DELAWARE 4911 58-2598670
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification Number)
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COPIES TO:
GALE E. KLAPPA CLIFF S. THRASHER WALTER M. BEALE, JR.
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER BALCH & BINGHAM LLP
CHIEF FINANCIAL OFFICER SOUTHERN POWER COMPANY 1901 SIXTH AVENUE NORTH
AND TREASURER 270 PEACHTREE STREET, N.W. SUITE 2600
THE SOUTHERN COMPANY ATLANTA, GEORGIA 30303 BIRMINGHAM, ALABAMA 35203
270 PEACHTREE STREET, N.W.
ATLANTA, GEORGIA 30303
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CALCULATION OF REGISTRATION FEE
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TITLE OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE(2)
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6.25% Senior Notes, Series B due July
15, 2012........................... $575,000,000 100% $575,000,000 $52,900
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(1) The proposed maximum aggregate offering price represents the total value of the notes being exchanged under this Registration Statement.
(2) The registration fee has been calculated pursuant to Rule 457(f)(2) under the Securities Act.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the securities and exchange commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 200
$575,000,000
SOUTHERN POWER COMPANY
A SUBSIDIARY OF
(SOUTHERN COMPANY LOGO)
OFFER TO EXCHANGE
ALL OUTSTANDING
6.25% SENIOR NOTES, SERIES A DUE JULY 15, 2012
FOR
6.25% SENIOR NOTES, SERIES B DUE JULY 15, 2012
(REGISTERED UNDER THE SECURITIES ACT OF 1933)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 200 , UNLESS EXTENDED
We are offering you the opportunity to exchange your 6.25% Senior Notes, Series A due July 15, 2012 that are not registered under the Securities Act of 1933 for our new 6.25% Senior Notes, Series B due July 15, 2012 that are registered under the Securities Act of 1933 in the Exchange Offer.
Material terms of the Exchange Offer are:
- EXPIRATION. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 200 , unless we extend it.
- EXCHANGE. We will exchange all outstanding Original Senior Notes that are validly tendered and not validly withdrawn before the Exchange Offer expires.
- TERMS OF THE NOTES. The terms of the Exchange Senior Notes are substantially identical to the Original Senior Notes, except that the Exchange Senior Notes are registered under the Securities Act of 1933. Certain transfer restrictions and registration rights relating to the Original Senior Notes do not apply to the Exchange Senior Notes.
- REPRESENTATION OF HOLDERS. You will be required to make various representations including that (1) any Exchange Senior Notes received by you will be acquired in the ordinary course of business, (2) you are not participating in the distribution of the Exchange Senior Notes, (3) you are not an affiliate of Southern Power Company and (4) you are not a broker-dealer, and if you are a broker-dealer, that you will receive the Exchange Senior Notes for your own account, you will deliver a prospectus on resale of your Exchange Senior Notes and that you acquired your Original Senior Notes as a result of market making activities or other trading activities.
- WITHDRAWAL RIGHTS. You may withdraw tenders of Original Senior Notes at any time before the Exchange Offer expires.
- CONDITIONS. The Exchange Offer is subject to customary conditions, including the condition that the Exchange Offer not violate applicable law or any applicable interpretation of the staff of the Securities and Exchange Commission.
- TAX CONSEQUENCES. We believe that the Exchange Offer will not be a taxable event for U.S. federal income tax purposes, but you should see "Material U.S. Federal Income Tax Considerations" on page 74 for more information.
- USE OF PROCEEDS. We will not receive any proceeds from the Exchange Offer.
- TRADING. There is no existing market for the Exchange Senior Notes and we will not apply to list them on any securities exchange.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN RISKS THAT YOU SHOULD CONSIDER IF YOU TENDER YOUR ORIGINAL SENIOR NOTES IN CONNECTION WITH THIS EXCHANGE OFFER.
These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 200
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. This prospectus is an offer only of the Exchange Senior Notes to be issued in exchange for the Original Senior Notes but only under circumstances and in jurisdictions where it is lawful to do so. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.
Each broker-dealer that receives Exchange Senior Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Senior Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Senior Notes received in exchange for Original Senior Notes where the Original Senior Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, during the 270-day period following the consummation of the Exchange Offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "PLAN OF DISTRIBUTION."
Whenever we refer to the outstanding 6.25% Senior Notes, Series A due July 15, 2012 issued in a private offering on June 18, 2002, we will refer to them collectively as the "Original Senior Notes" and each individually as an "Original Senior Note." Whenever we refer to the 6.25% Senior Notes, Series B due July 15, 2012 registered under the Securities Act and issued in exchange for the Original Senior Notes, we will refer to them collectively as the "Exchange Senior Notes" and each individually as an "Exchange Senior Note." The Original Senior Notes and the Exchange Senior Notes are collectively referred to as the "Notes."
TABLE OF CONTENTS
PAGE
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Where to Find More Information.............................. ii
Forward-Looking Statements.................................. iii
Summary..................................................... 1
Risk Factors................................................ 11
Use of Proceeds............................................. 18
Capitalization.............................................. 18
Selected Historical Financial Data.......................... 19
Pro Forma Financial Data.................................... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Our Business................................................ 32
Our Management.............................................. 49
Executive Compensation...................................... 50
Stock Ownership Table....................................... 54
The Operating Companies..................................... 54
Certain Relationships and Related Transactions.............. 56
The Exchange Offer.......................................... 57
Description of The Exchange Senior Notes and The
Indenture................................................. 67
Material U.S. Federal Income Tax Considerations............. 78
Ratings..................................................... 79
Plan of Distribution........................................ 79
Experts..................................................... 79
Independent Engineer........................................ 80
Independent Market Expert................................... 80
Legal Matters............................................... 80
Index to Financial Statements............................... F-1
Annex A -- Independent Engineer's Report.................... A-1
Annex B -- Independent Market Expert's Report............... B-1
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WHERE TO FIND MORE INFORMATION
In connection with the Exchange Offer, we have filed with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 under the Securities Act, to register the Exchange Senior Notes offered hereby in exchange for the Original Senior Notes. As permitted by SEC rules, this prospectus omits information included in the Registration Statement. For a more complete understanding of this Exchange Offer, you should refer to the Registration Statement, including its exhibits.
WE ARE NOT CURRENTLY SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). UPON THE EFFECTIVENESS OF THE REGISTRATION STATEMENT WE WILL BECOME SUBJECT TO THOSE PERIODIC REPORTING REQUIREMENTS. OUR PARENT COMPANY, THE SOUTHERN COMPANY ("SOUTHERN"), IS SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE EXCHANGE ACT AND, IN ACCORDANCE WITH THAT ACT, FILES REPORTS, PROXY STATEMENTS AND OTHER INFORMATION WITH THE SEC. THE PUBLIC MAY READ AND COPY THESE REPORTS OR OTHER INFORMATION THAT IS FILED WITH THE SEC AT THE SEC'S PUBLIC REFERENCE ROOM, ROOM 1024 AT JUDICIARY PLAZA, 450 FIFTH STREET, N.W., WASHINGTON, D.C. 20549, OR AT THE SEC'S REGIONAL OFFICES LOCATED AT 233 BROADWAY, NEW YORK, NEW YORK 10279, AND SUITE 1400, 500 WEST MADISON STREET, CHICAGO, ILLINOIS 60661. THE PUBLIC MAY OBTAIN INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM BY CALLING THE SEC AT 1-800-SEC-0330. THESE DOCUMENTS ARE ALSO AVAILABLE TO THE PUBLIC FROM COMMERCIAL DOCUMENT RETRIEVAL SERVICES AND AT THE WEB SITE MAINTAINED BY THE SEC AT HTTP://WWW.SEC.GOV. YOU MAY ALSO OBTAIN A COPY OF THE REGISTRATION STATEMENT AT NO COST BY WRITING US AT THE FOLLOWING ADDRESS:
SOUTHERN POWER COMPANY
ATTN: CHIEF FINANCIAL OFFICER
270 PEACHTREE STREET, N.W.
ATLANTA, GEORGIA 30303
To obtain timely delivery, you must request this information no later than five business days before you must make your investment decision, or no later than , 200 , which is five business days before the expiration of the Exchange Offer.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. All statements, other than statements of historical facts, included in this prospectus that address activities, events or developments that we expect or anticipate will or may occur in the future, including such matters as projections, future capital expenditures, business strategy, competitive strengths, goals, development or operation of generation assets, market and industry developments and the growth of our businesses and operations, are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "projects," "potential," or "contemplate" or the negative of these terms or other comparable terminology. These statements are based on assumptions and analyses made in light of experience and other historical trends, current conditions and expected future developments, as well as various factors we believe are appropriate under the circumstances. However, actual results and developments may differ materially from our expectations and predictions due to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties include:
- significant considerations and risks discussed in this prospectus;
- political, legal, regulatory and economic conditions and developments in the United States;
- the effect of and changes in economic conditions in the areas in which we operate;
- fluctuations in demand for energy, capacity and ancillary services in the markets in which we operate;
- the effect, extent and timing of the entry of additional competition in the markets in which our company operates;
- acquisition and development opportunities (or lack thereof) that may be presented to and pursued by us;
- impact of recent and future federal and state regulatory changes, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric utility industry and also changes in environmental and other laws and regulations to which our company is subject, as well as changes in application of existing laws and regulations;
- environmental constraints on construction and operations;
- rapidly changing markets for energy products;
- financial market conditions and the results of financing efforts;
- the direct or indirect impact on our company's business resulting from the terrorist incidents on September 11, 2001, or any similar incidents or responses to such incidents;
- weather and other natural phenomena; or
- current and future litigation.
Consequently, all of the forward-looking statements made in this prospectus are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by us or the projections will be realized or, even if realized, will have the expected consequences to or effects on us or our business, financial condition or results of operations. You should not place undue reliance on these forward-looking statements in making your investment decision. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to these forward-looking statements to reflect events or circumstances that occur or arise or are anticipated to occur or arise after the date hereof. In making a decision regarding the tender of your Original Senior Notes in connection with this Exchange Offer, we are not making, and you should not infer, any representation about the likely existence of any particular future set of facts or circumstances.
SUMMARY
The following summary contains basic information about Southern Power Company and the Exchange Offer. It may not contain all of the information that may be important to you in making a decision to tender your Original Senior Notes in connection with the Exchange Offer. You should read the entire prospectus, and the documents to which we refer, before making an investment decision. Unless the context otherwise indicates, all references to the "Company," "Southern Power," "we," "us" or "our" in this prospectus refer to Southern Power Company.
SOUTHERN POWER COMPANY
We are a wholly owned subsidiary of The Southern Company ("Southern"). Our principal executive offices are located at 270 Peachtree Street, N.W., Atlanta, Georgia 30303, and the telephone number is (404) 506-5000. We were formed to own, construct and acquire Southern's new competitive contract-based wholesale generation assets. Consequently, our business activities should not be subject to traditional state regulation, but are subject to regulation by the Federal Energy Regulatory Commission (the "FERC"). We will be the primary vehicle to develop Southern's position in the energy markets in the Southeastern United States. It is contemplated that substantially all of our generating capacity will be committed under long-term, fixed-price power purchase agreements ("PPAs"), primarily with our affiliates.
We are an electric utility company as defined under the Public Utility Holding Company Act of 1935, as amended (the "Holding Company Act"). We are subject to regulation under the Holding Company Act because we are a wholly owned subsidiary of Southern, a registered public utility holding company under the Holding Company Act. The following is a chart of Southern's electric operating companies, its service company and us:
(SOUTHERN CO. FLOW CHART)
As a separate subsidiary in the Southern system, we provide the means by which Southern can own, construct and acquire new generation assets outside of the traditional rate-based state regulated generation structure. Substantially all of our operating or under construction generating facilities were acquired from affiliates within the Southern system. We intend to own and finance all of the new competitive contract-based wholesale generation assets to be built in the Southern system. Southern believes that this structure is most effective for pursuing generation opportunities in the competitive wholesale markets. This structure ensures a consistent approach to developing new wholesale generation and improves efficiency.
We intend to own, construct and acquire generating facilities in the "Super Southeast" region (as described below) of the United States and to sell the output of our generating facilities under long-term, fixed-price capacity contracts to wholesale customers in this region. The Super Southeast includes the states in Southern's traditional service territory -- Alabama, Florida, Georgia and Mississippi. Our customers in these states are expected to be predominantly Southern's operating utilities, namely Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company and Savannah Electric and Power Company (collectively, the "Operating Companies"), but will include unaffiliated third parties as well. The Super Southeast also consists of the surrounding states of Kentucky, Louisiana, North
Carolina, South Carolina, Tennessee, and Virginia. Although we will focus on the Super Southeast, we may also acquire or construct generating facilities outside of the Super Southeast or sell the output of our generating facilities to customers outside of the Super Southeast.
As of June 30, 2002, we had 4,777 megawatts ("MW") of generating capacity in commercial operation or under construction. By the end of 2005, we expect to have approximately 6,600 MW of generating capacity in commercial operation. Currently, substantially all of our existing, under construction and planned generating capacity is committed under long-term PPAs, mostly with the Operating Companies, but also with municipalities and certain unaffiliated third parties (collectively, the "PPA Counterparties"). All of the PPA Counterparties are strong entities from either a credit or financial security perspective.
Along with the Operating Companies, we are a member of and share in the benefits and obligations of the Southern system power pool (the "Southern Pool"). As a member of the Southern Pool, our generating facilities located within Southern's service territory will be economically dispatched with the generating facilities of the Operating Companies to serve the members' aggregate load requirements. A member of the Southern Pool has the first call on its own generating resources, but if lower cost generation resources are available on the Southern system, a Southern Pool member has the right to purchase that lower variable cost energy to satisfy its obligations. As a member of the Southern Pool, we will also benefit from economies of scale, share geographic load diversity and maintain lower reserve levels than would be required on a stand- alone basis. The Southern Pool includes approximately 37,000 MW of generating capacity.
For each of our generating facilities located in the service territory of an Operating Company, there will be an interconnection agreement to govern the interconnected operations of that facility with the transmission facilities of the appropriate Operating Company. Each Operating Company is interconnected to the transmission facilities of the other Operating Companies by means of high-voltage lines. Additionally, the Operating Companies have long-standing contracts with the principal neighboring utility systems relating to capacity exchanges, capacity purchases and sales, transfers of economy energy and other similar transactions. For the most part, such interchange transactions are now conducted under market-based tariff arrangements. We expect that each generating facility located outside of the Operating Companies' service territory will have an interconnection agreement with the applicable transmission provider.
In order to optimize efficiencies, we will utilize employees currently in the Southern system for our day-to-day operations at our generation facilities. For each of our generating facilities in an Operating Company's service territory, we intend for such Operating Company to provide operation and maintenance services at cost (in accordance with the Holding Company Act). There are or will be operation and maintenance contracts between us and the appropriate Operating Company for the facilities located in such Operating Company's service territory. Because Stanton A is located outside of the Operating Companies' service territory, Southern Company Services, Inc. ("SCS"), a subsidiary of Southern, will be responsible for the operation and maintenance of Stanton A. Additionally, under the terms of a services agreement, SCS will perform overall project management of the construction process of our generating facilities.
BUSINESS STRATEGY
Our strategy is to develop, construct and acquire additional generating facilities to compete for and serve the demand in the Super Southeast market. To implement this strategy, we plan to:
- Derive at least 80% of operating cash flow under long-term, fixed-price PPAs.
- Utilize the expertise of Southern affiliates in planning, designing, constructing, marketing, operating and maintaining generating facilities.
- Mitigate market price, fuel supply, fuel transportation and electric transmission risk.
