EXHIBIT 10.40
FUEL SUPPLY MANAGEMENT AGREEMENT
THIS AGREEMENT is made effective on the 10th day
of October, 1990 by and between:
PANDA-XXXXXXXX CORPORATION, a Delaware corporation,
with principal offices in Dallas, Texas, hereafter
referred to as "PANDA"; and
NATURAL GAS CLEARINGHOUSE, a Colorado general
partnership, with principal offices in Houston,
Texas, hereafter referred to as "NGC".
WITNESSETH, THAT:
WHEREAS, PANDA is engaged in the development,
construction and operation of a cogeneration electricity
generating facility (the "Facility") in Roanoke Rapids,
North Carolina together with a 9.6 mile pipeline (the "Panda
Pipeline") to interconnect with the pipelines of North
Carolina Natural Gas Corporation ("NCNG"),
Transcontinental Gas Pipe Line Corporation ("Transco") and
Columbia Gas Transmission Corporation ("Columbia") near
Xxxxxxxx Xxxx, Xxxxxxxxxxx Xxxxxx, Xxxxx Xxxxxxxx
(hereinafter called the "Facility"); and
WHEREAS, NGC is a gas and oil marketing organization
with the capability to perform fuel management services
for industrial companies as to natural gas and other fuels;
and
WHEREAS, PANDA desires to hire and retain NGC to manage
the acquisition and transportation of fuel to the Facility
and NGC wishes to be hired and retained therefor.
NOW THEREFORE, in consideration of the mutual covenants,
obligations and considerations hereinafter set forth,
the parties hereto do hereby contract and agree as follows.
ARTICLE I.
DEFINITIONS
1.01 "Best Cost" shall mean the lowest price
reasonably available for reliable supplies and transportation
of Gas and/or No. 2 fuel oil meeting the specifications
established for the Faciality, when purchased in similar
quantities for delivery to the same point and at the same
point in time.
1.02 "Btu" shall mean the amount of heat required to raise
the temperature of one pound of water one degree at 60 degrees
Fahrenheit.
1.03 "Commercial Operations Date" shall mean the date that
the Facility is ready to commence commercial operations.
1.04 "Dekatherm" or "dt" shall be equivalent to one (1) MMBtu.
1.05 "Delivery Point" shall mean the point of
interconnection between the Transporter's sales meter and
the Panda Pipeline near Pleasant Hill, Northampton County,
North Carolina, unless otherwise expressly agreed in writing
between NGC and PANDA.
1.06 "Electrical Dispatch" shall mean the quantity
of electricity which Virginia Electric Power Company
requires the Facility to generate from time to time.
1.07 "Facility"- shall mean the steam, chilled water and
power generation facilities owned by PANDA its successors and
assigns in Roanoke Rapids, North Carolina or in the
immediate vicinity of Roanoke Rapids.
1.08 "Financiers" means (a) any individual or entity
lending money to PANDA for the construction or term
financing of the Facility, or the establishment and/or
maintenance of working capital requirements, or the
refinance or take-out of any such loan; or, (b) any lessor
under a single investor or leveraged lease finance
arrangement.
1.09 "Force Majeure" as employed herein and for all
purposes relating hereto shall mean any situation or
occurrence not reasonably within the control of the party
claiming suspension and which, by the exercise of due
diligence, such party is unable to prevent or overcome,
and shall include, not by way of limitation, acts of
God, strikes, lockouts or other industrial disturbances,
acts of the public enemy, wars, blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, fires,
storms, hurricanes, floods, washouts, arrests and restraints
of governments and people, civil disturbances, explosions,
breakage or accident to machinery or lines of pipe including
the Facility, freezing of xxxxx or pipelines,
curtailment of transportation, the necessity for making
repairs or alterations to machinery or lines of pipe
including the Facility, inability of any party hereto to
obtain necessary materials, supplies, licenses or permits (or
unavoidable delays, after the exercise of reasonable
diligence, in acquiring such materials, supplies, licenses
or permits), and any other causes, whether of the kind
herein enumerated or otherwise, not within the control of
the party claiming suspension and which by the exercise of
due diligence such party is unable to prevent or overcome.
It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the
party having the difficulty. However, Force Majeure shall
not be applicable to a failure to pay sums of money owed.
