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AMENDMENT NO. 3
TO
AGREEMENT FOR THE SALE AND PURCHASE OF NATURAL GAS
between
CHUGACH ELECTRIC ASSOCIATION INC.
and
CHEVRON U.S.A. INC.
dated April 27, 1989
WHEREAS, Chugach Electric Association, Inc. ("Chugach") and Chevron
U.S.A., Inc. ("Chevron") entered into an Agreement for the Sale and Purchase of
Natural Ga ("Agreement") dated April 27, 1989, which Agreement provides for the
sale and delivery of gas by Chevron to Chugachs gas-fueled generation
facilities located on the west side of Xxxx Inlet, Alaska ("Beluga Station");
WHEREAS, Xxxxx Electric Association, Inc. ("HEA") and Alaska Electric
Generation and Transmission, Inc. ("AEG&T") have proposed to relocate the
Soldotna Unit 1 generation facility to the Alaska Nitrogen Products, LLC
(ammonia production facility) ("Facility") that is located on the east side of
Xxxx Inlet, Alaska, near Nikiski on the Kenai Peninsula;
WHEREAS, to Chugachs knowledge, HEA's and AEG&T's purpose for
proposing to relocate the Soldotna Unit 1 generation facility would not be to
displace Chevrons gas sales and deliveries to the Beluga Station under the
Agreement;
WHEREAS, the relocated generation facility would be operated under a
dispatch agreement with Chugach ("Dispatch Agreement") and would be known as the
Nikiski Cogeneration Project ("Nikiski Project");
WHEREAS, the portion of the generation capability of the Nikiski
Project that Chugach obtains under the Dispatch Agreement would become part of
Chugach's generation facilities;
WHEREAS, it is possible that ammonia production could cease at the
Facility, which in turn could stop the use of steam at the Facility for process
purposes;
WHEREAS, it is also possible that steam formerly used at the Facility
for process purposes could be used to generate electricity, if equipment were
installed at the Nikiski Project that permitted such use;
WHEREAS, if Chugach were to obtain steam-produced electricity from the
Nikiski Project, the electricity so obtained could displace a portion of the
electric power generated at Chugachs gas-fueled generation facilities;
WHEREAS, although it is unlikely that the above-described contingencies
will all occur, the potential exists that, if Chugach obtains steam-produced
electricity from the Nikiski Project, a reduction in gas deliveries under the
Agreement could occur;
WHEREAS, the parties desire to enter into an arrangement by which, if
the above- described contingencies do occur, Chevron may exercise an option to
sell and deliver gas under the Agreement in addition to gas otherwise sold
thereunder;
WHEREAS, the Agreement has heretofore been twice amended;
WHEREAS, Chugach and Chevron desire to further amend the Agreement for
the benefit of the parties and to accomplish the above-stated objectives;
NOW, THEREFORE, the parties agree as follows:
1. Unless otherwise provided herein, all references in this
Amendment to Sections, Subsections, or Exhibits mean such Section, Subsection,
or Exhibit contained or referenced in the Agreement.
2. This Amendment will take effect upon approval by the Alaska
Public Utilities Commission ("APUC").
3. The following conditions precedent must be satisfied in full
before the parties have rights and obligations under the Amendment:
A. Commercial ammonia production ceases at the Facility,
and the Facility stops using steam for process purposes; and
B. Equipment is installed at the Nikiski Project that
permits electricity to be generated by steam; and
C. Chugach obtains steam-produced electricity from the
Nikiski Project.
4. If the conditions listed in Paragraph 3, above, have been
satisfied in full, Chevron may exercise an option ("Option") to sell and deliver
gas to Chugach at the Beluga Station ("Nikiski-Displaced Gas") based on the
procedure and formula described in this Amendment. The price of gas sold under
the Option shall be the price specified in Section 7. The Nikiski-Displaced Gas
will be considered gas sold under the Agreement in addition to gas otherwise
sold thereunder.
5. Chugach shall promptly notify Chevron under Section 11(i) when
the conditions listed in Paragraph 3, above, have been satisfied in full.
Chevron may then exercise its Option as follows: On or before thirty (30) days
("Option Deadline") from the date that Chevron receives Chugach's notice under
this Paragraph 5, Chevron shall notify Chugach under Section 11(i) that Chevron
chooses to sell and deliver Nikiski-Displaced Gas at the Beluga Station. The
Option's effective date will be the date Chugach receives Chevron's notice.
Chevron will be considered to have declined to exercise the Option if Chevron
does not fully and timely exercise the Option by the Option Deadline as provided
in this Paragraph 5 and in Section 11(i).
