20050817IPC 1st response to staff request.pdf

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BARTON L. KLINE , ISB # 1526
MONICA B. MOEN , ISB # 5734
Idaho Power Company
1221 West Idaho Street
O. Box 70
Boise , Idaho 83707
Telephone: [phone]
FAX Telephone: [phone]
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Attorney for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
IDAHO POWER COMPANY FOR APPROVAL)
OF A FIRM ENERGY SALES AGREEMENT
FOR THE SALE AND PURCHASE OF
ELECTRIC ENERGY BETWEEN IDAHO
POWER COMPANY AND ARROW ROCK
WIND , INC.
CASE NO. IPC-05-
IDAHO POWER COMPANY'
RESPONSE TO FIRST
PRODUCTION REQUEST
OF COMMISSION STAFF
COMES NOW, Idaho Power Company ("Idaho Power" or "the Company
and in response to the First Production Request of Commission Staff to Idaho Power
Company dated August 2, 2005 , herewith submits the following information:
REQUEST NO.1: Please provide a copy of the lease agreement between
Arrow Rock Wind, Inc. and the owner of the specific generation equipment as specified
in Appendix B of the Agreement.
RESPONSE TO REQUEST NO.1: Attached to this response is a copy of
the form of the lease provided by Arrow Rock Wind ("ARW"
).
ARW initially advised the
Company that it intended to expeditiously enter into this lease but, as described in
IDAHO POWER COMPANY'S RESPONSE TO FIRST PRODUCTION
REQUEST OF COMMISSION STAFF Page
Attachment 2 to this response , ARW has now decided to purchase the turbine
generators and certain interconnection facilities from Invenergy, the owner and
developer of the non-PURPA Judith Gap Project.
Attachment 2 to this response is a letter from ARW stating its intent to
purchase the assets described in the proposed lease prior to the first energy date from
this project. As described by ARW, the lease structure was contemplated as a financing
instrument, but after significant review ARW determined that the lease structure
. complicated the utilization of the production tax credits. A copy of the proposed Letter
of Intent ("LOI") between ARW and Invenergy to purchase the turbines is provided as
Attachment 3. Included with this draft LOI is a letter from Invenergy affirming the status
of the ongoing negotiations between ARW and Invenergy.
The response to this request was prepared by Randy C. Allphin, Contract
Administrator, Power Supply Planning, Idaho Power Company, in consultation with
Barton L. Kline, Senior Attorney, Idaho Power Company.
REQUEST NO.2: Please provide a map to scale of the Judith Gap area
showing the locations of the thirteen individual turbines numbered 41-53 in Appendix B
of the Agreement in relation to any other turbines now installed or to be installed by the
owner of the generation facility in the same general vicinity. Please describe how the
thirteen turbines constituting the Arrow Rock project are separate and distinct from other
turbines in the vicinity owned by the same owner or installed in the same approximate
time frame.
RESPONSE TO REQUEST NO.2: Attached to this response is a map
provided by ARW, which includes turbines 41-53 as identified in Appendix B of the
IDAHO POWER COMPANY'S RESPONSE TO FIRST PRODUCTION
REQUEST OF COMMISSION STAFF Page 2
Agreement. The map and ARW indicate that the thirteen turbines are physically
separate from other turbines being installed by Invenergy as a part of the non-PURPA
Judith Gap Project. ARW also indicates that the ARW turbines will be constructed
operated , metered and maintained through a separate electrical collection and
distribution system. ARW also states that the turbines are accessible by a separate
dedicated road , which allows servicing of the turbines.
The response to this request was prepared by Randy C. Allphin , Contract
Administrator, Power Supply Planning, Idaho Power Company, in consultation with
Barton L. Kline, Senior Attorney, Idaho Power Company.
REQUEST NO.3: Please provide a copy of the Qualifying Facility
Certificate issued by the FERC for the Arrow Rock project, or alternatively provide a
copy in accordance with 18 CFR 9292.207 (a)(ii) of the Qualifying Facility self-
certification filing made with the FERC.
RESPONSE TO REQUEST NO.3: The requested document is attached.
The response to this request was prepared by Randy C. Allphin, Contract
Administrator, Power Supply Planning, Idaho Power Company, in consultation with
Barton L. Kline, Senior Attorney, Idaho Power Company.
DATED this day of August , 2005.
BA ON L. KLINE
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO FIRST PRODUCTION
REQUEST OF COMMISSION STAFF Page 3
BEFORE THE IDAHO PUBLIC UTiliTIES COMMISSION
IDAHO POWER COMPANY
CASE NO. IPC-O5-
ATTACHMENT
RESPONSE TO PRODUCTION
REQUEST NO.
LEASE AND OPTION TO PURCHASE
THIS LEASE AND OPTION TO PURCHASE ("Lease ), is made and entered into thisday of , 2005 , by and between Judith Gap Energy, LLC, a Montana limited liability
company, whose address is ("Lessor ) and Arrow Rock
Wind, Inc., an Idaho corporation whose address is 5203 South 11th East, Idaho Falls, ID 83404
Lessee
) .
WITNESSETH:
WHEREAS, Lessor is a limited liability company that intends to develop a wind generation
facility on a site located approximately six miles south of Judith Gap, Montana in Wheatland
County; and
WHEREAS, Lessor desires to lease certain facilities referred to herein as the Leased Facilities
for the purpose of producing electric energy and Environmental Attributes from such Leased
Facilities, and to obtain an option on the Leased Turbines (as defined hereinafter), all on the
terms and conditions set forth herein; and
WHEREAS, Lessor is willing to grant an option to Lessee for the purchase of the Leased
Turbines (as defined hereinafter) pursuant to the terms and conditions contained herein; and
WHEREAS Lessor is willing to enter into such a lease and allow Lessee to conduct such
business, all on the terms, conditions and covenants hereinafter set forth; and
WHEREAS, Lessee will cause the Leased Facilities to be operated in accordance with Prudent
Utility Practices, as specified in Article VI herein
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which
each party hereby acknowledges, the parties agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise required by the context in which any term appears: (i) capitalized terms used in
this Lease shall have the meanings specified in this Article 1; (ii) the singular shall include the
plural and vice versa; (iii) references to "articles
" "
sections
" "
schedules
" "
annexes
appendices" or exhibits" (if any) shall be to Articles , Sections, Schedules, Annexes, Appendices
or Exhibits hereof; (iv) all references to a particular entity shall include a reference to such
entity s successors and permitted assigns; (v) the words "herein
" "
hereof' and "hereunder" shall
refer to this Lease as a whole and not to any particular section or subsection hereof; (vi) all
accounting terms not specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States of America, consistently applied; (vii)
references to this Lease shall include a reference to all appendices, annexes, schedules and
exhibits hereto, as the same may be amended, modified, supplemented or replaced from time to
time; and (viii) the masculine shall include the feminine and neuter and vice versa. The Parties
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collectively have prepared this Lease, and none of the provisions hereof shall be construed
against one Party on the ground that such Party is the author of this Lease or any part hereof.
Actual Project Output" shall mean the quantity of Energy (in MWh) generated by the Leased
Facilities.
Affiliate" shall mean, with respect to any Person, (i) each Person that directly or indirectly,
controls or is controlled by or is under common control with such designated Person; (ii) any
Person that beneficially owns or holds ten percent (10%) or more of any class of voting securities
of such designated Person or ten percent (10%) or more of the equity interest in such designated
Person; or (iii) any Person of which such designated Person beneficially owns or holds ten
percent (10%) or more of the equity interest. For the purposes of this definition
, "
control"
(including, with correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of such Person
whether through the ownership of voting securities or by contract or otherwise.
After-Tax Basis" shall mean, with respect to any payment received or deemed to have been
received by any Person, the amount of such payment (the "Base Payment") supplemented by a
further payment (the "Additional Payment") to such Person so that the sum of the Base
Payment plus the Additional Payment shall, after deduction of the amount of all taxes required to
be paid by such Person in respect of the receipt or accrual of the Base Payment and the
Additional Payment (taking into account any current or previous credits or deductions arising
from the underlying event giving rise to the payment, the Base Payment and the Additional
Payment), be equal to the amount required to be received. Such calculations shall be made on
the assumption that the recipient is subject to Federal income taxation at the highest applicable
statutory rate applicable to corporations for the relevant period or periods, is subject to state and
local income taxation at the highest applicable statutory rates applicable to corporations doing
business in Wheatland County in the State of Montana and shall take into account the
deductibility (for Federal income tax purposes) of state and local income taxes.
Applicable Law" shall mean, with respect to any Person or the Wind Project, all laws, statutes
codes, acts, treaties, ordinances, orders, judgments, writs, decrees, injunctions, rules, regulations
governmental approvals, licenses and permits, directives and requirements of all regulatory and
other governmental authorities, in each case applicable to or binding upon such Person or the
Wind Project (as the case may be).
Availability Damages" shall have the meaning set forth in Section 3.3(a).
Base Hours" for each Leased Turbine and for each applicable Lease Year shall mean the
number of hours (or portions of an hour) in the prior Lease Year, less (without duplication) any
hours (or portions of an hour) during such Lease Year that any of the following have occurred:
(i) Lessee is unable for any reason (other than due to a breach by Lessor of its obligations under
this Lease) to produce Energy that such Leased Turbine is otherwise capable of generating, or
(ii) such Leased Turbine is not operational or capable of delivering Energy as a result of
scheduled maintenance (not to exceed 109.5 hours per Leased Turbine per year for purposes of
this Base Hours calculation), a System Emergency, a Transmission Force Majeure Event, a Force
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Majeure Event, or the action or inaction of Lessee or any of its Affiliates or any of its or their
agents, contractors, vendors or employees in breach of this Lease, or (iii) Non-Generating Wind
Conditions.
Base Rent" shall have the meaning set forth in Section 4.
Business Day" shall mean every day other than a Saturday or Sunday or any other day on
which banks in the State of Montana are permitted or required to remain closed.
Commercial Operation" shall mean that all of the Leased Turbines have achieved Turbine
Commercial Operation.
Commercial Operation Date" shall mean the date set forth in a written notice from Lessor to
Lessee on which Commercial Operation was achieved.
Conditions Precedent" shall mean those certain conditions set forth in Exhibit D.
Confidential Information" shall have the meaning set forth in Section 13.
Day" or "day" shall mean a period of twenty-four (24) consecutive hours beginning at 00:00
hours Mountain Time on any calendar day and ending at 24:00 hours Mountain Time on the
same calendar day.
Disclosing Party" shall have the meaning set forth in Section 13.
Dispute" shall have the meaning set forth in Section 13.11.
Energy shall mean electric energy generated by the Leased Facilities and available for
delivery to the Point of Interconnection, (excluding the electric energy consumed by the Leased
Facilities) which shall be in the form of three (3)-phase, sixty (60) Hertz, alternating current.
Environmental Attributes" means any credits, credit certificates, rights, powers, privileges or
similar items such as those for greenhouse gas reduction, green certificates or the generation of
green power or renewable energy, or for satisfying renewable portfolio standards or similar
renewable energy mandates, or offsets of emissions of greenhouse gases, in each case created by
any governmental agency and/or independent certification board or group generally recognized
in the electric power generation industry, and generated by or associated with the Leased
Facilities, but specifically excluding (i) any and all state and federal production tax credits
(including but not limited to PTCs), investment tax credits and any other tax credits which are or
will be generated by the Leased Facilities, and (ii) cash payments or outright grants of money
relating in any way to the Leased Facilities.
Event of Default" shall have the meaning set forth in Section 10.
Firm Transmission Service" shall mean firm point-to-point transmission service, firm network
transmission service or the substantial equivalent of the foregoing constituting the highest
priority transmission service.
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Force Majeure Event" shall have the meaning assigned in Section 13.2(a).
Generation Interconnection Agreement" shall mean the mutually agreed-upon generation
interconnection agreement between the Transmission Provider and Lessor pursuant to which
Lessor s Interconnection Facilities and the Transmission Provider s Interconnection Facilities
will be constructed and operated and maintained.
Guaranteed Mechanical Availability Percentage" shall have the meaning set forth in Section
3.3(a).
Inflation Adjustment Factor" shall mean the GDP Implicit Price Deflator, as published from
time to time by the United States Department of Commerce, Bureau of Economic Analysis, or
such successor index. In the event a substantial change is made in the means of calculation, term
or number of items in the GDP Implicit Price Deflator, then the Inflation Adjustment Factor shall
be adjusted to the figure that would have been arrived at had the change in the manner of
computing the GDP Implicit Price Deflator in effect at the date of this Lease not been altered.
the event that the GDP Implicit Price Deflator (or a substantially-similar successor or substitute
index) is not available, the Parties shall mutually agree upon a reliable governmental or other
non-partisan publication evaluating the information theretofore used in determining the GDP
Implicit Price Deflator.
Installed Capacity" shall mean the nameplate capacity set forth in Exhibit A-
Invenergy shall have the meaning set forth in Section 1 0.(a)( v).
IPC Contract" shall mean the Firm Energy Sales Agreement between Idaho Power Company
and Lessor dated as of , 2005.
Late Payment Rate" shall have the meaning set forth in Section 4.4(b).
Lease" shall have the meaning set forth in the first paragraph hereof.
Lease Year" shall mean the period from January 1 to December 31 of each year; provided that
the first Lease Year shall commence on the Commercial Operation Date and shall end on
December 31 of the calendar year following the Commercial Operation Date. The last Lease
Year shall end on the date of termination of this Lease. As an example only, if the Commercial
Operation Date is on December 10, 2005 , the first Lease Year shall be the period from December
2005 to December 31 , 2006.
Leased Facilities" shall mean that part of the Wind Project consisting of the Leased Turbines
and the Leased Interconnection Facilities.
Leased Interconnection Facilities" shall mean the facilities and equipment necessary for the
gathering, distribution and interconnection of the Energy output from the Leased Turbines to the
Point of Interconnection as further described in Exhibit A-
Leased Turbines" shall mean the Turbines to be leased by Lessor to Lessee pursuant to the
terms and conditions of this Lease and described in Exhibit A-
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Lender" or "Lenders" shall mean any and all Persons or successors in interest thereof lending
money or extending credit as follows: (i) for the construction, interim or permanent financing of
the Wind Project; (ii) for working capital or other ordinary business requirements of the Wind
Project (including the maintenance, repair, replacement or improvement of the Wind Project);
(iii) for any development financing, bridge financing, credit support, credit enhancement or
interest rate protection in connection with the Wind Project; (iv) for any capital improvement or
replacement related to the Wind Project; or (v) for the purchase of the Wind Project and the
related rights from Lessor.
