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*TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTION 200.80(b)(4),
200.83 AND 240.24b-2
Exhibit 10.16
EXECUTION VERSION
SECOND AMENDED AND RESTATED
RENEWABLE ENERGY PURCHASE AND SALE AGREEMENT
THIS SECOND AMENDED AND RESTATED RENEWABLE ENERGY PURCHASE AND
SALE AGREEMENT
(hereinafter referred to as the "Agreement"), dated as of August
18, 2006 is
entered into by and between Snowflake White Mountain Power, LLC,
a limited
liability company organized and existing under the laws of the
State of Arizona
(hereinafter referred to as "Seller"), and Salt River Project
Agricultural
Improvement and Power District, an agricultural improvement
district organized
and existing under the laws of the State of Arizona (hereinafter
referred to as
"Buyer").
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1: Conditions Precedent; Term of
Agreement....................... 2
Article 2:
Definitions...................................................
4
Article 3: Tier One Purchase
Provisions.................................. 8
Article 4: Tier Two Purchase
Provisions.................................. 13
Article 5: Title and Risk of Loss;
Indemnity............................. 15
Article 6: Billing and Terms of
Payment.................................. 15
Article 7: Events of
Default............................................. 16
Article 8:
Remedies......................................................
17
Article 9:
Termination...................................................
18
Article 10: Limitation of
Liability....................................... 19
Article 11: Relationship of the
Parties................................... 19
Article 12:
Taxes.........................................................
19
Article 13:
Notices.......................................................
20
Article 14: Confidential
Information...................................... 21
Article 15:
Miscellaneous.................................................
22
EXHIBIT A: Contract
Rates................................................ 29
EXHIBIT B: EA
Certificate................................................ 30
</TABLE>
RECITALS
Whereas, Seller has now, or will have in the future, a certain
Renewable
Resource located in Snowflake, Arizona (the "Project");
Whereas, the Project will create certain Environmental
Attributes that arise
from the generation of electricity;
Whereas, Seller is in the business of generating and marketing
electricity,
capacity, and the associated Environmental Attributes; and
Whereas, Seller desires to sell to Buyer and Buyer desires to
purchase from
Seller certain quantities of energy, capacity, and corresponding
Environmental
Attributes created by the Project; and
Whereas, Seller and Buyer previously entered into (i) that
certain Renewable
Energy Purchase and Sale Agreement, dated as of February 24,
2005, that was
subsequently replaced in its entirety by (ii) that certain
Amended and Restated
Renewable Energy
<PAGE>
Purchase and Sale Agreement date as of May 25, 2006 pertaining
to the purchase
and sale of the energy identified herein as "Tier One" for a
term of twenty (20)
years; and
Whereas, Seller has entered into an agreement with Arizona
Public Service
Company ("APS Agreement") for substantially all of the
additional energy
produced by the Project for a term of fifteen (15) years;
and
Whereas, Seller has offered to sell and Buyer desires to
purchase additional
energy from the Project, commencing at the beginning of the
sixteenth (16th)
Delivery Year and ending on the Termination Date of this
Agreement. The amount
purchased shall consist of all of the remaining capacity and
energy of the
Project after Tier One deliveries are made to Buyer.
NOW, THEREFORE, in consideration of the above recitals and the
mutual promises
of the Parties set forth below, the Parties hereto and intending
to be legally
bound hereby, agree as follows:
ARTICLE 1: CONDITIONS PRECEDENT; TERM OF AGREEMENT.
(a) Conditions Precedent. Each of Seller's and Buyer's
obligations under this
Agreement shall become effective upon the satisfaction or waiver
by Seller
of each of the following conditions precedent:
(i) Seller shall have obtained all governmental and
regulatory
authorizations required for the construction, ownership,
operation and
maintenance of the Project and for the sale of capacity and
energy
therefrom;
(ii) Seller shall have obtained financing in connection with
the
construction, ownership, operation and maintenance of the
Project on
terms and conditions reasonably acceptable to Seller; and
(iii) Seller shall have entered into an interconnection
arrangement on
terms and conditions reasonably acceptable to Seller.
