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POWER PURCHASE AND SALE AGREEMENT
BETWEEN
MINNESOTA POWER, INC.
AND
SQUARE BUTTE ELECTRIC COOPERATIVE
Dated as of May 29, 1998
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Table of Contents
Page
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ARTICLE I - DEFINITIONS......................................................1
1.1 "AC Transmission Facilities"...............................1
1.2 "Additional Delivery Costs"................................1
1.3 "Affiliate"................................................1
1.4 "Alternate Capacity".......................................2
1.5 "Alternate Energy".........................................2
1.6 "Capacity".................................................2
1.7 "Central Prevailing Time"..................................2
1.8 "Contract Year"............................................2
1.9 "Decommissioning"..........................................2
1.10 "Decommissioning Costs"....................................2
1.11 "Deed of Conveyance".......................................2
1.12 "Delivery Agreement".......................................2
1.13 "Delivery Point"...........................................2
1.14 "Duluth HVDC Terminal".....................................2
1.15 "Effective Date"...........................................3
1.16 "Energy"...................................................3
1.17 "FERC".....................................................3
1.18 "Fixed Charges"............................................3
1.19 "Generator Step-Up Transformer"............................3
1.20 "Governmental Approval"....................................3
1.21 "Governmental Authority"...................................3
1.22 "HVDC Transmission Facilities".............................3
1.23 "Indenture"................................................3
1.24 "Joint Facilities".........................................3
1.25 "Joint Operating Agreement"................................3
1.26 "Joint Operating Committee"................................4
1.27 "kW".......................................................4
1.28 "kWh"......................................................4
1.29 "XXXX Agreement"...........................................4
1.30 "Mine".....................................................4
1.31 "Minnesota Power"..........................................4
1.32 "Minnesota Power Service Agreement"........................4
1.33 "Minnkota".................................................4
1.34 "Minnkota PSA".............................................4
1.35 "Month"....................................................4
1.36 "Monthly Charge for Capacity and Energy"...................4
1.37 "MW".......................................................4
1.38 "MWh"......................................................4
1.39 "Net Capability"...........................................4
1.40 "Obligations"..............................................5
1.41 "Operating Agent"..........................................5
1.42 "Option"...................................................5
1.43 "Option No. 1".............................................5
1.44 "Option No. 1 Exercise Date"...............................5
1.45 "Option No. 2".............................................5
1.46 "Option No. 2 Exercise Date"...............................5
1.47 "Option No. 3".............................................5
1.48 "Option No. 3 Exercise Date"...............................5
1.49 "Option No. 4".............................................5
1.50 "Party"....................................................5
1.51 "Plant Closure Date".......................................5
1.52 "Prudent Utility Practice".................................5
1.53 "Royalty Payments".........................................5
1.54 "RUS"......................................................6
1.55 "Site".....................................................6
1.56 "Square Butte".............................................6
1.57 "Square Butte Substation"..................................6
1.58 "Square Butte's Monthly Fuel Costs"........................6
1.59 "Square Butte's Monthly Fuel Royalty Costs"................6
1.60 "Square Butte's Monthly Non-Fuel Costs"....................6
1.61 "Square Butte's Transmission Tariff".......................6
1.62 "Transmission Facilities"..................................7
1.63 "Trustee"..................................................7
1.64 "Uncontrollable Forces"....................................7
1.65 "Uniform System of Accounts"...............................7
1.66 "Unit #1"..................................................7
1.67 "Unit #2"..................................................7
1.68 "URGE".....................................................7
ARTICLE II - TERM OF AGREEMENT...............................................7
2.1 Term of Agreement..........................................7
2.2 Extension of Term..........................................7
ARTICLE III - AVAILABILITY OF CAPACITY AND DELIVERY OF ENERGY................8
3.1 Availability of Capacity and Delivery of Energy............8
3.2 Power Entitlements and Options.............................8
3.2.1 Option No. 1......................................8
3.2.2 Option No. 2......................................8
3.2.3 Option No. 3......................................9
3.2.4 Option No. 4......................................9
3.3 Notices for and Restrictions on Exercise of Options........9
3.4 Alternate Capacity and Alternate Energy...................10
ARTICLE IV - CHARGES........................................................10
4.1 Monthly Charges...........................................10
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4.1.1 Square Butte's Monthly Non-Fuel Costs............10
4.1.2 Square Butte's Monthly Fuel Costs................10
4.1.3 Square Butte's Monthly Fuel Royalty Costs........10
4.1.4 Costs of Alternate Capacity and Energy...........11
4.1.5 Margin...........................................11
4.2 Estimates of Monthly Charge...............................11
4.3 Revised Estimates.........................................11
4.4 Suspension of Payment Obligation..........................11
4.4.1 Obligation to Make Payment.......................11
4.4.2 Suspension of Payment Obligation.................12
ARTICLE V - BILLING AND PAYMENT.............................................12
5.1 Billing Statement.........................................12
5.2 Payment Due Date..........................................12
5.3 Failure to Make Payment...................................13
5.4 Billing Disputes..........................................13
5.5 Annual Statement..........................................13
5.6 Overpayments and Underpayments............................13
ARTICLE VI - SCHEDULING OF DELIVERIES.......................................14
6.1 Scheduling of Deliveries by Minnesota Power...............14
6.2 Minnesota Power Scheduling Responsibilities...............14
6.3 Scheduling of Deliveries by Square Butte..................14
6.4 Scheduling Limitations....................................14
ARTICLE VII - POINT OF DELIVERY.............................................14
7.1 Delivery Point............................................14
ARTICLE VIII - CONTROL......................................................15
8.1 Control and Communication Equipment.......................15
8.2 Voltage...................................................15
8.3 Reactive Power............................................15
ARTICLE IX - CHARACTER AND CONTINUITY OF SERVICE............................15
9.1 Character and Continuity of Service.......................15
9.2 Uncontrollable Forces.....................................15
ARTICLE X - METERING AND TRANSMISSION.......................................16
10.1 Metering Equipment........................................16
10.2 Transmission..............................................16
10.3 Measurement of Transmission Losses........................16
10.4 Use of Transmission Facilities............................16
ARTICLE XI - ACCOUNTING, AUDIT RIGHTS, AND INFORMATION SHARING..............17
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11.1 Records and Accounts; Audits..............................17
11.2 Copies of Audits..........................................17
11.3 Examination of Records....................................17
11.4 Insurance Policies........................................17
11.5 Access to Facilities......................................17
ARTICLE XII - INSURANCE AND EMINENT DOMAIN..................................17
12.1 Insurance.................................................17
12.2 Settlement of Claims......................................17
12.3 Eminent Domain............................................17
ARTICLE XIII - FAILURE OF PERFORMANCE AND LIABILITY.........................18
13.1 Liability and Indemnification.............................18
13.2 Failure to Perform........................................18
13.3 Uncontrollable Forces.....................................18
13.3.1 Performance Excused..............................18
13.3.2 Obligation to Remove Disability..................18
13.3.3 Actions of Third Parties.........................18
13.4 Limitation on Damages.....................................18
ARTICLE XIV - DISPUTE RESOLUTION............................................19
14.1 Dispute Resolution........................................19
14.2 Mediation.................................................19
14.3 Arbitration...............................................19
14.3.1 Arbitration Rules................................19
14.3.2 Notice...........................................19
14.3.3 Pre-Arbitration Conference.......................19
14.3.4 Authority of Arbitrators.........................19
14.3.5 Decision or Award................................19
14.3.6 Costs............................................20
ARTICLE XV - ASSIGNMENT.....................................................20
15.1 Permitted Assignments.....................................20
15.1.1 Assignment by Square Butte.......................20
15.1.2 Assignment by Minnesota Power....................20
ARTICLE XVI - MISCELLANEOUS.................................................21
16.1 Waiver of Default.........................................21
16.2 Notices and Computation of Time...........................21
16.3 Minnesota Power Financial Information.....................21
16.4 Governing Law.............................................21
16.5 Counterparts..............................................21
16.6 Rules of Construction.....................................21
16.6.1 Captions and Headings............................21
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16.6.2 Including........................................21
16.6.3 Singular and Plural..............................21
16.6.4 Time of the Essence..............................22
16.7 Joint Operating Committee.................................22
16.8 Survival..................................................22
16.9 Amendments................................................22
16.10 Governmental Approvals....................................22
16.11 Other Business............................................22
16.12 Additional Financing; Sale of Facilities..................22
16.13 Modification of Certain Instruments.......................22
16.14 Obligation to Pay Decommissioning Costs...................22
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POWER PURCHASE AND SALE AGREEMENT
This Power Purchase and Sale Agreement (hereinafter called the
"Agreement"), is made and entered into as of this 29th day of May, 1998, by and
between MINNESOTA POWER, INC., a Minnesota corporation (hereinafter called
"Minnesota Power"), and SQUARE BUTTE ELECTRIC COOPERATIVE, a North Dakota
cooperative corporation (hereinafter called "Square Butte").
