Exhibit 10.6
POWER SALE, FUEL SUPPLY
AND SERVICES AGREEMENT
THIS POWER SALE, FUEL SUPPLY AND SERVICES
AGREEMENT (this “Agreement”), dated as of
January 3, 2006 (the “Agreement Date”), is among
MIRANT AMERICAS ENERGY MARKETING, LP , a Delaware limited
partnership (“MAEM”), MIRANT BOWLINE, LLC
(“Mirant Bowline”), MIRANT LOVETT, LLC
(“Mirant Lovett”), and MIRANT NY-GEN, LLC
(“Mirant NY-Gen”), all Delaware limited liability
companies (Mirant Bowline, Mirant Lovett and Mirant NY-Gen are
referred to individually as “Project Company” and
collectively as the “Project Companies”).
RECITALS
WHEREAS, Project Companies own and
operate certain electric generating stations as set forth on
Exhibit A hereto (collectively, the “Generating
Stations”);
WHEREAS, Project Companies may enter
into contracts with third parties to sell capacity, electricity,
ancillary services and/or other related products generated by, or
available from, the Generating Stations;
WHEREAS, in the absence of such
third party contracts, Project Companies desire to contract herein
to sell all or a portion of the capacity, electricity, ancillary
services and/or other related products generated by, or available
from, the Generating Stations to MAEM, and MAEM desires to purchase
such capacity, electricity, ancillary services and/or other related
products on the terms and conditions set forth herein;
and
WHEREAS, Project Companies desire
that MAEM perform certain services related to the management and
operation of their Generating Stations, and MAEM desires to perform
such services.
NOW, THEREFORE, in consideration of
the foregoing and the mutual covenants contained herein, and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the Parties, the Parties hereby
agree as follows:
ARTICLE 1.
DEFINITIONS
The following capitalized terms,
whether used in the singular or plural, shall be defined as
provided in this Article 1.
“ Agreement ” has
the meaning set forth in the first paragraph hereof.
“ Agreement Date
” has the meaning set forth in the first paragraph of this
Agreement.
“ Asset Book ”
has the meaning set forth in Section 5.1.
1
“ Asset Companies
” means any affiliates of MAEM either directly or indirectly
owned by Mirant Corporation, other than Mirant Bowline, Mirant
Lovett or Mirant NY-Gen, which own electric generating stations in
the United States.
“ Bankruptcy Court
” means the United States Bankruptcy Court for the Northern
District of Texas, Fort Worth Division.
“ Bowline Station
” means the Generating Station owned by Mirant
Bowline.
“ Bowline Unit 1
” means unit 1 at Bowline Station.
“ Bowline Unit 2
” means unit 2 at Bowline Station.
“ Chapter 11 Cases
” means the cases commenced under chapter 11 of the United
States Bankruptcy Code pending before the Bankruptcy Court with
respect to Mirant Corporation and its affiliated debtors, styled as
In re Mirant Corporation, et al ., Chapter 11 Case
No. 03-46590 (DML), Jointly Administered.
“ 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.
“ Coal Delivery Point
” means the physical location at Lovett Station where MAEM
shall deliver coal to Mirant Lovett.
“ 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.
“ Confirmation Date
” means December 9, 2005 which is the date on which the
clerk of the Bankruptcy Court entered the Confirmation Order on the
docket of the Bankruptcy Court.
“ Confirmation Order
” means, with respect to the Chapter 11 Cases, the Order
Confirming the Amended and Restated Second Amended Joint Chapter 11
Plan of Reorganization for Mirant Corporation and its Affiliated
Debtors.
“ Day Tanks ”
means the day tank for Bowline Unit 1 and the day tank for Bowline
Unit 2.
“ 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
2
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.
“ Emissions 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
”) at any time during any applicable calendar
year.
“ Event of Default
” has the meaning set forth in Section 9.1.
“ Expenses ” has
the meaning set forth in Section 8.2.
“ FERC ” means
the Federal Energy Regulatory Commission, or its
successor.
“ Force Majeure ”
means an event or circumstance which prevents a 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 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 and/or natural gas, as applicable.
“ Fuel Delivery
Point(s) ” means the Coal Delivery Point, Fuel Oil
Delivery Point and/or Natural Gas Delivery Point, as
applicable.
