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Exhibit 10.16
AGREEMENT
AGREEMENT made as of the 13th day of April, 1999 ("Agreement") between and
among NGE GENERATION, INC., a New York corporation ("NGE"), NEW YORK STATE
ELECTRIC & GAS CORPORATION, a New York corporation ("NYSEG", with NGE and NYSEG
being collectively referred to as "Sellers") and AES EASTERN ENERGY, L.P., a
Delaware limited partnership ("AEE").
W I T N E S S E T H :
WHEREAS, the Sellers and AES NY, L.L.C., a Delaware limited liability
company ("AES NY") entered into a certain Asset Purchase Agreement dated as of
August 3, 1998 (as the same may be modified, supplemented or amended from time
to time, the "APA") pursuant to which Sellers agree to sell and AES NY agrees to
purchase the Purchased Assets. Capitalized terms used herein shall, except as
otherwise specifically provided herein, have the respective meanings ascribed
thereto under the APA;
WHEREAS, a vibration condition has been observed in the number 9 bearing of
the turbine-generator at the Xxxxxxx Station (the "Vibration Condition"), which
condition, in the opinion of AEE, differs from the vibration condition that
existed at the Xxxxxxx Station turbine-generator as of the date of the APA;
WHEREAS, the Vibration Condition may be satisfactorily addressed by
maintenance and repair to the Xxxxxxx Station turbine-generator that will be
performed during the AEE Turbine Outage (hereinafter defined);
WHEREAS, the parties recognize that the possibility exists that
satisfactorily addressing the Vibration Condition will require inspection of,
and maintenance and repair to, the Xxxxxxx Station turbine-generator in addition
to that which is customarily performed during a scheduled 10-year outage such as
the AEE Turbine Outage;
WHEREAS, the Vibration Condition may also have further material
implications for revenue to be derived from the Xxxxxxx Station from and after
the Closing Date in that such possible additional inspection, repair and
maintenance required to satisfactorily address the Vibration Condition
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may require the Xxxxxxx Station turbine-generator to be unavailable to produce
power for a period extending beyond the duration of the planned AEE Turbine
Outage and the planned AEE Boiler Outage (hereinafter defined);
WHEREAS, AES NY has assigned certain of its rights and obligations under
the APA with respect to the Xxxxxxx Station to AEE (the "AEE Assignment") and
has assigned certain other of its rights and interests under the APA with
respect to the Xxxxxxx Station to the owner trusts more specifically described
in Exhibit A attached hereto (collectively, the "Owner Trusts");
WHEREAS, AEE will be the lessee, under various lease agreements to be
entered into between AEE and the Owner Trusts (the "Lease Agreements"), of the
rights and interests to be acquired by the Owner Trusts in and to the Xxxxxxx
Station, which lease agreements will grant AEE operational control over such
rights and interests held by the Owner Trusts in the Xxxxxxx Station;
WHEREAS, as of the Closing Date, AEE will be the entity entitled to
exercise control over the operations of the Xxxxxxx Station as a result of the
execution and delivery of the Lease Agreements and the conveyance to AEE of the
other interests in and to the Xxxxxxx Station by Sellers under the APA pursuant
to the AEE Assignment, NGE will assign its rights and obligations under this
Agreement to NYSEG, and NYSEG shall assume such rights and obligations;
WHEREAS, AEE will conduct an outage (the "AEE Turbine Outage") for the
Xxxxxxx Station, to commence on or about May 1, 1999, to perform repair and
periodic maintenance to the Xxxxxxx Station turbine-generator consistent with a
10-year wear and tear factor from the baseline data contained in the GE Power
Generation Services "Inspection Report" dated Fall 1990, FSR 306T015 (the "1990
Inspection Report");
WHEREAS, AEE will, and will cause AES NY to, close under the APA
notwithstanding the Vibration Condition and uncertainty on the date of this
Agreement regarding the precise nature of the cause of the Vibration Condition,
the nature of addressing the Vibration Condition and the magnitude of the impact
the Vibration Condition may have on repair costs and future revenues from the
Xxxxxxx Station,
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based upon the undertakings of Sellers hereinafter set forth;
WHEREAS, Sellers wish to insure that AEE and AES NY will close under the
APA, based upon the undertakings of Sellers hereinafter set forth,
notwithstanding the Vibration Condition and the uncertainty on the date of this
Agreement regarding the precise nature of the cause of the Vibration Condition,
the nature of addressing the Vibration Condition, and the magnitude of the
impact the Vibration Condition may have on repair costs and future revenues from
the Xxxxxxx Station.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings and agreements hereinafter set forth and intending to be legally
bound hereby, Sellers and AEE agree as follows:
1. As used in this Agreement, the following terms shall have the meanings
specified below:
"Xxxxxxx Station" shall mean the Xxxxxxx Generating Station consisting of a
coal-fired, steam turbine generating unit with a net generating capacity of 675
MW located in Barker, New York, and associated facilities.