W I T N E S S E T H :
WHEREAS, Square Butte is a North Dakota cooperative corporation
organized to own and operate Unit #2 and the Transmission Facilities;
WHEREAS, the Parties hereto have previously entered into a Power Sales
& Interconnection Agreement, dated as of April 1, 1974;
WHEREAS, Square Butte is refinancing Unit #2 and the Transmission
Facilities and the Parties desire to enter into this Agreement and other
agreements in order to support the refinancing of Unit #2 and the Transmission
Facilities and to continue to obtain capacity and energy from Unit #2;
WHEREAS, negotiations and studies have indicated that the arrangement
proposed hereunder will provide advantages to Square Butte and Minnesota Power
such as reduced debt service and other costs; and
WHEREAS, due to the aforementioned advantages, Minnesota Power is
desirous of continuing to purchase electric capacity and energy produced by Unit
#2, subject to certain options providing for Square Butte to sell electric
capacity and energy produced by Unit #2 to others;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Minnesota Power and Square Butte hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 "AC Transmission Facilities" shall mean the 230 kilovolt
alternating current facilities required to connect Unit #2 to the HVDC
Transmission Facilities.
1.2 "Additional Delivery Costs" shall have the meaning set forth in the
Delivery Agreement.
1.3 "Affiliate" shall mean, with respect to any specified entity, any
other entity directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified entity. For purposes of this
definition, "control" when used with respect to any specified entity means the
power to direct the management and policies of such entity, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "control" have meanings correlative
to the foregoing.
1.4 "Alternate Capacity" shall mean electric capacity made available by
Square Butte to Minnesota Power from any source other than Unit #2 when Net
Capability cannot be made available to Minnesota Power.
1.5 "Alternate Energy" shall mean the energy that is associated with
Alternate Capacity or energy that is delivered by Square Butte to Minnesota
Power when Energy from Unit #2 is not available or cannot be delivered to
Minnesota Power.
1.6 "Capacity" shall mean the rated capacity of Unit #2, which as of
the Effective Date is four hundred fifty-five megawatts (455 MW) (except in July
and August, when the rated capacity is four hundred forty-eight megawatts (448
MW)), as the same may be increased or decreased from time to time in accordance
with the URGE rating then in effect. It shall be expressed in kilowatts (kW) or
megawatts (MW).
1.7 "Central Prevailing Time" or "CPT" shall mean Central Standard Time
or Central Daylight Time, whichever is in effect.
1.8 "Contract Year" shall mean the twelve-month period, commencing at
12:01 a.m. CPT on January 1 of each calendar year, except the first Contract
Year shall begin on May 29, 1998, and end at 12:01 a.m. CPT on January 1, 1999.
1.9 "Decommissioning" shall mean the retirement from service of Unit
#2, the Transmission Facilities and the Mine, including, but not limited to,
decommissioning, dismantling, demolishing, disposing of, closing or removing
Unit #2, the Transmission Facilities and the Mine, and the monitoring, security
and maintenance associated with the retirement from service and decommissioning
of Unit #2, the Transmission Facilities and the Mine.
1.10 "Decommissioning Costs" shall mean any and all costs and expenses
associated with Decommissioning.
1.11 "Deed of Conveyance" shall have the meaning set forth in the Joint
Operating Agreement.
1.12 "Delivery Agreement" shall mean the Delivery Agreement between and
among Minnesota Power and Square Butte and Minnkota, dated as of June 1, 1998.
1.13 "Delivery Point" shall have the meaning set forth in Section 7.1.
1.14 "Duluth HVDC Terminal" shall mean the point of interconnection
between the Transmission Facilities and Minnesota Power's transmission system.
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1.15 "Effective Date" shall have the meaning set forth in Section 2.1.
1.16 "Energy" shall mean the electrical energy produced by Unit #2 that
is associated with the Net Capability. It shall be expressed in kilowatt-hours
(kWh) or megawatt-hours (MWh).
1.17 "FERC" shall mean the Federal Energy Regulatory Commission, or any
entity or Governmental Authority succeeding to the powers and functions thereof.
1.18 "Fixed Charges" shall mean the principal, interest and any other
amounts payable on the Obligations.
1.19 "Generator Step-Up Transformer" shall mean the generator step-up
transformer, as that term is defined from time to time by FERC, associated with
Unit #2.
1.20 "Governmental Approval" shall mean any jurisdictional approval or
consent required to be obtained for the subject matter hereunder by Square Butte
or Minnesota Power from any Governmental Authority, including RUS.
1.21 "Governmental Authority" shall mean any local, state, regional, or
federal administrative, judicial or executive agency, commission, department, or
other similar governmental or quasi-governmental body.
1.22 "HVDC Transmission Facilities" shall mean the +/- 250 kilovolt
direct current transmission line from Center, North Dakota, to Duluth,
Minnesota, the direct current terminals associated with such transmission line,
the grounding facilities, and the filtering and other necessary reactive
components, protective, control, instrumentation, and communications facilities
associated with such transmission line and direct current terminals.
1.23 "Indenture" shall mean the Amended and Restated Indenture of
Mortgage, dated as of May 29, 1998, by Square Butte Electric Cooperative, as
grantor, to Bankers Trust Company, as Trustee, and all amendments and
supplements thereto.
1.24 "Joint Facilities" shall mean all facilities used in common for
the operation and maintenance of Xxxx #0 xxx Xxxx #0, including, but not limited
to, those facilities subject to the Deed of Conveyance, additional land or
rights therein, any other tangible and intangible property acquired,
constructed, installed or replaced in accordance with the terms of the Joint
Operating Agreement for the operation and maintenance of Xxxx #0 xxx Xxxx #0,
and all facilities determined by the Joint Operating Committee to be "Joint
Facilities."
1.25 "Joint Operating Agreement" shall mean the Amended and Restated
Joint Operating Agreement among Square Butte, Minnkota and Minnesota Power,
dated as of the date hereof.
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1.26 "Joint Operating Committee" shall mean the committee established
in accordance with the Joint Operating Agreement.
1.27 "kW" shall mean kilowatt.
1.28 "kWh" shall mean kilowatt-hour.
1.29 "XXXX Agreement" shall mean the Restated Mid-Continent Area Power
Pool Agreement dated as of November 1, 1996, as such agreement may be amended
from time to time.
1.30 "Mine" shall mean the BNI Coal lignite coal mine located near Unit
#1 and Unit #2 in the Center, North Dakota, area, including, but not limited to,
the improvements, facilities and fixtures which are a part thereof.
1.31 "Minnesota Power" shall mean Minnesota Power, Inc., a Minnesota
corporation, and shall include its authorized agents, whether individual,
corporation, cooperative or contractor, acting for and on its behalf.
1.32 "Minnesota Power Service Agreement" shall mean the service
agreement, dated as of the date hereof, between Square Butte and Minnesota Power
under Square Butte's Transmission Tariff.
