ELECTRIC POWER PURCHASE AND SALE AGREEMENT

Exhibit 4.20

 

Elec

 

Chesf

 

Companhia Hidro Elétrica do São Francisco

 

ELECTRIC POWER PURCHASE AND SALE AGREEMENT

 

CHESF

 

X

 

BRASKEM S.A.

 

CHLORO SODA UNIT – UCS - AL

 

CCVE-012/2004

 

ELECTRIC POWER PURCHASE AND SALE AGREEMENT CELEBRATED BETWEEN COMPANHIA HIDRO ELÉTRICA DO SÃO FRANCISCO - CHESF AND BRASKEM S.A.

 

By this deed, the Parties

 

COMPANHIA HIDRO ELÉTRICA DO SÃO FRANCISCO — CHESF, a public services concessionaire engaged in the supply of electric power, headquartered in the city of Recife, in the state of Pernambuco, at Rua Delmiro Gouveia, n° 333, Bairro do Bongi, enrolled before the CNPJ of the Ministry of Finance under no. 33.541.368/0001-16, and enrolled before the state tax office under no. 18.1.001.0005584-6, hereinafter simply referred to as “CHESF” and represented herein pursuant its Social Bylaws by its Directors, described and undersigned at the end of the agreement; and

 

BRASKEM S.A.-UCS-AL, with headquarters in the city of Maceió, in the state of Alagoas, at Av. Assis Chateaubriand, n° 5260, Bairro Portal da Barra, enrolled before the CNPJ of the Ministry of Finance under no. 42.150.391/0022-03, and enrolled before the state tax office under no. 240.071.115-AL, hereinafter referred to simply as “CONSUMER”, represented herein pursuant its Social Bylaws by its Directors described and undersigned at the end of the agreement.

 

WHEREAS

 

•

on June 02, 1998, the PARTIES celebrated the Electric Power Reserve Agreement for the supply of electric power by CHESF to the CONSUMER’ s industrial installations, located within the Municipality of Maceió, in the state of Alagoas, under a voltage of 230 kV, and governed by the hourly-seasonal tariff structure;

 

•

pursuant art. 25 of Law no. 10.848, dated March 15, 2004, the PARTIES are interested in amending this agreement intending to make it comply with the new sectorial regulations regarding the sale of electric power,

 

•

§ 2 of art. 54 of Decree no. 5.163, dated July 30, 2004 has determined that all amendments to electric power supply agreements must be first replaced by separate agreements drawn for the purchase and sale of electric power, and for the use of transmission and connecting systems;

 

•

the Electric Power Purchase and Sale agreement must be celebrated with the concessionaire of the public power generating service; the Use of the Transmission System Agreement must be celebrated with ONS, since the consumer service is provided by the Basic Powergrid installations, and the Connection Agreement must be executed with the power transmission concessionaire at the point of access

 

the PARTIES have therefore decided to celebrate this Electric Power Purchase and Sale Agreement ( “AGREEMENT” ) in replacement to the Electric Power Supply and Reserve Agreement, celebrated on June 02, 1998, pursuant the hourly-seasonal tariff structure, and pursuant the following clauses and conditions:

 

CHAPTER I

 

TERMINOLOGY AND ANNEXES

 

CLAUSE 1 – Purporting to obtain a perfect understanding and precise definition of the technical terminology employed in this AGREEMENT together with its annexes, the concept referring to the following words and expressions is agreed forthwith between the PARTIES :

 

(a) “ANEEL”; Agência Nacional de Energia Elétrica (National Electric Power Agency), a regulating agency responsible for the control of electric power supply, empowered by Law no. 9.427 dated December 26, 1996, and regulated by Decree no. 2.335, dated December 06, 1997;

 

(b) “COMPETENT AUTHORITY”: any government agency empowered to interfere in this AGREEMENT or in the activities executed by the PARTIES ;

 

(c) “BILLING CYCLE”: a time interval taking place between the date the power consumption measuring meters are read for billing purposes, as defined by CHESF, measured as of the previous month until the day of measurement on the month of reference;

 

(d) “CONNECTION TO THE TRANSMISSION SYSTEM AGREEMENT” agreement celebrated between the users and the power transmission concessionaires, which establishes the terms and conditions to connect the users to the Basic Power grid;

 

(e) “TRANSMISSION SYSTEM USE AGREEMENT”: an agreement that establishes the terms and conditions for the use of the Basic Power grid by a user, including the transmission services provided by the power transmission concessionaires, by means of the control and supervision of ONS, and the providing of the coordination and

 

operation control services pertaining to the interconnected services by ONS, pursuant a model approved by ANEEL;

 

(f) “ELECTRIC POWER”: is the amount of electric power that is being supplied over a given period of time, expressed in Watts/hour (Wh) or by its multiples;

 

(g) “PEAK HOURS”: a Period made up of three (3) consecutive daily hours, encompassed in the interval between 18:00 and 21:00 hours, excepting Saturdays, Sundays and national holidays. The daily time interval of three consecutive hours may be redefined within the time interval between 17:00 and 22:00 hours, agreed between CHESF and the CONSUMER, taking into account the characteristics of the latter’s electric system;

 

(h) “OFF-PEAK HOURS”: a period made up of two daily consecutive hours, which are a complement to those that have been defined by the OFF-PEAK HOURS;

 

(i) “IGPM”: Índice Geral de Preços de Mercado (General Market Price Index) computed by Fundação Getúlio Vargas;

 

(j) “AUCTION”: means the auction or auctions pertaining to the purchase of electric power deriving from the existing power generation systems, pursuant Law 10.848, dated March 15, 2004, and by Decree 5.163, dated July 30, 2004.