- Focus on the Super Southeast for additional generation and wholesale marketing opportunities.
- Expand our asset base to at least 6,600 MW in commercial operation by year-end 2005, with potential for further capacity additions thereafter.
For a more detailed explanation of our business strategy, see "OUR BUSINESS -- Business Strategy."
COMPETITIVE STRENGTHS
We believe that we are well positioned to implement our business strategy because of the following competitive strengths:
- Stable revenues under long-term, fixed-price PPAs.
- Mitigation of market price, fuel supply, fuel transportation and electric transmission risk.
- Relationship with Southern.
- Efficiencies relating to new generating facilities.
- Stable regulatory environment.
- Absence of electric restructuring legislation in Southern's service territory.
- Stable regional demand.
For a more detailed explanation of our competitive strengths, see "OUR BUSINESS -- Competitive Strengths."
SUMMARY FINANCIAL INFORMATION
Southern Power commenced operations effective January 8, 2001. The following table sets forth our summary historical financial information as of December 31, 2001 and for the period from January 8, 2001 through December 31, 2001 and our summary historical financial information as of June 30, 2002 and for the six months ended June 30, 2002. This summary financial information has been derived from financial statements prepared by us and included elsewhere in this prospectus. You should read the information set forth below in conjunction with "SELECTED HISTORICAL FINANCIAL DATA" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and our consolidated and condensed consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.
As more fully described under "PRO FORMA FINANCIAL DATA", the summary unaudited pro forma information for the period from inception (January 8, 2001) to December 31, 2001 reflects the acquisition of Plant Dahlberg as if it occurred on January 8, 2001.
PRO FORMA
(UNAUDITED) PERIOD FROM FOR THE PERIOD
SIX MONTHS INCEPTION FROM INCEPTION
ENDED (JANUARY 8, 2001) TO (JANUARY 8, 2001) TO
JUNE 30, 2002 DECEMBER 31, 2001 DECEMBER 31, 2001
-------------- -------------------- --------------------
($ IN THOUSANDS)
INCOME STATEMENT DATA
Operating Revenues................................ $77,076 $29,301 $70,454
Operating Expenses................................ 52,942 18,814 40,034
------- ------- -------
Operating Income.................................. 24,134 10,487 30,420
Other Income...................................... (1,220) 658 658
------- ------- -------
Earnings Before Interest and Income Taxes......... 22,914 11,145 31,078
Total Interest Expense, net....................... 1,195 427 4,331
Income Taxes...................................... 8,406 2,511 8,923
------- ------- -------
Net Income........................................ $13,313 $ 8,207 $17,824
======= ======= =======
OTHER FINANCIAL DATA
Ratio of Earnings to Fixed Charges (1)............ 1.58x 3.36x
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(UNAUDITED)
AS OF AS OF
JUNE 30, 2002 DECEMBER 31, 2001
-------------- -----------------
($ IN THOUSANDS)
BALANCE SHEET DATA
Total Current Assets........................................ $ 60,581 $ 27,639
Plant in Service, net....................................... 877,464 261,862
Construction Work in Progress............................... 729,841 500,358
Other Assets and Deferred Charges........................... 45,866 32,998
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Total Assets................................................ $1,713,752 $822,857
========== ========
Current Liabilities, excluding Subordinated Note Payable to
Parent.................................................... $ 41,785 $ 31,693
Deferred Credits and Other Liabilities...................... 45,300 30,016
Long-Term Debt.............................................. 732,401 293,205
Subordinated Note Payable to Parent......................... 186,342 950
Common Stockholder's Equity................................. 707,924 466,993
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Total Liabilities and Stockholder's Equity.................. $1,713,752 $822,857
========== ========
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(1) Ratio of earnings to fixed charges represents, on a pre-tax basis, the number of times earnings cover fixed charges. Earnings consist of net income plus interest expense and income taxes. Fixed charges consist of interest expense plus capitalized interest.
INDEPENDENT CONSULTANTS' REPORTS
R. W. Beck ("Beck" or the "Independent Engineer") has prepared the Independent Engineer's Report (the "Independent Engineer's Report"), included as Annex A to this prospectus. Beck is an international engineering and consulting firm with substantial experience in the electric power industry. The Independent Engineer's Report includes a technical review of our generation facilities and projections of our financial performance through 2022. You should read the entire Independent Engineer's Report. We advise you that the Independent Engineer's Report is dated June 13, 2002, and information contained in that report may only be accurate as of that date. We have not requested, nor do we intend to request, that Beck update the information in the Independent Engineer's Report.
PA Consulting Services, Inc. ("PA Consulting" or the "Independent Market Expert") has prepared the Independent Market Expert's Report (the "Independent Market Expert's Report"), included as Annex B to this prospectus. The Independent Market Expert's Report includes an analysis of the principal market regions in which we operate and price forecasts for our energy and capacity. You should read the entire Independent Market Expert's Report. We advise you that the Independent Market Expert's Report is dated June 5, 2002, and information contained in that report may only be accurate as of that date. We have not requested, nor do we intend to request, that PA Consulting update the information in its report.
SUMMARY PROJECTED FINANCIAL INFORMATION
We do not as a matter of course make public projections as to future sales, earnings or other results. However, the Independent Engineer, at our request, has prepared the Independent Engineer's Report from which the financial information set forth below has been derived. The projected financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of our management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of our management's knowledge and belief, the expected course of action and the expected future financial performance of our company. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and you are cautioned not to place undue reliance on the projected financial information.
Neither our independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the projected financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the projected financial information.
The projections presented below are subject to the qualifications, limitations and exclusions set forth in the Independent Engineer's Report. Franklin 3, McIntosh 10 and McIntosh 11 are currently in advanced stages of development and have not been incorporated into these projections. See "OUR BUSINESS -- Our Planned Electric Generating Facilities." The following information reflects the base case assumptions set forth in the Independent Engineer's Report.
YEAR ENDING DECEMBER 31,
-----------------------------------------------------------------------
2002 (1) 2003 2004 2005 2006 2012 2017 2022
-------- ------ ------ ------ ------ ------ ------ ------
($ IN MILLIONS)
SELECTED PROJECTED FINANCIAL DATA
Total Revenues..................... $144.9 $319.5 $406.6 $394.2 $407.4 $836.0 $847.0 $953.1
Fuel Expenses.................... $ 7.7 $ 40.3 $ 19.6 $ 0.0 $ 1.7 $344.1 $355.0 $409.2
Non-Fuel Expenses................ $ 31.3 $ 60.8 $ 88.2 $101.6 $114.5 $118.9 $113.2 $116.9
Total Expenses..................... $ 39.0 $101.1 $107.8 $101.6 $116.2 $463.0 $468.2 $526.1
Cash Flow Available for Debt
Service (CFADS).................. $105.9 $218.4 $298.8 $292.6 $291.1 $373.0 $378.7 $427.0
CFADS Interest Coverage Ratio...... 5.05x 3.30x 3.40x 3.33x 3.31x 4.24x 4.31x 4.86x
2002-2012 Average.................. 3.61x
2002-2022 Average.................. 4.05x
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YEAR ENDING DECEMBER 31,
---------------------------------------- AVERAGE AVERAGE
2002 (1) 2003 2004 2005 2006 2002-2006 2002-2012
-------- ----- ----- ----- ----- --------- ---------
Percent of Cash Flow under Contract........... 96.8 96.8 99.6 97.7 97.3 97.7 80.6(2)
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(1) For purposes of the above data, the year 2002 commenced in June 2002 and accordingly only includes seven months.
(2) The 80.6% assumes no renewals or extensions of the existing PPAs. We plan to renew the existing PPAs or enter into new PPAs when the existing PPAs expire.
SUMMARY OF THE EXCHANGE OFFER
THE EXCHANGE OFFER............ We are offering to exchange up to $575,000,000
aggregate principal amount of our 6.25% Senior
Notes, Series B due July 15, 2012, or Exchange
Senior Notes, which have been registered under
the Securities Act, for a like amount of our
outstanding 6.25% Senior Notes, Series A due
July 15, 2012, or Original Senior Notes, which
we issued on June 18, 2002 in a private
offering. To exchange your Original Senior
Notes, you must properly tender them by
following the procedures described under the
heading "THE EXCHANGE OFFER" and we must accept
them.
EXPIRATION DATE............... The Exchange Offer expires at 5:00 p.m., New
York City time, on , 200 ,
unless we extend it.
WITHDRAWAL RIGHTS............. You may withdraw the tender of your Original
Senior Notes at any time before 5:00 p.m., New
York City time, on the Expiration Date. If we
decide for any reason not to accept any
Original Senior Notes for exchange, we will
return your Original Senior Notes without
expense to you promptly after the expiration or
termination of the Exchange Offer.
CONDITIONS TO THE EXCHANGE
OFFER......................... The Exchange Offer is subject to customary
conditions, some of which we may waive. We
reserve the right to terminate and amend the
Exchange Offer at any time if any such
condition occurs before the Expiration Date.
INTEREST PAYMENTS............. Interest on the Exchange Senior Notes will
accrue from the last interest payment date on
which interest was paid on the Original Senior
Notes surrendered for exchange. If no interest
has been paid on the Original Senior Notes at
the time of issuance of the Exchange Senior
Notes, interest on the Exchange Senior Notes
will accrue from June 18, 2002, the date of
original issuance of the Original Senior Notes.
PROCEDURES FOR TENDERING
ORIGINAL SENIOR NOTES......... If you are a holder of Original Senior Notes
who wishes to accept the Exchange Offer for
Exchange Senior Notes:
- you must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof and mail or otherwise
deliver it, together with your Original
Senior Notes, to the Exchange Agent at the
address set forth under "THE EXCHANGE
OFFER -- Exchange Agent;" or
- arrange for The Depository Trust Company, or
DTC, to transmit certain required information
to the Exchange Agent in connection with a
book-entry transfer.
Do not send Letters of Transmittal and
certificates representing Original Senior Notes
to us.
By tendering your Original Senior Notes in this
manner, you will be representing, among other
things, that:
- the Exchange Senior Notes you acquire
pursuant to the Exchange Offer are being
acquired in the ordinary course of your
business;
6
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- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
in the distribution of the Exchange Senior
Notes issued to you in the Exchange Offer;
- you are not an "affiliate" of our company, or
if you are an affiliate, you will comply with
the registration and prospectus delivery
requirements of the Securities Act to the
extent applicable; and
- you are not a broker-dealer; and if you are a
broker-dealer, that you will receive the
Exchange Senior Notes for your own account,
you will deliver a prospectus on resale of
your Exchange Senior Notes and that you
acquired your Original Senior Notes as a
result of market making activities or other
trading activities.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............. If you are a beneficial owner whose Original
Senior Notes are registered in the name of a
broker, dealer, commercial bank, trust company
or other nominee and wish to tender your
Original Senior Notes in the Exchange Offer,
please contact the registered owner as soon as
possible and instruct it to tender on your
behalf. If you wish to tender on your own
behalf, you must, prior to completing and
executing the Letter of Transmittal and
delivering your Original Senior Notes, either
arrange to have your Original Senior Notes
registered in your name or obtain a properly
completed bond power from the registered owner.
The transfer of registered ownership may take
considerable time.
GUARANTEED DELIVERY
PROCEDURES.................... If you wish to tender your Original Senior
Notes and time will not permit your required
documents to reach the Exchange Agent by the
Expiration Date, or the procedure for
book-entry transfer cannot be completed on
time, you may tender your Original Senior Notes
according to the guaranteed delivery procedures
set forth in "THE EXCHANGE OFFER -- Procedures
for Tendering."
APPRAISAL OR DISSENTERS'
RIGHTS........................ Owners of Original Senior Notes do not have any
appraisal or dissenters' rights in the Exchange
Offer.
CONSEQUENCES OF NOT EXCHANGING
ORIGINAL SENIOR NOTES......... If you do not tender your Original Senior Notes
or we reject your tender, you will not be
entitled to any further registration rights or
exchange rights, except under limited
circumstances, and your Original Senior Notes
will continue to be subject to restrictions on
transfer. Therefore, if you do not exchange
your Original Senior Notes, you will not be
able to reoffer, resell or otherwise dispose of
your Original Senior Notes unless (i) you
comply with the registration and prospectus
delivery requirements of the Securities Act, or
(ii) you qualify for an exemption from those
Securities Act requirements. Such conditions
may adversely affect the market price of your
Original Senior Notes. However, your Original
Senior Notes will remain outstanding and
entitled to the benefits of the indenture
governing the Exchange Senior Notes.
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RESALES....................... We believe that you can offer for resale,
resell or otherwise transfer the Exchange
Senior Notes without complying with further
registration and prospectus delivery
requirements of the Securities Act if you make
the representations described above under
"Procedures for Tendering Original Senior
Notes."
We base our belief on interpretations by the
SEC staff in no-action letters issued to other
issuers in Exchange Offers like ours. We cannot
guarantee that the SEC would make a similar
decision about our Exchange Offer. If our
belief is wrong, you could incur liabilities
under the Securities Act. We will not protect
you against any loss incurred as a result of
this liability under the Securities Act.
If you are unable to make any of such
representations and you transfer any Exchange
Senior Notes without delivering a proper
prospectus or without qualifying for a
registration exemption, you may incur liability
under the Securities Act and applicable state
securities laws. We will not assume or
indemnify you against such liability.
FEDERAL TAX CONSEQUENCES...... Your exchange of Original Senior Notes for
Exchange Senior Notes pursuant to the Exchange
Offer generally will not result in any gain or
loss to you for United States federal income
tax purposes. For more information, see
"MATERIAL U.S. FEDERAL INCOME TAX
CONSIDERATIONS."
USE OF PROCEEDS............... We will receive no proceeds from the Exchange
Offer. We will pay all of our expenses related
to the Exchange Offer.
EXCHANGE AGENT................ The Bank of New York has been appointed as
Exchange Agent of the Exchange Offer. Questions
and requests for assistance, requests for
additional copies of this prospectus or of the
Letter of Transmittal and requests for Notices
of Guaranteed Delivery should be directed to
the Exchange Agent addressed as follows:
By hand delivery, registered or certified mail
or overnight delivery:
The Bank of New York
Corporate Trust Operations
Reorganization Unit
101 Barclay Street - 7E
New York, New York 10286
Attn: Ms. Carolle Montreuil
By facsimile:
(212) 298-1915
For information or confirmation by telephone:
(212) 815-5920
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SUMMARY OF TERMS OF THE EXCHANGE SENIOR NOTES
The Exchange Offer relates to the exchange of up to $575,000,000 aggregate principal amount of the Original Senior Notes for an equal aggregate principal amount of Exchange Senior Notes. The form and terms of the Exchange Senior Notes will be the same as the form and terms of the Original Senior Notes, except that the Exchange Senior Notes will be registered under the Securities Act and, therefore, the registration rights and the transfer restrictions applicable to the Original Senior Notes are not applicable to the Exchange Senior Notes. The Exchange Senior Notes will evidence the same debt as the Original Senior Notes. The Exchange Senior Notes and the Original Senior Notes will be governed by the same indenture. See "DESCRIPTION OF THE EXCHANGE SENIOR NOTES AND INDENTURE" for a more complete description of the Exchange Senior Notes.
ISSUER........................ Southern Power Company
EXCHANGE SENIOR NOTES......... We will offer $575,000,000 aggregate principal
amount of 6.25% Senior Notes, Series B due July
15, 2012.
INTEREST...................... Interest will accrue on the Exchange Senior
Notes from the date of delivery at a rate of
6.25% per year and will be payable semiannually
in arrears on January 15 and July 15 of each
year, commencing January 15, 2003.