1.33 "Minnkota" shall mean Minnkota Power Cooperative, Inc., a
Minnesota cooperative corporation, and shall include its authorized agents,
whether individual, corporation, cooperative or contractor, acting for and on
its behalf.
1.34 "Minnkota PSA" shall mean the Power Purchase and Sale Agreement
between Minnkota and Square Butte, dated as of the date hereof.
1.35 "Month" shall mean a calendar month, except that the first Month
hereunder shall begin on the Effective Date and end at 12:01 a.m. CPT on the
first day of the following Month.
1.36 "Monthly Charge for Capacity and Energy" shall have the meaning
set forth in Section 4.1.
1.37 "MW" shall mean megawatt.
1.38 "MWh" shall mean megawatt-hour.
1.39 "Net Capability" shall mean the Capacity of Unit #2 established
from time to time by the Joint Operating Committee based on the URGE rating then
in effect, measured in kilowatts. The net figure shall represent the net
capability available from Unit #2 to the Transmission Facilities.
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1.40 "Obligations" shall have the meaning set forth in the Indenture.
1.41 "Operating Agent" shall mean Minnkota, or its successor operating
agent named in accordance with the Joint Operating Agreement, which shall be
responsible for the operation and maintenance of Unit #2 and the Joint
Facilities in accordance with the Joint Operating Agreement.
1.42 "Option" shall have the meaning set forth in Section 3.2.
1.43 "Option No. 1" shall have the meaning set forth in Section 3.2.1.
1.44 "Option No. 1 Exercise Date" shall have the meaning set forth in
Section 3.2.1.
1.45 "Option No. 2" shall have the meaning set forth in Section 3.2.2.
1.46 "Option No. 2 Exercise Date" shall have the meaning set forth in
Section 3.2.2.
1.47 "Option No. 3" shall have the meaning set forth in Section 3.2.3.
1.48 "Option No. 3 Exercise Date" shall have the meaning set forth in
Section 3.2.3.
1.49 "Option No. 4" shall have the meaning set forth in Section 3.2.4.
1.50 "Party" shall mean either Square Butte or its permitted successors
or assigns or Minnesota Power or its permitted successors or assigns.
1.51 "Plant Closure Date" shall have the meaning set forth in Section
2.1, as such date may be revised in accordance with Section 2.2.
1.52 "Prudent Utility Practice" shall mean, at a particular time, any
of the practices, methods, and acts engaged in or approved by a significant
portion of the electric utility industry prior to such time, or any of the
practices, methods, and acts which, in light of the facts known at the time the
decision was made, could have been expected to accomplish the desired results at
the lowest cost consistent with good business practices, reliability, safety,
and expedition. "Prudent Utility Practice" is not intended to be limited to the
optimum practice, method, or act to the exclusion of all others, but rather to
be a spectrum of possible practices, methods, or acts having due regard for,
among other things, manufacturers' warranties and other contractual obligations,
the requirements or guidance of governmental agencies of competent jurisdiction,
requirements of insurers, and the requirements of this Agreement.
1.53 "Royalty Payments" shall mean those charges based on Square
Butte's obligation to Minnkota pursuant to the Joint Operating Agreement.
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1.54 "RUS" shall mean the Rural Utilities Service, an agency of the
United States Department of Agriculture, or any entity or Governmental Authority
succeeding to the powers and functions thereof.
1.55 "Site" shall have the meaning set forth in the Joint Operating
Agreement.
1.56 "Square Butte" shall mean Square Butte Electric Cooperative, a
North Dakota cooperative corporation, and shall include its authorized agents,
whether individual, corporation, cooperative or contractor, acting for and on
its behalf.
1.57 "Square Butte Substation" shall mean the substation owned by
Square Butte located near the Site.
1.58 "Square Butte's Monthly Fuel Costs" shall mean those monthly
charges recorded in Account 501 of the Uniform System of Accounts related to
Unit #2 exclusive of Royalty Payments.
1.59 "Square Butte's Monthly Fuel Royalty Costs" shall mean those
monthly charges relating to Royalty Payments (which are excluded from Section
1.58).
1.60 "Square Butte's Monthly Non-Fuel Costs" shall mean all of Square
Butte's costs and expenses except Decommissioning Costs, Square Butte's Monthly
Fuel Costs, Square Butte's Monthly Fuel Royalty Costs, the costs associated with
Alternate Capacity and Alternate Energy as recovered under Section 4.1.4,
margins as recovered under Section 4.1.5, and any costs associated with the
Transmission Facilities recovered under Square Butte's Transmission Tariff.
"Square Butte's Monthly Non-Fuel Costs" shall include, but not be limited to,
Fixed Charges, principal, interest and other amounts payable on obligations of
Square Butte (other than Obligations), depreciation on items not otherwise
reflected in payments to amortize the principal of the Obligations or other
indebtedness of Square Butte, amounts payable by Square Butte to Minnesota Power
pursuant to the Delivery Agreement (including, but not limited to, Additional
Delivery Costs), taxes (including, but not limited to, Square Butte's income
taxes), operating expenses, maintenance expenses, and administration costs; and
shall be reduced by credits, including, but not limited to, interest income,
capital credits received in cash, rental income, any costs associated with the
Transmission Facilities recovered under Square Butte's Transmission Tariff from
parties other than Minnesota Power and Minnkota that are not credited to
Minnesota Power and Minnkota under Square Butte's Transmission Tariff, and
payments received for SO2 allowances. Where such costs, expenses and credits,
other than Fixed Charges, are on a basis other than monthly, an appropriate
division shall be made to reflect them on a monthly basis.
1.61 "Square Butte's Transmission Tariff" shall mean the Pro Forma Open
Access Transmission Tariff of Square Butte, dated as of December 16, 1996, as
such tariff may be amended from time to time.
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1.62 "Transmission Facilities" shall mean the HVDC Transmission
Facilities and AC Transmission Facilities.
1.63 "Trustee" shall have the meaning set forth in the Indenture.
1.64 "Uncontrollable Forces" shall mean any cause beyond the reasonable
control of Square Butte, Minnkota, the Operating Agent or Minnesota Power, as
the case may be, and which by the exercise of due diligence the party is unable
to prevent or overcome, including but not limited to an act of God, fire, flood,
explosion, strike, sabotage, an act of the public enemy, civil or military
authority, including court orders, injunction, insurrection or riot, an act of
the elements, failure of equipment, or inability to obtain or ship materials or
equipment because of the effect of similar causes on suppliers or carriers.
1.65 "Uniform System of Accounts" shall mean the Uniform System of
Accounts Prescribed for Electric Borrowers of RUS or, if applicable, of FERC in
effect on the date hereof as it may from time to time be revised or amended.
1.66 "Unit #1" shall mean Unit #1 of the Xxxxxx X. Xxxxx Steam Electric
Station located at Center, North Dakota, and owned and operated by Minnkota.
1.67 "Unit #2" shall mean Unit #2 of the Xxxxxx X. Xxxxx Steam Electric
Station located adjacent to Minnkota's existing Xxxxxx X. Xxxxx Steam Electric
Xxxxxxx Xxxx #0 xx Xxxxxx, Xxxxx Xxxxxx.
1.68 "URGE" shall mean the Uniform Rating of Generating Equipment
procedure as set forth in the XXXX Agreement.
ARTICLE II
TERM OF AGREEMENT
2.1 Term of Agreement. This Agreement shall be effective as of May 29,
1998 (the "Effective Date"). The Agreement shall remain in full force and effect
from the Effective Date until January 1, 2027 (the "Plant Closure Date"), plus
an additional period of time necessary to undertake or fund all activities
necessary to complete Decommissioning.
