Exhibit 10.42
POWER PURCHASE AND SALE AGREEMENT
BETWEEN
PHELPS DODGE ENERGY SERVICES, LLC
AND
EL PASO ELECTRIC
COMPANY
This POWER PURCHASE AND SALE
AGREEMENT (“Agreement”) is executed as of
December 16, 2005 (the “Execution Date”), by and
between PHELPS DODGE ENERGY SERVICES, LLC , a Delaware
limited liability company (“PDES”), and EL PASO
ELECTRIC COMPANY , a corporation organized and existing under
the Laws of the State of Texas (“EPE”) (collectively
referred to as “Parties” and individually referred to
as a “Party”).
WITNESSETH:
WHEREAS, PDES holds a thirty-three and one third percent
undivided ownership interest in the Luna Energy Facility, an
approximately 570 megawatt (“MW”) (nominal) combined
cycle natural gas-fired electric generation facility located in
Luna County, New Mexico;
WHEREAS, EPE is a regulated utility that generates and
distributes electricity through an interconnected system to
approximately 330,000 customers in the Rio Grande Valley in west
Texas and southern New Mexico;
WHEREAS, each Party has obtained from the Federal Energy
Regulatory Commission (“FERC”) and currently holds
authorization to sell electric capacity and energy at market-based
rates;
WHEREAS, PDES desires to sell 100 MW of energy from the
Luna Energy Facility and delivered to EPE at the Luna Delivery
Point in exchange for EPE selling 100 MW of energy
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generated by or for EPE and delivered to PDES at
the Greenlee Delivery Point, or in each instance at such other
agreed delivery points and quantities; and
WHEREAS, the Parties are willing to perform such energy
exchange and provide for the purchase and sale of additional energy
as described herein, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE,
in consideration of the mutual
promises, covenants, and agreements set forth herein, the Parties
do hereby agree with each other, for themselves and their
successors and assigns, intending to be legally bound, as
follows:
ARTICLE 1
DEFINITIONS AND
INTERPRETATIONS
1.1 Definitions . All
capitalized terms used herein and not otherwise defined, whether
singular or plural, shall have the respective meanings set forth in
Schedule A attached hereto and incorporated herein.
1.2 Interpretation . In this
Agreement, unless the context otherwise requires, the singular
shall include the plural and any pronoun shall include the
corresponding masculine, feminine, and neuter forms. The words
“hereof,” “herein,” “hereto,”
and “hereunder” and words of similar import when used
in this Agreement shall, unless otherwise expressly specified,
refer to this Agreement as a whole and not to any particular
provision of this Agreement. Whenever the term
“including” is used herein in connection with a listing
of items included within a prior reference, such listing shall be
interpreted to be illustrative only, and shall not be interpreted
as a limitation on or exclusive listing of the items included
within the prior reference. Any reference in this Agreement to
“Section,” “Article,”
“Appendix,”
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“Exhibit,” or “Schedule”
shall be references to this Agreement unless otherwise stated, and
all such Appendices, Exhibits, and Schedules shall be incorporated
in this Agreement by reference. Unless specified otherwise, a
reference to a given agreement or instrument, and all schedules,
exhibits, appendices, and attachments thereto, shall be a reference
to that agreement or instrument as modified, amended, supplemented,
and restated, and in effect from time to time. Unless otherwise
stated, any reference in this Agreement to any entity shall include
its permitted successors and assigns, and in the case of any
Governmental Authority, any entity succeeding to its functions and
capacities.
1.3 Construction . In the
event of a conflict between the text of this Agreement and any
Schedule, Appendix, or Exhibit, the terms of this Agreement shall
prevail. Each Party acknowledges that it was active in the
negotiation and drafting of this Agreement and that no Law or rule
of construction shall be raised or used in which the provisions of
this Agreement shall be construed in favor of or against either
Party because one is deemed to be the author thereof.
ARTICLE 2
EFFECTIVE DATE, TERM AND,
TERMINATION
2.1 Effective Date . This
Agreement shall become effective upon execution by the Parties and
obtaining from any Governmental Authorities any necessary
approvals, if any.
2.2 Initial and Subsequent
Terms . The Initial Term of this Agreement shall commence on
the later to occur of (i) the Commercial Operation Date of the
Luna Energy Facility, or (ii) the Effective Date. The Initial
Term shall terminate at 11:59 p.m. Mountain Standard Time on
December 31, 2021. Thereafter, this Agreement shall
automatically extend
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for additional terms of one (1) year each
(each a “Subsequent Term”), unless either Party
provides written notice of its decision to terminate the Agreement
at the end of the existing Initial Term or Subsequent Term. Such
written notice of termination shall be provided to the other Party
not less than fifteen (15) calendar months prior to the end of
the then effective Initial Term or Subsequent Term.
