HomeMy WebLinkAboutReso 91-533 - Approve & Authorize the mayor to sign the letter of intent between COR & Industrial Power Technology, for purchase and sale of an Electric Power Generation Facility • Ir
RESOLUTION NO. `7�Jt� ,�
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
APPROVING AND AUTHORIZING THE MAYOR TO SIGN THE LETTER
OF INTENT BETWEEN THE CITY OF REDDING AND INDUSTRIAL
POWER TECHNOLOGY, FOR THE PURCHASE AND SALE OF AN
ELECTRIC POWER GENERATION FACILITY.
IT IS HEREBY RESOLVED that the City Council of the City of
Redding hereby approves entering into a Letter of Intent between
the City of Redding and Industrial Power Technology, a true copy
of which is attached hereto and incorporated herein by reference.
IT IS FURTHER RESOLVED that the Mayor of the City of Redding
is hereby authorized and directed to sign said Letter of Intent
on behalf of the City of Redding; and the City Clerk is hereby
authorized and directed to attest the signature of the Mayor and
to impress the official seal of the City of Redding thereto.
I HEREBY CERTIFY that the foregoing Resolution was
adjourned
introduced and read at an,,regular meeting of the City Council of
the City of Redding on the 11th day of December , 1991, and was
duly adopted at said meeting by the following vote:
AYES: COUNCIL MEMBERS: Buffum, Moss & Dahl
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: Arness & Fulton
ABSTAIN: COUNCIL MEMBERS: None
Mike Dahl, Mayor
City of Redding
ATTEST: FORM APPROVED:
ETHEL A. NICHOLS, City Clerk RA14DALL A. HAYS, 91ty Attorney
LETTER OF INTENT
BETWEEN
THE CITY OF REDDING
AND
INDUSTRIAL POWER TECHNOLOGY, INC.
This letter of intent (LOI) is being entered into by and between
the City of Redding (City) and Industrial Power Technology (IPT) , a
California corporation, hereinafter sometimes individually referred
to as Party and collectively as Parties. This LOI and the attached
principles (Principles) set forth the general terms and conditions
to be included in a project purchase agreement (Purchase Agreement)
to be entered into by and between the Parties on or before
February 4, 1992. It is the Parties intent that the Purchase
Agreement will address additional terms and/or details not set
forth in either the LOI or the Principles including, but not
necessarily limited to, those listed in Section 16 of the
Principles.
Both Parties agree that, except as set forth in Sections 5 (a) and
7 (a) of the Principles, the obligations described in the LOI and
the Principles shall be neither binding nor enforceable on either
Party. The remaining obligations shall be described only by the
Purchase Agreement and shall not become binding or enforceable
until the Purchase Agreement is properly executed by both Parties.
As indicated by the signatures below, the Parties concur with the
terms and conditions set forth in both this LOI and the attached
Principles.
For the For
CITY OF REDDING, CALIFORNIA IND TRIAL POWER TECHNOLOGY
DATE: DATE: /VO U.
Agreed as to Form
1 PRINCIPLES
2
3
4 1. PROJECT DESCRIPTION.
5 The electric power generation facility (Project) will consist of
6 three (3) or four (4) reconditioned or new (at IPT's sole election)
7 General Electric Frame 5 combustion turbine generating units, or
8 other comparable units mutually agreed upon between the Parties
9 before March 1, 1992 . These generating units are referenced
10 individually herein as "Unit" and collectively as "Units" . The
11 Units shall be capable of producing at least 58.5 megawatts (MW)
12 (Capacity) net International Standards Organization (ISO) using a
13 combination of natural gas and/or Liquified Petroleum Gas (LPG) .
14
15 The Project is to be built by IPT in Redding, California on
16 property owned by the City and located on the same site and
17 adjacent to the Redding Power Plant (Plant) located at 17120 Clear
18 Creek Road, Redding, California.
19
20 The Project shall be completed in all respects to electric utility
21 industry standards, capable of independent Unit operation and
22 operation in parallel, and fully dispatchable from the City' s
23 Electric Utility operations center. The Project shall include all
24 equipment necessary to connect the Project to the low voltage side
25 of the step-up transformer.
26
27 2. ACCEPTANCE TEST.
28 Prior to the City taking possession of the Project, a series of
29 tests (Acceptance Test) will be performed to determine the
30 operating viability of the Project. The Parties agree that the
31 specific requirements of the Acceptance Test will be included in
32 the Purchase Agreement. The Acceptance Test shall conform to
33 electric utility industry standards and shall include verification
34 that the Project can produce reliably at least 58.5MW net with
35 turbine inlet temperatures at 90° F for a consecutive 24-hour
36 period using natural gas and/or LPG. ISO procedures will be used
37 to adjust the actual Project net output resulting from the actual
38 turbine inlet temperatures measured during the Acceptance Test to
39 the theoretical Project net output if the turbine inlet
40 temperatures were 90° F. The Acceptance Test also shall include
41 verification that the Percentage Change In Project Efficiency, as
42 described in Section 3 (g) , equals or exceeds zero percent.