FINAL MATURITY................ July 15, 2012
RANKING....................... The Exchange Senior Notes will be senior
unsecured obligations and will rank equally in
right of payment with all of our other present
and future senior unsecured debt. The Exchange
Senior Notes will rank senior in right of
payment to all of our present and future
subordinated debt.
RATINGS....................... The Exchange Senior Notes have been rated
"Baa1" by Moody's Investors Service, Inc.
("Moody's"), "BBB+" by Standard and Poor's
Ratings Services ("S&P") and BBB+ by Fitch
Ratings ("Fitch"). See "RATINGS."
OPTIONAL REDEMPTION........... We may redeem the Exchange Senior Notes, in
whole or in part, at any time at a redemption
price equal to 100% of the principal amount of
the Exchange Senior Notes to be redeemed plus
accrued interest, if any, plus a make-whole
premium, calculated using a discount rate equal
to the interest rate on comparable U.S.
treasury securities plus 25 basis points.
FORM AND DENOMINATION......... The Exchange Senior Notes will be issued in
book entry form through the facilities of DTC
without coupons in denominations of $1,000 and
integral multiples thereof and represented by a
Global Note. Beneficial interests in the Global
Note will be shown on, and transfers thereof
will be effected only through, the book-entry
records maintained by DTC and its direct and
indirect participants.
CERTAIN COVENANTS............. The Indenture limits:
- our ability to consolidate or merge or sell
all or substantially all of our assets
- the ability of our company and our
subsidiaries to sell assets
- the ability of our company and our
subsidiaries to create certain liens
- the ability of certain of our subsidiaries to
issue indebtedness
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In addition, in order to be permitted to
declare and pay dividends or make payments on
our subordinated loans from our affiliates, we
are required either to (i) maintain long-term,
fixed-price capacity power purchase agreements
which generate at least 80% of our operating
cash flow, or (ii) maintain a recourse
indebtedness to total capitalization ratio of
60% or less.
These limitations are subject to a number of
important qualifications and exceptions. See
"DESCRIPTION OF THE EXCHANGE SENIOR NOTES AND
THE INDENTURE -- Certain Covenants."
RISK FACTORS.................. An investment in the Exchange Senior Notes
involves certain risks, including the
competitive markets in which we operate, the
future operating costs and performance of our
electric generating facilities and our need to
comply with present and future environmental
laws and regulations. You should carefully
consider each of the factors described in the
section titled "RISK FACTORS" before
participating in the Exchange Offer.
TRUSTEE....................... The Bank of New York
GOVERNING LAW................. The Exchange Senior Notes and the Indenture are
governed by the laws of the State of New York.
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RISK FACTORS
Your investment in the Exchange Senior Notes involves risks. In deciding whether to participate in the Exchange Offer, you should carefully consider the following risk factors in addition to the other information contained in this prospectus. Each of the following factors could have a material adverse effect on our business and could result in a loss or a decrease in the value of your investment.
RISKS RELATING TO THE EXCHANGE OFFER
YOU ARE RESPONSIBLE FOR COMPLIANCE WITH THE EXCHANGE OFFER PROCEDURES. YOU WILL NOT RECEIVE NOTICE FROM THE EXCHANGE AGENT OR US OF DEFECTS OR IRREGULARITIES IN YOUR TENDER OF YOUR ORIGINAL SENIOR NOTES.
Issuance of the Exchange Senior Notes in exchange for your Original Senior Notes pursuant to this Exchange Offer will be made only after a timely receipt by the Exchange Agent of your Original Senior Notes, a properly completed and signed Letter of Transmittal and all other required documents. Therefore, if you desire to tender your Original Senior Notes in exchange for Exchange Senior Notes you should allow sufficient time to ensure timely delivery. Neither we nor the Exchange Agent is under any duty to give notification of defects or irregularities in the tender of your Original Senior Notes for exchange. Original Senior Notes that are not tendered or are tendered but not accepted for exchange will, following the completion of this Exchange Offer, continue to be subject to the existing restrictions on transfer of the Original Senior Notes, and upon completion of this Exchange Offer, our obligation to register your Original Senior Notes will terminate.
RISKS RELATING TO OUR BUSINESS
OUR FINANCIAL PERFORMANCE DEPENDS ON THE OPERATION OF OUR ELECTRIC GENERATING FACILITIES.
Operating electric generating facilities involves many risks, including:
- operator error and breakdown or failure of equipment or processes;
- operating limitations that may be imposed by environmental or other regulatory requirements;
- labor disputes;
- fuel supply interruptions; and
- catastrophic events such as fires, earthquakes, explosions, floods or other similar occurrences.
A decrease or elimination of revenues generated by our facilities or an increase in the costs of operating our facilities could decrease or eliminate funds available to us to make payments on the Exchange Senior Notes or other obligations.
OUR ACTUAL FUTURE PERFORMANCE MAY NOT MEET PROJECTIONS.
The projections contained in the Independent Engineer's Report prepared by Beck attempt to present our future operating performance. Beck has reviewed the performance and the technical operating parameters of our generating facilities (except for Franklin 3, McIntosh 10 and McIntosh 11 which generating facilities are not included in the projected financial information) and our operating and maintenance budgets and has made forecasts based on a review of certain technical, environmental, economic and licensing aspects. The projections are based on certain assumptions and forecasts of our generation capacity, generation revenues, the market prices for energy, capacity and ancillary services and the costs associated with our operations.
The assumptions made about future market prices for energy and capacity are
based on a market analysis prepared by PA Consulting. The Independent Market
Expert's Report contains qualifications about the information in the report
prepared by PA Consulting and the circumstances under which PA Consulting
performed its analysis. These assumptions and the other assumptions upon which
the projections are based
are inherently subject to significant uncertainties. No inference should be made about the likely existence of any particular future set of facts or circumstances.
Potential investors should carefully review the Independent Engineer's Report and the Independent Market Expert's Report, as well as the qualifications in those reports. The projections are not necessarily indicative of our future performance or the performance of any individual generation facility. We do not intend to provide investors with any revised projections or analysis of the differences between the projections and actual operating results.
OUR REVENUES DEPEND ON SALES UNDER POWER PURCHASE AGREEMENTS.
We have agreed to sell a substantial amount of our capacity to the PPA Counterparties under PPAs having initial terms of five to 25 years. Our revenues are dependent on the continued performance by the PPA Counterparties of their obligations under the PPAs. Even though we have a rigorous credit evaluation, the failure of one of the PPA Counterparties to perform its obligations could have a material adverse effect on our results of operations or financial condition. Although our credit evaluations take into account the possibility of default by a PPA Counterparty, our actual exposure to a default by a PPA Counterparty may be greater than our credit evaluation predicts.
Further, while the PPAs are currently a substantial portion of our business, we cannot predict whether they will be renewed at the end of their respective terms or on what terms any renewals may be made. If a PPA is not renewed, we cannot predict whether it will be replaced.
OUR GENERATING FACILITIES WILL REQUIRE ONGOING CAPITAL EXPENDITURES.
As our generating facilities come into commercial operation, we will require ongoing capital expenditures to maintain reliable levels of operation. Furthermore, we intend to develop and construct additional generating facilities in the future. To do so, we will need to make substantial expenditures to construct and maintain the performance of these generating facilities. We intend to finance these costs from equity contributions and subordinated loans from Southern, borrowings under our credit facility (which expires in November 2004) and other funding sources, including internally generated cash flow from operations and the proceeds from potential issuances of additional debt. We cannot assure you that we will be successful in obtaining the funds to provide for the ongoing maintenance or future construction of our generating facilities.
OUR REVENUES AND RESULTS OF OPERATIONS WILL DEPEND IN PART ON MARKET AND OTHER FORCES BEYOND OUR CONTROL.
We are currently subject to fuel supply and market risk for the portion of our capacity that is not committed under PPAs. Furthermore, the PPAs are for limited terms and if we cannot renew the PPAs or replace them with new PPAs, we could have a substantial portion of our business that is subject to risks relating to fuel supply, fuel transportation, electric transmission and market price in the future. To the extent that our capacity is not committed under PPAs, our revenues and results of operations will depend on the prices that we can obtain for energy and capacity. Among the factors that could influence such prices (all of which factors are beyond our control to a significant degree) are:
- fuel supply and price: Historically, natural gas markets have exhibited price volatility. Supply and demand imbalances can create this market volatility. In addition, transportation capacity constraints can also influence the market prices for natural gas.
- competition: Market conditions can encourage new participants to enter the market and build new generation. Wholesale market energy prices are heavily dependent upon the balance of supply and demand.
- pricing and market development: The regulatory and pricing structures for the Super Southeast market are continuing to develop. The exact path of this development is unknown and can influence the regional market for energy and capacity outside of bilateral contracts.
- transmission: Regulatory changes and the establishment of regional transmission organizations can influence the price and availability of transmission in the future. The exact course these changes will take is unknown. These regulatory changes as well as export transmission constraints could limit our ability to sell to markets adjacent to the Super Southeast.
- demand: The rate of growth of electric energy usage is influenced by many factors. Some of these factors include: population changes, regional economic conditions, and the implementation of conservation programs. Generating facilities for future demand are based on estimates of these factors.
- weather: Weather is a critical component to the consumption of electricity in the Super Southeast. Among other factors, variations in climate conditions can influence market conditions in the Super Southeast, fuel availability, transmission and demand for energy.
All of these factors could have an adverse impact on our revenues and results of operations.
UNAVAILABILITY OF POWER TRANSMISSION FACILITIES MAY IMPACT OUR ABILITY TO DELIVER OUR OUTPUT TO CUSTOMERS.
We depend on transmission facilities owned and operated by others to deliver the electricity we generate and sell. If transmission is interrupted, or if transmission capacity is inadequate, our ability to sell and deliver our electric energy products may be adversely impacted. If the underlying transmission infrastructure is or becomes inadequate, our ability to generate revenues may be limited.
WE ARE SUBJECT TO SUBSTANTIAL ENVIRONMENTAL REGULATION.
We are subject to federal, state and local environmental requirements which, among other things, regulate air emissions, water discharges and the management of hazardous and solid waste in order to adequately protect the environment. Compliance with these legal requirements requires us to commit significant capital toward environmental monitoring, installation of pollution control equipment, emissions fees and permits at all our facilities. These expenditures are significant and we expect that they will increase in the future. We will install, operate and maintain continuous emission monitoring systems as required by federal, state or local authorities, and we will require our vendors to meet specifications and offer warranties that meet or exceed regulatory requirements. We believe that we have obtained all material environmental approvals to operate our electric generating facilities or such approvals have been applied for and will be received in a timely manner. Failure to comply with such requirements could result in the complete shutdown of individual facilities not in compliance as well as the imposition of civil and criminal penalties.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY REGULATORY CHANGES IN THE ELECTRIC POWER INDUSTRY.
We currently have general authorization from the FERC to sell generation from our facilities to non-affiliates at market-based prices. We have to obtain specific approval from the FERC to sell power under a PPA with an affiliate. The FERC retains the authority to modify or withdraw our market-based rate authority if it determines that the markets in which we sell generation are not workably competitive, that we possess unmitigated market power or that we are not otherwise charging just and reasonable rates. In that event, we would need to obtain FERC approval of rates based on "cost of service" principles. Those rates may be lower than the market-based rates we could negotiate with purchasers. In addition, the loss of market-based rate authority would subject us to the accounting, record-keeping and reporting requirements that are imposed on public utilities with cost-based rate schedules. The FERC has recently announced that it may revise its analysis regarding the determination of market power. Such a revision or similar developments that result in a reduction by the FERC of the rate we may receive or any unfavorable regulation of our business by state regulators could materially adversely affect our results of operations.
In November 2001, the FERC expressed concern that entities that have been
granted market-based rate authorization might, under certain circumstances,
exercise market power or engage in anticompetitive behavior that could result in
unjust and unreasonable rates. Accordingly, it has proposed to require all
market-based sellers' tariffs to include the following provision: "As a
condition of obtaining and retaining market-based rate authority, the seller is
prohibited from engaging in anticompetitive behavior or the exercise of market
power. The seller's market-based rate authority is subject to refunds or other
remedies as may be appropriate
to address any anticompetitive behavior or exercise of market power." Industry participants have submitted comments addressing the proposed tariff provision. The FERC has not yet issued an order adopting the provision. If such a provision is added, it will subject all sellers at market-based rates, including us, to possible refund liability which could be retroactive.
The FERC has implemented a new screening mechanism to assess whether a seller seeking to sell (or continuing to sell) power at market-based rates possesses generation market power in the relevant market. The FERC has recently applied that new test to Southern and its affiliates with market-based rate authorization, which includes us. As a result, FERC imposed spot market mitigation measures for purchases and sales within the Southern control area, but that requirement is currently being held in abeyance. If later imposed, those measures may adversely impact the rate we may receive from such transactions. This development, as well as any unfavorable regulation of our business by state regulators, could materially adversely affect our results of operations.
On July 31, 2002, the FERC issued a notice of proposed rulemaking entitled
"Remedying Undue Discrimination Through Open Access Transmission Service and
Standard Electricity Market Design." The FERC has indicated that the proposal,
if adopted, would (among other things): (i) require transmission assets of
jurisdictional utilities to be operated by an independent entity; (ii) establish
a standard market design; (iii) establish a single type of transmission service
that applies to all customers; (iv) assert jurisdiction over the transmission
component of bundled retail service; (v) establish a generation reserve margin;
(vi) establish bid caps for day-ahead and spot energy markets; and (vii) revise
the FERC policy on the pricing of transmission expansions. Comments on the
proposal are due 75 days after its issuance. Any impact of this proposal on
Southern Power will depend on the form in which final rules may be ultimately
adopted.
OUR BUSINESS IS SUBJECT TO SUBSTANTIAL ENERGY REGULATORY REQUIREMENTS.
The electric power generation business is subject to substantial regulation and permitting requirements from federal, state and local authorities. We are required to comply with numerous laws and regulations and to obtain numerous governmental permits in order to construct and operate our generating facilities. Additionally, various state public service commissions ("PSCs") have broad powers of supervision and regulation over the Operating Companies and, therefore, can oversee aspects of transactions between the Operating Companies and us. Our business could be materially and adversely affected as a result of legislative or regulatory changes or judicial or administrative interpretations of existing energy regulatory laws, regulations or licenses that impose more comprehensive or stringent requirements on us.
We believe that we have obtained all material energy-related approvals required as of the date hereof to operate or construct our electric generating facilities. We may be required to obtain additional regulatory approvals, including, without limitation, licenses, renewals, extensions, transfers, assignments, reissuances or similar actions. We cannot assure you that we will be able to:
- obtain all required regulatory approvals that we do not yet have or that we may be required to obtain in the future,
- obtain any necessary modifications to existing regulatory approvals, or
- maintain all required regulatory approvals.
Delay in obtaining or failure to obtain and maintain in full force and effect any such regulatory approvals, or delay or failure to satisfy any applicable regulatory requirements, could prevent operation of our electric generating facilities, or the sale of electricity from those facilities, or could result in potential civil or criminal liability or additional costs to us.
We can give no assurance that regulations will not be revised or reinterpreted, that new laws and regulations will not be adopted or become applicable to us or any of our generating facilities or that future changes in laws and regulations will not have a detrimental effect on our business.
WE RELY UPON AFFILIATES AND THIRD PARTIES TO CONDUCT IMPORTANT PARTS OF OUR BUSINESS.