Lessee" shall have the meaning set forth in the first paragraph of this Lease.
Lessor" shall have the meaning set forth in the first paragraph of this Lease.
Lessor s Interconnection Facilities shall mean the interconnection facilities, control and
protective devices and metering facilities (including any necessary distribution or transmission)
required to connect the Wind Project with the Transmission Provider s Transmission System up
, and on Lessor s side of, the Point of Interconnection.
Mean Project Output" shall mean an aggregate amount (expressed in MWh per year)
determined in accordance with the following formula:
Mean Project Output Installed Capacity x 8 760 hours x 35%
(Example: Based on Leased Facilities with a Installed Capacity of 15 MW, the Mean Project
Output would be 45 990 MWh per year.
Mechanical Availability Percentage shall mean the following fraction (expressed as a
percentage) with respect to any Lease Year:
(total Operational Hours during the Lease Year for all Leased Turbines that
have achieved Turbine Commercial Operation)
(total Base Hours during the Lease Year for all Leased Turbines that have
achieved Turbine Commercial Operation)
Meter" shall mean an instrument and associated equipment meeting applicable electric industry
standards used to measure and record the quantity and the required delivery characteristics of
Energy and back-up power delivered hereunder.
MW" shall mean a megawatt of installed turbine capacity.
MWh" shall mean a megawatt hour of energy.
NERC" shall mean the North American Electric Reliability Council.
Non-Generating Wind Conditions" shall mean conditions in the location of any Turbine in
which the wind velocity at such Turbine would cause such Turbine to fault because of excessive
wind velocity; provided, however, that the duration of the Non-Generating Wind Conditions
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shall be the period between the time when the Turbine ceases generating and the time when it
resumes generating in accordance with the manufacturer s standard specifications for resumption
of generation in such circumstances.
Operating Agent" shall mean the Person appointed by Lessee to operate the Leased Facilities
in conjunction with the remainder of the Wind Project in accordance with the terms of ARTICLE
VI.
Operation and Maintenance Agreement" shall mean the agreement between by Lessee and
the Operating Agent for the operation of the Leased Facilities in conjunction with the remainder
of the Wind Project.
Operational Hours for each Leased Turbine that has achieved Turbine Commercial
Operation and for each applicable Lease Year, shall mean the number of hours (or portions of an
hour) during the prior Lease Year in which such Leased Turbine is capable of producing power
as measured by such Leased Turbine s internal turbine controller, including without limitation
any such hours (or portions of an hour) during any applicable Lease Year in which deliveries of
Energy from such Leased Turbine are being curtailed pursuant to Section 4.5 or Section 6.5(b);
provided, however that in no event shall the number of Operational Hours for such Leased
Turbine exceed the number of Base Hours for such Leased Turbine. Operational Hours
specifically exclude any hours during which such Leased Turbine is (i) in an emergency, stop,
service mode or pause state; (ii) in "run" status and faulted; or (iii) not operational or capable of
delivering Energy as a result of scheduled maintenance, a System Emergency, a Transmission
Force Majeure Event, a Force Majeure Event, or the action or inaction of Lessee or any of its
Affiliates or any of its or their agents, contractors, vendors or employees in breach of this Lease.
Parties" shall have the meaning set forth in the first paragraph of this Lease.
Party" shall have the meaning set forth in the first paragraph of this Lease.
Person" shall mean an individual, partnership, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental entity, limited liability company or
any other entity of whatever nature.
Point of Interconnection" shall mean the point, more specifically described in Exhibit B
where Lessor s Interconnection Facilities connect to the Transmission Provider s Interconnection
Facilities.
Prime Rate" shall mean the interest rate (sometimes referred to as the "base rate ) for large
commercial loans to creditworthy entities announced from time to time by Citibank, N.A. (New
York), or its successor bank, or, if such rate is not announced, the rate published in The Wall
Street Journal as the "Prime Rate" from time to time (or, if more than one rate is published, the
arithmetic average of such rates), in either case determined as of the date the obligation to pay
interest arises, but in no event more than the maximum rate permitted by Applicable Law.
Produced Energy" shall mean all Energy produced by the Leased Turbines and delivered at the
Point of Interconnection during each hour.
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Property Taxes" shall have the meaning set forth in Section 4.2(b).
Prudent Utility Practices" shall mean the practices , methods and standards of professional
care, skill and diligence engaged in or approved by a significant portion of the electric generation
industry for wind facilities of similar size, type, and design, that, in the exercise of reasonable
judgment, in light of the facts known at the time, would have been expected to accomplish
results consistent with Applicable Law reliability, safety, environmental protection and
standards of economy and expedition.
PTCs" shall mean production tax credits under section 45 of the Internal Revenue Code as in
effect on the date of this Lease or any successor or other provision as renewed that provide for a
federal tax credit determined by reference to renewable electric energy produced from wind
resources.
PTC Termination Date" shall mean the date by which a facility must be placed in service for
qualification for PTCs.
Purchase Option" shall mean the ongoing right of the Lessee to purchase the Leased Turbines
as set forth in Section 4.
QF" shall mean a "qualifying facility" as defined in the Public Utility Regulatory Policies Act
of 1978 (PURPA) (add statutory reference).
Receiving Party" shall have the meaning set forth in Section 13.
Site" shall mean the real property in Wheatland County, Montana on which the Wind Project is
to be located.
System Emergency shall mean a system condition on the Transmission Provider
Transmission System, at the Wind Project, or on transmission facilities used to deliver the
Energy from the Wind Project to the Point of Interconnection, which condition is likely to result
in imminent significant disruption of service or reliability to the Transmission Provider
Transmission System customers or is imminently likely to endanger life or property.
Term" shall have the meaning set forth in Section 3.
Transfer Taxes" shall have the meaning set forth in Section 4.2(a).
Transmission Force Majeure Event" shall mean a Force Majeure Event that (a) is an act of
God or the elements, extreme or severe weather conditions, mudslides, landslides, explosion
fire , sabotage, terrorism, lightning, earthquake, flood or similar cataclysmic events, an act of
public enemy, war, epidemic, blockade equipment failure on the transmission system, civil
insurrection, riot, or a civil disturbance, and (b) results in a curtailment or interruption of Firm
Transmission Service.
Transmission Provider s Interconnection Facilities" shall mean the interconnection facilities
control and protective devices and metering facilities required to connect the Transmission
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Provider s Transmission System with the Wind Project on the Transmission Provider s side of
the Point of Interconnection.
Transmission Provider s Transmission System" shall mean the facilities for the transmission
of Energy from the Point of Interconnection to Lessee s point of delivery.
Transmission Provider shall mean the independent transmission entity of NorthWestern
Corporation or any replacement regional transmission organization or other entity that operates
the Transmission Provider s Transmission System facilities interconnected with the Wind
Project.
Transmission Services" shall mean all transmission or wheeling services, scheduling services
imbalance services, congestion services, tagging services, dispatch services, ancillary services
control area services, and other transmission services necessary for Lessee to transmit Energy
from the Point of Interconnection to Lessee s point of delivery.
Turbine" shall mean each of the single wind turbine generating systems (including its tower
transformer, and controller system) to be constructed as part of the Wind Project.
Turbine Commercial Operation" shall mean, with respect to a particular Leased Turbine, the
completion of the construction, installation, commissioning and testing of such Leased Turbine
and all other equipment and facilities necessary to connect such Leased Turbine with the
Lessor s Interconnection Facilities and the Transmission Provider s Transmission System has
occurred, and such Leased Turbine has been "placed in service" as contemplated by Internal
Revenue Code Section 45 for purposes of qualification for PTCs for the sustained generation and
delivery of Energy in accordance with Prudent Utility Practices.
Wind Energy Incentives" shall have the meaning set forth in Section 4.3(b).
Wind Project" shall mean Lessor s electrical plant and equipment used to generate electricity
utilizing renewable wind power located at the Site, including Lessor s Interconnection Facilities
and any and all replacements or modifications. The Wind Project is more particularly described
in Exhibit A-
AR TI CLE
LEASED FACILITIES
Section 2.Grant.In consideration of the full and timely performance by Lessee of all the
terms, conditions and covenants of this lease by it to be kept and performed, including timely
payment of all base rent and additional rent hereunder, Lessor does hereby grant, demise and let
unto Lessee, and Lessee does hereby hire and take from Lessor, the Leased Facilities.
Section 2.Subject to Lessor s Title. The Leased Facilities are leased subject to all title
matters of public record, to public streets and highways, to any matters that an accurate surveyor
physical inspection of the Leased Facilities may show, and to all zoning, subdivision, building
and similar rules, regulations and ordinances now in effect or hereafter enacted.
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Section 2.Covenant for Quiet Enjoyment.Lessee shall and will, upon paying the rent
taxes assessments and insurance premiums and any other additional rental payments herein
provided to be paid by Lessee , and upon fully observing and performing the terms, conditions
and covenants herein provided to be observed and performed by Lessee, quietly and peaceably
hold and enjoy the Leased Facilities for and during the full term of the lease, unless this lease be
sooner terminated as provided herein.
Section 2.4 Lessee s Interest.Other than Lessee s leasehold interest in the Leased Facilities
and the exclusive right to all Energy produced by the Leased Facilities, this Lease shall not be
interpreted to create any rights in favor of Lessee.
ARTICLE III
TERM
Section 3.Term. The term of this Lease shall commence on the date hereof and continue
until December 31 of the calendar year during which the twentieth (20th) anniversary of the
Commercial Operation Date occurs (the "Term
),
which Term may be terminated early in
accordance with the terms hereof.
Section 3.Early Termination
( a) This Lease may be terminated by the appropriate Party prior to the
expiration of the Term if, by the dates set forth in Exhibit D, each of the Conditions
Precedent set forth in Exhibit D with respect to such Party has not been fulfilled, waived
or deemed waived.
(b) Notwithstanding any provision of this Lease to the contrary, in the event
of termination pursuant to this Section, the Parties shall be released and discharged from
any obligations arising or accruing hereunder from and after the date of such termination
and shall not incur any additional liability to each other as a result of such termination
provided that such termination shall not discharge or relieve either Party from any
obligation that has accrued prior to such termination or any indemnity obligations under
Article 6 or the provisions of Section 13., which provisions shall survive any
termination of this Lease.
Section 3.3 Project Availability Guarantee
( a) Lessor guarantees that, as calculated at the beginning of the third Lease
Year and at the beginning of each Lease Year thereafter, the Leased Facilities shall have
achieved a Mechanical Availability Percentage for the prior Lease Year equal to ninety
four percent (94%) (the "Guaranteed Mechanical Availability Percentage ). For the
avoidance of doubt, the Guaranteed Mechanical Availability Percentage shall initially be
applicable to the second Lease Year, as calculated at the beginning of the third Lease
Year. For any Lease Year during which Lessor fails to meet the Guaranteed Mechanical
Availability Percentage and despite prudent operation and maintenance by the Lessee
Lessor shall pay Lessee liquidated damages in an amount equal to $1 000 for each one
percentage point (1 %) by which the Mechanical Availability Percentage for such Lease
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Year is less than the Guaranteed Mechanical Availability Percentage (the Availability
Damages ), not to exceed $30 000 for any Lease Year; provided, however, that if the
Actual Project Output is greater than the Mean Project Output for such Lease Year, the
Availability Damages for such Lease Year shall be zero. Notwithstanding anything to the
contrary herein, Lessee and Lessor agree that Lessee s sole and exclusive damage and
remedies for Lessor failure to achieve the Guaranteed Mechanical Availability
Percentage shall be the Availability Damages provided for in this Section.
(b) Beginning in the third Lease Year and continuing each Lease Year
thereafter and following the last Lease Year, no later than the thirtieth (30th) Day of such
Lease Year (or thirty (30) Days after the end of the last Lease Year), Lessor shall deliver
to Lessee a proper invoice showing Lessor s computation of the Mechanical Availability
Percentage for the applicable period ending on the final Day of the preceding Lease Year
and the amount due Lessee in respect thereof. Lessor shall pay to Lessee within ten (10)
Days after it delivers such invoice to Lessee, by wire transfer of immediately available
funds to an account specified in writing by Lessee or by any other means agreed to by the
Parties in writing from time to time, the amount set forth as due in such invoice. This
Section shall survive the expiration of this Lease to the extent necessary to give effect to
this provision with respect to the last Lease Year.
Section 3.4 Lessee to Surrender Premises in Good Condition Upon the expiration or
termination of the term of this lease, Lessee shall at its own expense: (a) remove from the Leased
Facilities all moveable furnishings and other items of personal property and equipment, (b) repair
any damage or injury, and make any necessary replacements, caused or necessitated by such
removal; and (c) quit and deliver up the Leased Facilities to Lessor, peaceably and quietly, in as
good order, condition and repair as the same were on the date this lease commenced, or were
thereafter placed in by Lessor, reasonable wear and tear and acts of God excepted.
ARTICLE IV
BASE RENT AND RIGHT TO PURCHASE
Section 4.Base Rent.Lessee shall pay Lessor as rental, the applicable base rent set forth in
Exhibit C (as applicable during the respective periods, the "Base Rent"
Section 4.Transfer Taxes; Property Taxes
(a) In addition to the amounts otherwise payable by Lessee in accordance
with Section 4., Lessee shall pay as additional rent (and shall indemnify and hold Lessor
harmless on an After-Tax Basis from and against) all sales, use, excise, ad valorem
transfer and other similar taxes ("Transfer Taxes ), but excluding in all events taxes
based on or measured by net income, that are imposed by any taxing authority arising out
of or with respect to the production or sale of Produced Energy and/or Environmental
Attributes (regardless of whether such Transfer Taxes are imposed on Lessee or Lessor),
together with any interest, penalties or additions to tax payable with respect to such
Transfer Taxes.
