20091228Application.pdf

'*IDA
(" r: '.1 r: ~ PCR~v,:, \ \' '., './ An IDACORP Company
BARTON L. KLINE
Lead Counsel
bklineCãìdahopower.com
December 28,2009
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. IPC-E-09-34
IN THE MA TTER OF THE APPLICA TlON OF IDAHO POWER COMPANY
FOR AN ACCOUNTING ORDER AUTHORIZING THE INCLUSION OF
POWER SUPPL Y EXPENSES ASSOCIA TED WITH THE PURCHASE OF
CAPACITY AND ENERGY FROM USG OREGON LLC IN THE COMPANY'S
POWER COST ADJUSTMENT
Dear Ms. Jewell:
Enclosed please find for filing an original and seven (7) copies of Idaho Power
Company's Application in the above matter.
Very truly yours,
~
Barton L. Kline
BLK:csb
Enclosures
P.O. Box 70 (83707)
1221 W. Idaho St.
Boise. 10 83702
BARTON L. KLINE (ISB No. 1526)
DONOVAN E. WALKER (ISB No. 5921)
Idaho Power Company
P.O. Box 70
1221 West Idaho Street
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
bkline((idahopower.com
dwalker((idahopower.com
oc:c-tH.: ;-1~~ l'fJ
2009 DEC 28 PH 12: ~.
..0
Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF IDAHO POWER COMPANY FOR AN ) CASE NO. IPC-E-09-34
ACCOUNTING ORDER AUTHORIZING )
THE INCLUSION OF POWER SUPPLY ) APPLICATION
EXPENSES ASSOCIATED WITH THE )
PURCHASE OF CAPACITY AND ENERGY )
FROM USG OREGON LLC IN THE )
COMPANY'S POWER COST )ADJUSTMENT. )
)
Idaho Power Company ("Idaho Powet' or the "Company"), in accordance with
Idaho Code § 61-503 and RP 52, hereby respectfully applies to the Idaho Public Utilties
Commission ("IPUC" or the "Commission") for an accounting order authorizing Idaho
Power to include the expenses associated with the purchase of energy from the USG
Oregon LLC, Neal Hot Springs Unit #1 geothermal generation facility ("Project") in the
Company's Power Cost Adjustment. In support of this Application Idaho Power
represents as follows:
APPLICATION -1
i. BACKGROUND
1. Over the past several years, Idaho Power has made a concerted effort to
acquire cost-effective energy from geothermal generating resources for its resource
portolio. In its 2004 and 2006 Integrated Resource Plans ("I RPs"), the Company
discussed why it is strongly supportive of the acquisition of energy from geothermal
generating resources. First, geothermal generation utilzes a renewable resource,
geothermally heated fluid, which decouples the project's variable operating costs from
the volatilty associated with the cost of fossil fuels. Geothermal generation, except for
occasional planned and forced outages, is unique in comparison to other renewable
resources (i.e., wind, solar, run-of-river hydro, etc.), which are more intermittent in their
availabilty. Geothermal generation is essentially available 24/7 throughout the year and
therefore can be considered to be a base load resource. Second, numerous studies and
tests indicate that it is likely that there are significant sources of geothermally heated hot
water underlying Idaho Powets service area. Development of these geothermal
resources wil add economic value in local communities in the Company's service
territory and wil make efficient use of limited transmission capacity. Third, under
various Renewable Portolio Standards, geothermal resources qualify for renewable
energy credits that can provide independent financial and environmental benefits to
Idaho Power and its customers. Fourth, the inclusion of geothermal resources in the
Company's resource portolio provides diversity and reduced exposure to fuel cost
fluctuations. Finally, due principally to very aggressive renewable portolio standards,
particularly in California, a number of utilities are actively seeking to acquire geothermal
resources throughout the entire western United States. In short, geothermal generation
APPLICATION - 2
resources have the potential to provide a desirable, long-term, and economically stable
generating resource for Idaho Power and there is some urgency to move forward to
develop these desirable local resources.
2. Idaho Power disclosed its intention to actively seek to acquire geothermal
generating resources in both its 2004 and 2006 IRPs. In 2006, Idaho Power issued a
Request for Proposals ("RFP") to acquire geothermal resources. The 13 MW Raft River
Geothermal Power Plant Unit #1, developed by a subsidiary of U.S. Geothermal, was
selected as one of the successful proposals. The Raft River #1 plant began delivering
energy to Idaho Power in April 2008 under a power purchase agreement developed as
a result of the 2006 RFP process. U.S. Geothermal included additional geothermal
projects in its successful 2006 bid, including additional generation at Raft River and a
new project at Neal Hot Springs. However after further review of escalating
construction costs, U.S. Geothermal concluded that its fixed-price bid was not viable
and withdrew its offer to sell power from the Neal Hot Springs site as submitted.
3. Consistent with its continuing desire to include geothermal generation in
its resource portolio, Idaho Power issued a new RFP in 2008 to acquire additional
geothermal resources. This 2008 RFP received three responses, two of which were
shortly withdrawn by the bidders prior to Idaho Power fully evaluating the bids. Idaho
Power concluded that the third bid was too speculative and therefore unacceptable.
4. In reviewing the disappointing results of the 2006 and 2008 geothermal
RFPs both internally and with geothermal industry experts, it has become apparent to
Idaho Power that due to the substantial uncertainties inherent in the exploration and
APPLICATION - 3
development processes required for geothermal projects, the competitive RFP process
is not the optimal means to acquire geothermal resources.
5. Based on its belief that a non-RFP driven resource acquisition process for
geothermal resources is more likely to be successful, Idaho Power has actively pursued
development discussions with the developers of approximately five different potential
geothermal sites. These sites had been identified in previous RFPs or brought to the
Company's attention as a result of previous proposals received directly from
developers. The Project identified in this Application became the front-runner in the
non-RFP procurement process for several reasons, including: (1) substantial prior
geotechnical exploration of the potential resource site, (2) its location in Idaho Powets
service area and proximity to Treasure Valley load centers, (3) available transmission
capacity, and (4) favorable energy pricing in comparison to other proposals. Idaho
Power is continuing discussions with the other potential geothermal projects and,
consistent with the action plans in its accepted IRPs, may, in the future, present to the
Commission power purchase agreements for additional geothermal resources Idaho
Power determines to be prudent choices to fulfil Idaho Power identified energy needs.
II. GENERAL DESCRIPTION OF TERMS AND CONDITIONS
IN THE POWER PURCHASE AGREEMENT FOR THE
NEAL HOT SPRINGS UNIT #1 PROJECT
6. On December 11, 2009, Idaho Power and USG Oregon LLC entered into
a Power Purchase Agreement ("Agreement") for the purchase of energy from the Neal
Hot Springs Unit #1 geothermal electrical generation facilty. USG Oregon LLC is a
subsidiary of U.S. Geothermal, a Boise-based geothermal developer. The Project wil
be located approximately 12 miles WNW of Vale, Oregon, just west of the Bully Creek
APPLICATION - 4
Reservoir. The expected MW output from the Project wil be approximately 22 MW, with
an estimated on-line date of late 2012 (the Agreement requires an on-line date no later
than 2016) and with an initial term of 25 years with an option for Idaho Power to extend
the term of the Agreement. A copy of the Agreement is enclosed as Attachment NO.1.
7. Under the Agreement, Idaho Power wil receive, as a part of the purchase
price, the rights to all Environmental Attributes and Renewable Energy Credits ("RECs")
as currently known and any additional Environmental Attributes and Renewable Energy
Credits created during the term of the Agreement.
8. The Agreement requires the Project to maintain a 90 percent capacity
factor, with applicable annual energy output guarantees. Various development
milestones have been established within the Agreement. Failure to meet these
development milestones or annual output guarantees will result in damages being
calculated and will require the Project to post liquid security. The Project is required to
provide energy delivery forecasting to Idaho Power. The Agreement also allows Idaho
Power to curtail energy deliveries to Idaho Power in an amount up to 1,620 MWh per
contract year at no cost to Idaho Power. This curtailment right wil allow the Company
some flexibility, albeit limited, to dispatch the Project to benefit customers.
9. Delay damages and other liquidated damages are applicable based upon
the Projects compliance with various exploration, development, and construction
milestones, as well as its ongoing performance.
10. The Agreement grants Idaho Power the first right-of-offer to participate in
any future U.S. Geothermal resource development at this geothermal site or in close
proximately to the site and in any future ownership restructuring of the planned Project.
APPLICATION - 5
11 . The energy price within the Agreement wil be seasonally adjusted
consistent with seasonality factors currently being used in Idaho Power's PURPA
agreements. Using seasonality factors to adjust prices provides for reduced energy
prices in months of historically low market energy values, with increased energy prices
in months when Idaho Power experiences its peak energy needs. Seasonal prices give
the correct price signal by incenting production when the value of the energy to the
Company is the highest. Beginning in 2012, the flat energy price (energy price to which
seasonality is then applied) is $96.00/MWh. An annual price escalation that varies from
6 percent in the initial years to 1.33 percent in the later years of the Agreement was
used to create the fixed monthly price schedule shown in Appendix A of the Agreement.
Applying levelized energy pricing models to this fixed set of prices results in an
approximate 25-year levelized contract price of $117.56.
12. For comparison purposes, PURPA contracts are currently only available
for a 20-year term. The levelized price for a 20-year PURPA contract, with first energy
deliveries in 2012 is $95.56/MWh (IPUC Order No. 30744). The calculated levelized
contract price for energy provided under this Agreement for a 20-year term would be
approximately $115.28/MWh. IPUC Order No. 30744 establishes PURPA non-Ievelized
contract price for energy received in 2012 to be $80.05/MWh, which escalates to
$138.93/MWh in calendar year 2034 (2034 is the last year currently priced in IPUC
Order .No. 30744). The energy price for 2012 in the Agreement is $96.00/MWh and the
price escalates to $140.82/MWh in 2034. While the price of energy under the
Agreement is higher than energy purchased under PURPA contracts, there are aspects
of the Agreement that bring value to Idaho Powets customers that PURPA contracts do
APPLICATION - 6
not. For example, typical PURPA agreements currently do not provide Idaho Power
rights to any of the project's RECs. To obtain the RECs for a PURPA project, Idaho
Power must incur additional costs to purchase those credits from the developer in a
separate transaction. PURPA agreements offer no energy curtailment rights, no
operational financial security requirements, no rights of first offer on ownership or other
site development, no exploration, development or construction milestone requirements
and associated damages, and no rights for extension of the contract term.
13. USG Oregon LLC has submitted a request and completed a Large
Generation Interconnection Agreement for this Project. The Project wil pay all
interconnection costs associated with this Project and the schedule for completion of
installation and construction of all required interconnection equipment is consistent with
the Projects expected energy delivery dates. With the addition of one relatively minor
system upgrade, sufficient firm transmission capacity is available for the full output of
the Project to be delivered to Idaho Powets load centers. The Project wil advance the
cost of the upgrade and receive credit for its advanced funds based on its capacity and
the OATT rate.
14. Section 1.8, Articles 27 and 28 of the Agreement provides that the
Agreement wil not become effective until the Commission has approved all of the
Agreement's terms and conditions and declared that all payments Idaho Power makes
under this Agreement wil be allowed as prudently incurred expenses for ratemaking
purposes.
APPLICATION - 7
II. ACCOUNTING TREATMENT
15. Idaho Power intends to include the expenses associated with the
purchases from the Project in FERC Account 555. The Agreement is not a PURPA
agreement and therefore the Company proposes that the cost of power purchased
under the Agreement be recovered in the PCA in a manner similar to other non-QF
power purchase expenses, with 95 percent of variations captured through the
Company's PCA' mechanism until the next general rate case, at which time the
Company wil be allowed to include the costs of the Agreement in base rates.
IV. MODIFIED PROCEDURE
16. Idaho Power believes that a hearing is not necessary to consider the
issues presented herein and respectully requests that this Application be processed
under Modified Procedure, i.e., by written submissions rather than by hearing. RP 201,
et seq. If, however, the Commission determines that a technical hearing is required, the
Company stands ready to present its testimony and support the Application in such
hearing.
V. COMMUNCIATIONS AND SERVICE OF PLEADINGS
17. Communications and service of pleadings, exhibits, orders, and other
documents relating to this proceeding should be sent to the following:
Barton L. Kline, Lead Counsel
Donovan E. Walker, Senior Counsel
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
bkline((idahopower.com
dwalker((idahopower.com
Randy C. Allphin
Contract Administrator
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
rallphin((idahopower.com
APPLICATION - 8
Vi. REQUEST FOR RELIEF
18. Idaho Power Company respectfully requests that the Commission issue
an Order: (1) Authorizing that this matter be processed by Modified Procedure; and (2)
finding that the Agreement is prudent for ratemaking purposes; and (3) approving Idaho
Powets requested accounting treatment for inclusion of the power purchase expense
associated with the Agreement in the Company's Power Cost Adjustment rate.
Respectfully submitted this 28th day of December 2009.
(?~
BARTON L. KLINE
Attorney for Idaho Power Company
APPLICATION - 9
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on the 28th day of December 2009 I served a true and
correct copy of the within and foregoing APPLICATION upon the following named
parties by the method indicated below, and addressed to the following:
USG Oregon LLC
Dan Kunz
USG Oregon LLC
1505 Tyrell Lane
Boise, Idaho 83706
Hand Delivered
-2 U.S. Mail
_ Overnight Mail
FAX
Email
~
Barton L. Kline
APPLICATION - 10
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. IPC-E-09-34
IDAHO POWER COMPANY
ATTACHMENT NO.1
POWER PURCHASE AGREEMENT
BETWEEN
USG OREGON LLC
AND
IDAHO POWER COMPANY
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS............................................................................................
ARTICLE 2 RULES OF CONSTRUCTION ................................................................
ARTICLE 3 RESOURCE EXPLORATION ..................................................................
ARTICLE 4 CONDITIONS TO ACCEPTANCE OF ENERGY FIRST
ENERGY DATE.........................................................................................
ARTICLE 5 TERM AND OPERATION DATE ............................................................
ARTICLE 6 PRICE.........................................................................................................
ARTICLE 7 ENVIRONMENTAL ATTRIBUTES ........................................................
ARTICLE 8 DELIVERY AND SHORTFALL OBLIGATIONS...................................
ARTICLE 9 METERING AND TELEMETRy.............................................................
ARTICLE 10 SYSTEM PROTECTION ...........................................................................
ARTICLE 11 FACILITY AND INTERCONNECTION ..................................................
ARTICLE 12 GENERAL OPERATIONS ........................................................................
ARTICLE 13 BILLING, RECORDS, AUDITS ...............................................................
ARTICLE 14 INDEMNIFICATION AND INSURANCE...............................................
ARTICLE 15 CREDIT AND COLLATERAL REQUIREMENTS .................................
ARTICLE 16 FORCE MAJEURE.....................................................................................
ARTICLE 17 FORCED OUTAGE ...................................................................................
ARTICLE 18 BUYER'S ACCESS RIGHTS....................................................................
ARTICLE 19 NO THIRD PARTY LIABILITY, NO DEDICATION OF FACILITY
OR SYSTEM.............................................. ................................................
ARTICLE 20 SEVERAL OBLIGATIONS.......................................................................
ARTICLE 21 WAIVER.....................................................................................................
ARTICLE 22 CHOICE OF LAW.....................................................................................
ARTICLE 23 LIMITATIONS...........................................................................................
ARTICLE 24 DISPUTES..................................................................................................
ARTICLE 25 EVENTS OF DEFAULT, DELAY DAMAGES AND
MATERIAL BREACHES ..........................................................................
ARTICLE 26 TERMINATION.........................................................................................
ARTICLE 27 GOVERNMENTAL AUTHORIZATION .................................................
ARTICLE 28 REGULATORY APPROVAL ...................................................................
ARTICLE 29 SUCCESSORS AND ASSIGNS ................................................................
ARTICLE 30 MODIFICATION .......................................................................................
ARTICLE 31 TAXS........................................................................................................
ARTICLE 32 NOTICES....................................................................................................
ARTICLE 33 ADDITIONAL TERMS AND CONDITIONS ..........................................
ARTICLE 34 SEVERAILITY ........................................................................................
ARTICLE 35 CONFIDENTIAL BUSINESS INFORMATION ......................................
ARTICLE 36 REPRESENTATIONS AND WARRNTIES...........................................
ARTICLE 37 ENTIRE AGREEMENT.............................................................................
ARTICLE 38 COUNTERPARTS .....................................................................................
ARTICLE 39 CAPTIONS .................................................................................................
POWER PURCHASE AGREEMENT
BETWEEN
USG OREGON LLC
AND
IDAHO POWER COMPANY
Ths Power Purchase Agreement ("Agreement") is entered into this /1 V day
of l)Ct""bt'l' , 2009, by and between USG OREGON LLC, a Delaware limited
liability company with a principal place of business at 1505 Tyrell Lane, Boise, ID 83706
("Seller"), and IDAHO POWER COMPANY, an Idaho corporation with a principal
place of business at 1221 W. Idaho Street, Boise, ID 83702 ("Buyer"). Seller and Buyer
may be referred to individually as "Pary," or jointly as "Parties."
Recitals
A. Seller desires to develop, constrct, own and operate a geothermal electric
generating facility known as the Neal Hot Springs Unit #1 with an estimated average
annual net output of no less than 14,000 kW and no greater than 25,000 kW. At the time
of signing this Agreement the expected estimated average anual net output is 22,000
kW. This estimated average anual net output wil be precisely established as specified
in Article 3.
B. Seller desires to deliver, and sell the full electrical energy output from this
facility to the Buyer along with all environmental benefits associated with the electrcal
energy output for all calendar months of each year for the full ter of this Agreement.
C. Seller and Buyer wish to enter into this Agreement in order to set fort the
terms and conditions under which Seller wil sell and Buyer wil purchase energy from
the Seller's Facility.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the suffciency and adequacy of which are hereby acknowledged by each
Pary, the Parties agree to the following:
PAGEl
ARTICLE 1
DEFINITIONS
1.1 "Affiliate" means any other person or entity that controls, is under the
control of, or is under common control with, the named person or entity. For purposes of
this definition, the term "control" (including the terms "controls," ''under the control of,"
and ''under common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or the policies of a person or
entity, whether through ownership interest, by contract or otherwise.
1.2 "Annual Allowed Energy Reduction" means 1,620 MWh for each
Contract Year.
1.3 "Anual Capacity Factor" means 90%.
1.4 "Anual Guaranteed Output" means the Anual Output Forecast as
defined in Section 8.5 multiplied by the Anual Capacity Factor.
1.5 "Banpt" means with respect to any entity, such entity (1) files a
petition or otherwise commences, authorizes or acquiesces in the commencement of a
proceeding or cause of action under any banptcy, insolvency, reorganization or similar
law, or has any such petition filed or commenced against it, (2) makes an assignent or
any general arangement for the benefit of creditors, (3) otherise becomes banpt or
insolvent (however evidenced), (4) has a liquidator, administrator, receiver, trstee,
conservator or similar official appointed with respect to it or any substantial portion of its
property or assets, or (5) is generally unable to pay its debts as they fall due. The term
"Bankptcy" shall have a corollary meanng when used herein.
1.6 "Business Day" means any calendar day that is not a Saturday, a Sunday,
or a NERC-recognized holiday.
1.7 "Commission" means the Idaho Public Utilities Commission or its
successor.
1.8 "Commission Approval" means an order issued by the Commission
approving this Agreement and finding the Contract Price to be reasonable and that all
payments to be made to Seller under this Agreement shall be allowed as prudently incured
expenses of Buyer for ratemakng purposes, without condition(s) or modification(s) other
than condition(s) or modification(s) accepted in wrting by the Pary or Paries adversely
affected by such condition(s) or modification(s).
1.9 "Contract Price" means the price for all Net Energy that has been agreed
to by the Paries in this Agreement and referenced in Appendix A.
1.10 "Contract Year" means the period commencing March 1 st of the first
calendar year after the establishment of the Operation Date ending one (l) year later, and
each one year period thereafter beginning on March 1.
PAGE 2
1.11 "Credit Rating" means (1) with respect to any entity other than a financial
institution, the (a) current ratings issued or maintained by S&P's or Moody's with respect
to such entity's long-term senior, unsecured, unsubordinated debt obligations (not
supported by third-pary credit enhancements) or (b) corporate credit rating or long-term
issuer rating issued or maintained with respect to such entity by S&P's or Moody's, or
(2) if such entity is a financial institution, the ratings issued or maintained by S&P's or
Moody's with respect to such entity's long-term, unsecured, unsubordinated deposits.
