Exhibit 10.14
December 6, 1999
Xx. Xxxx Xxxxxx
Project Orange Associates, L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Re: Contract Optimization/Energy Marketing Services for Project Orange
Dear Xxxx:
The purpose of this letter ("Marketing Agreement") is to confirm the
understanding between Project Orange Associates, L.P. ("POA") and Niagara Mohawk
Energy Marketing, Inc. ("NMEM") with respect to the performance of certain
dispatch and contract optimization services for POA by NMEM.
POA owns an 80MW cogeneration plant located in Syracuse, New York (the
"Facility"). XXX has requested NMEM, and NMEM agrees to provide certain services
described below for the purpose of assisting POA in maximizing its economic
performance under certain of its contracts. Accordingly, the Parties agree to
the following terms and conditions:
1. The "POA Contracts" that NMEM will assist in managing are as follows:
a. Restated Gas Sale and Purchase Agreement dated March 18, 1991
between Project Orange Associates, L.P., Noranda Inc. and Canadian
Hunter Exploration Ltd.
b. Gas Transportation Agreement dated June 26, 1992 between Tennessee
Gas Pipeline Company and Project Orange Associates, L.P.
c. Firm Natural Gas Transportation Agreement dated March 29, 1991
between Tennessee Gas Pipeline Company and Project Orange
Associates, L.P.
d. Gas Transportation Agreement dated November 19, 1987 between
Tennessee Gas Pipeline Company and Gas Alternative Systems, Inc.
e. Firm Service Contract dated October 11, 1990 between Transcanada
Pipelines Limited and Canadian Hunter Exploration Ltd.
f. ISDA (International Swap Dealers Association, Inc.) Master
Agreement dated June 30, 1998.
g.. Power Put Agreement dated September 19, 1986 between Project
Orange Associates, L.P. and Niagara Mohawk Power Corporation.
h. Steam Contract, dated February 27, 1990, between Project Orange
Associates, L.P. and Syracuse University.
i. Operating Agreement, dated February 27, 1990, between Syracuse
University and Project Orange Associates, L.P.
2. POA will appoint NMEM as its exclusive agent for the purpose of
allowing NMEM to acquire and sell electric and natural gas supplies as
well as transmission and transportation and related services on behalf
of the Facility. The Parties will work together to develop trading
procedures and to define NMEM's authority, NMEM shall use its best
efforts to assist POA in maximizing the value of its electric and
natural gas assets. The functions that NMEM shall perform will
include, but are not limited to:
a. Establish seasonal, monthly and daily plans that seek profit
opportunities in the forward power and natural gas markets and
manage risk.
b. Directing the dispatch of the Facility, and the boilers owned by
Syracuse University, to their most economic level subject to the
constraints identified by POA. Through its day-ahead and real
time trading operations, NMEM will continuously evaluate and
maximize the market opportunities and options contained within
POA'S portfolio, This would include continuous redispatch of the
Facility as well as continuous reconfiguration of energy
transactions and transmission/transportation rights.
c. Market the electricity produced by the Facility. This will
include entering into bilateral transactions and/or submitting
bids into the New York Independent System Operator ("NYISO")
markets for capacity, energy and ancillary services. The Parties
will jointly develop a marketing strategy that will not
compromise the Facility's ability to hedge the Indexed Swap
Agreement.
d. Remarketing any natural gas and transportation owned by POA. In
addition,
NMEM will economically nominate, within contract constraints,
natural gas volumes with pipelines and LDCs.
e. Exercising the options contained in the Facility's Power Put
agreement with NMPC. NMEM will also provide the notices and
schedules required in Paragraph 3 the Power Put Agreement.
f. Advise and assist in the remarketing of the Facility's emissions
credits.
3. POA represents and warrants that it shall designate a representative
that can authorize NMEM to implement transactions on behalf of POA on
a timely basis. Confirmations for such transactions may be made via
taped telephone conversation and followed-up with a written
confirmation, Neither party shall object to the introduction into
evidence of any legal proceeding or arbitration of taped telephone
conversations for the purpose of confirming transactions centered into
by NMEM on behalf of POA. POA will execute all reasonable
documentation required for it to obtain transmission and
transportation services and acquire or sell electric supplies
recommended to it by NMEM. Except as specifically set forth in the
Asset Management Agreement between the parties, POA shall be
responsible for billing, credit and collection matters associated with
transactions arranged by NMEM for POA, NMEM will provide POA with the
necessary information for such functions. NMEM does not assume any
financial responsibility nor should POA represent that NMEM will
assume such responsibility for any transactions. Notwithstanding the
foregoing, NMEM may enter into electricity or natural gas transactions
with POA as provided in Paragraph 6.