2.2 Extension of Term. Notwithstanding the provisions of Section 2.1,
the Parties agree to revise the Plant Closure Date, and thereby extend the term
of this Agreement, to the date of permanent retirement of Unit #2, as determined
by the Joint Operating Committee. Such revised Plant Closure Date shall include
an additional period of time necessary to undertake or fund all activities
necessary to complete Decommissioning, as determined by the Joint Operating
Committee, and shall in no event be before January 1, 2027. In the event that
the Joint Operating Committee is unable to agree on a revised Plant Closure Date
and/or such additional period of time necessary to undertake or fund all
activities necessary to complete Decommissioning, then the term of this
Agreement shall expire in accordance with the
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provisions of Section 2.1. In the event that the term of this Agreement is
extended, the Parties shall consent to the extension, by a corresponding period
of time, of the term(s) of the Joint Operating Agreement, the Minnesota Power
Service Agreement, and other appropriate agreements necessary to implement the
extension of the term of this Agreement.
ARTICLE III
AVAILABILITY OF CAPACITY AND DELIVERY OF ENERGY
3.1 Availability of Capacity and Delivery of Energy. Square Butte shall
make available to Minnesota Power the Net Capability and shall deliver to
Minnesota Power at the Delivery Point Energy in accordance with the entitlements
set forth in Section 3.2.
3.2 Power Entitlements and Options. Beginning on May 29, 1998,
Minnesota Power shall be entitled, subject to the exercise of the options as set
forth in this Section 3.2, to 70.8333% of the Net Capability and to the electric
energy associated with such entitlement to Net Capability as measured at the
Delivery Point for Energy. Thereafter, upon the exercise by Minnkota of its
options to increase its entitlement to Net Capability and to the energy
associated with its entitlement to Net Capability under the Minnkota PSA,
Minnesota Power's entitlement to Net Capability and to the energy associated
with its entitlement to Net Capability shall correspondingly decrease, in
accordance with the options set forth in this Section 3.2 (the "Options") and in
accordance with the provisions of Section 3.3. Minnesota Power shall transfer
and assign to Minnkota any reserved capacity under Square Butte's Transmission
Tariff necessary for the delivery of Minnkota's increased entitlement to Net
Capability and associated energy associated with the exercise of such Options.
3.2.1 Option No. 1. Under Option No. 1, Minnesota Power's
entitlement to Net Capability shall decrease by 5.2083% of the Net Capability.
Minnesota Power's entitlement to energy associated with its entitlement to Net
Capability shall decrease by a corresponding amount. Minnesota Power's
entitlement to such Net Capability and associated energy under this Option No. 1
shall decrease as of January 1, 2006, or the annual anniversary thereafter, upon
receipt of notice from Minnkota of its exercise of such Option. If Minnesota
Power's entitlement decreases as a result of the exercise by Minnkota of Option
No. 1, the date of such decrease shall be the "Option No. 1 Exercise Date."
3.2.2 Option No. 2. Under Option No. 2, Minnesota Power's
entitlement to Net Capability shall decrease by 5.2083% of the Net Capability.
Minnesota Power's entitlement to energy associated with its entitlement to Net
Capability shall decrease by a corresponding amount. Minnesota Power's
entitlement to such Net Capability and associated energy under this Option No. 2
shall decrease as of the later of January 1, 2007, or the date that is one (1)
year after the Option No. 1 Exercise Date, upon receipt of notice from Minnkota
of its exercise of such Option. If Minnesota Power's entitlement decreases as a
result of the exercise by Minnkota of Option No. 2, the date of such decrease
shall be the "Option No. 2 Exercise Date."
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3.2.3 Option No. 3. Under Option No. 3, Minnesota Power's
entitlement to Net Capability shall decrease by 5.2083% of the Net Capability.
Minnesota Power's entitlement to energy associated with its entitlement to Net
Capability shall decrease by a corresponding amount. Minnesota Power's
entitlement to such Net Capability and associated energy under this Option No. 3
shall decrease as of the later of January 1, 2008, or the date that is one (1)
year after the Option No. 2 Exercise Date, upon receipt of notice from Minnkota
of its exercise of such Option. If Minnesota Power's entitlement decreases as a
result of the exercise by Minnkota of Option No. 3, the date of such decrease
shall be the "Option No. 3 Exercise Date."
3.2.4 Option No. 4. Under Option No. 4, if Minnkota has
exercised Option No. 1, Option No. 2 and Option No. 3, Minnesota Power's
entitlement to Net Capability shall decrease by an amount that will reduce
Minnesota Power's entitlement to Net Capability to fifty percent (50%) of the
Net Capability. Minnesota Power's entitlement to energy associated with its
entitlement to Net Capability shall decrease by a corresponding amount.
Minnesota Power's entitlement to such Net Capability and associated energy under
this Option No. 4 shall decrease as of the later of January 1, 2009, or the date
that is one (1) year after the Option No. 3 Exercise Date, upon receipt of
notice from Minnkota of its exercise of such Option.
3.3 Notices for and Restrictions on Exercise of Options. Square Butte
shall notify Minnesota Power of Minnkota's election to exercise an Option to
increase Minnkota's entitlement to Net Capability and to energy associated with
such entitlement under the Minnkota PSA as soon as practicable after Square
Butte has received notice from Minnkota of Minnkota's election to exercise such
Option. Subject to the provisions of this Section 3.3, once a decrease in
Minnesota Power's entitlement to Net Capability and associated energy is made
under Section 3.2, it shall be irrevocable thereafter. In the event Minnkota
provides Minnesota Power with notice under the Minnkota PSA that sufficient
transmission capacity is not available for the delivery to the Points of
Delivery set forth in the Transmission Service Agreement between Minnesota Power
(transmission) and Minnesota Power (merchant operations), dated April 17, 1998,
of energy associated with Minnkota's entitlement to Net Capability under the
Minnkota PSA which is the subject of an Option thereunder and Minnkota exercises
its rights under the Minnkota PSA to reduce its entitlement to Net Capability
and associated energy thereunder with respect to such Option, upon receipt of
notice from Minnkota, (i) Minnesota Power's entitlement to Net Capability shall
increase by an amount equal to the amount by which Minnkota's entitlement to Net
Capability under the Minnkota PSA decreases thereunder, and (ii) Minnesota
Power's entitlement to energy associated with its entitlement to Net Capability
shall increase by a corresponding amount. If transmission capacity thereafter
becomes available and Minnkota's entitlement to Net Capability and associated
energy under the Minnkota PSA is increased in accordance with the Minnkota PSA,
Minnesota Power's entitlement to Net Capability and associated energy shall
decrease by the amount by which Minnkota's entitlement to Net Capability and
associated energy under the Minnkota PSA increases thereunder. Minnesota Power
shall transfer and assign to Minnkota, or shall receive and accept from
Minnkota, any reserved capacity under Square Butte's Transmission Tariff
necessary for the delivery of Minnesota Power's decreased or increased
entitlement to Net Capability and associated energy
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transferred from Minnesota Power to Minnkota, or from Minnkota to Minnesota
Power, as the case may be, in accordance with the terms of this Section 3.3.
3.4 Alternate Capacity and Alternate Energy. If Square Butte is unable
to make available to Minnesota Power all or part of the Net Capability to which
Minnesota Power is entitled under Section 3.2 or is unable to deliver to
Minnesota Power at the Delivery Point all or part of the energy to which
Minnesota Power is entitled under Section 3.2, Square Butte shall not make
available or deliver to Minnesota Power substantial amounts of Alternate
Capacity or Alternate Energy without Minnesota Power's prior consent, except to
prevent the suspension of Minnesota Power's payment obligations under the terms
of Section 4.4.2.
ARTICLE IV
CHARGES
4.1 Monthly Charges. Minnesota Power shall pay to Square Butte for each
Month of each Contract Year a monthly charge (hereinafter called the "Monthly
Charge for Capacity and Energy"), regardless of the amount of Net Capability or
Alternate Capacity actually made available to Minnesota Power or the amount of
Energy or Alternate Energy actually delivered to Minnesota Power, except as
provided in Section 4.4. The Monthly Charge for Capacity and Energy for each
Month shall consist of the total of all amounts set forth in Sections 4.1.1
through 4.1.5. Costs associated with the Transmission Facilities recovered by
Square Butte in accordance with Square Butte's Transmission Tariff shall not be
recovered hereunder.