1.10 "Gas" or "Natural Gas" shall mean gas in its natural
state as produced from an oil, gas or gas condensate well as
well as residue gas resulting from gas processing, and which
gas is then treated so as to comply with the quality
specifications of the interstate pipeline transporting
such Gas to markets for consumption.
1.11 "Interest" shall mean the compensation for the accrual
of monetary obligations under this Agreement computed
monthly and prorated daily, from the time each such
obligation becomes due and payable, based on an annual
interest rate equal to the Prime Rate plus one (1) percent.
For purposes hereof, Prime Rate shall mean the rate of
interest from time to time publicly announced by The Chase
Manhattan Bank, N.A., at its principal office, presently
located at 0 Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
as its prime commercial lending rate, determined as of the
time such obligation becomes due and payable, or the maximum
non-usurious rate of interest allowed by the laws of the
State of North Carolina, whichever is less.
1.12 "MMBtu" shall mean one million Btu's.
1.13 "Month" shall mean the period beginning at eight
o'clock A.M. on the first Day of a calendar Month and ending
at eight o'clock A.M. on the first Day of the next
succeeding calendar Month.
1.14 "NCNG" shall mean North Carolina Natural Gas Corporation.
1.15 "PANDA Pipeline" shall mean that certain natural
gas pipeline which PANDA has built or will build between
Pleasant Hill, North Carolina and the Facility, together
with all appurtenant safety and other operating equipment
required in the operation of a high pressure gas pipeline.
1.16 "Receipt Point" shall mean the point or points
on Transporter's pipeline set forth on Exhibit "A" attached
hereto and as the same may be amended from time to time.
1.17 "Transporter" shall mean the interstate pipeline
or pipelines taking delivery of Gas at the Receipt
Point and transporting same to the Delivery Point.
1.18 "Year" shall mean a contract year (rather than a
calendar year unless the context clearly contemplated a
calendar year) which shall mean a period of three
hundred sixty-five (365) consecutive days, the first
such contract year beginning at eight o'clock A.M. on the
Day of first delivery of Gas hereunder; provided,
however, that any such year which contains a date of February
29 shall consist of three hundred sixty six (366)
consecutive days.
ARTICLE II.
NATURAL GAS RESPONSIBILITIES OF NGC
2.1 NGC will do the following with regard to the acquisition
and transportation of natural gas:
A. Advise PANDA and assist in the negotiation of
natural gas purchase and transportation
agreements for the full requirements of the
Facility;
B. Purchase and arrange for delivery, as agent for
PANDA, of quantities of natural gas as approved by
PANDA.
C. Manage all plant and pipeline dispatching,
allocation, invoicing, verification of volumes to
assure adequate fuel supply to plant at all
times.
D. Negotiate discounts from interruptible and
firm pipeline transportation fees as to
transportation of gas supplies to the Facility,
it being understood that NGC will be entering into
interruptable transportation agreements pending
the availability of firm transportations;
and
E. Supervise and conduct communications between and
among the Facility, NCNG, any pipelines which may
transport gas on behalf of PANDA or NGC for
delivery to the Facility, and natural gas
producers to ensure delivery of reliable and
economically priced gas supplies to the Facility.
ARTICLE III.
FUEL OIL RESPONSIBILITIES OF NGC
3.1 NGC will do the following with regard to the acquisition
and transportation of fuel oil:
A. Advise PANDA and assist in the negotiation of
fuel acquisition, inventorying, deliveries, and
fuel oil hedging agreements.
B. Supervise and conduct invoicing and verification
of delivery volumes and quality specifications.
C. Purchase and arrange for delivery, as agent
for PANDA, of quantities of fuel oil as
approved by PANDA.
ARTICLE IV.
COMPENSATION
4.1 PANDA will pay the following amounts to NGC:
A. Four cents ($0.04) for each MMBtu of natural
gas which is actually purchased and transported
to the Facility pursuant to arrangements made by
NGC; or,
B. Three cents ($0.03) for each MMBtu of natural
gas reserves owned by PANDA and transported
to the Facility pursuant to arrangements made by
NGC.
C. Two-tenths of one cent ($0.002) for each gallon
of fuel oil which is actually purchased and
delivered to the Facility pursuant to arrangements
made by NGC.
4.2 So long as that certain Gas Purchase Contract between
PANDA and NGC dated April 12, 1990 (which provides
for certain minimum volumes of gas to be delivered to the
Facility) remains in effect, NGC shall not be compensated
for performing the duties and obligations set forth in
this Agreement as to such gas volumes.