2.3 Termination . This
Agreement may be terminated by either Party in accordance with
Section 7.2 or Section 8.4. No termination shall become
effective until the Parties have complied with all Laws applicable
to such termination.
ARTICLE 3
ENERGY EXCHANGE
3.1 PDES’ Obligation to
Sell and Deliver Energy at the Luna Delivery Point .
3.1.1 PDES shall generate or cause
to be generated 100 MW from the Luna Energy Facility and shall sell
and deliver to EPE (and EPE shall purchase and receive) such energy
at the Luna Delivery Point, or such other point as may be agreed by
the Parties.
3.1.2 Notwithstanding any other
provision of this Agreement, PDES shall not take, sell, exchange,
transfer, or consume energy from the Luna Energy Facility unless
and until it has satisfied its sale and delivery obligations
prescribed by Article 3; provided, however, that for the period
commencing upon the Effective Date and ending at 12:00 a.m.
Mountain Standard Time on May 31, 2008, PDES may first
generate or cause to be generated from the Luna Energy Facility not
more than 80 MW to serve its current load commitments (the
“Current Load Commitment Sale”) and that during such
period PDES shall sell and deliver to EPE all energy
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(not to exceed 100 MW absent the
written agreement of the Parties) PDES generates or causes to be
generated from the Luna Energy Facility in excess of the Current
Load Commitment Sale.
3.2 EPE’s Obligation to
Sell and Deliver Energy at the Greenlee Delivery Point . In
exchange for the energy that PDES delivers to EPE in accordance
with Section 3.1, EPE concurrently shall sell and deliver to
PDES (and PDES shall purchase and receive) at the Greenlee Delivery
Point, or such other point as may be agreed by the Parties, a
quantity of energy identical to the quantity of energy sold and
delivered by PDES pursuant to Section 3.1.
3.3 Obligations in the Event of a
Failure to Deliver Energy .
3.3.1 If a Party fails to deliver or
receive all or a part of the energy that it is required to deliver
or receive under Section 3.1 or Section 3.2, then the
other Party shall suspend delivery or receipt of the same amount of
energy that the former Party failed to deliver or receive. Except
as provided in Section 3.5 and Section 4.2, a
Party’s exclusive remedy for the other Party’s failure
to deliver or receive energy under Section 3.1 or
Section 3.2 this Agreement shall be the remedy prescribed by
this Section 3.3.1.
3.3.2 If a forced or unplanned
outage or other event precludes a Party from fulfilling its sale
and delivery obligations under Article 3, its delivery obligation
shall be excused and it shall provide immediate Notice of such
outage or event to the other Party including, to the extent
practicable, a description of the nature and estimated duration of
such outage or event and, when feasible, shall provide further
Notice of the time at which it will be able to resume delivery or
receipt.
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3.3.3 If an unforced or planned
outage or other event will preclude a Party from fulfilling its
sale and delivery obligations under Article 3, its delivery
obligations shall be excused and it shall provide the other Party
Notice of the nature and estimated duration of such outage or other
event as soon as is reasonably practicable and, when feasible,
shall provide further Notice of the time at which it will be able
to resume delivery or receipt.
3.4 Mutual Agreement of Different
Quantities of Exchange . Subject to the provisions of
Section 3.1.2, PDES may offer to sell and deliver to EPE at
the Luna Delivery Point (or such other point as the Parties may
agree) energy in quantities of less than 100 MW that PDES generates
or causes to be generated from the Luna Energy Facility. In such
event, EPE shall sell and deliver to PDES at the Greenlee Delivery
Point (or such other point as the Parties may agree) an identical
quantity of energy. Upon agreement, quantities of greater than 100
MW may be sold and exchanged pursuant to the terms of this
Agreement.
3.5 Equitable Relief . The
Parties acknowledge that any breach or violation of
Section 3.1.2 by PDES or Section 3.2 by EPE may subject
the other Party to irreparable harm and that the remedies
prescribed by Section 3.3.1 and Section 4.2 may be
inadequate to compensate the non-breaching Party’s resulting
losses and damages. The Parties therefore agree that, in addition
to the remedies prescribed by Section 3.3.1 and
Section 4.2, the non-breaching Party shall be entitled to seek
specific performance or injunctive relief to compel performance
under, or to prevent or curtail any breach or violation of,
Section 3.1.2 or Section 3.2, subject to all applicable
requirements for obtaining such equitable relief under Law, but
without the necessity of the posting of a bond or other security as
a condition precedent to such relief.