4.1.1 Square Butte's Monthly Non-Fuel Costs. The Monthly Charge
for Capacity and Energy for each Month shall consist of a share of Square
Butte's Monthly Non-Fuel Costs, which share shall be determined by applying the
percentage of Net Capability to which Minnesota Power is entitled for such Month
under Section 3.2 to Square Butte's Monthly Non-Fuel Costs for such Month;
provided that Minnesota Power's share of any costs and expenses incurred prior
to the date hereof that are a part of Square Butte's Monthly Non-Fuel Costs
shall be determined by applying the percentage of its entitlement to power and
energy from Unit #2, in effect at the time such costs and expenses arose, under
the Power Sales & Interconnection Agreement between Minnesota Power and Square
Butte, dated as of April 1, 1974, to such costs and expenses.
4.1.2 Square Butte's Monthly Fuel Costs. The Monthly Charge for
Capacity and Energy for each Month shall consist of a share of Square Butte's
Monthly Fuel Costs, which share shall be determined by applying the percentage
of Energy delivered to Minnesota Power from Unit #2 during such Month under
Section 3.2 to Square Butte's Monthly Fuel Costs for such Month.
4.1.3 Square Butte's Monthly Fuel Royalty Costs. The Monthly Charge
for Capacity and Energy for each Month shall consist of a share of Square
Butte's Monthly Fuel Royalty Costs, which share shall be determined by applying
the percentage of Energy delivered
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to Minnesota Power from Unit #2 during such Month under Section 3.2 to Square
Butte's Monthly Fuel Royalty Costs for such Month.
4.1.4 Costs of Alternate Capacity and Energy. The Monthly Charge
for Capacity and Energy for each Month shall consist of the costs of any
Alternate Capacity and Alternate Energy for such Month, including the costs of
any transmission, transmission losses, ancillary services, and any other
transmission-related services associated with making available such Alternate
Capacity and delivering such Alternate Energy.
4.1.5 Margin. The Monthly Charge for Capacity and Energy for each
Month shall consist of an amount equal to a share of five percent (5%) of the
total of Square Butte's costs for such Month reflected in Accounts 500, 502
through 599, and 920 through 935 as recorded in the Uniform System of Accounts,
which share shall be determined by applying the percentage of Net Capability to
which Minnesota Power is entitled for such Month under Section 3.2 to five
percent (5%) of the total of Square Butte's costs for such Month reflected in
Accounts 500, 502 through 599, and 920 through 935 as recorded in the Uniform
System of Accounts.
4.2 Estimates of Monthly Charge. Prior to the beginning of the first
Contract Year and on or before forty-five (45) days prior to the beginning of
each Contract Year thereafter, Square Butte shall prepare and deliver to
Minnesota Power a pro-forma statement (in a form to be agreed upon by the Joint
Operating Committee) showing a detailed estimate of the Monthly Charge for
Capacity and Energy for each Month of the following Contract Year which will
establish the basis for Minnesota Power's payment as provided herein.
4.3 Revised Estimates. At the end of the sixth (6th) Month of each
Contract Year other than the first Contract Year, Square Butte shall review its
estimate of the Monthly Charge for Capacity and Energy for each Month of the
Contract Year, and in the event such estimate does not substantially correspond
with actual receipts or expenditures, or if there are at any time during such
Contract Year extraordinary receipts or payments of unusual costs substantially
affecting the Monthly Charge for Capacity and Energy for any Month of such
Contract Year, Square Butte shall prepare and deliver to Minnesota Power a
revised estimate of the Monthly Charge for Capacity and Energy for each Month as
a basis for Minnesota Power's monthly payments for the balance of that Contract
Year.
4.4 Suspension of Payment Obligation.
4.4.1 Obligation to Make Payment. Except as provided in Section
4.4.2, Minnesota Power shall make all payments that are required pursuant to the
terms of this Agreement at such time or times herein provided for such payments,
notwithstanding (i) the non-performance by Square Butte of any of its
obligations herein or in the Joint Operating Agreement, whether due to
Uncontrollable Forces or otherwise; (ii) the failure, inoperativeness or
suspension, interruption or interference of the operation of Unit #2 or the
Transmission Facilities; (iii) the failure to make available to Minnesota Power
Net Capability or Alternate
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Capacity or to deliver to Minnesota Power Energy or Alternate Energy (except as
provided in Section 4.4.2); (iv) the invalidity or unenforceability or lack of
due authorization of this Agreement; or (v) any other matter or event
whatsoever, including without limitation the bankruptcy or insolvency of Square
Butte or the disaffirmance of any agreement by any trustee or receiver, which
might otherwise relieve Minnesota Power from the obligation to pay such amounts
at such times, notwithstanding any present or future law to the contrary.
Minnesota Power agrees that no such payment by Minnesota Power shall be subject
to any right of set-off or counterclaim or any other defense which Minnesota
Power may now or hereafter have against Square Butte. This Section 4.4.1 shall
not be construed as a guarantee by Minnesota Power of any obligation of Square
Butte or to release Square Butte from the performance of any of its obligations
expressed in this Agreement or, except to the extent expressly provided in this
Agreement, prevent or restrict Minnesota Power from asserting any rights it may
have against Square Butte under this Agreement.
4.4.2 Suspension of Payment Obligation. Minnesota Power's
obligation to pay charges under Section 4.1 shall be suspended only in the event
that Square Butte fails to deliver any Energy or Alternate Energy whatsoever to
any Delivery Point for a period of twelve (12) consecutive Months. Such
suspension, if any, shall begin at 12:01 a.m. CPT of the first (1st) day of the
Month following such twelve (12) Month period, and shall continue until such
time as Square Butte shall resume the delivery to Minnesota Power of any Energy
or any Alternate Energy at any Delivery Point; provided, however, that such
suspension shall not relieve Minnesota Power of its obligation to make payment
of the Monthly Charges for Capacity and Energy incurred prior to the
commencement of such suspension.
ARTICLE V
BILLING AND PAYMENT
5.1 Billing Statement. On the first (1st) day of each Month beginning
with the initial Month of the first Contract Year, Square Butte shall render to
Minnesota Power a monthly statement showing the amount of the Monthly Charge for
Capacity and Energy for the Month during which such statement is rendered as
shown in the pro-forma estimate of the Monthly Charge for Capacity and Energy
for such Month or any revisions thereof, furnished by Square Butte pursuant to
Section 4.2 and Section 4.3. Square Butte also shall set forth in such statement
the charges for any Alternate Capacity and/or Alternate Energy provided by
Square Butte to Minnesota Power in the preceding Month, including any charges
for transmission and transmission-related services associated with such
Alternate Capacity and/or Alternate Energy, and any other charges due from
Minnesota Power to Square Butte.
5.2 Payment Due Date. The pro-forma estimate of the Monthly Charge for
Capacity and Energy submitted pursuant to Section 5.1, plus an adjustment for
the difference between the prior Month's pro-forma estimate of the Monthly
Charge for Capacity and Energy and the prior Month's actual Monthly Charge for
Capacity and Energy, and any other amounts due from Minnesota Power to Square
Butte, shall be due and payable from Minnesota Power to Square
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Butte on the twentieth (20th) day after the date the monthly statement is
rendered. Fixed Charges shall be paid on the due date of such Fixed Charges.
5.3 Failure to Make Payment. Square Butte may, whenever any amount due
remains unpaid subsequent to the fifteenth (15th) day after the due date,
discontinue deliveries to Minnesota Power until such xxxx and any subsequent
payments which have become due are paid. No such discontinuance shall be treated
as a failure on the part of Square Butte to make Net Capability or Alternate
Capacity available or to deliver Energy or Alternate Energy to Minnesota Power
or otherwise relieve Minnesota Power from any of its obligations under this
Agreement. During any such discontinuance, for purposes of Section 4.1, if Unit
#2 is capable of producing all or part of the Net Capability and Energy to which
Minnesota Power is entitled under Section 3.2, Square Butte shall be deemed to
have made available to Minnesota Power such Net Capability and to have delivered
to Minnesota Power at the Delivery Point such Energy.