(b) Termination Rights Upon Failure to Achieve Conditions
Precedent. In the
event that any of the conditions precedent set forth in
subsection (a) of
this Article 1 have not been satisfied or waived by Seller by
May 1, 2006,
either Seller or Buyer shall have the right to terminate this
Agreement
upon thirty (30) days written notice to the other Party if the
conditions
precedent have not been satisfied or waived by Seller within
such thirty
(30) day period. If Buyer elects to terminate this Agreement
pursuant to
this Article 1, neither Party shall have any liability or
obligation to the
other Party. If Seller elects to waive any of the conditions
precedent set
forth in subsection (a) of this Article 1, such condition shall
no longer
be a condition precedent to the effectiveness of Seller's and
Buyer's
obligations under this Agreement. If Seller elects to terminate
this
Agreement pursuant to this Article 1, Seller shall make a
one-time payment
to Buyer for liquidated damages, within ten (10) days of such
termination,
in the amount of $250,000.
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(c) Term: First Right of Refusal.
(i) The term of this Agreement shall commence on the date hereof
and shall
remain in effect through and including the Termination Date.
(ii) Commencing on the beginning of the fifteenth (15th)
Delivery Year but
not sooner, Seller may negotiate with third parties for proposed
agreements
for the sale of the net energy, capacity and Environmental
Attributes
generated by the Project during all or any portion of the period
commencing
on the day after the Termination Date and ending on the ten (10)
year
anniversary of the Termination Date, or, stated differently, for
a period
from the end of the twentieth (20th) Delivery Year and ending on
the day
before the thirty-first (31st) anniversary of the Delivery
Commencement
Date (such period, the "Right of First Refusal Term" or "ROFR
Term");
provided, however, that Buyer shall have a first right of
refusal to match
any proposed agreement with any such third party for the sale of
the net
energy, capacity and Environmental Attributes generated by the
Project
during all or any portion of the ROFR Term, as follows. If
Seller reaches a
bona fide proposed definitive agreement with a third party for
the sale of
the net energy, capacity and Environmental Attributes generated
by the
Project during all or any portion of the ROFR Term (a "Third
Party Offer"),
Seller shall provide a copy of such proposed definitive
agreement to Buyer
within ten (10) days of reaching agreement on the proposed Third
Party
Offer. Buyer shall have thirty (30) days to notify Seller in
writing
whether it wishes to exercise its right of refusal by entering
into an
agreement with Seller for the sale of the net energy, capacity
and
Environmental Attributes generated by the Project by Seller to
Buyer on
essentially the same terms and conditions (including sources of
fuel) as
set forth in the Third Party Offer (such notice, the "Election
Notice").
Upon the timely and proper delivery of an Election Notice,
Seller and Buyer
shall act in good faith to modify and execute any and all
definitive
agreements required for Buyer to purchase the net energy,
capacity and
Environmental Attributes on essentially the same terms and
conditions
(including sources of fuel) as set forth in the Third Party
Offer, it being
understood that the Third Party Offer shall be modified only as
minimally
necessary to properly reflect the identification of the Buyer
and to meet
Buyer's minimum standards for power purchase contracts, but
shall be
essentially identical to the Third Party Offer with respect to
all
financial terms. If Buyer shall fall to properly deliver an
Election Notice
within the 30-day notification period, or if Buyer shall
property deliver
such Election Notice within the 30-day notification period but,
after
good-faith negotiations between Buyer and Seller to modify the
Third Party
Offer agreements as provided above, shall fail to execute the
necessary
definitive agreements within thirty (30) days following the date
on which
the Election Notice is given to Seller, then in either event
Seller shall
be free to execute definitive agreements with the third party
who
originally made such offer to Seller. Buyer's right of refusal
under this
Section 1(c) shall survive the Termination Date of this
Agreement for the
ROFR Term.