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(b) Lessee shall reimburse Lessor for any and all taxes, assessments, or other
governmental charges, or any payments to any government or municipal agency or entity
in lieu of such taxes, assessments or charges , during the Term that shall be imposed on
or arise in connection with the direct presence of the Leased Facilities, whether imposed
directly upon Lessor or Lessor is indirectly liable for such charges by contract including
but not limited to any real estate tax or other taxes or charges, impact fees or payments in
lieu of taxes, that may be assessed against Lessor, or for which Lessor may be liable by
contract, by any local municipality, school district, or other agency, as a result of the
location of the Wind Project, including but not limited to assessments related to the
construction of additional access roads (collectively, "Property Taxes ). If the Leased
Facilities are not assessed as a separate tax parcel, Lessee shall pay its pro-rated share of
all Property Taxes due for all tax parcels upon which the Leased Facilities are located;
provided, however, that if additional taxes are assessed against such tax parcels solely
because of the presence of the Leased Facilities on such tax parcels, Lessee shall be
responsible for the payment of all of such additional taxes. Lessor shall pay all Property
Taxes to the appropriate taxing authority when such amounts are due and payable under
Applicable Law.
(c) Lessor shall exercise commercially reasonable efforts to minimize
Property Taxes by reviewing (and if necessary protesting) the valuation of all or any part
of the Leased Facilities or the application of law in the assessment of Property Taxes.
Section 4.Environmental Attributes; Wind Energy Incentives
(a) Lessee shall be entitled to all Environmental Attributes resulting from the
generation of Produced Energy that is actually purchased by Lessee pursuant to this
Lease. Lessee shall not be entitled to any Environmental Attributes resulting from a
curtailment under Section 6.5 or the generation of Energy that Lessee, for any reason
does not accept and purchase under this Lease.
(b) Lessor shall be entitled to all (i) federal and state production tax credits
(including but not limited to the PTCs), investment tax credits and any other tax credits
which are or will be generated by the Wind Project (including the Leased Facilities), (ii)
any cash payments or outright grants of money relating in any way to construction
development or operation of the Wind Project, and (iii) any Environmental Attributes that
Lessee is not entitled to pursuant to the provisions of subsection (a), above (collectively,
Wind Energy Incentives ) and, as Additional Rent payable hereunder, Lessee hereby
irrevocably assigns to Lessor all Wind Energy Incentives arising from or related to the
Leased Facilities. Lessee acknowledges that Lessor has the right to sell any Wind Energy
Incentives to which it is entitled pursuant to this subsection (b) to any Person other than
Lessee at any rate and upon any terms and conditions that Lessor may determine in its
sole discretion without liability to Lessee hereunder.
Section 4.4 Billing and Payment.Billing and payment for Base Rent and any other amounts
due and payable hereunder shall be as follows:
2627743v7
(a) Commencing on the first Day of the Test Period and continuing
throughout the remainder of the Term, no later than the tenth (10th) Day of each calendar
month: (i) Lessor shall deliver to Lessee an invoice showing the Base Rent due Lessor
and any other amounts owed by one Party to the other Party pursuant to this Lease. No
later than the twenty-fifth (25th) Day of each calendar month (unless such Day is not a
Business Day, in which case such payment shall be due on the next succeeding Business
Day), Lessee shall pay to Lessor, by wire transfer of immediately available funds to an
account specified in writing by Lessor or by any other means agreed to by the Parties in
writing from time to time, the amount set forth as due in an invoice for amounts due in
the preceding calendar month (or in the case of the final Lease Year, the last calendar
month or portion thereof of the Term), irrespective of any unresolved dispute with respect
to the amount set forth as due in the invoice.
(b) Except as expressly provided in this Lease, all payments hereunder shall
be made without set-off or deduction. Any payment not made by the date required by
this Lease shall bear interest from the date on which such payment was required to have
been made through and including the date such payment is actually received at an annual
rate equal to the Prime Rate then in effect plus two percent (2%), but in no event shall
such interest exceed the maximum interest rate permitted by Applicable Law ("Late
Payment Rate ). If, as a result of a dispute settled in favor of Lessee , a refund is owed to
Lessee, then the amount of the overpayment shall bear interest from the date on which
such payment was made by Lessee through and including the date that the overpayment
is refunded by Lessor at an annual rate equal to the Late Payment Rate.
(c) Following any delinquency in payment for more than one time in any
calendar year, Lessor may, in its sole discretion, require Lessee to (i) establish an escrow
account at a commercial bank reasonably acceptable to Lessor; (ii) direct Idaho Power (or
its successor) to deposit all payments due to Lessee under the terms of the IPC Contract
into the escrow account; and (iii) direct the bank to promptly disburse funds necessary to
pay all amounts due from Lessee to Lessor under this Agreement in the ordinary course
of business prior to any other distributions from the escrow account. Other parties who
provide shaping or transmission services in connection with the IPC Contract may also be
paid out of the escrow account after all amounts due to Lessor in the ordinary course of
business have been paid out of the escrow account. If such an escrow account is
established Lessee shall be solely responsible for all fees and' costs associated with
establishing and maintaining the escrow account.
(d) Statements or invoices shall be sent to Lessee by mail or facsimile to the
address or facsimile number designated in ARTICLE XII. Lessee may change the
address or facsimile number by providing written notice to Lessor.
Section 4.Lessee s Failure to Accept Delivery of Energy
(a) In the event that Lessee fails to accept delivery of all of the Energy
tendered at the Point of Interconnection by Lessor as provided herein for any reason other
than due to a Transmission Force Majeure Event or a System Emergency that prevents
such acceptance, and to the extent such Energy is not otherwise subj ect to the provisions
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of Section 6., then Lessee shall pay to Lessor as liquidated damages an amount equal to
the positive difference, if any, between (i) (x) the amount that would have been payable
by Lessee to Lessor hereunder if such tendered Energy had been accepted by Lessee plus
(y) the amount of any payment or penalty that is due from Lessor to any third party as a
result of Lessee s failure to accept such tendered Energy (provided that prior to the time
that Lessee fails to accept delivery of tendered Energy Lessor has notified Lessee of the
fact that such payment or penalty may be due from Lessor to such third party, and further
provided that Lessee is hereby deemed to have notice of potential imbalance charges at
any time during the Term), and (ii) the net amount, if any, that Lessor, using
commercially reasonable efforts under the circumstances, actually realizes through
remarketing of such Energy to Persons other than Lessee, provided that in the event
Lessor is unable to remarket in a commercially reasonable manner such Energy, then the
net amount described in clause (ii) shall be $0 and the damages owed by Lessee shall also
include the then current amount of the PTCs and other Wind Energy Incentives (on a per
MWh basis) on an After-Tax Basis for each MWh of such Energy that Lessor was unable
to remarket. The damages provided in this Section shall be the sole and exclusive
remedy of Lessor for any failure of Lessee to accept delivery of Energy that it is required
to accept hereunder. Any notice from Lessor to Lessee regarding potential damages
under clause (i)(y) above shall state the nature of the agreement (or other circumstance)
which would give rise to such damages and the general scope of such damages, but such
notice need not state the specific party to whom damages would be owed or a specific
formula for determination of such damages.
(b) Lessor shall include in a monthly invoice delivered to Lessee pursuant to
Section 4.4 the amounts owed by Lessee pursuant to subsection (a), above, and a
description, in reasonable detail, of the calculation of damages resulting from Lessee
failure to accept delivery of Energy.
Section 4.Option to Purchase Leased Turbines
(a) Grant of Purchase Option. As additional consideration for the rent paid by
Lessee, the sufficiency of which is hereby acknowledged, Lessor hereby grants to Lessee
the exclusive right and option (the "Purchase Option ) to purchase the Leased Turbines.
The Purchase Option shall be in full force and effect throughout the Term. In the event
the Term (including any extension thereof) expires without Lessee having exercised the
Purchase Option to purchase the Leased Turbines, the Purchase Option shall
automatically expire and terminate, effective on such date, without the necessity for
notice.
(b) Purchase Price The purchase price of the Leased Turbines (the
Purchase Price ) will be determined by the actual date of Closing (as defined below) as
set forth in Exhibit E, and will be payable to Lessor at the time of Closing in cash or
otherwise immediately available funds.
(c) Exercise Of Purchase Option. The Lessee may exercise the Purchase
Option by giving to Lessor a written notice of its election to do so. The delivery of the
notice shall immediately create an effective and binding contract between Lessor and
2627743v7
Lessee for the sale of the Leased Turbines by Lessor to Lessee and the purchase of the
Leased Turbines by Lessee from Lessor on the terms and conditions set forth in this
Lease.
(d) Leased Turbines Sold As-. Lessee will control the Leased Turbines for
the period prior to the date of the Closing and is responsible for maintaining the condition
of the Leased Turbines. Therefore , Lessor is offering the Leased Turbines, and they will
be sold to Lessee, in an "AS IS, WHERE IS, AND WITH ALL FAULTS" condition, and
no warranty or representation is being made by Lessor regarding the Leased Turbines;
provided, however that Lessor shall assign any existing manufacturer s warranty for the
Leased Turbines to Lessee.
(e) Closing Procedure. Upon proper exercise of the Purchase Option in
accordance with the terms of this Lease, and subject to any extension agreed to in writing
by the parties, the closing of the purchase of the Leased Turbines (the "Closing ) shall
take place in the office of Lessor s counsel on the date ("Closing Date ) that is the first
business day that is thirty (30) days following receipt by Lessor of Lessee s written notice
of exercise of the Purchase Option to purchase the Leased Turbines (or such earlier date
as may be mutually agreeable to Lessor and Lessee). The following procedure shall
govern the Closing:
(i)Lessor shall deliver the following to Lessee at the Closing: (A) a bill of sale
(warranting only Lessor s title) which conveys to Lessee the Leased Turbines free
and clear of all liens and encumbrances; (B) to the extent that any portion of the
Leased Turbines are deemed a fixture, a warranty deed conveying the Leased
Turbines to Lessee free and clear of all liens and encumbrances; and (C) an
assignment of any manufacturer s warranty to Lessee.
(ii)Lessee shall deliver the Purchase Price to Lessor at the Closing.
(f) Effect of Closing on Lease Upon Closing, the Lease shall remain in full
force and effect for the Leased Interconnection Facilities except that Base Rent for the
Leased Interconnection Facilities shall thereafter be payable pursuant to the terms of
Exhibit E. Lessee shall have the right to keep the Leased Turbines in the same location
as they are located immediately prior to Closing. Lessee shall ensure the prudent
operation and maintenance of the Leased Interconnection Facilities in accordance with
the terms of this Lease.
AR TI CLE
USE; COMPLIANCE WITH LAWS
Section 5.Permitted Use. Subject to all the terms and conditions of this Lease, Lessee shall
use and occupy the Leased Facilities only for the generation of Energy and Environmental
Attributes.
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Section 5.Transmission.
(a) Lessor shall be responsible for applying for and receiving Transmission
Provider approval of the Wind Project interconnection requirements and facilities so that
Lessor can perform its Energy deliveries hereunder in accordance with applicable
Transmission Provider requirements. Lessee shall be responsible for arranging and
paying for all Transmission Services required to effectuate the transmission of Produced
Energy from the Point of Interconnection. The Parties acknowledge that the Base Rent
does not include charges for Transmission Services beyond the Point of Interconnection
all of which shall be paid by Lessee.
(b) Lessee shall secure a Firm Transmission Service delivery path for the
Produced Energy from the Point of Interconnection to Lessee s point of delivery over the
Transmission Provider s Transmission System, in an amount sufficient to deliver the
Energy from the Leased Facilities.
Section 5.Scheduling Lessee shall arrange for the scheduling of all Produced Energy
during the Term, including, without limitation, arranging any Open Access Same Time
Information Systems (OASIS), tagging, dispatch, congestion management, transmission
scheduling or similar services or protocols with the Transmission Provider, any regional
transmission organization or any other Persons. Lessee shall be responsible for the payment of
all charges associated with such scheduling activities, including, without limitation, any
generation imbalance charges and shaping services.
Section 5.4 Government Approvals - Lessor s Obligation
(a) Except with respect to governmental approvals, licenses and permits that
may be required to allow Lessee to perform its obligations hereunder or as otherwise
specified hereunder (all of which shall be obtained and maintained by Lessee at its sole
cost), Lessor shall secure and maintain, at no cost to Lessee, all governmental approvals
permits (including environmental permits), licenses, easements, rights-of-way, releases
and other approvals necessary for the construction engineering, operation and
maintenance of the Wind Project and the performance by Lessor of its obligations
hereunder. Lessor shall provide proof of all such approvals, licenses and permits to
Lessee upon the reasonable request of Lessee.
(b) Lessor shall promptly seek to obtain all licenses, permits and approvals
necessary to perform its obligations hereunder, including the avian studies and any avian
mitigation plan required in Section 5.
Section 5.Government Approvals - Lessee s Obligation. Lessee shall secure and maintain
at no cost to Lessor, all approvals, permits, and licenses (if any) necessary for the performance
by Lessee of its obligations hereunder to the extent that the foregoing are not required to be
obtained by Lessor under Section 5.4. Upon execution of this Lease, Lessee shall promptly seek
approval of the Leased Facilities as a QF and shall maintain such status throughout the Term.
Section 5.Avian Policy and Mitigation Plan. Lessor, at its sole cost and expense, shall use
commercially reasonable efforts to comply with Lessee s avian policy, which, at a minimum
2627743v7
requires Lessor to: (a) provide the results of any already completed avian studies regarding the
Wind Project so they are reasonably available to the public, (b) undertake all long-term studies
on the environmental impacts of the Wind Project as required by the USFWS , (c) comply with
Applicable Law in connection with the mitigation monitoring and study of avian impacts, and (d)
report significant avian issues to Lessee in a timely manner.
Section 5.
(i)
(ii)
Metering Equipment.
(a)Lessor shall:
Provide, install and maintain, at no cost to Lessee, appropriate Meters and
associated measuring and recording equipment ("Lessee s Meters ) necessary to
permit an accurate determination of the quantities of the hourly Produced Energy
produced by the Leased Facilities and make available to Lessor, at no cost to
Lessor, all of the data from such Meters and equipment; and
Exercise reasonable care in the maintenance and operation of any such Meters and
equipment so as to assure to the maximum extent reasonably practicable an
accurate determination of the quantities of the hourly Produced Energy produced
by the Leased Facilities. Lessee s Meters shall be located on Lessee s side of the
Point of Interconnection. Lessee Meters shall be used for quantity
measurements under this Lease.