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3.6 Purchase and Sale of
Additional Energy . Notwithstanding PDES’ failure to
deliver all or any part of the energy referenced in
Section 3.1:1, if, in the sole opinion of PDES, the Luna
Energy Facility is operational and available to serve load, EPE
shall have the right to dispatch PDES’ interest of the Luna
Energy Facility and purchase, for an agreed price, up to 100 MW of
firm energy per hour (or such additional energy as is necessary to
satisfy the minimum operating characteristics of the Luna Energy
Facility) at the Luna Delivery Point (or such other point as the
Parties may agree), less the quantity of energy, if any, delivered
by PDES under Section 3.1.1 subject to the
following:
3.6.1 the price for such energy
shall not exceed the greater of: (i) the market price for such
energy at the Palo Verde hub or Four Comers hub, whichever is
greater, or (ii) the sum of (a) PDES’ incremental
cost of providing such energy, inclusive of start-up costs, fuel
and fuel transportation costs, variable operations and maintenance
costs, environmental credit costs, and all other direct operating
costs of producing such energy, plus (b) an adder of 5% of
PDES’ non-fuel incremental costs referenced in clause
(a);
3.6.2 EPE’s right to purchase
energy under Section 3.6 shall be subject to PDES’
obligations under the Current Load Commitment Sale; and
3.6.3 all energy purchased and sold
pursuant to Section 3.6 shall be separate and distinct from
energy sold and exchanged under Section 3.1 and
Section 3.2 and shall not affect, alter, or modify the
Parties’ respective obligations to exchange energy under
Section 3.1 through Section 3.4 or the computation and
assessment of the energy purchase and sale exchange fee under
Section 4.1 or the minimum annual bill under
Section 4.2.
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ARTICLE 4
ENERGY PURCHASE AND SALE
FEE
4.1 Energy Purchase and Sale
Exchange Fee . In consideration for their mutual obligations to
sell and deliver electric energy, PDES shall pay to EPE an energy
purchase and sale exchange fee of $2.05 per megawatt hour
(“MWh”) for each MWh of energy delivered by EPE under
Section 3.2 or Section 3.4 up to a maximum of 700,000 MWh
per calendar year. PDES shall have no obligation to pay any fee or
charge to EPE for energy deliveries by EPE in excess of 700,000
MWh. EPE shall invoice PDES monthly for amounts due under this
Section 4.1.
4.2 Minimum Annual Bill .
Within ten (10) Days following the end of each calendar year
during the Initial Term and any Subsequent Term of this Agreement,
EPE shall calculate the total amount of energy delivered to PDES
under Section 3.2 (the “Total MWh Delivered”). EPE
shall also calculate the total number of hours that it failed to
make deliveries under Section 3.3 (the “Total Hours of
Nondelivery”); provided that the Total Hours of Nondelivery
shall not include any period during which EPE suspended delivery of
energy pursuant to Section 3.3.1. EPE shall then determine the
Total Adjusted MWh Delivered by adding to the Total MWh Delivered
the product of 45.662 and the Total Hours of Nondelivery. In the
event the Total Adjusted MWh Delivered is less than 400,000 MWh
(the “Base Amount”), PDES shall pay EPE a lump sum
amount equal to $2.05 multiplied by the difference between the Base
Amount and the Total Adjusted MWh Delivered. Notwithstanding the
foregoing, PDES shall not be obligated to pay EPE any amount under
this Section 4.2 for the calendar year 2006.
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4.3 Billing and Payment .
Within twenty (20) Days following the end of each month, each
Party shall render to the other Party an invoice setting forth all
charges and amounts due hereunder. On or before the tenth
(10th) Day after the invoice date, or if such tenth
(10th) Day is not a Business Day, the immediately following
Business Day (the “Due Date”), a Party owing money
shall pay the amount due stated on the invoice. Overdue payments
shall accrue interest at the Interest Rate from and including the
Due Date to, but excluding, the date payment is received by
EPE.