(d) Prior Agreement Terminated. Seller and Buyer have previously
entered into
the "Renewable Energy Purchase and Sale Agreement", dated as of
February
24, 2005 that was replaced by and terminated pursuant to the
Amended and
Restated Renewable Energy Purchase and Sale Agreement date as of
May 25,
2006 (the "Prior Agreement"). It is the intention of the Parties
that this
Second Amended and Restated Renewable Energy Purchase and Sale
Agreement
shall
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replace the Prior Agreement in its entirety. Accordingly, upon
the
execution by each of the Parties of this Second Amended and
Restated
Renewable Energy Purchase and Sale Agreement, the Prior
Agreement shall
terminate and have no further force and effect.
ARTICLE 2: DEFINITIONS. As used in this Agreement, the following
terms have the
respective meanings set forth below. Other capitalized terms are
defined
elsewhere in this Agreement.
"AGREEMENT" means all provisions, exhibits incorporated as part
of this
Agreement, and documents incorporated by reference.
"ARIZONA FOREST THINNINGS" means forest thinnings and/or
residues
associated with the harvest of trees, salvage timber, small
diameter
timber, salt cedar and other phreatophyte or woody vegetation
removed from
forest and woodlands, river basins or watersheds in the State of
Arizona,
including sawdust and sawmill waste resulting from the
processing of the
foregoing.
"ARIZONA FOREST THINNINGS CALCULATION" has the meaning set forth
in Article
3(a)(i).
"AUTHORIZED REPRESENTATIVE" has the meaning set forth in Article
15(m).
"BIOMASS" means paper sludge, urban debris, agricultural waste
and any
other "biomass," including Arizona Forest Thinnings and Out-of
State Forest
Thinnings, falling within the definition thereof for purposes of
qualifying
renewable generation and promulgated from time to time by the
Arizona
Corporation Commission or any successor agency having
regulatory
jurisdiction over renewable generation.
"BUSINESS DAY" means any day which is not (i) a Saturday, (ii) a
Sunday or
(iii) a legal holiday in the State of Arizona or a federal
holiday in the
United States of America.
"CAMD" means the Clean Air Markets Division of the Environmental
Protection
Agency, any successor agency and any other state or federal
entity that is
given jurisdiction over a program involving transferability
of
Environmental Attributes.
"CLAIMS" means all third party claims or actions, threatened or
filed and,
whether groundless, false, fraudulent or otherwise, 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.
"DEFAULTING PARTY" has the meaning set forth in Article
7(a).
"DELIVERY COMMENCEMENT DATE" means the earlier to occur of (i)
January 1,
2008 or (ii) the commercial operation date of the Project, as
designated in
a written notice from Seller to Buyer; provided, however, that
without
limiting the generality of the provisions of Article 15(i), and
so long as
Seller has achieved Significant Construction Milestones by April
30, 2007,
if due to delays in construction of the Project that are beyond
the
reasonable control of Seller, the commercial operation
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date of the Project does not occur on or prior to January 1,
2008, the
Services Commencement Date shall mean the earlier to occur of
July 1, 2008
or such commercial operation date.
"DELIVERY TERM" means the period commencing at hour ending 0100
MST on the
Delivery Commencement Date through and including the hour ending
2400 MST
on the Termination Date.
"DELIVERY YEAR" means the consecutive twelve-month period
commencing at
hour ending 0100 MST on the Delivery Commencement Date (and each
subsequent
anniversary thereof) through and including the hour ending 2400
MST on the
final day of such twelve-month period.
"EA CERTIFICATE" means a certificate in the form attached hereto
as Exhibit
B.
"ELECTION NOTICE" has the meaning set forth in Article 1(c).
