AGREEMENT FOR CONSTRUCTION OF HOKU ELECTRIC SUBSTATION AND ASSOCIATED FACILITIES
Exhibit
10.59
[*]
=
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED FROM PUBLIC FILING PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION. THE OMITTED
INFORMATION, WHICH HAS BEEN IDENTIFIED WITH THE SYMBOL “[*],” HAS BEEN FILED
SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
AGREEMENT
FOR CONSTRUCTION OF HOKU ELECTRIC SUBSTATION
AND
ASSOCIATED FACILITIES
THIS
AGREEMENT for the construction of Hoku electric substation and associated
facilities (the “Agreement”) is entered into as of the 28th day
of
December,
2007 by and between HOKU MATERIALS, INC., Xxx Xxxx Xxx, Xxxxxxxxx,
Xxxxx 00000 (“Hoku”) and IDAHO POWER COMPANY, X.X. Xxx 00, Xxxxx, Xxxxx
00000 (“Idaho Power” or “IPCO”). Hoku and IPCO may also be referred to
hereinafter
individually as “Party” or collectively as the “Parties”.
RECITALS
A. Hoku
is
developing a manufacturing plant to produce polysilicon, a key material
used in the production of solar cells and integrated circuits. The construction
of an
electric substation and associated transmission facilities is required to allow
IPCO to supply
electric capacity and energy to Hoku’s manufacturing complex located at South
Xxxxxxx
Road in Pocatello, Idaho (“Hoku Facility”). Hoku has requested that the
substation
and associated facilities be sized to allow IPCO to provide electric service
to
the
Hoku
Facility in an amount up to [*] Megawatts (“MW”) of demand.
B. Because
the Hoku Facility will be located in an area where Idaho Power does
not
have existing facilities of adequate capacity, delivery of power to the Hoku
Facility
site will require the construction of (1) approximately [*] of [*] volt
overhead
transmission line to interconnect with Idaho Power’s existing transmission
system,
(2) a new [*] volt electric substation at the Hoku Facility, and (3) additional
equipment and facilities at IPCO’s existing substations. These facilities are
sometimes hereinafter collectively referred to as the “Requested Facilities” and
are described in greater detail in Exhibit 1 to this Agreement. This Agreement
is not subject to or governed by Rule H, Idaho Power’s tariff governing line
installations, including any revisions to that rule, or any successor rules
or
schedules.
Page
1
C. Idaho
Power will construct the Requested Facilities in accordance with the terms
and
provisions of this Agreement.
NOW,
THEREFORE, in consideration of the mutual obligations and undertakings set
forth
herein, and other good and valuable consideration, the sufficiency is hereby
acknowledged, Hoku and Idaho Power agree as follows:
AGREEMENTS
1. Construction
of Requested Facilities
1.1
Idaho
Power will construct the Requested Facilities to provide for the
delivery of power (capacity) at a point generally described as the load side
terminals of
the
substation transformer [*]
disconnect
switches at the Hoku Facility
(the “Delivery Point”).
1.2
Idaho
Power will use commercially reasonable efforts to complete construction
of the Requested Facilities by February 15, 2009. However, Hoku recognizes
that Idaho Power’s ability to complete the Requested Facilities on or before
that
date
is subject to the receipt of the site plans and payments from Hoku as
described
herein, Idaho Power’s ability to obtain required labor, materials and
equipment,
timely receipt of satisfactory easements and rights of way, and timely receipt
of governmental regulatory authorizations.
1.3
If
Idaho Power fails to meet the completion deadline described above,
and such failure is not excused as provided in Section 1.2, the Parties agree
that Hoku may submit the matter to the Idaho Public Utilities Commission
(“Commission”) for
appropriate relief, and pending final resolution, Hoku’s obligation to make
further payments pursuant to the terms of this Agreement shall be
suspended.
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2
2. Project
Cost
2.1
Excluding amounts previously paid for design and engineering expenses,
the total estimated cost for the construction of the Requested Facilities is
$14,804,000. Hoku’s payments to IPCO constitute a Contribution In Aid of
Construction (“CIAC”)
and include a tax gross-up of thirty-one percent (31%) to cover IPCO’s
resulting
income tax liability. Hoku shall pay IPCO in the amounts and at the times specified
below:
|
January
9, 2008
|
$3,701,000
|
|
March
1, 2008
|
$3,701,000
|
|
June
1, 2008
|
$3,701,000
|
|
September
1, 2008
|
$3,201,000
|
|
Facilities
Available for Service
|
$500,000
|
For
purposes of the payment schedule described above, “Facilities Available for
Service”
shall mean the date when the capacity is first made available to provide the
requested
service. In the event of significant scheduling changes, the payment
milestones
will be delayed or accelerated accordingly. The total estimated cost of the
Requested Facilities does not include costs associated with use of any temporary
substations,
transmission or distribution facilities that may be necessary to provide
Hoku
with
temporary start-up power prior to the expected February 15, 2009 completion
date. The cost of such temporary facilities will be invoiced to and paid by
Hoku
separately from this Agreement.