5.4 Billing Disputes. In the event of any dispute between Minnesota
Power and Square Butte as to any portion of any monthly statement, Minnesota
Power shall pay the full amount of the charges when due. As soon as practicable
after the date of the disputed xxxx or an audit exception, Minnesota Power shall
give written notice of the dispute or audit exception to Square Butte. Such
notice shall identify the disputed xxxx, state the amount in dispute and set
forth a full statement of the grounds on which such dispute is based. No
adjustment shall be considered or made for disputed charges unless notice is
given as aforesaid within twenty-four (24) Months after the date of the monthly
statement. The dispute shall then be resolved in accordance with the dispute
resolution procedures set forth in Article XIV.
5.5 Annual Statement. On or before one hundred twenty (120) days after
the end of each Contract Year, Square Butte shall submit to Minnesota Power a
detailed statement of the actual aggregate amount of the Monthly Charges for
Capacity and Energy for all of the Months for the prior Contract Year, based on
the annual audit of accounts provided for in Section 11.1. If, on the basis of
the statement submitted as provided in this Section 5.5, the actual aggregate
amount of the Monthly Charges for Capacity and Energy for the prior Contract
Year exceeds the amount paid therefor by Minnesota Power (based on Square
Butte's estimate and revision, if any, provided in accordance with Section 4.2
and Section 4.3), Minnesota Power shall pay Square Butte promptly the amount to
which Square Butte is entitled. If, on the basis of the statement submitted
pursuant to this Section 5.5, the actual aggregate amount of the Monthly Charges
for Capacity and Energy for the prior Contract Year is less than the amount paid
therefor by Minnesota Power (based on Square Butte's estimate and revision, if
any, provided in accordance with Section 4.2 and Section 4.3), Square Butte
shall credit such excess against Minnesota Power's next monthly payment or
payments pursuant to Section 5.1.
5.6 Overpayments and Underpayments. If at the end of the term of this
Agreement there are monies or credits remaining with Square Butte which are
overpayments by Minnesota Power under this Agreement, or if Minnesota Power
should owe Square Butte monies by virtue of the provisions of this Agreement,
such settlements will be made by the Parties pursuant to bills rendered and
promptly paid.
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ARTICLE VI
SCHEDULING OF DELIVERIES
6.1 Scheduling of Deliveries by Minnesota Power. Scheduling of Net
Capability and Energy from Unit #2 by Minnesota Power shall be as requested by
Minnesota Power, subject to the limitations set forth in this Agreement, and the
limitations, if any, established by the Joint Operating Committee.
6.2 Minnesota Power Scheduling Responsibilities. Operating
representatives of Minnesota Power shall deliver to Square Butte (i) at least
one hundred twenty (120) days prior to the beginning of each Contract Year other
than the first Contract Year, a statement of the estimated total Net Capability
and total Energy from Unit #2 desired by Minnesota Power for each Month of the
ensuing Contract Year; (ii) at least seven (7) days before the end of each Month
of each Contract Year, a statement of the estimated maximum daily Net Capability
and total daily Energy from Unit #2 desired by Minnesota Power for the ensuing
Month; and (iii) at least two (2) hours before any deadline for submission by
Minnesota Power to Square Butte of transmission schedules for deliveries for the
following day, an hourly schedule of total Energy deliveries desired by
Minnesota Power for delivery for that day. Revisions in schedules furnished
pursuant to clauses (ii) and (iii) of this Section 6.2 may be made with
reasonable notice from time to time by Minnesota Power.
6.3 Scheduling of Deliveries by Square Butte. In the event that Square
Butte makes available to Minnesota Power Alternate Capacity and/or delivers to
Minnesota Power Alternate Energy, Square Butte shall schedule such delivery or
deliveries to Minnesota Power at the Delivery Point in accordance with the
transmission tariff of Minnesota Power or other applicable transmission
provider.
6.4 Scheduling Limitations. The power scheduled from Unit #2 shall not
exceed the reasonable and proper capability of Unit #2 less margins for spinning
reserve and regulation as may be required for interconnected system operation in
accordance with Prudent Utility Practice. Insofar as is practicable and unless
otherwise agreed by Square Butte and Minnesota Power, required margins for
spinning reserve shall be as determined by the Parties in accordance with
Prudent Utility Practice and the applicable power pool policies or eligibility
requirements then in effect.
ARTICLE VII
POINT OF DELIVERY
7.1 Delivery Point. The Delivery Point for the delivery by Square Butte
of Energy hereunder shall be the Square Butte Substation. The Delivery Point for
the delivery by Square Butte of Alternate Energy hereunder shall be any point on
Minnesota Power's transmission system at which such Alternate Energy can be
delivered (including the Duluth HVDC Terminal) or the Square Butte Substation,
at Square Butte's option.
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ARTICLE VIII
CONTROL
8.1 Control and Communication Equipment. Operation of Unit #2 shall be
scheduled with Square Butte by the system operation center of Minnesota Power
through proper load control, supervisory and communication equipment. It shall
be the responsibility of Square Butte to provide and maintain control and
communication equipment located at Unit #2, consistent with Prudent Utility
Practice and for the proper operation of the Transmission Facilities, Minnesota
Power's transmission system and other applicable interconnected systems. It
shall be the responsibility of Minnesota Power to provide and maintain control
and communication equipment located at its system operation center, consistent
with Prudent Utility Practice and for the proper operation of the Transmission
Facilities, its transmission system and other applicable interconnected systems.
8.2 Voltage. Square Butte shall schedule voltage levels at Unit #2 in
coordination with Minnesota Power's system, Minnkota's system and other
applicable interconnected systems.
8.3 Reactive Power. Reactive kilovolt-amperes shall be made available
to Minnesota Power up to Minnesota Power's entitlement to Net Capability under
Section 3.2, consistent with the hourly schedule of energy deliveries and
voltage level schedule for Unit #2 at the time. At its discretion, Minnesota
Power may take additional reactive deliveries when available, or otherwise by a
reduction of real power delivery from Unit #2, so as to provide the additional
reactive capacity requested. Square Butte shall operate Unit #2 so that under
all conditions adequate reactive capacity is available so as not to cause an
impairment of the service or facilities of Minnesota Power, Minnkota, or other
applicable interconnected systems.
ARTICLE IX
CHARACTER AND CONTINUITY OF SERVICE
9.1 Character and Continuity of Service. Capacity and energy generated
by Unit #2 hereunder shall be three-phase alternating current at approximately
sixty (60) cycles per second. Square Butte may temporarily interrupt or reduce
deliveries of electric energy to Minnesota Power if Square Butte determines that
such interruption or reduction is necessary in case of emergencies affecting the
ability of Square Butte to produce power or deliver power from Unit #2. Planned
outages of Unit #2 shall be in accordance with the terms of the Joint Operating
Agreement.
9.2 Uncontrollable Forces. Except as interrupted by Uncontrollable
Forces, or as otherwise provided in this Agreement, Square Butte shall operate
Unit #2 and make Net Capability and Energy therefrom available to Minnesota
Power in accordance with this Agreement. In the event of interruption due to
Uncontrollable Forces, Square Butte will correct the cause of the interruption
as soon as possible in accordance with Prudent Utility Practice.
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ARTICLE X
METERING AND TRANSMISSION
10.1 Metering Equipment. Square Butte shall provide and maintain, as
agreed upon by the Parties, suitable metering equipment at Unit #2 and on the AC
Transmission Facilities to indicate, record and telemeter Net Capability and
Energy. Periodic tests and inspections of such metering equipment shall be made
at reasonable intervals as agreed upon by the Parties to ensure that their
accuracy of registration is maintained in accordance with Prudent Utility
Practice. The expense involved in such tests shall be included in the Monthly
Charges for Capacity and Energy. On the request of either Party, special tests
shall be made at the requesting Party's expense. Each Party shall afford
opportunity to representatives of the other to be present at all regular or
special tests, if desired. If any test of metering equipment discloses an
inaccuracy exceeding two percent (2%) above or below the equipment's calibrated
standards, the Parties shall be promptly notified and the account between the
Parties for service supplied shall be adjusted appropriately. Such correction
and adjustment shall be made in the billing from the date the meter became
inaccurate, if known; if such date cannot be determined, then such adjustment
shall be made for the previous Month or from the date of the latest test, if
within the previous Month, and for the elapsed period in the Month during which
the test was made. Should any metering equipment at any time fail to register or
should the registration thereof be so erratic as to be meaningless, the Net
Capability made available and Energy transmitted shall be determined by the
Parties from the best available data.