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1 3. PROJECT EFFICIENCY.
2 The City agrees to pay IPT incentive increases (Incentive
3 Increases) for power output levels above the minimum established
4 for the Acceptance Test in accordance with Section 4 (b) . The
5 amount of the Incentive Increase shall be based on the difference
6 between the minimum Project efficiency specified in Sections 2 and
7 3 (g) of these Principles and the actual Project efficiency. The
8 difference shall be determined in accordance with this Section 3
9 using the Unit Full Output of each Unit determined in accordance
10 with Section 3 (a) , the test load points of each Unit set forth in
11 Section 3 (b) (Test Load Points) , the base heat rate for each Test
12 Load Point of each Unit set forth in Section 3 (c) (Base Heat Rate)
13 and the actual heat rate for each Test Load Point of each Unit
14 determined in accordance with Section 3 (d) (Actual Heat Rate) .
15
16 3 (a) Unit Full Output:
17 The unit full output (Unit Full Output) for each Unit shall
18 equal each Unit's minimum average hourly net (as determined by
19 ISO procedures) output, in MW, as determined during a test
20 period of 24-consecutive-hours.
21
22 3 (b) Test Load Points:
23 The efficiency of each Unit shall be measured at five (5) Test
24 Load Points. Each Test Load Point shall equal the product of
25 the Unit Full Output and a percentage. The five percentages
26 used to calculate the five (5) Test Load Points for each Unit
27 shall be: 100%, 90%, 80%, 60%, and 50%.
28
29 3 (c) Base Heat Rate Table:
30 Each Test Load Point shall have a corresponding Base Heat Rate
31 as presented in the following Table 3A:
32
33
34
35
36 TABLE 3A
37 Test
38 Load Points
39 (Percent of
40 Full Output Base Heat
41 for each Unit) Rate (Btu/kWh)
42
43 1. 100 13 ,700
44 2. 90 14, 100
45 3 . 80 14,500
46 4. 60 15, 600
47 5. 50 16, 600
48
49
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1 3 (d) Actual Heat Rate:
2 Each Unit's Actual Heat Rate for the five (5) Test Load Points
3 of each Unit shall equal the Btus consumed (based on fuel
4 consumption) by the Unit divided by the kWh's produced by the
5 Unit as measured while the Unit operates for one continuous
6 half-hour at each Test Load Point during five (5) one-half
7 hour test periods following the determination of the Unit Full
8 Output, as required in Section 3 (a) .
9
10 3 (e) Percent Change In Heat Rate:
11 The Percent Change In Heat Rate for each Test Load Point of
12 each Unit will be determined using the following procedure:
13
14 (1) Subtract the Actual Heat Rate determined in Section
15 3 (d) from the corresponding Base Heat Rate set forth
. 16 in Table 3A of Section 3 (c) , and
17 (2) Divide the resulting difference by the Base Heat Rate
18 set forth in Table 3A of Section 3 (c) , and
19 (3) Multiply the resultant quotient by one hundred (100)
20
21 The resultant product shall be the Percent Change In Heat
22 Rate.
23
24 3 (f) Percent Change In Unit Efficiency:
25 The Percent Change In Unit Efficiency for each Unit will be a
26 weighted average of the Percent Change In Heat Rate for each
27 Test Load Point and will be determined using the following
28 procedure:
29
30 (1) Multiply the Percent Change In Heat Rate, derived in
31 Section 3 (e) , associated with the Unit's 100% Test
32 Load Point by 0. 5,
33 (2) Multiply the Percent Change In Heat Rate associated
34 with each of the Unit's remaining four Test Load
35 Points by 0. 125, and
36 (3) Sum the five products derived for each Unit in Section
37 3 (f) Steps (1) and (2) above.
38
39 The resultant sum shall be the Percent Change In Unit
40 Efficiency.
41
42 3 (g) The Percent Change In Proiect Efficiency:
43 The Percent Change In Project Efficiency will be a weighted
44 average of the Units' Percent Change In Unit Efficiency and
45 will be determined using the following procedure:
46
47 3 (g) .(i) Calculate the Unit Weights to be used to
48 determine the weighted average of the Percent Change In
49 Unit Efficiency:
50
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1 For 3 Units:
2 (1) Multiply the Unit Full Output for the most
3 efficient Unit [i.e. , the Unit with the highest
4 positive value derived in Section 3 (f) above] by
5 1.5, the product shall be Weight #1.