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3
2.3
Hoku’s payments under this Agreement shall not provide or give Hoku
any
ownership rights or interest in the Requested Facilities. Ownership of the
Requested Facilities and new Hoku Substation shall remain with
IPCO.
3. Capacity
Entitlement
3.1
Once
construction of the Requested Facilities is complete, Idaho Power
will have installed facilities and equipment sufficient to provide Hoku with
[*]
MW of
electrical capacity measured at the Delivery Point to serve loads at the Hoku
Facility.
For five (5) years following the completion of construction, Idaho Power agrees
not to
serve
additional customers from the two (2) substation transformers installed or
utilize the
two
(2) vacant transformer spaces pursuant to this Agreement without the prior
written consent
of Hoku . However, if at the conclusion of the five (5)-year period following
the completion of construction, total loads at the Hoku Facility are less than
[*]
MW,
Hoku’s entitlement to capacity at the Delivery Point will be limited to the
amount of contract demand
established in the Electric Service Agreement referenced in Section 6 that
is
currently being negotiated between the Parties. Relinquishment of any portion
of
Hoku’s capacity
entitlement, as discussed above, does not entitle Hoku to any refund of the
CIAC
payments specified in Section 2.1. Idaho Power will send a letter to Hoku
specifying
the date when construction of the Requested Facilities has been completed and
notifying Hoku that the five (5)-year time period described above has
commenced.
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4
4. Ownership
Operation and Maintenance
4.1
Idaho
Power will own, operate and maintain the Requested Facilities
constructed pursuant to this Agreement. Hoku recognizes that the Requested
Facilities
will become part of Idaho Power’s integrated electrical transmission and
distribution
system and will be used by Idaho Power to provide electric service to other
existing, and future, customers.
5. Rights
of Way and/or Easements
5.1
Hoku
and IPCO agree to work in good faith to acquire the rights to access
and use the real property determined by IPCO to be reasonably required for
locating,
constructing, operating and maintaining the Requested Facilities. Idaho Power
recognizes
that Hoku does not own the land on which the Hoku Facility will be located
(the
“Land”),
but holds a long-term ground lease under which the City of Pocatello is the
landlord.
It is IPCO’s preference to own said real property in fee simple free and
clear
of
liens and other encumbrances. In the event IPCO purchases or otherwise
acquires
the real property rights it deems necessary to access and use the Requested
Facilities, Hoku shall fully reimburse IPCO for amounts spent by IPCO to
purchase or otherwise acquire such necessary real property interest. All such
easements and rights of way will be in a form reasonably acceptable to Idaho
Power, and
will
be provided to Idaho Power at no cost. Idaho Power will be responsible for
obtaining
any and all other permits, rights-of-way, and/or regulatory approvals
required
by public agencies for performance of this Agreement and for payment of any
and
all permit fees and/or taxes required for or associated with such permits,
rights-of-way,
and
regulatory approvals.
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5
5.2
IPCO
will make a good faith effort to coordinate construction, operation
and maintenance schedules with Hoku so that such activities will not
unreasonably
interfere with Hoku’s access, ingress and egress to the Hoku manufacturing
complex.
6. Refunds.
6.1
The
Parties are concurrently negotiating an ELECTRIC SERVICE AGREEMENT
(“ESA”) to govern the rates and terms of IPCO’s provision of electric
service
to Hoku. The ESA shall be subject to the approval of the Commission and the
respective
rights and obligations of the Parties hereunder shall be subject to the
continuing
jurisdiction and regulatory authority of said Commission. In the event an
ESA
cannot be reached that is satisfactory to the Parties and receives regulatory
approval
from the Commission, or if Hoku notifies IPCO that it no longer wishes to
proceed
with the construction of the Requested Facilities for any other reason, IPCO
will
refund only the amounts received that exceed the cost of constructing the
Requested
Facilities then completed or committed to date, and IPCO shall use reasonable
efforts to avoid or mitigate such costs.
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6
7.1
Liability.
Each
Party will indemnify and hold harmless the other Party
from and against loss, damage or liability, exclusive of costs and attorney’s
fees, resulting from claims asserted by third persons against either or both
Parties to this Agreement
on account of injury or death to persons or damage or destruction of
property
occurring on such (indemnifying) Party’s side of the aforesaid Delivery Point,
unless such injury or damage shall have resulted from the sole negligence of
the
other Party; provided, however, that each Party shall be solely responsible
for
claims of and payment to its employees for injuries occurring in connection
with
their employment or arising out of any worker’s compensation laws.
7.2
Limitation
on Liability. NEITHER
PARTY SHALL, IN ANY EVENT, BE
LIABLE
TO THE OTHER FOR ANY SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES SUCH AS, BUT NOT LIMITED TO, LOST
PROFITS, REVENUE OR GOOD WILL, OR INTEREST, WHETHER SUCH LOSS
IS
BASED ON CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR
OTHERWISE.
7.3
Waivers.