"ENVIRONMENTAL ATTRIBUTE" means any and all fuel, emissions, air
quality,
or other environmental characteristics, including green energy
tags,
renewable energy credits or certificates (REC) (including as
defined in any
legislation applicable in the Western Electricity Coordinating
Council
region), credits, benefits, reductions, offsets, and allowances,
howsoever
entitled or named, resulting from the use of renewable
generation or the
avoidance of the emission of any gas, chemical, or other
substance to the
air, soil or water attributable to the metered output generated
by the
facility which generated the energy sold by Seller to Buyer
during the
Delivery Term and in which the Seller has property rights or
will have
property rights upon such attributes coming into existence, and
includes
any of the same arising out of legislation or regulation
concerned with
oxides of nitrogen, sulfur, or carbon, particulate matter, soot,
or
mercury, or implementing the United Nations Framework Convention
on Climate
Change (the "UNFCCC") or the Kyoto Protocol to the UNFCCC or
crediting
"early action" with a view thereto, or laws or regulations
involving or
administered by the CAMD, and all Environmental Attribute
Reporting Rights,
but specifically excluding only the Production Tax Credits (PTC)
or fuel
subsidies. One (1) MWh of electrical energy from the Project or
another
applicable renewable energy generation facility corresponds to
one (1) MWh
Environmental Attribute.
"ENVIRONMENTAL ATTRIBUTE REPORTING RIGHTS" means the right to
report to any
agency, authority or other party, including without limitation
under
Section 1605(b) of the Energy Policy Act of 1992, ownership of
the
Environmental Attributes.
"FINANCIER" means any individual(s) or entity(ies) and any
representative(s) or trustee(s) for any such individual(s) or
entity(ies)
providing financing to Seller or any entity controlling,
controlled by or
under common control with such entity, in respect of the Project
or the
transactions contemplated by this Agreement, including in the
form of term
debt or Interim debt or subordinated debt financing, including
any
refinancing or take-out of any such loan(s) or financings.
"FIRM TRANSMISSION SERVICE" means (i) with respect to Seller,
firm
point-to-point transmission service provided by Arizona Public
Service
Company under the Arizona Public Service Company Pro Forma Open
Access
Transmission Tariff and (ii) with respect to Buyer, firm
point-to-point
transmission service provided by Salt River
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Project Agricultural Improvement and Power District under the
Salt River
Project Agricultural Improvement and Power District Open
Access
Transmission Tariff.
"GUARANTOR" means, with respect to Seller, Robert M. Worsley and
Christi M.
Worsley.
"LATE PAYMENT RATE" means a per annum rate of interest equal to
the lesser
of (i) LIBOR plus two percent (2%) or (ii) the maximum rate
permitted by
applicable law.
"LIBOR" means the London Interbank Offered Rate of interest per
annum at
which deposits in U.S. Dollars are offered by prime banks as of
11:00 a.m.,
London time, on the date which is two (2) Business Days prior to
the first
day of any period to which interest is applicable, for
settlement on the
first day of such interest period as such rate is quoted on
Telerate Page
3750, or a functionally equivalent successor thereto, to be
agreed between
Buyer and Seller.
"MW" means megawatt(s).
"MWH" means megawatt hour(s).
"MINIMUM NET WORTH AMOUNT" has the meaning set forth in the
Personal
Guaranty Agreement dated of even date herewith by Guarantor.
"MOODY'S" means Moody's Investor Services, Inc.
"MST" means Mountain Standard Time, as applicable, in Phoenix,
Arizona.
"NET-OUT-OF-STATE FUEL COST" has the meaning set forth in
Article 3(a)(ii).
"NET-ARIZONA FUEL COST INCREASE" has the meaning set forth
in
Article 3(a)(i).
"NON-DEFAULTING PARTY" has the meaning set forth in Article
7(a).
"OPTION" has the meaning set forth in Article 3(k).
"OPTION PERIOD" has the meaning set forth in Article
3(k)(i).
"OPTION PREMIUM" has the meaning set forth in Article
3(k)(iii).