(b) Lessor shall be responsible for the installation costs of telemetry
equipment sufficient to transmit instantaneous and hourly data to the proper control areas.
( c ) Lessor may install and maintain check Meters and all associated
measuring equipment necessary to permit verification of the Produced Energy delivered
under this Lease.
Section 5.Testing and Correction
( a) The accuracy of each of Lessee s Meters shall be tested and verified by
Lessee or the Transmission Provider at least once every two (2) years and the accuracy of
any of Lessor s check Meters, if installed, shall be tested and verified by Lessor at least
once every two (2) years. Each Party hereby grants the other Party the right of access to
such Party s Meters (with reasonable prior notice and at reasonable times) in order to test
and verify the accuracy of such Party s Meters' measurements and recordings. Such
inspections and verifications shall be at the requesting Party s sole expense.
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(b)
(c)
Lessor shall bear the cost of the testing of any of Lessee s Meters.
Each Meter shall be accurate within a one percent (1 %) variance.
(d)If either Party disputes a Meter s accuracy or condition:
(i)The Party disputing the Meter s accuracy shall notify the other Party in writing;
(ii)
(iii)
(iv)
(v)
(vi)
Section 5.
The Party receiving such notice shall, within fifteen (15) Days after receiving
such notice, advise the other Party in writing as to its position concerning the
Meter s accuracy and reasons for taking such position;
If the Parties are unable to resolve their disagreement through reasonable
negotiations, then either Party may submit such dispute to an unaffiliated third-
party certified meter testing company mutually acceptable to the Parties to test the
Meter. Should the Meter be found to be registering within the permitted one
percent (1 %) variance, the disputing Party shall bear the cost of inspection;
otherwise, the cost shall be borne by the Party owning the inaccurate Meter;
Any repair or replacement shall be made at the expense of the Party that owns the
Meter as soon as practicable, based on the third-party testing company s report. If
upon testing, any Meter is found to be accurate or to be in error by not more than
the permitted one percent (1 %) variance, previous recordings of such Meter shall
be considered accurate in computing deliveries hereunder, but if in error, such
Meter shall be promptly adjusted to record correctly;
, upon testing, any Meter shall be found to be in error by an amount exceeding
the permitted one percent (1 %) variance, then such Meter shall be promptly
adjusted to record properly; and
, upon testing, any of the Meters used to determine the amount of Produced
Energy is found to be in error by more than the permitted one percent (1 %)
variance, the payments for Produced Energy made since the previous test of such
Meter shall be adjusted to reflect the corrected measurements determined. If the
difference of the payments actually made by Lessee minus the adjusted payment
is a positive number, Lessor shall credit the difference to Lessee on the next
invoice issued by Lessor. If the difference is a negative number, Lessee shall pay
the difference to Lessor. In either case, the Party paying or crediting such
difference shall also payor credit, as applicable, interest at the Late Payment Rate
from the last date on which such Meter was tested and found to be accurate (but
not to exceed six (6) months prior to the testing date) to the date that such Meter
is adjusted to record properly and such payment or credit (including such interest)
shall be made within thirty (30) Days of receipt of a corrected billing statement.
Observations; Records
(a) Lessor shall provide Lessee on a monthly basis reports indicating Lessor
hourly delivery of Produced Energy. Lessee shall have the right to be present whenever
Lessor reads, cleans, changes , repairs, inspects, tests, calibrates, or adjusts any of
Lessor s equipment used in measuring or checking the measurement of the amount of
Energy delivered to the Point of Interconnection. Lessor shall give at least forty-eight
(48) hours' notice to Lessee in advance of taking any such actions. The records from the
measuring equipment shall remain the property of Lessor, but, upon request, Lessor shall
submit to Lessee its records and charts , together with calculations therefrom, for
2627743v7
inspection, verification and copying, subject to return within ten (10) Days after receipt
thereof. Lessor agrees to retain such records for a period of two (2) years.
(b) Prior to the Commercial Operation Date and as a condition precedent to
the achievement of the Commercial Operation Date:
(i)Any insurance coverage and copies of insurance policies required by this Lease
shall have been obtained and submitted to Lessee; and
(ii)Lessor shall provide to Lessee periodic status reports on the progress of the
design, construction and installation of the Wind Project, which reports shall be
provided by Lessor to Lessee not less frequently than once a month.
(c) Any inspection or observation rights during or after construction will be
exercised by Lessee and its representatives in a reasonable manner and subject to
Lessor s safety requirements. Third party contractors of Lessee shall sign confidentiality
agreements with Lessor where necessary to protect Lessor s trade secret methodology or
other intellectual property.
(d) No monitoring, review, consent, verification, advice, recommendation
authorization, notice, witness, inspection, test or any other act by Lessee (and no delay or
failure by Lessee to monitor, review, approve, consent, verify, advise, recommend
authorize, notify, witness, inspect, test or otherwise act) regarding the procurement
construction, installation, start up, testing or operation of the Wind Project shall
constitute or be interpreted or construed as, or be relied upon or held out by Lessor or any
other person or entity as, any waiver, warranty, representation or endorsement by Lessor.
Section 5.10 Telemetry and Anemometer Equipment.Lessor shall install, operate and
maintain standard telemetry and anemometer equipment on behalf of Lessee that allows Lessee
to access power production data and meteorological data from the Leased Facilities on a real-
time basis; provided, however, that Lessor s liability for the quality of the data or information
generated by such equipment or for the failure of such equipment to operate is limited to the
manufacturer s warrantee of such equipment.
AR TI CLE
OPERATIONS AND MAINTENANCE
Section 6.Operation and Maintenance Agreement.Lessee shall enter into an Operation and
Maintenance Agreement with an Operating Agent for the operation of the Leased Facilities in
compliance with Applicable Law, Prudent Utilities Practice and the terms of this Lease. The
identity of the Operating Agent and the terms and conditions of the Operation and Maintenance
Agreement shall be subject to the prior written approval of Lessor, which approval shall not be
unreasonably withheld or delayed; provided, however that if Lessee is entering into an Operation
and Maintenance Agreement with a party other than Lessor (or an Affiliate of Lessor) because of
the termination of a prior Operation and Maintenance Agreement with Lessor (or an Affiliate of
Lessor) as Operating Agent following default under such Operation and Maintenance
Agreement by such Operating Agent, Lessor s consent to the identity of the Operating Agent or
2627743v7
the terms and conditions of such subsequent Operation and Maintenance Agreement shall not be
required.
Section 6.Duty to Operate; Standard of Care. The Lessee covenants that (a) from the first
Day of the Test Period through the expiration or termination of this Lease, it shall cause the
Leased Facilities to be operated and maintained in accordance with Applicable Law, Prudent
Utilities Practice and the terms of this Lease, and (b) it shall use reasonable efforts to cause its
employees (and shall cause the Operating Agent to cause its employees) to comply with the
Occupational Safety and Health Act, and the rules promulgated thereunder by the U.
Department of Labor, and all applicable Montana statutes and regulations affecting job safety.
Section 6.Operating Agent's Right to Enter Leased Facilities . The Operating Agent and its
authorized agents or attorney, shall have the right to enter the Leased Facilities at any time to
perform such duties as may be required of the Operating Agent under the terms of this Lease.
Section 6.4 Maintenance The Lessee shall (and shall cause the Operating Agent to) keep and
maintain the Leased Facilities in good and safe operating condition (except to the extent repairs
maintenance or replacement are made necessary by the abuse, misuse or negligence of Lessee, its
employees, agents or contractors, in which case Lessee shall be responsible for required repairs
maintenance or replacements), making whatever repairs or replacement may be necessary under
the circumstances.
Section 6.Curtailment.
(a) Curtailments by the Operating Agent. The Operating Agent may curtail
deliveries of Energy in accordance with Prudent Utility Practices and in a commercially
reasonable manner if the Operating Agent reasonably believes that curtailment is
necessary: (i) to construct, install, maintain, repair, replace, remove or inspect any of its
equipment, (ii) in connection with an emergency condition likely to result in significant
damage to Lessor s equipment (including the Leased Facilities) or is deemed necessary
by the Operating Agent to protect life or property, or (iii) to comply with its obligations
under the Generation Interconnection Agreement. Notwithstanding the foregoing, the
Operating Agent shall immediately notify Lessee of any such curtailment. The Operating
Agent shall resume deliveries of Energy as soon after such curtailment as is reasonably
possible, safe, and in accordance with Prudent Utility Practices.
(b) Curtailment Due to System Emergency. The Operating Agent shall curtail
deliveries of energy if the Operating Agent or Lessee is notified by the Transmission
Provider that a System Emergency exists or if either Party determines that a System
Emergency or Transmission Force Majeure Event has occurred, but such curtailment
shall only continue for the duration of such System Emergency or Transmission Force
Maj eure Event and then only to the extent required by such Transmission Provider. The
Operating Agent shall follow the requirements set forth in the Generation Interconnection
Agreement applicable to any System Emergency and shall resume deliveries of Energy as
soon after such curtailment as is reasonably possible, safe, and in accordance with
Prudent Utility Practices.
2627743v7
AR TI CLE VII
INDEMNITY; INSURANCE
Section 7.General Indemnity. Subject to the provisions of Section 3., Section 4., Section
10.1 , and Section 10.2 (with respect to damages for certain activities), and Section 7.4, Section
13.5 (waiver of certain damages), Lessor and Lessee hereby protect, defend, indemnify and hold
harmless, on an After-Tax Basis, the other Parties, their Affiliates, directors, officers, employees
and agents, from and against all claims, demands, causes of action, judgments, liabilities and
associated costs and expenses (including reasonable attorney s fees) arising from property
damage, bodily injuries or death suffered by any Person (including, without limitation
employees of Lessee) related to, arising from, or connected to the negligence or misconduct of
the indemnifying party hereunder. The indemnitor s liability to the indemnitee shall be reduced
proportionately to the extent that an act or omission of the indemnitee may have contributed to
the loss, injury or property damage. Further, no indemnitee shall be indemnified hereunder for
its loss, liability, injury and damage resulting from its sole negligence or its gross negligence
fraud or willful misconduct. The indemnitor, upon anotherParty s request, shall defend any suit
asserting a claim covered by this indemnity and shall pay all costs (subject to the proportionality
standard set forth above in the event of the indemnitee s contributory negligence), including
reasonable legal fees, that may be incurred by the other Parties in enforcing this indemnity,
provided that the indemnitor shall be entitled, at its option, to assume and control the defense and
any settlement of such suit. Each indemnity set forth in this Article 6 is a continuing obligation
separate and independent of the other obligations of each Party and survives the expiration or
termination hereof. It is not necessary for a Party to incur expense or make payment before
enforcing a right of indemnity conferred by this Lease.
Section 7.Patent Indemnity Subject to the provisions of Section 13., each of Lessor
Operating Agent and Lessee hereto protects, defends , indemnifies and holds harmless, on an
After- Tax Basis, the other Parties, their directors, officers employees and agents, from and
against all claims, demands, causes of action, judgments, liabilities and associated costs and
expenses (including reasonable attorneys fees) arising from the infringement by the
indemnifying Party of any patent relating to the Wind Project or the Lessor s Interconnection
Facilities.
Section 7.Insurance.
(a) Each Party, at its own cost and expense, shall maintain and keep in full
force and effect from the date of commencement of construction through the later of the
date of expiration or termination hereof, the following insurance coverage:
(i)Workers Compensation Insurance for statutory obligations imposed by
applicable state laws, and Employer s Liability Insurance with a minimum limit
of one million dollars ($1 000 000) for disease and injury to employees; and
(ii)Commercial General Liability Insurance, including premises and operations
bodily injury, broad form property damage, products/completed operations
contractual liability and independent contractors liability all with minimum
combined single limit liability for Lessor of five million dollars ($5 000 000) and
2627743v7
a mInImum combined single limit liability for Lessee of one million dollars
($1 000 000).
(b) Any insurance required by this Section to be maintained by either Party
may be maintained in the form of self-insurance. All insurance polices required to be
obtained hereunder shall provide insurance for occurrences from the date hereof through
the later of the expiration or termination hereof. All insurance coverage, other than self-
insurance, required by this Lease if not self-insurance shall be issued by an insurer with
an A.M. Best's rating of not less than "" or such other insurer as is reasonably
acceptable to both Parties.
(c) Each Party shall require its insurer(s) to notify the other Party of any
material change in, or cancellation of, the insurance required by this Section at least thirty
(30) Days prior to the effective date of such change or cancellation. Within fifteen (15)
Days after the date hereof, each Party shall provide to the other Party and thereafter
maintain with the other Party a current certificate of insurance or evidence of self-
insurance verifying the existence of the insurance coverage required by this Lease.
Section 7.4 Waiver of Claims. Lessor and Lessee hereby waive any and all claims and causes
of action against each other based on the destruction of or damage to the Leased Facilities or the
contents thereof as a result of any cause covered by the insurance described in Section 7., and
agree that their respective insurers shall be bound by this waiver, even if such loss or damage
was caused by the fault or negligence of the other party or anyone for whom the other party may
be responsible.
Section 7.Damage Not to Terminate Lease Should any building, structure or other
improvement upon the Leased Facilities be damaged or destroyed by any cause, such damage or
destruction shall not effect a cancellation of this lease, effect any reduction or abatement of rent
or release either party from liability for the full performance of all of the covenants of this Lease
past, present or future.
Section 7.Rebuilding after Damage. In case any building, structure, or other improvement
or equipment on the Leased Facilities shall be damaged or destroyed by fire or other casualty
covered by the aforesaid casualty insurance policy, Lessor shall, as soon as is reasonably
possible after the date of such injury or destruction, commence to repair, restore or rebuild such
building, structure or other improvement, and shall its best efforts to complete the same as
rapidly as possible, but in any event not later than six (6) months after such damage or
destruction.