 

(k) “SERVICE OF NOTICE REGARDING CONTROVERSIES”; is a formal document intended to inform the PARTIES regarding any controversies arising from the provisions of this AGREEMENT and/or pertaining to it;

 

(l) “ONS”: means the National Electric Power System Operator ( Operador Nacional do Sistema Elétrico ), created by Law no. 9.648/98 and regulated by Decree no. 5.081/04;

 

(m) “DRY PERIOD”: a period made up of seven consecutive months encompassing the power supply derived from the consumption measurements taken between May and November of each year;

 

(n) “WET PERIOD”: a period made up of five consecutive months, encompassing the power supply derived from the consumption readings made between December of a given year and April of the following year;

 

(o) “POINT OF DELIVERY”: means the point of connection starting at CHESF ’s transmitting installations and ending at the electric installations of the CONSUMER ’s INDUSTRIAL UNIT;

 

(p) “POWER”: electric power referring to a unit of time expressed in kilowatts (kW);

 

(q) “POWER RESERVE CHART”: pursuant Annex I;

 

(r) “ELECTRIC POWER RESERVE”: demand for power contracted, referred chronologically to a given period of time;

 

(s) “HOURLY-SEASONABLE ELEMENTS”: are made up of the composition of the dry and wet periods together with the Peak and Off-peak Hours;

 

(t) “INTERCONNECTED SYSTEM”: means the generation, transmission and distribution installations, connected to the Basic Transmission Gridwork, including their respective installations;

 

(u) “INDUSTRIAL UNIT”: the CONSUMER ’s industrial installations located in Maceió-AL.

 

Sole Paragraph – All the afore defined terms, when used in the singular within the context of this AGREEMENT and its annexes shall also mean their plural form and vice versa.

 

CLAUSE 2 – ANNEX I – ELECTRIC POWER RESERVE CHART is an appurtenant to this AGREEMENT .

 

CHAPTER II

 

OBJECT AND TERM OF EFFECTIVENESS

 

CLAUSE 3 – The purpose of this AGREEMENT is to establish the terms and conditions pertaining to the RESERVE OF ELECTRIC POWER, corresponding to the commercialization of said Electric Power, to be made available by CHESF to the CONSUMER at the POINT OF DELIVERY, pursuant the amounts and periods that have been listed on the chart found in ANNEX I, and over which shall apply the tariffs to be determined by ANEEL, pursuant the hourly-seasonal tariff structure.

 

CLAUSE 4 – This AGREEMENT shall go into effect on November 30, 2004, and it shall remain in effect for a period of five years, or until the effective accomplishment of all contractual obligations, including the payment of the Invoice/Electric Power Bill referring to the last month of delivery of electric power.

 

Sole Paragraph – The effectiveness and the execution of the obligations and commitments governed by this AGREEMENT shall be entailed to the signing of the instruments infra, to which the PARTIES pledge forthwith:

 

a)

CONNECTION TO THE TRANSMISSION SYSTEM AGREEMENT, between the CONSUMER and the involved TRANSMISSION AGENT;

 

b)

CONNECTION TO THE TRANSMISSION SYSTEM AGREEMENT, between CHESF and the involved TRANSMISSION AGENT;

 

c)

TRANSMISSION SYSTEM USE AGREEMENT by the CONSUMER ;

 

d)

TRANSMISSION SYSTEM USE AGREEMENT by CHESF .

 

CHAPTER III

 

ELECTRIC POWER RESERVE

 

CLAUSE 5 – For the purposes envisaged in Clause 3, and pursuant the provisions in Clauses 4, 6 and 7 of this AGREEMENT , CHESF pledges to insure the availability of ELECTRIC POWER to cater to the CONSUMER’s needs during the periods and in the amounts established in ANNEX I.

 

First Paragraph – For all the purposes of this AGREEMENT , the dates for the start of the effectiveness of the electric power reservations shall be counted for each month as of 00:00 hours of the first day of the supply periods taken into account in ANNEX I.

 

Second Paragraph – Every year as of 2005, and at least sixty (60) days in advance of the AUCTION, the CONSUMER shall inform CHESF in writing as of its power needs to be effective as of January of the following years, considering that:

 

(a)

CHESF shall inform the date of the AUCTION at least thirty days in advance of the date the CONSUMER is supposed to inform its own estimate.