10.2 Transmission. Square Butte will arrange for transmission of Energy
from Unit #2 to the Delivery Point. Square Butte shall have no obligation
hereunder for transmission scheduling, charges, or losses, ancillary services or
other transmission-related services for such Energy after the Delivery Point. In
the event that Square Butte delivers Alternate Energy to Minnesota Power, Square
Butte will arrange for appropriate transmission of such Alternate Energy to the
Delivery Point, and Minnesota Power shall be responsible for all charges and
losses associated with such transmission. Minnesota Power agrees to obtain firm
transmission rights on the Transmission Facilities under Square Butte's
Transmission Tariff in an amount equal to its entitlement to Net Capability and
associated energy under Section 3.2, for a term that is coextensive with Square
Butte's obligation to make available Net Capability and deliver energy to
Minnesota Power hereunder.
10.3 Measurement of Transmission Losses. All deliveries of Energy
hereunder shall be measured at Unit #2 and the AC Transmission Facilities.
Minnesota Power shall be responsible for all losses of Energy beyond the high
side of the Generator Step-up Transformer.
10.4 Use of Transmission Facilities. Use of the Transmission Facilities
shall be in accordance with the rates, terms and conditions of Square Butte's
Transmission Tariff.
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ARTICLE XI
ACCOUNTING, AUDIT RIGHTS, AND INFORMATION SHARING
11.1 Records and Accounts; Audits. Square Butte agrees to keep accurate
records and accounts for Unit #2 in accordance with the Uniform System of
Accounts, separate and distinct from other records and accounts. Said accounts
shall be audited annually by a firm of certified public accountants, experienced
in electric utility accounting and acceptable to Minnesota Power, to be employed
by Square Butte. Said annual audit shall cover the transactions of the Contract
Year.
11.2 Copies of Audits. A copy of each annual audit, including all
written comments and recommendations of such accountants, shall be furnished by
Square Butte upon request to Minnesota Power.
11.3 Examination of Records. All operating and financial records and
reports relating to Unit #2 and the Joint Facilities may be examined by
Minnesota Power at the office of Square Butte or at the site of Unit #2 at
reasonable times and at its own expense.
11.4 Insurance Policies. Copies of policies of insurance carried by
Square Butte pursuant to Article XII shall be available at the office of Square
Butte for inspection by Minnesota Power.
11.5 Access to Facilities. Minnesota Power's representatives shall at
all reasonable times be given access to Unit #2 and the Joint Facilities, and
the records and reports referred to in Section 11.3 and Section 11.4.
ARTICLE XII
INSURANCE AND EMINENT DOMAIN
12.1 Insurance. Square Butte agrees to obtain and maintain in full
force and effect during the term of this Agreement, with responsible insurers,
appropriate insurance in amounts and with deductibles satisfactory to Minnesota
Power and Square Butte and in conformity with the Indenture.
12.2 Settlement of Claims. Square Butte agrees not to accept or agree
to any settlement of any material claim it may have against any of its insurers
without the prior written consent of Minnesota Power, which consent shall not be
unreasonably withheld or delayed.
12.3 Eminent Domain. If any of Square Butte's properties shall be taken
by or become subject to the exercise of the power of eminent domain, Square
Butte shall promptly notify Minnesota Power and afford it an opportunity to
participate in any proceedings with respect thereto. Square Butte shall not
agree to the settlement of any such eminent domain proceeding without the prior
written consent of Minnesota Power, which consent shall not be unreasonably
withheld or delayed.
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ARTICLE XIII
FAILURE OF PERFORMANCE AND LIABILITY
13.1 Liability and Indemnification. Square Butte and Minnesota Power
each assumes full responsibility and liability for the maintenance and operation
of its respective properties, including any property leased to either pursuant
to lease agreements, and shall indemnify and save harmless the other Party from
all liability and expense on account of any and all damages, claims or actions,
including injury to or death of persons arising from any act, omission or
accident in connection with a Party's installation, maintenance and operation of
property and equipment.
13.2 Failure to Perform. In the event that either Party fails to
perform its obligations hereunder, such Party shall be liable to the other Party
for direct actual damages for such failure to perform. In the case of a failure
to perform by Minnesota Power, such direct actual damages are in addition to
Minnesota Power's payment obligations under Article IV. In no event shall
Minnesota Power be relieved of its obligations under Article IV as a result of
its payment of such direct actual damages.
13.3 Uncontrollable Forces.
13.3.1 Performance Excused. Notwithstanding any provision of this
Agreement, the performance of the obligations set forth in this Agreement (other
than the payment of any monies due hereunder) shall be suspended or excused in
the event that such performance is adversely affected by an Uncontrollable Force
or its adverse effects; provided, however, that nothing in this Section 13.3
shall excuse Minnesota Power from its obligations under Section 4.1.
13.3.2 Obligation to Remove Disability. A Party affected by an
Uncontrollable Force shall use due diligence to place itself in a position to
fulfill its obligations hereunder, and if unable to fulfill any obligation by
reason of an Uncontrollable Force, such Party shall exercise due diligence to
remove such disability at the earliest practicable time.
13.3.3 Actions of Third Parties. The action or inaction of any
Affiliate or any third party contractor or subcontractor of a Party shall not be
an Uncontrollable Force unless (a) such third party's action or failure to act
is itself the result of an Uncontrollable Force, (b) such third party affected
by an Uncontrollable Force is using due diligence to place itself in a position
to fulfill its obligations to the Party, and (c) if such third party is unable
to fulfill any obligation by reason of an Uncontrollable Force, such third party
is exercising due diligence to remove such disability at the earliest
practicable time.
13.4 Limitation on Damages. To the fullest extent permitted by law,
neither Party shall have liability to the other Party for any indirect,
consequential, multiple, punitive, or special damages unless such damages are
the result of the Party's bad faith, gross negligence or willful misconduct.
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ARTICLE XIV
DISPUTE RESOLUTION
14.1 Dispute Resolution. In the event of a dispute between the Parties
arising out of the performance or non-performance of this Agreement, the Parties
will in good faith negotiate to resolve such dispute. If the Parties are unable
to resolve the dispute through such good faith negotiations within a reasonable
amount of time, then the dispute shall be subject to the dispute resolution
procedures set forth herein.
14.2 Mediation. If the Parties are unable through good faith
negotiations between themselves to resolve such a dispute, then they will
endeavor to resolve the dispute by mediation in good faith accordance with the
Commercial Mediation Rules of the American Arbitration Association then in
effect, and this shall be a condition precedent to the commencement of any
arbitration.
14.3 Arbitration. Any controversy or claim arising out of or relating
to this Agreement or the breach of any part thereof, or appeal from action of
one of the Parties to this Agreement, which is not resolved through good faith
negotiations or mediation between the Parties, shall be settled by arbitration,
in accordance with the following procedures.
14.3.1 Arbitration Rules. Such arbitration shall be conducted
before a single arbitrator selected by the American Arbitration Association and
the arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect, subject to the
further qualification that the arbitrator named under said rules shall be
unbiased and qualified by virtue of education and experience in the particular
matter subject to arbitration.
14.3.2 Notice. The Party desiring arbitration shall demand such
arbitration by giving written notice to the other Party involved. Such notice
shall conform to the procedures of the American Arbitration Association and
shall include a statement of the facts or circumstances causing the controversy
and the resolution, determination or relief sought by the Party desiring
arbitration.