4.3 In the event that in a given month NGC arranges for
natural gas supplies at a delivered price less than
the Benchmark Delivered Price for such month, then PANDA
will pay NGC an amount equal to sixty percent (60%) of
the difference in such price. The Benchmark Delivered
Price is composed of the Benchmark Gas Price together
with the Benchmark Transportation Rate. For purposes of this
agreement, the Benchmark Gas Price is the Index Price set
forth in the first issue each month of Inside F.E.R.C.'s
Gas Market Report for Zone 3 (Station 65) on
Transcontinental Gas Pipe Line Corporation and the
Benchmark Transportation Rate is the lower of the maximum
transportation rate or general discounted transportation
rate in effect for such month from Zone 3 to Zone 5 on
Transcontinental Gas Pipe Line Corporation plus applicable
surcharges.
ARTICLE V.
TERM OF AGREEMENT
5.1 This agreement shall be effective from and after the date
hereinabove written and shall have a term equal to the longer
of five (5) years from the date of commercial operations
of the plant or the term of that certain Gas Purchase
Contract dated April 12, 1990 between PANDA and NGC.
5.2 This agreement may be terminated by PANDA upon thirty
(30) days notice if NGC fails to perform its obligations
hereunder. Such failure to perform shall include:
A. Failure to arrange for the purchase or
transportation of natural gas or fuel oil when
required by the Facility.
B. Arranging for natural gas delivered to the
Facility with a price more than $.04 per
MMBtu above the Benchmark Delivered Price.
ARTICLE VI.
HEDGING ARRANGEMENTS AND BEST COST PRICING
6.1 NGC shall monitor Gas and No. 2 fuel oil market
conditions and shall communicate with PANDA monthly
regarding market expectations and opportunities,
recommending price hedging strategies, utilizing futures
and options on the New York Mercantile Exchange, when
advisable. NGC shall execute and administer hedging
transactions as approved by PANDA. For such hedging
transactions PANDA shall pay a transaction fee of one-
half cent ($.005) per MMBTU of gas of five cents ($.05) per
barrel of No. 2 fuel oil. PANDA shall advance funds to NGC
to cover the initial and subsequent maintenance margin
required to effect said hedging transaction, or
alternatively at NGC's option, shall pay NGC a working
capital charge to cover its cost of capital for funding such
transaction on behalf of PANDA.
6.2 NGC will endeavor on a best-efforts basis, at all
times during the continuation of this Agreement, to arrange
for the purchase and transportation of natural gas
and/or fuel oil supplies for the Facility on a "Best Cost"
basis.
ARTICLE VII
PAYMENT
7.1 On or before the tenth (lOth) day of each month
following the month in which services were provided by NGC
hereunder, NGC shall furnish a statement to PANDA showing
the quantity of gas (expressed in MCF and dekatherms)
delivered to the Facility together with NGC's invoice
for all sums due from PANDA to NGC therefor and including
the fees for any applicable gas transportation incurred and
paid for by NGC and also including any sums due for
sharing of gas transportation discounts received.
A. As to invoices relating to natural gas
purchases and fees due on gas transportation,
within fifteen (15) days after receipt of said
statement but in no event earlier than the 25th
day of the month following the month in which
services were provided by NGC hereunder),
PANDA shall wire transfer funds to cover said
statement to the bank designated by NGC in such
statement.
B. As to invoices relating to No. 2 fuel oil, within
ten (10) days after receipt of invoice, PANDA
shall wire transfer funds to the bank designated
by NGC in said invoice.
C. Should either party hereto fail to pay the
full amount due on any statement or invoice when
the same is due, then Interest on the unpaid balance
shall accrue from the date such payment or
payments was/were due until the same is/are paid.
If PANDA fails to pay any such statement or
invoice for thirty (30) days beyond the due
date, then, subject to notification of PANDA's
Financiers as hereinbelow provided, NGC may
suspend performance of its obligations hereunder
until such invoice or invoices is/are paid.
7.2 In the event of a dispute as to the amount due to
NGC, PANDA shall nevertheless pay the undisputed portion
of the invoice pending settlement of the dispute.