"Lost Net Revenues" for any period shall mean net revenues that would have
been received by AEE during such period assuming that the Xxxxxxx Station would
have operated during that period consistent with its average dispatch curve over
the then most-recent 12-month period, and that the output (installed net
capacity and energy) that the Xxxxxxx Station would have produced during that
period would have been sold at a price equal to the applicable price set forth
in the "Daily-Western New York" index contained in "Power Market Weekly" (the
"Index"). For purposes of this definition of Lost Net Revenue, (a) if the Index
provides a range of installed net capacity and/or energy prices applicable to
all or part of the period in question, then the price that shall be used for
purposes of calculating Lost Net Revenue shall be the average of the prices set
forth in that range, and (b) if the Index should cease to be published, or if
the Index is not published for all or part of the period, then the applicable
price for installed net capacity and energy at PJM Western Hub for that period
shall be used for calculating Lost Net Revenue.
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"Completion Date" shall mean the date on which an independent engineering
consultant (the "Consultant") retained by NYSEG and AEE and selected by NYSEG
and AEE from the list attached hereto as Exhibit B (or such other consultant as
mutually agreed to by NYSEG and AEE), has confirmed in writing, provided to both
AEE and NYSEG, its professional engineering opinion that the Vibration Condition
has been satisfactorily addressed in that the Xxxxxxx Station turbine-generator
can be reasonably expected, given the assumptions that the Consultant may
reasonably find appropriate for such an opinion, to operate for a period of 10
years from the Completion Date without the re-occurrence of the Vibration
Condition outside of the manufacturer's operating specifications. AEE and NYSEG
shall share the cost of the Consultant equally. AEE and NYSEG shall cause the
Consultant to issue the aforesaid opinion as soon as possible after the
completion of those steps taken by AEE, and agreed to be NYSEG, to address the
Vibration Condition.
2. During the AEE Turbine Outage, AEE shall inspect the Xxxxxxx Station
turbine-generator and shall address the Vibration Condition in a manner
reasonably satisfactory to AEE and consistent with Good Utility Practices. AEE
will proceed with due diligence and employ Good Utility Practices to address the
Vibration Condition. As part of AEE's obligation to employ due diligence to
address the Vibration Condition, and at NYSEG's expense, AEE shall use
commercially reasonable efforts to place on, or have available at, the Xxxxxxx
Station site, on or before the date that the AEE Turbine Outage will commence,
equipment, machinery, and personnel (including a lifting rig and lathe) that
NYSEG confirms in writing may be required to satisfactorily address the
Vibration Condition during the AEE Turbine Outage. AEE shall employ reasonable
best efforts to satisfactorily address the Vibration Condition during the
duration of the AEE Turbine Outage.
3. AEE will permit representatives and employees of NYSEG and the
Consultant to be present at the Xxxxxxx Station from the date the AEE Turbine
Outage commences through the Completion Date for the purpose of observing the
AEE Turbine Outage, enabling NYSEG to exercise its rights under this Agreement,
and facilitating the Consultant's performance of its functions under and in
connection with this Agreement.
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4. AEE will not undertake any aspect of addressing the Vibration Condition
without first obtaining the consent of NYSEG thereto, which consent shall not be
unreasonably withheld, delayed or conditioned. If NYSEG does not either give its
consent, or refuse, in writing, to give its consent (specifying in such writing,
in reasonable detail, its reason for refusing to give such consent) within 48
hours after AEE's request for such consent (which must be written), NYSEG's
consent shall be deemed given. If NYSEG shall refuse, in writing, to give its
consent to the matter requested, and NYSEG and AEE are unable to resolve their
differences on such matter within an additional 12-hour period, such matter
shall be promptly referred to the Consultant for resolution consistent with the
terms and conditions of this Agreement, and NYSEG and AEE shall require the
Consultant to render a decision on such matter no later than four (4) hours
after the Consultant has received such matter for resolution. The decision of
the Consultant shall be binding on NYSEG and AEE.
5. Subject to paragraph 7, NYSEG shall be responsible for, and shall pay
all costs and expenses reasonably incurred by AEE, up to and including the
Completion Date, in connection with satisfactorily addressing the Vibration
Condition, including, but not limited to, the costs of all necessary replacement
parts, the costs of repair to damaged parts, and all labor and other costs
incurred in connection therewith, to the extent such costs and expenses are
incurred in connection with AEE undertaking repair and maintenance of the
Xxxxxxx Station turbine-generator that is (a) beyond the repair and maintenance
to the Xxxxxxx Station turbine-generator consistent with a 10-year wear and tear
factor from the baseline data contained in the 1990 Inspection Report, or (b)
not activity to address normal wear and tear of the Xxxxxxx Station
turbine-generator. Except as otherwise provided in this paragraph 5, AEE shall
be responsible for all costs and expenses in connection with the AEE Turbine
Outage, including those costs and expenses incurred by AEE in satisfactorily
addressing the Vibration Condition.