4.4 Payment Disputes and Billing
Audits . If a Party disputes amounts shown on the invoice or
the methodology for deriving such amounts, such Party shall on or
before the Due Date (i) pay to the other Party the greater of
the undisputed amount or the amount of the most recent prior
month’s undisputed invoice, but not in excess of the invoice
subject to dispute, and (ii) furnish such other Party a
written explanation specifying the amount of and the basis for the
dispute. Within ten (10) Business Days of dispute resolution,
the Party owing money shall pay the other Party the amount owed and
interest thereon at the Interest Rate from the date such amount was
originally paid or due through and including the Day immediately
preceding the date such amount is paid or refunded to the other
Party. Each Party has the right, at its sole expense, during normal
working hours, and upon ten (10) Business Days Notice, to
audit books and records of the other Party that relate to the
foregoing information. Such audit rights shall extend for a period
of one (1) year beyond the date of the applicable invoice, and
no adjustment for any invoice or payment will be made unless
objection to the accuracy thereof was made prior to the expiration
of such one-year period. The Party subject to the audit will be
entitled to review the audit report and supporting
materials.
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ARTICLE 5
SCHEDULING OF ENERGY
5.1 Scheduling . PDES and EPE
shall coordinate and schedule energy for delivery pursuant to
Article 3 on a day-ahead basis in accordance with all applicable
WECC scheduling practices or the applicable scheduling practices of
any successor independent system operator (“ISO”) or
regional transmission organization (“RTO”) or other
organization with authority to administer scheduling and use of the
applicable transmission system (jointly with ISOs and RTOs, an
“Independent Transmission Operator”). In addition,
subject to Sections 3.3.2 and 3.3.3 and the operating capabilities
of the Facility (including applicable ramp rates), EPE may dispatch
and schedule the Luna Energy Facility pursuant to Section 3.6
on other than a day ahead basis provided it does so in accordance
with all applicable WECC scheduling practices or the applicable
scheduling practices of any successor Independent Transmission
Operator.
ARTICLE 6
INADVERTENT ENERGY
6.1 Inadvertent Energy . The
Parties shall exercise reasonable commercial efforts to minimize
any difference between the amount of energy provided by PDES
pursuant to Section 3.1 and the amount of energy provided by
EPE pursuant to Section 3.2. In the event a Party receives
more energy than it provides under Section 3.1 or
Section 3.2, the Party receiving the energy shall repay such
energy in kind at a mutually agreeable time and in a manner that is
consistent with all applicable NERC, WECC, and Independent
Transmission Operator rules regarding the payback of inadvertent
energy. Not later than five (5) Business Days after the last
day of each month, the Parties shall communicate with each other to
confirm the amount, if
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any, of energy provided by each Party to the
other Party for such month and to establish a schedule for the
repayment of any energy imbalance.
6.2 Energy Imbalance Audits .
Each Party shall, upon ten (10) Business Days Notice, make
available to the other Party books of account and other records
relating to this Agreement, including those that support the amount
energy provided to the other and documentation of payment of any
energy imbalances pursuant to Section 6.1. Either Party may,
at is sole discretion and expense, audit or examine such books and
records. Each Party shall furnish the other Party with such
summaries or counterparts of such records as may be necessary to
satisfy applicable regulatory requirements. Notwithstanding any
other provision of this Agreement, any documents concerning energy
exchanges or sales pursuant to this Agreement shall be final, and
shall not be subject to adjustment for any reason, unless a Party
has provided Notice to the other Party that it believes such
documents are in error not later than one (1) year from the
date of the invoice corresponding to the applicable energy exchange
or sale.
6.3 Modification of Energy
Imbalance Settlement Practices . In the event that WECC or any
successor Independent Transmission Operator should adopt energy
imbalance settlement practices that differ materially from the
practices described in Section 6.1 including, without
limitation, the payment of energy imbalance penalties or fees, the
Parties shall, through their duly authorized representatives,
convene to discuss and assess in good faith appropriate
modifications to Section 6.1 that address and fairly apportion
responsibilities for the financial or other settlement of energy
imbalances.
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ARTICLE 7
REGULATORY APPROVALS
7.1 FERC Approval . In the
event that a Party elects or is required to file the Agreement with
FERC (for acceptance or for informational purposes), the Parties
shall use good faith efforts to agree on the form and substance of
the filing; provided that either Party may file the Agreement with
FERC five (5) days after providing a draft of the filing to
the other Party for its review. An affected Party shall have the
rights and remedies prescribed by Section 7.2 if FERC or any
other Governmental Authority (i) rejects this Agreement or, as
a condition precedent to its acceptance, requires, or in the
reasonable estimation of such Party may require, any amendment(s)
or modification(s) to this Agreement or other condition(s) to such
acceptance that will or may result in a material adverse
consequence(s) to such Party, (ii) denies or revokes the
market based rate authority of either Party, and such denial or
revocation applies ab initio or retroactively to include
this Agreement, or (iii) takes other action that makes
performance of this Agreement imp