7.3 In the event that it is determined by any regulatory
or legislative body having jurisdiction over the pricing of
gas or No. 2 fuel oil or the fees charged by pipelines
or other carrier transporting such fuels that PANDA has
underpaid or overpaid therefor, then the parties hereto
shall adjust their accounts within thirty (30) days after
final determination of the amount of such over or under
payment. In no event, however, shall NGC be obligated
to refund any fees previously paid to NGC for its
services rendered hereunder, and in the event such
actions would reduce the fee to be paid
prospectively to NGC for its services, then NGC reserves
the right to terminate this agreement.
7.4 It is expressly understood and agreed that PANDA
will reimburse to NGC, in addition to all other amounts due
to be paid to NGC hereunder, the cost of all letters of
credit which NGC is required to provide in purchasing
natural gas hereunder.
VIII.
NOTICES
8.l Until PANDA is otherwise notified in writing by NGC,
notices to NGC shall be addressed to NGC at the address set
forth below or at such address as may hereafter by named:
Natural Gas Clearinghouse
00000 Xxxxxxxxx Xxxxxxx Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
8.2 Until NGC is otherwise notified in writing by PANDA,
notices to PANDA shall be addressed to PANDA at the address
set forth below or at such other address as may hereafter by
named:
Panda-Xxxxxxxx Corporation
Attn: Natural Resources Department
0000 Xxxxxx Xxxxxx Xx.
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: (214) 980-7l59
Telecopier: (000) 000-0000
8.3 Notices may be given by facsimile transmission or
in writing, postage prepaid and addressed to the last known
address of the party being notified. All notices and
invoices shall be considered delivered when actually
received. Any notice to suspend, terminate or extend this
Agreement shall be sent by United States Mail, postage
prepaid, certified, return receipt requested, to the last
known address of the party being notified.
8.4 For so long as PANDA shall have outstanding and unpaid
any financing liabilities relating to the Facilities to any
person, firm or entity (hereafter called "Financiers"), NGC
shall not suspend perforance under or terminate this
Agreement until sixty (60) days following each
Financier's receipt of NGC notification to such effect
(such notice to be sent postage prepaid, certified,
return receipt requested to the last known address of each
Financer). NGC shall not suspend performance under or
terminate this Agreement if, after notice thereof and prior
to any effective date of such suspension or termination,
Financiers, or any of them, have either: (a) caused
the condition precipitating the notice of breach or
termination to be cured; or (b) assumed all obligations of
PANDA under this Agreement.
ARTICLE IX.
INDEMNIFICATION
9.1 Each party ("Indemnitor") shall indemnify, defend and
hold harmless the other party ("Indemnitee"), and their
officers, directors, employees, heirs successors and
administrators from and against any and all claims,
demands, suits, actions, liabilities, losses, damages,
judgments, and/or legal or other expenses (collectively
"Claims") which may arise from or in connection with the
performance or non-performance of their obligations
hereunder. If a Claim is asserted or action brought against
Indemnitee as to which it believes it is entitled to
indemnification under this Article, Indemnitee shall
promptly notify Indemnitor in writing of such Claim. Prompt
notice as contemplated in the preceding sentence shall mean
such notice as would be required to enable Indemnitor
to assert and prosecute appropriate defenses relative to
such Claim or action in a timely manner. If Indemnitee
fails to give Indemnitor prompt notice of any claim or
action as provided in this Section, Indemnitor shall
have no obligation to indemnify pursuant to this
Article. Upon receipt of such notice request for
indemnification, Indemnitor shall promptly make a
determination of whether it is required to indemnify and
shall promptly notify Indemnitee in writing of that
determination.
ARTICLE X.
REPRESENTATIONS AND WARRANTIES
10.1 NGC represents and warrants the following to PANDA:
That it is a general partnership duly organized and
existing under the laws of the State of Colorado
possessing the power to do business in North Carolina as
well as each state in which it will purchase gas and No. 2
fuel oil for the Facility; that it is solvent and has not
sought protection from its creditors in Bankruptcy that each
of the general partners is solvent and has not sought
protection from its creditors in Bankruptcy; that it has the
power to enter into this Agreement; that all actions
required to enter and to perform this Agreement have been
taken or will be taken when required; that the party
executing this Agreement on behalf of NGC is duly
authorized and empowered to bind NGC hereto; and, that there
are no impediments of any sort to NGC's entering into this
Agreement.