“ Fuel Oil ”
means No. 6 fuel oil, No. 2 fuel oil and/or jet fuel, as
applicable.
“ Fuel Oil Delivery
Point ” means the physical location at Bowline Station
where MAEM shall deliver Fuel Oil to Mirant Bowline.
3
“ Fuel Oil Index Price
” is the mean published price (in $/barrel) for 0.3% sulfur
high pour residual oil (No. 6 Fuel Oil) for New York Harbor
cargo delivery as published in Platt’s Oilgram plus
$0.50.
“ Fuel Oil
Specifications ” has the meaning given in
Section 3.4(c).
“ 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 set forth in Section 8.2.
“ Implementation Order
” means, with respect to the Chapter 11 Cases, 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.
“ 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 the
New York Independent System Operator, Inc., a not-for-profit
corporation established pursuant to the Independent System Operator
Agreement.
“ ISO FERC Tariff
” means the ISO Market Administration and Control Area
Services Tariff, as amended from time to time, as on file with and
approved by the FERC.
“ Locational Marginal
Price ” means the locational marginal price established
in the day ahead and/or real time energy markets administered by
the ISO.
“ Lovett Station
” means the Generating Station owned by Mirant
Lovett.
“ MAEM ” has the
meaning set forth in the first paragraph of this
Agreement.
“ Massey Coal Agreement
” means the Restated Coal Purchase and Sale Agreement between
Mirant Lovett and Massey Coal Sales Company, Inc. effective
July 1, 1998, as amended from time to time.
4
“ MET ” has the
meaning set forth in Section 11.1(b).
“ Mirant Bowline
” has the meaning set forth in the first paragraph of this
Agreement.
“ Mirant Lovett ”
has the meaning set forth in the first paragraph of this
Agreement.
“ Mirant NY-Gen ”
has the meaning set forth in the first paragraph of this
Agreement.
“ Natural Gas Delivery
Point ” means the meter at the Generating Station where
MAEM shall deliver natural gas to Project Company.
“ Net Market Revenues
” has the meaning set forth in Section 8.2.
“ Offer ” has the
meaning set forth in Section 2.2(a).
“ Party ” means
any of MAEM or the Project Companies. In the context where
MAEM is referenced as a “Party,” a reference to the
“other Party” shall mean the Project Companies.
In the context where the Project Companies are 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,
with respect to the Chapter 11 Cases, the Amended and Restated
Second Amended Joint Chapter 11 Plan of Reorganization for Mirant
Corporation and its Affiliated Debtors dated September 30,
2005.
“ Products ”
means electric capacity, energy, ancillary services and/or any
other related products which are or may become commercially
recognized in the ISO markets during the term of this
Agreement.
“ Project Companies
” has the meaning set forth in this first paragraph of this
Agreement.
“ Purchased Power
” has the meaning set forth in Section 4.2.
“ 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.
“ Storage Tank ”
means a storage tank at Bowline Station dedicated to the storage of
Fuel Oil.
“ Third Party Contracts
” has the meaning set forth in
Section 2.2(b).
5
“ 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
Station.
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 Companies.
(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 transactions
involving the Generating Station.
(c)
Title, Risk of Loss and
Indemnity . The following
provision shall apply to all transactions involving the Generating
Station 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 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.
6
2.2
Resale of Products by
MAEM .
(a)
Offers . MAEM may resell the Products purchased from
Project Companies by submitting offers to sell such 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
Companies 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 Station, as provided by Project
Company to MAEM;
(ii)
the limitations imposed by any
transmission service reservations for the purpose of transmitting
Products from the Generating Station;
(iii)
Project Company’s scheduled
maintenance plans with respect to the Generating Station, as agreed
to between the Parties;
(iv)
the availability of the Generating
Station (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;
(viii)
Good Utility Practices;
(ix)
any environmental limitations
applicable to the Generating Station; and
(x)
operating protocols agreed to from
time to time by the Parties.
7
ARTICLE 3.
FUEL SERVICES
3.1
All Requirements Fuel
Supply . With the
exception of any Direct Contracts as described in Section 4.1,
MAEM shall procure and supply to Project Companies, 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. The Project Companies shall reimburse MAEM for
such Fuel at MAEM’s actual cost with the exception of Fuel
Oil delivered to Bowline Station as described in Section 3.4
below. 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 this
Section 3.1. 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 further
described in the calculation of Net Market Revenues pursuant to
Section 8.2.