1.12 "Delay Energy Quantity" means 3,000 k W less any portion of the capacity
rating (kW) of the Facility that has met the Operation Date requirements specified in
Section 5.4 multiplied by the hours beginning with the 744th hour past midnight of the
Scheduled Operation Date to midnight of the day preceding the Operation Date, not to
exceed, 2,160 total hours.
1.13 "Delay Liquidated Damages" means the Delay Energy Quantity multiplied
by the Delay Price.
1.14 "Delay Price" means 85% of the applicable month's Market Energy Cost
less the applicable month's Contract Price as specified in Appendix A. If this calculation
results in a value less than zero (0) then the result wil be zero (0).
1.15 "Designated Dispatch Facility" means Buyer's generation dispatch group
or any subsequent group designated by Buyer.
1.16 "Effective Date" means the date first written above.
1.17 "Emergency" means an emergency condition as defined under the
Interconnection Agreement or the applicable OATT.
1.18 "Environmental Attrbutes" means the aggregate amount of environmental
air quality credits, off-sets, or other benefits related to the Net Energy and Test Energy
produced by the Facility that reduces, displaces or off-sets emissions resulting from fuel
combustion at another location pursuant to any federal, state or local legislation or
regulation, and the aggregate amount of credits, offsets or other benefits related to Buyer's
current marketing program, any successor green pricing program, or other environmental or
renewable energy credit trading program derived from the use, purchase or distrbution of
Net Energy from the Facility or any similar program pursuant to any federal, state or local
legislation or regulation. The Environmental Attbutes include, but are not limited to,
green tags, green certificates, renewable energy credits (REC's) and tradable renewable
certificates directly associated with the Net Energy produced at this Facility. One REC is
associated with the generation and deliver of one thousand (1,000) kWh of Net Energy.
Notwithstanding any other provision of this Agreement, Environmental Attrbutes do not
include: (1) the PTC's, (2) any investment tax credits, and any other tax credits,
deductions, exemptions, or other tax benefits associated with the Facility, and (3) any state,
federal, local or private cash payments, exemptions, refunds or grants relating in any way
to the Facility, constrction of the Facility or output of the Facility, including the
production of Test Energy, Station Use, or Net Energy.
PAGE 3
1.19 "Facility" means the electrc generation facility commonly known as
Seller's Neal Hot Springs Unit #1 geothermal power plant, as described in more detail in
Appendix B, which includes all of the equipment required to enable this power plant to
produce and deliver the electrc energy as specified within this Agreement to the Buyer.
This equipment shall include, but not be limited to, the electrcal interconnection
equipment, generator, tubine, heat exchanger, and cooling tower(s). The geothermal fluid
extraction wells, geothermal fluid injection wells, geothermal fluid transportation systems
from the varous wells to the generation unit are included in the Facility to the extent that
they are used in the production of energy from the Facility.
1.20
29.7.1.
"Facility Assets" shall have the meaning given to that term in Section
1.21 "Facility Lender" means, collectively, any lender(s) providing any Project
Financing and any guarantors of such lenders and successor(s) or assigns thereto that Seller
identifies in Aricle 32.
1.22 "Financing Documents" means the loan and credit agreements, notes,
bonds, indentures, security agreements, lease financing agreements, mortgages, deeds of
trst, and other documents relating to any Project Financing for the Facility, and any and
all amendments, modifications, or supplements to the foregoing that may be entered into
from time to time at the discretion of Seller in connection with any Project Financing of the
Facility, or of the Facility in combination with other assets of the Seller.
1.23 "First Energy Date" means the day commencing at 00:01 hours, Mountain
Time, following the day that the conditions in Section 4.1 have been satisfied.
1.24 "Forced Outage" means a Facility condition that requires a sudden or
mandatory unplanned curtailment of the Net Energy deliveres from the Facility that (1) is
due to equipment failure or unplaned shutdown which was not caused by an event of force
majeure or by neglect, disrepair or lack of adequate preventative maintenance of the
Seller's Facilty or (2) is required to allow unplaned repair or maintenance to prevent
equipment failure.
1.25 "Good Utilty Practice(s)" means any of the practices, methods and acts
engaged in or approved by a significant portion of the electrc utility industr durng the
relevant time period, or any of the practices, methods and acts which, in the exercise of
reasonable judgment in light of the facts known at the time the decision was made, could
have been expected to accomplish the desired result of the lowest reasonable cost
consistent with good business practices, reliability, safety and expedition. Good Utility
Practice(s) is not intended to be limited to the optimum practice, method or act to the
exclusion of all others, but rather to be acceptable practices, methods, or acts generally
accepted in the region and consistently adhered to.
1.26 "Guaranty" means an instrment or agreement pursuant to which a
guarantor guarantees the performance of the obligations of an obligor, which instrent or
agreement is substantially in the form set forth as Appendix C.
PAGE 4
1.27 "Guaranty Default" means with respect to a Guaranty or the guarantor
thereunder, the occurrence of any of the following events: (1) any representation or
waranty made or deemed to be made or repeated by such guarantor in connection with
such Guaranty shall be false or misleading in any material respect when made or when
deemed made or repeated; (2) such guarantor fails to pay, when due, any amount required
pursuant to such Guaranty; (3) the failure of such guarantor to comply with or timely
perform any other material covenant or obligation set fort in such Guaranty if such failure
is not capable of remedy or shall not be remedied in accordance with the terms and
conditions of such Guaranty; (4) such Guaranty shall expire or terminate, or shall fail or
cease to be in full force and effect and enforceable in accordance with its terms against
such guarantor, prior to the satisfaction of all obligations of the obligor under this
Agreement, in any such case without replacement; (5) such guarantor shall repudiate,
disaffirm, disclaim, or reject, in whole or in par, or challenge the validity of, its Guaranty,
or (6) such guarantor becomes Banpt; provided, however, that no Guaranty Default
shall occur or be continuing in any event with respect to a Guaranty after the time such
Guaranty is required to be canceled or returned to a Party in accordance with the terms of
this Agreement.
1.28 "Initial Term" has the meanng given to that term in Section 5.1.1.
1.29 "Interconnection Agreement" means the agreement between the
Interconnection Provider and the Seller that enables the Seller's energy to be delivered and
integrated into the Interconnection Provider's electrcal system.
1.30 "Interconnection Facilties" means all equipment required to be installed
to interconnect and deliver energy from the Facility to the Interconnection Provider's
system including, but not limited to, connection, switching, metering, relaying,
communications and safety equipment.
1.31 "Interconnection Provider" means that portion of Idaho Power Company,
or its successor, that is responsible for the interconnections and operations of the Idaho
Power Company distrbution and transmission system as specified in the Idaho Power
Company OATT.
1.32 "Interest Rate" means (1) for purposes of identifyng the Interest Rate to
be paid on cash collateral, an anual interest rate equal to the overnght federal fuds rates,
or (2) for puroses of identifyng the Interest Rate to be paid in an event of default, an
annual interest rate equal to one hundred percent (100%) of the LIB OR three (3) month rate
plus two hundred (200) basis points. The designated Interest Rate shall be the rate
published on the date of the invoice, or other notice, in The Wall Street Journal (or, if
The Wall Street Journal is not published on that day, the next succeeding date of
publication); provided, however, that the anual interest rate used as the Interest Rate shall
not exceed the maximum rate permitted by law.
1.33 "Investor" means any invcstor(s) (including any transferees of such
investors) that acquire a direct or indirect interest in Seller that Seller identifies in Aricle
32.
PAGES
1.34 "Market Energy Cost" means the monthly weighted average of the daily
on-peak and off-peak Dow Jones Mid-Columbia Index (Dow Jones Mid-C Index) prices
for non-firm energy. If the Dow Jones Mid-C Index price is discontinued by the reporting
agency, both Paries wil mutually agree upon a replacement index similar to the Dow
Jones Mid-C Index. The selected replacement index wil be consistent with other similar
agreements and a commonly used index by the electrcal industr.
1.35 "Market Energy Price" means ninety percent (90%) of the Market Energy
Cost.
1.36 "Material Adverse Change" means, with respect to Seller's Guarantor, the
Guarantor's non-credit enhanced unsecured debt has (a) a Credit Rating below BBB- by
S&P or below Baa3 by Moody's, or (b) a Credit Rating of BBB- by S&P accompanied by a
negative watch or Baa3 by Moody's accompanied by a negative watch, or (c) both ratings
are withdrawn or terminated on a voluntary basis by the rating agencies. If S&P changes
its rating system during the Term, "BBB-" shall be replaced by S&P's lowest investment
grade rating under the new rating system; likewise, if Moody's changes its rating system
durng the Term, "Baa3" shall be replaced by Moody's lowest investment grade rating
under the new rating system.
1.3 7 "Material Breach" means a default or Event of Default (Aricle 25) subject
to Section 25.3.
1.38 "Maximum Capacity" shall not exceed 30,000 kW without prior mutual
consent by both Paries and wil be precisely established as specified in Section 3.2.2.
1.39 "Meterng and Telemetr Equipment" means all equipment specified in
the Interconnection Agreement, this Agreement, and any additional equipment specified in
Appendix B required to measure, record and telemeter power flows between the Facility
and the Interconnection Provider's electrcal system.
1.40 "Metering Point" means the point where the Seller's energy is measured
by the Interconnection Provider's Metering Equipment.
1.41 "Moody's" means Moody's Investor Services, Inc. or its successor.
1.42 "NERC" means the North Amercan Electrc Reliability Councilor its
successor.
1.43 "Net Energy", expressed in (kWh), means all of the electrc energy
produced by the Facility, less Station Use, and delivered to and measured at the Metering
Point that is (l) after an Operation Date has been established (2) is delivered by the Seller
to the Metering Point and accepted by the Buyer at the Metering Point and (3) not
exceeding the Maximum Capacity. Net Energy does not include Test Energy.
1.44 "Net Energy Shortfall" means as calculated in Section 8.5.5 and subject to
Net Energy Shortfall Damages.
PAGE 6
1.45 "Net Energy Shortfall Price" means the price used to calculate the Net
Energy Shortfall Damages as specified in Appendix D.
1.46 "Net Energy Shortfall Damages" means any remaining Net Energy
Shortfall after the provisions of Section 8.5.5.2 have been applied, multiplied by the Net
Energy Shortfall Price applicable to the actual period when the Net Energy Shortfall
occurred.
1.47 "OATT" means the Open Access Transmission Tarff applicable to the
Interconnection Provider's system or the Buyer's transmission system.
1.48 "Operation Date" means the day commencing at 00:01 hours, Mountain
Time, following the day that all conditions of Section 5.4 have been satisfied.
1.49 "Performance Assurance" means collateral in the form of either a
Guaranty, cash, letter(s) of credit, or other security acceptable to Buyer, as described in
Aricle 15.
1.50 "Point of Delivery" means the point where the Transmission Tap
intersects the Interconnection Provider's Vale-Unity transmission line.
1.51 "Project Financing" means debt with respect to which the Facility
Lender(s) are granted securty interests in the Facility, as well in such other of Seller's
assets, and in such revenues generated therefrom, as are specified in the Financing
Documents.
1.52 "Project Milestone" means a defined date by which time the Seller shall
have accomplished a particular activity, as defined in Appendix H.
1.53 "PTC's" means Production Tax Credits applicable to electricity produced
from certain renewable resources pursuant to 26 U.S.C. § 45, or replacement or substitute
tax benefits based on energy production from the Facility.
1.54 "PTC Value" means if the Seller elects to receive PTCs for this Facility,
an amount equal to: (a) the PTC's to which Seller would have been entitled with respect to
renewable energy it is unable to deliver because of a Buyer Event of Default; plus (b) a
"gross up" amount to take into account the federal, state and local income tax to Seller on
such payments in lieu ofPTC's, so that the net amount retained by Seller, after payment of
federal, state and local income taxes, is equal to the amount set forth in clause (a) of this
definition. For purposes of determining the foregoing, Seller shall deliver a certificate from
an officer of Seller stating the corporate income tax rates (federal, state or local, as
applicable) that are in effect for the Seller durig the tax year in which the receipt of such
PTC Value is taxed, and such income tax rates shall be used in the calculation of the PTC
Value. If the Seller does not elect to receive PTC's for this Facility, the PTC Value shall
be zero (0).
PAGE?
1.55 "Scheduled First Energy Date" means the date that is thirty (30) months
from the date on which the Seller issues the notice to proceed for the power plant
constrction as described in the fourh Project Milestone of Appendix H.
1.56 "Scheduled Maintenance" means as defined in Section 12.2.
1.57 "Scheduled Operation Date" means six (6) months after the Scheduled
First Energy Date.
1.58 "Scheduled Outage" means the pre-scheduled kWh curtailment associated
with the Scheduled Maintenance.
1.59 "Seller's Guarantor" means the entity providing the Guaranty or a
successor or assignee thereof that is not experiencing a Material Adverse Change.
1.60 "Site" means the parcel of real property on which the Facility wil be
constrcted and located, including any easements, right-of-ways, sUDace use agreements,
and other interests or rights in real estate reasonably necessary for the constrction,
operation and maintenance of the Facility.
1.61 "Station Use" means electrc energy produced by the Facility that is used
to operate equipment that is auxilary or otherwise related to the production of electrcity
by the Facility, including geothermal fluid pumps.
1.62 "S&P" means Standard & Poor's, a division of McGraw-Hil Companes
Inc. or its successor.
1.63 "Ter" means the period of time during which this Agreement shall
remain in full force and effect, including the Initial Ter and any extension of the Ter as
provided in Aricle 5.
1.64 "Test Energy" (expressed in kWh), means all of the electrc energy
produced by the Facility, less Station Use, and delivered to and measured at the Meterng
Point, that is (1) prior to an Operation Date being established and (2) delivered by the
Seller to the Meterng Point and accepted by the Buyer at the Metering Point and (3) not
exceeding the Maximum Capacity.
1.65 "Total Anual Facility Net Energy" means the sum of twelve (12) months
of actual Net Energy beginning with March 1 st of each calendar year.
1.66 "Transmission Tap" means the approximate eleven (11) mile transmission
line connecting the Facilty to the Point of Delivery.
1.67 "WECC" means the Wester Electrcity Coordinating Councilor its
successor.
PAGE 8
1.68 "WREGIS" means the Western Renewable Electrcity Generation
Information System which is an independent, renewable energy tracking system for the
region covered by the Western Electricity Coordinating Council (WECC).
ARTICLE 2
RULES OF CONSTRUCTION
2.1 General. The defined terms listed in Aricle 1 (as indicated by initial
capitalization) shall have the meanings set forth in Aricle 1 whenever the terms appear in
this Agreement and attached Appendices, whether in the singular or the plural or in the
present or past tense. Other terms used in this Agreement but not listed in Aricle 1 shall
have meanings as otherwise defined within this Agreement or as commonly used in the
English language and, where applicable, in Good Utility Practice(s). Words not
otherwise defined in this Agreement that have well-known and generally accepted
techncal or trade meanings are used in accordance with such recognized meanings. In
addition, the following rules of interpretation shall apply:
2.1.1 The masculine shall include the feminine and neuter.
2.1.2 References to "Aricles," "Sections," or "Appendices" shall be to
aricles, sections or appendices of this Agreement.
2.1.3 The Appendices attached to this Agreement are incorporated in
and are intended to be a par of this Agreement.
2.1.4 This Agreement was negotiated and prepared by both Paries with
the advice and paricipation of counsel. The Paries have agreed to the wording of this
Agreement, and none of the provisions of this Agreement shall be constred against one
Pary on the grounds that such Party is the author of this Agreement or any par of this
Agreement.
2.1.5 The Paries shall act reasonably and in accordance with the
principles of good faith and fair dealing in the pedormance of this Agreement. Unless
expressly provided otherwise in this Agreement, (i) where the Agreement requires
consent, approval, or a similar action by a Party, such consent, approval or other action
shall not be uneasonably withheld, conditioned or delayed, and (ii) where the Agreement
gives a Party a right to determine, require, specify or take similar action with respect to a
matter, such determination, requirement, specification or similar action shall be
reasonable.
2.2 Interpretation of Interconnection Agreement and Interconnection Provider
documentation. The Paries recognize that the Seller has entered into a separate
Interconnection Agreement enabling the delivery of the Facility's electrical energy to the
Buyer. This agreement shall include but not be limited to an Interconnection Agreement
with the Interconnection Provider and documentation from the Interconnection Provider
approving the delivery of the Facility's energy to the Point of Delivery.
PAGE 9
2.2.1 The Parties acknowledge and agree that the Interconnection
Agreement(s) and the Interconnection Provider documentation shall be separate and
free-standing documents and agreements and that the terms of ths Agreement are not
binding upon the Interconnection Provider.
2.2.2 Notwithstanding any other provision in this Agreement, nothing in
the Interconnection Agreement(s) or the Interconnection Provider documentation shall
alter or modify the Buyer's or Seller's rights, duties and obligations under this
Agreement. This Agreement shall not be construed to create any rights between the
Seller and the Interconnection Provider.
ARTICLE 3
PROJECT MILESTONES
3.1 The Seller shall meet all requirements of the first three (3) Project
Milestones specified in Exhibit H (exploration schedule, exploration drillng, and
resource report).
3.1.1 Within sixty (60) days of the date the resource report required
under the third Project Milestone is provided to the Buyer, the Parties shall review the
provided report and establish the estimated average anual net output (kW rating) of the
Facility. Based upon this agreed upon kW rating, the Facility shall be developed as
follows:
a.) If the report indicates that the geotheral resource is able
to accommodate a Facility kW rating from 14,000 kW to
25,000 kW the Seller shall proceed with completion of the
Facility as specified within this Agreement.
b.) If the report indicates that the geotheral resource is able
to accommodate a Facility kW rating of less than 14,000
kW, the Seller within sixty (60) days of the date of the
issuance of the resource report shall notify the Buyer of the
Seller's 1) intent to proceed with development and
constrction of the Facilty as specified within ths
Agreement, or 2) propose to the Buyer modifications of the
existing Agreement, or 3) provide notification of
termination of this Agreement. If the Seller provides no
notification within the sixty (60) day perod, the Seller shall
be obligated to proceed with development and constrction
of this Facility as specified within this Agreement. If the
report indicates the kW rating of the Facility shall be less
than 10,000 kW, the Buyer reseres the right to terminate
this Agreement within this sixty (60) day period. If after
commercially reasonable efforts the Paries are unable to
agree upon modifications proposed as specified in item 2)
PAGE 10
above, either Pary may terminate this Agreement with 30
days notification. Upon mutual consent, the Paries may
agree to extend this sixty (60) day period prior to the end of
the initial sixty (60) day period. Termination of this
Agreement as allowed with this section 3.1.1 b) shall result
in no damages be assessed against either the Buyer or the
Seller.
c.) If the report indicates that the geothermal resource is able
to accommodate a Facility kW rating greater than 25,000
kW the Seller shall proceed with development of up to a
25,000 kW rated Facility. The Parties may mutually agree
to Net Energy deliveries to the Buyer exceeding 25,000
kWh per hour as an amendment to this Agreement or in a
separate agreement.
3.2 The Seller shall meet all requirements of the fourth Project Milestone
(issuance of notice to proceed with power plant construction) specified in Exhibit H.
3.2.1 Within sixty (60) days of meeting the fourt Project Milestone,
Seller may revise, if necessary, item B-1 of Appendix B. Any such revision shall provide
suffcient detail to accurately describe the entire geotheral facility that wil be included
in this Agreement. This description must include, but not be limited to, generation
equipment, cooling towers, control equipment, tubine, heat exchanger, geothermal fluid
production and injection wells, geothermal fluid transportation system, etc.
3.2.2 Within sixty (60) days of meeting the fourh Project Milestone,
Seller shall submit a revised Maximum Capacity value not to exceed the Maximum
Capacity established in Section 1.38.
ARTICLE 4
CONDITIONS TO ACCEPTANCE OF ENERGY
FIRST ENERGY DATE
4.1 Conditions. As a condition of the Buyer's acceptance of deliveres of
energy from the Seller, the following conditions shall be satisfied.
4.1.1 The Commission shall have approved this Agreement as
contemplated in Aricles 27 and 28, or Buyer shall have waived such approval.