"OUT-OF-STATE FOREST THINNINGS" means forest thinnings and/or
residues
associated with the harvest of trees, salvage timber, small
diameter
timber, salt cedar and other phreatophyte or woody vegetation
removed from
forest and woodlands, river basins or watersheds outside the
State of
Arizona, including sawdust and sawmill waste resulting from the
processing
of the foregoing.
"PARTY" or "PARTIES" means Buyer and Seller, individually or
collectively,
as applicable.
"PERSON" means an individual, partnership, corporation, limited
liability
company, association, trust, unincorporated organization, or a
governmental
authority or agency or political subdivision thereof.
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"PRODUCTION TAX CREDITS" means the federal renewable electricity
production
tax credit allowed in conjunction with the sale of electricity
from
qualified energy resources as most recently set forth in the
Working
Families Tax Relief Act of 2004 (Public Law No. 108-311) and the
American
Jobs Creation Act of 2004 (Public Law No. 108-357) and as it may
be further
defined in subsequent legislation.
"PROJECT" has the meaning set forth in the recitals of this
Agreement.
"RENEWABLE RESOURCE" means an electric power generator using
Biomass to
produce electric energy.
"ROFR PERIOD" has the meaning set forth in Article 1(c).
"S&P" means Standard & Poor's Rating Group, a division
of McGraw-Hill, Inc.
"SIGNIFICANT CONSTRUCTION MILESTONES" means (i) the boiler and
steam
generator components of the Project have been delivered to the
Project Site
and (ii) Seller has entered into contracts for installation and
testing of
the Project with the major contractors for the construction of
the Project.
"TEST ENERGY PRICE" has the meaning set forth in Article
3(k)(iv).
"TIER ONE DELIVERY POINT" has the meaning set forth in Article
3(e).
"TIER TWO DELIVERY POINT" has the meaning set forth in Article
4(e).
"TIER ONE DELIVERY TERM" means the period commencing at hour
ending 0100
MST on the Delivery Commencement Date through and including the
hour ending
2400 MST on the Termination Date.
"TIER TWO DELIVERY TERM" means the period commencing at hour
ending 0100
MST on the first day of the sixteenth (16th) Delivery Year
through and
including the hour ending 2400 MST on the Termination Date.
"TIER ONE MAXIMUM ANNUAL CONTRACT QUANTITY" means 87,600 MWh (of
which
70,080 MWh must be Biomass energy); provided that, in any
Delivery Year in
which the month of February has twenty-nine (29) days, the Tier
One Maximum
Annual Contract Quantity shall be 87,840 MWh (of which 70,272
MWh must be
Biomass energy); provided further that, with respect to the
Delivery Year
in which the Tier One Delivery Term terminates, the Maximum
Annual Contract
Quantity shall be reduced accordingly based upon the ratio of
(i) the total
number of days in such Delivery Year within the Delivery Term
for such year
to (ii) 365.
"TIER ONE MINIMUM ANNUAL CONTRACT QUANTITY" means 78,840 MWh (of
which
63,072 MWh must be Biomass energy); provided that, in any
Delivery Year in
which the month of February has twenty-nine (29) days, the Tier
One Minimum
Annual Contract Quantity shall be 79,056 MWh (of which 63,245
MWh must be
Biomass energy); provided further that, with respect to the
Delivery Year
in which the Delivery Term terminates, the Tier One Minimum
Annual Contract
Quantity shall be reduced accordingly based upon the ratio of
(i) the total
number of days in such Delivery Year within the Delivery Term
for such year
to (ii) 365.
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"TIER TWO MINIMUM ANNUAL CONTRACT QUANTITY" means 78,840 MWh of
Biomass
energy; provided that, in any Delivery Year in which the month
of February
has twenty-nine (29) days, the Tier Two Minimum Annual Contract
Quantity
shall be 79,056 MWh of Biomass energy; provided further that,
with respect
to the Delivery Year in which the Delivery Term terminates, the
Tier Two
Minimum Annual Contract Quantity shall be reduced accordingly
based upon
the ratio of (i) the total number of days in such Delivery Year
within the
Delivery Term for such year to (ii) 365. There is no maximum
annual
quantity for Tier Two deliveries, which shall include all power
and energy
generated by the Project that is not delivered as Tier One
quantities.