ARTICLE VIII
REPRESENTATIONS. WARRANTIES AND COVENANTS
Section 8.1
follows:
Lessor s Representations and Warranties Lessor represents and warrants as
(a) Lessor is a limited liability company, duly organized, validly existing, and
in good standing under the laws of the State of Montana;
2627743v7
(b) Lessor has the power and authority to enter into and perform this Lease
and is not prohibited from entering into this Lease or discharging and performing all
covenants and obligations on its part to be performed under and pursuant to this Lease;
(c) The execution and delivery of this Lease, the consummation of the
transactions contemplated herein and the fulfillment of and compliance by Lessor with
the provisions of this Lease will not conflict with or constitute a breach of or a default
under or require any consent, license or approval (except for those approvals set forth in
Section 5.4) that has not been obtained pursuant to any of the terms, conditions or
provisions of any law, rule or regulation, any order, judgment, writ, injunction, decree
determination award or other instrument or legal requirement of any court or other
agency of government, the documents of formation of Lessor or any contractual
limitation, restriction or outstanding trust indenture, deed of trust, mortgage, loan
agreement, lease, other evidence of indebtedness or any other agreement or instrument to
which Lessor is a party or by which it or any of its property is bound and will not result in
a breach of or a default under any of the foregoing;
(d) Lessor has taken all such action as may be necessary or advisable and
proper to authorize this Lease, the execution and delivery hereof, and the consummation
of transactions contemplated hereby;
(e) There are no bankruptcy, insolvency, reorganization or receiverships
pending or being contemplated by Lessor, or to its knowledge threatened against Lessor;
(f) To Lessor s knowledge, there are no actions, proceedings, judgments
rulings or orders issued by, or pending before any court or other governmental body that
would materially adversely affect Lessor s ability to perform its obligations under this
Lease; and
(g)
This Lease is a legal, valid and binding obligation of Lessor enforceable in
accordance with its terms, except as limited by laws of general applicability limiting the
enforcement of creditor s rights or by the exercise of judicial discretion in accordance
with general principles of equity.
Section 8.
follows:
Lessee s Representations and Warranties Lessee represents and warrants
(a) Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and authorized to conduct business in
Montana;
(b) Lessee has the power and authority to enter into and perform this Lease
and is not prohibited from entering into this Lease or discharging and performing all
covenants and obligations on its part to be performed under and pursuant to this Lease;
(c) Lessee has taken all action required by Applicable Law in order to
approve, execute and deliver this Lease;
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(d) The execution and delivery of this Lease, the consummation of the
transactions contemplated herein and the fulfillment of and compliance by Lessee with
the provisions of this Lease will not conflict with or constitute a breach of or a default
under or require any consent, license or approval (except for those approvals set forth as
Conditions Precedent) that has not been obtained pursuant to any of the terms, conditions
or provisions of any law, rule or regulation, any order, judgment, writ, injunction, decree
determination award or other instrument or legal requirement of any court or other
agency of government, the documents of formation of Lessee or any contractual
limitation, restriction or outstanding trust indenture, deed of trust, mortgage, loan
agreement, lease, other evidence of indebtedness or any other agreement or instrument to
which Lessee is a party or by which it or any of its property is bound and will not result
in a breach of or a default under any of the foregoing;
(e) Lessee has taken all such action as may be necessary or advisable and
proper to authorize this Lease, the execution and delivery hereof, and the consummation
of transactions contemplated hereby;
(f) To Lessee s knowledge, there are no actions, proceedings, judgments
rulings or orders issued by, or pending before any court or other governmental body that
would materially adversely affect Lessee s ability to perform its obligations under this
Lease; and
(g)
This Lease is a legal, valid and binding obligation of Lessee enforceable in
accordance with its terms, except as limited by laws of general applicability limiting the
enforcement of creditor s rights or by the exercise of judicial discretion in accordance
with general principles of equity.
(h) From and after the Commercial Operation Date, Lessee shall maintain the
status of the Leased Facilities as a QF.
Section 8.Lessor s Covenants Lessor covenants not to support, and to cooperate with
Lessee in opposing, any action of any regulatory body having jurisdiction there over that could
result in the modification or vitiation of any of the terms or conditions hereof or have any other
material adverse effect on this Lease. Lessor covenants to construct the Leased Facilities and
negotiate contracts related to the construction, operation, and maintenance thereof, including but
not limited to, the turbine supply contract, using Prudent Utility Practices, including but not
limited to, using commercially reasonable efforts to negotiate favorable warranties, and to
enforce all warranties in any such contracts.
Section 8.4 Lessee s Covenants . Lessee covenants that (a) from the date hereof through the
expiration or termination of this Lease, Lessee shall comply with this Lease and Applicable
Laws, and (b) Lessee will not support, and will cooperate with Lessor in opposing, any action of
any regulatory body having jurisdiction thereover that could result in the modification
vitiation of any of the terms or conditions hereof or have any other material adverse effect on
Lessor, the Wind Project or this Lease.
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AR TI CLE
ASSIGNMENT AND SUBLETTING; ENCUMBRANCES
Section 9.Successors and Assigns; Assignment.
( a) This Lease shall inure to the benefit of and shall be binding upon the
Parties and their respective successors and assigns. This Lease shall not be assigned or
transferred by either Party without the prior written consent of the other Party, which
consent shall not be unreasonably withheld, delayed or conditioned.
(b) Notwithstanding the foregoing, but subject to the terms of Section
10. 1 (a)(v), no consent shall be required for:
(i)Any assignment or transfer of this Lease by Lessor to an Affiliate of Lessor;
(ii)Any assignment or transfer of this Lease by Lessor or Lessee to a Person
succeeding to all or substantially all of the assets of such Party, provided that such
Person s creditworthiness is equal to or better than that of such Party, as
reasonably determined by the non-assigning or non-transferring Party;
(iii)Any assignment of this Lease by a Party to any Lenders as collateral security for
obligations under the financing documents entered into with such Lenders; or
(iv)Any assignment by the Lenders to a third party after the Lenders have exercised
their foreclosure rights with respect to this Lease or the Wind Project.
(c) Lessee acknowledges that upon an event of default under any financing
documents relating to the Wind Project, any of the Lenders may (but shall not be
obligated to) assume, or cause its designee or a new purchaser of the Wind Project to
assume, all of the interests, rights and obligations of Lessor thereafter arising under this
Lease and such assumption does not materially change the rights or benefits of Lessee
under this Lease.
(d) If the rights and interests of Lessor in this Lease shall be assumed, sold or
transferred as herein provided, and the assuming party shall agree in writing to be bound
by and to assume, the terms and conditions hereof and any and all obligations to Lessee
arising or accruing hereunder from and after the date of such assumption, then Lessor
shall be released and discharged from the terms and conditions hereof and each such
obligation hereunder from and after such date, and Lessee shall continue this Lease with
the assuming party as if such Person had been named as Lessor under this Lease;
provided, however, that if any such Person assumes this Lease as provided herein, Lessee
acknowledges and agrees that such Persons shall not be personally liable for the
performance of such obligations hereunder except to the extent of the total interest of the
Lenders in the Wind Project. Notwithstanding any such assumption by any of the
Lenders or a designee thereof, Lessor shall not be released and discharged from and shall
remain liable for any and all obligations to Lessee arising or accruing hereunder prior to
such assumption.
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(e) The provisions of this Section are for the benefit of the Lenders as well as
the Parties hereto, and shall be enforceable by the Lenders as express third-party
beneficiaries hereof. Lessee hereby agrees that none of the Lenders, nor any bondholder
or participant for whom they may act or any trustee acting on their behalf, shall be
obligated to perform any obligation or be deemed to incur any liability or obligation
provided in this Lease on the part of Lessor or shall have any obligation or liability to
Lessee with respect to this Lease except to the extent any of them becomes a party hereto
pursuant to this Section.
Section 9.Other Liens Prohibited Lessee shall not cause, suffer or acquiesce in the
attachment of any other liens or encumbrances, including without limitation, any mechanic s or
materialmen s liens, judgment liens, tax liens or liens for the cost of environmental remediation
to the Leased Facilities or Lessor s or Lessee s interest therein.
Section 10.
(i)
(ii)
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ARTICLE X
DEFAULT; REMEDIES
Defaults and Remedies.
(a)Each of the following shall constitute an "Event of Default" hereunder:
A failure by a Party to pay any undisputed amount due hereunder, where such
failure is not cured within fifteen (15) Days of receipt of written notice; or
Either Party has (a) commenced a voluntary case under any bankruptcy law
applied for or consented to the appointment of, or the taking of possession by, a
receiver, trustee, assignee, custodian or liquidator of all or a substantial part of its
assets, (b) failed, or admitted in writing its inability generally, to pay its debts as
such debts become due, (c) made a general assignment for the benefit of creditors
(d) been adjudicated bankruptcy or has filed a petition or an answer seeking an
arrangement with creditors, (e) taken advantage of any insolvency law or shall
have submitted an answer admitting the material allegations of a petition in
bankruptcy or insolvency proceeding, (f) become subject to an order, judgment or
decree for relief, entered in an involuntary case, without the application, approval
or consent of such Party by any court of competent jurisdiction appointing a
receiver, trustee, assignee, custodian or liquidator, for a substantial part of any of
its assets and such order, judgment or decree shall continue unstayed and in effect
for any period of one hundred eighty (180) consecutive Days, (g) filed a voluntary
petition in bankruptcy, (h) failed to remove an involuntary petition in bankruptcy
filed against it within one hundred eighty (180) Days of the filing thereof, or (i)
become subject to an order for relief under the provisions of the United States
Bankruptcy Act, 11 U.C. ~ 301; or
(iii)Any failure on the part of the Operating Agent to perform any obligation under
this Lease that has a material adverse effect on Lessee if such failure has not been
cured by the Operating Agent within thirty (30) Days after receiving written
notice from Lessee setting forth, in reasonable detail, the nature of such default
(iv)
(v)
and its impact on Lessee; provided, however, that, in the case of any such default
that is not reasonably capable of being cured within the 30-Day cure period, the
Operating Agent shall have additional time as necessary to cure the default if it
commences to cure the default within such 30-Day cure period and it diligently
and continuously pursues such cure; or
Any other failure on the part of either Party to perform any obligation under this
Lease that has a material adverse effect on the non-defaulting Party if such failure
has not been cured by the defaulting Party within thirty (30) Days after receiving
written notice from the non-defaulting Party setting forth, in reasonable detail, the
nature of such default and its impact on the non-defaulting Party; provided
however, that, in the case of any such default that is not reasonably capable of
being cured within the 30-Day cure period, the defaulting Party shall have
additional time as necessary to cure the default if it commences to cure the default
within such 30-Day cure period and it diligently and continuously pursues such
cure; or
The transfer, conveyance or assignment, on or prior to the Commercial Operation
Date, of any equity interest in Lessor that would cause a change in "control" (as
defined in the definition of "Affiliate" in ARTICLE I) without the consent of
Lessee, other than any such transfer, conveyance or assignment to an Affiliate of
Invenergy Wind LLC ("Invenergy ), any Lender or any tax-oriented equity
investor, so long as Invenergy or an Affiliate of Invenergy continues to manage
day-to-day operations of the Wind Project by and through Lessor.
(b) Subj ect to the provisions of subsection (d), below, upon the occurrence of
an Event of Default by a Party, the non-defaulting Party shall have the following rights:
(i)
(ii)
(iii)
(iv)
2627743v7
Subject to the provisions of subsection (c), below, to terminate this Lease by
providing at least sixty (60) Days prior written notice to the other Party of its
intent to exercise its termination rights , unless such Event of Default is cured prior
to the date of termination;
To suspend performance of its obligations and duties hereunder immediately upon
delivering written notice to the defaulting Party of its intent to exercise its
suspension rights;
Upon the occurrence of an Event of Default by Lessee, then Lessor may, without
further notice to Lessee, either (A) re-enter the Leased Facilities and terminate
Lessee s right to possession thereof, without terminating this lease or (B) re-enter
the Leased Facilities and terminate both Lessee s right to possession thereof and
this Lease;
Upon the occurrence of an Event of Default by Lessor, then Lessee may exercise
the Purchase Option and offset any damages incurred by Lessee as a result of such
Event of Default against the Purchase Price.
(v)To pursue any other remedy given under this Lease or now or hereafter existing at
law or in equity or otherwise.
( c ) Lessee shall not exercise its remedies hereunder unless and until all of the
requirements of subsection (d), below, have been satisfied with respect to any Lenders.
(d) Notwithstanding the foregoing provisions of this Section, in the case of an
Event of Default by Lessor, Lessee shall provide the Lenders (if any) with notice of such
Event of Default and the Lenders shall have the right (but not the obligation) for ninety
(90) Days (except that for an Event of Default described in Section 10.1(a)(i), Lender
shall have the right (but not the obligation) for fifteen (15) Business Days), after receipt
of such notice either to cure the Event of Default on behalf of Lessor or the Operating
Agent, or, upon payment to Lessee of amounts due from Lessor or the Operating Agent
but not paid by such party, to assume, or cause its designee or a lessee or purchaser of the
Wind Project to assume, all of the rights and obligations of Lessor or the Operating Agent
under this Lease arising after the date of such assumption as more fully described in
Section 11.
Section 10.Specific Performance and Injunctive Relief.Each Party shall be entitled to seek a
decree compelling specific performance with respect to, and shall be entitled, without the
necessity of filing any bond, to seek the restraint by injunction of, any actual or threatened
breach of any material obligation of the other Party under this Lease. The Parties in any action
for specific performance or restraint by injunction agree that they shall each request that all
expenses incurred in such proceeding, including, but not limited to, reasonable counsel fees, be
apportioned in the final decision based upon the respective merits of the positions of the Parties.
Section 10.Payment by Lessee Upon Re-entry Upon re-entry pursuant to Section
10.1 (b )(iii), whether or not Lessor shall terminate this lease, Lessee shall pay to Lessor upon
demand (a) all base rent, additional rent and any other amount due to Lessor at the time of such
re-entry and (b) all costs and expenses incurred by Lessor to effect such re-entry, including,
without limitation, reasonable attorneys ' fees, and costs to repair the Leased Facilities and
remodel it for reletting (hereinafter "Re-entry Costs
).
No such re-entry shall be deemed a
termination of this lease unless Lessor notifies Lessee that this lease is terminated; and any such
termination shall be effective only as of the date set forth in such notice.