4.1.2 Seller shall include updated information as to the Facilty's
expected First Energy Date in the Progress Reports and Seller shall have notified Buyer
of the expected First Energy Date no later than five (5) Business Days before the
expected First Energy Date.
PAGE 11
4.1.3 Seller shall have delivered to the Buyer a certificate signed by an
officer of Seller (1) certifyng that to the best of the officer's knowledge all licenses,
permits or approvals necessary for Seller's commencement of deliveries have been
obtained from applicable federal, state or local authorities, and (2) listing all such
licenses, perits and approvals.
4.1.3.1 Seller shall certify that either (a) the Seller's market-
based tariff applicable for sale of the Test Energy and Net Energy has attained FERC
Market-Rate authority or (b) the Facilty is exempt from FERC Market-Rate authority
and such application or acceptance is not required for Seller to commence Test Energy
and Net Energy deliveries under this Agreement.
4.1.4 Opinion of Counsel. Seller shall have submitted to the Buyer an
opinion letter signed by a law firm that includes attorneys admitted to practice and in
good standing in the states of Idaho or Oregon providing an opinion that Seller's licenses,
permits and approvals as set forth in Section 4.1.3 above are legally and validly issued,
are held in the name of the Seller and, based on a reasonable review (which may include
reliance on certificates provided by officers or other responsible personnel of Seller), the
firm is of the opinion that Seller is in substantial compliance with said permits as of the
date of the opinion letter. The opinion letter wil be in a form acceptable to Buyer and
wil acknowledge that the firm renderng the opinion understands that Buyer is relying on
said opinion in connection with and for the puroses of this transaction. Buyer's
acceptance of the form wil not be unreasonably withheld, conditioned or delayed. The
opinion letter wil be governed by and shall be interpreted in accordance with the legal
opinion accord of the Amercan Bar Association Section of Business Law (1991). If
Buyer does not object in wrting to the proposed form of opinion letter within ten (10)
Business Days after receiving in it, it shall be deemed accepted.
4.1.5 Seller shall have delivered to Buyer certification that the Facility is
substantially complete, tested and capable of beginning energy deliveries to the Buyer in
a safe maner.
4.1.6 Engieer's Certifications. Submit an executed Engineer's
Certification of Design & Construction Adequacy and an Engineer's Certification of
Operations and Maintenance (O&M) Policy. These certificates wil be in the form
specified in Appendix E but may be modified to the extent necessar to recognze the
different engineering disciplines providing the certificates.
4.1.7 Insurance. Submit written proof to the Buyer of all insurance
required in Aricle 14.
4.1.8 Interconnection Provider ApprovaL. Provide the Buyer with proof
that the Interconnection Agreement is complete and all Interconnection Provider
approvals, including approval for Seller to deliver Test Energy and Net Energy to the
Metering Point of no less than the Maximum Capacity arc complete.
PAGE 12
4.1.9 Written Acceptance. Seller shall request and obtain written
confirmation from the Buyer that all conditions to acceptance of Test Energy have been
fulfilled. Such wrtten confirmation shall be provided within a commercially reasonable
time following the Seller's request and wil not be uneasonably withheld by the Buyer.
The conditions set forth in this Section 4.1 are to be used solely for purposes of
determining when the Facility has achieved its First Energy Date. They are not intended
to affect in any way when the Facility is deemed to have been "placed in service" for tax
treatment purposes.
4.2 Buyer's Approval of First Energy Date; Disagreements. Seller's
designation of the First Energy Date shall be subject to Buyer's approval, which Buyer
shall not uneasonably withhold, condition or delay. No later than five (5) Business Days
after Seller's notification to the Buyer of the Seller's proposed First Energy Date, as
specified in Section 4.1.9, Buyer shall send Seller a written notice, either (A) approving
the First Energy Date specified in the notice, or (B) setting fort in reasonable detail
Buyer's reasons for concluding that the First Energy Date has not been achieved or wil
be achieved on a date other than the date designated in Seller's notice. If Buyer does not
respond on or before the fifth (5th) Business Day after Seller's notice, the First Energy
Date shall be deemed to have occured on the date designated in Seller's notice. If Buyer
reasonably disagrees that the First Energy Date has been achieved, the Paries shall
cooperate promptly and in good faith to address Buyer's concerns and agree upon the
First Energy Date. If the Paries are unable to agree to a First Energy Date within
ten (10) Business Days of Buyer's notice of disagreement, either Pary may pursue
dispute resolution under Aricle 24 to determine the First Energy Date.
ARTICLES
TERM AND OPERATION DATE
5.1 Term.
5.1.1 Initial Term. This Agreement shall become effective as of the
Effective Date and shall remain in full force and effect through the last day of the last
month of the twenty-fifth (25th) Contract Year, subject to any terination provisions set
forth in this Agreement (the "Initial Term").
5.1.2 Buyer's Option to Extend Term. Buyer shall have the option to
extend the Ter. Buyer may exercise ths option by giving irrevocable notice of exercise
to Seller on or before the end of the twenty-third (23rd) Contract Year. If Buyer does not
timely exercise this option, the option shall automatically expire. The option set forth in
this Section shall automatically terinate upon any termination of this Agreement. If
Buyer timely exercises this option, the Paries wil negotiate, in good faith, the terms and
conditions under which the Term of this Agreement would be extended; provided,
however, the option set forth in this Section shall terminate without liability to either
Pary if the Paries fail to enter into a definitive written agreement concernng the
extension to the Term withn six (6) months following the date of Buyer's notice. The
PAGE 13
terms and conditions of any such extension shall be subject to the Paries' respective
management, Board of Directors, and any required Commission approval.
5.2 Progress Reports. On the first Business Day of each calendar quarer
following the first Project Milestone (exploration report) until the Seller has achieved the
fourth Project Milestone (power plant notice to proceed) and on the first Business Day of
each calendar month thereafter until the Operation Date is achieved, Seller shall submit to
the Buyer progress reports on the development and constrction of the planed Facility in
a form reasonably satisfactory to the Buyer. These Progress Reports shall include, but
not be limited to, a project development schedule including all significant activities and
milestones and the status of these items, notation and explanation of any significant
delays and the Seller's planed action, and other information pertinent to Seller's
progress on development and construction of the Facility.
5.3 Monitoring of Facility. Buyer shall have the right at its sole risk and
expense to monitor the constrction, start-up and testing of the Facility and the Seller
shall comply with all reasonable requests of the Buyer with respect to these monitoring
events. Seller shall cooperate in such physical inspections of the Facility as may be
reasonably requested by the Buyer during and after completion of constrction. All
persons visiting the Facility on behalf of the Buyer shall comply with all of the Seller's
applicable safety and health rules and requirements. Buyer's technical review and
inspection of the Facility shall not be constred as endorsing the design of the Facility
nor as any waranty of the safety, durability, or reliabilty of the Facility.
5.4 Operation Date. Seller wil in good faith seek to achieve the Operation
Date by the Scheduled Operation Date. The Operation Date shall occur after all of the
following conditions have been satisfied.
5.41 Seller shall notify the Buyer of the Seller's proposed Operation
Date, in written form no later than five (5) Business Days prior to the proposed Operation
Date.
5.4.2 Seller shall have completed and shall have maintained all
conditions to acceptance of energy as specified in Aricle 4.
5.4.3 The generator, turbines, extraction wells, injection wells and other
associated equipment enabling the Facility to deliver at least 3,000 kW of Net Energy in a
stable, reliable, consistent and safe maner have been installed, tested and determined to
be functioning properly.
5.4.4 All Facility systems necessary for the stable, safe, reliable and
consistent operation of the installed Facility are substantially complete, any testing of the
installed Facility required pursuant to the Interconnection Agreement(s) and
Interconnection Provider documents and equipment supplier requirements have been
successfully completed, and the Facility is available for operation in all material respects
in accordance with applicable laws.
PAGE 14
5.4.5 Seller shall have delivered to Buyer a "Certificate of Facility
Completion" signed by an officer of Seller certifying that the requirements of
Sections 5.4.3 and 5.4.4 have been satisfied with respect to the Facility.
5.4.6 Seller shall have requested and obtained written confirmation from
the Buyer that all conditions to receiving an Operation Date have been fulfilled. Such
wrtten confirmation shall be provided within a commercially reasonable time following
the Seller's request and wil not be uneasonably withheld by the Buyer.
These Operation Date requirements are to be used solely for purposes of determining
when the Facility has achieved its Operation Date. They are not intended to affect in any
way when the Facility is deemed to have been "placed in service" for purposes of PTC
eligibility.
5.5 Buyer's Approval of Operation Date; Disagreements. Seller's designation
of the Operation Date shall be subject to Buyer's approval, which Buyer shall not
unreasonably withhold, condition or delay. No later than five (5) Business Days after
Seller's notification to the Buyer of the Seller's proposed Operation Date, as specified in
Section 5.4.6, Buyer shall send Seller a wrtten notice, either (A) approving the Operation
Date specified in the notice, or (B) setting forth in reasonable detail Buyer's reasons for
concluding that the Operation Date has not been achieved or wil be achieved on a date
other than the date designated in Seller's notice. If Buyer does not respond on or before
the fifth (5th) Business Day after Seller's notice, the Operation Date shall be deemed to
have occurred on the date designated in Seller's notice. If Buyer reasonably disagrees
that the Operation Date has been achieved, the Paries shall cooperate promptly and in
good faith to address Buyer's concerns and agree upon the Operation Date. If the Parties
are unable to agree to an Operation Date within ten (10) Business Days of Buyer's notice
of disagreement, either Pary may pursue dispute resolution under Aricle 24 to determine
the Operation Date. Upon completion of the dispute resolution process establishing an
Operation Date and/or upon mutual agreement between the Parties of an Operation Date,
the Buyer shall revise any previous Net Energy payments to reflect the applicable Net
Energy Price from the date of the agreed upon Operation Date.
5.6 Continuing Obligations. Seller shall provide Buyer with the following
during the Term of this Agreement:
5.6.1 At Buyer's request, Seller shall provide evidence that it is in
compliance with the insurance requirements set forth in Section 14.2.
5.6.2 Seller shall maintain compliance and remain in good standing in all
requirements of Aricles 4 and 5 of this Agreement.
PAGE 15
ARTICLE 6
PRICE
6.1 Test Energy Price. Notwithstanding any other energy pricing provisions
in the Agreement, Buyer shall pay the Seller the lesser of the curent month Market
Energy Price or Contract Price for each kWh of Test Energy.
6.2 Net Energy Price. For all Net Energy delivered by the Seller to the Buyer
from the Operation Date though the end of the Initial Ter, Buyer shall pay the Seller
the Contract Price.
6.3 Contract Price, Ters and Conditions to Remain in Effect for Term. The
prices, terms and conditions specified in ths Agreement shall remain in effect until
expiration of the Term. Notwithstanding any provision in this Agreement, neither Pary
shall seek, nor shall support any third pary in seeking, to prospectively or retroactively
revise the prices, terms or conditions of service of this Agreement through application or
complaint to FERC pursuant to the provisions of Section 205, 206 or 306 of the Federal
Power Act, or any other provisions of the Federal Power Act, absent the prior wrtten
agreement of the Parties. Further, absent the prior agreement in wrting by both Paries,
the standard of review for changes to the prices, ters and conditions of service of this
Agreement proposed by a Pary, a non-Pary or the FERC 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 US 332 (1956) and Federal Power Commission v. Sierra Pacifc
Power Co., 350 US 348 (1956).
ARTICLE 7
ENVIRONMENTAL ATTRIBUTES
7.1 Environmental Attbutes. Buyer wil be granted ownership of all of the
Environmental Attrbutes associated with the Facilty. Title of all Environmental
Attrbutes shall pass to Buyer at the same time that transfer of title of the associated Test
Energy or Net Energy to Buyer occurs. If after the Effective Date any additional
Environmental Attbutes or similar environmental value is created by legislation,
regulation, or any other action, including but not limited to, carbon credits and carbon
offsets, Buyer shall be granted ownership of all of these additional Environmental
Attbutes or environmental values that are associated with the Test Energy or the Net
Energy delivered by the Seller to Buyer. All reasonable costs of securng the ownership
of these additional Environmental Attrbutes and environmental values, including
documented Seller costs, shall be paid by the Buyer.
Seller shall use prudent and commercially reasonable efforts to ensure that any
operations of the Facility do not jeopardize the curent or future Environmental Attrbute
status of this geothermal generation Facilty.
7.2 The Paries shall cooperate to ensure that all Environmental Attrbute
certifications, rights and reporting requirements are completed by the responsible Paries.
PAGE 16
7.2.1 At least sixty (60) days prior to the First Energy Date, the Paries
shall mutually cooperate to enable the Environmental Attrbutes from this Facility to be
placed into the Buyer's WREGIS account or any other Environment Attribute accounting
and tracking system selected by the Buyer. The Buyer shall reimburse the Seller for any
WREGIS or other Environmental Attrbute system fees incurred to enable this to occur
and/or any reoccurrng WREGIS or other Environmental Attbute system fees for the
Term of this Agreement. If the Environmental Attrbute accounting and tracking system
initially selected by the Buyer is materially altered or discontinued during the Term of
this Agreement, the Paries shall cooperate to identify an appropriate alternative
Environmental Attribute accounting and tracking process and enable the Environmental
Attbutes be processed though this alternative method.
7.2.2 The Seller shall not report under Section 1605(b) of the Energy
Policy Act of 1992 or under any applicable program that any Environmental Attbutes
are owned by the Seller.
7.2.3 As the Buyer is the sole owner of the Environmental Attrbutes
from this Facility, only the Buyer shall be entitled to sell, trade, assign or otherwise
transfer or claim the Facility's Environmental Attrbutes.
7.2.4 If the Buyer requests additional Environmental Attbute
certifications beyond what is provided by the WREGIS process the Seller shall obtain
any Environmental Attribute certifications required by the Buyer for those Environmental
Attbutes delivered to the Buyer from the Seller. If the Seller incurs cost, as a result of a
Buyer's request, Seller shall invoice the Buyer for the reasonable costs of providing such
certification. If the Buyer elects to obtain its own certifications, then Seller shall fully
cooperate with the Buyer in obtaining such certification.
ARTICLES
DELIVERY AND SHORTFALL OBLIGATIONS
8.1 Deliver and Acceptance of Test Energy. Except when either Party's
performance is excused as provided herein, the Buyer wil purchase and Seller wil sell
the Test Energy produced by the Facility.
8.2 Delivery and Acceptance of Net Energy. Except when either Pary's
performance is excused as provided herein, the Buyer wil purchase and Seller wil sell
the Net Energy produced by the Facility.
8.3 No Deliveries In Excess of the Maximum Capacity. Under no
circumstances wil the Seller deliver Net Energy and/or Test Energy to the Metering
Point in an amount that (1) exceeds 36,000 kW at any moment in time or (2) that exceeds
the Maximum Capacity by any amount for more than five (5) consecutive minutes.
Delivery of Net Energy and/or Test Energy by the Seller to the Metering Point that
exceeds either item (1) or (2) of this section shall be a Materal Breach of this Agreement.
Any Material Breach of this Agreement arsing under this Section 8.3 may be cured by
PAGE 17
the Seller reducing the Net Energy or Test Energy deliveries to the Buyer to no longer
exceed the limits established in this section. In addition, the Seller shall identify the
circumstances that caused the Facility to deliver energy in excess of these limitations and
implement the necessary operational procedures to prevent similar deliveries in excess of
these limits. If the Seller repeatedly exceeds these limits and is not taking commercially
reasonable efforts to resolve this issue, the Buyer may terminate this Agreement.
8.4 Forecasting. At its expense, Seller shall provide to Buyer for the Term,
forecasting information provided via electronic format acceptable to the Buyer or any
other format that the Buyer and Seller mutually agree is acceptable. The Seller shall be
responsible for all costs associated with creating and transmitting the forecasting
information to the Buyer. Each forecast wil take into account any Scheduled Outages,
any known Forced Outages, known curtailments or known capacity deratings affecting
the Facility. The Buyer and Seller shall mutually develop and approve the electronic
format and process of transmitting the data no later than thirt (30) days prior to the
Operation Date. The forecasting information shall be provided as follows:
(1) No later than 1 :00 pm Pacific Time each Business Day, the Seller
shall provide an hourly forecast that stars at 5:00 am Pacific Time of the
next day and rus for a minimum of 168 hours (7 days).
(2) Any deviations exceeding or equal to plus or minus ten percent
(10%) of the previously provided forecast wil be communicated to
the Buyer in a prompt and timely maner. In the case of a planed
event the Seller shall notify the Buyer by 5 :00 pm Pacific Time of
the preceding day of any Net Energy forecasting deviation of the
previously provided forecast. In the case of an unplaned event,
the Seller shall notify the Buyer promptly after the occurence of
the unplaned event. In both cases, the Seller wil include with
this notification the expected duration and quantity of the energy
delivery reductions that wil occur at the Metering Point.
8.4.1 Basis of Forecasts. The forecasts called for by this
Agreement shall be consistent with any specific requirements of this Agreement,
geothermal industr standards and Good Utilty Practice(s).
8.4.2 Provision of Forecasting. The provision of the forecasting
information described in Section 8.4 in accordance with Good Utility Practice(s) is an
integral component of this Agreement. Accordingly, Seller shall act in a maner
consistent with Good Utility Practice(s) with the goal of providing timely, useful, quality
forecasts to the Buyer under Section 8.4. If Seller fails in any material respect to act in
conformity with the preceding sentence, Buyer may provide notice to Seller stating in
reasonable detail the basis for Buyer's belief that Seller is defaulting in its obligations
under this Aricle 8. Seller shall have ten (10) Business Days in which to cure the alleged
default, to commence the cure of the alleged default if it cannot reasonably be cured
within the ten (10) Business Day period (and thereafter diligently pursue such cure to
completion), or to submit the matter to dispute resolution under Aricle 24. With respect
PAGE 18
to any Facility Lender or Investor, the ten (10) Business Day periods set fort in the
preceding sentence shall be extended to thirty (30) days from date of Buyer's notice to
Seller under this Section 8.4. As long as Seller is pursuing dispute resolution under
Aricle 24 in good faith, Seller shall not be in default of this Section and shall have
sixty (60) days from any final resolution of the dispute in which to implement any
agreed-upon or required cure ("Forecast Cure Perod").
8.5 Output Guarantee
8.5.1 By December 1 st of each calendar year, the Seller shall submit in
writing to the Buyer the identity of a licensed professional
independent engineer or licensed professional independent
engineering firm and the independent engineer or engineering
firm's qualifications that the Seller intends to contract with to
complete the anual certification as required in this Section. The
Seller shall be responsible for all costs of retaining this engineer
and the cost of completing the certification as required withn ths
Section. No later than ten (10) Business Days after Seller's
notification to the Buyer of the Seller's proposed independent
engineer or independent engineering firm, Buyer shall send Seller
a written notice, either (A) approving the independent engineer or
independent engineering firm specified in the notice, or (B) setting
fort in reasonable detail Buyer's reasons for concluding that the
independent engineer or independent engineering firm selected by
the Seller is not acceptable. If Buyer does not respond on or before
the end of the tenth (1oth) Business Day after Seller's notice, the
independent engineer or the independent engineerng firm selected
by the Seller shall be deemed to be acceptable. If Buyer
reasonably disagrees that the Seller selected independent engineer
or independent engineering firm is acceptable, the Paries shall
cooperate promptly and in good faith to address Buyer's concerns
and agree upon an independent engineer or independent
engineerng firm. If the Paries are unable to agree to an
independent engineer or independent engineering firm within
ten (10) Business Days of Buyer's notice of disagreement, either
Pary may pursue dispute resolution under Article 24 to determine
an independent engineer.
8.5.2 No later than Februar 1 st of each calendar year, the Seller wil
provide the Buyer with a report and an energy forecast, stamped
and approved by the professional independent engineer or the
independent engineering firm specified above, containing at the
minimum, cerification of the following:
a) Current status of the geothennal resource in comparison to the
previous status of the resource. This information wil include a
detailed description of any geothermal resource degradation,
PAGE 19
the apparent "Cause of such degradation, assessment of future
status of the resource and its ability to sustain its curent level
of output in consideration of the requirements of Section 8.7.
b) Estimated lost Net Energy (measured in kWh) production
associated with Scheduled Outages as specified in Section 1.58
that are planed to occur for the next twenty-four (24) months
beginning with March 1 st of the current year.
c) Estimated energy (measured in kWh) that the Facility wil be
able to deliver to the Metering Point for each of the next
twenty-four (24) months beginnng with March of the current
year.
d) The assumptions used by the engineer.