14.3.3 Pre-Arbitration Conference. Before the matter is presented
to the arbitrator, a conference shall be held to stipulate as many facts as
possible and to clarify and narrow the issues to be submitted to arbitration.
14.3.4 Authority of Arbitrators. The arbitrator shall have no
authority, power or jurisdiction to alter, amend, change, modify, add to or
subtract from any of the provisions of this Agreement, nor to consider any
issues arising other than from the language in and authority derived from this
Agreement.
14.3.5 Decision or Award. The decision or award of the arbitrator
shall be final and binding upon the Parties and the Parties shall do such acts
as the arbitration decision or
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award may require of them. Judgment upon any award rendered by the arbitrator
may be entered in any court having jurisdiction and execution issued thereon.
This provision shall survive the termination of this Agreement.
14.3.6 Costs. Cost of the arbitration shall be shared equally
unless the award shall specify a different division of cost.
ARTICLE XV
ASSIGNMENT
15.1 Permitted Assignments. Subject to any additional limitations set
forth in the Indenture and except as provided in Section 15.1.1 and Section
15.1.2, neither Party may assign its rights and obligations under this Agreement
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed.
15.1.1 Assignment by Square Butte. Minnesota Power agrees to
Square Butte's sale, transfer and assignment of its right, title and interest in
this Agreement, including any and all extensions, renewals, amendments,
modifications and supplements hereto, and all amounts due hereunder, as security
for its obligations, without such assignees assuming or becoming in any respect
obligated to perform any of the obligations of Square Butte hereunder, and, if
any such assignee be a corporation, without its being required by the Parties
hereto to qualify to do business in the State of North Dakota, and any such
assignee may transfer, convey and assign all of its right, title and interest
in, to or by virtue of this Agreement in connection with any proceeding (whether
or not judicial) to realize on any security interests granted to it to secure
Square Butte's obligations to any purchaser of any part of the property subject
to such security interests, or exercise any other remedy permitted by the
documents governing its security interests. This Agreement may not be terminated
other than in accordance with its terms, and the terms and provisions of this
Agreement may not be amended, altered, modified or waived except as permitted
under the Indenture. No such assignment for security shall impose on any
assignee any of the duties, obligations or liabilities of Square Butte
hereunder, but the assignee shall acquire thereby all the rights of Square Butte
hereunder as shall be necessary for it to collect and receive all such amounts
payable hereunder, so as to constitute such assignee the beneficiary of the
obligations of Minnesota Power set forth hereunder. Minnesota Power agrees to
execute and cooperate in filing any acknowledgment or consent to any assignment
as described above.
15.1.2 Assignment by Minnesota Power. Square Butte agrees to the
assignment by Minnesota Power of this Agreement and Minnesota Power's respective
rights hereunder, but not to the delegation by Minnesota Power of its respective
obligations hereunder, to an Affiliate of Minnesota Power.
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ARTICLE XVI
MISCELLANEOUS
16.1 Waiver of Default. Any waiver at any time by either Party of its
rights with respect to any default of the other Party hereto, or with respect to
any other matter arising in connection with this Agreement, shall not be
considered a waiver with respect to any other default or matter.
16.2 Notices and Computation of Time. Any notice or demand, except
those provided for in Article VI and Article XIII, by Minnesota Power under this
Agreement to Square Butte shall be deemed properly given if mailed postage
prepaid and addressed to Square Butte Electric Cooperative, X.X. Xxx 00000,
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000-0000, Attention: General Manager; any notice or
demand by Square Butte under this Agreement to Minnesota Power shall be deemed
properly given if mailed postage prepaid and addressed to Minnesota Power, Inc.,
00 Xxxx Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxx 00000, Attention: Chief Executive
Officer; and in computing any period of time from such notice, such period shall
commence at 11:59 p.m. CPT of the day mailed. Notices of demands delivered
pursuant to Article VI and Article XIII shall be deemed given when received. A
Party may change at any time the designation of the name and address to which
any notice or demand is directed by giving written notice of such change to the
other Party as above provided.
16.3 Minnesota Power Financial Information. Minnesota Power agrees to
furnish Square Butte adequate copies of the financial information relating to
Minnesota Power which Square Butte is obligated to furnish to the Trustee
pursuant to the Indenture at such times as Square Butte shall require to enable
it to satisfy such obligation.
16.4 Governing Law. The Parties hereto agree that this Agreement shall
be governed by and construed in accordance with the laws of the State of
Minnesota.
16.5 Counterparts. This Agreement may be executed simultaneously in
several counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
16.6 Rules of Construction.
16.6.1 Captions and Headings. Captions and section headings, other
than in Article I, are for ease of reading and reference and are not intended to
be a part of this Agreement and shall have no binding effect.
16.6.2 Including. Wherever the term "including" is used in this
Agreement, such term shall not be construed as limiting the generality of any
statement, clause, phrase, or term.
16.6.3 Singular and Plural. The terms defined in this Agreement
shall be applicable to the plural as well as the singular and the singular as
well as the plural.
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16.6.4 Time of the Essence. Time is of the essence of this
Agreement.
16.7 Joint Operating Committee. There shall be established hereunder a
Joint Operating Committee, the membership, functions and duties of which shall
be set forth in the Joint Operating Agreement.
16.8 Survival. The applicable provisions of this Agreement shall
continue in effect after termination of this Agreement to the extent necessary
to provide for final billing, billing adjustments and payments, and with respect
to liability and indemnification from acts or events that occurred while this
Agreement was in effect.
16.9 Amendments. Subject to any additional limitations set forth in the
Indenture, no amendment to this Agreement shall be effective unless it is in
writing, executed by both Parties, and has been approved or accepted for filing
and permitted to go into effect by any Governmental Authority having
jurisdiction.
16.10 Governmental Approvals. It is recognized by the Parties that this
Agreement may be subject to Governmental Approvals. Each Party agrees to
cooperate with the other Party in obtaining any necessary Governmental Approvals
of this Agreement or any amendment thereto.
16.11 Other Business. Square Butte agrees not to engage in any business
or activity other than the ownership and operation of Unit #2, the Transmission
Facilities and the Joint Facilities.
16.12 Additional Financing; Sale of Facilities. Square Butte may desire
or be required to arrange financing for Unit #2 and/or the Transmission
Facilities, including, but not limited to, financing for subsequent additions or
replacements. Square Butte agrees that it will not enter into any such
arrangement without the prior written consent of Minnesota Power, which consent
shall not be unreasonably withheld, it being expressly recognized herein that
Minnesota Power's obligation to pay Monthly Charges for Capacity and Energy
could be increased by any such arrangement. Prior to the Plant Closure Date,
Square Butte shall not sell any substantial portion of its assets without the
prior written consent of Minnesota Power, which consent shall not be
unreasonably withheld, it being expressly recognized herein that Minnesota
Power's obligation to pay Monthly Charges for Capacity and Energy and other
charges under this Agreement could be affected by any such transaction.
16.13 Modification of Certain Instruments. Square Butte shall not,
without the written consent of Minnesota Power, amend, modify, supplement or
otherwise change the Indenture or the Trustee thereunder.
16.14 Obligation to Pay Decommissioning Costs. In recognition of the
fact that the Monthly Charge for Capacity and Energy hereunder does not contain
a component to recover Decommissioning Costs, Minnesota Power shall pay a share
of Decommissioning Costs, as provided in the Joint Operating Agreement.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed and delivered by its duly authorized representative.
MINNESOTA POWER, INC.
[CORPORATE SEAL]
/s/ Xxxxx Xxxxxxx
Attest: --------------------------
Treasurer
/s/ Xxxxxx X. Xxxxxx
--------------------------
Assistant General Counsel
SQUARE BUTTE ELECTRIC
[CORPORATE SEAL] COOPERATIVE
/s/ Xxxxxx X. Xxxxxx
Attest: --------------------------
President
/s/ Xxxxxxx Xxxxxx
--------------------------
Secretary-Treasurer
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