"TERMINATION DATE" means, with respect to both Tier One and Tier
Two, the
end of Delivery Year twenty (20), or such earlier date upon
which this
Agreement is terminated in accordance with the provisions of
this
Agreement.
ARTICLE 3: TIER ONE PURCHASE PROVISIONS.
Seller agrees to deliver and sell and Buyer agrees to accept and
purchase,
during the Tier One Delivery Term, all right, title and interest
of Seller in
and to the Tier One energy, capacity and associated
Environmental Attributes as
set forth in this Article 3 to the extent (i) Seller has such
right, title, and
interest in and to such Tier One energy, capacity and associated
Environmental
Attributes under applicable law, and (ii) such transfer and sale
to Seller is
not in violation of any applicable law at the time of such
transfer and sale.
Seller shall take such action as may be necessary to transfer
and evidence the
transfer of Environmental Attributes to Buyer.
(a) Tier One Contract Price. Subject to adjustment pursuant to
clauses
(i)-(iii) of this Article 3(a), for the Tier One energy,
capacity and
associated Environmental Attributes delivered by Seller to Buyer
during
each hour of the Tier One Delivery Term, Buyer shall pay to
Seller an
amount equal to the product of (i) the applicable Contract Rate
(in dollars
per MWh) set forth in Exhibit A (which the Parties acknowledge
contains an
escalation of [*] per Delivery Year) and (ii) the quantity of
Tier One
energy (in MWh) delivered by or on behalf of Seller.
(i) No later than six (6) months prior to the end of the
fifteenth (15th)
Delivery Year, Seller may (but shall not be obligated to)
calculate
the increase (the "Net Arizona Fuel Cost Increase") in Seller's
actual
fuel cost (determined consistent with past practices and net of
any
subsidy for Arizona Forest Thinnings received by Seller from
the
United States Department of Agriculture Forest Service) since
the
Delivery Commencement Date for transporting to the Project
Arizona
Forest Thinnings to generate the Tier One energy, capacity
and
Environmental Attributes sold to Buyer under this Agreement
(such
calculation, the "Arizona Forest Thinnings Calculation"), and
deliver
the Arizona Forest Thinnings Calculation to Buyer. Buyer shall
have
twenty (20) days from receipt of the Arizona Forest
Thinnings
Calculation to review such calculations in accordance with its
rights
under Article 3(h), and if a dispute arises between Seller and
Buyer
as to such calculations, such dispute shall be resolved in
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accordance with the provisions of Article 3(i). If the Arizona
Forest
Thinnings Calculation, as finally determined either by
Buyer's
agreement or resolved after a dispute pursuant to the provisions
of
Article 3(i), reflects that the Net Arizona Fuel Cost Increase
exceeds
44.80% (which the Parties acknowledge is equivalent to an
average
annual increase of 2.50%) Buyer shall elect, in its sole
discretion,
by written notice to Seller within ten (10) Business Days of
such
final determination, either (A) to increase the Contract
Rate
applicable during Delivery Years sixteen (16) through twenty
(20) by
an amount (expressed in dollars per megawatt-hour) by which the
Net
Arizona Fuel Cost Increase exceeded 44.80%, or (B) exercise its
rights
under Article 3(a)(ii) below. If Buyer falls to make an
election
within such ten (10) Business Day period, Buyer shall be deemed
to
have elected option (A). If Buyer elects or is deemed to have
elected
option (A), the Parties shall amend this Agreement to reflect
the new
Contract Rate for the remaining Delivery Years and to delete
clauses
(I)-(iii) of this Article 3(a).