8.5.3 No later than ten (10) Business Days after Seller provides a written
copy of the certification as specified above to the Buyer, the Buyer shall send Seller a
written notice, either (A) approving the certification, or (B) setting forth in reasonable
detail Buyer's reasons for concluding that the certification is not acceptable. If Buyer
does not respond on or before the end of the tenth (1oth) Business Day after Seller's
notice, the certification provided by the Seller shall be deemed to be acceptable. If Buyer
reasonably disagrees that the Seller's certification is acceptable, the Parties shall
cooperate promptly and in good faith to address Buyer's concerns and agree upon a
certification. If the Parties are unable to agree on the certification as being acceptable
within ten (10) Business Days of Buyer's notice of disagreement, either Party may pursue
dispute resolution under Aricle 24 to deterine an acceptable certification.
8.5.4 The "Anual Output Forecast" (measured in kWh) shall be the
lower of (i) the sum of the monthly estimated energy established in Section 8.5.2 c) for
the first twelve (12) months of the information provided or (ii) the Expected Annual
Average Capacity established in Appendix B, multiplied by 8,760 hours and then by the
Anual Capacity Factor. The last Anual Output Forecast of the Initial Term of this
Agreement shall be based upon the actual Calendar Months available for the project to
deliver Net Energy from March 1 st to the last day of the Initial Term of this Agreement,
which mayor may not be a full twelve (12) months.
8.5.4.1 For the period beginning with March 1 st of the first (1 st)
Contract Year through Februar 28th of the third (3rd) Contract Year an
Anual Output Forecast shall be provided for information puroses only
and no Net Energy Shortfall wil be calculated for this period.
8.5.4.2 Upon conclusion of an event that causes energy deliveries
to the Buyer to be reduced, the Seller shall calculate the quantity of energy
delivery reductions they believe occurred due to the event. These events
shall include Forced Outages, force majeure, actual Scheduled
Maintenance outages, curtailments required by the Buyer or curailments
PAGE 20
required by the Interconnection Provider. Upon mutual agreement as to
the quantity of energy delivery reduction, the Annual Guaranteed Output
shall be adjusted accordingly.
8.5.5 Energy Delivery Guarantee, Reconciliation, and Net
Energy Shortfall Determination. Seller guarantees that the Total Anual Facility
Net Energy shall equal or exceed the Anual Guaranteed Output for each Contract
Year during the Initial Term of this Agreement beginning with March 1 st of the
fourh (4th) Contract Year. The determination of whether Seller has met its
Anual Guaranteed Output requirement shall be made on an anual basis
beginnng on March 1 st of the fifth (5th) Contract Year by comparing the amount
of the previous twelve (12) month's Total Anual Facility Net Energy to the
Anual Guaranteed Output as provided forin this Section.
8.5.5.1 Ifthe Total Anual Facility Net Energy is equal to
or greater than the Anual Guaranteed Output in the applicable
period, Seller shall be deemed to have met its Anual Guaranteed
Output obligation for that period, and Seller shall have no
obligation to pay Net Energy Shortfall Damages or to tre-up
energy delivery obligations with respect to that period. Any Net
Energy delivered durng this period exceeding the Anual
Guaranteed Output may be used to make up the previous period
Net Energy Shortfall if one exists.
8.5.5.2 If the Total Anual Facility Net Energy is less
than the Anual Guaranteed Output for a specified perod, then a
Net Energy Shortfall exists and is equal to the Anual Guaranteed
Output minus the Total Anual Facility Net Energy. The Net
Energy Shortfall may be made up in the subsequent twelve (12)
month perod beginning at March 1 st. Net Energy delivered during
the immediately following twelve (12) month period in excess of
the Annual Guaranteed Output for that period may be used to make
up the previous perod's Net Energy Shortfall. At the end of the
subsequent twelve (12) month perod, if the Net Energy Shortfall
has not been made up, then any remaining Net Energy Shortfall
Damages wil be calculated based upon any remaining balance of
the Net Energy Shortfall and a biling wil be presented to the
Seller which the Seller wil be required to pay the Buyer within
fifteen (15) days of the date of the biling notice.
Any remaining Net Energy Shortfall at the end of the Intial Term
of this Agreement wil be payable to the Buyer within fifteen (15)
days of the date of the biling notice being provided to the Seller.
PAGE 21
8.6 Buyer Acceptance of Energy, Excused Payment, Payment for Unexcused
Curailments and Adiustment of the Anual Guaranteed Output
8.6.1 Acceptance of Energy -
a.) The Buyer shall be excused from accepting Net Energy
and Test Energy for any reason.
8.6.2 Excused Energy Payment -
a.) The Buyer shall be excused from paying for Net Energy
and Test Energy that the Buyer did not accept in any
Contract Year due to an event of Force Majeure or that
is equal to or less than the Anual Allowed Energy
Reduction. Net Energy and Test Energy that is not
accepted by the Buyer due to an event of Force Majeure
is not included in the calculation of MWh's not
accepted by the Buyer in determining if the Buyer has
exceeded the Anual Allowed Energy Reduction.
b.) The Buyer shall not be excused from paying for Net
Energy and Test Energy that the Buyer did not accept
due to an economic dispatch.
8.6.3 Payment for Unexcused Curailment -
a.) If the Buyer fails to accept Net Energy or Test
Energy that the Facility could have delivered, and
payment for the unaccepted energy is not excused
as specified in section 8.6.2 a), then the Buyer shall
pay the Seller the applicable Contract Price or Test
Energy Price plus any applicable PTC Value for the
estimated Net Energy and/or Test Energy that the
Seller was unable to deliver to the Buyer. The
estimated Net Energy and/or Test Energy (measured
in kWh) that was not delivered wil be determined
based upon the most recently provided energy
forecast, prior to the curtailment, as specified in
Section 8.4 of this Agreement for the applicable
time period in which the Buyer did not accept the
Seller's energy. If the curtailment event exceeds
the time period of the energy forecast (168 hours)
the Buyer and Seller shall mutually agree upon the
estimated Net Energy and/or Test Energy based
upon the most recently provided energy forecast
PAGE 22
plus any additional information available.
b.) If the Buyer does not accept the Net Energy from
this Facility, then Seller may attempt to sell all or a
portion of the Net Energy to another pary for just
the period of when Buyer is not accepting the Net
Energy from the Facility. Seventy-five percent
(75%) of any net energy sales payments the Seller
receives from another pary wil be deducted from
any payments the Buyer is required to make to the
Seller for the period in which the Buyer was not
accepting the Facility's Net Energy.
8.6.4 Adjustment of Guaranteed Output -
If the Buyer requires the Seller to reduce Net Energy deliveries to
the Buyer from the Facility pursuant to the terms of this Article 8.6,
the Anual Guaranteed Output for the impacted Contract Y ear( s)
wil be reduced by the same amount as the estimated Net Energy that
was not delivered as a result of the Buyer's curtailment
requirements.
8.7 Requirements for the Addition of New Geothermal Energy Uses.
Seller may add additional uses of geothermal energy controlled by Seller or available for
Seller's use, subject to the ters of this Section 8.7.
8.7.1 Cerification of Geothermal Energy Suffciency. Prior to allowing
each new geotheral use(s) to be built and delivery of geothermal energy
to commence to the new geothermal use(s), an independent licensed
geothermal reservoir engineer shall certify that for the remaining Term of
this Agreement and in the professional judgment of this engineer, the
geotheral energy production capability of the geothermal resource
controlled by Seller or available for Seller's use is sufficient to supply at
least one hundred percent (100%) of the geothermal energy requirements
of (1) the Facility, (2) the existing other use(s) of geothermal energy, and
(3) the proposed new use(s) ofthe geothermal energy.
8.7.1.1 The independent engineer shall be selected by
Seller and shall be reasonably acceptable to Buyer. The Seller
shall be responsible for all costs of retaining this engineer and the
cost of completing the certification as required within this Section.
8.7.1.2 Seller shall provide Buyer with a copy of the
independent engineer's certification prior to adding any additional
PAGE 23
geothermal uses. Buyer shall have sixty (60) days to provide
Seller with the Buyer's acceptance or rejection of such
certification. Ifrejected, the Buyer wil supply Seller the reason(s)
why the certification was rejected and the necessar modifications
required to make the certification acceptable.
8.7.1.3 Geotheral energy use(s) that utilize waste heat
from the Facility and do not materially affect the power operations
of the Facility may be installed by Seller.
8.8 Title and Risk of Loss. As between the Paries, Seller shall be deemed to
be in control of the energy output from the Facility up to and until delivery and
acceptance at the Metering Point by the Buyer. Title and risk ofloss related to the energy
shall transfer from Seller to Buyer at the Meterng Point.
8.9 Station Energy. Seller shall enter into separate arangements for the
supply of electric services to the Facility to supply Station Energy when the Facilty's
generation is unable to meet the Station Energy requirements. Seller is responsible for
causing these electrc services to be available before the First Energy Date. Seller wil
specifically design the Facility to ensure that no energy purchased for supply of electrc
energy to the Facility is delivered to the Buyer as Net Energy or Test Energy.
ARTICLE 9
METERING AND TELEMETRY
9.1 Metering and Telemetr. Seller wil arrange for the Interconnection
Provider to provide, install, and maintain Metering and Telemetry Equipment to be
located at the Metering Point to accurately calculate the actual energy deliveries from the
Seller to the Meterng Point and provide continuous telemetry information from the
Facility to the Interconnection Provider and the Buyer. The Metering and Telemetry
Equipment shall be of the type required to accurately measure, record and report the
energy to provide the Buyer adequate Net Energy and Test Energy measurement data to
administer this Agreement and to integrate the Facility's energy into the Interconnection
Provider's electrcal system. The Buyer shall not be responsible for any costs of the
actual Meterng and Telemetr Equipment, installation, inspections, maintenance and
testing costs.
9.2 Seller wil arrange for and make available at Seller's cost a communication
circuit acceptable to the Interconnection Provider and the Buyer, dedicated to
Interconnection Provider and the Buyer's use to be used for load profiling and another
communications circuit dedicated to Interconnection Provider and Buyer's
communcation equipment for continuous telemetering of the Facilty's energy deliveries
to Designated Dispatch Facility. Interconnection Provider and Buyer provided
equipment wil be owned and maintained by either the Interconnection Provider or the
PAGE 24
Buyer. The Buyer shall be not be responsible for any of the cost of purchase, installation,
operation, and maintenance, including administrative cost of this equipment.
9.3 All meters used to determine the biling hereunder shall be sealed and the
seals shall be broken only by the Interconnection Provider or the Buyer when the meters
are to be inspected, tested or adjusted.
9.4 Meter Inspection. Seller wil arrange for the Interconnection Provider to
inspect the Metering and Telemetry installations regularly and test meters on the
applicable periodic test schedule relevant to the Metering and Telemetr Equipment
installed. If requested by the Seller, the Interconnection Provider shall make a special
inspection or test of a meter and the Seller shall pay the reasonable costs of such special
inspection. The Seller shall make arangements with the Interconnection Provider to be
notified at least two (2) Business Days prior to the time when any inspection or test shall
take place, and the Seller may have representatives present at the test or inspection. If a
meter is found to be inaccurate or defective, it shall be adjusted, repaired or replaced, at
the Seller's expense, in order to provide accurate metering. If a meter fails to register, or
if the measurement made by a meter during a test vares by more than two percent (2%)
from the measurement made by the standard meter used in the test, adjustment (either
upward or downward) to the payments Seller has received shall be made to correct those
payments affected by the inaccurate meter for the actual perod durng which inaccurate
measurements were made. If the actual period canot be deterined, corrections to the
payments shall be based on the shorter of (1) a period equal to one-half(l/2) the time
from the date of the last previous test of the meter to the date of the test which established
the inaccuracy of the meter; or (2) six (6) months. Seller shall state such adjustment as a
credit or additional charge, as appropriate, on its next invoice.
9.5 Additional Telemetry. If the Buyer requests telemetr equipment,
information or services of any nature beyond that expressly required by the
Interconnection Provider, the Seller and Buyer shall mutually cooperate to make efficient
use of Seller's, Interconnection Provider's and Buyer's telemetr equipment to provide
the additional information requested by Buyer in the most cost-effective manner. The
Seller shall not be responsible for any cost associated with additional telemetr
equipment, information, services or requirements that are beyond those expressly
required by the Interconnection Provider.
ARTICLE 10
SYSTEM PROTECTION
10.1 Operation and Maintenance of Seller's Facilities. Seller shall construct,
operate and maintain the Facility and Seller's Interconnection Facilities in accordance
with the Interconnection Providers' requirements, Good Utility Practice(s), the National
Electrcal Code, the National Electrcal Safety Code, and any other applicable local, state
and federal codes.
PAGE 25
ARTICLE 11
FACILITY AND INTERCONNECTION
11.1 Design of Facilty. Seller wil design, construct, install, own, operate and
maintain the Facility and any Seller-owned Interconnection Facilities so as to allow safe
and reliable generation and delivery of energy to the Buyer for the full Ter of the
Agreement.
11.2 Interconnection Facilities. Seller wil constrct, install, own and maintain
all Interconnection Facilities other than those owned, installed or maintained by the
Interconnection Provider. Buyer wil not be responsible for any costs of interconnecting
the Seller's Facility with the Interconnection Provider.
ARTICLE 12
GENERAL OPERATIONS
12.1 Communications. Seller, Interconnection Provider and Buyer shall
maintain appropriate operating communications through the Designated Dispatch Facility
in accordance with Appendix F.
12.2 Scheduled Maintenance. On or before March 1st of each calendar year,
Seller shall submit a written proposed maintenance schedule of significant Facilty
maintenance for the next twelve (12) months, beginnng with March 1st of the current
year, and Buyer and Seller shall mutually agree as to the acceptabilty of the proposed
schedule. The Paries determination as to the acceptabilty of Seller's timetable for
scheduled maintenance wil take into consideration the need to perform maintenance and
perform other work as required to maintain the Facility's reliable operations, Good
Utility Practice(s), Buyer's system requirements, Interconnection Provider's maintenance
schedule, Buyer's maintenance schedule and Seller's preferred schedule. Neither Pary
shall uneasonably withhold acceptance of the proposed maintenance schedule. Upon
mutual agreement between the Paries, or otherwise if required by Good Utilty Practices,
the previously approved Scheduled Maintenance may be revised during a Contract Year.
12.3 Maintenance Coordination. Buyer and Seller shall mutually cooperate, to
the extent practical, to coordinate the Facility's maintenance schedules with the
Interconnection Provider's maintenance schedules and the Buyer's maintenance
schedules such that they occur simultaneously.
12.4 Contact Prior to Curailment. The Buyer wil make a reasonable attempt to
contact Seller prior to exercising its rights to curtail, interrpt or reduce deliveries from
the Seller's Facilty. Seller understands that in the case of emergency circumstances,
real time operations of the electrcal system, and/or unplaned events, the Buyer may not
be able to provide notice to the Seller prior to interrption, curtailment, or reduction of
electrcal energy deliveries to the Buyer.
PAGE 26
ARTICLE 13
BILLING, RECORDS, AUDITS
13.1 Biling Invoices. The monthly biling period shall be the calendar month.
No later than three (3) Business Days after the end of each calendar month, Seller shall
provide to Buyer, bye-mail or fax and confirmed by first-class mail, an invoice for the
amount due Seller by Buyer for the previous calendar month biling period. Seller's
invoice shall show all biling parameters, rates and factors, and any other data reasonably
pertinent to the calculation of monthly payments due to the Seller. Each such monthly
invoice shall calculate the amount that Buyer owes to the Seller for Test Energy, Net
Energy and any offsets for Net Energy Shortfall Damages. Upon receipt of this invoice,
Buyer shall review and confirm all calculations and contact the Seller with any identified
discrepancies.
13.2 Payments. Unless otherwise specified in this Agreement, undisputed
payments due under this Agreement shall be due and payable by electronic fuds transfer
on or before the twenty-fifth (25th) day of the invoicing month or fifteen (15) days after
receipt of the biling statement from the Seller by the Buyer, whichever is later. If the due
date occurs on a day that is not a Business Day, payment wil be due on the next Business
Day. If the undisputed amount due is not paid on or before the due date, a late payment
charge shall be applied to the unpaid balance and shall be added to the next biling
statement. Such late payment charge shall be calculated based on the Interest Rate.
Buyer shall have the right to withhold from the payment any unpaid and undisputed
Seller amounts due to Buyer.
13.3 Maintenance of Records. Seller shall maintain at the Facility or such other
location mutually acceptable to the Paries adequate total generation, net generation, and
maximum generation (kW) records in a form and content consistent with Good Utility
Practice( s).
13.4 Right to Audit; Refuds; Biling Disputes.
13.4.1 Audit Rights. Each Party shall have the right, upon reasonable
notice to the other Pary and durng the other Pary's regular business hours and without
unduly interfering with the conduct of that Pary's business, to access all of that Pary's
records pertaining to invoices under this Agreement and to audit reports, data,
calculations, invoices, Net Energy, and maximum generation records pertaining to the
Facility. The auditing Party shall bear its own costs of pedorming such audit; provided,
however, that the other Pary shall cooperate with the audit and shall not charge the
auditing Pary for any reasonable costs (including without limitation the cost of
photocopies) that the other Party may incur as a result of such audit. A Part shall have
twenty-four (24) months from the date on which an invoice or notice is received to audit
and to challenge that invoice or notice.
13.4.2 Refunds of Overpayments and Underpayments. If an audit
discovers a biling error or errors that resulted in an overayment by the Buyer, Seller
PAGE2?
shall refud to the Buyer the amount of the overpayment plus interest calculated at the
Interest Rate thereon from the date such overayment was made by the Buyer to (but not
including) the date the Buyer actually receives the refud from the Seller. If the audit
discovers a biling error or erors that resulted in an underpayment by the Buyer, the
Buyer shall pay to the Seller the amount of the underpayment plus interest calculated at
the Interest Rate thereon from the due date thereof to (but not including) the date the
Seller actually receives the payment thereof from the Buyer. The Interest Rate used in
this Section shall be the Interest Rate applicable to cash collateraL.
13.4.3 Biling Disputes. Either Pary may dispute invoiced amounts, but
shall pay to the other Pary at least the undisputed portion of invoiced amounts on or
before the invoice due date. To resolve any biling dispute, the Parties shall use the
procedures set forth in Aricle 24. When the biling dispute is resolved, the Pary owing
shall pay the amount owed within five (5) Business Days of the date of such resolution,
with interest charges calculated on the amount owed in accordance with the provisions of
Section 13.4.2. Buyer at any time may offset against any and all amounts that may be
due and owed to Seller under this Agreement, any and all undisputed amounts, including
damages and other payments, that are owed by Seller to Buyer pursuant to this
Agreement. Likewise, Seller at any time may offset against any and all amounts that may
be due and owed to Buyer under this Agreement, any and all undisputed amounts,
including damages and other payments, that are owed by Buyer to Seller pursuant to this
Agreement. Undisputed and non-offset portions of amounts invoiced under this
Agreement shall be paid on or before the due date or shall be subject to the interest
charges set forth in Section 13.4.2.
ARTICLE 14
INDEMNIFICATION AND INSURACE
14.1 Indemfication. Each Pary shall agree to hold harmless and to indemify
the other Pary, its offcers, agents, affiliates, subsidiaries, parent company and
employees against all loss, damage, expense and liability to third persons for injury to or
death of person or injury to property, proximately caused by the indemnifyng Pary's
constrction, ownership, operation or maintenance of, or by failure of, any of such
Pary's works or facilities used in connection with this Agreement. The indemifyng
Pary shall, on the other Pary's request, defend any suit asserting a claim covered by this
indemnty. The indemfyng Pary shall pay all costs, including reasonable attorney fees
that may be incurred by the other Pary in enforcing this indemity.
14.2 Insurance. Durng the Term of this Agreement, Seller shall secure and
continuously carry the following insurance coverage:
14.2.1 Worker's Compensation Insurance. Seller shall, durng the Initial
Term of this Agreement and any extensions thereof, provide and maintain Worker's
Compensation Insurance for all its employees engaged in work under this Agreement in
accordance with statutory requirements. Seller shall obtain a Waiver of Subrogation
Endorsement in favor of Buyer in reference to Worker's Compensation Insurance.