All of our business is operated by affiliates with the participation of our management. In particular, SCS markets our energy and capacity, is responsible for our fuel supply, provides support services to us and will complete construction of our facilities. The Operating Companies will operate and maintain most of our generating facilities for us under long-term contracts. Additionally, unaffiliated third parties participate in the construction and maintenance of our facilities and we depend on other unaffiliated third parties for transmission of our electricity outside of the Operating Companies' service territory. We would require substantial additional resources to perform any of these important functions ourselves if that were to become necessary or desirable due to changes in law or regulation, any substandard performance by one or more of these affiliates or unaffiliated third parties, or other factors.
CONFLICTS OF INTEREST MAY ARISE BETWEEN US AND OUR AFFILIATES.
We rely on certain of our affiliates for important parts of our business and sales. Despite the fact that we and our affiliates are wholly owned by Southern, conflicts of interest may arise if we need to enforce the terms of agreements between us and any of our affiliates. Because of these affiliate relationships, it is possible that decisions concerning the interpretation or operation of these agreements could be made from perspectives other than the interests solely of our company or our creditors.
Although it is Southern's intention that we will own and finance all of the new competitive contract-based wholesale generation assets to be built in the Southern system, it is possible that other subsidiaries of Southern could acquire or participate in the ownership of such facilities.
WE ARE SUBJECT TO CONTROL BY SOUTHERN.
We are a wholly owned subsidiary of Southern and, therefore, Southern ultimately controls the decision of all matters submitted for shareholder approval. In circumstances involving a conflict of interest between Southern, on the one hand, and our creditors, on the other, Southern could exercise this power in a manner that would benefit Southern to the detriment of our creditors, including the holders of the Exchange Senior Notes.
WE HAVE A LIMITED OPERATING HISTORY AS A STAND-ALONE POWER GENERATOR.
We have operated as a separate, stand-alone entity since January 8, 2001. We depend on Southern for some of our liquidity, capital resources and credit support needs, and on our affiliates for important parts of our business and sales. The process of constructing and integrating the generation facilities and operations acquired from the Operating Companies is still ongoing. Additionally, we may not be able to successfully integrate our acquisitions or developments with our existing business.
WE ARE SUBJECT TO REGULATION BY THE SEC UNDER THE HOLDING COMPANY ACT.
We are an "electric utility company" as defined in Section 2(a)(3) of the Holding Company Act. We are subject to regulation by the SEC under the Holding Company Act because we are a wholly owned subsidiary of Southern, a registered public utility holding company under the Holding Company Act. Under the Holding Company Act, we cannot issue debt or equity securities or guaranties without the SEC's approval. Under the Holding Company Act, generally, we can invest only in the traditional electric and gas utility business and related businesses. The acquisition of the voting stock of other gas or electric utilities is subject to prior SEC approval. The Holding Company Act also imposes restrictions on transactions among affiliates. The limitations imposed on us by the Holding Company Act may limit our ability to pursue acquisition or development opportunities.
BECAUSE POWER PLANT CONSTRUCTION IS COSTLY AND SUBJECT TO NUMEROUS RISKS, WE MAY INCUR ADDITIONAL COSTS OR DELAYS AND MAY NOT BE ABLE TO RECOVER OUR INVESTMENT.
We have announced construction plans for a number of generating facilities and we intend to continue our strategy of developing and constructing other new facilities and expanding existing facilities. Our completion of these facilities without delays or cost overruns is subject to substantial risks, including:
- shortages and inconsistent quality of equipment, materials and labor;
- work stoppages;
- permits, approvals and other regulatory matters;
- adverse weather conditions;
- unforeseen engineering problems;
- environmental and geological conditions;
- delays or increased costs to interconnect our facilities to transmission grids;
- unanticipated cost increases; and
- our attention to other projects.
If we are unable to complete the development or construction of a facility, we may not be able to recover our investment in it. In addition, construction delays and contractor performance shortfalls can result in the loss of revenues and may, in turn, adversely affect our results of operations and financial position. Furthermore, if construction projects are not completed according to specifications, we may incur liabilities and suffer reduced plant efficiency, higher operating costs and reduced earnings.
RISK ASSOCIATED WITH A CHANGING ECONOMIC ENVIRONMENT.
In response to the September 11, 2001 terrorist attacks on the United States and the ongoing war against terrorism by the United States, the financial markets have been disrupted in general. Additionally, the availability and cost of capital for our business and that of our competitors has been adversely affected by the bankruptcy of Enron Corporation and events related to the California electric market crisis. These events could constrain the capital available to our industry and could adversely affect our access to funding for our operations, the demand for and pricing of our products and the financial stability of our customers and counterparties in transactions.
WE MAY NOT BE ABLE TO RESPOND EFFECTIVELY TO COMPETITION OR NEW TECHNOLOGIES.
We may not be able to respond in a timely or effective manner to the many changes in the electric power industry that may occur as a result of regulatory initiatives to increase competition. As a result, additional competitors in our industry may be created, and we may not be able to maintain our revenues and earnings levels or pursue our growth strategy. In addition, new technologies may be developed that impact the competitiveness of our generation facilities. To the extent that competition increases, our profit margins may be negatively affected.
The introduction of new participants with better technologies in our regional market could increase competition, which could lower prices and have a material adverse effect on our results of operations or financial condition. These risks are particularly significant when the existing PPAs expire and the associated capacity must be re-marketed.
THERE IS NO EXISTING MARKET FOR THE EXCHANGE SENIOR NOTES, AND WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP.
The Exchange Senior Notes are new securities and there is no existing market for the Exchange Senior Notes and we do not intend to apply for listing of the Exchange Senior Notes on any securities exchange. There can be no assurance as to the liquidity of any market that may develop for the Exchange Senior Notes, the ability of the holders to sell their Exchange Senior Notes or the price at which the holders will be able to sell their Exchange Senior Notes. Future trading prices of the Exchange Senior Notes will depend on many factors including, among others, prevailing interest rates, our operating results and the market for similar securities.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the Exchange Senior Notes offered hereby. In consideration for issuing the Exchange Senior Notes as contemplated in this prospectus, we will receive in exchange Original Senior Notes in like principal amount, the forms and terms of which are identical, in all material respects, to the Exchange Senior Notes. The Original Senior Notes surrendered in exchange for the Exchange Senior Notes will be retired and canceled and cannot be reissued. Accordingly, the issuance of the Exchange Senior Notes will not result in any increase or decrease in our indebtedness.
We received net proceeds of $570 million from the sale of the Exchange Senior Notes after deducting discounts to the initial purchasers and estimated fees and expenses. We used the net proceeds to reduce the outstanding indebtedness under our $850 million revolving credit facility, dated as of November 15, 2001, with Citibank N.A., as administrative agent, and the lenders thereto (the "Credit Facility") and to reduce our subordinated loans from Southern.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2002. You should read the information set forth below in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and our consolidated and condensed consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.
AS OF
JUNE 30, 2002
-------------
(UNAUDITED)
-------------
($ THOUSANDS)
Long-Term Debt:
Obligation under Credit Facility............................ $ 158,205
Senior Notes................................................ 575,000
Unamortized Discount........................................ (804)
----------
Total Long-Term Debt.............................. 732,401
Subordinated Note Payable to Parent......................... 186,342
Common Stockholder's Equity................................. 707,924
----------
Total Capitalization........................................ $1,626,667
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SELECTED HISTORICAL FINANCIAL DATA
Southern Power commenced operations effective January 8, 2001. The following table sets forth our selected historical financial data. The selected historical financial data for the year ended December 31, 2001 have been derived from our audited financial statements included elsewhere in this prospectus. The selected historical financial data for the six months ended June 30, 2002 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. You should read the information set forth below in conjunction with "PRO FORMA FINANCIAL DATA" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and our financial statements and the accompanying notes appearing elsewhere in this prospectus.
(UNAUDITED) PERIOD FROM INCEPTION
SIX MONTHS ENDED (JANUARY 8, 2001) TO
JUNE 30, 2002 DECEMBER 31, 2001
------------------ ---------------------
($ IN THOUSANDS)
INCOME STATEMENT DATA
Operating Revenues.......................................... $77,076 $29,301
Operating Expenses.......................................... 52,942 18,814
------- -------
Operating Income............................................ 24,134 10,487
Other Income................................................ (1,220) 658
------- -------
Earnings Before Interest and Income Taxes................... 22,914 11,145
Total Interest Expense, net................................. 1,195 427
Income Taxes................................................ 8,406 2,511
------- -------
Net Income.................................................. $13,313 $ 8,207
======= =======
OTHER FINANCIAL DATA
Ratio of Earnings to Fixed Charges (1)...................... 1.58x 3.36x
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(UNAUDITED)
AS OF AS OF
JUNE 30, 2002 DECEMBER 31, 2001
-------------- -----------------
($ IN THOUSANDS)
BALANCE SHEET DATA
Total Current Assets........................................ $ 60,581 $ 27,639
Plant in Service, net....................................... 877,464 261,862
Construction Work in Progress............................... 729,841 500,358
Other Assets and Deferred Charges........................... 45,866 32,998
---------- ---------
Total Assets................................................ $1,713,752 $ 822,857
========== =========
Current Liabilities, excluding Subordinated Note Payable to
Parent.................................................... $ 41,785 $ 31,693
Deferred Credits and Other Liabilities...................... 45,300 30,016
Long-Term Debt.............................................. 732,401 293,205
Subordinated Note Payable to Parent......................... 186,342 950
Common Stockholder's Equity................................. 707,924 466,993
---------- ---------
Total Liabilities and Stockholder's Equity.................. $1,713,752 $ 822,857
========== =========
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(1) Ratio of earnings to fixed charges represents, on a pre-tax basis, the number of times earnings cover fixed charges. Earnings consist of net income plus interest expense and income taxes. Fixed charges consist of interest expense plus capitalized interest.
PRO FORMA FINANCIAL DATA
UNAUDITED PRO FORMA STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 2001
We acquired Plant Dahlberg from Georgia Power Company, our sister company, on July 31, 2001. The acquisition was made at Georgia Power Company's carrying value, in accordance with SEC regulations under the Holding Company Act and our application on Form U-1 (Release No. 35-27322). This transaction has been reflected in our 2001 consolidated financial statements as an asset purchase (see Note 2 to the Consolidated Financial Statements herein) in accordance with the guidance contained in Emerging Issues Task Force Issue No. 98-3, "Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business."
However, for purposes of Rule 11-01(d) of Regulation S-X, this transaction may be considered a business acquisition. Accordingly, the following unaudited pro forma income statement information reflects the transaction as if it occurred on January 8, 2001. No pro forma balance sheet information is required, since the transaction is fully reflected in our December 31, 2001 balance sheet. In addition, carve-out financial statements for Plant Dahlberg have been included herein.
The unaudited pro forma financial data are provided for informational purposes only and are not necessarily indicative of the results of operations of the Company had the transaction assumed therein occurred, nor are they necessarily indicative of the results of operations which may be expected to occur in the future. The unaudited pro forma financial data are based on assumptions that we believe are reasonable and should be read in conjunction with the financial statements and the accompanying notes thereto included elsewhere in this prospectus.
SOUTHERN POWER PRO FORMA
FOR THE FOR THE
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(JANUARY 8, PLANT DAHLBERG FOR (JANUARY 8,
2001) TO THE SEVEN MONTHS ADJUSTMENTS 2001) TO
DECEMBER 31, ENDED AND DECEMBER 31,
2001 JULY 31, 2001 ELIMINATIONS 2001
-------------- ------------------ ------------ ------------
(IN THOUSANDS)
Operating revenues.................... $29,301 $41,153 $70,454
Operating expenses.................... 18,814 21,220 40,034
------- ------- -------- -------
Operating income...................... 10,487 19,933 30,420
Other income.......................... 658 0 658
Interest expense, net................. 427 3,904 4,331
------- ------- -------- -------
Income before income taxes............ 10,718 16,029 26,747
------- ------- -------- -------
Income taxes.......................... 2,511 6,412 8,923
------- ------- -------- -------
Net income............................ $ 8,207 $ 9,617 $17,824
======= ======= ======== =======
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
We were formed in January 2001 as a new wholly owned subsidiary of Southern. We own, construct and acquire a substantial portion of Southern's new competitive contract-based wholesale generation assets which operate outside of traditional state regulation. We will be the primary vehicle to develop Southern's position in the competitive contract-based wholesale generation market. At June 30, 2002, 2,515 MW were in commercial operation and 2,262 MW of capacity were under construction. By the end of 2003, we plan to have 4,777 MW of generating capacity in commercial operation.
In June 2001, Alabama Power Company transferred the Harris plant site and assigned the related vendor contracts to us. Alabama Power Company also transferred its interest in the Goat Rock site (which was subsequently renamed the Franklin site) to us at that time. In July 2001, Georgia Power Company transferred Dahlberg to us and assigned us three related PPAs with non-affiliated entities. In November 2001, Georgia Power Company transferred to us its interests in the Franklin site, including land and construction work in progress and assigned us the related vendor contracts. In January 2002, Georgia Power Company transferred the construction work in progress for Wansley 6 and 7 to us. See Notes B and I to our condensed consolidated financial statements and Note 2 to our consolidated financial statements herein for additional information related to these asset transfers.
During 2001 and through May 2002, Dahlberg was our only electric generating facility in commercial operation. Franklin 1, Wansley 6 and Wansley 7 were placed into commercial operation in June 2002. We expect Franklin 2, Harris 1, Harris 2 and Stanton A to be in commercial operation in 2003 and Franklin 3, McIntosh 10 and McIntosh 11 in 2005. We intend for an Operating Company to operate each facility under the terms of an Operating Agreement if located within Southern's service territory. Because Stanton A is located outside of the Operating Companies' service territory, Stanton A will be operated by SCS.
We have entered into PPAs for the sale of substantially all of our existing, under construction and planned generating capacity. The PPAs are structured to provide for capacity revenues sufficient to cover fixed costs and generate profit as long as our facilities meet specified availability standards or we are able to meet our obligations with alternate resources at a reasonable cost. The payment schedules under our PPAs generally reflect a summer surcharge for capacity. However, the related revenues are recognized on a levelized basis.
RESULTS OF OPERATIONS
We have a limited operating history. Our company was formed in January 2001 and began significant operations with the transfer of Dahlberg to us in July 2001. The following discussion and analysis should be read in conjunction with "RISK FACTORS" and "SELECTED HISTORICAL FINANCIAL DATA" and our condensed consolidated and consolidated financial statements and the accompanying notes appearing herein.
Six Months Ended June 30, 2002 as Compared to Six Months Ended June 30, 2001
Operating Revenues. For the six months ended June 30, 2002, operating revenues were $77.1 million. Through May 2002, operating revenues were derived solely from the operations of Dahlberg. Wansley 6, Wansley 7 and Franklin 1 were placed in commercial operation on June 1, 2002. Of the total operating revenues, $42.8 million were derived from capacity and energy sales to non-affiliated companies under PPAs. The remainder ($34.1 million) was derived from sales to affiliated companies through the Southern Pool primarily under the PPAs for Wansley 6, Wansley 7 and Franklin 1. Revenues from sales to affiliated companies through the Southern Pool that are not covered by PPAs will vary depending on demand and the availability and cost of generating resources at each company within the Southern Pool. These transactions do not have a significant impact on earnings, since the energy is generally sold at variable cost. Our company earned no revenue during the six months ended June 30, 2001.
Operating Expenses. For the six months ended June 30, 2002, total operating expenses were $52.9 million. These expenses consist primarily of fuel ($21.2 million), purchased power ($15.5 million), general and administrative ($7.5 million), other operation and maintenance ($1.8 million), and depreciation ($5.5 million). For the six months ended June 30, 2001, our total operating expenses consisted of $1.7 million in general and administrative expenses related to the startup of our company.