6 (2) Multiply the next most efficient Unit's Unit Full
7 Output by 1. 0, the product shall be Weight #2.
8 (3) Multiply the least efficient Unit's Unit Full
9 Output by 0.5, the product shall be Weight #3.
10
11 For 4 Units•
12
13 (1) Multiply the Unit Full Output for the most
14 efficient Unit [i.e. , the Unit with the highest
15 positive value derived in Section 3 (f) above] by
16 1.5, the product shall be Weight #1.
17 (2) Multiply the second most efficient Unit's Unit
18 Full Output by 1.25, the product shall be Weight
19 #2 .
20 (3) Multiply the third most efficient Unit's Unit Full
21 Output by 0.75, the product shall be Weight #3.
22 (4) Multiply the least efficient Unit's Unit Full
23 Output by 0. 5, the product shall be Weight #4.
24
25 3 (g) (ii) Calculate the weighted average of the Units '
26 Percent Change in Unit Efficiency:
27
28 For 3 Units:
29 (1) Multiply the Percent Change in Unit Efficiency for
30 the most efficient Unit [i.e. , the Unit with the
31 highest positive value derived in Section 3 (f)
32 above] by Weight #1,
33 (2) Multiply the next most efficient Unit's Percent
34 Change In Unit Efficiency by Weight #2 ,
35 (3) Multiply the least efficient Unit's Unit Percent
36 Change In Unit Efficiency by Weight #3 ,
37 (4) Sum the three products derived for each Unit in
38 Section 3 (g) (ii) Steps 1, 2, and 3 , and
39 (5) Divide the sum derived in Section 3 (g) (ii) Step 4
40 by the sum of the three Weights derived in Section
41 3 (g) (i)
42
43 For 4 Units:
44 (1) Multiply the Percent Change in Unit Efficiency for
45 the most efficient Unit (i.e. , the Unit with the
46 highest positive value derived in Section 3 (f)
47 above] by Weight #1,
48 (2) Multiply the second most efficient Unit's Percent
49 Change In Unit Efficiency by Weight #2,
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a
1 (3) Multiply the third most efficient Unit's Percent
2 Change In Unit Efficiency by Weight #3 ,
3 (4) Multiply the least efficient Unit' s Unit Percent
4 Change In Unit Efficiency by Weight #4,
5 (5) Sum the four products derived for each Unit in
6 Section 3 (g) (ii) Steps 1, 2 , 3 , and 4, and
7 (6) Divide the sum derived in Section 3 (g) (ii) Step 5
8 by the sum of the four Weights derived in Section
9 3 (g) (i) .
10
11 The resultant quotient shall be the Percent Change In
12 Project Efficiency.
13
14 4. PURCHASE PRICE.
15 The purchase price (Purchase Price) shall be the base purchase
16 price (Base Purchase Price) plus Incentive Increases minus a price
17 decrease (Price Decrease) , if applicable.
18
19 4 (a) Base Purchase Price:
20 The Base Purchase Price will be Thirty-two Million Three
21 Hundred Sixty Thousand Dollars ($32 , 360, 000) . The Base
22 Purchase Price will be owed to IPT only if the Project passes
23 the Acceptance Test.
24
25 4 (b) Incentive Increases:
26 To the extent that the Project's capacity exceeds 51MW at
27 90° F turbine inlet temperature (as determined by ISO
28 procedures) and/or efficiency exceeds the minimum amounts
29 specified in Section 3 (g) of these Principles, there shall be
30 a corresponding Incentive Increase. The amount of the
31 Incentive Increases for increased capacity and increased
32 efficiency shall be in accordance with the following:
33
34
35 Capacity
36 Incentive
37 Percent Efficiency Increases
38 Change In (Heat Rate) (per MW
39 Project Incentive above
40 Efficiency Increases 51MW)
41
42 1. 0 - 3 .9 $ -0- $200, 000
43 2. 4 . 0 - 7.9 $ 400, 000 $250, 000
44 3 . 8 . 0 - 11.9 $ 900, 000 $300, 000
45 4. 12. 0 - 15.9 $1, 500, 000 $350, 000
46 5. 16. 0 - 19. 9 $2,200, 000 $350, 000
47 6. 20. and $3 ,200, 000 $350, 000
48 over
49
50
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1 4 (c) Price Decrease:
