Exhibit 10.18
COMMONWEALTH UTILITIES
CORPORATION
TINIAN POWER PLAN
(RFP97-0002)
CONTRACT AGREEMENT
(CUC CONTRACT NO: CUC-PG-97-C057)
CHANGE ORDER NO. 3
May 11, 2001
CHANGE ORDER
Change Order Date: May 11, 2001 Change Order No. 03
Contractor: Telesource CNMI, Inc. CUC Contract No. CUC-PG-97-C057
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This CHANGE ORDER NO. 03 is made in reference to the AGREEMENT FOR DESIGN,
SUPPLY OF PLANT AND EQUIPMENT, PRIVATE CONSTRUCTION, MAINTENANCE AND OPERATION,
AND TRANSFER OF OWNERSHIP (Contract No. CUC-PG-97-C057) effective as of June 10,
1997 between the COMMONWEALTH UTILITIES CORPORATION and TELESOURCE CNMI, INC.,
as amended by Change Orders No. 1 and No. 2 thereto (the "Original Agreement").
To the extent the terms and conditions of the Original Agreement are not in
conflict with the terms and conditions of this Change Order No. 3 the provisions
of both the Original Agreement and this Change Order No. 3 shall hereafter
govern the rights and obligations of the parties (collectively, the "Expanded
Agreement").
Recitals
A. Effective as of October 11, 1996, CUC issued Request for Proposal No.
97-0002, which solicited responses from independent power producers for the
design engineering, erection and operation of a power production facility
on the island of Tinian which was capable of sustaining a 10 MW load
expandable up to 30 MW.
B. Effective as of June 10, 1997, CUC and Contractor executed and delivered
the Original Agreement.
C. On November 30, 1998, CUC and Contractor executed and delivered Change
Orders No. 1 and No. 2, authorizing the expansion of the Plant Facilities
to be capable of sustaining a 30 MW load and clarifying Section 11.2 of the
Original Agreement regarding the review, comment and approval of all
Drawings.
D. Both CUC and Contractor wish to further modify the Original Agreement to,
among other things, provide for an additional extension of the term of such
Original Agreement and to modify the pricing structure pursuant to such
Original Agreement.
Agreement
NOW, THEREFORE in consideration of the premises and the mutual agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Definitions. Unless otherwise defined, all capitalized terms used in this
Change Order No. 3 are defined in the Original Agreement and are used
herein as so defined.
2. Suspension of Escalator in Original Agreements; Escalator to be applied for
Extended Term.
For the period commencing January 1, 2001 and terminating December 31,
2005, Contractor agrees to suspend the application of the GDPIPD Adjustment
(the "Escalator") to the Operations and Maintenance Fee and Production Fee
payable pursuant to Section 6.2 of the Original Agreement. Commencing
January 1, 2006 the GDPIPD Adjustment set forth in Section 6.2.4 of the
Original Agreement shall be in full force and effect until February 28,
2009. The year 2005 shall be treated as the base year for calculating all
subsequent GDPIPD Adjustments. For the period of the Extended Term, the
Escalator to be applied will be the annual GDPIPD increase only.
3. Extended Term.
(a) This Expanded Agreement shall become effective upon the execution of
this Change Order No. 3, and shall remain in full force and effect until
the later of (1) March 31, 2020 (10 years from the completion of the term
of Change Order No.1), or (2) the completion of the term (as agreed upon
pursuant to Subparagraph (c) below) if additional generator unit(s) are
added. CUC agrees to extend the Term of the Lease for the Site, recorded at
File No. 98-2806, Commonwealth Recorder, upon similar terms to those
currently in place if necessary to equal the term of this Expanded
Agreement.
(b) (i) The rate CUC shall pay for power produced will not change during
the terms of the Original Agreement and the Expanded Agreement (Change
Order No. 1) for the period those agreements are in effect except as agreed
in Paragraph 2 above.
(ii) Base Load Rate During Extended Term. At the expiration the term
of the Original Agreement, effective March 1, 2009 and extending until
March 31st 2020, CUC will pay a fee of $ 0.03 (three cents) plus the
applicable annual GDPIPD price adjustments per each kilowatt-hour CUC uses
each month up to 5,140,000 kilowatt-hours. The rate starting March 1, 2009
will be adjusted to include GDPIPD adjustments from January 1, 2005 through
February 28, 2009. Thereafter the rate will be adjusted annually for the
GDPIPD..