PAGE 28
If any direct claim for Worker's Compensation benefits is asserted against
Seller by any of Seller's employees or, in the event of the death of a Seller's
employee, by such employee's personal representatives, then, upon timely wrtten
notice from Buyer, Seller shall undertake to defend Buyer against such claim(s)
and shall indemnify and hold Buyer harless from and against any such claim(s)
to the extent of all benefits awarded.
14.2.2 Comprehensive General Liability Insurance (including coverage
for bodily injury and death, property damage, independent contractors, products and
completed operations) with limits equal to $1,000,000, each occurrence, combined single
limit. The deductible for such insurance shall be consistent with current Insurance
Industr Utility practices for similar property. Seller to obtain a Waiver of Subrogation
Endorsement in favor of Buyer in reference to comprehensive general liability insurance.
14.2.3 ExcesslUmbrella Liability Insurance with limits not less
than $5,000,000.
14.2.4 If the Seller, in its sole discretion, elects to obtain Boiler
and Machinery Insurance, Property Insurance or Business Interrption Insurance,
the coverages and deductible shall be additionally declared on the anual
insurance certification as required in section 14.3.
14.2.5 All of the above insurance coverages shall be placed with
insurance companies with an A.M. Best rating of A- or better and shall include:
a) A Waiver of Subrogation Endorsement in favor ofthe Buyer.
b) With respect to Comprehensive General Liability Insurance
and ExcesslUmbrella Liability Insurance, an endorsement
naming Buyer as an additional insured, and loss payee.
c) The policy shall include a provision stating that such policy
shall not be canceled or the limits of liability reduced without
sixty (60) days' prior wrtten notice to Seller. Seller shall
notify Buyer within five (5) Business Days after Seller receives
any such notice.
14.3 Seller to Provide Cerificate of Insurance. As required in Section 4.1.7 of
this Agreement and anually thereafter, Seller shall fuish Buyer a certificate of
insurance evidencing the coverage and required endorsements as set forth above.
14.4 Seller to Notify Buyer of Loss of Coverage. If the insurance coverage
required by Section 14.2 shall lapse for any reason, Seller wil immediately notify the
Buyer in writing. The notice wil advise the Buyer of the specific reason for the lapse
and the steps the Seller is taking to reinstate the coverage.
PAGE 29
14.5 Seller's Failure to Maintain Required Insurance. Seller's failure to
maintain the insurance as required in this Aricle 14 shall be a Material Breach of this
Agreement.
ARTICLE 15
CREDIT AND COLLATERA REQUIREMENTS
15.1 Financial Information.
15.1.1 The Buyer shall make available electronically to the Seller
(i) within one hundred-twenty (120) days following the end of a Buyer's fiscal year, a
copy of the Buyer's audited consolidated financial statements for its fiscal year, and
(ii) within sixty (60) days after the end of each of its first thee (3) fiscal quarters of each
fiscal year, a copy of the Buyer's unaudited consolidated financial statements for such
fiscal quarter. In all cases, the statements shall be for the most recent accounting period
and prepared in accordance with generally accepted accounting principles, consistently
applied; provided, however, that should any such statements not be available on a timely
basis due to a delay in preparation or certification, such delay shall not be an Event of
Default so long as the Buyer diligently pursues the preparation of the statements. This
Financial Information is available on the Buyer's website www.idahopower.com.
Buyer's assistance in guiding the Seller to this information on the Buyer's website wil be
satisfaction of this requirement.
15.1.2 The Seller shall make available electronically to the Buyer
(i) within one hundred-twenty (120) days following the end of U.S. Geothermal's fiscal
year, a copy of U.S. Geothermal's audited consolidated financial statements for its fiscal
year, and (ii) within sixty (60) days after the end of each of its first three (3) fiscal
quarers of each fiscal year, a copy of U.S. Geothermal's unaudited consolidated financial
statements for such fiscal quarer. In all cases, the statements shall be for the most recent
accounting perod and prepared in accordance with generally accepted accounting
principles, consistently applied; provided, however, that should any such statements not
be available on a timely basis due to a delay in preparation or cerification, such delay
shall not be an Event of Default so long as the Seller diligently pursues the preparation,
certification and delivery of the statements. Ths Financial Information is available on
the Seller's website ww.usgeothermal.com. Seller's assistance in guiding the Buyer to
this information on the Seller's website_wil be satisfaction of this requirement.
15.1.3 If during the Ter of this Agreement any of the financial
statements required in Sections 15.1.1 or 15.1.2 are not publicly available, the Paries
shall mutually agree to confidentially agreements to allow exchange of confidential
information and/or alternative reporting that is acceptable documentation in lieu of the
documents required in Sections 15.1.1 and 15.1.2.
PAGE 30
15.2 Seller's Performance Assurances.
15.2.1 Exploration Performance Assurance. Within fifteen (15) Business
Days after the Seller fails to satisfy the second or third Project Milestones identified in
Appendix H, the Seller shall provide evidence to Buyer that Performance Assurance in
the amount of no less than $100,000 has been established and wil be maintained until
such time as 1) this Agreement has been terminated, at which time the Seller wil forfeit
the $100,000 Performance Assurance to Buyer, or 2) all Seller Project Milestone defaults
have been cured, at which time any rights the Buyer has to this specific Performance
Assurance wil be released. Upon the Seller's default of these Project Milestones, Notice
of Default and the Default cure provisions as specified in Section 25.2 shall apply.
15.2.2 Development Performance Assurance - Within fifteen (15)
Business Days after the Seller fails to satisfy the fourth Project Milestone (power plant
engineer, procure, and constrct notice to proceed) identified in Appendix H, the Seller
shall provide evidence to Buyer that Pedormance Assurance in the amount of no less
than $250,000 has been established and wil be maintained until such time as this
Agreement has been terminated at which time the Seller shall forfeit this $250,000
Pedormance Assurance to the Buyer. If the Seller is able to demonstrate that the Seller
after commercially reasonable efforts was unable to achieve this Project Milestone due to
its inabilty to obtain project financing, the Buyer may stil terminate the Agreement but
the $250,000 Performance Assurance shall not be fodeited to the Buyer. If all Seller
Project Milestone defaults have been cured, any rights the Buyer has to this specific
Performance Assurance wil be released. Upon the Seller's default of this Project
Milestone, Notice of Default and the Default cure provisions as specified in Section 25.2
shall apply.
15.2.3 Delay Performance Assurance - Ifthe Facility does not achieve
its First Energy Date within ninety (90) days of the Scheduled First Energy Date, the
Seller shall within fifteen (15) Business Days provide evidence to Buyer that
Pedormance Assurance in the amount of no less than $250,000 has been established and
wil be maintained until such time as 1) this Agreement has been terminated and all
damages due the Buyer have been satisfied, or 2) all Seller defaults and Material
Breaches have been cured, the First Energy Date has been achieved and all damages due
to the Buyer have been satisfied, at which time any rights the Buyer has to this specific
Performance Assurance wil be released.
15.2.4 Operational Performance Assurance - If a Net Energy Shortfall as
determined by Section 8.5.5 exceeds thirt percent (30%) of the Anual Guaranteed
Output, the Seller shall within fifteen (15) Business Days provide evidence to Buyer that
Performance Assurance in the amount of no less than $250,000 has been established and
wil be maintained until such time as 1) this Agreement has been terminated and all
damages due the Buyer have been satisfied, or 2) all Seller defaults and Material
Breaches have been cured, the Facility has met or exceeded its Anual Guaranteed
Output for two (2) consecutive Contract Years and no outstanding Net Energy Shortfall
exists, at which time any rights the Buyer has to this specific Performance Assurance wil
be released.
PAGE 31
15.3 If Performance Assurance is required, the Seller shall provide one or a
combination of the following as Pedormance Assurance(s).
15.3.1 Cause Seller's Guarantor to execute and deliver to the Buyer a
Guaranty which is substantially in the form set forth as Appendix C (or, at Seller's
discretion, cause another guarantor that is not experiencing a Material Adverse Change
to execute and deliver to the Buyer a Guaranty which is substantially in the form set
forth as Appendix C or in another form acceptable to the Buyer); or
15.3.2 Establish and maintain at the Seller's expense an escrow account
for the benefit of the Buyer in a form reasonably acceptable to the Buyer; or
15.3.3 Provide a cash deposit to the Buyer; or
15.3.4 Provide a letter of credit in a form reasonably acceptable to the
Buyer.
15.4 Grant of Security Interest in Certain Collateral and Securty. To secure its
obligations under this Agreement, Seller hereby grants to Buyer, a present and continuing
security interest in, and lien on (and right of setoff against), and assignent of, all cash
collateral and cash equivalent collateral and any and all proceeds resulting therefrom or
the liquidation thereof, whether now or hereafter held by, on behalf of, or for the benefit
of, the secured Pary. Seller shall take such action as Buyer reasonably requires in order
to perfect Buyer's first-priority security interest in, and lien on (and right of setoff
against), such collateral and any and all proceeds resulting therefrom or from the
liquidation thereof. This Section 15.4 applies only to cash collateral and cash equivalent
collateral established in accordance with Section 15.3 above.
15.5 Realization Upon Performance Assurance. Upon or at any time after the
occurence and during the continuation of an Event of Default or an Early Termination
Date affecting Seller, the Buyer may do anyone or more of the following: (i) exercise
any of the rights and remedies of a secured party with respect to all Pedormance
Assurance, including any such rights and remedies under law then in effect; (ii) exercise
its rights of setoff against any and all property of the Seller in the possession of the Buyer
or its agent; (iii) draw on any outstanding letter of credit issued for the Buyer's benefit;
and (iv) liquidate all Performance Assurance then held by or for the benefit of the Buyer
free from any claim or right of any natue whatsoever of the Seller, including any equity
or right of purchase or redemption by the Seller. The Buyer shall apply the proceeds of
the collateral realized upon the exercise of any such rights or remedies to reduce the
Seller's obligations under this Agreement, subject to the Buyer's obligation to return any
surplus proceeds remaining after such obligations are satisfied in full.
15.6 Interest Rate on Cash CollateraL. Performance Assurance in the form of
cash shall bear interest at the Interest Rate and shall be paid to Seller on the third (3rd)
Business Day of each calendar month.
PAGE 32
ARTICLE 16
FORCE MAJEURE
16.1 Force Majeure.
16.1.1 General. As used in this Agreement, "force majeure" or "an event
of force majeure" means any cause beyond the reasonable control of the Pary claiming
force majeure which, despite the exercise of due diligence, such Part is unable to
prevent or overcome. Force majeure includes, but is not limited to, acts of God, fire,
flood, storms, wars, hostilities, civil strfe, strkes and other labor distubances (even if
such strikes or disturbances could be resolved by conceding to the demands of a labor
group), earthquakes, fires, lightning, epidemics, sabotage, severe weather, or changes in
law or regulation or governental orders occurng after the Effective Date, to the extent
that by the exercise of reasonable foresight such Pary could not reasonably have been
expected to avoid and by the exercise of due diligence it shall be unable to overcome
suchforce majeure event.
16.1.2 Events That Are Not "Force Majeure." Notwithstanding
Section 16.1.1, the ter force majeure does not include: (a) Seller's ability to sell, or
Buyer's abilty to purchase, Net Energy or Environmental Attbutes at a more
advantageous price than is provided under this Agreement; (b) governental or
regulatory action occurrng after receipt of the Commission approval contemplated by
Aricle 27 and Aricle 28 that impairs Buyer's ability to recover the Contract Price in its
rates or that otherwise affects the value of this Agreement to Buyer or (c) the inabilty for
any reason to make payments hereunder when due.
16.1.3 Requirements Upon Occurrence of Force Majeure. If either Pary
is rendered wholly or in par unable to perorm its obligations under this Agreement
because of an event of force majeure, both Parties shall be excused from whatever
performance is affected by the event offorce majeure, provided that:
16.1.3.1 The Pary claimingforce majeure shall, as soon as
is reasonably possible after the occurrence of the force majeure, give the
other Pary written notice describing the particulars of the occurrence. If
notice is provided by the Pary claiming force majeure withn seven days
of the actual event of force majeure, the Pary claiming force majeure
may identify the star time of the force majeure event and upon the event
of force majeure being accepted by the notified Party, the pary claiming
force majeure wil be granted relief of obligations under this Agreement
from the date identified. If the Pary claiming Force Majeure does not
provide notification to the other Pary within seven days of the event, the
Pary claiming force majeure wil only be eligible to receive relief from
obligations within this agreement from the date the notice is provided..
PAGE 33
16.1.3.2 The suspension of performance shall be of no
greater scope and of no longer duration than is required by the event of
force majeure.
16.1.3.3 No obligations of either Party which arose before
the occurrence causing the suspension of performance and which could
and should have been fully performed before such occurrence shall be
excused as a result of such occurrence.
16.1.3.4 The Pary claiming force majeure shall proceed
with reasonable diligence to remedy its inabilty to perform and shall
provide weekly progress reports to the other Pary describing actions taken
to end theforce majeure.
16.1.3.5 The Pary claimingforce majeure is able to resume
performance of its obligations under this Agreement, that Pary shall give
the other Pary wrtten notice to that effect.
Failure of a Pary to comply with provisions of Sections 16.1.3.1, 16.1.3 .2,
16.1.3.4 and 16.1.3.5 shall create liabilty of such Pary only to the extent
the other Party is damaged by such failure.
16.2 Extension of Scheduled Operation Date and the Term. The Scheduled
Operation Date shall be extended on a day-for-day basis in the event offorce majeure. In
no event wil any delay or failure of performance caused by any conditions or events of
force majeure extend this Agreement beyond its stated Term.
16.3 Termination for Extended Force Majeure. If a delay or failure of
performance caused by the event of force majeure results in a thirt percent (30%) or
more decrease in the delivery or receipt of Net Energy at the Metering Point of the
Facility when similarly compared to the most recently provided Anual Forecast
preceding the event of force majeure and continues for an uninterrpted period of three
hundred sixty-five (365) days from the event's occurence or inception, the Pary not
claimingforce majeure may, at any time following the end of such three hundred sixty-
five (365) day period, and prior to the event offorce majeure being cured, terinate this
Agreement upon wrtten notice to the pary claiming force majeure, without fuer
obligation by either Pary except as to costs and balances incurred before the effective
date of such termination. The Pary not claiming force majeure may, but shall not be
obligated to, extend such three hundred sixty-five (365) day period, for such additional
time as it, at its sole discretion, deems appropriate.
PAGE 34
ARTICLE 17
FORCED OUTAGE
17.1 Seller to Notify Buyer. Promptly upon the occurrence of an event at the
Facility that the Seller deems to be a Forced Outage the Seller shall notify the Buyer of
the declared Forced Outage and adjust the forecast if required as specified in Section 8.4.
17.2 Seller to Submit Explanation. Withn two (2) Business Days of the Forced
Outage event the Seller shall submit to the Buyer a detailed explanation of the Forced
Outage event including but not limited to details of the equipment failure, apparent cause
of the failure, equipment affected by and taken out of service, estimated lost energy
production, and a schedule and plan for making the necessar repairs.
17.3 Buyer Shall Respond to Seller. Upon receipt of the detailed explanation of
the Forced Outage event, the Buyer shall within two (2) Business Days respond to the
Seller accepting, rejecting or requesting additional information in regards to the declared
Forced Outage event. If the Buyer does not respond to the Seller's initial submittal
within two (2) Business Days, the declared Forced Outage event shall be deemed to be
accepted.
17.4 Adjustment to Seller's Anual Guaranteed Output. Only after the
declared Forced Outage event has been accepted by the Buyer and the actual Net Energy
reduction of the specific Forced Outage event has been determined to be equal to or
greater than 33,000 kWh shall the Seller's Anual Guaranteed Output obligation be
adjusted to reflect the Net Energy curtailment that was a result of the Forced Outage. If
it is determined that the actual Net Energy reduction associated with the specific Forced
Outage event is less that 33,000 kWh, no adjustment of the Seller's Anual Guaranteed
Output shall be made.
ARTICLE 18
BUYER'S ACCESS RIGHTS
18.1 Seller to Provide Access. To the extent necessar, Seller hereby grants to
the Buyer for the Term of this Agreement all necessar right-of-ways and easements to
install, operate, maintain, replace, and remove the Buyer's Metering and Telemetr
Equipment, and other equipment and facilities necessary or useful to this Agreement,
including adequate and continuing access rights on property of the Seller.
18.2 Indemnity. If the Buyer exercises any right under this Agreement to
access or enter upon the Seller's property, such access or entr shall be at the Buyer's
sole risk and expense. Buyer shall hold the Seller harless from, and indemify the
Seller against, any and all liabilty for any loss, damage or injury to property or persons
arsing from the Buyer's access to or entry upon to the Seller's propery, except to the
extent that such loss, damage or injury is cause by the Seller's negligence or wilful
misconduct.
PAGE 35
ARTICLE 19
NO THIRD PARTY LIABILITY,
NO DEDICATION OF FACILITY OR SYSTEM
19.1 No Third Pary Liability. Nothing in this Agreement shall be constred to
create any duty to, any standard of care with reference to, or any liability to any person
not a Pary to this Agreement. There are no third pary beneficiares of this Agreement.
19.2 No Dedication. No undertaking by one Party to the other under any
provision of this Agreement shall constitute the dedication of that Pary's system or
facility or any portion thereof to the other Party or to the public or affect the status of the
Buyer as an independent public utility corporation or the Seller as an independent entity.
ARTICLE 20
SEVERAL OBLIGATIONS
Except where specifically stated in this Agreement to be otherwise, the duties,
obligations and liabilities of the Parties are intended to be several and not joint or
collective. Nothing contained in this Agreement shall ever be constred to create an
association, trust, partership or joint venture, or impose a trust or partership duty,
obligation or liabilty on or with regard to either Pary. Each Pary shall be individually
and severally liable for its own obligations under this Agreement.
ARTICLE 21
WAIVER
Any waiver at any time by either Party of its rights with respect to a default under
this Agreement or with respect to any other matters arsing in connection with this
Agreement shall not be deemed a waiver with respect to any subsequent default or other
matter.
ARTICLE 22
CHOICE OF LAW
This Agreement shall be constred and interpreted in accordance with the laws of
the State of Idaho without reference to its choice of law provisions.
ARTICLE 23
LIMITATIONS
23.1 Remedies Satisfy Essential Puroses. THE PARTIES CONFIRM THAT
THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS
AGREEMENT SATISFY THE ESSENTIAL PURPOSES OF THIS AGREEMENT.
PAGE 36
23.2 Sole and Exclusive Remedies. FOR ANY PROVISION FOR WHICH
AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH
EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND
EXCLUSIVE REMEDY. THE OBLIGOR'S LIABILITY SHALL BE LIMITED AS
SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES
AT LAW OR IN EQUITY ARE WAIVED.
23.3 No Punitive, Consequential or Incidental Damages. IF NO REMEDY OR
MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S
LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH
DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY
AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE
WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL
BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR
INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION
DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY
PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE
LIMITATIONS IMPOSED IN THIS AGREEMENT ON REMEDIES AND THE
MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES
RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY,
WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR
ACTIVE OR PASSIVE.
23.4 Liquidated Damages. TO THE EXTENT ANY DAMAGES REQUIRED
TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE
THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR
OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND
THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE
APPROXIMATION OF THE HARM OR LOSS.
ARTICLE 24
DISPUTES
24.1 Disputes. If a dispute arises under this Agreement (a "Dispute"), within
ten (10) days following the delivered date of a written request by either Party (a "Dispute
Notice"), (1) each Pary shall appoint a representative, and (2) the Paries' representatives
shall meet, negotiate and attempt in good faith to resolve the Dispute quickly, informally
and inexpensively. If the Parties' representatives cannot resolve the Dispute within
thirty (30) days after commencement of negotiations, then within ten (10) Business Days
following any request by either Pary at any time thereafter, each Pary representative
(3) shall independently prepare a wrtten sumar of the Dispute describing the issues
and claims, (4) shall exchange its sumar with the summar of the Dispute prepared by
the other Party representative, and (5) shall submit a copy of both summares to a senior
offcer of the representative's Pary with authority to irrevocably bind the Party to a
resolution of the Dispute. Within ten (10) Business Days after receipt of the Dispute
sumares, the senior officers for both Parties shall negotiate in good faith to resolve the
PAGE 37
Dispute. If the Paries are unable to resolve the Dispute within fourteen (14) Business
Days following receipt of the Dispute summares by the senior offices, either Pary may
seek available remedies.