2 To the extent the City furnishes and installs generation
3 control equipment for the Units, there shall be a
4 corresponding Price Decrease. The Parties agree to establish
5 the provisions for such Price Decrease in the Purchase
6 Agreement.
7
8 S. PAYMENTS TO IPT.
9 Billing and payment under these Principles and the Purchase
10 Agreement shall be in accordance with this Section 5:
11
12 5 (a) Initial Payment:
13 Three (3) payments of Eighty Thousand Dollars ($80, 000) each
14 shall be paid by the City to IPT after execution of these
15 Principles. The first such payment shall occur subsequent to
16 the execution of these Principles and within 10 days of
17 receipt of billing by IPT. IPT shall bill for the second and
18 third payments on or after thirty (30) and sixty (60) days,
19 respectively, and respective payment by the City for such
20 billings shall occur within 10 days of receipt of such
21 billings. The total payment (Initial Payment) from the City
22 to IPT under this Section 5 (a) shall be Two Hundred Forty
23 Thousand Dollars ($240, 000) . The Initial Payment set forth
24 under this Section 5 (a) is intended to cover the costs
25 associated with IPT's obligation under Section 7 (a) of these
26 Principles and shall not be owed to IPT if IPT fails to meet
27 its obligations under such Section 7 (a) .
28
29 5 (b) Second Payment:
30 Following execution of the Purchase Agreement by the Parties
31 and upon receipt of notice of the availability of the proceeds
32 of the debt issued to finance the Project, the City shall
33 within 15 days of receipt of billing by IPT, pay to IPT the
34 sum of Five Hundred Thousand Dollars ($500, 000) provided that
35 IPT has obtained the sureties in accordance with Section 7 (b)
36 of these Principles.
37
38 5 (c) Progress Payments:
39 Beginning with the first month following the month during
40 which the second payment referenced in Section 5 (b) of these
41 Principles is made, and continuing until the date upon which
42 the Project has passed the Acceptance Test, IPT will, within
43 the first ten (10) days of each month during the 29-month
44 permitting and construction period, render a bill to the City
45 for work completed during the prior month. Such bill shall be
46 based on the percentage of completion of the Project for the
47 prior month and may include billing for previously completed
48 work not yet compensated. The City shall pay to IPT the
49 undisputed amount of the monthly progress payment within 15
50 days after receipt of the bill. Such payment shall be reduced
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1 by the retainage described in Section 5 (f) of these
2 Principles. All monthly billings for Project work shall be in
3 accordance with Section 6 of these Principles.
4
5 5 (d) Payment for Units:
6 At such time that IPT has purchased Units and, provided such
7 Units are not new units, arranged for the reconditioning
8 thereof, the City shall, within 15 days after receipt of a
9 bill from IPT, pay IPT for funds expended for the procurement
10 or reconditioning of the Units, and IPT shall concurrently
11 grant to the City a first priority security interest in the
12 Units and any reconditioning contracts between IPT and third
13 parties for the reconditioning of such Units. Such payment
14 shall be reduced by the retainage described in Section 5 (f) of
15 these Principles.
16
17 5 (e) Acceptance Payment:
18 Within fifteen (15) days following the date on which the
19 Project has passed the Acceptance Test, the City shall pay to
20 IPT an amount equal to the difference between the Base
21 Purchase Price (adjusted by the Incentive Increases and/or
22 Price Decrease in accordance with Sections 4 (b) and 4 (c) of
23 these Principles, respectively) , and the aggregate of the sums
24 paid in accordance with Sections 5 (b) , 5 (c) , and 5 (d) of these
25 Principles. Such payment shall be reduced by the retainage
26 described in Section 5 (f) of these Principles. All payments
27 shall be made in U.S. Dollars and from immediately available
28 funds.
29
30 5 (t) Retainage:
31 Each of the payments to be made to IPT as described in
32 Sections 5 (c) , 5 (d) , and 5 (e) of these Principles shall be
33 subject to retention by the City of ten (10) percent
34 (Retainage) . The purpose of all such retainage is to ensure
35 satisfactory performance of the Project during its first year
36 of commercial operation. If the Project fails to perform as
37 agreed during the first year of commercial operation, and
38 provided IPT refuses to otherwise cure such failure, the
39 Retainage shall, except as otherwise provided in this Section
40 5 (f) , be used to cure the failure so that the Project performs
41 as agreed. If, in the sole opinion of the City, cure of the
42 failure is not practical, all Retainage shall remain with the
43 City. On the first business day following the first
44 anniversary of the date on which the Project passes the
45 Acceptance Test, any remaining Retainage, plus an amount equal
46 to seven percent of the remaining Retainage, shall be paid to
47 IPT.
48
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1 5 (g) Project Financing:
2 All obligations for payments by the City under the Purchase
3 Agreement shall be subject to the City obtaining financing for
4 the Project.
5
6 6. BUDGET AND DRAW-DOWN SCHEDULE.
7 The City and IPT shall. mutually agree upon a budget for the
8 Project, which budget shall be attached to the Purchase Agreement
9 as an exhibit. The budget shall include a draw-down schedule which
10 shall be based on a 29-month permitting and construction schedule.
