Biomass Power Generation Project Lease Agreement June, 2010
Xi’an TCH
Energy Technology Co., Ltd
PuCheng
XinHengYuan Biomass Power Generation Co., Ltd
June,
2010
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Lessor: Xi’an TCH Energy
Technology Co., Ltd (hereinafter refers to as Party A)
Leasee: PuCheng XinHengYuan
Biomass Power Generation Co., Ltd. (hereinafter refers to as Party
B)
Whereas:
1. In
order to improve the efficiency of assets operation and decrease the management
cost, Party A agrees Party B to lease its biomass power generation assets, and
Party B agrees to lease such biomass power generation assets and pay the leasing
fee according to this Agreement.
2. Both
Parties have received valid authorization for the lease agreement, and such
lease does not need any further review, verification or approval by relevant
government agencies.
3. Through
friendly negotiation, Parties reach the agreement on Party B leasing Party A’s
biomass power generation assets. According to the Contract Law of China and
other laws and regulations, Parties hereby enter into the lease agreement that
is binding on both.
Article
1 Lease scope
1.1 The
biomass power generation equipment assets that Party B leases from Party A
(hereinafter referred to as “Lease Project”) has a total installed capacity of
12,000 kw. The details of the Lease Project see “Target Assets List” as an
attachment of this Agreement.
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1.2 Party
B leases the Lease Project for its power generation purpose, and Party B will
enjoy the incomes from such power generation.
1.3 Party
B operates the Lease Project, keeps its own accounts, and is responsible for its
own profits or losses. Party B shall bear all the taxes and fees in
connection with the operation of the Lease Project.
Article
2 Lease Term
The lease
term is 15 years starting from the signature day of this Agreement. Upon the
expiration, Party A will transfer the lease assets to Party B without other
charges.
Article
3 Leasing fee and method of payment
3.1 The
minimum leasing fee is RMB 1,900,000 per month, the payment of leasing fee shall
be made monthly by Party B to Party A in cash through bank wire.
3.2 Party
B ensures to make payment of leasing fees on the 15th of each
month.(If the 15th of the
month is a weekend or national holiday, such payment shall be made on the first
working day after the weekend or holiday) Party B shall pay a default
fee to Party A everyday that equals to 0.08% of leasing fee for everyday of its
delaying payment.
3.3 If
the State electricity price for biomass generated power increases, the leasing
fee shall be increased proportionately in accordance with the same rate or
amount by which the State electricity price has increased on top of the minimum
RMB 1,900,000 a month, according to a formula below.
The
specific calculation is as follows:
As the
current electricity rate applied to biomass generated power at RMB 0.686 per
kilowatt hour (“KWH”), the operating cost is RMB 0.30 per KWH, the depreciation
expense is RMB 0.082 per KWH, gross profit per KWH is then RMB 0.304. Party B
will pay 87% of its gross profit to Party A as its leasing fee which is RMB
0.2645. The total annual power generation volume for the Lease Project is 86.22
million KWH, and annual leasing fee will be RMB 22.8 million per
year, which is minimum RMB 1.9 million per month.
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If
biomass electricity rate rises to RMB 0.81, the gross profit per KWH will be RMB
0.428, then according to 87% of the gross profit formula, the leasing fee will
rise to RMB 2.67 million per month from RMB 1.9 million per month.
The
formula is: New Monthly Leasing Fee = New gross profit * 87% / 12.
Party B
confirms that its operating cost, depreciation expense and power generation
volume of the Lease Project will remain the same during the term of this
Agreement.
Article
4 Lease Deposit
4.1 To
ensure the operating profit of the Lease Project and Party B to fulfill its
obligations under this Agreement, both Parties agree that Party B shall pay
Party A certain amount of security deposit. The security deposit will
guarantee Party B operates the project honestly, manage the power generation
assets diligently and carefully and bear the operating risk during the operation
period.
4.2 Party
B shall pay RMB 1,900,000 to Party A as lease security deposit within 10 days
after the effectiveness of this Agreement.
4.3 If
there is any damage or loss to the Lease Project caused by the operating risk
during Party B’s operation process, Party A has the rights to deduct the
relevant amount from leasing deposit paid by Party B as a compensation based
upon specific situation according to this Agreement and its attachment. If the
deposit is not enough to pay for Party A’s loss, Party A has the right to
request Party B to pay for the difference.
4.4 Upon
the expiration of this Agreement, Party A shall return the deposit to Party B
after Parties conclude the accounting based upon this Agreement, excluding the
amount that should be deducted subject to this Agreement and its
attachment.