(iii) Excess Load Rate During Extended Term. At the expiration of the
Expanded Agreement (Change Order No. 1) effective April 1, 2010 and
extending until March 31, 2020 CUC will pay a fee of $ 0.03 (three cents)
plus the applicable GDPIPD price adjustments per kilowatt-hour CUC uses
each month in excess of the Base Load limit. The rate starting April 1,
2010 will include GDPIPD adjustments from January 1, 2005 through March 31,
2010. Thereafter the rate will be adjusted annually for the GDPIPD.
(c) In the event additional generation unit(s) are added by Contractor
pursuant to Paragraph 5 of Change Order No.1, the term for such expansion
shall be as mutually agreed upon, CUC shall pay in addition to payment
under Paragraph (b) above an additional fee for power produced in excess of
the Base and Second Phase Loads, at a rate per kilowatt-hour as mutually
agreed upon by the parties.
4. Early Termination. After December 31, 2010, and upon a six month written
notice to Contractor, CUC shall have the right to terminate this Expanded
Agreement. In the event CUC exercises this early termination right, CUC
shall promptly pay an early termination fee in the amount of $6,000,000 to
Contractor.
5. Exclusivity. During the term of this Expanded Agreement, CUC shall not
purchase (nor agree to purchase) for any given period electric energy from
any power producer other than Contractor for
the Island of Tinian, unless CUC first purchases (or agrees to purchase)
from Contractor the maximum electrical output generated or to be generated
by the 30 MW Plant Facilities for the same period at the competitive prices
set forth herein or as otherwise agreed. Contractor agrees to add
additional generation units to meet future demands for the rates in the
Expanded Agreement, subject to CUC's approval.
6. Further Expansion. During the term of the Expanded Agreement, if CUC wishes
for Contractor to expand its production capacity, both parties shall
negotiate in good faith mutually agreeable terms for such expansion prior
to negotiating such matter with any other party. CUC shall provide
Contractor with prompt written notice of its intention to expand power
production on the island of Tinian.
7. Research and Development. Contractor shall support and conduct research and
development activities regarding such matters as alternative power sources
and the improvement of distribution line losses in such manner and in
amounts as Contractor deems reasonable in its sole discretion. Contractor
shall maintain a laboratory for such purposes near the Plant Facilities and
hire or contract with individuals capable of conducting such activities as
Contractor reasonably sees fit. The operations of research and development
laboratory shall not interfere with the provision of services pursuant to
this Expanded Agreement. The results of such research and development
activities shall be the property of the Contractor and will be shared with
CUC, subject to confidentiality restrictions.
8. Training. Contractor shall invite, allow and make available a certain
number of places for CUC personnel to join Contractor's own personnel in
the training courses that Contractor carries out in its ordinary course of
business to update and upgrade Contractor's personnel's knowledge in fields
such as Modern Power Plant Management Aspects, i.e. SCADA, Environmental,
Transmission, Safety and Loss Prevention, etc. Such training arrangements
shall be conducted by professionals in their respective fields of
discipline from recognized and accredited institutions. Contractor shall
not charge CUC any fee for such participation.
9. Distribution System. Contractor shall upgrade solely the high-voltage
component of CUC's current electrical distribution system (installed and
available as of April 15th, 2001) on Tinian from 4KV to 13.8KV at no charge
to CUC. The upgrade will include, but is not limited to the tasks set out
in attached Schedule 1. Contractor will operate and maintain the CUC's
existing distribution system up to the point of electrical meter, and all
future distribution systems purchased and installed by CUC on Tinian for
the duration of the Expanded Agreement at no cost to CUC. A memorandum of
agreement shall be executed and delivered by the parties hereto as to the
working relationships and the respective parties' responsibilities and
duties as to customer service procedures. Notwithstanding the foregoing,
CUC will remain responsible at its own cost and expense for all customer
service matters regarding such distribution system, including any customer
complaints or other communications.