 

(b)

in case CHESF fails to effect said communication, the date of September 30 shall prevail for the CONSUMER to present said forecast.

 

(c)

in case the CONSUMER fails to make its electric power consumption reserve within the timeframe determined in this paragraph, CHESF shall for all purposes use the Electric Power Consumption Reservation Chart in effect.

 

(d)

CHESF pledges to validate the forecast dealt with in this paragraph, provided the provisions of the Third Paragraph of this clause are complied with.

 

Third Paragraph – The Power Consumption Reserve Chart dealt with in ANNEX I shall be elaborated and defined during each year electric power is supplied, pursuant the following rules:

 

(a)

Up until October 20, 2004, the CONSUMER shall present its consumption estimate for each hourly-seasonal segment, estimating a supply period for the next subsequent five (5) years.

 

(b)

The power requirements to be informed pursuant sub-item (a) must comply with the following terms:

 

I.

The power requirements for the year of 2005 shall be at least eighty percent of the last amount informed until 2003 by the CONSUMER, said amount having been validated by CHESF

 

II.

The power requirements for 2006 shall be at least 85% of the power requirements defined for 2005, pursuant previous condition I.

 

III.

The power requirements for 2007 to 2009 shall be defined at will by the CONSUMER.

 

(c)

The annual estimates established in the Second Paragraph of this Clause shall remain within the limits of variation expressed in the table infra, and they shall refer to the power requirements established in sub-items (a) and (b) above:

 

 

Fourth Paragraph – Any power load increases or reductions requested by the CONSUMER outside of the terms and conditions envisaged in the third paragraph of this Clause shall be dealt with as exceptions, and they shall be subject to CHESF ’s agreement, to be expressed in writing up to 60 days before the request is made by the CONSUMER.

 

Fifth Paragraph – For information purposes only, up until June 30 of each year the CONSUMER shall inform in writing its power requirements estimate for the following five years, starting in January of the subsequent year, in order to enable CHESF to convey said information to the electric power consumption agencies.

 

CHAPTER IV

 

OPERATIONAL, TECHNICAL AND COMMERCIAL CHARACTERISTICS

 

CLAUSE 6 – The PARTIES shall submit themselves to the POWERGRID PROCEDURES established by ONS and ratified by ANEEL.

 

CLAUSE 7 – The operational conditions pertaining to the physical delivery of electric power and the requirements regarding the purchase and sale that are the object of this AGREEMENT shall be ruled by the POWERGRID PROCEDURES, and they shall be governed by ANEEL.

 

Sole Paragraph – In the event of disturbances or power shutdowns of the TRANSMISSION SYSTEM, CHESF , intending to maintain the entitlements of the CONSUMER, and at the latter’s discretion, may represent said CONSUMER before ONS in order to define and to determine the responsibilities arising thereof.

 

CLAUSE 8 – The ELECTRIC POWER which is the object of this agreement shall be delivered at the POINT OF DELIVERY in tri-phasic, alternate current, at 60 Hertz frequencies, and under nominal voltage of 230 kV in between phases.

 

CLAUSE 9 – The measurement of active and reactive ELECTRIC POWER shall be accomplished by CHESF by means of appropriate measuring devices, of a class and accuracy equal to or less than 1% (one percent). Any measurements accomplished using measuring devices that may show differences of over 1% (one percent) shall imply in a mandatory correction of the previous bills that may be not precise, up until a maximum of the last 6 previous bills, the respective differences found being either dunned from or credited to the CONSUMER.

 

First Paragraph – If it so wishes, the CONSUMER may monitor the measurements, as well as check their respective calculations.

 

Second Paragraph – The measurement device for the consumption, to be used by CHESF ’s in its billing procedure, shall be installed at the sub-station belonging to the CONSUMER and it shall be kept under the latter’s responsibility.

 

Third Paragraph – It is up to the CONSUMER to design and to install under its own responsibility the corrective equipment which it may need to improve the power consumption factor.

 

CLAUSE 10 – The CONSUMER shall pay CHESF monthly the tariff in effect for each megawatt-hour for each BILLING CYCLE, abiding by the hourly-seasonal tariff structure defined and published by ANEEL.

 

CLAUSE 11 – The electric power tariffs shall be determined by ANEEL.

 

CHAPTER V

 

REGARDING BILLING AND PAYMENT OF THE BILL

 

CLAUSE 12 – The consumption readings and the bills for the power supply contracted herein shall be accomplished every thirty (30) day intervals. The due dates for each monthly Invoice/Power Bill shall be expressed therein, abiding by the minimum time frame envisaged in the regulations.

 

CLAUSE 13 – The power requirements equivalent to the Power Requirement Reservations envisaged in the ANNEX to this AGREEMENT shall contain the minimum billing amounts, even if no corresponding consumption took place during the supply periods listed on the POWER CONSUMPTION RESERVATION CHART defined in the aforementioned CLAUSE.

 

Sole Paragraph – Any changes that may eventually be agreed to between the parties in the amounts and on the dates defined for the start of the effectiveness of the power requirements contracted herein shall be