4. It is NMEM's objective to enhance the financial performance of the
Facility and POA contracts by assisting POA in the management of its
contracts and dispatch of its Facility so that POA obtains more Net
Revenue, as defined below, than it would have obtained by simply
selling the generating output of its Facility to NMPC under the Power
Put Agreement with NMPC. Accordingly, the incremental Net Revenue
created by NMEM as a result of its performance hereunder shall be
called "Optimization Revenue". Such Optimization Revenue shall be
defined as the actual net revenues realized by POA less the
theoretical net revenues that would have been realized by POA under a
mode of operation where, (i) the Facility is operated as a base loaded
plant, and (ii) for each hour that the Facility is available, the
Facility is operated and the electricity generated by the Facility is
sold to NMPC, in amounts up to the maximum allowed under the Power Put
Agreement between POA and NMPC.
5. NMEM's compensation under this Marketing Agreement shall be limited to
an incentive fee, The incentive fee shall equal to a percentage of the
Optimization Revenue realized by POA in each Contract Year. A Contract
Year shall be defined as the twelve consecutive month period
commencing January 1, 2000 and each succeeding twelve-month
consecutive month period. POA shall compensate NMEM on a monthly basis
pursuant to Paragraph "8" below, based upon NMEM's performance under
the following schedule in each Contract Year:
Optimization Revenue NMEM Compensation
-------------------- -----------------
First $2 Million 0%
Next $2 Million 5%
Amount above S4 million 10%
6. In order to implement some of the activities set forth in paragraph 2
or any additional recommendations of NMEM, NMEM may, from time to
time, enter into natural gas or electricity purchase or sale
transactions with POA. Any such transactions may be provided at NMEM's
cost and made under the terms of a Power Purchase and Sale Agreement
("Power Agreement") or a Natural Gas Purchase and Sale Agreement
("Natural Gas Agreement") between NMEM and POA.
7. This Marketing Agreement shall commence on December 6, 1999. Either
Party may terminate this Marketing Agreement upon forty-five (45) days
prior written notice to the other Party; provided however, that the
termination of this Marketing Agreement shall not affect the Power
Agreement or the Natural Gas Agreement, termination of such agreements
and any transactions thereunder shall be governed by the terms of such
agreements. In the event this Marketing Agreement is terminated prior
to the end of any Contract Year, then NMEM's compensation determined
pursuant to paragraph "5" shall be determined on a pro rata basis to
the date of termination and for purposes of such calculation, the
Optimization Revenue and the thresholds contained in paragraph "5"
shall also be pro rated to the date of termination.
8. Following the beginning of each calendar month, NMEM shall prepare and
deliver an invoice to POA for services provided under this Marketing
Agreement each month. Such invoice shall include information
concerning transaction activity in sufficient detail to demonstrate
amounts due under the incentive fee. The amount stated in such invoice
shall be payable by wire transfer on or before the 25th of the month
following the month of service, unless the invoice is not received by
the 15/th/, in which case it shall be due ten (10) days after receipt
by POA. POA reserves the right to audit NMEM's records relating to the
calculation of the invoice. Interest on unpaid amounts (other than
amounts reasonably in dispute) or on refunds due shall accrue daily
from the due date of such unpaid amount or refund until the date paid
at a rate equal to the prime interest rate per annum of Citibank, New
York, New York, or its successor, plus 2%. In the event that payment
of such amount is late, NMEM shall he entitled, in addition to any
other rights and remedies available to NMEM at law or equity, upon
forty-five (45) days prior written notice to POA to suspend and/or
terminate performance, of its obligations hereunder provided POA shall
not have fully cured such non-payment within the forty-five (45) day
notice period. In such event, NMEM shall not be
required to resume performance until all outstanding obligations due
NMEM are made current. If the event of default or breach by POA is a
default or breach other than non-payment, POA shall have a reasonable
period of time to cure such default or breach, so long as POA
commences and diligently and continuously pursues to cure such default
or breach within ninety (90) days of the date of notice of such
default or breach.
9. NMEM shall not be responsible for any liability or damages associated
with the ownership or operation of the Facility and POA shall
indemnify, defend and hold harmless NMEM, its officers, directors,
employees or representatives for any claims, liabilities, costs or
expense, including reasonable attorney's fees arising from or related
to its ownership and operation of the Facility, including liabilities
based on environmental claims or Hazardous Waste to the fullest extent
permitted by law, except for claims based upon the negligence, gross
negligence or willful misconduct of NMEM, which NMEM shall be fully
liable and not subject to indemnification hereunder.