11 The draw-down schedule shall be used as the basis for establishing
12 the appropriate payment for the percentage of work completed. Upon
13 notification by IPT, the City shall inspect, review, verify, and
14 determine the percentage of completion for all work included in any
15 billing prior to rendering payment for such work. Payment for such
16 work shall be made in accordance with Sections 5 (c) and 5 (d) of
17 these Principles. During the 29-month permitting and construction
18 period, IPT shall bill the City on the first (1st) business day of
19 . each month for the costs incurred by IPT for Project work completed
20 during preceding months. Such costs may include the dollar amounts
21 set forth in the Project budget to cover IPT's administrative,
22 design, and permitting costs for the immediately preceding month,
23 and any undisputed costs not yet compensated from previous
24 billings, provided, however, that such costs shall not be billed if
25 Project construction is behind schedule
26
27 7. GUARANTEES BY IPT.
28 IPT shall provide the City certain guarantees as discussed in this
29 Section 7.
30
31 7 (a) Within 60 Days of Execution of These Principles:
32 Within sixty (60) days of execution of these Principles, IPT
33 shall prepare and submit to the SCAQMD the air quality permit
34 application for the Project. This permit application shall be
35 prepared and submitted in the City's name such that the City
36 may proceed with the permitting process for construction of a
37 combustion turbine at or near the Plant in the event the
38 Purchase Agreement is not executed.
39
40 7 (b) Prior to Receiving Authority to Construct:
41 All obligations of IPT to repay to the City such sums as are
42 paid by the City to IPT in connection with the Project prior
43 to the date of the issuance by the Shasta County Air Quality
44 Management District (SCAQMD) of the Authority to Construct
45 (ATC) shall be guaranteed by sureties obtained by IPT for such
46 sums. Such sureties shall be mutually acceptable to the
47 Parties.
48
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1 7 (c) Prior to Purchasing units:
2 Prior to purchasing the Units, IPT shall provide certificates
3 of insurance for the Units with terms acceptable to the City
4 and naming the City as a coinsured . IPT shall also obtain a
5 performance bond prior to executing the refurbishing contract.
6 The terms of performance bond shall be acceptable to the City
7 and shall be transferable to the City if IPT is found to be in
8 default under the terms of the Purchase Agreement. The City's
9 approval of the Insurance and Performance Bond shall not be
10 unreasonably withheld.
11
12 7 (d) Performance Bond and Payment Bond:
13 Prior to commencing construction and prior to purchasing any
14 Units that require refurbishing, IPT shall obtain a
15 performance bond and a payment bond consistent with the terms
16 and conditions of the Public Works Performance Bond and Public
17 Works Payment Bond as required of all construction contractors
18 retained by the City.
19
20 8. PROJECT PERMITS.
21 IPT covenants that the Project as described herein will be designed
22 and constructed such that all required permits will be obtainable.
23
24 8(a) Obligations of IPT:
25 IPT shall obtain all permits necessary for construction and
26 operation of the Project, including, but not necessarily
27 limited to:
28
29 8 (a) (i) The ATC,
30
31 8 (a) (ii) The Regional Water Quality permit,
32
33 8 (a) (iii) The Department of Health Services approval for
34 aqueous ammonia (including a Risk Management Protection
35 Plan) ,
36
37 8 (a) (iv) All approvals required under the California
38 Environmental .Quality Act (CEQA) ,
39
40 8 (a) (v) The Small Power Producer Exemption (SPPE)
41 permit as issued by the California Energy Commission, and
42
43 8(a) (vi) An Authority to Operate (ATO) issued by the
44 SCAQMD.
45
46 All permits shall provide that the Project is permitted to
47 operate for at least 2, 200 hours per year. IPT further agrees
48 to cooperate with and provide reasonable assistance to the
49 City in repermitting the Plant from the execution date of the
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1 Purchase Agreement to the date the Project begins commercial
2 operation.
3
4 8 (b) Obligations of the City:
5 All permitting costs associated with any repermitting required
6 for the Plant shall be borne in full by the City. Following
7 the City's acceptance of the Project, procurement or renewal
8 of any and all permits, compliance testing, and all other
9 actions as may be required for the Project to remain in
10 compliance on an ongoing basis, shall be the responsibility of
11 the City and IPT shall have no liability therefor. The City
12 further agrees to cooperate with- and provide reasonable
13 assistance to- IPT in obtaining the ATC and ATO, provided such
14 assistance is limited to the use of existing City staff and,
15 in the sole opinion of the City, has negligible effect on
16 other tasks City staff may be assigned. Further, in no case
17 shall the City's level of cooperation under this Section 8 (b)
18 influence IPT's obligations.