6. The AEE Turbine Outage is scheduled to commence on or about May 1, 1999
and end 39 days after it commences (the "Turbine Outage Target Date"). In
addition, AEE has planned an outage at Xxxxxxx Station with respect to the
boiler (the "AEE Boiler Outage") which is scheduled to
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commence on or about May 1, 1999 and end 45 days after it commences (the "Boiler
Outage Target Date").
7. If (a) the Completion Date has not occurred on or prior to the Turbine
Outage Target Date, but it does occur before the Boiler Outage Target Date,
resulting in a loss of revenue due to foregone sales of, or credits for,
installed net capacity and/or energy to AEE from and after the Boiler Outage
Target Date, NYSEG shall provide compensation to AEE for Lost Net Revenues for
and with respect to the period beginning on the Boiler Outage Target Date and
ending on the date that is a number of days after the Boiler Outage Target Date,
that number being equal to the number of days after the Turbine Outage Target
Date that the Completion Date occurs, or (b) the Completion Date occurs after
the Boiler Outage Target Date, resulting in a loss of revenue due to foregone
sales of, or credits for, installed net capacity and/or energy to AEE from and
after the Boiler Outage Target Date, NYSEG shall provide compensation to AEE for
Lost Net Revenue for and with respect to the period beginning on the Boiler
Outage Target Date and ending on a date after the Completion Date that is the
lesser of(AA) six (6) days, or (BB) the number of days needed to complete the
AEE Boiler Outage after the Completion Date, in either case (a) or (b) above to
the extent the delay in achieving the Completion Date prior to the later of
those outage target dates is caused by AEE's need to satisfactorily address the
Vibration Condition and is not caused by (i) repair and maintenance to the
Xxxxxxx Station turbine-generator consistent with a 10-year wear and tear factor
from the baseline data contained in the 1990 Inspection Report, (ii) a breach by
AEE of its obligations under this Agreement, (iii) activity related to
addressing normal wear and tear of the Xxxxxxx Station turbine-generator, (iv)
any repair or maintenance to the Xxxxxxx Station turbine-generator that is
unrelated to the need to satisfactorily address the Vibration Condition, (v) any
negligence or willful misconduct of AEE or any of its representatives,
employees, or contractors, (vi) any event customarily referred to as "force
majeure," or (vii) any independent delay in performing the AEE Turbine Outage or
the AEE Boiler Outage. For purposes of this paragraph 7, AEE shall use
commercially reasonable efforts to complete the AEE Boiler Outage as soon as
possible after the Completion Date.
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8. The sums payable by NYSEG to AEE under this Agreement shall be limited
to those amounts set forth in paragraphs 5 and 7 (and, to the extent such costs
are incurred by AEE, NYSEG's share of the cost of the Consultant or costs
incurred pursuant to paragraph 2) and shall be paid by NYSEG, subject to audit,
within twenty (20) days of written demand therefor, accompanied by reasonable
documentary substantiation of same, in immediately available funds to an account
specified by AEE.
9. (a) Within fourteen (14) days after the AEE Turbine Outage has
commenced, AEE may provide written notice to NYSEG (the "Outage Notice") to the
effect that, in the opinion of AEE, it is not possible for ARE to complete the
repair and maintenance necessary to address satisfactorily the Vibration
Condition in accordance with the terms and conditions of this Agreement on or
before the Turbine Outage Target Date.
(b) If NYSEG agrees with AEE's opinion expressed in the Outage Notice,
which agreement shall be delivered to AEE in writing within forty-eight (48)
hours after NYSEG's receipt of the Outage Notice, (i) AEE shall have the right
to complete the AEE Turbine Outage without addressing the Vibration Condition,
(ii) AEE shall have the right to schedule a Xxxxxxx Station turbine outage (the
"Subsequent Turbine Outage") to address the Vibration Condition, which outage
shall be scheduled to commence on a date, mutually agreed to by NYSEG and AEE,
during the 12-month period (the "Subsequent Outage Period") commencing with the
later of (AA) the completion of the AEE Turbine Outage, (BB) if the timing of
the Subsequent Turbine Outage is the subject of disagreement, the end of the
good-faith discussion period described in subsection (iii) below, and (CC) if
the timing of the Subsequent Turbine Outage is subject to the determination of
the Consultant under section (c) below, the date that the Consultant renders a
decision, and (iii) NYSEG and AEE shall engage in good-faith discussions, for a
period no longer than forty-five (45) days following NYSEG's receipt of the
Outage Notice, to agree upon the timing of the Subsequent Turbine Outage and the
scope of repair and maintenance to the Xxxxxxx Station turbine-generator that
will be conducted by AEE during the Subsequent Turbine Outage to address
satisfactorily the Vibration Condition.