10. Permits. Contractor shall maintain its current material governmental
permits and shall continue to comply with all applicable governmental
permits, regulations and guidelines.
11. Workers. Contractor shall use its best efforts to fill employment positions
in the Plant Facilities with qualified residents of Tinian, as and to the
extent such residents are available and agreeable to the terms of such
employment which shall include not include any unreasonable requirements.
12. Customer Matters. Holding all legal and title to the power produced by the
Plant, CUC shall be responsible at its own cost and expense for all
customer service matters relating to such power produced by the Plant,
including invoicing, the collection of receivables and responding to
customer inquiries and complaints. A memorandum of agreement shall be
executed and delivered by the parties hereto as to the working
relationships and the respective parties' responsibilities and duties as to
customer service procedures.
13. Section 19.2.1. Section 19.2.1 of the Original Agreement is amended and
restated to provide in its entirety:
"If Contractor shall fail to observe or perform any material
covenant or material agreement contained in this Agreement and shall
fail to materially cure such failure within fifteen (15) days after
written notice thereof shall have been given to Contractor by CUC;
Days attributed for shipment of materials for purpose of cure shall
not be counted towards this fifteen (15) day period"
14. Prepayment. Schedule II to the Original Agreement regarding prepayments is
hereby amended and restated as set forth in Schedule 2.2 hereto.
15. Savings. All of the rights and obligations of the parties as set forth in
the Original Agreement (as amended by any Change Orders entered into prior
to the date hereof) shall apply to this Expanded Agreement to the extent
they do not conflict with the express terms of this Change Order No 3.
SIGNATURES (to be signed in order listed)
CERTIFICATIONS
1. Procurement & Supply Office
I hereby certify that to the best of my information and belief that this
contract is in compliance with the CUC procurement regulations, is for a public
purpose, and does not waste or abuse public funds.
/s/XXXXXXX DLG. XXXXXXX 5/8/01
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MARINAO DLG. XXXXXXX Date
Procurement & Supply Manager, CUC
2. Comptroller
I hereby certify that there are sufficient funds available for the execution of
this Change Order.
/s/XXXX X. XXXXXX 5/8/01
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XXXX X. XXXXXX Date
Comptroller
3. Attorney General
I hereby certify that this contract has been numbered, reviewed and approved as
to form and legal capacity.
/s/XXXXXXX XXXX 5/9/01
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XXXXXXX XXXX Date
Attorney General
SIGNATURES OF THE PARTIES
4. Commonwealth Utilities Corporation (CUC)
/s/XXXXXXX X. XXXXXXXXXX 5/10/01
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XXXXXXX X. XXXXXXXXXX Date
Executive Director/Contracting Officer
/s/XXXXX X. XXXXXXXX 5/10/01
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XXXXX X. XXXXXXXX Date
Chairman/CUC Board of Directors
5. CONTRACTOR - Telesource CNMI, Inc.
On behalf of Telesource CNMI, Inc., I represent that I am authorized to
bind Telesource CNMI, Inc. to the terms of this Change Order, and by my
signature I do so hereby accept for Telesource, CNMI, Inc., and bind Telesource
CNMI, Inc. that no person associated with Telesource CNMI, Inc. has retained any
person in violation of Section 6-205 of the CUC Procurement Regulations.
/s/X.X. Xxxxxxxx 5/10/01
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X.X. Xxxxxxxx Date
President/CEO
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6. Certification of Contract Completion
I hereby certify that this contract bears all required signatures and is
therefore complete.
/s/XXXXXXX DLG. XXXXXXX 5/11/01
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XXXXXXX DLG. XXXXXXX Date
Procurement & Supply Manager, CUC
SCHEDULE 2.2
PREPAYMENT FOR PHASE I AND EXPANSION PHASE
(This schedule replaces schedule 2 and Schedule 2.1)
PHASE I & EXPANDED PHASE AMOUNT IN US$
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End of Year 3 28,000,000
End of Year 4 25,000,000
End of Year 5 21,000,000
End of Year 6 17,250,000
End of Year 7 14,000,000
End of Year 8 11,000,000
Early Termination of Changer Order No. 3 option available beginning March 31,
2010 for $6,000,000. This option is available at anytime starting March 31, 2010
with a 6 month notice.