All of our generation is fueled by natural gas. The average price of natural gas for the six months ended June 30, 2002 was $3.87/mmBtu. This represents a 20% increase from the average price for the year ended December 31, 2001. We incurred no fuel expense for the six months ended June 30, 2001, since we had no plants in operation during that period. See "-- Future Earnings Potential" for discussion of our limited exposure to fuel risk under our existing PPAs.
Expenses from purchased power transactions will vary depending on demand and the availability and cost of generating resources accessible through the Southern Pool. Load requirements are submitted to the Southern Pool on an hourly basis and are fulfilled with the lowest cost alternative available, whether that is Southern Power-owned generation, affiliate-owned generation or external purchases. See "OUR BUSINESS" herein for further discussion of the operations of the Southern Pool.
Effective June 1, 2002, we changed Dahlberg's estimated useful life from 35 to 40 years, resulting in a $79,000 monthly decrease in depreciation expense. In addition, the general and administrative expenses include the writeoff in May 2002 of $2.9 million for previously deferred site investigation and site development costs associated with potential new plant sites that, after management review, are no longer considered probable of future development.
Other, Net. For the six months ended June 30, 2002, other, net consisted primarily of the unrealized losses on derivative energy contracts. See "-- Market Price Risk" below for further information related to these contracts.
Interest Expense, Net. Interest expense, net of amounts capitalized, totaled approximately $1.2 million for the six months ended June 30, 2002. After the commercial operation of Wansley 6, Wansley 7 and Franklin 1, on June 1, 2002, the construction base used to calculate the capitalization of interest decreased significantly.
Net Income. For the six months ended June 30, 2002, net income was $13.3 million. Net income was derived primarily from the sale of wholesale capacity and energy to affiliated and non-affiliated companies. A significant portion of this income, $8.8 million, was earned in the second quarter of 2002 as a result of the commercial operations of Wansley 6, Wansley 7 and Franklin 1 on June 1, 2002 and the initiation of PPAs for those units with our affiliates, Georgia Power Company and Savannah Electric and Power Company. The remaining income was primarily derived from the PPAs with non-affiliates related to Dahlberg. For the six months ended June 30, 2001, we incurred a net loss of $1.0 million related to startup and organizational expenses.
Year Ended December 31, 2001
Operating Revenues. Operating revenues for the period from January 8, 2001 through December 31, 2001 were $29.3 million. Operating revenues were derived solely from the operations of Dahlberg. The majority of the revenues ($26.4 million) were derived from capacity and energy sales to non-affiliated companies under PPAs. The remainder ($2.9 million) was derived from sales to affiliated companies through the Southern Pool. Revenues from sales to affiliated companies through the Southern Pool that are not covered by PPAs will vary depending on demand and the availability and cost of generating resources at each company within the Southern Pool. These transactions do not have a significant impact on earnings, since the energy is generally sold at variable cost.
Expenses. Operating expenses totaled $18.8 million for the period from January 8, 2001 through December 31, 2001. Operating expenses consist primarily of fuel ($3.8 million), purchased power ($4.7 million), general and administrative expenses related to start-up and corporate support ($5.6 million),
other operation and maintenance ($1.0 million), and depreciation ($3.2 million).
All of our generation is fueled by natural gas. The average price of natural gas for Dahlberg for the months of August through December 2001 was $3.23/mmBtu.
Expenses from purchased power transactions will vary depending on demand and the availability and cost of generating resources accessible through the Southern Pool. Load requirements are submitted to the Southern Pool on an hourly basis and are fulfilled with the lowest cost alternative available, whether that is Southern Power-owned generation, affiliate-owned generation or external purchases. See "OUR BUSINESS" herein for further discussion of the operations of the Southern Pool.
Interest Expense, Net. Interest expense, net of amounts capitalized, totaled approximately $427,000 for the period from January 8, 2001 through December 31, 2001.
Net Income. Net income for the period from January 8, 2001 through December 31, 2001 was $8.2 million and was derived primarily from the sales of wholesale capacity and energy to affiliated and non-affiliated companies.
EFFECTS OF INFLATION
We are subject to long-term contracts and income tax laws that are based on the recovery of historical costs. While the inflation rate has been relatively low in recent years, it still has an adverse effect on us because of our large investments in generating facilities with long economic lives. Conventional accounting for historical cost does not recognize this economic loss nor the partially offsetting gain that arises through financing facilities with fixed-money obligations such as long-term debt.
FUTURE EARNINGS POTENTIAL
The results of operations for 2001 and the six months ended June 30, 2002 are not necessarily indicative of future earnings. The level of future earnings depends on numerous factors including regulatory matters, energy sales and completion of construction on new generating facilities and the total generating capacity available in the Super Southeast.
In 2001 and through May 2002, Dahlberg was our only electric generating facility in commercial operation. Franklin 1, Wansley 6 and Wansley 7 were placed in commercial operation in June 2002. Also in June 2002, our PPAs with Georgia Power Company, Savannah Electric and Power Company and 11 electric municipal cooperatives went into effect. See "OUR BUSINESS -- Existing and Approved Power Purchase Agreements, -- Requirements Agreements". We expect Franklin 2, Harris 1, Harris 2 and Stanton A to be in commercial operation in 2003 and Franklin 3, McIntosh 10 and McIntosh 11 in 2005. We have sold substantially all of our generating capacity in operation, under construction or planned under PPAs to the PPA Counterparties. The Harris 2 PPA with Georgia Power Company begins in June 2004.
Our PPAs with non-affiliated counterparties have a material adverse change clause that requires the posting of collateral or an acceptable substitute guarantee in the event that S&P or Moody's downgrades the credit ratings of such counterparty to below-investment grade. The PPAs are expected to provide us with a stable source of revenue during their respective terms.
Reference is made to Note 7 to the consolidated financial statements, regarding Long-Term Power Sales Contracts. We have a PPA with a PPA Counterparty that is currently experiencing liquidity problems and has had its credit rating reduced below investment grade. Minimum capacity revenues under this PPA average approximately $13 million annually through May 2005. The PPA Counterparty has provided a letter of credit totaling $20 million which expires in February 2003. See Note C to the Condensed Consolidated Financial Statements herein for an additional PPA related to Franklin 3. The PPA Counterparty has also provided us letters of credit totaling $50 million which expires in April 2003 in connection with this new PPA. These letters of credit can be drawn if not replaced by acceptable security prior to expiration or if the PPA
Counterparty defaults under the PPA. In the event of such a default, and if we are unable to resell that capacity in the market, future earnings could be affected. The outcome cannot now be determined.
As a general matter, our existing PPAs provide that the PPA Counterparties are responsible for substantially all of the cost of fuel relating to the energy delivered under such PPA. To the extent a particular generating facility does not meet certain operational thresholds in a PPA, however, we may be responsible for a portion of the related fuel costs. With respect to fuel transportation risk, most of our PPAs provide that the PPA Counterparties are responsible for procuring and transporting the fuel to the particular generating facility.
Fixed and variable operation and maintenance ("O&M") costs will be covered either through capacity charges or other charges based on dollars per kilowatt year or dollars per megawatt hour. We have also entered into long-term service contracts with General Electric International, Inc. ("GE") to reduce our exposure to certain O&M costs relating to GE equipment. See Note 5 to the consolidated financial statements herein for additional information.
Although under some of our PPAs we will be selling energy to the Operating Companies, our generating facilities will not be in their regulated rate bases, and we will not be able to seek recovery from the Operating Companies' ratepayers for construction, repair and maintenance costs of our generating facilities. It is expected that the capacity payments in the PPAs will produce sufficient cash flow to meet these costs, pay debt service and provide an equity return. However, our overall profit will depend on numerous factors, including efficient operation of our generating facilities.
FERC MATTERS
In December 1999, the FERC issued its final rule on Regional Transmission Organizations ("RTO"). The rule encouraged utilities subject to FERC jurisdiction and owning transmission systems to form RTOs on a voluntary basis. Southern has submitted a series of status reports informing the FERC that its operating companies, Entergy Corporation, Cleco Power, and a number of non-jurisdictional cooperative and public power entities are developing a for-profit RTO known as SeTrans. In January 2002, the sponsors of SeTrans held a public meeting to form a Stakeholder Advisory Committee, which will participate in the development of the RTO. On April 25, 2002, the Stakeholder Advisory Committee met and selected the candidates that will be considered for the SeTrans Independent System Administrator. On June 27, 2002, Southern and the other SeTrans sponsors submitted a Petition for Declaratory Order seeking the FERC's guidance on various issues. The petition asks for a response from the FERC by October 2002. The creation of SeTrans is not expected to have a material impact on our financial statements.
In November 2001, the FERC announced a new interim screen to assess generation dominance (for purposes of market-based rate authority), together with several mitigation measures for entities that fail the interim screen. Some of these mitigation measures pertain to transmission activities while others involve the spot energy market (the "SMA Order"). In that particular proceeding, the FERC determined that American Electric Power Company, Inc. ("AEP"), Entergy and Southern failed the new screen inside their control areas. Thus, the FERC imposed these mitigation measures on AEP, Entergy and Southern together with Southern's affiliates with market-based rate authorization which included us. However, in December 2001, the FERC issued a notice announcing that it would convene a technical conference to discuss the issue of generation dominance and deferred for an indefinite period the effective date of spot energy market mitigation measures. On January 14, 2002, the FERC issued an order granting Motions for Rehearing for Southern, AEP and Entergy for purposes of "reconsidering" the SMA Order. This order tolls the statutory time period by which the FERC is required to act; however, the FERC has announced that it intends to convene a technical conference to address the market dominance issue in the future.
On July 31, 2002, the FERC issued a notice of proposed rulemaking entitled
"Remedying Undue Discrimination Through Open Access Transmission Service and
Standard Electricity Market Design" ("SMD NOPR"). The FERC has indicated that
the proposal, if adopted, would (among other things): (i) require transmission
assets of jurisdictional utilities to be operated by an independent entity; (ii)
establish a standard electric market design; (iii) establish a single type of
transmission service that applies to all customers; (iv) assert jurisdiction
over the transmission component of bundled retail service; (v) establish a
generation
reserve margin; (vi) establish bid caps for day-ahead and spot energy markets;
(vii) revise the FERC policy on the pricing of transmission expansions; (viii)
establish market monitoring and market mitigation measures; and (ix) institute
locational marginal pricing as a market-based solution to transmission
congestion and Congestion Revenue Rights as the means to hedge against the
associated financial effects. Comments on the proposal are due October 15, 2002.
FERC anticipates issuing a final rule near the end of 2002. Any impact of this
proposal on Southern Power will depend on the form in which the final rule may
be ultimately adopted.
On August 1, 2002, FERC issued a notice of proposed policy statement ("NOPPS") proposing to adopt a general policy regarding the standard of review that must be met to justify proposed changes to a market-based rate contract for wholesale sales of electric energy. Comments are due September 23, 2002. FERC proposes to require parties to a bilateral market-based contract to include precise language if they intend the standard of review for contract changes (which would include rate changes) to be the higher and more strict "public interest" standard. If the contract does not contain this precise and stricter language, FERC intends to apply the lower and less strict "just and reasonable" standard of review to proposed contract changes. FERC notes that the purpose of this policy statement is to promote contract certainty necessary to support competitive wholesale power markets.
ENVIRONMENTAL MATTERS
Federal and state environmental regulatory agencies are actively considering and developing additional control strategies for emission of air pollution from all major sources of air pollution, particularly including electric generating facilities. This includes the overall reduction of emission of nitrogen oxides (NO(x)) in the eastern United States, the reduction of NO(x) and particulate matter emissions to reduce regional haze and visibility impairment in sensitive areas, the development of appropriate control standards and technologies for emissions of mercury and the reduction of so-called "greenhouse gases" (such as carbon dioxide) to address concerns over global climate change.
Development and implementation of final federal and state rules on these issues could require substantial further reductions in all air emissions associated with electricity generation. Additional compliance costs and capital expenditures resulting from the implementation of such rules and standards cannot be determined until the results of legal challenges are known and final rules have been adopted at both the federal and state level.
The EPA and state environmental regulatory agencies are reviewing and evaluating various other matters including: control strategies to reduce regional haze; limits on pollutant discharges to impaired waters; cooling water intake restrictions; and hazardous waste disposal requirements. The impact of any new standards will depend on the development and implementation of applicable regulations.
Several major pieces of environmental legislation are being considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation and Recovery Act; the Toxic Substances Control Act; and the Endangered Species Act. Changes to these laws could affect many areas of our company's operations. The full impact of any such changes cannot be determined at this time.
Compliance with possible additional legislation related to global climate change and other environmental and health concerns could significantly affect our company. The impact of new legislation, if any, will depend on the subsequent development and implementation of applicable regulations.
All of our PPAs contain provisions that permit us to charge the counterparty with some of the new costs incurred as a result of change in law, including environmental regulations.
Certain environmental, natural resource and land use concerns could have an effect on site selection. This includes the potential for designation of target areas as non-attainment for ozone or particulate matter under newly adopted National Ambient Air Quality Standards, the availability of water withdrawal rights, uncertainties regarding aesthetic impacts such as increased light or noise or regarding any potential for adverse health impacts associated with electric and magnetic fields. Such concerns and uncertainties can increase the cost of siting and operating any type of electric generating facility.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of our liquidity for the year ended December 31, 2001 and the six months ended June 30, 2002 were equity contributions and subordinated loans from Southern and borrowings under our Credit Facility, as well as the issuance of the Original Senior Notes in June 2002. The primary uses of these funds were for acquisitions related to and construction of our electric generating facilities.
From time to time, we may receive subordinated loans from Southern in the form of a subordinated promissory note. On June 20, 2001, we issued a subordinated promissory note to Southern (the "Southern Subordinated Note"). As of June 30, 2002, $186 million aggregate principal amount was outstanding under the Southern Subordinated Note, which amount varies from month to month and is being used to fund Franklin 3, McIntosh 10 and McIntosh 11 until other financing is arranged. The Southern Subordinated Note bears interest at a rate that is the higher of the average effective interest cost of Southern's outstanding obligations for borrowed money or the applicable Federal Rate for short-term loans published by the Internal Revenue Service. The principal amount on the Southern Subordinated Note is due upon demand by Southern, but in no event later than June 20, 2003. The Southern Subordinated Note is subordinate and subject in right of payment to the prior payment in full of all of our indebtedness, liabilities and obligations (including the Original Senior Notes) whether direct or indirect, absolute or contingent, due or to become due or now in existence or hereinafter occurred for borrowed money, including without limitation, all principal, interest, premium upon repayment and related fees and expenses and, in respect of or pursuant to or otherwise arising out of any guarantees, indemnities, sureties, support or capital maintenance agreements or keep-well agreements of or with respect to our indebtedness, liabilities or obligations or any one or more of our affiliates or subsidiaries ("Senior Indebtedness") and any promissory notes issued pursuant thereto, subject, however, to any such indebtedness, liabilities or obligations being expressly designated as subordinate to the Southern Subordinated Note. We shall not make any payment on account of the Southern Subordinated Note if an "event of default" shall have occurred and be continuing under any Senior Indebtedness until such Senior Indebtedness shall have been paid in full. We may issue a similarly subordinated promissory note in June 2003 to repay any outstanding amounts on the Southern Subordinated Note. Additionally, from time to time in the future, we may issue similarly subordinated notes which may include provisions permitting us to extend maturity or convert into our equity.