19
20 8 (c) Subsequent Changes to Law:
21 IPT does not warrant the compliance of the Project should any
22 statutory, regulatory or like changes that directly affect the
23 Project occur after issuance of the ATC. However, any waiver
24 of IPT's obligations in the event of such changes shall be
25 limited to the specific areas of compliance affected.
26 Warrants for compliance in all other areas shall remain in
27 full force and effect.
28
29 9. PROJECT EOIIIPMENT AND SERVICES.
30 The Project shall include the following equipment and services, and
31 it shall be IPT's obligation to provide:
32
33 9 (a) Primary Generation Equinment:
34 Primary generation equipment consisting of three (3) or four
35 .(4) new or used (at IPT's sole discretion) and fully
36 reconditioned General Electric Frame 5 combustion gas turbine
37 generators, supplied with filters and precoolers, with
38 Woodward or better solid state control systems compatible with
39 Bailey Net 90 controls. Precoolers will be designed to lower
40 turbine inlet temperature. Each Unit will be electric start
41 and installed in self-contained housings. Each Unit will be
42 capable of completing startup within ten (10) minutes of start
43 signals, including: synchronizing and interconnecting with
44 the City's electric utility system and producing Unit Full
45 Output.
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1 9 (b) Project Fuel System:
2 A fuel system consisting of:
3
4 9 (b) (i) An interconnection to City's gas supply system
5 at or near the point where the City gas supply system
6 connects with Pacific Gas and Electric Company's (PG&E)
7 gas meter (excluding any necessary or requested
8 reinforcement of the existing PG&E gas line extending from
9 Highway 273 to PG&E's gas meter serving the Project site,
10 which will be the City's responsibility) , and
11
12 9 (b) (ii) An alternate fuel system consisting of storage
13 tanks (located at the Project site) capable of storing and
14 supplying LPG to support Full Output for at least 24
15 hours. The alternate fuel system shall be complete with
16 an off-loading system, a vaporizer, and gas blending and
17 support equipment suitable for instantaneous remote fuel
18 switching from natural gas to sufficient LPG and back with
19 no interruption to Project operation.
20
21 9 (c) Project Emission Control Equipment:
22 Emission control equipment [including selective catalytic
23 reduction (SCR) , if required by a permitting agency or, if
24 desired by the City) including support hardware as may be
25 required.
26
27 9 (d) Plant Control System Modification:
28 Modification to the control system equipment and interface to
29 the existing control room at the Plant. The City will be
30 responsible for all modifications of the Plant system to
31 interface the City's Electric Utility operations center. IPT
32 will interface the Project controls with the Plant controls at
33 the Plant control room to allow for complete operation from
34 that location.
35
36 9 (e) Proiect Permits:
37 All required permits for the construction and operation of the
38 Project in accordance with Section 8 hereof. All permits
39 shall be in the name of the City or assigned to the City on or
40 before the Project's commercial operation date.
41
42 9 (t) Site Improvements:
43 All site improvements required for the construction of the
44 Project, including but not necessarily limited to site
45 lighting, local fire protection system, security and paving.
46
47 9 (g) Proiect Systems Control:
48 Project control systems designed to provide for complete
49 control interface to the Plant and independent or remote
50 dispatch for each Unit.
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1 9 (h) Heat Recovery Ecruipment Provisions:
2 Arrangement of the Project for the future inclusion of a heat
3 recovery steam generator and combined cycle steam turbine,
4 with spool pieces installed to facilitate this future
5 modification.
6
7 10. DEFAULT AND REMEDIES.
8 This Section 10 describes the circumstances relating to default by
9 the Parties under the Purchase Agreement and the remedies for each
10 potential default. If a dispute regarding an alleged default
11 arises, all obligations under the Purchase Agreement shall remain
12 in full force and effect until such time the Parties have resolved
13 this dispute. Resolution of disputes is referenced in Section 12
14 herein.
15
16 10 (a) Default by IPT:
17 Any of the following will constitute default by IPT:
18
19 10 (a) (i) IPT fails to obtain the ATC by April 1, 1993 ;
20
21 10 (a) (ii) The Project, during the first year of
22 commercial operation, suffers more than three (3)
23 consecutive occasions upon which the Project fails to
24 deliver capacity (between 5MW and 58. 5MW, as requested by
25 the City) within one-half hour of such request, for
26 reasons other than force majeure or operation and
27 maintenance of the Project by the City in a manner not in
28 accordance with prudent electric utility operating
29 practices;
30
31 10 (a) (iii) Failure by IPT to complete the Project by the
32 specified completion date, provided that such failure is
33 not due to:
34
35 1) The City's failure to perform any obligation which
36 it shall be required to perform under the terms of
37 the Purchase Agreement, or
38
39 2) Action or inaction by the City which is
40 inconsistent with the manner in which the City
41 normally would act or refrain from acting with
42 respect to any other developer building a similar
43 project within its corporate boundaries.