Section 1004 Payment of Rent Upon Termination. If Lessor, following reentry Upon re-entry
pursuant to Section 10.1 (b )(iii), shall terminate this lease by such notice, or if this lease shall be
terminated by the order or decree of any court of competent jurisdiction, Lessee shall pay Lessor
upon demand, in addition to the amounts set forth in (a) and (b) of the preceding paragraph
hereof, base rent and additional rent for the period between such re-entry and such termination.
Section 10.Reletting on Lessee s Behalf.Following any re-entry pursuant to Section
10.1 (b )(iii), Lessor may, if it does not terminate this lease, relet the Leased Facilities or any part
thereof for the account of Lessee for such term or terms (whether longer or shorter than the
unexpired initial or option period term of this lease), at such rent and upon such conditions and
covenants as Lessor, in its sole discretion, may reasonably deem advisable. Upon each such
reletting, all rent received by Lessor shall be applied to the following obligations of Lessee to the
2627743v7
extent not then satisfied: first, to Re-entry Costs; second, to any costs and expenses incurred by
Lessor in reletting the Leased Facilities or part thereof, including, without limitation, the costs of
reasonable brokers' and attorneys ' fees; third , to the payments of base rent, additional rent and
liquidated damages unpaid and due to Lessor at the time of such reletting; fourth, to any other
unpaid amount then due from Lessee to Lessor; and the balance, if any, shall be held by Lessor
and applied in payment of base rent, additional rent and liquidated damages as the same shall
become due hereunder. If the rent received upon such reletting during any calendar month shall
be less than the total of (i) base rent that would have been paid by Lessee for that month plus (ii)
the liquidated damage amount payable therewith, Lessee shall pay the deficiency to Lessor, such
deficiency being calculated and paid monthly.
Section 10.No Election of Remedy. No remedy provided to a Party hereunder shall be
deemed an exclusive remedy and the election by such Party of any such remedy shall not bar
such Party from pursuing any other remedy, for damages or otherwise, whether available to such
Party hereunder or existing at law or in equity.
ARTICLE XI
LESSOR'S FINANCING
Section 11.Financing Liens
(a) Lessor, without approval of Lessee , may, by security, charge or otherwise
encumber its interest under this Lease for the purposes of financing the development
construction and/or operation of the Wind Project and the Lessor s Interconnection
Facilities.
(b) Promptly after making such encumbrance, Lessor shall notify Lessee in
writing of the name, address, and telephone and facsimile numbers of each Lender to
which Lessor s interest under this Lease has been encumbered. Such notice shall include
the names of the account managers or other representatives of the Lenders to whom all
written and telephonic communications may be addressed.
(c) After giving Lessee such initial notice, Lessor shall promptly give Lessee
notice of any change in the information provided in the initial notice or any revised
notice.
(d) If Lessor encumbers its interest under this Lease as permitted by this
Section, the following provisions shall apply:
(i)The Parties, except as provided by the terms of this Lease, shall not modify or
cancel this Lease without the prior written consent of the Lenders;
(ii)The Lenders or their designees shall have the right, but not the obligation, to
perform any act required to be performed by Lessor under this Lease to prevent or
cure an Event of Default by Lessor or the Operating Agent and such act
performed by the Lenders or their designees shall be as effective to prevent or
cure an Event of Default as if done by Lessor;
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(iii)
(iv)
Lessee shall upon request by Lessor execute statements certifying that this Lease
is unmodified (or, modified and stating the nature of the modification), in full
force and effect and the absence or existence (and the nature thereof) of Events of
Default hereunder by Lessor and documents of consent to such assignment to the
encumbrance and any assignment to such Lenders; and
Upon the receipt of a written request from Lessor or any Lender, Lessee shall
execute, or arrange for the delivery of, such certificates, opinions and other
documents as may be reasonably necessary in order for Lessor to consummate
any financing or refinancing of the Wind Proj ect or any part thereof and will enter
into reasonable agreements with such Lender, which agreements will grant certain
rights to the Lenders as more fully developed and described in such documents
including (a) this Lease shall not be terminated (except for termination pursuant to
the terms of this Lease) without the consent of Lender, which consent is not to be
unreasonably withheld or delayed, (b) Lenders shall be given notice of, and the
opportunity to cure as provided in Section 10.(d), any breach or default of this
Lease by Lessor, (c) that if the Lender forecloses, take a deed in lieu of
foreclosure or otherwise exercise its remedies pursuant to any security documents
then (i) Lessee shall, at Lender s request and subject to the performance of
Lessor s obligations hereunder by Lender or its nominee, continue to perform all
of its obligations hereunder, and Lender or its nominee may perform in the place
of Lessor, and may assign this Lease to another Person in place of Lessor, (ii)
Lender shall have no liability under this Lease except during the period of such
Lender s ownership or operation of the Wind Project and (iii) that Lessee shall
accept performance in accordance with this Lease by Lender or its nominee, and
(d) that Lessee shall make representations and warranties to Lender as Lender
may reasonably request with regard to (1) Lessee s existence, (2) Lessee
authority to execute, deliver and perform this Lease, (3) the binding nature of the
document evidencing Lessee s consent to assignment to Lender and this Lease on
Lessee and (4) receipt of regulatory approvals by Lessee with respect to its
execution and performance under this Lease.
Section 11.Subordination. This lease is subject and subordinate to the lien of any mortgage
which may now or hereafter encumber the Leased Facilities. In confirmation of such
subordination, Lessee shall, at Lessor s request from time to time, promptly execute any
certificate or other document requested by the holder of the mortgage. Lessee agrees that in the
event that any proceedings are brought for the foreclosure of any mortgage, Lessee shall
immediately and automatically attorn to the purchaser at such foreclosure sale, as the landlord
under this lease, and Lessee waives the provisions of any statute or rule of law, now or hereafter
in effect, which may give or purport to give Lessee any right to terminate or otherwise adversely
affect this lease or the obligations of Lessee hereunder in the event that any such foreclosure
proceeding is prosecuted or completed. Notwithstanding anything to the contrary in this
ARTICLE XI , so long as Lessee is not in default under this Lease, this Lease shall remain in full
force and effect and the holder of the Mortgage and any purchaser at foreclosure sale thereof
shall not disturb Lessee s rights and/or possession hereunder.
2627743v7
Section 11.Estoppel Certificates. Lessee agrees at any time and from time to time, upon not
less than five (5) days prior written notice by Lessor, to execute, acknowledge and deliver to
Lessor or a party designated by Lessor a statement in writing (i) certifying that this lease is
unmodified and in full force and effect, or if there have been modifications, that the lease is in
full force and effect as modified and stating the modifications; (ii) stating the dates to which the
rent and other charges hereunder have been paid by Lessee; (iii) stating whether or not Lessor is
in default in the performance of any covenant, agreement or condition contained in this lease
and, if so, specifying each such default; and (iv) such other matters relating to this lease as may
reasonably be requested. Any such statement delivered pursuant thereto may be relied upon by
Lessor, any prospective purchaser of the Leased Facilities, any mortgagee or prospective
mortgagee of the Leased Facilities or of Lessor s interest, or any prospective assignee of any
such mortgagee.
AR TI CLE XII
NOTICES
Each notice, request, demand, statement or routine communication required or permitted under
this Lease, or any notice or communication that either Party may desire to deliver to the other
shall be in writing and shall be considered delivered when received by the other Party by
certified U.S. mail or reputable overnight courier addressed to the other Party at its address
indicated below or at such other address as either Party may designate for itself in a written
notice to the other Party in accordance with this Article.
If to Lessor:Judith Gap Energy, LLC
c/o Invenergy Wind LLC
One S. Wacker Drive
Suite 2020
Chicago, IL 60606
Attn: Judith Gap Project Manager
Telephone: [phone]
Facsimile: [phone]
If to Lessee:Arrow Rock Wind, Inc.
5203 South 11 th East
Idaho Falls, ID 83404
Attn: Ted Sorenson
Telephone: [phone]
Facsimile: [phone]
ARTICLE XIII
MISCELLANEOUS
Section 13.Confidential Information.
(a) The Parties have and will develop certain information, processes, know-
how, techniques and procedures concerning the Wind Project that they consider
confidential and proprietary (together with the terms and conditions of this Lease, the
2627743v7
Confidential Information ). Notwithstanding the confidential and proprietary nature
of such Confidential Information, the Parties (each, the "Disclosing Party ) may make
such Confidential Information available to the other (each, a "Receiving Party ) subject
to the provisions of this Section.
(b)
Party shall:
Upon receiving or learning of Confidential Information, the Receiving
(i)
(ii)
(iii)
(iv)
(i)
(ii)
(iii)
(iv)
2627743v7
Treat such Confidential Information as confidential and use reasonable care not to
divulge such Confidential Information to any third party except as required by
law, subject to the restrictions set forth below;
Restrict access to such Confidential Information to only those employees
subcontractors, suppliers, vendors, and advisors whose access is reasonably
necessary for the development, construction, operation or maintenance of the
Wind Project and for the purposes of this Lease who shall be bound by the terms
of this Section;
Use such Confidential Information solely for the purpose of developing the Wind
Project and for purposes of this Lease; and
Upon the termination of this Lease, destroy or return any such Confidential
Information in written or other tangible form and any copies thereof.
(c)The restrictions of this Section do not apply to:
Release of this Lease to any governmental authority required for obtaining any
approval or making any filing pursuant to Section 504 or Section 5., provided
that each Party agrees to cooperate in good faith with the other to maintain the
confidentiality of the provisions of this Lease by requesting confidential treatment
with all filings to the extent appropriate and permitted by Applicable Law;
Release of permits provided under Section 5A(a) to any of Lessee
counterparties;
Information which is, or becomes, publicly known or available other than through
the action of the Receiving Party in violation of this Lease;
Information which is in the possession of the Receiving Party prior to receipt
from the Disclosing Party or which is independently developed by the Receiving
Party, provided that the Person or Persons developing such information have not
had access to any Confidential Information;
(v)Information which is received from a third party which is not known (after due
inquiry) by Receiving Party to be prohibited from disclosing such information
pursuant to a contractual, fiduciary or legal obligation; and
(vi)Information which is, in the reasonable written opInIon of counsel of the
Receiving Party, required to be disclosed pursuant to Applicable Law (including
any Freedom of Information Act request); provided, however, that the Receiving
Party, prior to such disclosure , shall provide reasonable advance notice to the
Disclosing Party of the time and scope of the intended disclosure in order to
provide the Disclosing Party an opportunity to obtain a protective order or
otherwise seek to prevent, limit the scope of, or impose conditions upon such
disclosure.
(d) Notwithstanding the foregoing, Lessor may disclose Confidential
Information to the Lenders and any other financial institutions expressing an interest in
providing equity or debt financing or refinancing and/or credit support to Lessor, and the
agent or trustee of any of them.
(e) Neither Party shall issue any press or publicity release or otherwise
release, distribute or disseminate any information, with the intent that such information
will be published without the prior written approval of the other Party, which approval
will not be unreasonably withheld or delayed. This provision shall not prevent the Parties
from releasing information which is required to be disclosed in order to obtain permits
licenses, releases and other approvals relating to the Wind Project or as are necessary in
order to fulfill such Party s obligations under this Lease.
(f) The obligations of the Parties under this Section shall remain in full force
and effect for three (3) years following the expiration or termination of this Lease.
Section 13.Force Majeure
(a) "Force Majeure Event" shall mean any event which wholly or partly
prevents or delays the performance of any obligation arising under this Lease, but only if
and to the extent (i) such event is not within the reasonable control, directly or indirectly,
of the Party affected, (ii) such event, despite the exercise of reasonable diligence, cannot
be prevented, avoided or overcome by such Party, (iii) the Party affected has taken all
reasonable precautions and measures in order to avoid the effect of such event on such
Party ability to perform its obligations under this Lease and to mitigate the
consequences thereof, and (iv) such event is not the direct or indirect result of a Party'
negligence or the failure of such Party to perform any of its obligations under this Lease
or to comply with Applicable Law. A Force Majeure Event includes, but is not limited
, any of the following: (A) acts of God or the public enemy, war, whether declared or
not, blockade, insurrection, riot, civil disturbance, public disorders, rebellion, violent
demonstrations, revolution, sabotage or terrorist action; (B) any effect of unusual natural
elements, including fire sudden subsidence, earthquakes, floods, lightning, tornadoes
unusually severe storms, or similar cataclysmic occurrence or other unusual natural
calamities; (C) explosion accident or epidemic; (D) environmental and other
contamination affecting the Wind Project that was not caused by Lessor, Lessor
Affiliates or Lessor s contractors or that was caused by Lessor, Lessor s Affiliates or
Lessor s contractors as a result of an occurrence which independently constitutes a Force
Majeure Event; (E) governmental action or inaction impacting Lessor ability to
2627743v7
construct, operate or maintain the Wind Project or generate Energy; (F) general strikes
lockouts or other collective or industrial action by workers or employees , or other labor
difficulties; (G) catastrophic equipment failure, and any event affecting the ability of any
supplier (including under any engineering, procurement or construction agreement for the
Wind Project) to the Wind Project to fulfill its obligations to Lessor and the Wind Project
so long as, in each case, the cause thereof otherwise would qualify as a Force Majeure
Event; (H) accidents of navigation or breakdown or injury of vessels , accidents to
harbors, docks, canals or other assistances to or adjuncts of shipping or navigation, or
quarantine; (I) nuclear emergency, radioactive contamination or ionizing radiation or the
release of any hazardous waste or materials; and (J) air crash, shipwreck, train wrecks or
other failures or delays of transportation.
(b) Exclusions from Definition of Force Majeure. Notwithstanding anything
in the Lease to the contrary, "Force Majeure Event" shall not include:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Changes in market conditions, or changes in the availability or the lack of funds
or project financing;
The inability or failure to arrange for, acquire or procure Transmission Services;
Any waiting period or other period of time that is usual and necessary in
connection with any governmental action;
The curtailment, unavailability or interruption of Transmission Services except to
the extent that such curtailment, unavailability or interruption is caused by a
Transmission Force Majeure Event;
Customary inclement weather affecting construction, start-up, operation, or
decommissioning of the Wind Project; and
Unavailability of equipment, repairs or spare parts for the Wind Project, except to
the extent due to a qualifying event of Force Majeure.