In November 2001, we entered into the three-year $850 million senior unsecured revolving Credit Facility with Citibank N.A., as the administrative agent and the lenders listed therein. We are permitted to use amounts drawn under the Credit Facility to finance acquisition and construction costs related to gas-fired electric generating facilities, general corporate purposes (subject to a $25 million limit) and to pay or back-stop commercial paper issued to finance construction or acquisition costs of gas-fired electric generating facilities, subject to borrowing limitations for each generating facility. Currently, costs of acquisition and construction of Dahlberg, Wansley 6, Wansley 7, Franklin 1, Franklin 2, Harris 1, Harris 2 and Stanton A are or will be funded in part under the Credit Facility. The Credit Facility does permit additional gas-fired generating facilities to be financed by borrowings under the Credit Facility upon meeting certain requirements. Southern executed an equity contribution agreement (the "Southern Equity Contribution Agreement") at the closing of our Credit Facility which requires Southern to make equity contributions to fund 40% of the costs of construction and acquisition of each generating facility financed under the Credit Facility.
In connection with our execution of the Credit Facility, Southern executed
a guarantee of completion of construction of each generating facility that is
financed in part by the lenders under the Credit Facility (the "Completion
Guarantee"). Under the terms of the Completion Guarantee, Southern guarantees
timely completion of construction of the facilities financed under the Credit
Facility, agrees to fund any associated construction cost overruns to the extent
our own cash flow is insufficient, and agrees to prepay all of the indebtedness
borrowed for a generating facility if such facility does not achieve completion
of construction within two years of the scheduled completion date, and may be
obligated to repay a portion of such indebtedness if completion is achieved but
guaranteed performance levels at completion are not met. In addition, prepayment
of all outstanding indebtedness under our Credit Facility associated with any
generating facility which has not yet achieved completion is required upon the
occurrence of certain events of default
relating to Southern, including, but not limited to, bankruptcy of Southern or any significant subsidiary of Southern, payment default under other Southern indebtedness of at least $100 million, or change of control of Southern. Our Credit Facility matures on November 15, 2004.
Borrowings under our Credit Facility will accrue interest, at our option, at either (i) the base rate plus a specified margin or (ii) the eurodollar rate plus a specified margin. In addition, we pay fees and expenses based upon borrowing availability and administrative and legal costs. At December 31, 2001 and June 30, 2002, the eurodollar rate option was in effect with resulting interest rates of 3.44% and 3.01%, respectively.
Our Credit Facility contains covenants restricting our activities, including limitations on payments of dividends and other distributions, creation of liens, incurrence of debt and asset sales. Our Credit Facility also requires us to maintain a ratio of recourse debt to total capitalization of not more than 0.6:1.0 (60%) throughout the term of the Credit Facility. As of June 30, 2002, we are in compliance with all of these covenants.
As of June 30, 2002, we had approximately $158.2 million in outstanding borrowings and $691.8 million in borrowing availability remaining under our Credit Facility.
Our Credit Facility permits us to fund construction of future generating facilities with borrowings under the Credit Facility upon meeting certain requirements. We intend to finance construction of certain future gas-fired electric generating facilities with a combination of equity contributions and subordinated loans from Southern, borrowings under our Credit Facility and other available financings. Upon completion of construction of a generating facility, we intend primarily to use proceeds of additional senior notes, and project financings on a limited basis, to repay borrowings under our Credit Facility.
Southern is currently authorized by the SEC under the Holding Company Act to fund the development of our company up to an aggregate amount not to exceed $1.7 billion, which may take the form of purchases or contributions of equity interests, loans and guarantees issued in support of our securities or obligations. As of June 30, 2002, Southern has invested a total of $1.0 billion in us, in the form of equity investments, subordinated loans and guarantees. We also have SEC approval under the Holding Company Act to issue up to an aggregate amount of $2.5 billion of preferred securities, long and short-term debt and other equity issuances. We will maintain the equity component of our consolidated capitalization at or above 30% unless otherwise permitted by the SEC.
ACCOUNTING POLICIES
CRITICAL ACCOUNTING POLICIES
Our accounting policies are described in Note 1 to our consolidated financial statements herein, under "Basis of Presentation and Summary of Significant Accounting Policies." We have identified three critical accounting policies that require a significant amount of judgment and are considered to be the most important to the presentation of our financial position and results of operations. The first critical policy is our levelized recognition of capacity revenues from long-term contracts as further described in Note 7 to our consolidated financial statements as of December 31, 2001 under "Long-Term Power Sales Contracts." Under this policy, we recognized $1.7 million and $5.0 million less in revenues for the year ended December 31, 2001 and for the six months ended June 30, 2002, respectively, than we actually received in payments. Secondly, as further described in Note 3 to our consolidated financial statements under "Financial and Other Derivative Instruments," we designate qualifying derivative instruments as cash flow or fair value hedges under Statement of Financial Accounting Standards ("SFAS") No. 133. We mark such derivative instruments to market based primarily on quoted market prices. The unrealized changes in fair value of qualifying cash flow hedges are deferred in Other Comprehensive Income. Any ineffectiveness in those hedges and changes in non-qualifying positions is reported as a component of current period income. Third, as further described in Note 8 to our consolidated financial statements under "Income Taxes," we use flow-through accounting for state manufacturer's tax credits. This means that we recognize the credit as a reduction of tax expense when it is more likely than not that it has been earned. We recognized $2.7 million of these credits in 2001.
NEW ACCOUNTING STANDARDS
In June 2001, the FASB issued Statement No. 143, Asset Retirement Obligations, which establishes new accounting and reporting standards for legal obligations associated with retiring assets. The liability for an asset's future retirement must be recorded in the period in which the liability is incurred. The cost must be capitalized as part of the related long-lived asset and depreciated over the asset's useful life. Changes in the liability resulting from the passage of time will be recognized as operating expense. Statement No. 143 must be adopted by January 1, 2003. We are currently assessing the impact of adopting Statement No. 143 on our financial statements.
The Emerging Issues Task Force is currently addressing how to determine whether an arrangement, including purchase power agreements, constitutes a lease within the scope of SFAS No. 13, in Issue No. 01-08, Determining Whether an Arrangement is a Lease. Any impact on our company will depend on the form in which final rules may be ultimately adopted.
FINANCIAL CONDITION
OVERVIEW
In 2001, gross utility plant additions were $766 million. These additions were primarily related to the purchase of the Dahlberg combustion turbine units and the construction of combined cycle units. For the six months ended June 30, 2002, gross utility plant additions were $853 million. These additions were primarily related to on-going construction of the combined cycle units and the purchase of Wansley 6 and Wansley 7. The funds needed for gross property additions were provided by our Credit Facility, the issuance of the Original Senior Notes and capital contributions and subordinated loans from Southern.
CREDIT RATING RISK
We do not have any credit agreements that would require material changes in payment schedules or terminations as a result of a credit rating downgrade. There are certain contracts that could require collateral -- but not accelerated payment -- in the event of a credit rating change to below investment grade. These contracts are primarily for physical electricity sales, fixed-price physical gas purchases and agreements covering interest rate swaps and currency swaps. At June 30, 2002, the maximum potential collateral requirements under the electricity sale contracts were approximately $174 million. Generally, collateral may be provided for by a Southern guaranty, letter of credit or cash. At June 30, 2002, there were no material collateral requirements for the gas purchase contracts or other financial instrument agreements.
MARKET PRICE RISK
We are exposed to market risks, including changes in interest rates, currency exchange rates, and certain commodity prices. To manage the volatility attributable to these exposures, we net the exposure to take advantage of natural offsets and enter into various derivative transactions, for the remaining exposure pursuant to our policies in areas such as counterparty exposure and hedging practices. Our policy is that derivatives are to be used primarily for hedging purposes. Derivative positions are monitored using techniques that include market valuation and sensitivity analysis.
If we sustained a 100 basis-point change in interest rates for all variable rate long-term debt, the change would affect annualized gross interest cost by approximately $2.9 million at December 31, 2001 and $3.5 million at June 30, 2002. Most or all of that change would be capitalized, given the size of our construction program. To further mitigate our exposure to interest rates, in 2001, we entered into interest rate swaps that were designated as cash flow hedges of our 2002 and 2003 planned debt issuances. Changes in the fair values of these swaps are deferred in other comprehensive income. Based on our overall interest rate exposure at June 30, 2002, including derivative and other interest-rate sensitive instruments, a near-term 100 basis-point change in interest rates would not materially affect our financial statements. In addition, we are not aware of any facts or circumstances that would significantly affect such exposures in the near term.
Because energy from our facilities is primarily sold under long-term contracts with tolling agreements and provisions shifting substantially all of the responsibility for fuel cost to the PPA Counterparties, our exposure to market volatility in commodity fuel prices and prices of electricity is limited. To mitigate residual risks in those areas, we enter into fixed-price contracts for the purchase or sale of fuel and electricity. In connection with the transfers to us of Franklin in 2001 and Wansley in 2002, Georgia Power Company transferred approximately $5.6 million and $1.6 million, respectively, in derivative assets relating to electric and gas forward contracts in effect at the date of the transfers. These contracts were recorded at fair value on the date of the transfer, which was equal to Georgia Power Company's carrying amount. Following the transfer, these contracts are marked to market until realized and settled.
We have firm purchase commitments that require payment in Euros. As a hedge against fluctuations in the exchange rate for Euros, we entered into forward contracts to purchase Euros and have designated these contracts as fair value hedges of an unrecognized firm commitment. Since the terms of these Euro contracts mirror the purchase commitment terms, there is no ineffectiveness recognized in income. At June 30, 2002, we had outstanding contracts covering a notional amount of $19.8 million in commitments through May 2003.
Unrealized gains and losses on electric and gas contracts used to hedge anticipated purchases and sales are deferred in other comprehensive income. Gains and losses on contracts that do not represent hedges are recognized in the Statement of Income as incurred. The fair values of derivative energy contracts at December 31, 2001 and June 30, 2002 are as follows:
TOTAL FAIR VALUE DEFERRED IN RECOGNIZED IN
ELECTRIC AND GAS OTHER COMPREHENSIVE CURRENT PERIOD
FORWARD CONTRACTS INCOME INCOME
----------------- ------------------- --------------
(IN MILLIONS)
Contracts, January 8, 2001............. -- -- --
Less: Contracts realized or settled.... -- -- --
New contracts at inception............. 5.6
Changes in valuation techniques........ -- -- --
Current period changes................. (.1) (.7) .6
Contracts, December 31, 2001 based on
actively quoted prices............... 5.5 -- --
Less: Contracts realized or settled.... 2.8 0.8 2.0
New contracts at inception............. 1.6
Changes in valuation techniques........ -- -- --
Current period changes................. -- -- --
Contracts, June 30, 2002 based on
actively quoted prices............... 4.3
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At June 30, 2002, approximately $2.3 million of these contracts will mature within 12 months, with the remainder maturing within 3 years.
See "-- Financing Activities" below and Note 3 to the consolidated financial statements herein for additional information.
FINANCING ACTIVITIES
At year-end 2001, our capitalization consisted of 61% equity and 39% debt. At June 30, 2002, our capitalization consisted of 43% equity and 57% debt including the Southern Subordinated Note. Our long-term target capitalization is 65% debt for facilities completed and in commercial operation. Currently, the Credit Facility requires us to maintain a ratio of recourse debt, which excludes the Southern Subordinated Note, to total capitalization of not more than 0.6:1.0 (60%). Additionally, under the Southern Equity Contribution Agreement, Southern is required to fund 40% of the cost of construction of each generating facility financed under the Credit Facility with capital contributions. If permitted by an amendment to our Credit Facility and Southern Equity Contribution Agreement or after the termination of our Credit Facility, we intend to fund our new construction first with the 35% equity from Southern before drawing on any debt construction financing.
Capital contributions from Southern through year-end 2001 were approximately $452 million. During the first six months of 2002, Southern made additional equity contributions of approximately $254 million, plus subordinated loans of approximately $185 million. Equity contributions and subordinated loans from Southern are projected to total approximately $523 million by the end of 2002. No dividends were paid in 2001. No dividends are projected to be paid in 2002.
In June 2002, we issued $575 million of the Original Senior Notes. The net proceeds were used to reduce outstanding indebtedness under our Credit Facility and subordinated loans from Southern. In June 2002, we also settled several interest rate swap agreements originally entered into in anticipation of this issuance for $16.9 million. This amount has been deferred in other comprehensive income and will be amortized to interest expense over the life of the Original Senior Notes. See Note L in the Notes to Condensed Consolidated Financial Statements herein for additional information.
OFF-BALANCE SHEET FINANCING ARRANGEMENTS
In 2001, we entered into a financing arrangement with Westdeutsche Landesbank Girozentrale ("WestLB") and Southern guaranteed our obligations under the arrangement. Under this agreement, we had the right to assign up to $125 million in vendor contracts for equipment to WestLB, who following such assignment would become the owner of such contracts. We acted as agent for WestLB, including instructing WestLB when to make payments to the vendors. At December 31, 2001, approximately $47 million of such vendor equipment contracts had been assigned to WestLB. This financing arrangement was terminated on March 22, 2002, and we repurchased the equipment at original cost, which totaled approximately $61 million including interest and fees, using funds from the Southern Subordinated Note. We will indemnify WestLB against any future claims arising from the arrangement and Southern has guaranteed our indemnification obligation.
In conjunction with the termination of the agreement, WestLB assigned a contract with Alstom Power Inc. ("Alstom") related to the purchase and sale of a steam generator and auxiliary equipment for Franklin 3 to us. Southern entered into a limited keep-well arrangement with Alstom whereby Southern will contribute funds to us via loans or capital contributions to fund our performance or equipment purchases under certain arrangements. As of June 30, 2002, our remaining purchase obligations to Alstom totaled $5 million.
CAPITAL REQUIREMENTS FOR CONSTRUCTION
Capital expenditures are estimated to be $834 million for 2002, $488 million for 2003 and $473 million for 2004. For additional information, see Note 2 to our consolidated financial statements herein under "Asset Transfers and Construction Program."
The significant contractual capital commitments during this period relate to turbine purchases of $141.1 million, $93.1 million and $34.1 million in 2002, 2003 and 2004, respectively. While the turbine
purchase contracts have cancellation options, we do not consider cancellation to be an economically viable alternative.
Actual construction costs may vary from estimates because of changes in such factors as: business conditions; environmental regulations; the cost and efficiency of construction labor, equipment and materials and the cost of capital.
OTHER CAPITAL REQUIREMENTS
In addition to the construction program requirements, funds will also be required by the end of 2004 for principal payments on borrowings under our Credit Facility and the Southern Subordinated Note.
We also have outstanding commitments for fuel and payments under our long-term service agreements ("LTSAs"). The LTSAs cannot be canceled before the end of 2004. At December 31, 2001, these capital requirements and purchase commitments -- discussed further in Notes 4, 5, and 9 to the consolidated financial statements herein -- are as follows.
2002 2003 2004
---- ---- ----
(IN MILLIONS)
Borrowings:
Credit Facility........................................... -- -- 293
Southern Subordinated Note................................ 1 -- --
Purchase Commitments:
Fuel...................................................... 2 8 4
Long-term Service Agreements.............................. 8 12 17
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At June 30, 2002, we had used $158.2 million of our $850 million available credit, which expires in November 2004. In addition, we had $186 million outstanding under the Southern Subordinated Note.
OUR BUSINESS
We are a wholly owned subsidiary of Southern. We were formed to own, construct and acquire Southern's new competitive contract-based wholesale generation assets. Consequently, our business activities should not be subject to traditional state regulation. We will be the primary vehicle to develop Southern's position in this competitive contract-based wholesale generation market. It is contemplated that substantially all of our generating capacity will be committed under long-term, fixed-price PPAs primarily with our affiliates.
We are an electric utility company as defined under the Holding Company Act. We are subject to regulation under the Holding Company Act because we are a wholly owned subsidiary of Southern, a registered public utility holding company under the Holding Company Act.