10.2 PANDA represents and warrants the following to NGC:
That it is a duly incorporated and validly existing
Delaware corporation qualified to do business in the
State of North Carolina; that it is solvent and has not
sought protection from its creditors in Bankruptcy; that
is has the power to enter into this agreement; that all
actions required to enter and to perform this Agreement have
been taken or will be taken when required; that the party
executing this Agreement on behalf of PANDA is duly
authorized and empowered to bind PANDA hereto; and that
there are no impediments of any sort to PANDA's entering
into this Agreement.
ARTICLE XI.
FORCE MAJEURE
11.1 In the event that either party hereto is prevented
from carrying out its material duties and obligations
hereunder by the occurrence of an event beyond the control
of and not the fault of such party ("Force Majeure"),
then the affected party shall promptly give notice,
full particulars and remedial actions being taken to
correct such event of Force Majeure to the other party
and the affected party shall take all steps reasonably
necessary to correct the condition causing the Force
Majeure. The party receiving notice of the event of
Force Majeure shall have the right, to terminate this
Agreement if the event of Force Majeure continues for
ninety (90) days, upon giving the affected party thirty
(30) days written notice to such effect, unless the
affected party is able to resolve the condition of Force
Majeure and resume performance of its duties hereunder
within such thirty (30) day period. In no event shall the
failure to pay sums of money due and owing hereunder be
excused by any event of Force Majeure.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
12.1 No waiver by either party of one or more defaults
or breaches by the other party in the performance of any
of the provisions of this Agreement shall operate or be
construed as a waiver of any other or further default or
breach, whether of a like or of a different character.
12.2 This Agreement shall be binding upon and inure to
the benefit of the legal representatives, successors and
assigns of the respective parties hereto. No assignment
or sale of any interest shall be effective until the
remaining party hereto has received written notice to such
effect. No assignment or sale of interest shall relieve
the assigning party of its obligations hereunder without
the written consent of the remaining party hereto;
provided, however, that NGC hereby grants its consent to and
agrees to look to Financier in the event that Financier
assumes operational control and/or ownership of the
Facilities during the term hereof. Nothing in this
Agreement shall be construed to prohibit PANDA from
assigning or pledging this Agreement as additional
security for certain loans made or to be made to PANDA
by Financier relative to the development and operation of
the Facility.
12.3 This Agreement constitutes the entire agreement between
the parties and supersedes all previous contracts,
agreements and understanding between the parties both
written and oral. This Agreement may not be amended
except in writing and executed by both parties hereto.
12.4 This Agreement may be executed in multiple originals,
each of which, when taken together, shall be construed as a
complete original.
12.5 In interpreting this Agreement, it is acknowledged that
it was prepared jointly by both parties hereto and not
to the exclusion of one party by the other and that in
preparing this Agreement, each party had access to its own
counsel.
12.6 It is not the purpose of the parties to create
a partnership, joint venture or association, or the
relationship of agency or employer-employee unless and
except as otherwise expressly provided herein. Neither
this Agreement nor any dealings hereunder shall be
construed or considered as creating such relationship.
12.7 This Agreement shall be governed by the laws of the
State of Texas.
12.8 Neither party shall be liable for consequential damages
for failure to perform its obligations hereunder.
PANDA's sole remedy for NGC's failure to perform shall be
the termination of this Agreement.
12.9 PANDA will not, during the duration of this
Agreement, contract with any other party or entity for
fuel management services.
12.10 The parties hereto recognize that execution of
additional amendments, clarifications, documentation,
assignments, mortgages, pledges and other evidences of
security herein may be required from time to time by
Financier. PANDA and NGC agree to promptly execute each such
instrument requested by Financier from time to time and at
all times during the continuance of this Agreement.
12.11 This Agreement shall remain confidential during the
Term hereof and neither party shall disclose any of
the terms, conditions, obligations, duties promises,
benefits or liabilities set forth in this Agreement
without the express prior written permission of the
remaining party hereto; except, however, that each party
shall be free to disclose such facts as may be required
by applicable statute, rule, regulation or by loan agreements
of either party's lenders or either of the parties hereto,
without need of securing the prior permission of the other
party hereto.
IN WITNESS WHEREOF, this instrument is executed in
duplicate originals as of the date first hereinabove
written.
BUYER: PANDA-XXXXXXXX CORPORATION
Xxxxxx X. Xxxxxx
President
Attest
NATURAL GAS CLEARINGHOUSE
By: Xxxxxxx X. Xxxxxxxxx
Its: Executive Vice President
Marketing & Supply
Attest