If AEE so schedules the Subsequent Turbine Outage as agreed by NYSEG and
AEE, or as determined by the
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Consultant, (x) NYSEG shall reimburse AEE for the costs of, and Lost Net Revenue
associated with, the Subsequent Turbine Outage to the same extent as set forth
in paragraphs 5 and 7 of this Agreement, and upon the payment of such sums,
NYSEG shall have no further liability to AEE under this Agreement, (y) AEE shall
use commercially reasonable efforts to commence the Subsequent Turbine Outage
during the Subsequent Outage Period, provided, however, that if AEE cannot so
timely commence the Subsequent Turbine Outage despite such efforts due to the
unavailability of equipment, parts or personnel, then AEE shall have the right,
upon written notice to NYSEG, to commence the Subsequent Turbine Outage during
the six-month period following the expiration of the Subsequent Outage Period on
a date mutually agreeable to NYSEG and AEE, and (z) the terms and conditions of
this Agreement applicable to addressing the Vibration Condition during the AEE
Turbine Outage shall be equally applicable to addressing the Vibration Condition
during the Subsequent Turbine Outage, unless such terms and conditions are
modified by NYSEG and AEE in writing.
(c)(i) If NYSEG disagrees with AEE's opinion expressed in the Outage
Notice, which disagreement shall be conveyed to AEE in writing within
forty-eight (48) hours after NYSEG's receipt of the Outage Notice, or (ii) if
AEE and NYSEG cannot agree, despite a period of forty-five (45) days' good-faith
discussions, on the timing of, and the scope of repair and maintenance to be
performed by AEE during, the Subsequent Turbine Outage to address satisfactorily
the Vibration Condition, then the matter shall be promptly referred to the
Consultant for resolution consistent with the terms and conditions of this
Agreement, and NYSEG and AEE shall require the Consultant to render a decision
no later than four (4) hours after receiving for resolution the matter described
in subsection (c)(i) above, or no later than five (5) days after receiving the
matter for resolution described in subsection (c)(ii) above. The decision of the
Consultant shall be binding on NYSEG and AEE.
10. All notices and other communications hereunder shall be in writing and
shall be deemed given and effective if delivered personally or by facsimile
transmission or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
following address (or at such other address or facsimile for a Party as shall be
specified
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by like notice; provided, however, that notices of a change of address shall be
effective only upon receipt thereof):
(a) If to NYSEG, to:
NEW YORK STATE ELECTRIC & GAS
CORPORATION
Legal Services Department
Corporate Drive-Kirkwood Industrial Park
X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxx 00000-0000
Attn: Secretary
with a copy to:
Xxxxx Xxxxxxxx & Xxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxxxxxx, Esq.
(b) If to AEE, to:
AES Eastern Energy, L.P.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Project Manager
with a copy to:
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxx, Esq.
(it being intended that no separate notice be given to NGE under this
Agreement).
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York (regardless of the law that
might otherwise govern under applicable New York principles of conflicts of law)
as to all matters, including, but not limited to, matters of validity,
construction, effect, performance and remedies. The Parties hereto agree that
venue in any and all actions and proceedings related to the subject matter of
this Agreement shall be in the State and federal courts in and for New York
County, New York, which
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courts shall have exclusive jurisdiction for such purpose, and the parties
hereto irrevocably submit to the exclusive jurisdiction of such courts and
irrevocably waive the defense of an inconvenient forum to the maintenance of any
such action or proceeding. Service of process may be made in any manner
recognized by such courts. Each of the Parties hereto irrevocably waive its
right to a jury trial with respect to any action or claim arising out of any
dispute in connection with this Agreement or the transactions contemplated
hereby.
12. Dispute Resolution. In the event a dispute arises between the Sellers
and AEE regarding the application or interpretation of any provision of this
Agreement, the provision for settlement of disputes set forth in Section 10.1 of
the APA shall apply and such provision is incorporated herein by reference
thereto and made a part of this Agreement.
13. Amendments. Subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of NYSEG and AEE.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Assignment. As between Sellers, NGE may assign all of its rights and
obligations under this Agreement to NYSEG without the consent of AEE and upon
such an assignment, AEE will be deemed to have released NGE from all obligations
and liabilities hereunder.
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16. Interpretation. The Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the Parties and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the Sellers and AEE have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
NGE GENERATION, INC.
By __________________________
Xxxxxxx X. Xxxxxxxx
Executive Vice President
NEW YORK STATE ELECTRIC & GAS
CORPORATION
By __________________________
Xxxxxxx X. Xxxxxxxx
Executive Vice President
AES EASTERN ENERGY, L.P.
By __________________________
Xxxxx Xxxxxxx
Vice President
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