24.2 Venue. Venue for any litigation arising out of or related to this Agreement
shall lie in the District Cour ofthe Fourth Judicial Distrct ofIdaho in and for the County
of Ada.
ARTICLE 25
EVENTS OF DEFAULT, DELAY DAMAGES AND MATERIAL BREACHES
25.1 Events of Default. The following shall be deemed to be Events of Default:
25.1.1 A Pary's dissolution or liquidation;
25.1.2 A Party's assignent of this Agreement or any of its rights under
this Agreement for the benefit of creditors (except for an assignent to the Facility
Lender as security under the Financing Documents as permitted by this Agreement).
25.1.3 A Pary's filing of a petition in banptcy or insolvency or for
reorganization or arrangement under the banptcy laws of the United States or under
any insolvency act of any state, or a Party voluntarly taking advantage of any such law
or act by answer or otherwise.
25.1.4 The fiing of a case in banptcy or any proceeding under any
other insolvency law against a Pary that could materally impact Buyer's ability to
perform its obligations under this Agreement if the affected Pary does not obtain a stay
or dismissal ofthe filing within sixty (60) days after the Pary receives a notice of default.
25.1.5 A Pary's assignent of this Agreement, except as permitted by
this Agreement.
25.1.6 Any representation or waranty made by a Pary in ths Agreement
proves to have been false or misleading in any materal respect when made or ceases to
remain tre during the Ter if such inaccuracy or cessation would reasonably be
expected to result in a signficant adverse impact on the other Pary and such default is
not cured within thrty (30) days after the Pary's receipt of a notice of default.
25.1.7 Seller's failure to establish and maintain Pedormance Assurance as
required by this Agreement if the failure is not cured within thrty (30) days of Seller's
receipt of a notice of default.
25.1.8 A Guaranty Default affecting a Guaranty delivered in support of
this Agreement if the Guaranty Default is not cured within the time permitted by the
Guaranty and the Seller does not provide substitute Performance Assurance to replace the
Guaranty within fifteen (15) Business Days after the Seller's receipt of a notice of the
Guaranty Default.
PAGE 38
25.1.9 Seller's unexcused failure to deliver energy from the Facility to
Buyer as required under this Agreement if the failure is not cured within fifteen (15)
Business Days of Seller's receipt of a notice of default.
25.1.10 Buyer's unexcused failure to receive and accept energy from the
Facility as required under this Agreement if the failure is not cured within fifteen (15)
days of Buyer's receipt of a notice of default.
25.1.11 Seller's failure to attain an actual Operation Date within 2,904
hours (4 months) of the Scheduled Operation Date.
25.1.12 A Pary's failure to make a payment to the other Party when due
under this Agreement, if the failure is not cured within ten (10) Business Days of the
Pary's receipt of a notice of default.
25.1.13 A Pary's failure to comply with any material obligation under this
Agreement, if the failure would result in a significant adverse impact on the other Party
(other than a default already specifically enumerated in this Aricle) and the failure is not
cured within thirty (30) days of the Party's receipt of a notice of default; provided,
however, if such default canot be cured within thirty (30) days despite Seller's diligent
efforts but Seller commences the cure within the thrty (30) day period and thereafter
diligently pursues the cure, the thirty (30) day period shall be extended for as long as is
reasonably required to cure the default (but in no event more than a total of one hundred
twenty (120) days.
25.1.14 Seller's failure to meet the requirements of any one of the Project
Milestones identified in Appendix H.
25.2 Notice of Default. If either Pary defaults in its performance of this
Agreement as provided in Section 25.1, the non-defaulting Party may give notice of the
default in writing to the defaulting Pary, specifying in reasonable detail the natue of the
default. If the defaulting Pary fails to cure the default within sixty (60) days or any other
cure period specifically identified for the default, the non-defaulting Pary may exercise
the specific remedies identified for that default or if no specifics are identified, at its
option, terminate this Agreement and/or pursue its legal or equitable remedies, subject to
any limitation on remedies and damages set forth in this Agreement. The non-defaulting
Pary has the right, but not the obligation, to extend the cure period if the non-defaulting
Party deterines that the defaulting Pary is using all commercially reasonable efforts to
cure the default but is unable to cure the default within an initial sixty (60) day cure
period or the specific cure perod for the identified default.
25.3 Material Breaches. The notice and cure provisions in Aricle 25 do not
apply to defaults identified in this Agreement as Materal Breaches. Material Breaches
must be cured as expeditiously as possible following occurence of the breach and once
cured shall no longer be cause for termination under this Agreement.
PAGE 39
25.4 Delay Damages. If Seller fails to achieve the Operation Date within thirty
(30) days after the Scheduled Operation Date and such failure is not excused by force
majeure or Forced Outage by the Seller or by default or delay of Buyer Delay Liquidated
Damages wil be calculated as defined in Section 1.13 of this agreement. Buyer shall
calculate and invoice the Seller and the Seller shall pay Buyer for any Delay Liquidated
Damages accrued during a given calendar month within fifteen (15) days of the receipt of
the Buyer's invoice. The calculation and payment of Delay Damages to the Buyer from
the Seller shall not exceed $690,000.
25.5 Limitations on Seller's Damages. The following limits shall apply to
Seller's liability for damages: (a) Seller's aggregate financial liability to the Buyer in the
event this Agreement is terminated as allowed in Section 26.5.2 shall be limited to any
Performance Assurances the Seller has been required to provide as specified within this
Agreement as of the date of the termination, (b) Seller's aggregate financial liability to
Buyer for Delay Damages shall not exceed the amount specified in Section 25.4,
(c) Seller's aggregate financial liability for Net Energy Shortfall Damages for any single
Contract Year shall not exceed the values as specified in Appendix D. The limitations on
damages set forth in this Section 25.5 shall not apply to damages arising out of either of
the following events:
25.5.1 Wilful breach of this Agreement by Seller.
25.5.2 Any claim for indemification under Aricle 14.
25.6 Duty to Mitigate Damages. Each Pary agrees that it has a duty to mitigate
damages and covenants that it wil use commercially reasonable efforts to minimize any
damages it may incur as a result of the other Pary's performance or non-pedormance of
the Agreement.
25.7 Buyer's right to collect damages and any other unpaid amounts. The
Buyer shall have the right to withhold any past due, undisputed payments payable to the
Buyer from any payments payable to the Seller.
ARTICLE 26
TERMINATION
26.1 Termination. Upon execution, this Agreement shall continue in full force
and effect for the Term uness terinated in accordance with this Aricle.
26.2 Mutual Agreement. The Paries can mutually terminate ths Agreement by
a wrting signed by both Paries.
26.3 Event of Default. A non-defaulting Party may terminate this Agreement
in accordance with Aricle 25.
PAGE 40
26.4 Prolonged Force Majeure. A Party not claiming force majeure may
terminate this Agreement in accordance with Section 16.3.
26.5 Right to Terminate.
26.5.1 If the Commission issues a final order either disapproving this
Agreement or approving it with condition(s) or modification(s) unacceptable to the
Pary or Paries adversely affected by such modification(s) or condition(s), either Party
has the right to terminate this Agreement by written notice to the other Pary either
within ten (10) Business Days after the Commission denies any Petition(s) for
Reconsideration or, if the Commission grants reconsideration, within ten (10) Business
Days after the Commission renders a decision on reconsideration if said decision either
disapproves the Agreement or approves it with condition(s) or modification(s)
unacceptable to either Party. Any such termination under this Section shall be effective
ten (10) Business Days after such notice is given.
26.5.2 Either Pary may terminate this Agreement as specified in Aricle 3
of this Agreement or if after commercially reasonable efforts the Seller is unable to
satisfy the fourh Project Milestone (issuance of power plant notice to proceed). If
termination occurs as a result of a default of the fourh Project Milestone and the Seller is
able to demonstrate to the Buyer's reasonable satisfaction that the uncured default was a
result of unforeseen Facility financing costs or construction costs, the Seller's
Performance Assurance shall be released and no damages to Buyer wil be applicable.
26.5.3 If a Party does not give the other Pary a notice of termination in
accordance with this Section 26.5 on or before the applicable date specified above, the
affected termination right under this Section 26.5 shall be deemed waived and this
Agreement shall remain in full force and effect in accordance with its ters regardless
of any subsequent Commission order.
26.5.4 Neither Party shall have any liability to the other Pary for any
termination under this Section 26.5.
26.5.5 Any termination under this Section shall be effective ten (10)
Business Days after such notice is given.
26.5.6 If termination of this Agreement is due to a default or Material
Breach of ths Agreement by the Seller neither the Seller, nor the Facility Lender or
Investor individually or collectively takng title to the Facility by foreclosure or otherise
shall make any arangements with any party other than the Buyer for the sale of electric
energy generated from geothermal energy from this Site and the associated Neal Hot
Springs geothermal reservoir for a period of three (3) years from the date of the
termination. If after termination and within this thee (3) year period, the Seller wishes to
resume operations of this Facility and prior to the Facilty resuming operations; 1) all
applicable damages due the Buyer as a result of the termination shall have been satisfied,
and 2) a purchased power agreement for the sale of energy from this Facility to the Buyer
shall be completed. The paries shall act in good faith to negotiate a new purchase power
PAGE 41
agreement. The new purchase power agreement shall include terms and conditions
similar to this agreement, except for revisions required to update this agreement to
current industr standards and revisions required to address the termination of the prior
Agreement. Unless mutually agreed to, the energy pricing in this new purchase power
agreement shall be equal to the energy pricing contained within the Agreement.
ARTICLE 27
GOVERNMENTAL AUTHORIZATION
This Agreement is subject to the jurisdiction of those governental agencies
having control over either Pary of this Agreement, including, but not limited to, the
Commission.
ARTICLE 28
REGULATORY APPROVAL
28.1 Within ten (10) Business Days after the Effective Date Buyer shall fie this
Agreement with the Commission, seeking Commission ApprovaL.
ARTICLE 29
SUCCESSORS AND ASSIGNS
29.1 Binding Agreement. This Agreement and all of the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of the respective
permitted successors and assigns of the Parties.
29.2 Assignent without Consent. Except as permitted in ths Aricle, neither
Pary shall assign this Agreement or any portion of this Agreement, without the prior
wrtten consent of the other Party, which consent shall not be unreasonably withheld,
conditioned or delayed.
29.3 Seller's Consent Not Required. Seller's consent shall not be required for
Buyer to assign ths Agreement to an Affiliate of the Buyer, provided that (1) the
assignee has the same or better credit rating from Moody's and S&P as the Buyer and (2)
the assignee's non-credit enhanced unsecured debt (a) has a rating by at least one of the
two rating agencies, and (b) does not have a Credit Rating below BBB- by S&P or below
Baa3 by Moody's, or does not have a Credit Rating of BBB- by S&P accompanied by a
negative watch or Baa3 by Moody's accompanied by a negative watch. If S&P changes
its rating system during the Term, "BBB-" shall be replaced by S&P's lowest investment
grade rating under the new rating system; likewise, if Moody's changes its rating system
durng the Term, "Baa3" shall be replaced by Moody's lowest investment grade rating
under the new rating system.
PAGE 42
29.4 Buyer's Consent Not Required. Buyer's consent shall not be required:
29.4.1 For Seller to assign this Agreement for collateral purposes to the
Facility Lender; or
29.4.2 For Seller to assign this Agreement to any Affliate of the Seller,
provided that the assignee provide the Performance Assurance of the Agreement; or
29.4.3 For Seller to Assign this Agreement to any third par or paries in
connection with a sale of the Facility to such third pary or parties, provided that such
third pary or paries shall either: (1) have at least three (3) years experience in operating
geothermal electrc generating facilities with an installed nameplate capacity of ten
thousand (10,000) kW or greater; or (2) enter into an operating agreement with another
person (who may be the Seller or an Affiliate of the Seller) who has at least three (3)
year's experience in operating geothermal electrc generating facilities with an installed
nameplate capacity of ten thousand (10,000) kW or greater; and (3) the third party or
paries shall provide the Performance Assurance of the Agreement.
29.5 Accommodation of Facility Lender or Investor. To faciltate the Seller's
obtaining of Project Financing or to facilitate investments in the Seller, Buyer shall use
commercially reasonable efforts to provide such consents to assignents, cerifications,
representations, information, opinions or other documents as may be reasonably
requested by the Seller, the Facility Lender or the Investor in connection with the
financing of or investment in the Facility; provided that in responding to any such
request, the Buyer shall have no obligation to provide any consent, or enter into any
agreement that in Buyer's reasonable opinion significantly adversely affects or expands
any of the Buyer's rights, benefits, risks and/or obligations under this Agreement. Seller
shall reimburse, or shall cause the Facility Lender or the Investor to reimburse, the Buyer
for the incremental direct expenses (including, without limitation, the reasonable fees and
expenses of counsel) incurred by the Buyer in the preparation, negotiation, execution
and/or deliver of any documents requested by the Seller, Facility Lender or Investor,
and provided by the Buyer, pursuant to this Aricle. The rights of the Facility Lender or
Investor wil be set forth in a collateral assignent, estoppel agreement, consent
agreement or similar instrument delivered at the closing of any Facility financing or any
investment and wil include the following provisions:
29.5.1 Right to Cure Defaults. Facility Lender or Investor shall have the
right, but not the obligation, to perform any act required to be perormed by the Seller
under this Agreement to prevent or cure a default by the Seller, and such act performed
by Facility Lender or Investor shall be as effective to prevent or cure a default as if done
by the Seller. Seller shall, in accordance with Aricle 32, provide the Buyer with a notice
identifyng the agent or trstee of the Facility Lender or the Investor and providing
appropriate contact information for the Facility Lender or Investor. Following receipt of
such notice, Buyer shall provide copies of any notices provided to Seller concerning any
default or Event of Default described in this Agreement to the agent or trustee of the
Facility Lender or Investor specified by the Seller in accordance with Aricle 32, and the
Buyer wil accept a cure performed by the agent or trstee of the Facility Lender or
PAGE 43
Investor and wil negotiate in good faith with the agent or trustee of the Facility Lender
and Investor as to the cure period(s) that wil be allowed for the Facility Lender or
Investor to cure any default or Event of Default hereunder and the Buyer wil accept a
cure performed by the Facility Lender or Investor, so long as the cure is accomplished
within the applicable cure period so agreed to by the Buyer and the Facility Lender or
Investor. In complying with the notice provisions in this Section 29.5.1, Buyer wil have
the right to rely on the information provided by the Seller in accordance with Aricle 32.
29.5.2 Right to Assume Agreement. If the Seller defaults under any
financing or investment documents, the Facility Lender or Investor may (but shall not be
obligated to) assume, or cause its designee to assume, all of the interests, rights, and
obligations of the Seller thereafter arsing under this Agreement. Notwithstanding any
such assumption, the Seller shall not be released or discharged from and shall remain
liable for any and all obligations to the Buyer arsing or accruing under this Agreement.
29.5.3 No Obligation to Perform. Buyer agrees that neither the Facility
Lender nor the Investor shall be obligated to perorm any obligation or be deemed to
incur any liability or obligation provided in this Agreement on the par of the Seller or
shall have any obligation or liability to the Buyer with respect to this Agreement except
to the extent the Facility Lender or Investor has assumed the obligations of the Seller
under this Agreement pursuant to this Aricle; provided that the Buyer shall nevertheless
be entitled to exercise all of its rights under this Agreement against the Seller in the event
that the Seller, Facility Lender or Investor fails to perorm the Seller's obligations under
this Agreement.
29.5.4 Notice of Facility Lender or Investor Action. Within ten (10)
Business Days following the Seller's receipt of each wrtten notice from a Facility Lender
or an Investor of a default, or of Facility Lender's or Investor's intent to exercise any
remedies, under the Financing Documents or any investment agreement, Seller shall
deliver a copy of such notice to the Buyer.
29.5.5 If the Facilty Lender or Investor directly or indirectly, takes
possession of or title to the Facility (including possession by a receiver or title by
foreclosure or deed in lieu of foreclosure), then the Facilty Lender or Investor shall
assume all of the Seller's obligations under this Agreement. Provided that the Facility
Lender or Investor shall have no personal liability for any monetar obligations of Seller
under this Agreement which are due and owing to Buyer as of the assumption date.
29.5.6 If the Facility Lender or Investor elect to sell or transfer the
Facility (after directly or indirectly taking possession of, or title to, the Facility) or if the
sale of the Facility occurs though the actions of the Facility Lender or Investor
(including, a foreclosure sale where a third party is the buyer, or otherise), then, as a
condition of such sale or transfer, the Facility Lender or Investor shall cause the buyer or
transferee of the Facility to assume all of Seller's obligations arsing under this
Agreement from and after the date of such sale or transfer.
PAGE 44
29.6 Subcontracting. Seller may subcontract its duties or obligations under this
Agreement without the prior wrtten consent of the Buyer, provided, that no such
subcontract shall relieve the Seller of any of its duties or obligations under this
Agreement.
29.7 Right of First Offer upon Sale of Facility Assets, increase of existing
Facility Nameplate rating, or addition of new generation capacity.
29.7.1 Facility Assets. If, at any time durng the Term, Seller intends to
sell the assets comprising all or substantially all of the Facility (the "Facility Assets") to a
person or entity that is not an Affliate of Seller, Seller shall first offer the Facility Assets
to Buyer. Seller's offer to the Buyer shall set forth, in writing and in reasonable detail,
substantially similar terms and conditions of the offer being proposed by the Seller to the
other person or entity. Seller shall promptly answer any questions that Buyer may have
concerning the offered terms and conditions and shall meet with Buyer to discuss the
offer.
29.7.2 Buyer's Rejection of Offer; Revival of Offer. If Buyer does not
provide notice of its intent to accept the offered terms and conditions within thirty (30)
days after receiving each ofthe Seller's offers made under 29.7.1, Seller may in its sole
discretion enter into an agreement to sell the Facility Assets to a third pary in compliance
with the requirements of this Aricle 29 and on terms and conditions satisfactory to Seller
in its sole discretion. Seller may elect not to proceed with the sale of the Facility Assets.
29.7.3 Buyer's Acceptance of Offer. If Buyer provides notice of its intent
to accept the offer made by Seller under this Section, the Paries shall negotiate in good
faith to enter into a definitive sales agreement that incorporates the terms and conditions
of Seller's offer. The definitive agreement shall be subject to each Party's management
and regulatory approvals. If within thirty (30) days of Buyer's acceptance of the offer, a
wrtten term sheet setting forth the major terms of the definitive sales agreement,
including a timeline to complete negotiations of the definitive sales agreement, has not
been executed by an officer of the Buyer and Seller, then either Party may terminate the
negotiations without fuher obligation to the other Pary.
29.7.4 Limit on Right of First Offer. The right of first offer set forth in
this Section shall apply only if Seller sells all or substantially all of the assets comprising
the Facility in an asset sale to a third pary. It shall not apply to changes in the
membership of Seller or any other reorganization, change of control or other transaction
directly or indirectly affecting Seller or an Affiliate of Seller.
29.7.5 Right of First Offer of additional geothermal generation. If at the
time of development of this Facilty or at any future date, the Seller proposes to increase
the nameplate rating of this Facility or add additional geothermal electrcal generation at
this Site or in close proximity to this Site, the Seller shall first offer the additional
geothermal electrical generation to the Buyer as an amendment to this Agreement, as a
separately negotiated purchase power agreement, or whole or partial ownership of the
Facility or the additional generation facilities. This offer from the Seller shall include but
PAGE 45
not be limited to proposed capacity, energy pricing, contract term, online date and other
information that wil enable the Buyer to be able to evaluate the Buyer's interest in this
additional geothermal electrcal generation. Upon receipt of the Seller's offer (containing
adequate information) the Buyer shall have sixty (60) days to respond to Seller's offer of
the Buyer's intent to continue negotiations for this additional geotheral electrcal
generation. If the Buyer provides notice that the Buyer has no current intention to
continue negotiations the Seller may pursue other opportnities with other paries for the
development and sale of this additional geothermal electrical generation. If the Buyer
provides notice to the Seller of the desire to continue negotiations the Buyer and Seller
shall commence good faith negotiations of an amendment to this Agreement and/or a
separate agreement. If after one hundred and twenty (120) days of good faith
negotiations, an agreement is not completed and/or appears to not be imminent, the Seller
may provide notice to the Buyer of their intention to pursue opportnities with other
paries. By mutual consent, this one hundred twenty (120) day negotiation perod may be
extended.