As a separate subsidiary in the Southern system, we provide the means by which Southern can own, construct and acquire new generation assets outside of the traditional rate-based state regulated generation structure. Substantially all of our operating or under construction generating facilities were acquired from affiliates within the Southern system. We intend to own and finance all of the new competitive contract-based wholesale generation assets to be built in the Southern system. Southern believes that this structure is most effective for pursuing generation opportunities in the competitive wholesale markets. This structure ensures a consistent approach to developing new wholesale generation and improves efficiency.
We intend to own, construct and acquire generating facilities in the Super Southeast and to sell the output of our generating facilities under long-term, fixed-price capacity contracts to wholesale customers in this region. The Super Southeast includes the states in Southern's traditional service territory -- Alabama, Florida, Georgia, and Mississippi. Our customers in these states are expected to be predominantly the Operating Companies, but will include unaffiliated third parties as well. The Super Southeast also consists of the surrounding states of Kentucky, Louisiana, North Carolina, South Carolina, Tennessee, and Virginia. Although we will focus on the Super Southeast, we may also acquire or construct generating facilities outside of the Super Southeast or sell the output of our generating facilities to customers outside of the Super Southeast.
As of June 30, 2002, we had 4,777 MW of generating capacity in commercial operation or under construction. By the end of 2005, we expect to have approximately 6,600 MW of generating capacity in commercial operation. Currently, substantially all of our existing, under construction and planned generating capacity is committed under PPAs with the PPA Counterparties. All of the PPA Counterparties are strong entities from either a credit or financial security perspective.
Along with the Operating Companies, we are a member of and share in the benefits and obligations of the Southern Pool. As a member of the Southern Pool our generating facilities located within Southern's service territory will be economically dispatched with the generating facilities of the Operating Companies to serve the members' aggregate load requirements. A member of the Southern Pool has the first call on its own generating resources, but if lower cost generation resources are available on the Southern system, a Southern Pool member has the right to purchase that lower variable cost energy to satisfy its obligations. As a member of the Southern Pool, we will also benefit from economies of scale, share geographic load diversity and maintain lower reserve levels than would be required on a stand-alone basis. The Southern Pool includes approximately 37,000 MW of generating capacity.
For each of our generating facilities located in the service territory of an Operating Company, there will be an interconnection agreement to govern the interconnected operations of that facility with the transmission facilities of the appropriate Operating Company. Each Operating Company is interconnected to the transmission facilities of the other Operating Companies by means of high-voltage lines. Additionally, the Operating Companies have long-standing contracts with the principal neighboring utility systems relating to capacity exchanges, capacity purchases and sales, transfers of economy energy and other similar transactions. For the most part, such interchange transactions are now conducted under market-based tariff arrangements. We expect each generating facility located outside of the Operating Companies' service territory will have an interconnection agreement with the applicable transmission provider. Regardless of whether a facility is
located in or outside of the service territory of an Operating Company, transmission service will need to be reserved across the applicable transmission systems to deliver power from each facility, which includes obtaining transmission service across each applicable Operating Company.
In order to optimize efficiencies, we will utilize employees currently in the Southern system for our day-to-day operations at our generation facilities. For each of our generating facilities in an Operating Company's service territory, we intend for such Operating Company to provide operation and maintenance services at cost (in accordance with the Holding Company Act). There are or will be operation and maintenance contracts between us and the appropriate Operating Company for the facilities located in such Operating Company's service territory. Because Stanton A is located outside of the Operating Companies' service territory, SCS will be responsible for the operation and maintenance of Stanton A. Additionally, under the terms of a services agreement, SCS will perform overall project management of the construction process of our generating facilities.
The FERC has adopted standards of conduct that govern the relationship between SCS on behalf of the Operating Companies (as transmission provider) and its affiliated wholesale merchant function, which includes us. Among other things, the standards of conduct prohibit employees of Southern's transmission function from providing preferential access to information about the Southern transmission system that is not publicly available to all users as posted on Southern's Open Access Same-Time Information System (OASIS). Southern (and the Operating Companies) is also required to provide transmission service in a non- discriminatory and impartial manner to affiliates and non-affiliates alike.
In September 2001, the FERC issued a notice of proposed rulemaking to revise the standards of conduct. Among other things, the proposal would broaden the scope of the standards and may result in additional restrictions. The FERC has received comments on the proposed rule. The FERC issued a follow-up white paper in April 2002, and comments on that paper were due in June 2002. It is uncertain when the FERC will issue a final rule.
In addition to these FERC rules, the applicable state PSCs may have affiliate rules in place that govern our interaction with an Operating Company (such as those pertaining to participation in an RFP).
BUSINESS STRATEGY
Our strategy is to develop and acquire additional generating facilities to compete for and serve the demand in the Super Southeast market. To implement this strategy, we plan to:
DERIVE AT LEAST 80% OF OPERATING CASH FLOW UNDER LONG-TERM, FIXED PRICE PPAS. We intend to have a significant portion of our existing, under construction and planned capacity committed under PPAs mostly with the Operating Companies, but also with certain third parties that are predominantly strong entities from either a credit or financial security perspective.
UTILIZE THE EXPERTISE OF SOUTHERN AFFILIATES IN PLANNING, DESIGNING, CONSTRUCTING, MARKETING, OPERATING AND MAINTAINING GENERATING FACILITIES. All of our business currently is and is expected to be operated by Southern affiliates with participation of our management. To optimize efficiencies, we will utilize employees currently in the Southern system for our day-to-day operations at our generating facilities located in Southern's service territory. In 2001, the employees of Southern and its affiliates achieved a peak season Equivalent Forced Outage Rate ("EFOR") of 2 percent, which was the lowest in Southern history. SCS will perform overall project management of the construction process of our generating facilities.
MITIGATE MARKET PRICE, FUEL SUPPLY, FUEL TRANSPORTATION AND ELECTRIC TRANSMISSION RISK. By negotiating long-term PPAs for substantially all of our existing, under construction and planned generating capacity, we have attempted to lessen our exposure to market risk. Additionally, we have negotiated the terms of most of our PPAs to insulate our company from significant fuel supply, fuel transportation and electric transmission risks, in most instances, by making such risks mostly the responsibility of the PPA Counterparties. We intend to continue this business practice.
FOCUS ON THE SUPER SOUTHEAST FOR ADDITIONAL GENERATION AND WHOLESALE MARKETING OPPORTUNITIES. We intend to focus primarily on the Super Southeast for additional generation opportunities. We believe the Super Southeast is a particularly attractive market because the existing and projected supply and demand for power in this region will require the construction of new generating facilities to meet expected increased customer demand. Additionally, the Southeast has a stable regulatory environment for electricity with regulators that recognize the need for reliable power supply.
EXPAND OUR ASSET BASE TO AT LEAST 6,600 MW IN COMMERCIAL OPERATION BY YEAR-END 2005, WITH POTENTIAL FOR FURTHER CAPACITY ADDITIONS THEREAFTER. We intend to continue to expand our generation capacity. By the end of 2003, we expect to have approximately 4,777 MW of generating capacity in commercial operation. We expect to begin construction of Franklin 3, McIntosh 10 and McIntosh 11 in the last half of 2002 with scheduled completion dates in June 2005. The expected capacity of Franklin 3 is 615 MW and McIntosh 10 and McIntosh 11 is 1,240 MW. The addition of these three units will increase our capacity to over 6,600 MW. We will continue to evaluate opportunities to construct or acquire new generating facilities.
COMPETITIVE STRENGTHS
We believe that we are well positioned to implement our business strategy because of the following competitive strengths:
STABLE REVENUES UNDER LONG-TERM, FIXED-PRICE PPAS. Substantially all of our existing, under construction or planned capacity is committed under long-term, fixed-price PPAs with initial terms of five to 25 years. These PPAs are predominantly with the Operating Companies who all maintain solid investment grade credit ratings. Additionally, our existing PPAs with the Operating Companies relating to generating facilities in operation or under construction have already been approved by the respective state PSCs as well as the FERC. Given these minimal credit and regulatory risks, we believe that these PPAs will provide us with relatively stable energy revenues.
MITIGATION OF MARKET PRICE, FUEL SUPPLY, FUEL TRANSPORTATION AND ELECTRIC TRANSMISSION RISK. Through the terms of the PPAs, we have effectively mitigated our market price risks for substantially all our existing, under construction and planned generating capacity. Additionally, with respect to most of our PPAs, fuel supply, fuel transportation and electric transmission are, in most instances, the responsibilities of the PPA Counterparties. By structuring these provisions of the PPAs in this manner, we are effectively insulated from any significant fuel supply, fuel transportation and electric transmission risk during the terms of the PPAs.
RELATIONSHIP WITH SOUTHERN. Southern has been active in the Super Southeast wholesale market for years and has developed extensive marketing experience. Our management team is comprised of seasoned individuals from within the Southern system who have long-standing experience with generating facilities, power sales and dispatch, engineering, construction, market conditions, and business development. Additionally, Southern has developed strong relationships in the Southeast energy market.
EFFICIENCIES RELATING TO NEW GENERATING FACILITIES. To maximize experience and efficiencies, we will utilize employees currently in the Southern system for our day-to-day operations of our generation facilities. Our agreements with the Operating Companies and SCS will allow us to optimize their extensive knowledge, experience and proven track record in power plant and power systems operations. Additionally, all of our initial facilities will be new, state of the art, gas-fired generation using GE gas turbines. To reduce our exposure to operation and maintenance costs we have entered into long-term service agreements with GE for substantially all of our generating facilities. Under these services agreements, GE is obligated to cover the major maintenance of the GE equipment.
STABLE REGULATORY ENVIRONMENT. The Super Southeast has a stable regulatory environment for electricity.
ABSENCE OF ELECTRIC RESTRUCTURING LEGISLATION IN SOUTHERN'S SERVICE TERRITORY. No state legislature or regulatory authority within the Southern traditional service territory has adopted electric utility service restructuring.
STABLE REGIONAL DEMAND. The Super Southeast has historically been a strong area for economic growth, and we believe that we will be able to benefit from future regional supply and demand patterns.
OUR EXISTING ELECTRIC GENERATING FACILITIES
Our electric generating facilities currently operating or under construction are:
FACILITY LOCATION UNIT TYPE(1) TOTAL MW(2) IN-SERVICE DATE
-------- -------- ------------ ----------- ---------------
Dahlberg Units
1-10............... Jackson County, CT 810 May/June 2000 (Units 1-8)
Georgia
May 2001 (Units 9 & 10)
Wansley 6 and Wansley
7(3)............... Heard County, Georgia CC 1,134 June 2002
Franklin 1........... Lee County, Alabama CC 571 June 2002
Franklin 2........... Lee County, Alabama CC 615 June 2003 (scheduled)
Harris 1............. Autauga County, CC 618 June 2003 (scheduled)
Alabama
Harris 2............. Autauga County, CC 618 June 2003 (scheduled)
Alabama
Stanton A............ Orlando, Florida CC 411(4) October 2003 (scheduled)
-----
TOTAL................ 4,777
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(1) "CT" means combustion turbine and "CC" means combined-cycle.
(2) Total MW reflects designed output under rated conditions as specified by each facility's capacity test under its respective PPA. Dahlberg reflects its tested new and clean capacity while peak firing.
(3) We lease Wansley 6 and Wansley 7 from the Development Authority of Heard County and have the beneficial economic ownership. For a more detailed description of the ownership structure, See "-- Our Existing Electric Generating Facilities -- Wansley 6 and Wansley 7" below.
(4) Represents our sixty-five percent undivided ownership interest in Stanton A. For a more detailed description of the ownership structure, See "-- Our Existing Electric Generating Facilities -- Stanton A" below.
DAHLBERG
Dahlberg is an 810 MW facility consisting of ten GE 7EA gas turbines located in Jackson County, near Athens, Georgia. Currently, all ten units are in service. The first eight units were completed in June 2000 under a turnkey contract with GE and the remaining two units were completed in May 2001. Georgia Power Company built Dahlberg to meet wholesale obligations under contracts with LEM and Dynegy Power, which have been assigned to us. On July 31, 2001, Georgia Power Company transferred the ten units to us and we financed such transfer using equity contributions and subordinated loans from Southern.
WANSLEY 6 AND WANSLEY 7
Wansley 6 and Wansley 7 are two new combined-cycle units that are adjacent to an existing coal-fired plant in Heard County, Georgia, that is co-owned by Georgia Power Company, Oglethorpe Power Cooperative ("OPC"), Municipal Electric Authority of Georgia ("MEAG") and the City of Dalton, Georgia. Wansley 6 and Wansley 7 have a total output of 1,134 MW. Construction began in August 2000. On January 22, 2002, Georgia Power Company transferred its interest in Wansley 6 and Wansley 7 to us. Wansley 6 and Wansley 7 went into commercial operation in June 2002.
Each Wansley unit includes two GE 7FA gas turbines, two Vogt-NEM triple pressure HRSGs, and a GE steam turbine. Dry low NOx burners are included in the gas turbines. Duct burners are provided for supplemental firing of the HRSGs to provide additional peaking capability. Each unit's summer peak capacity is 567 MW.
We lease Wansley 6 and Wansley 7 from the Development Authority of Heard County for certain ad valorem tax abatement opportunities. The Development Authority of Heard County holds legal title to Wansley 6 and Wansley 7 but beneficial economic ownership remains with us during the term of this arrangement. We have the right to purchase Wansley 6 and Wansley 7 at any time and are required to do so at the end of the lease term in each case for a nominal amount from the Development Authority of Heard County.
FRANKLIN 1 AND FRANKLIN 2
Franklin 1 and Franklin 2 are part of a combined-cycle facility in Lee County, Alabama, that will total 1,186 MW upon completion. Until June 30, 2001, Georgia Power Company and Alabama Power Company owned the plant site as tenants in common. As of June 30, 2001, Alabama Power Company transferred its interest in the plant site and related contracts to us and as of November 16, 2001, Georgia Power Company transferred its interest in the plant site and related contracts in such property to us. The site currently has one unit in commercial operation, a second unit under construction and a third unit is planned. The site is permitted and engineered to allow for a fourth unit. Franklin 1 began construction in June 2000 and went into commercial operation in June 2002. Franklin 2 began construction in June 2001 with a scheduled completion date of June 2003.
Franklin 1 is a natural gas-fired combined-cycle unit. It has two GE 7FA gas turbines, two Vogt-NEM triple pressure HRSGs, and a GE steam turbine. Dry low NOx burners are included in the gas turbines. Duct burners are provided for supplemental firing of the HRSGs to provide additional peaking capability. Franklin 1's capacity is 571 MW peak firing under summer conditions.
Franklin 2 will be a slightly larger natural gas-fired combined-cycle unit than Franklin 1. It will use two GE 7FA gas turbines, two Deltak triple pressure HRSGs, and an Alstom steam turbine. Dry low NOx burners are also included in the gas turbines. Duct burners are provided for supplemental firing of the HRSGs to provide additional peaking capability. Franklin 2's expected capacity is 615 MW peak firing under summer conditions.
Franklin 1 and Franklin 2 were previously known as Goat Rock 1 and Goat Rock 2, respectively.
HARRIS 1 AND HARRIS 2
Harris 1 and Harris 2 are part of a combined-cycle facility in Autauga County, Alabama, approximately twenty miles northwest of Montgomery, Alabama. Harris 1 and Harris 2 will total 1,236 MW upon completion. On June 30, 2001, Alabama Power Company transferred its interest in Harris to us. Both Harris 1 and Harris 2 began construction in June 2001 with an expected completion date of June 2003. Harris 1 and Harris 2 each have an expected summer peak output of 618 MW. Two additional units could be built at this site.