(ii) If Buyer elects under Article 3(a)(i) to exercise its
rights under
this Article 3(a)(ii), Seller shall, within thirty (30) days
after
Buyer's election, calculate the projected fuel cost (the
"Net
Out-of-State Fuel Cost") (net of any subsidy for Out-of-State
Forest
Thinnings payable by the United States Department of
Agriculture
Forest Service) during the sixteenth (16th) Delivery Year
for
transporting to the Project Out-of-State Forest Thinnings to
generate
the energy, capacity and Environmental Attributes sold to Buyer
under
this Agreement (such calculation, the "Out-of-State Forest
Thinnings
Calculation"), and deliver the Out-of-State Forest Thinnings
Calculation to Buyer. Buyer shall have twenty (20) days from
receipt
of the Out-of-State Forest Thinnings Calculation to review
such
calculations in accordance with its rights under Article 3(h),
and if
a dispute arises between Seller and Buyer as to such
calculations,
such dispute shall be resolved in accordance with the provisions
of
Article 3(i). If the Out-of-State Forest Thinnings Calculation,
as
finally determined either by Buyer's agreement or resolved after
a
dispute pursuant to the provisions of Article 3(i), reflects
that the
Net Out-of-State Fuel Cost exceeds the first Delivery Year fuel
cost
by more than 44.80%, Buyer shall elect, in its sole discretion,
by
written notice to Seller within ten (10) Business Days of such
final
determination, either (A) to increase the Contract Rate
applicable
during Delivery Years sixteen (16) through twenty (20) by an
amount
(expressed in dollars per megawatt-hour) by which the Net
Out-of-State
Fuel Cost exceeds 44.80%, or (B) exercise its rights under
Article
3(a)(iii) below. If Buyer fails to make an election within such
ten
(10) Business Day period, Buyer shall be deemed to have elected
option
(A). If Buyer elects or is deemed to have elected option (A),
the
Parties shall amend this Agreement to reflect the new Contract
Rate
for the remainder of the Term, to modify the provisions of
Article
3(c) in order to allow Seller to utilize Out-of-State Forest
Thinnings
as fuel at the Project rather than Arizona Forest Thinnings for
the
remainder of the Term, and to delete clauses (i)-(iii) of this
Article
3(a).
(iii) If Buyer elects under Article 3(a)(ii) to exercise its
rights under
this Article 3(a)(iii), the Contract Rate shall not be
increased, and
the Parties shall
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amend this Agreement to modify the provisions of Article 3(c) in
order
to allow Seller to utilize any Biomass as fuel at the Project
rather
than Arizona Forest Thinnings or Out-of-State Forest Thinnings
during
the remainder of the Term and to delete clauses (i)-(iii) of
this
Article 3(a).
(b) Tier One Contract Quantity. In Delivery Years one (1)
through twenty (20),
Seller shall deliver at least the Tier One Minimum Annual
Contract Quantity
of energy and associated Environmental Attributes to Buyer. If
in Delivery
Year one (1) through nineteen (19), Seller delivers more than
the Tier One
Minimum Annual Contract Quantity to Buyer, Seller may elect,
upon written
notice to Buyer, to apply such excess quantities towards
Seller's
obligation to deliver the Tier One Minimum Annual Contract
Quantity to
Buyer in the immediately succeeding Delivery Year. Seller shall
not deliver
more than the Tier One Maximum Annual Contract Quantity of
energy and
associated Environmental Attributes to Buyer in Delivery Years
one (1)
through fifteen (15), without the written consent of Buyer. In
Delivery
Years sixteen (16) through twenty (20) Seller shall deliver the
Tier One
Minimum Annual Contract Quantity and Tier Two Minimum Annual
Contract
Quantity of energy and associated Environmental Attributes to
Buyer prior
to making any election, as provided above in this subsection, to
apply any
portion of any excess quantities towards Seller's obligation to
deliver the
Tier One Minimum Annual Contract Quantity to Buyer in the
immediately
succeeding Delivery Year.
