Exhibit 10.64
February 22, 1996
Xx. Xxxxxxx X. Xxxxxxxx
LG&E Power Marketing Inc.
00000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000-0000
Dear Xxxx:
TRANSACTION CONFIRMATION LETTER
This letter is to confirm the agreement made between Ohio Edison Company
("OE") and LG&E Power Marketing ("LPM") regarding the sale of coal processing
service by OE to LPM under the terms and conditions of this letter and the
Agreement for System Power Transactions filed with FERC on December 4, 1995.
A. CAPACITY AND ENERGY RESERVATION - LPM shall be entitled to the receive
power in the amount of 250 MW each hour in January and February, and
300 MW each hour in March through December, at the Delivery Points
which will be nominated in accordance with Section C below.
B. TERM - January 1 through December 31, 1996.
C. SCHEDULING OF ELECTRICITY - LPM shall provide OE with each day's
hourly energy Schedule including identification of the desired
Point(s) of delivery, no later than 11:00 a.m. prevailing time in
Wadsworth, Ohio on the last Business Day prior to receipt of the
energy.
Xx. Xxxxxxx X. Xxxxxxxx
February 22, 1996
Page 2
There will be a maximum of six Schedules during any given hour. There
will be four free Schedule changes per month. Any additional changes
shall be charged at a rate equal to $500 per schedule change.
D. COAL SUPPLY -
LPM shall make available for delivery to the Burger Plant and/or
Mansfield Plant, as specified by OE, coal that is acceptable to OE
during the period December 15, 1995 through December 31, 1996. OE in
its sole discretion may refuse acceptance of any coal which does not
meet minimum specifications as stated in Attachment 1. LPM is to
provide OE "as loaded" coal quality information in a timely manner and
consistent with OE plant operation practices. This information will
be used to evaluate the acceptability of coal.
The point of coal delivery shall be F.O.B. barge to the specified
plant. Unless otherwise agreed, LPM shall arrange for purchase and
schedule barge freight relative to this transaction in accordance with
Section E of this agreement. Title to and custody of said coal shall
transfer from LPM to OE at the point of coal delivery. Delivery shall
be deemed to have been accomplished when the barges have been
adequately moored at the Burger or Mansfield Plants.
If quality of coal delivered results in operating problems, parties
will use best efforts to resolve the problems.
Xx. Xxxxxxx X. Xxxxxxxx
February 22, 1996
Page 3
LPM is to be responsible for payment of all costs associated with the
procurement and delivery of coal including but not limited to
demurrage unless due to OE's failure to unload in a timely manner and
any payments that may be due to the rejection of any coal shipments.
Coal which is accepted by OE but which does not fall within the
quality specifications as stated in Attachment 1 will result in
additional payments by LPM to OE. The additional payments shall be
calculated using the quality adjustments formula in Attachment 1.
OE weights and analyses are to be the sole basis for establishing the
quantity and quality of coal actually delivered.
E. SCHEDULING OF COAL -
Coal deliveries shall be scheduled with the specified Plant no later
than Wednesday for deliveries for the following week. The primary
site for delivery shall be the Burger Plant, but at OE's request and
with adequate notification, coal may be received at the Mansfield
Plant. Commercially reasonable efforts shall be made to accommodate
Plant coal yard work schedules.
F. COAL TO ENERGY TOLLING
During the period January 1, 1996 through December 31, 1996 coal
furnished to OE under this letter shall be converted to energy and
made available at any point
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February 22, 1996
Page 4
of interconnection on the OE transmission system as agreed by LPM and
OE ("Point of Delivery") such that it does not violate transmission
constraints. BTU's supplied by said coal, as measured by OE, shall be
converted to energy by a heat rate factor of 10,500 BTU/kWh. An
example of this calculation is provided in Attachment 2.
LPM will pay OE $5.00/MWh for the conversion of coal to electrical
energy.
G. EMISSION ALLOWANCES
In addition to the $5.00/MWh, LPM shall provide emission allowances to
OE for this transaction on a quarterly basis. The number of emission
allowances to be transferred to OE shall be based on the sulfur
content of the coal, the quantity of coal received, and the output
factor of the plant to which the coal is delivered. A sample of this
calculation is included in Attachment 2.
H. FIRMNESS
1. Neither party may interrupt 100 MW of firm power, except for
force majeure.
2. OE may refuse to convert up to 200 MW of electricity during July
and August for LPM's use for a minimum of 16 Hrs/Day not to
exceed a total of 40,000 Mwh in 1996.
Xx. Xxxxxxx X. Xxxxxxxx
February 22, 1996
Page 5
3. Whenever the Pennsylvania-New Jersey-Maryland (PJM) Pool declares
a minimum generation problem, LPM may refuse to accept up to 200
MW of electricity from OE during any day, not to exceed a total
of 50,000 Mwh in 1996.