10. This Marketing Agreement is not intended to create and shall not
create any relationship of joint venture, or partnership, or any other
association of like kind or type between the Parties or to impose any
obligation or liability upon either Party other than those explicitly
provided for herein. Consistent with NMEM's obligations hereunder,
NMEM shall be POA's attorney-in-fact and agent for the explicit
purposes stated herein.
11. In the event of a breach of NMEM's obligations under this Marketing
Agreement, NMEM's total liability for any claims, including claims for
indemnity is limited to fees paid to NMEM under this Agreement. If no
remedy or measure of damages is expressly provided, the liability of
the non-performing party shall be limited to direct damages only and
all other damages and remedies are waived. Except as provided in
Paragraph 9, in no event shall either Party be liable to the other
Party for consequential, incidental, punitive, exemplary or indirect
damages in tort, for contract or otherwise.
12. This Marketing Agreement shall be governed by the laws of the State of
New York without reference to conflict of law principles. Venue for
any claims based on this Marketing Agreement shall be in New York
State Courts in Onondaga County or the United States District Court
for the Northern District of New York.
13. Neither Party may assign this Marketing Agreement nor any of its
rights or responsibilities hereunder without the prior written consent
of the other Party; such consent shall not be unreasonably withheld.
Notwithstanding the foregoing, NMEM may assign payments to a third-
party as collateral security for financing purposes or it may assign
the Marketing Agreement to an affiliate without the prior consent of
POA; and POA may assign its rights hereunder to a third party for
financing purposes or it may assign the Marketing Agreement in the
event of the sale of substantially all of the assets or equity
interests of POA. Any such assignment shall be binding upon such
successors and assignors.
14. Neither NMEM nor POA intends by the provision of this Marketing
Agreement to create rights enforceable by anyone who is not a Party or
a successor assignee of a Party to the Marketing Agreement.
15. NMEM warrants that the services will be performed in conformance with
professional standards prevailing in the applicable industry at the
time of NMEM's performance. This warranty shall not apply where the
failure to meet the warranty is the result of acts or omissions of
persons other than NMEM, or of accidents not solely caused by NMEM.
This express warranty is exclusive and no other warranties of any
kind, whether statutory, written, oral or implied (including
warranties of merchantability or fitness for use or for a particular
purpose) shall apply to the services, all of which other warranties
are expressly disclaimed.
16. To the fullest extent permitted by law, NMEM agrees to indemnify and
hold POA, its directors, officers, employees or representatives
harmless from and against any and all damages, costs, expenses,
including reasonable attorney's fees, claims or liabilities arising
out of NMEM's failure to perform under this Marketing Agreement,
except to the extent that such damages, costs, expenses, claims or
liabilities arc attributable to the negligence or willful misconduct
of POA. To the fullest extent permitted by law, POA agrees to
indemnify and hold NMEM, its directors, officers, employees and
representatives harmless from and against any and all damages, costs,
expenses, including reasonable attorney's fees claims or liabilities
arising out of or based on NMEM's performance under this Marketing
Agreement to the extent that such damages, costs, expenses, claims or
liabilities are not caused by the negligence or willful misconduct of
NMEM. The indemnification, provided for in this Marketing Agreement
shall survive for a period of two (2) years from the termination of
this Marketing Agreement,
17. Both Parties represent and warrant to each other that they are duly
organized, validly existing and in good standing under the laws of the
State of incorporation or formation and any jurisdiction which such
Party is required to have authority to conduct business and that each
Party has full authority to execute this Marketing Agreement and to
perform its obligations under this Marketing Agreement. NMEM's and
POA's signatories, to this Marketing Agreement hereby represent and
warrant to each other that they are fully authorized to act on behalf
of each entity, such that this Marketing Agreement, upon execution by
such signatories, will constitute the legal, valid and binding
obligation of NMEM and POA, enforceable against each in accordance
with its terms. Each Party represents to the other the execution and
delivery of this Marketing Agreement and the performance of its
obligations will not violate any provision of any existing law or
regulation applicable to it, or any existing order, judgment, award or
decree of any court, arbitrator or governmental authority applicable
to it.
If the terms and conditions accurately reflect our understanding, please sign
below and return an executed original to me.
Very truly yours,
/s/ Xxxxx Xxxxxxxxx
-------------------------
Xxxxx Xxxxxxxxx
Vice President Business Development
ACCEPTED AND AGREED BY PROJECT ORANGE ASSOCIATES, L.P.:
By G.A.S. Orange Associates, L.L.C., Its Managing General Partner;
By: /s/ Xxxx Xxxxxx
-------------------------
Xxxx Xxxxxx, President