6. Provided that Chevron has exercised its Option, the quantity
of Nikiski- Displaced Gas that Chevron shall sell and deliver under this
Amendment will be determined as follows: Chugach shall first calculate the
generation capacity from steam production ("Steam Capacity") that is available
in megawatts ("MW") from the Nikiski Project as of the effective date of the
Option.Chugach shall then calculate the total generation capacity
("Total Capacity") that is available in MW from the Nikiski Project as of the
effective date of the Option. The Total Capacity will be the sum of: a) the
capacity in MW represented by the Soldotna Unit 1 alone; b) the capacity in MW
added to the Nikiski Project from sources other than steam production
capability; and c) the Steam Capacity. The percentage incremental capacity
increase that is attributable to steam production capability at the Nikiski
Project, i.e. Steam Capacity divided by Total Capacity, will be expressed as a
percentage carried out to the first decimal point ("Steam Percentage"). The
quantity of Nikiski-Displaced Gas that Chevron shall sell and deliver under this
Amendment will be the product of the following: a Steam Multiplier, multiplied
by the Steam Percentage, multiplied by the gas used as fuel for Chugach's
portion of the capability and output of the Nikiski Project. The Steam
Multiplier is Twenty Percent (20%), subject however to modification under
Paragraph 8, below.
7. Chevron and Chugach recognize that ARCO Alaska, Inc. ("ARCO")
and the Municipality of Anchorage d/b/a Municipal Light & Power ("ML&P") also
sell and deliver gas to Chugach at the Beluga Station under Agreements for the
Sale and Purchase of Natural Gas dated April 21, 1989 and April 25, 1989,
respectively, as later amended (respectively, the "ARCO Agreement" and the "ML&P
Agreement"). ARCO and ML&P are referred to in this Amendment as the Remaining
Beluga Producers. Chevron and Chugach further recognize that Chugach has
offered the same options under the same terms to the Remaining Beluga Producers
("Corresponding Options") as the Option that Chugach has offered Chevron under
this Amendment.
8. If Chevron exercises its Option, then after the Remaining
Beluga Producers have notified Chugach whether they exercise or decline to
exercise the Corresponding Options, Chugach shall promptly notify Chevron under
Section 11(i) if a Remaining Beluga Producer has declined to exercise its
Corresponding Option. If a Remaining Beluga Producer has so declined, Chevron
may then amend its Option by exercising a Revised Option as follows: On or
before thirty (30) days ("Revised Option Deadline") from the date that Chevron
receives Chugach's notice under this Paragraph 8, Chevron shall notify Chugach
under Section 11(i) that Nikiski-Displaced Gas will be calculated using a Steam
Multiplier that Chevron shall specify in its notice and that is between
Twenty Percent (20%) and Thirty Percent (30%), inclusive (if one Remaining
Beluga Producer has declined to exercise its Corresponding Option), or between
Twenty Percent (20%) and Sixty Percent (60%), inclusive (if both Remaining
Beluga Producers have declined to exercise their Corresponding Options). The
Revised Option's effective date will be the Options effective date, retroactive
to such date. Chevron will be considered to have declined to exercise its
Revised Option, and shall continue to sell Nikiski-Displaced Gas that is
calculated using a Steam Multiplier of Twenty Percent (20%), if Chevron does not
fully and timely exercise the Revised Option by the Revised Option
Deadline as provided in this Paragraph 8 and in Section 11(i).
9. If the Steam Capacity or Total Capacity at the Nikiski Project
changes after Chevron exercises its Option and (if applicable) its Revised
Option, then retroactive to the effective date of the change in the Steam
Capacity or Total Capacity, Chugach shall recalculate the Steam Capacity, Total
Capacity, and Steam Percentage for purposes of determining the quantity of
Nikiski-Displaced Gas that Chevron shall sell and deliver under this Amendment.
10. After Chevron exercises its Option and (if applicable) its
Revised Option, the sale and delivery of Nikiski-Displaced Gas shall continue
through the earlier of a) the termination of the Dispatch Agreement, or b) the
end of Period #2 as defined in the Agreement.
11. By agreeing to this Amendment, Chevron consents to Chugach
obtaining steam-produced electricity from the Nikiski Project under the
circumstances described in this Amendment, should Chugach choose at its
discretion to obtain such electricity.
12. By agreeing to this Amendment, and except as provided in this
Amendment, neither Chevron nor Chugach waives, modifies, or prejudices any right
or obligation that may be available to it, at any time. This Amendment has no
precedential effect. It does not commit either party to further amend the
Agreement or to enter into other contractual arrangements. Nor does this
Amendment commit either party to take a a certain position in discussions or
negotiations, either with the other party or with any other entity.
13. Except for the foregoing amendments, all other terms and
conditions of the Agreement remain in full force and effect.
IN WITNESS WHEREOF, Chugach and Chevron have caused this Amendment
No. 3 to be executed by their authorized representatives.
Chugach Electric Association, Inc. Chevron U.S.A. Inc.
By: /s/Xxxxxx X. Xxxxxxxxx By: /s/ D. T. Berlin
Its: General Manager Its: Attorney-In-Fact
Date: May 24, 1999 Date: 5-26-99