ARTICLE 30
MODIFICATION
No modification to this Agreement shall be valid unless it is in wrting and signed
by both Paries and subsequently approved by the Commission.
ARTICLE 31
TAXS
Each Party shall pay before delinquency all taxes and other governental charges
which, if failed to be paid when due, could result in a lien upon the Facility or the
Interconnection Facilities.
ARTICLE 32
NOTICES
All wrtten notices under ths Agreement shall be directed as follows and shall be
considered delivered when faxed, e-mailed and confirmed with deposit in the U.S. Mail,
first-class, postage prepaid, as follows:
To Seller:USG Oregon LLC
Att: Manager
1505 Tyrell Lane
Boise,ID 83706
Phone: [phone]
Fax: [phone]
Email: dku~usgeotherma1.com
PAGE 46
with a copy to:USG Oregon LLC
Attn: CFO
1505 Tyrell Lane
Boise,ID 83706
Phone: [phone]
Fax: [phone]
Email: khawkley~usgeothermai.com
Facility Lender or Investor: To be identified by the Seller when applicable. The
Seller shall be limited to identify only one Facility
Lender or Investor.
To Buyer:Idaho Power Company
Attn: Senior Vice President, Power Supply
P.O. Box 70
Boise,ID 83707
Fax: [phone]
Email: 19row~idahopower.com
with a copy to:Idaho Power Company
Attn: Legal Departent
P.O. Box 70
Boise, ID 83707
Fax: [phone]
Email: bkline~idahopower.com
By giving notice to the other Pary, either Pary may from time to time change the
address (es) to which notices or copies are to be sent to it under ths Agreement.
ARTICLE 33
ADDITIONAL TERMS AND CONDITIONS
This Agreement includes the following appendices, which are attached hereto and
included by reference:
Appendix A
Appendix B
Appendix C
Appendix D
Appendix E
Appendix F
Appendix G
Appendix H
Contract Prices
Facility Description
Sample Form of Seller Guaranty
Net Energy Shortfall Price and Anual Cap
Engineerng Cerificates
Communications
One- Line Diagram
Project Milestones
PAGE 47
ARTICLE 34
SEVERABILITY
The invalidity or unenforceability of any ter or provision of this Agreement
shall not affect the validity or enforceability of any other terms or provisions and ths
Agreement shall be construed in all other respects as if the invalid or unenforceable term
or provision were omitted, unless the deletion of such provision or provisions would
result in such a material change so as to cause completion of the transactions
contemplated herein to be unreasonable.
ARTICLE 35
CONFIDENTIAL BUSINESS INFORMATION
35.1 Definition. The following constitutes "Confidential Business
Information," whether oral or written: (l) Parties' proposals and negotiations before the
Effective Date concerning this Agreement, and (2) information that a Pary stamps or
otherwise identifies as "confidential" or "proprietar" before disclosing it to the other
Pary. Notwithstanding the foregoing, "Confidential Business Information" does not
include (A) information that was publicly available at the time of the disclosure thereof
by one Pary to the other, other than as a result of a disclosure by the receiving Pary in
breach of this Article; (B) information that becomes publicly available though no fault of
the receiving Party after the time of the disclosure by the disclosing Pary to the receiving
Party; (C) information that was rightfully in the possession of the receiving Pary
(without confidential or proprietary restrction) at the time of disclosure or that becomes
available to the receiving Pary from a source not subject to any restriction against
disclosing such information to the receiving Party; and (D) information that the receiving
Party independently developed without a violation of this Agreement. The Confidential
Business Information specified in item (l) above shall be considered the Confidential
Business Information of both Seller and Buyer and, therefore, exceptions (C) and (D)
above shall not apply to such information.
35.2 Duty to Maintain Confidentiality. Each Pary agrees not to disclose
Confidential Business Information of the other Par to any other person (other than its
Affiliates, counsel, consultants, lenders, prospective lenders, purchasers, investors,
contractors constrcting or providing serices to the Facility (including but not limited to
turbine suppliers), employees, officers and directors who agree to be bound by the
provisions of this Aricle), without the prior written consent of the other Pary, provided
that either Pary may disclose Confidential Business Information if and to the extent such
disclosure is required (1) by any Requirements of Law, (2) in order for the Buyer to
receive regulatory recovery of expenses related to the Agreement, (3) pursuant to an
order of a court or regulatory agency or (4) in order to enforce this Agreement or to seek
approval of ths Agreement. In addition, Seller may include information concerning the
ters or conditions of this Agreement in financial statements to the extent that such
information is required to be included in financial statements prepared with respect to the
PAGE 48
Facility, Seller or any Affiiate of the Seller in accordance with generally accepted
accounting principles consistently applied. In the event a Party is required by
Requirements of Law or by a court or regulatory agency to disclose Confidential
Business Information, such Party shall to the extent possible notify the other Pary at least
three (3) Business Days in advance of such disclosure and the other Party may seek an
appropriate protective order or waive compliance with the confidentiality terms of this
Agreement. In that event, the Party required by Requirements of Law or by a cour or
regulatory agency to disclose Confidential Business Information wil cooperate fully with
the other Party in seeking a protective order or other assurance that confidential treatment
wil be accorded to the Confidential Business Information.
35.3 Ireparable Injury; Remedies. Each Party agrees that violation of the
terms of this Aricle constitutes irreparable har to the other, and that the hared Pary
may seek any and all remedies available to it at law or in equity, including but not limited
to injunctive relief.
ARTICLE 36
REPRESENTATIONS AND WARRTIES
36.1 Seller's Representations, Waranties and Covenants. Seller hereby
represents and warrants as follows:
36.1.1 Seller is a Delaware Limited Liability company, organized and
existing under the laws of the State of Delaware with a principal place of business at
1505 Tyrell Lane, Boise, ID 83706. Seller is qualified to do business in each other
jurisdiction where the failure to so qualify would have a material adverse effect on the
business or financial condition of the Seller; and the Seller has all requisite power and
authority to conduct its business, to own its properties, and to execute, deliver, and
perform its obligations under this Agreement.
36.1.2 The execution, delivery, and performance of its obligations under
this Agreement by the Seller have been duly authorized by all necessar business entity
action( s), and do not and wil not:
36.1.2.1 Require any consent or approval by any governing body
of the Seller, other than that which has been obtained and is in full force
and effect (evidence of which shall be delivered to the Buyer upon its
request);
36.1.2.2 violate any provision oflaw, rule, regulation, order, writ,
judgment, injunction, decree, determination, or award curently in effect
having applicabilty to the Seller or violate any provision in any formation
documents of the Seller, the violation of which could have a material
adverse effect on the ability of the Seller to perform its obligations under
this Agreement;
PAGE 49
36.1.2.3 result in a breach or constitute a default under the
Seller's formation documents or bylaws, or under any agreement relating
to the management or affairs of the Seller or any indenture or loan or
credit agreement, or any other agreement, lease, or instrent to which the
Seller is a party or by which the Seller or its properies or assets may be
bound or affected, the breach or default of which could reasonably be
expected to have a material adverse effect on the ability of the Seller to
perform its obligations under this Agreement; or
36.1.2.4 result in, or require the creation or imposition of any
mortgage, deed of trst, pledge, lien, securty interest, or other charge or
encumbrance of any natue (other than as may be contemplated by this
Agreement) upon or with respect to any of the assets or properties of the
Seller now owned or hereafter acquired, the creation or imposition of
which could reasonably be expected to have a material adverse effect on
the ability of the Seller to perform its obligations under this Agreement.
36.1.3 This Agreement is a valid and binding obligation of the Seller.
36.1.4 The execution and performance of this Agreement wil not conflict
with or constitute a breach or default under any contract or agreement of any kind to
which the Seller is a par or any judgment, order, statute, or regulation that is applicable
to the Seller or the Facility.
36.2 Seller's Disclaimer of Certain Representations and Waranties.
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT,
36.2.1 SELLER DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE SALE OF TEST ENERGY, NET ENERGY AND
ENVIRONMENTAL ATTRIBUTES.
36.2.2 SELLER MAKS NO REPRESENTATION OR WARRNTY,
EITHER EXPRESS OR IMPLIED, REGARDING THE CURRNT OR FUTURE
EXISTENCE OF ANY ENVIRONMENTAL ATTRIBUTES UNDER THIS
AGREEMENT OR OTHERWISE OR THEIR CHARACTERIZATION OR
TREATMENT UNDER APPLICABLE LAW OR OTHERWISE.
36.3 Buyer's Representations, Waranties and Covenants. Buyer hereby
represents and warrants as follows:
36.3.1 Buyer is a corporation duly organzed, validly existing and in good
standing under the laws of the State of Idaho and is qualified in each other jurisdiction
where the failure to so qualify would have a material adverse effect upon the business or
financial condition of the Buyer; and the Buyer has all requisite power and authority to
conduct its business, to own its properies, and to execute, deliver, and perform its
obligations under this Agreement.
PAGE 50
36.3.2 The execution, delivery, and performance of its obligations under
this Agreement by the Buyer has been duly authorized by all necessary corporate action.
36.3.2.1 violate any provision of law, rule, regulation, order, wrt,
judgment, injunction, decree, determination, or award currently in effect
having applicability to the Buyer or violate any provision in any corporate
documents of the Buyer, the violation of which could have a material
adverse effect on the ability of the Buyer to perform its obligations under
this Agreement;
36.3.2.2 result in a breach or constitute a default under the
Buyer's corporate charter or bylaws, or under any agreement relating to
the management or affairs of the Buyer, or any indenture or loan or credit
agreement, or any other agreement, lease, or instrent to which the
Buyer is a pary or by which the Buyer or its properties or assets may be
bound or affected, the breach or default of which could reasonably be
expected to have a material adverse effect on the ability of the Buyer to
perorm its obligations under this Agreement; or
36.3.2.3 result in, or require the creation or imposition of any
mortgage, deed of trst, pledge, lien, securty interest, or other charge or
encumbrance of any nature (other than as may be contemplated by this
Agreement) upon or with respect to any of the assets or properies ofthe
Buyer now owned or hereafter acquired, the creation or imposition of
which could reasonably be expected to have a material adverse effect on
the abilty of the Buyer to perform its obligations under this Agreement.
36.3.3 Subject to Commission Approval, this Agreement is a valid and
binding obligation of the Buyer.
36.3.4 The execution and performance of this Agreement wil not conflict
with or constitute a breach or default under any contract or agreement of any kind to
which the Buyer is a pary or any judgment, order, statute, or regulation that is applicable
to the Buyer.
36.3.5 Except for Commission Approval, to the best knowledge of the
Buyer, all approvals, authorizations, consents, or other action required by any
Governental Authority to authorize the Buyer's execution, delivery and performance of
this Agreement have been duly obtained and are in full force and effect.
ARTICLE 37
ENTIRE AGREEMENT
PAGE5!
This Agreement constitutes the entire Agreement of the Paries concerning the
subject matter of this Agreement and supersedes all prior or contemporaneous oral or
written agreements between the Paries concernng the subject matter of this Agreement.
No oral or written representation, waranty, course of dealing or trade usage not
contained or referenced herein shall be binding on either Pary.
ARTICLE 38
COUNTERPARTS
This Agreement may be executed by the Parties in two or more separate
counterparts (including by facsimile transmission), each of which shall be deemed an
original, and all of said counterpars taken together shall be deemed to constitute one and
the same instrment.
ARTICLE 39
CAPTIONS
The captions for Aricles and Sections contained in this Agreement are for
convenience and reference only and in no way define, describe, extend or limit the scope
of this Agreement or the intent of any provision contained herein.
IN WITNESS WHEREOF, the Paries have caused this Agreement to be executed
in their respective names on the dates set forth below:
USG Oregon LLC IDAHO POWER COMPANY
\
By ~ -r~ By fi~ Q · &n¿J
Daniel Kunz LisaA. Grow
Printed Name Printed Name
Manager - USG Oregon LLC Senior Vice President, Power Supply
LJ.lii /200 rDate .(¿'/J .oei
Date
PAGE 52
E-Z
==~~~z ~~~~
~
u~~fJ~~'-
~~z z 0 00~U ~""~8 Q UQ0~i:00 ~;Z E-~~ ~
~~==E-~~~u ~0 0 E-~i:~u~~~
~00 0 ~i:;;==E-~Z~Q~""0
0 u
~
0 0 -.ir C"0 00 -.
CJ C'00 ('--C"fl t-
Q,oó ..0\Q ir ('00 -t---C"C"('('('('--------
0 0 -.ir C"0 00 -.~C'00 ('--C"fl t-
Q ir oó ('00 -..t-01Z--C"C"('('('('--------
0 0 00 01 t-('01 ir..0 0 t-t-C'00 -.""CJ N I...0 I.0\01 -\0
01 01 0 0 0 ---------
0 0 00 01 t-('01 iri:~0 t-t-C"00 -.""Q,0\C"\0 0\-..\000\0 0 0 0 ---01 01 ------
0 0 -.ir C"0 00 -.~C'00 ('--C"('t-
:=ir oó ('00 -..t-01~--C"C"('('('('--------
0 0 -.ir C"0 00 -.-C'00 ('--C"fl t-
:=ir oó ('00 -..t-01..--C"C"('('('('--------
0 0 00 01 t-('01 ir
=0 0 r;,t-C"00 -.""
~I.0\C"\0 0\-..\0
01 01 0 0 0 ---------
..t-t--.00 01 t-C"\0
=('ir ('C'0 01 ~('
~Ó N ir 00 Ó -('irt-t-t-t-oo 00 00 00
i.t-t--.00 01 t-C"\0i:('ir fl C'0 ~01 fl~Ó N ir 00 Ó -('irt-t-t-t-oo 00 00 00
i.t-t--.00 01 t-C"\0=('ir ('C'0 ~~('
~Ó N ir 00 Ó -('irt-t-t-t-oo 00 00 00
0 0 00 01 t-('01 ir
,Q 0 0 r;t-C"00 -.-.
Q,I.0\C"\0 0\-..I.~01 01 0 0 0 ---------
0 0 00 01 t-('01 ir
=0 0 t-t-C"00 -.""=\0 0\C"\0 01 -..\0..01 01 0 0 0 ---------
i.C"('-.ir \0 t-oo 01=--------
Q,0 0 0 0 0 0 0 0~C"C"C"C"C"C"C"C"
N
~
~~I~
~
1i~
~
V)N \0 ~\0 N ('00 -V)N -N V)0 00 r--\0 -N ('V)r-oi V)~~N 00 ~-r-~N ~r-0\-('V)r-0\-N ~V)r-01 0 N~~~~V)V)V)V)V)\0 \0 \0 \0 \0 \0 r-r------------------
V)N \0 ~\0 N ('00 -V)N -N V)0 00 r--\0 -N ('V)t'01 V)~~N 00 ~-r-~
N ~r-0\-('V)r-0\-N ~V)r-01 0 N~~~~V)V)V)V)V)\0 \0 \0 \0 \0 \0 r-r------------------
\0 N ('r-('~r-V)N -N ~00 ~N -('~V)\0 ('-01 r-\0 01 N V)00 -V)01 ('t'
00 0 N ~\0 r-01 -N ~V)\0 00 01 0 N ('-N N N N N N ('('('('('('('~~~-----------------
\0 N ('r-('~r-V)N -N ~00 ~N -('~V)\0 ('-01 r-\0 01 N V)00 -V)01 ('t'
00 0 N ~\0 r-01 -N ~V)\0 00 0\0 N ('-N N N N N N ('('('('('('('~~~-----------------
V)N \0 ~\0 N ('00 -V)N -N V)0 00 r--\0 -N ('V)t'01 V)~\0 N 00 ~-r-~
N ~r-0\-('V)r-0\-N ~V)r-0\0 N~~~~V)V)V)V)V)\0 \0 \0 \0 \0 \0 r-r------------------
V)N \0 ~\0 N ('00 -V)N -N V)0 00 r--\0 -C'('V)r-01 V)0 ~N 00 ~-r-~N ~r-01 -('V)r-01 -N ~V)r-01 0 N~~~~V)V)V)V)V)\0 \0 \0 \0 \0 \0 r-r------------------
\0 N ('r-('~r-V)N -N ~00 ~N -('~V)\0 ('-oi r-\0 01 N V)00 -V)01 ('t'
00 0 N ~\Ó r-01 -N ~V)\0 00 0\0 N ('-N N N N N N ('('('('('('('~~~-----------------
('~01 \0 \0 00 N 0 ('00 ('0 01 00 01 N V)
00 ('00 -~r--V)~('('('C'N C'('('
\0 OÒ 01 -N ('V)\0 r-OO 0\0 -N ('~V)
00 00 00 01 01 01 01 01 01 01 01 0 0 0 0 0 0------
('~01 \0 \0 00 N 0 ('00 ('0 01 00 01 N V)('C'C'C'('('00 ('00 -~r--V)~('('0 ~\Ó OÒ 01 -N ('V)\0 r-OO 0\-N ('V)0 0 0 0 0 00000000101010101010101------
('~01 \0 \0 00 N 0 ('00 ('0 01 00 01 N V)
00 ('00 -~r--V)~('('('C'N C'('('
\0 OÒ 0\-N ('V)\0 r-OO 0\0 -N ('~V)
00 00 00 01 01 01 01 01 01 01 01 0 0 0 0 0 0------
\0 N ('r-('~r-V)N -N ~00 ~N -('~V)~('-01 r-\0 01 N V)00 -V)01 ('r-
OO 0 N ~\Ó r-0\-N ~V)\0 00 0\0 N ('-N N N N N N ('('('('('('('~~~-----------------
\0 N ('r-('~r-V)N -N ~00 ~N -('~V)~('-01 r-\0 01 N V)00 -V)01 ('r-
OO 0 N ~\0 r-01 -N ~V)\0 00 01 0 N ('-N N N N N N ('('('('('('('~~~-----------------
0 -N ('~V)\0 r-OO 01 0 -N ('~V)\0NNNNNNNNNN('('('('('('('0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0NNNNNNNNNNNNNNNNN
N
~N
~¡:,..
g
~
APPENDIXB
TO
POWER PURCHASE AGREEMENT
BETWEEN
USG OREGON LLC
AND
IDAHO POWER COMPANY
FACILITY DESCRIPTION
B-1 DESCRIPTION OF FACILITY
The Facility is the Neal Hot Springs Unit #1 geothermal power plant.
The Buyer shall update this Description of Facility to be consistent with the Buyers
Facility description contained within the Buyers notice to proceed to the primar
contractor responsible for the constrction of the Neal Hot Springs Geotheral Power
Plant within sixty (60) days of the date the Seller issues this notice to proceed. The
revised Descrption of Facilty must include specific generation and geothermal plant
information. Including but not limited to generation unit nameplate ratings, V AR
capability, approximated geothermal production and injection well configuration,
geothermal fluid deliver and handling system and any other information deemed to be
appropriate to specifically identify the Facility subject to the terms and conditions of this
Agreement.
As of the Effective Date of this Agreement the Description of the Facility is as follows:
Summary Description of Facility:
The Facility wil be comprised of two or thee modular power plant units
provided by Turbine Air Systems. The unts wil be air cooled. Geotheral
fluid wil be produced from two or more production wells and injected back via
two or more injection wells.
Expected Anual Average Capacity from the Facilty:
The facility is expected to provide between 14,000 - 25,000 kW anual
average capacity, excluding Forced and Scheduled Outages. This wil be
updated to a single annual average design capacity number as par of the
requirements of the fourth Project Milestone of Appendix H and wil be used in
the Anual Output Forecast (Section 8.5.4).
APPENDEX B - PAGE i OF 2
B-2 LOCATION OF FACILITY
The Neal Hot Springs geothermal resource is located in north-central Malheur County, Oregon,
12 miles west-northwest of the town of Vale, Figure B-L. The project encompasses
approximately 6,300 acres of private land leased from JR Land and Livestock Inc. and Cyprus
Gold, all located in the Bully Creek Drainage. Equipment and wells wil be located in Sections
5, 8, and 9, Township 18 South, Range 43 East, Wilamette Merdian
Access is provided by state and county road systems to the project site. Travel west on State
Highway 20 & 26 from Ontaro Oregon to Vale Oregon. On the west edge of Vale tu right on
Graham road, and then west 5.2 miles to the Bully Creek Road. Travel north and west on Bully
Creek road approximately 8 miles to the project site.
