasons for such refusal as soon as practical).

 

(ii)                                   To the extent Fuel Oil is delivered to the Fuel Oil Delivery Point and is not in compliance with the Fuel Oil Specifications, and such non-compliance is not approved by Project Company, Project Company may instruct MAEM to arrange at no cost to Project Company for the reasonably expeditious removal of any such non-compliant Fuel Oil from the Fuel storage tanks.

 

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(f)                                     Fuel Oil Loading, Unloading, Storage and Handling Facilities

 

(i)                                      Project Company shall, as soon as practical under the circumstances, provide MAEM with notice of any applicable operating constraints affecting their Fuel storage tanks. Project Company shall provide MAEM with a daily inventory, storage tank farm analysis report, and the volume of Fuel Oil delivered to the Fuel Oil Delivery Point.  Further, Project Company, after each delivery of Fuel Oil to Fuel storage tanks, shall provide MAEM with a terminal port log/discharge report and the current delivery analysis report.

 

(ii)                                   Project Company, at its own expense, and in accordance with Good Utility Practices, will maintain, operate and restore to operable condition, or contract with third parties for such maintenance, operation and restoration of, the Fuel Oil terminals, loading, unloading, storage and handling facilities at the Morgantown Station. Project Company shall maintain i