44
45 10 (a) (iv) Failure of the Project to meet the Acceptance
46 Test.
47
48 10 (b) Default By the City:
49 Any of the following shall constitute default by the City:
50
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1 10 (b) (i) Any failure by the City to pay IPT within 15
2 days after receipt of a valid, non-disputed bill from IPT;
3
4 10 (b) (ii) Any gross negligence and willful action or
5 willful failure to act on the part of the City or its
6 agents which is inconsistent with the manner in which the
7 City would normally act or would refrain from acting and
8 which impedes the permitting process for the Project or
9 triggers any action by any regulatory agency which results
10 in the issuance of a stop-work order; or
11
12 10 (b) (iii) Any action or inaction (except such actions
13 referenced in Sections 5 and 6 of these Principles) on the
14 part of the City or its agents which adversely impact the
15 construction schedule, other than the City's actions or
16 inaction which would normally occur with respect to any
17 other developer building a public works project within its
18 corporate boundaries.
19
20 10 (c) Default Remedies:
21 The following shall be used to remedy a default:
22
23 10 (c) (i) If IPT is found to be in default under the
24 terms of Section 10(a) (i) of these Principles, IPT shall
25 refund to the City all funds previously tendered to IPT
26 for this purpose. Title to all previously purchased
27 material and equipment, including the Units, shall be
28 transferred to the City at no additional cost to the City.
29
30 10 (c) (ii) If IPT is found to be in default under the
31 terms of Section 10(a) (ii) or 10 (a) (iv) of these
32 Principles, the City shall promptly notify IPT of such
33 default. IPT shall have up to six (6) months following
34 the date of the default to correct the Project deficiency
35 so that the Project will pass the Acceptance Test.
36 Thereafter, the City shall have a right to receive damages
37 from IPT, including but not limited to savings lost to the
38 City, as determined by arbitration in accordance with
39 Section 12 of these Principles.
40
41 10 (c) (iii) If IPT is found to be in default under the
42 terms of Section 10 (a) (iii) of these Principles, the
43 Purchase Price shall be decreased by an amount equal to
44 One Thousand Dollars ($1,000) for each day after the
45 specified completion date upon which the Project has not
46 been completed, prior to April 1, 1994. Thereafter, the
47 City shall have a right to receive additional damages
48 including but not limited to lost savings to the City as
49 determined by arbitration in accordance with Section 12 of
50 these Principles.
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1 10 (c) (iv) If the City is found to be in default under
2 the terms of Section 10 (b) (i) of these Principles, the
3 City shall thereafter pay interest on such unpaid bill at
4 a monthly rate of 1.5% until such bill is paid in full.
5
6 MOM If the City is found to be in default under
7 the terms of Sections 10 (b) (ii) or 10 (b) (iii) of these
8 Principles the specified completion date shall be extended
9 on a day-for-day basis for each day that the event of
10 default delays permitting or completion of the Project.
11 The City shall pay any and all Project-related costs
12 incurred by IPT which are a direct result of such event of
13 default and, if such event of default causes the Project
14 to be non-permittable or not able to be completed by April
15 1, 1995, IPT shall have the right to receive damages,
16 including but not limited to lost profits, as determined
17 by arbitration in accordance with Section 12 of these
18 Principles.
19
20 10 (d) Notice of Default
21 Any notice of default by a Party under the Purchase Agreement
22 shall be deemed properly given if given within one week after
23 the non-defaulting Party determines that a default has
24 occurred and if addressed in accordance with the terms of
25 Section 15 of these Principles.
26
27 11. FORCE MAJEURE.
28 Neither Party shall be considered to be in default with respect to
29 any obligation hereunder if prevented from fulfilling such
30 obligation by reason of force majeure. The term force majeure
31 shall be deemed for the purposes of the Purchase Agreement to mean
32 extreme weather conditions, lightning, earthquake, fire and/or
33 explosion, failure of facilities not due to lack of proper care or
34 maintenance, civil disturbance, labor dispute, sabotage, war,
35 national emergency, restraint by court or public authority except
36 as otherwise provided in the Purchase Agreement, changes in
37 applicable laws or regulations from those in effect on the date of
38 the issuance of the ATC, intervention by a third-party in any
39 proceeding regarding the Project (if and only to the extent such
40 intervention impacts the Project) , or other causes beyond the
41 control of the affected Party which such Party could not reasonably
42 have been expected to avoid by exercise of due diligence and
43 foresight. Any Party affected by force majeure shall use due
44 diligence to place itself in a position to fulfill its obligations
45 and if unable to fulfill any obligation by reason of force majeure,
46 such Party shall exercise due diligence to remove such disability
47 with reasonable dispatch.