( c ) Notice. In the event of any delay or nonperformance resulting from a
Force Majeure Event, the Party suffering the Force Majeure Event shall, as soon as
practicable, but no later than fifteen (15) Days after the occurrence of the Force Majeure
Event, notify the other Party in writing of the nature, cause, date of commencement
thereof, and the anticipated extent of any delay or interruption in performance, provided
that the failure of the Party experiencing the delay or hindrance to notify the other Party
within such fifteen (15) Day period shall not preclude such Party from claiming a Force
Majeure Event hereunder.
(d) Performance. The performance of any obligation required hereunder shall
be excused during the continuation of any Force Majeure Event suffered by the Party
whose performance is hindered in respect thereof, and the time for performance of any
obligation that has been delayed due to the occurrence of a Force Majeure Event. Each
Party suffering a Force Majeure Event shall take, or cause to be taken, such action as may
be necessary to overcome or otherwise to mitigate, in all material respects , the effects of
2627743v7
any Force Majeure Event suffered by either of them and to resume performance
hereunder as soon as practicable under the circumstances.
Section 13.Amendments This Lease shall not be modified nor amended unless such
modification or amendment shall be in writing and signed by authorized representatives of both
Parties.
Section 1304 Waivers . Failure to enforce any right or obligation by any Party with respect to
any matter arising in connection with this Lease shall not constitute a waiver as to that matter nor
to any other matter. Any waiver by any Party of its rights with respect to a default under this
Lease or with respect to any other matters arising in connection with this Lease must be
writing. Such waiver shall not be deemed a waiver with respect to any subsequent default or
other matter.
Section 13.Waiver of Certain Damages. Notwithstanding any other provision of this Lease
(except to the extent indemnification payments are made pursuant to Section 7.1 as a result of an
indemnified entity s obligation to pay special, indirect, incidental , punitive or consequential
damages to a third party (excluding either Party s Affiliates, officers, directors, shareholders or
members), as a result of actions included in the protection afforded by the indemnification set
forth in Section 7.1 and except with respect to the liquidated damages provided for in Section
, Section 4., Section 10., and Section 10.2), neither Lessee nor Lessor (nor any of their
Affiliates, contractors, consultants, officers, directors, shareholders members or employees)
shall be liable for special, indirect, incidental, punitive or consequential damages under, arising
out of, due to, or in connection with its performance or non-performance of this Lease or any of
its obligations herein, whether based on contract, tort (including, without limitation, negligence),
strict liability, warranty, indemnity or otherwise. Notwithstanding the foregoing, the Parties
acknowledge and agree that if this Lease is terminated due to an Event of Default by either Party,
the actual or direct damages incurred by the non-defaulting Party shall include but shall not be
limited to: (i) in the case of a termination by Lessor due to an Event of Default by Lessee, the
net present value of the difference, if positive, between (x) the amount that Lessee would have
been required to pay to Lessor pursuant to this Lease for delivery of all Produced Energy that
would have been delivered by Lessor hereunder during the remainder of the Term (absent
termination of this Lease and based on an assumption as to the amount thereof calculated using
reasonable projections based on historical performance) and (y) the net amount, if any, payable
to Lessor by a third party pursuant to any replacement power purchase agreement that Lessor
using commercially reasonable efforts under the circumstances enters into for the replacement of
such Produced Energy, plus, as and to the extent Lessor is unable to remarket all of such Energy,
then the net amount described in clause (y) shall be $0 and the damages owed by Lessee shall
also include the then current amount of the PTC (on a per MWh basis) on an After-Tax Basis for
each MWh of such Energy that Lessor was unable to remarket; (ii) in the case of a termination
by Lessee due to an Event of Default by Lessor, the net present value of the difference, if
positive, between (x) the sum of the amount that Lessee is obligated to pay to a third party
pursuant to any replacement power purchase agreement that Lessee enters into for Produced
Energy that would have been delivered by Lessor hereunder during the remainder of the Term
(absent termination of this Lease and based on an assumption as to the amount thereof calculated
using reasonable projections based on historical performance) and the value of any
Environmental Attributes to which Lessee would be entitled during the remainder of the Term
2627743v7
(absent termination of this Lease and based on an assumption as to the amount thereof calculated
using reasonable projections based on historical performance) and (y) the amount that Lessee
would have been required to pay to Lessor pursuant to this Lease for such Produced Energy and
Environmental Attributes; and (iii) any make-whole or other damages payable by Lessor to its
Lenders as a result of a termination of this Lease due to an Event of Default by Lessee. Actual
and direct damages as provided for in this Section shall be the sole and exclusive remedy of a
Party as a result of the termination of this Lease due to an Event of Default by the other Party.
Section 13.Survival.Notwithstanding any provisions herein to the contrary, the obligations
set forth in Section 13.1 and Section 13., the indemnity obligations set forth in ARTICLE VII
and the limitations on liabilities set forth herein shall survive (in full force) the expiration or
termination of this Lease.
Section 13.Severability. If any of the terms of this Lease are finally held or determined to be
invalid, illegal or void, all other terms of the Lease shall remain in effect; provided that the
Parties shall enter into negotiations concerning the terms affected by such decision for the
purpose of achieving conformity with requirements of any Applicable Law and the intent of the
Parties.
Section 13.Standard of Review Absent the agreement of the Parties to the proposed change
the standard of review for changes to this Lease proposed by a Party, a Person or the Federal
Energy Regulatory Commission acting sua sponte shall be the "public interest" standard of
review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956)
and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956) (the Mobile-
Sierra doctrine).
Section 13.Governing Law. This Lease shall be interpreted and enforced in accordance with
the laws of the State of Montana without regard its conflicts of laws provisions.
Section 13.10 Waiver of Trial by Jury. EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT EITHER
OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
LEASE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY
HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES
ENTERING INTO THIS LEASE.
Section 13.11 Disputes
( a) In the event of any dispute, controversy or claim between the Parties
arising out of or relating to this Lease (collectively, a "Dispute ), the Parties shall
attempt in the first instance to resolve such Dispute through friendly consultations
between the Parties.
2627743v7
(b) If such consultations do not result in a resolution of the Dispute within
fifteen (15) days after notice of the Dispute has been delivered to either Party, then such
Dispute shall be referred to the senior management of the Parties for resolution.
(c) All Disputes that have not been resolved following compliance with the
provisions of clauses (a) and (b) above shall be resolved through binding arbitration as set
forth in this clause (c) and clause (d) below. Such arbitration shall be conducted before a
single arbitrator agreed upon by the Parties, and shall be conducted in Chicago, Illinois.
If the Parties are unable to agree upon a single arbitrator, the arbitration shall be
conducted before a panel of three arbitrators, of whom each Party shall appoint one, with
the third arbitrator to be selected by the first two arbitrators from the list maintained by
the American Arbitration Association. The arbitrator or arbitrators hearing the arbitration
shall be competent by virtue of education and experience in the particular subject matter
in dispute, including having at least fifteen (15) years experience as an attorney practicing
in the area of power purchase agreements, who has not been previously employed by
either Party and who does not have a direct or indirect interest in either Party or the
subject of the arbitration.
(d) Except as specifically provided herein, the arbitration shall be conducted
in accordance with the commercial arbitration rules of the American Arbitration
Association. The arbitration shall be governed by the United States Arbitration Act, 9
C. Section 1-, as amended, and judgment upon the award rendered by the
arbitrator or arbitration panel may be recognized and enforced by any court having
jurisdiction thereof. Within six (6) weeks of the appointment of the arbitrator or
arbitration panel, or as otherwise agreed by the Parties, each Party shall submit to the
arbitrator, with a copy to the other Party, a detailed explanation of the dispute or
controversy and a proposal of the terms for the resolution of the dispute or controversy,
and a hearing shall be held within thirty (30) days of the submission of such information
or as otherwise agreed by the Parties. The arbitrator may then hold such hearings as he
she or they deem(s) commercially reasonable, and shall render a decision within five (5)
business days after the final hearing. The selected proposal shall become the arbitrator
final and binding decision and award, without modification. The arbitrator s decision
shall be final and binding, and the Parties agree to waive any right to appeal such
decision in any court or other forum. The Parties further agree to enter into a confession
of judgment adopting the arbitrator s award.
(e) The Parties agree to attempt to resolve all Disputes promptly, equitably
and in a good faith manner. In the event a dispute hereunder is resolved pursuant to
arbitration, the Party, whose petition does not prevail in such proceedings, shall
reimburse all of the other Party s third party costs (including reasonable attorney s fees)
incurred to prosecute or defend (as the case may be) such proceedings.
(f) In the event of any Dispute regarding an invoice delivered hereunder
notice of such Dispute shall be delivered to the non-disputing Party within ninety (90)
days of the date of the invoice. Failure to deliver such notice within such required period
shall be deemed a waiver of any objection to such invoice.
2627743v7
Section 13.12 No Third-Party Beneficiaries Except as set forth in ARTICLE VII and in Section
, Section 11.1 , and Section 13., this Lease is intended solely for the benefit of the Parties
hereto and nothing contained herein shall be construed to create any duty to, or standard of care
with reference to, or any liability to, or any benefit for, any Person not a Party to this Lease.
Section 13.13 No Agency. This Lease is not intended, and shall not be construed, to create any
association, joint venture, agency relationship or partnership between the Parties or to impose
any such obligation or liability upon either Party. Neither Party shall have any right, power or
authority to enter into any agreement or undertaking for, or act as or be an agent or representative
, or otherwise bind, the other Party.
Section 13.14 Cooperation. The Parties acknowledge that they are entering into a long-term
arrangement in which the cooperation of both of them will be required. If, during the Term
changes in the operations, facilities or methods of either Party will materially benefit a Party
without detriment to the other Party, the Parties commit to each other to make reasonable efforts
to cooperate and assist each other in making such change.
Section 13.15 Further Assurances. Upon the receipt of a written request from the other Party,
each Party shall execute such additional documents, instruments and assurances and take such
additional actions as are reasonably necessary and desirable to carry out the terms and intent
hereof. Neither Party shall unreasonably withhold, condition or delay its compliance with any
reasonable request made pursuant to this Section.
Section 13.16 Captions; Construction . All indexes, titles, subject headings, section titles, and
similar items are provided for the purpose of reference and convenience and are not intended to
affect the meaning of the content or scope of this Lease. Any term and provision of this Lease
shall be construed simply according to its fair meaning and not strictly for or against any Party.
Section 13.1 7 Entire Agreement.This Lease shall supersede all other prior and
contemporaneous understandings or agreements , both written and oral between the Parties
relating to the subject matter of this Lease.
Section 13.18 Counterparts. This Lease may be executed in several counterparts, each of which
shall be an original and all of which together shall constitute but one and the same instrument.
Section 13.19 Time is of Essence. Whenever any payment is to be made under this lease by
Lessee at or within a specified time, or whenever any act is to be done under this lease by either
party at or within a stated time, time is of the essence.
Section 13.20 No Recording Neither party shall record this lease without the prior written
consent of the other.
2627743v7
IN WITNESS WHEREOF, the parties have executed this instrument as of the day and year first
above written.
Exhibits:
Exhibit A-
Exhibit A-
Exhibit A-
Exhibit B
Exhibit C
Exhibit D
Exhibit E
2627743v7
LESSOR:
JUDITH GAP ENERGY, LLC, a Montana
limited liability company
By:
Name:
Its:
LESSEE:
ARROW ROCK WIND, INC., an Idaho
corporation
By:
Name:
Its:
Description of Wind Project
Leased Turbines
Leased Interconnection Facilities
Description of Point of Interconnection and One-Line Diagram
Schedule of Base Rent
Conditions Precedent
Option Purchase Price and Subsequent Base Rental for Leased Interconnection
Facilities
EXHIBIT A-
Description of Wind Project
Facility is located approximately 100 miles northwest of Billings, Montana in Wheatland
County on the west side of Highway 191 in the northwest quarter of Section 36
Township ION, Range 15E.
2627743v7
EXHIBIT A-
Leased Turbines
The exclusive Lease of Turbines includes thirteen (13) 1.5 MW GE wind turbines with a total
nameplate rating of 19.5 MW inclusive of all of the electrical output from these thirteen wind
turbines as well as adequate distribution collection system and electrical interconnection to enable
the Seller to deliver all of the energy from this Facility to the Transmitting Entity. Specific serial
numbers or other unique identification of each individual wind turbine is as follows:
Turbine 41 Serial No:Turbine 42 Serial No:
Turbine 43 Serial No:Turbine 44 Serial No:
Turbine 45 Serial No:Turbine 46 Serial No:
Turbine 47 Serial No:Turbine 48 Serial No:
Turbine 49 Serial No:Turbine 50 Serial No:
Turbine 51 Serial No:Turbine 52 Serial No:
Turbine 53 Serial No:
2627743v7
EXHIBIT A-
Leased Interconnection Facilities
The Leased Interconnection Facilities will include all necessary gathering, distribution
interconnection and metering equipment required to deliver the total energy output from
the Lease Turbines to the Point of Interconnection. These facilities include, but are not
limi ted to:
A network of several miles of low profile, gravel field roads providing access to
the Turbines.
An underground and aboveground electric cable collection system to carry
electricity to the substation.
An underground and aboveground fiber-optic data collection system and metering
with the capability of real-time data output.
One or more permanent meteorological ("MET") towers.
Electrical transformation equipment necessary to interconnect the Wind Project to
the NorthWestern system at the Point of Interconnection.
Nothing in this Exhibit A-3 is intended to either (i) limit the right of Lessor to make any
changes to the Wind Project it determines to undertake, or (ii) grant any rights to Lessee
regarding the description, nature or components of the Wind Project.
2627743v7
EXHIBIT B
Description of Point of Interconnection and One-Line Diagram
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---- _--_...-.....-' -.- .--.