Any
waiver at any time by either Party of any right with respect
to any matter arising under this Agreement, or any failure to give notice
provided
hereunder, shall not be deemed to be a waiver with respect to any subsequent
matter,
nor as the establishment of or consent to any practice under this Agreement
or
an
interpretation of any term or provision hereof.
7.4
Regulatory
Authority. This
Agreement is subject to valid laws and to
the
regulatory authority and orders, rules and regulations of the Commission and
such other
administrative bodies having jurisdiction, as well as Idaho Power Company’s
Rules and Regulations as now or may be hereafter modified and approved by the
Commission.
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7
7.5
Choice
of Law and Venue. This
Agreement shall be governed by and
construed in accordance with the laws of the State of Idaho, and venue for
any
court
proceeding arising out of this Agreement shall be in Boise, Idaho.
7.6
Dispute
Resolution. Prior
to
commencement of any suit, claim or other
cause of action in any court proceeding, Hoku and IPCO agree to undertake good
faith efforts to resolve such differences through negotiations between senior
business representatives
of each company. In the event of a dispute arising under this Agreement
that cannot be resolved through negotiation, the prevailing party shall be
entitled
to reimbursement from the non-prevailing party for all reasonable costs and
expenses, including reasonable attorney’s fees incurred by the prevailing party
in the formal resolution of the dispute.
7.7
Modifications
and Counterparts. This
Agreement sets forth the entire
understanding and agreement of Hoku and IPCO with regard to the construction
of
the
Requested Facilities. This Agreement may only be amended or modified by a
writing
signed by the duly authorized representatives of both parties. This Agreement
may
be
executed in counterparts, each of which, taken together, shall constitute one
and
the
same Agreement.
7.8
Notices.
All
notices, requests, demands and other communications which
are
required or may be given under this Agreement shall be in writing and shall
be
given
to the intended recipient at the address specified below:
Page
8
| If to IPCO, to: |
Xxx
Xxxxx
Senior
Vice President, Delivery
Idaho
Power Company
X.X.
Xxx 00
Xxxxx,
Xxxxx 00000
|
|
| With a copy to: | Xxxxxx Xxxxxx
General
Counsel
Idaho
Power Company
X.X.
Xxx 00
Xxxxx,
Xxxxx 00000
|
|
| and | ||
| If to Hoku, to: | Xxxx Xxxx
CTO
Hoku
Materials, Inc. Xxx
Xxxx Xxx
Xxxxxxxxx,
Xxxxx 00000
|
|
| With a copy to: | Xxxxxx Xxxxxx
CEO
Hoku
Scientific, Inc.
0000
Xxxxxxxxx Xxxxxx Xxxxxxx, Xxxxxx
00000-0000
|
8. Commission
Approval. This
Agreement and the respective rights and obligations of the Parties hereunder
shall be subject to the continuing jurisdiction and regulatory authority of
the
Commission.
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9
IN
WITNESS WHEREOF, the Parties have entered into this Agreement effective as
of
the day
and
year first above written.
| HOKU MATERIALS, INC. | ||
| |
|
|
| By: | /s/ Xxxxxx X. Xxxxxx | |
|
Title: CEO |
||
| IDAHO POWER COMPANY | ||
| |
|
|
| By: | /s/ Xxx Xxxxx | |
|
Title: Senior Vice President,
Delivery
|
||
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10
EXHIBIT
1
HOKU
REQUESTED FACILITIES
New
[*]
Substation
to be located at Hoku Facility
| · |
[*]
Line
Terminals with relay protection
|
| · |
[*]
LTC substation power transformers
|
| · |
[*]
circuit
breakers, diagonal ring bus
configuration
|
| · |
[*]
amp
metered bus points of delivery
|
| · |
Control
enclosure for equipment protective relays and station
battery
|
| · |
Approx
1+ acre yard size (site and access provided by
Hoku)
|
Don
Substation
|
·
|
Install
[*]
new [*]
Transmission Line Terminal with circuit breaker and
protective relays for service to new substation located at the Hoku
Facility.
|
Alameda
Substation
|
·
|
Install
[*]
new [*]
Transmission Line Terminal with protective relays for service to
new substation located at the Hoku
Facility.
|
|
·
|
Add
[*] circuit breaker and line relay protection to existing Alameda
Tap
Transmission Line.
|
Transmission
Lines
|
·
|
Construct
approx [*] single pole transmission line from Don Substation to new
substation located at the Hoku
Facility.
|
|
·
|
Construct
approx [*] single pole transmission line from Alameda Substation
to new
substation located at the Hoku
Facility.
|
Kinport
Substation
| · |
Install
protective relay for redundant Kinport-Alameda-Hoku [*] transmission
source.
|
Xxxxx
Substation
| · |
Install
protective relay for redundant Terry-Alameda-Hoku [*] transmission
source.
|
Pocatello
Service Building
| · |
Install
protective relay communications equipment for redundant
KinportAlameda-Xxxxx [*] transmission
source.
|
EXHIBIT1