3.2
Transportation and
Scheduling . MAEM
shall schedule or arrange for scheduling services with its
Transportation Providers to deliver Fuel to the Fuel Delivery
Point. MAEM shall manage Fuel imbalances on behalf of Project
Companies and all costs and revenues associated with Fuel
imbalances 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.
3.3
Title, Risk of Loss and
Indemnity . As between
the Parties, MAEM shall be deemed to be in exclusive possession and
control (and be responsible for any damages or injury caused
thereby) of the Fuel prior to delivery thereof at the Fuel Delivery
Point, and Project Company shall be deemed to be in exclusive
possession and control (and be responsible for any damages or
injury caused thereby) of the Fuel at and after delivery thereof at
the Fuel Delivery Point. MAEM warrants that it will deliver
to Project Company all Fuel free and clear of all liens, claims and
encumbrances arising prior to delivery thereof at the Fuel Delivery
Point. Title to and risk of loss related to delivered Fuel
shall transfer from MAEM to Project Company at the Fuel 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.
3.4
Fuel Oil Supply to Bowline
Station .
(a)
Daily Fuel Oil
Requirements . MAEM
shall supply and deliver Fuel Oil to the Fuel Oil Delivery Point as
required by Bowline Station. Mirant Bowline shall purchase
Fuel Oil from MAEM at the Fuel Oil Index Price as such Fuel Oil is
transferred from the Storage Tanks to the Day Tanks. For Fuel
Oil transferred on Saturday, the applicable purchase price shall be
the Fuel Oil Index Price for the preceding Friday. For Fuel
Oil transferred on Sunday, the applicable purchase price shall be
the Fuel Oil Index Price for the following Monday. For Fuel
Oil transferred on any holiday, the applicable price shall be the
Fuel Oil Index Price on the business
8
day preceding such holiday. The quantity
of Fuel Oil delivered to the Day Tanks shall be recorded by Mirant
Bowline daily and reported to MAEM.
(b)
Transfer of Title to Fuel Oil at
Termination . Upon
any termination of this Agreement pursuant to Section 6.2 or
Section 9.3(a), MAEM shall transfer and sell to Mirant Bowline
and Mirant Bowline shall purchase, take title to and pay MAEM for
Fuel Oil inventories at Bowline Station, as measured at midnight on
the date of transfer. The purchase price owed by Mirant
Bowline to MAEM for the on-hand 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. Mirant Bowline shall also pay the Fuel Oil Index
Price as of the transfer date for any Fuel scheduled for delivery
in accordance with the terms and provisions of this Agreement prior
to the date of termination and delivered after the date of
termination.
(c)
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 Mirant Bowline
from time to time (“Fuel Oil Specifications”).
Mirant Bowline and MAEM shall each notify one another of any
material failure of Fuel Oil to comply with the Fuel Oil
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. Mirant
Bowline shall be responsible for routine tests performed prior to
transferring Fuel Oil between tanks and prior to burning Fuel
Oil.
(d)
Failure of Fuel Oil to Materially
Conform to Fuel Oil 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, Mirant
Bowline 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
Mirant Bowline, Mirant Bowline may instruct MAEM to arrange at no
cost to Mirant Bowline for the reasonably expeditious removal of
any such non-compliant Fuel Oil from the Storage Tanks.
(e)
Fuel Oil Loading, Unloading,
Storage and Handling Facilities .
(i)
Mirant Bowline shall, as soon as
practical under the circumstances, provide MAEM with notice of any
applicable operating constraints affecting their Storage
Tanks. Mirant Bowline 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,
Mirant Bowline,
9
after each delivery of Fuel Oil to the Storage
Tanks, shall provide MAEM with a terminal port log/discharge report
and the current delivery analysis report.
(ii)
Mirant Bowline, 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 Bowline Station. Mirant Bowline shall maintain in
effect all permits necessary for such operation. Mirant
Bowline shall pay loading, unloading, storage and handling expenses
for Fuel Oil delivered to the Bowline Station. Mirant Bowline
and MAEM shall work together to coordinate in advance all vessel
deliveries to the Fuel Oil Delivery Point with the objective of
minimizing the expense of such deliveries.