4. Both parties will exercise best efforts to provide the other
party with notification of a refusal pursuant to Sections H.2 or
H.3.
I. DAMAGES FOR NON-PERFORMANCE
1. If OE fails to provide LPM with the amount of power as provided
for in this agreement, except as provided for in Section H.2, and
its failure to perform is not excused by a FORCE MAJEURE or by
LPM, OE will pay LPM (on the date payment would otherwise be due
under this transaction) an amount for each Mwh of such deficiency
equaling the sum of: (i) the price at which LPM is, or would be
able, to purchase or otherwise receive comparable supplies of
power at a commercially reasonable price (adjusted to reflect
difference in transmission costs, if any) minus (ii) $5.00/Mwh.
2. If LPM refuses to accept delivery, except as provided for in
Section H.3, and its failure to perform is not excused by a FORCE
MAJEURE or by OE, LPM will pay OE $5.00 for each Mwh of
deficiency. Payment will be
Xx. Xxxxxxx X. Xxxxxxxx
February 22, 1996
Page 6
made by LPM on the date payment would otherwise be due under the
Agreement.
J. At the end of the Term, if LPM has delivered to OE more coal than
called for in the conversion formula specified in Attachment 2, OE
will reimburse LPM for the amount of coal at a mutually agreeable
price. In no event will OE reimburse LPM for more than 15,000 tons of
coal.
Please confirm that the terms stated herein accurately reflect the
agreement reached between OE and LPM by returning an executed copy of this
Confirmation Letter.
OHIO EDISON COMPANY LG&E POWER MARKETING
Name: Name:
------------------------ ------------------------
Title: Title:
------------------------ ------------------------
Attachment 1
Ohio Edison - LG&E Power Marketing
Coal Tolling Arrangement
Burger Plant Coal Specifications
Plant Location: Dilles Bottom, Ohio (Belmont County)
Ohio River MM 102.3
Delivery Mode: Barge (Open xxxxxx)
Coal Specifications: Avg. Month Barge Limits
Moisture 8.00% 9.00% Max.
Ash 11#/MMBTU 12#/MMBTU Max.
Sulfur 1.0-5.0% 5.0% Max
BTU/LB 11,500 11,500 Min.
Ash Fusion: 1950 Degrees Softening Spherical
(Minimum)(Reducing atmosphere)
Volatile: 30-40
Grind: 42 Minimum
Top Size: 4 Inches Maximum
Fines (3/8 x 0) 50% Maximum
Pounds of Ash: % Ash X 10,000
--------------
BTU/LB
Loading Requirements: Coal in each barge should be loaded evenly and in a
manner which reasonably facilitates unloading.
Delivery Requirements: Equal monthly shipments (subject to Burger Plant
modification as needed)
Weights & Analysis: Based on Ohio Edison Company Data
Rejection: Barges can be rejected if they contain foreign material
or excess moisture and fines which limit unloading
and/or handling ability.
Coal Sourcing: From mines which load upriver from Greenup Lock
and Dam (MM341 Ohio River)
Quality Adjustment: "As Received" shipment quality will be provided to LPM
during the purchase period. Price adjustments due to
quality deviations will be made on a monthly basis.
The price adjustment for quality deviations will be
based on monthly as received data and will result in a
price adjustment as follows:
Ash $0.75/ton for each full 1 LB/MMBTU in excess
of 11 LB/MMBTU
BTU/LB - Any barge shipment not meeting BTU min.
spec. (11,500 BTU/LB) will be penalized $0.50/ton
for each 50 BTU below this spec.
Attachment 2
Ohio Edison - LG&E Power Marketing
Coal Tolling Arrangement
Available Energy and Emission Allowance Calculation
A. Available Energy Calculation -
The Available Energy shall be equal to the amount of coal
received times the heat content of the coal, as measured by OE,
divided by the agreed conversion heat rate (10,500 BTU/KWh)
Example: Received 1064 Tons of Coal
at Burger Sulfur - 1.36%
Heat Content - 12313
BTU/lb
Mwh's =1064 Tons X (2000lb/1T) X (12,313 BTU/lb) X (1 Kwh/10,500BTU) X
(1MWh/1000 Kwh)
=2495 Mwh
B. Emission Allowance Calculation -
The number of Emission Allowances owed shall be equal to the amount of
coal received times the sulfur content of the coal, as measured by OE
times the output factor (amount of SO2 that goes up the stack). The
output factor for Burger and Mansfield are 1.00 and 0.50 respectively.
This number shall then be rounded to the nearest whole number.
Continuing the above example:
EA's = 1064 Tons X (0.135 Tons Sulfur/1 Ton Coal) X (2 Tons SO2/1 Ton
Sulfur)
=28.94 Mwh
Rounding yields 29 East