Article
5 Rights and Obligations of Party A
5.1 Party
A has the right to supervise Party B on Lease Project. For the behaviors that
could damage the Lease Project and affect the economy of the operation, Party A
has the right to stop them and terminate this Agreement.
5.2 Party
B shall pay the leasing fee on schedule. If Party B delays the payment, Party A
has the right to deduct the fee from leasing deposit. If the deposit is not
enough to pay for the leasing fee, Party A has the right to request Party B to
pay the default fee subject to this Agreement and request Party B to compensate
Party A’s losses.
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5.3 Party
A shall not interfere with Party B’s normal operation and management activities.
The incomes that Party B obtains during its lease term belong to Party B after
payment of the leasing fee in full and leasing deposit.
5.4 One
of the shareholders of Party B shall provide joint liability guarantee to Party
A to ensure that Party B will make full payment of leasing fees on time and
perform its obligations under this Agreement.
Article
6 Rights and Obligations to Party B
6.1
During the operating period, Party B has the rights to autonomous management,
assuming full responsibilities for profits and losses, and independent and
separate accounts.
6.2 Party
B shall complete all related review and approval procedures for the Lease
Project and obtain the operating rights for the Lease Project by
itself.
6.3 Party
B shall ensure the integrity and good operating condition of the Lease Project.
If the Lease Project has problems during operation, Party B is responsible for
the repair, maintenance and their costs.
6.4 Party
B shall pay the leasing fee on schedule and give written notice to Party A when
making such payments.
6.5 Party
B shall pay the lease deposit in full, and such deposit accrues no
interest.
6.6
During the operating period, Party B shall not terminate or cancel this
Agreement without Party A’s consent. If this Agreement is terminated
due to Party B’s reason and it has caused losses to Party A, it shall be
considered as a breach of Agreement by Party B. Party B shall pay the
breach of contract penalty to Party A and be responsible to compensate Party A’s
losses.
Article 7
Force Majeure (as defined by the law)
If the
“Lease Project” could not be appropriately used due to force majeure, Party A or
Party B can be partially or wholly exempted from its liability practically and
realistically according to the impact caused by the force majeure. Either Party
that suffers a force majeure shall notify the other party within 2 working days
and provide proofs for the force majeure within 15 working days, and shall
endeavor to retrieve any loss as much as possible. Party A has the right to
terminate this Agreement if this Agreement cannot be performed due to the force
majeure.
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Article
8 Liability of breach of contract
8.1
Unless otherwise agreed in this Agreement or other written consents by Parties,
neither party can modify or terminate this Agreement during the term without the
written consent from the other party. If any party breaches this
Agreement, it shall pay for all the losses suffered by the other party as a
result of its breach.
8.2.
Party B shall pay a default fee to Party A each day that equals to 0.08% of
the leasing fee for everyday of its delaying payment.
8.3 If
Party B defaults payment of leasing fee accumulatively for 3 months, it is
considered as lack of ability to pay leasing fee, and Party A has the right to
terminate this Agreement, and Party B shall compensate all the losses of Party A
and pay default fees.
8.4 If
Party B breaches the term of Article 6 of this Agreement and causes losses to
Party A, Party B shall be responsible to compensate Party A’s losses and pay a
breach of contract penalty fee that equals to 40% of the overall leasing fees of
this Agreement to Party A. At the same time, Party A has the right to
make such claims to guarantor.
Article
9 Effect of the Agreement
This
Agreement is established when both Parties sign and seal the agreement. This
Agreement will take effect on the date when Parties sign “Target Assets List”
and “Joint Guarantee Agreement”. If the dates are different on the
aforementioned documents, this Agreement takes effect on the date of the last
Agreement is signed.
If any
term of this Agreement is considered invalid by the Court, the validity of other
terms of this Agreement shall not be affected.
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Article
10 Settlement of dispute
Any
disputes arising out of this Agreement shall be settled through friendly
negotiation, in case no settlement can be reached, each party can file a law
suit to the local People’s Court with jurisdiction in which the Party A is
located.
Article
11 Others
1. For
any other matters not addressed in this Agreement, Party A and Party B may reach
“Supplement Agreement”, and “Supplement Agreement” has the same legal effect to
this Agreement.
2. Party
B agrees, during the implementation of this Agreement, Part A can
change or assign this Agreement to any other party that Party A
designates, if necessary. Party B shall not assign/transfer its
rights and obligations under this Agreement without the written approval of
Party A.
3. This
Agreement has six original copies. Party A and Party B each holds three copies
and they all have same legal effect.
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Party
A : (sealed)
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Party
B : (sealed)
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Signature
of representative:
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Signature
of representative:
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Signing
date: June 29, 2010
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Signing
date: June 29,
2010
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