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1 12. ARBITRATION.
2 Any dispute arising from or relating to the Purchase Agreement, or
3 the breach thereof, and which cannot be mutually resolved by the
4 Parties, shall be settled by arbitration. Such arbitration shall
5 be effected by arbitrators selected as hereinafter provided and
6 shall be conducted in accordance with the rules existing at the
7 date thereof of the American Arbitration Association.
8
9 12 (a) Selection of Arbitrator:
10 The dispute shall be submitted to three (3) arbitrators, one
11 (1) arbitrator being selected by each Party and the third
12 being selected by the two (2) so selected, or if the two
13 cannot agree on a third, then by the American Arbitration
14 Association. In the event that either Party, within fifteen
15 (15) days after any notification of any demand for arbitration
16 hereunder, shall not have selected its arbitrator and given
17 notice thereof by registered or certified mail to the other,
18 such arbitrator shall be selected by the American Arbitration
19 Association.
20
21 12 (b) Location of Arbitration:
22 The arbitration shall take place in Sacramento, California,
23 and judgment may be entered on any award rendered by the
24 arbitrators in any court having jurisdiction.
25
26 12 (c) Obligations During Arbitration:
27 During the pendency of any arbitration proceeding, the Parties
28 shall continue to perform their respective obligations under
29 the Purchase Agreement, including all Project-related work
30 activities and making timely payments due under the terms of
31 the Purchase Agreement, except for such activities and
32 payments directly related to the dispute, and the failure to
33 do so shall constitute a breach of the Purchase Agreement.
34
35 12 (d) Interest Charges:
36 There shall be added to any monetary award for sums found to
37 have been due by the arbitrators an interest charge calculated
38 in the same manner as for late payments set forth in
39 Section 10 (c) (iv) of these Principles.
40
41 12 (s) Cost of Arbitration:
42 The cost of arbitration shall be borne by the Parties as
43 determined by the arbitrators.
44
45 13. QUALITY CONTROL.
46 Both Parties intend for the Project to be designed, constructed,
47 and equipped in accordance with prudent electric utility standards.
48 The City shall have the right to perform the "design review,
49 construction inspection, equipment inspection, and approve draw-
50 down payments (as provided for under Section 6 of these Principles,
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1 provided, however, that approvals by the City relating to such
2 review, inspection, and payment approval shall not be unreasonably
3 withheld) . The Parties agree the City may, at its own expense,
4 utilize an independent engineer to exercise these rights. The City
5 . shall notify IPT of any aspects of the Project's design,
6 construction, material, or equipment which the City determines is
7 not consistent with prudent electric utility standards. Such
8 notice shall be provided within fifteen (15) days of such
9 determination. IPT shall have sixty (60) days to provide a remedy
10 or to provide the City testimony refuting the City's allegation
11 regarding the quality of the Project. If IPT fails to remedy
12 within sixty (60) days, the City shall have the right to receive
13 damages including but not limited to savings lost to the City, as
14 determined by arbitration in accordance with Section 12 of these
15 Principles.
16
17 14. TAKES AND FEES.
18 IPT shall pay and be responsible for all applicable taxes and fees
19 except in-lieu-of-tax fee transfers from the City' s Electric
20 Department to the City's General Fund.
21
22 15. NOTICES.
23 Any notices required or permitted to be given hereunder shall be
24 given in writing and shall be delivered (a) in person, (b) by
25 certified mail, postage prepaid, return receipt requested, (c) by a
26 commercial overnight courier that guarantees next day delivery and
27 provides a receipt or (d) by telefacsimile, and such notices shall
28 be addressed as follows:
29
30 To City: CITY OF REDDING
31 760 Parkview Avenue
32 Redding, California 96001-3396
33
34 Attn. : Sam Lindley, Director
35 Electric Utilitv
36
37 TO IPT: INDUSTRIAL POWER TECHNOLOGY
38 2227 Capricorn Way, Suite 101
39 Santa Rosa, California 95407
40
41 Attn. : Robert Walther, President ,
42
43 or to such other address as either party may from time to time
44 specify in writing to the other party. Any notice shall be
45 effective only upon delivery.
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1 16. OTHER.
2 The Parties anticipate that the Purchase Agreement will also
3 contain additional terms and/or details not set forth herein
4 including, but not necessarily limited to the following areas:
5
6 - Acceptance Test
7 - Budget and Drawdown Schedules
8 - Project Equipment and Services
9 - Metering and Measurement
10 - Liabilities and Indemnification
it - Facilities Descriptions
12 - Test Plan
13 - One Line Diagrams
14 - Equipment performance specifications (e.g. , ramp rates,
15 minimum Unit load, et al)
16 - Other general contract provisions
17
1
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