(c) Tier One Sources of Fuel. Subject to Buyer's election to
terminate the
applicability of this sentence pursuant to the provisions of
Article 3(a),
at least eighty percent (80%) of the MWh of Tier One electric
energy
delivered by Seller to Buyer under this Agreement shall be
generated using
a fuel source comprised of Arizona Forest Thinnings. Arizona
Forest
Thinnings shall be used in concentrations that will allow, on a
monthly
basis, the Seller to meet the fuel requirement in this Article
3(c). Any
Tier One electric energy generated by the Project in excess of
eighty
percent (80%) of the MWh of electric Tier One energy delivered
by Seller to
Buyer under this Agreement may be generated using any fuel
source,
Including construction debris, paper sludge, agricultural waste,
tire
derived fuels, waste paper, plastics or other Biomass,
including
Out-of-State Forest Thinnings.
(d) Tier One Delivery Rate. During the Tier One Delivery Term
Seller may
schedule and deliver to Buyer at the Tier One Delivery Point up
to ten (10)
MWhs of energy per hour up to the Tier One Maximum Annual
Contract Quantity
of Tier One energy; provided that in Delivery Years one (1)
through fifteen
(15) such delivery rate may be Increased up to a maximum of 20
MWhs of
energy per hour upon mutual agreement of Buyer and Seller.
(e) Tier One Delivery Point. The delivery point for Tier One
energy delivered
by or on behalf of Seller to Buyer under this Agreement shall be
the Cholla
500 kV Switchyard, or any other delivery point mutually agreed
to by Seller
and Buyer (the "Tier One Delivery Point").
(f) Tier One Energy Sourcing. Unless otherwise noted and
mutually agreed to by
both Parties in writing, the Tier One energy and associated
Environmental
Attributes delivered by Seller to Buyer pursuant to this
Agreement shall be
generated from the Project.
__________
* Confidential Treatment Requested.
Page 10
<PAGE>
(g) Tier One Reporting. On or before the 30th day following the
end of each
Delivery Year during the Tier One Delivery Term, Seller shall
complete and
provide to Buyer an EA Certificate designating, for the previous
Delivery
Year: (i) the quantity of Tier One energy generation and
Environmental
Attributes created In MWh by month; (ii) the location and name
of the
generator used to create the Environmental Attributes; and (iii)
the date
the generator used to create the Environmental Attributes began
operation.
In addition, if in any Delivery Year during the Tier One
Delivery Term
Seller delivers Buyer Tier One electric energy under this
Agreement from
any Renewable Resource other than the Project, Seller shall be
obligated to
provide to Buyer a signed copy of an EA Certificate completed by
such
Renewable Resource for such Tier One Delivery Year.
(h) Tier One Audit Rights. Upon reasonable advance notice to
Seller, Buyer
shall have the right to designate its own employee
representative(s) or its
contracted representative(s) to audit and to examine at its own
expense the
supporting documentation concerning Seller's source of the
Arizona Forest
Thinnings, the Out-of-State Forest Thinnings or other Biomass
used by
Seller to generate Tier One electric energy delivered by Seller
to Buyer
under this Agreement and, subject to the limitations of time set
forth in
Article 3(a), Seller's calculations regarding costs of Arizona
Forest
Thinnings, Out-of-State Forest Thinnings and other Biomass
pursuant to the
provisions of Article 3(a). Buyer or Its representative(s) shall
undertake
any such audit(s) at reasonable times and appropriate locations
and in
conformance with generally accepted auditing standards. Seller
agrees to
fully cooperate with any such audit(s). During the term of this
Agreement,
Seller agrees to retain all records and documentation subject to
audit by
Buyer in accordance with this Article 3(h). Buyer shall promptly
notify
Seller in writing of any exception taken as a result of an audit
and Seller
shall respond In writing to such notification within thirty (30)
days of
receipt of Buyer's notice.
(i) Tier One Dispute Resolution - Fuel Costs. If a dispute
arises between the
Parties regarding either the Arizona Forest Thinnings
Calculation under
Article 3(a)(i) or the Out-of-State Forest Thinnings Calc
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