Attached
Exhibit C
Northwestern 230 kV to Broadview
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'1"PrJrrR "'NORTHWESTERN ENERGY
I I
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WINDPARK SOLUTIONS
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Northwestern 230 kV to Great FaUs
. .--- --
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NORTHWESTERN ENERGY
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FEEDER POSITIONS (QUANTITY TO BE DETERMINED)
2627743v7
EXHIBIT C
Schedule of Base Rent
Confidential
2627743v7
EXHIBIT D
Conditions Precedent
Lessee s Conditions Precedent:
(i) Execution of Firm Energy Sales Agreement with Idaho Power Company,
including required regulatory approvals in a form acceptable to Lessee. Regulatory approvals
shall mean that the IPUC shall have issued all approvals of this Agreement (and such approvals
are final and no longer subject to appeal or legal challenge).
Lessor s Conditions Precedent:
(i)Lessee shall have secured adequate transmission access and Firm
Transmission Service from the Transmission Provider; and
(ii)Lessor shall have obtained all zoning approvals, environmental approvals
permits , landowner easement agreements, licenses and other governmental approvals
necessary to construct and operate the Wind Project in the manner contemplated by this
Agreement and which are final and no longer subject to appeal or legal challenge.
2627743v7
EXHIBIT E
Option Purchase Price and Subsequent Base Rental for Leased Interconnection Facilities
Confidential
2627743v7
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IDAHO POWER COMPANY
CASE NO. IPC-O5-
ATTACHMENT 2
RESPONSE TO PRODUCTION
REQUEST NO.
Sent By: n;120852282231 ;Aug -12 - 05 2: 24PM;Page 2
.A.rro-mr R.ock "'1lIri:n.d, I:n.c.
5203 South 11th East
Idaho Falls Idaho 83404
Tel [phone]
fax [phone]
efllail: ted&J,tsoreflSOIl,llet
August 12, 2005
Randy Allphin, Contracts Manager
Idaho Power
1221 West Idaho
Boise, ID 83702
Subject: Arrow Rock Wind, Inc. Power Sales Agreement dated July 28, 2005
Dear Mr. Allphin:
This letter is written to infonl1 you that we arc proceeding \vith a purchase for the Arrow
Rock projectj instead of a lease. In order to accoinplish this, it is our intention to assign
the Arrow Rock, Inc-. contract with Idaho Po\\'er to Arrow Rock , LLC for tax purposes.
A letter from Invenergy and a draft letter of intent which we are working to finalize at
this time for the purchase of the turbines wi11 be sent separately.
Very ~ yo,/s,
Ted S. Sorenson
P:\WORD\ARROW\allphinILrAug 12. DOC
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IDAHO POWER COMPANY
CASE NO. IPC-O5-
ATTACHMENT 3
RESPONSE TO PRODUCTION
REQUEST NO.
(INVENER G Y LETTERHEAD)
August -, 2005
Arrow Rock Wind, LLC
c/o Ted Sorenson
5203 South 11 th East
Idaho Falls, ill 83404
RE:Letter of Intent - Acquisition of Turbines located in Wheatland County, Montana
and Exclusive Generating Rights Related Thereto
Ladies and Gentlemen:
We have been in negotiations with you in connection with a potential lease to you by Invenergy
(as defined below) of certain wind turbines and related interconnection facilities. After
significant review, the Parties have determined that the lease structure complicates the utilization
of the production tax credits associated with wind generation.
Therefore, the Parties have agreed to proceed to the contemplated purchase and sale option for
the thirteen GE Wind Energy 1.5SLE turbines. The sale of the wind turbines by Invenergy to
Arrow Rock, LLC will be accompanied by ancillary agreements including a lease for the land
under the turbines and the necessary gathering, telemetry and distribution facilities to
interconnect the turbines to the with respect to interconnection of the turbines to the transmission
network of NorthWestern Energy (the "Transmission Provider
This letter of intent summarizes our mutual agreement as to the key terms of the proposed
transactions between Invenergy and Arrow Rock Wind, LLC.
Invenergy:Invenergy Wind, LLC and/or its subsidiary or affiliate
Invenergy
) .
Arrow Rock:Arrow Rock Wind, LLC, a Delaware limited liability company
Arrow Rock"
ARW Turbines:Thirteen 1.5MW General Electric Wind Energy 1.5SLE
turbines with a total nameplate rating of 19.5MW (the "ARW
Turbines
).
The ARW Turbines are more particularly
described in Exhibit A attached hereto.
Security and Delivery of
ARW Turbines:
Invenergy has secured the necessary GE turbines and related
equipment contemplated in this Letter of Intent for sale to
Arrow Rock, knows as the "ARW Turbines . The ARW
Turbines are expected to arrive on site by September 15 , 2005
and reach commercial operation by December 1 , 2005.
2651203vl
Arrow Rock Wind, LLC
August -, 2005
Page 2
Terms for Purchase:
Representations and
Warranties Regarding
ARW Turbines:
Licenses and Permits
Interconnection Facilities
Lease Terms:
2651203vl
Pricing of ARW Turbines set forth in Exhibit B
Invenergy will warrant title to the ARW Turbines. Invenergy
will place such ARW Turbines at the site approximately 100
miles northwest of Billings, MT in Wheatland County on the
west side of Highway 191 in Section 36, Township ION, Range15E. Invenergy shall assign all manufacturers' and other
similar warranties to Arrow Rock. Invenergy will make no
other representations regarding the ARW Turbines.
Invenergy will submit proof to Arrow Rock that all licenses
permits or approvals necessary for the operation of the ARW
Turbines and the deli very of energy from the AR W Turbines to
the Point of Interconnection have been obtained. Invenergy
provide an opinion for reliance by Arrow Rock and Idaho
Power Company, which states that all such opinions are legally
and validly issued, are held in the name of Arrow rock, and that
Arrow Rock is in substantial compliance with such permits.
Invenergy cause Interconnection Facilities to be available to
Arrow Rock for a term of 20 years through a facility lease
commencing December 1 , 2005.
Invenergy will warrant title to its leasehold interest in the real
property upon which the Leased Interconnection Facilities are
located. Arrow Rock will have the absolute right to enter into
the property upon which the Leased Interconnection Facilities
and the ARW Turbines (collectively, the "ARW Project") are
located.
Invenergy will cause the Leased Interconnection Facilities to be
maintained in accordance with prudent utility practices and
applicable law and in such a manner as to allow the delivery of
the energy produced by the ARW Turbines to the Point of
Interconnection in a safe and reliable manner throughout the
lease term.
Arrow Rock shall have the unlimited right to assign the lease to
a successor entity that is the result of merger, acquisition, etc. or
to the purchaser of the ARW Turbines. All profits or losses
from such subleasing or assignment activities shall belong
solely to Arrow Rock.
Arrow Rock's obligations shall be contingent upon: its receipt
of regulatory approval of that certain Firm Energy Sales
Arrow Rock Wind, LLC
August -, 2005
Page 3
Contingencies:
Agreement between Idaho Power Company and Arrow Rock
Wind, Inc. (the "IPC Contract"); issuance of an executed
Engineer s Certification of Design and Construction Adequacy
and an Engineer s Certification of Operations and Maintenance
all as described in Section 4.104 of the IPC Contract.
Invenergy s obligations shall be contingent upon the approvalof the sale of the AR Turbines and of the ancillary
agreements described herein by its lenders.
This letter is Invenergy s agreement to negotiate exclusively and in good faith with Arrow Rock
for the sale of the ARW Turbines and lease of the Leased Interconnection Facilities pending
drafting and execution of the contemplated lease agreement, but it is not an agreement to lease
the Leased Interconnection Facilities. Except for Invenergy s agreement to negotiate exclusively
with Arrow Rock for the Leased Interconnection Facilities, until otherwise agreed, this letter
shall not be binding upon the parties.
If the foregoing accurately states our basic agreement and the additional principles upon which
our negotiations will progress, please countersign below where indicated and return a
fully-executed copy of this letter to me.
INVENERGY WIND, LLC
By:
Name:
Its:
ACCEPT AN CE
The undersigned hereby acknowledges and accepts the foregoing letter of intent.
ARROW ROCK WIND, LLC
Date:By:
Name:
Its:
2651203vl
Arrow Rock Wind, LLC
August -, 2005
Page 4
2651203vI
Arrow Rock Wind, LLC
August -, 2005
Page 5
EXHIBIT A
Description of ARW Turbines
Serial numbers of each of the ARW Turbines: TO BE PROVIDED.
2651203vl
Arrow Rock Wind, LLC
August -, 2005
Page 6
EXHIBIT B
Pricing of AR W Turbines
CONFIDENTIAL
2651203v 1
Inv nergy
-\ugust 15, 2005
Arrow Rock \'\"ind, LLC
Attn: Tcd Sorenson
5203 South 11th East
Idaho Falls, ID, 83404
Subject: _\R\\' LOI
Dear 111'. Sorenson:
\\Te are pleased to continue our discussions with Arrow Rock, LLC regarding the sale of 13 GE 1.5
j\.
f\\' turbines and continue to belieye that the purchase option is less cumbersome than the original
lease proposaL \X'e look forward to negotiating the terms of the turbine sale and development of the
-\rrow Rock site.
Sincerely,
Im..energy \X'ind LLC
- T-
- -
,.- ;~ L/~-' C- '
:~',- _
L ' t,L'
------
\1ark R. Leaman
Vice President
One SoUth Wacker Drive, Suire 2020 Chicago, IL 60606 T 312.22-4-1400 r 311.l2-P-J.H invenergylk,com
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IDAHO POWER COMPANY
CASE NO. IPC-O5-
ATTACHMENT
RESPONSE TO PRODUCTION
REQUEST NO.
Data use subject to license.
19 2004 DeLorme. Tapa USA(!) 5.
www.delorme.com
~ MNI".
Top!) USA(!\) 5.
Scale : 28125
1" = 2.343.8 ft Data Zoom 12-
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IDAHO POWER COMPANY
CASE NO. IPC-O5-
ATTACHMENT
RESPONSE TO PRODUCTION
REQUEST NO.
Sent By: n;120852282231 ;Aug -12 - 05 2: 24PM;Page 3
18 CFRPART 131.
FERC FORM 556
OMB NO. 1902-0075
CERTIFICATION OF QUALIFYING FACILITY STATUS FOR A PROPOSED
SMALL POWER PRODUCTION FACILITY
ARROW ROCK WIND PROJECT
PART A: GENERAL INFORMATION
Full name of Applicant:Arrow Rock Wind L
Purpose of instant filing is self-certification.
83404
Full address of applicant:5203 South 11 th East, Idaho Falls, Idaho
c. Indicate the owner(s) of the facility: The project is 1000/0 owned by
Arrow Rock Wind LLC. 0% is owned directly or indirectly by any electric utility or
electric utility holding company. AtTow Rock Wind Inc. is 100% owned by Ted and
Gayle Sorenson. The operator of the facility is Arrow Rock Wind Inc. Neither Arrow
Rock Wind Inc., nor Ted and Gayle Sorenson are engaged in the generation or sale of
electric power, nor do they have any ownership or operating interest in any electric
facilities other than qualifying facilities.
Ted s. orenso~ Manager
Arrow Rock Wind LLC.
2. Person to whom communications regarding the filed information may be
addressed:
Name:
Title:
Telephone number:
Mailing address:
E-mail:
Ted S. Sorenson; P.
Project Engineer
208-522-8069 - phone
208-522-8223 ~ fax
5203 South 11 th East, Idaho Falls, ID 83404
ted~tsorenson.
Page 1 of 3
Sent By: n;120852282231 ;Aug -1 2 - 05 2: 24PM;Page 4/5
State:
County:
City or Town:
Legal Description:
Location of facility to be certified:
Montana
Wheatland
100 miles NW of Billings Montana
West side of Highway 191 , Section 36, Township
ION Range 15 E
Power Sales: Idaho Power Company
Interconnection: NorthWestern Energy
Wheeling: NorthWestern Energy
Utilities providing supplementary power, backup power, maintenance
power, and/or intenuptible power service: NorthWestern
Describe the principal components of the facility:
Thirteen 1.5 Megawatt GE1.5SLE wind turbines with total nameplate
rating of 19.5 Megawatts.
Maximum gross and maximum net electric power production:
19.5 Megawatts maximum capacity. Project is capable of reliably
generating no more than 10 average Megawatts under normal design and
operation conditions.
Expected installation and operation date of the tacility:
Installation: August 2005 - November 2005
Online: November 2005
Primary energy input: Wind
5. Average annual hourly energy input in tenus of Btu for the following fossil fuel
energy inputs, and the related percentage of the total average annual hourly energy input
to the facility:
Natural gas:
Oil:
Coal:
0 BTU, 0%
0 BTU, 0%
0 BTU, 0%
6. Discuss any particular characteristic of the facility which the co-generator or
small power producer believes might bear on its qualifying status: None
Page 2 of3
Sent By: n;120852282231 ;Aug -12 - 05 2: 25PM;Page 5/5
PART B: DESCRIPTION OF THE SMALL POWER PRODUCTION FACILITY
7. Describe how fossil fuel use will not exceed 25 percent of the total annual energy
input limit: Project consists of wind driven turbines. Fossil fuel will be limited to the
following purposes to confonn to Federal Power Act Section 3(l7)(B): start-up, testing,
and minimal amounts of fuel required to alleviate or prevent unanticipated equipment
outages and emergencies directly affecting the public.
8. The proposed facility is an eligible wind facility. No other eligible facility located
within one mile of the instant facility is owned by any of the entities (or their affiliates)
reported in Part A at item Ie, above.
\\SERVF.R\DA T A \ WORD\ARROW\CERTIF1CA TION.lXJ(;
Page 3 of 3
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the I (p
-rnday of August , 2005 , I served a
true and correct copy of the within and foregoing IDAHO POWER COMPANY'
RESPONSE TO FIRST PRODUCTION REQUEST OF COMMISSION STAFF upon the
following named parties by the method indicated below, and addressed to the following:
Scott Woodbury
Deputy Attorney General
Idaho Public Utilities Commission
472 W. Washington Street
O. Box 83720
Boise, I D 83707 -007 4
Hand Delivered
S. Mail
Overnight Mail
FAX
Ted Sorensen
Arrow Rock Wind , Inc.
5203 South 11 th East
Idaho Falls, ID 83404
Hand Delivered
S. Mail
Overnight Mail
FAX
( -
/0.~
BARTON L. KLINE
CERTIFICATE OF SERVICE