Fi re B-1: Location of Neal Hot S rin s
~JOhnDaY
'\
\NEAL~T
SPRI GSPROJE_-~_
APPENDEX B - PAGE 2 OF 2
APPENDIXC
TO
POWER PURCHASE AGREEMENT
BETWEEN
USG OREGON LLC
AND
IDAHO POWER COMPANY
SAMPLE FORM OF SELLER GUARTY
($ XX, 000)
--20_
Idaho Power Company
POBox 70
Boise, Idaho 83707
Fax:
Ladies and Gentlemen:
The (the "Guarantor"), a corporation duly organized under the
laws of the State of is the of, a limited liability company duly
organized under the laws of the State of (the "Company"). Guarantor understands
and acknowledges that Idaho Power Company, an Idaho corporation ("Buyer"), has entered into
that certain Power Purchase Agreement between the Company and Buyer dated as of the
effective date hereof (the "Power Purchase Agreement"). For value received, and under the
provisions of the Power Purchase Agreement, Guarantor hereby unconditionally and, subject to
the provisions of the fifth and sixth paragraphs hereof, irrevocably guarantees the prompt and
complete payment as and when due, whether by acceleration or otherise, of the payment
obligations, whether now in existence or hereafter arsing, under the Power Purchase Agreement
(which guaranty, along with the other ters and conditions set forth herein, is hereafter refered
to as the "Guaranty"). This Guaranty is one of payment and not of collection. Capitalized terms
used but not defined in this Guaranty have the meanng given to them in the Power Purchase
Agreement.
The maximum aggregate liability of the Guarantor in respect of amounts claimed by
Buyer under or pursuant to this Guaranty shall at no time exceed an amount equal to
dollars ($ ); provided, however, that Guarantor also
APPENDIX C - PAGE 1 OF 3
guaranties payment in full (that is, without limitation as to amount) of any reasonable out-of-
pocket legal fees, costs and/or expenses, whether at tral, on appeal or in any arbitration, by
Buyer in connection with prevailing in enforcing the ters ofthis Guaranty.
The Guarantor hereby waives notice of acceptance of this Guaranty and notice of any
obligation or liability to which it may apply, and waives presentment, demand for payment,
protest, notice of dishonor or non-payment of any such obligation or liability, suit or the taking
of other action by Buyer against, and any other,notice to, the Company, the Guarantor or others.
Buyer may at any time and from time to time without notice to or consent of the
Guarantor and without impairing or releasing the obligations of the Guarantor hereunder: (1)
agree with the Company to make any change in the terms of any obligation or liability of the
Company to Buyer, including any modification or amendment to the Power Purchase Sales
Agreement, (2) take or fail to take any action of any kind in respect of any security for any
obligation or liability of the Company to Buyer, (3) exercise or refrain from exercising any rights
against the Company or others, (4) fail to first take action against the Company for amounts due
under the Power Purchase Agreement, and/or (5) compromise or subordinate any obligation or
liability of the Company to Buyer including any security therefore. Any other suretyship
defenses are hereby waived by the Guarantor.
This Guaranty shall terminate on the earlier to occur of (i) the substitution of an alternate
form of Seller Performance Assurance in accordance with the Power Purchase Agreement; and
(ii) the later of (A) the termination or expiration of the Power Purchase Agreement and (B) the
satisfaction of all obligations of the Company under the Power Purchase Agreement.
Notwithstanding the foregoing, the Guarantor fuher agrees that if at any time payment, or any
par thereof, of any of the obligations guaranteed hereunder, is rescinded, is demanded to be
retued and/or must otherwise be restored or returned by Buyer in connection with the
banptcy, insolvency, dissolution, reorganization or similar proceeding of the Company, this
Guaranty shall continue to be effective or be reinstated as the case may be; provided that ths
Guaranty may not be reinstated for any reason after its terination under clause (i) of this
paragraph.
Guarantor may not assign its rights nor delegate its obligations under this Guaranty, in
whole or in par, without prior written consent of Buyer, and any purported assignent or
delegation absent such consent is void, except for an assignent and delegation of all of the
Guarantor's rights and obligations hereunder in whatever form the Guarantor deterines may be
appropriate to a parnership, corporation, trst or other organzation in whatever form that
succeeds to all or substantially all of the Guarantor's assets and business and that assumes such
obligations by contract, operation of law or otherwise. Upon any such delegation and
assumption of obligations, the Guarantor shall be relieved of and fully discharged from all
obligations hereunder, whether such obligations arose before or after such delegation and
assumption.
In the event any payment owing to Buyer under the Power Purchase Agreement or under
this Guaranty is not promptly and completely paid as and when due, any indebtedness of
Company to Guarantor and any payment or distrbution right held by Guarantor against the
Company shall be subordinated to the due and unpaid indebtedness to Buyer until paid in fulL.
Guarantor shall have no right of subrogation until the Company's due and unpaid indebtedness to
Buyer is paid in fulL.
APPENDIX C - PAGE 2 OF 3
This Guaranty constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between Guarantor and Buyer with respect to the subject
matter hereof. This Guaranty may not be modified except pursuant to a written instrment
signed by Buyer and Guarantor. The execution, delivery and performance of this Guaranty have
been duly authorized by all requisite corporate action on the par of the Guarantor. The
provisions of this Guaranty are severable, and if any clause or provision shall be held invalid or
unenforceable in whole or in part, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, and shall not affect the validity or enforceability of any other
clause or provision.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. GUARANTOR AGREES TO
THE EXCLUSIVE JURISDICTION OF COURTS LOCATED IN THE STATE OF
UNITED STATES OF AMERICA, OVER ANY DISPUTES ARISING UNDER OR
RELATING TO THIS GUARANTY.
Very trly yours,
By:
Authorized Officer
APPENDIX C - PAGE 3 OF 3
APPENDIXD
TO
POWER PURCHASE AGREEMENT
BETWEEN
USG OREGON LLC
AND
IDAHO POWER COMPANY
NET ENERGY SHORTFALL PRICE AND ANNUAL CAP
Net Energy Shortall Price The Net Energy Shortfall Price shall be (1) the mathematical
average of the individual Contract Month's monthly Market Energy Cost values of the applicable
Anual Guaranteed Output period or (2) one hundred fifty percent (150%) ofthe Contract Price
specified in Appendix A for the month of June for the Calendar Year which corresponds to that
of the first month of the Anual Guaranteed Output period, whichever is less, minus the Contract
Price as specified in Appendix A for the month of June for the Calendar Year which corresponds
to that of the first month of the Annual Guaranteed Output period. If this Net Energy Shortfall
Price calculation results in a value less than zero (0) then the result wil be zero (0).
Example 1
A Net Energy Shortfall occurs for the Contract Year of March 1,2016 through Februar
28,2017:
Contract Price:109.27 mils/kWh
Mathematical average of the Contract Month's monthly Market Energy Cost
values for the period of March 1,2016 through Februar 28,2017:
40.00 mils/kWh
150% ofthe Contract Price: 109.27 * 150% =163.91 mils/kWh
Net Energy Shortfall Price calculation
The average Market Energy Cost (40.00) is less than 150% ofthe Anual
Rate (163.91). Therefore the Net Energy Shortfall Price calculation is
equal to:
Market Energy Cost (40.00) minus Contract Price (109.27) = -69.27
APPENDIX D - PAGE i OF 3
As the calculation results in a value less than 0, (-69.27) the Net Energy
Shortfall Price equals 0.00 mils/kWh.
Example 2
A Net Energy Shortfall occurs for the Contract Year of March 1,2016 though February
28,2017:
Contract Price:109.27 mils/kWh
Mathematical average ofthe Contract Month's monthly Market Energy Cost
values for the perod of March 1,2016 through February 28,2017:
125.00 mils/kWh
150% ofthe Contract Price: 109.27 * 150% =163.91 mils/kWh
Net Energy Shortfall Price calculation
The average Market Energy Cost (125.00) is less than 150% ofthe Anual
Rate (163.91). Therefore the Net Energy Shortfall Price calculation is
equal to:
Market Energy Cost (125.00) minus Contract Price (109.27) = 15.73
Net Energy Shortfall Price equals 15.73 mils/kWh
Example 3
A Net Energy Shortfall occurs for the Contract Year of March 1, 2016 though Februar
28,2017:
Contract Price:109.27 mils/kWh
Mathematical average of the Contract Month's monthly Market Energy Cost
values for the period of March 1,2016 through February 28,2017:
180.00 mils/kWh
150% ofthe Contract Price: 109.27 * 150% =163.91 mils/kWh
Net Energy Shortfall Price calculation
APPENDIX D - PAGE 2 OF 3
The average Market Energy Cost (180.00) is greater than 150% of the
AnualRate (163.91). Therefore the Net Energy Shortfall Price calculation
is equal to:
150% of Contract Price (163.91) minus Contract Price (109.27) = 54.64
Net Energy Shortfall Price equals 54.64 mils/kWh
Net Energy Shortfall Damages Cap
Contract Net Energy Contract Net Energy
Year Shortfall Damages Cap Year Shortall
Damae:es CaD
1 $0.00 14 $573,073
2 $0.00 15 $590,265
3 $414,000 16 $607,973
4 $426,420 17 $626,212
5 $439,213 18 $644,998
6 $452,389 19 $664,349
7 $465,961 20 $684,279
8 $479,939 21 $690,000
9 $494,338 22 $690,000
10 $509,168 23 $690,000
11 $524,443 24 $690,000
12 $540,176 25 See Note 1
13 $556,382
Note 1 - The Net Energy Shortall Damages Cap in the final year shall be $690,000 prorated to
the number of months in the Annual Output Forecast.
APPENDIX D - PAGE 3 OF 3
APPENDIXE
TO
POWER PURCHASE AGREEMENT
BETWEEN
USG OREGON LLC
AND
IDAHO POWER COMPANY
ENGINEERIG CERTIFICATIONS
Continued on next page
APPENDIX E - PAGE 1 OF 7
ENGINEER'S CERTIFICATION
OF
OPERATIONS & MAINTENANCE POLICY
The undersigned , on behalf of himself and
hereinafter collectively refered to as
"Engineer," hereby states and certifies to the Seller as follows:
1. That Engineer is a Licensed Professional Engineer in good standing.
2. That Engineer has reviewed the Power Purchase Agreement, hereinafter
"Agreement," between Idaho Power as Buyer, and as Seller, dated
3. That the geothermal power production Facility which is the subject of the
Agreement and this statement is identified as the and is
hereinafter referred to as the "Facility."
4.That the Facility is located in Section _ Township
County, Oregon.
, Range
5. That Engineer recognizes that the Agreement provides for the Facility to fuish
electrcal energy to Idaho Power for a twenty five (25) year perod.
6. That Engineer has substantial experence in the design, constrction and operation
of electrc power plants of the same type as this Facility.
7. The Engineer wil identify any material economic relationship to the Design
Engineer of this Facility.
APPENDIX E - PAGE 2 OF 7
8. That Engineer has reviewed and/or supervised the review of the operation and
maintenance policies ("O&M") for this Facility and it is his professional opinion that, provided
said Facility has been designed and built to appropriate standards, adherence to said O&M
policies wil result in the Facility's producing at or near the design electrical output, effciency
and plant factor for a twenty five (25) year period.
9. That Engineer recognizes that Idaho Power, in accordance with Aricle 3 and 4 of
the Agreement, is relying on Engineer's representations and opinions contained in this Statement.
10. That Engineer certifies that the above statements are complete, tre and accurate
to the best of his knowledge and therefore sets his hand and seal below.
By
(P.E. Stamp)
Date
APPENDIX E - PAGE 3 OF 7
ENGINEER'S CERTIFICATION
OF
ONGOING OPERATIONS AND MAINTENANCE
The undersigned , on behalf of himself
and hereinafter collectively referred to as
"Engineer," hereby states and certifies to the Seller as follows:
1. That Engineer is a Licensed Professional Engineer in good standing.
2. That Engineer has reviewed the Power Purchase Agreement, hereinafter
"Agreement," between Idaho Power as Buyer, and as Seller,
dated
3. That the geothermal power production Facility which is the subject of the
Agreement and this statement is identified as the
and is hereinafter referred to as the "Facility."
4.That the Facility is located in Section _ Township
County, Oregon.
, Range
5. That Engineer recognzes that the Agreement provides for the Facility to furnsh
electrcal energy to Idaho Power for a twenty five (25) year perod.
6. That Engineer has substantial experience in the design, constrction and operation
of electrc power plants of the same type as this Facility.
7. The Engineer shall identify any material economic relationship to the Design
Engineer of this Facility.
8. That Engineer has made a physical inspection of said Facility, its operations and
maintenance records since the last previous certified inspection. It is Engineer's professional
opinion, based on the Facility's appearance, that its ongoing O&M has been substantially in
APPENDIX E - PAGE 4 OF 7
accordance with said O&M Policy; that it is in reasonably good operating condition; and that if
adherence to said O&M Policy continues, the Facility wil continue producing at or near its
design electrcal output, effciency and plant factor, within the limits of the geotheral reservoir
capability of the Facility for the remaining years of the Agreement.
9. That Engineer recognizes that Idaho Power, in accordance with Aricle 3 and 4 of
the Agreement, is relying on Engineer's representations and opinions contained in this
Statement.
10. That Engineer certifies that the above statements are complete, tre and accurate
to the best of his knowledge and therefore sets his hand and seal below.
By
(P .E. Stamp)
Date
APPENDIX E - PAGE 5 OF 7
ENGINEER'S CERTIFICATION
OF
DESIGN & CONSTRUCTION ADEQUACY
The undersigned , on behalf of himself and
hereinafter collectively referred to as
"Engineer", hereby states and certifies to Idaho Power as follows:
1. That Engineer is a Licensed Professional Engineer in good standing.
2. That Engineer has reviewed the Power Purchase Agreement, hereinafter
"Agreement," between Idaho Power as Buyer, and as Seller, dated
3. That the geothermal power production Facility which is the subject of the
Agreement and this statement is identified as the and
is hereinafter referred to as the "Facility."
4.That the Facility is located in Section Township
County, Oregon.
, Range
5. That Engineer recognizes that the Agreement provides for the Facility to fuish
electrcal energy to Idaho Power for a twenty five (25) year period.
6. That Engineer has substantial experence in the design, constrction and operation
of electrc power plants of the same type as this Facility.
7. The Engineer shall identify any materal economic relationship to the Design
Engineer ofthis Facility and has made the analysis ofthe plans and specifications independently.
8. That Engineer has reviewed the engineering design and constrction of the
Facility, including the civil work, electrcal work, generating equipment, prime mover
APPENDIX E - PAGE 6 OF 7
conveyance system, Seller furnished Interconnection Facilities and other Facility facilities and
equipment.
9. That the Facility has been constrcted in accordance with said plans and
specifications, all applicable codes and consistent with Good Utility Practices as that term is
described in the Agreement.
10. That the design and constrction of the Facility is such that with reasonable and
prudent operation and maintenance practices by Seller, the Facility is capable of performing in
accordance with the terms of the Agreement and with Prudent Electrcal Practices for a
( ) year period.
11. That Engineer recognizes that Idaho Power, in accordance with Aricle 3 and 4 of
the Agreement, in interconnecting the Facility with its system, is relying on Engineer's
representations and opinions contained in this Statement.
12. That Engineer certifies that the above statements are complete, tre and accurate
to the best of his knowledge and therefore sets his hand and seal below.
By
(P .E. Stap)
Date
APPENDIX E - PAGE 7 OF 7
APPENDIXF
TO
POWER PURCHASE AGREEMENT
BETWEEN
USG OREGON LLC
AND
IDAHO POWER COMPANY
COMMUNICATIONS
Buyer Contact Information
Idaho Power Company
1221 West Idaho Street
Boise,ID 83702
Telephone: [phone]
Mr. Karl Bokenkamp
General Manager Power Supply Operations & Planning
Telephone: [phone]
Email: kbokenkampêidahopower.com
Mr. Mel Chick
Superisor Generation Dispatch
Telephone: [phone]
Email: mchickêidahopower.com
Ms. Tess Park
Manager Power Operations
Telephone: [phone]
Email: tpark2 êidahopower. com
Mr. Chrs Nebrigich
Leader, Transaction Specialist
Telephone: [phone]
Email: tnebrigichêidahopower.com
APPENDIX F - PAGE 1 OF 2
Seller Contact Information
USG Oregon LLC
1505 Tyrell Lane
Boise, ID 83706
208-424-1027
Daniel Kun
Chief Executive Office
dktiusgeothermal.com
Kerr Hawkley
Chief Financial Officer
khawkley(usgeothermal.com
24-Hour Project Operational Contact (To be provided prior to First Energy Date)
Name:
Telephone Number:
Cell Phone:
E-Mail:
Fax:
Project On-site Contact Information (To be provided prior to First Energy Date)
Phone:
E-mail:
APPENDIX F - PAGE 2 OF 2
APPENDIXG
TO
POWER PURCHASE AGREEMENT
BETWEEN
USG OREGON LLC
AND
IDAHO POWER COMPANY
ONE-LINE DIAGRAM OF GENERATING FACILITY
AND
INTERCONNECTION FACILITIES
This Appendix shall contain a one-line diagram of the proposed Facility, Interconnection
Facilities, Point of Delivery, ownership and location of Meters at the Meterng Point and any
other data that is deemed to be perinent in identifyng ownership of equipment, energy
deliveres to the Buyer and/or any other responsibilities of the Paries pertinent to this
Agreement.
No later than thirty (30) days after the execution of the Interconnection Agreement, the Seller
shall provide updates to this one-line diagram and/or confirmation that the previously provided
one-line diagram is stil accurate.
APPENDIX G - PAGE 1 OF 1
APPENDIXH
TO
POWER PURCHASE AGREEMENT
BETWEEN
USG OREGON LLC
AND
IDAHO POWER COMPANY
PROJECT MILESTONE REQUIREMENTS AND COMPLETION DATES
All Project Milestones may be completed earlier then the stated time at the sole option of the
Seller. Failure to complete the requirements of a Project Milestone by the specified
completion date shall be an event of default.
Project Milestones -
1. Exploration Schedule
Delivery of a report and exploration schedule to the Buyer.
Completion Date:The required documentation is due within thirty (30) days
of the date that final Commission Approval is received for
this Agreement.
Documentation:Seller shall provide the Buyer a schedule of the additional
exploration activities at this site beyond what has been
completed as of the date of this Agreement. This schedule
shall include but not be limited to key activities required to
establish an estimated MW rating of a potential generation
facility at this site, and the reporting requirements of
Section 5.2.
2. Additional Well Development
Seller shall have commenced the drillng of an additional geothermal fluid production
or injection well in addition to the single existing well.
Completion Date:June 30, 2011.
APPENDIX H - PAGE 1 of 3
Documentation:Seller shall provide the Buyer with written documentation
of the commencement of well drllng.
3. Exploration Completion and Resource Feasibilty Report
Seller shall have completed adequate exploration and study of the proposed Site to
enable the Seller to establish the estimated electrcal generation capability of the
geothermal resource.
Completion Date:
Documentation:
The required documentation shall be delivered to Buyer no
later than December 31, 2013
The Seller shall supply the Buyer a sumary report
including the Seller's statement of the kW rating of the
Facility this geothermal resource is able to support for the
term of this Agreement. The report shall include a
summar of the findings of the varous studies and
exploration and a recommendation from the Seller as to the
site's ability to accommodate the Facility as envisioned by
this Agreement. This recommendation shall reference and
be supported by the detailed studies and exploration.
Information contained in the report shall include, but not be
limited to, information on the projected electrical
generation capability of this site, ability of the site to
sustain the projected electrcal generation facilty, and
recommended site development plans to maximize the
usage of the identified geotheral resource. Buyer shall
have the right to request additional detail supporting the
summar report and/or discussions with the paries that
performed or validated the studies.
4. Executed EPC Agreement and NTP
Seller shall have executed an engineering, procurement and constrction (EPC)
contract with the primary power plant contractor for constrction of the Facility and a
notice-to-proceed (NTP) shall have been issued.
Completion Date:Seller shall have issued the required NTP described above
no later than December 31, 2014
APPENDIX H - PAGE 2 of 3
Documentation:Seller shall provide the Buyer with written confirmation
that a signed NTP was issued and the date on which that
NTP was issued.
Seller shall also meet the documentation requirements of
the Agreement that reference the fourh Project Milestone
included in Aricle 3.
APPENDIX H - PAGE 3 of3