Harris 1 and Harris 2 will each be comprised of two GE 7FA gas turbines, two Deltak triple pressure HRSGs, and an Alstom steam turbine. Dry low NOx burners are included in the gas turbines. Duct burners are provided for supplemental firing of the HRSGs to provide additional peaking capability.
STANTON A
Stanton A is a natural gas-fired combined-cycle generating facility in Orange County, Florida that will total 633 MW upon completion. Stanton A began construction in October 2001 with an expected completion date of October 2003. Stanton A is located within the existing Stanton Energy Center that is approximately 10 miles southeast of Orlando, Florida. Stanton Energy Center currently contains Stanton Units 1 and 2 that are existing coal-fired units owned by Orlando Utilities Commission that began operating commercially in 1987 and 1996, respectively. The Stanton Energy Center encompasses approximately 3,280 acres of land in eastern Orange County, Florida. Stanton A will be constructed on approximately 60 acres at the site.
Stanton A will be comprised of two GE 7FA gas turbines, two Deltak triple pressure HRSGs, and an Alstom steam turbine. Dry low NOx burners are also included in the gas turbines. Duct burners are provided
for supplemental firing of the HRSGs to provide additional peaking capability. The gas turbines will be capable of burning both natural gas and No. 2 distillate oil. Stanton has an expected average annual capacity of 633 MW.
We have a 65% interest in Stanton A through our wholly owned subsidiary Southern Company -- Florida LLC, a Delaware limited liability company authorized to do business in the State of Florida ("Southern Company -- Florida"). Stanton A is co-owned by Southern Company -- Florida, Orlando Utilities Commission ("OUC"), Florida Municipal Power Agency ("FMPA") and Kissimmee Utility Authority ("KUA") and each company's ownership interest is 65%, 28%, 3.5% and 3.5%, respectively. Each owner is entitled to the capacity and energy of Stanton A in proportion to its ownership interest.
OUR PLANNED ELECTRIC GENERATING FACILITIES
Our electric generating facilities that are planned but not yet under construction or are in the preliminary stages of construction are:
TOTAL
FACILITY(1) LOCATION UNIT TYPE MW(2) IN-SERVICE DATE
----------- -------- --------- ----- ---------------
Franklin 3.............. Lee County, Alabama CC 615 June 2005 (scheduled)
McIntosh 10 and McIntosh
11.................... Effingham County, Georgia CC 1,240 June 2005 (scheduled)
-----
TOTAL................... 1,855
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(1) Franklin 3, McIntosh 10 and McIntosh 11 are in advanced stages of development as of the date of this prospectus. The PPAs relating to McIntosh 10 and McIntosh 11 are still subject to regulatory approval. The PPAs for Franklin 3, McIntosh 10 and McIntosh 11 have not been incorporated into the projections set forth in the Independent Engineer's Report included as Annex A to this prospectus.
(2) Total MW reflects designed output under rated conditions as specified by each facility's capacity test under its respective PPA.
FRANKLIN 3
Franklin 3 will use a natural gas-fired combined-cycle block similar to Goat Rock 2. It will use two GE 7FA gas turbines, two Deltak triple pressure HRSGs and an Alstom steam turbine. Dry low NOx burners will also be included in the gas turbines. Duct burners will be provided for supplemental firing of the HRSGs to provide additional peaking capability. We anticipate to begin construction in the last half of 2002 with a scheduled completion date of June 2005. Franklin 3 has an expected capacity of 615 MW peak firing under summer conditions.
Franklin 3 was previously known as Goat Rock 3.
MCINTOSH 10 AND MCINTOSH 11
McIntosh 10 and McIntosh 11 will consist of two new combined-cycle units to be built adjacent to the existing Plant McIntosh Steam and Combustion Turbine Plant, located in Effingham County, Georgia near the city of Savannah, Georgia. McIntosh 10 and McIntosh 11 are expected to total 1,240 MW upon completion. Savannah Electric and Power Company owns a 165 MW coal unit and two combustion turbines located on this site. Georgia Power Company owns six combustion turbines currently located on this site. We anticipate to begin construction in the last half of 2002 with a scheduled completion date of June 2005.
Each combined-cycle unit will include two GE 7FA gas turbines with dry low NOx burners, two Deltak triple pressure heat recovery steam generators, and an Alstom steam turbine. Duct burners are provided for supplemental firing of the heat recovery steam generators to provide additional capacity. The gas turbines are also capable of running with power augmentation, providing additional peaking capacity. Each unit's expected
capacity is 620 MW under summer peak conditions with supplemental firing and power augmentation. The gas turbines will be capable of burning both natural gas and No. 2 distillate oil.
EXISTING AND APPROVED POWER PURCHASE AGREEMENTS
As described in the table below, we have entered into PPAs for substantially all of the capacity of our operating and under construction generating facilities. To the extent necessary, PPAs have received all required regulatory approvals from the FERC and all appropriate state regulatory bodies. In addition, these PPAs have been incorporated into the projections set forth in the Independent Engineer's Report included in Annex A to this prospectus. All PPAs commence on each facility's in-service date, with the exception of Harris 2, for which there is a one-year lag and Franklin 1 and Franklin 2, for which there is a one-year lag on a portion of the output. We expect to enter into forward sales contracts and bilateral agreements during the lag periods.
Our PPAs are with the PPA Counterparties. All of the PPA Counterparties are strong entities from either a credit or financial security perspective. Our PPAs with non-affiliated counterparties have a material adverse change clause that requires the posting of collateral or an acceptable substitute guarantee in the event that S&P or Moody's downgrades such counterparty to below investment grade.
As a general matter, our existing PPAs provide that the PPA Counterparties are responsible for substantially all of the cost of fuel relating to the energy delivered under such PPA. To the extent a particular generating facility does not meet certain operational thresholds in a PPA, however, we may be responsible for a portion of the related fuel costs. With respect to fuel transportation risk, most of our PPAs provide that the PPA Counterparties are responsible for procuring and transporting the fuel to the particular generating facility. Fixed and variable O&M costs will be recovered either through capacity charges or other charges based on dollars per kilowatt year or dollars per megawatt hour. The PPAs give us the flexibility to supply power purchased from the Southern Pool or alternate sources rather than from our generating facilities if it is economical or otherwise desirable to do so. It is expected that the capacity payments in the PPAs will produce sufficient cash flow to pay debt service and provide an equity return.
Most of our PPAs provide for fixed capacity sales from specific generating facilities. These obligations and counterparties are described below.
FACILITY COUNTERPARTY COUNTERPARTY RATING(1) MW(2) END DATE
-------- ------------ ---------------------- ------ --------
Dahlberg Units 1-7... LG&E Energy Marketing, Inc. A3/BBB+/BBB+ 578 12/31/04(4)
Dahlberg Unit 8-10... Dynegy Power B3/B-/B(3) 225 5/31/05(4)
Wansley 6 and Georgia Power Company A2/A/A+ 934 12/31/09
Wansley 7............ Savannah Electric and Power Company A2/A/NR 200 12/31/09
Franklin 1........... Georgia Power Company A2/A/A+ 571(5) 5/31/10
Franklin 2........... Georgia Power Company A2/A/A+ 615(6) 5/31/11
Harris 1............. Alabama Power Company A2/A/A 618 5/31/10
Harris 2............. Georgia Power Company A2/A/A+ 618(7) 5/31/19
Stanton A............ OUC Aa1/AA/AA 329(8) 10/31/13
KUA A2/NR/A 41(8) 10/31/13
FMPA A1/A+/A+ 41(8) 10/31/13
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(1) Issuer and corporate rating of guarantor by Moody's/S&P/Fitch, except as described in footnote 3 below.
(2) Total MW includes expected demonstrated capacity; the PPAs for the combined cycles allow for contracted capacity to be adjusted based upon actual capacity demonstrated.
(3) These are ratings on the senior unsecured debt of Dynegy, Inc. which is the guarantor for the PPA associated with the Dahlberg Units 8-10. Because these ratings are below investment grade, pursuant to the PPA, Dynegy Power has provided us, as security for its obligations under the PPA, letters of credit
totaling $20 million expiring in February 2003. These letters of credit can be drawn if they are not replaced by acceptable security prior to expiration or if Dynegy Power defaults under the PPA.
(4) Capacity available after these contracts expire may be used to meet capacity needs under Requirements Service Agreements with Georgia Electric Membership Corporations signed in 2002 (see "-- Requirements Agreements" below).
(5) During the first year of expected operation 370 MW have been contracted for sale pursuant to this PPA, and most of the remaining capacity has been sold in the forward market.
(6) During the first year of expected operation 400 MW have been contracted for sale pursuant to this PPA.
(7) Contract does not begin until the second year of expected facility operation.
(8) Beginning in the sixth year of these PPAs, the counterparties collectively have the right to elect to reduce the amount of combined capacity they are purchasing in 25 MW or 50 MW increments per year in each of the sixth through tenth years, subject to a maximum reduction of 200 MW.
2002 POWER PURCHASE AGREEMENTS AND REQUIREMENTS AGREEMENTS
POWER PURCHASE AGREEMENTS
During the first six months of 2002, we executed four additional PPAs whereby we will make capacity sales from our planned generating facilities. These sales obligations will begin in 2005. The McIntosh 10 and McIntosh 11 are still subject to regulatory approval. The Franklin 3, McIntosh 10 and McIntosh 11 PPAs have not been incorporated into projections set forth in the Independent Engineer's Report included as Annex A to this prospectus. These respective obligations and counterparties are described below:
COUNTERPARTY BEGINNING
FACILITY COUNTERPARTY RATING(1) MW(2) DATE END DATE
-------- ------------ ------------ ------- --------- --------
Franklin 3(3)........ Dynegy Power and Dynegy Marketing &
Trade(4) B1/B-/B(5) 615 6/1/05 5/31/30
McIntosh 10 and Georgia Power Company A2/A/A+ 1,040 6/1/05 5/31/19
McIntosh 11(6)....... Savannah Electric and Power Company A2/A/NR 200 6/1/05 5/31/19
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(1) Issuer and corporate rating of guarantor by Moody's/S&P/Fitch, except as described in footnote 5 below.
(2) Total MW includes contracted capacity; the PPAs allow for contracted capacity to be adjusted based upon actual capacity demonstrated at completion.
(3) We have the right to determine the generating resource to be used to supply capacity and energy under the new PPAs with Dynegy and named Franklin 3 as this resource.
(4) Represents two PPAs. One between us and Dynegy Power and one among us, Dynegy Power and Dynegy Marketing & Trade.
(5) The guarantor for these PPAs is Dynegy Holdings, Inc. These are ratings on
the senior unsecured debt of Dynegy Holdings, Inc. As a result of the
non-investment grade ratings of Dynegy Holdings, Inc.'s long-term senior
unsecured indebtedness, Dynegy Power and Dynegy Marketing & Trade have
provided us two one-year letters of credit totaling $50 million as security
for their obligations. We can draw on the letters of credit in the event of
(a) a default by Dynegy Power or Dynegy Marketing & Trade under the PPA or
(b) Dynegy Power's or Dynegy Marketing & Trade's failure to renew the
letters of credit 10 days prior to their expiration. The obligation to
provide letters of credit becomes effective only if Dynegy Holdings, Inc.
(or other guarantor) is rated: (i) below investment grade by S&P or Moody's
or BBB- and on negative CreditWatch by S&P or Baa3 and on watch for possible
downgrade by Moody's (if prior to January 1, 2006); or (ii) rated below
investment grade by S&P or Moody's (if after December 31, 2005).
(6) Capacity for the new Georgia Power Company and Savannah Electric and Power Company PPAs is expected to be provided from McIntosh 10 and McIntosh 11.
REQUIREMENTS AGREEMENTS
Also during the first six months of 2002, we executed agreements to coordinate the existing generating resources and meet the load growth and resource-retirement capacity requirements ("Requirements Agreements") of eleven Georgia Electric Membership Corporations ("EMCs"). These Requirements Agreements are entered into pursuant to market-based tariff arrangements and are subject to filing and acceptance by the FERC. No state PSC approval is required. Under the terms of the agreements, both the loads and the resources of the EMCs will be integrated into the Southern Pool as obligations and resources of our company.
We forecast that the EMCs' load growth will be approximately 5% per year which would require us to provide 200 MW beginning in 2005 and increasing to 1,300 MW by 2012. We will fulfill the load requirements of the EMCs by utilizing the EMCs' entitlements to capacity resources owned by Oglethorpe Power Corporation ("OPC") and other capacity purchase contracts. We will secure additional capacity resources to meet load growth as needed. This additional capacity may be supplied from our existing resources as the current PPAs terminate, future construction or capacity purchases. Initially, the additional capacity requirements of the EMCs are expected to be most efficiently served from peaking-type resources, which could be served utilizing Dahlberg, if available. In addition, we have effectively mitigated our fuel costs and fuel transportation risks as well as the fixed and variable O&M costs throughout the terms of the Requirements Agreements.
The Requirements Agreements also have a material adverse change clause that requires the posting of collateral if (i) S&P or Moody's downgrades such counterparty to below investment grade, or (ii) if not rated, the counterparty does not meet a minimum interest coverage test.
SOUTHERN COMPANY SERVICES MANAGEMENT OF CONSTRUCTION
Under the terms of a services agreement, SCS will oversee the construction process and perform overall project management of each generating facility. SCS will perform overall project management of the construction process with internal resources. SCS contracts directly for site work, pilings, concrete/underground, general erection, buildings, tank erection and transformer yard construction. These contractors may also utilize subcontractors for portions of their work.
In order to achieve economies of scale, most of our new energy generating facilities which we construct will utilize a standardized design. The power block areas for the various facilities will be similar in size and layout. This reduces costs related to engineering, procurement, construction, parts inventory and maintenance.
FUEL PROCUREMENT
FUEL SUPPLY
As a general matter, our existing PPAs provide that the PPA Counterparties are responsible for substantially all of the cost of fuel relating to the energy delivered under such PPA. To the extent a particular generating facility does not meet certain operational thresholds in a PPA, however, we may be responsible for a portion of the related fuel costs. In addition, SCS has a 20-year master storage contract with Petal Gas Storage Company ("Petal") which will provide Dahlberg, Wansley 6 and Wansley 7, Franklin 1, Franklin 2, Franklin 3, Harris 1 and Harris 2 with natural gas capacity and withdrawal rights for up to ten days of emergency fuel should gas supply interruptions occur.
FUEL TRANSPORTATION
SCS has entered into fuel transportation agreements as agent for the Operating Companies for gas transportation service under the PPAs with the Operating Companies. Gas transportation service for Dahlberg is acquired on a seasonal or daily interruptible basis from existing Transcontinental Gas Pipeline ("Transco") pipeline capacity. Dahlberg has oil backup for gas supply interruptions. Franklin 1, Franklin 2, Harris 1 and Harris 2 will obtain fuel transportation through firm transportation agreements with Southern Natural Gas Company ("SNG"), a subsidiary of the El Paso Corporation. For Wansley 6 and Wansley 7, SCS has a firm
transportation agreement in place with Transco. Each of these firm transportation agreements has a term of fifteen years. OUC is responsible for arranging and acquiring all natural gas for Stanton A. In that regard, OUC has entered into a 20-year firm transportation agreement with Florida Gas Transmission Company for service to Stanton A.
OPERATION AND MAINTENANCE
As each new facility in an Operating Company service area enters into service, we intend for an Operating Company to provide O&M services at cost in accordance with the Holding Company Act. SCS may provide O&M services for facilities outside the Operating Companies' service territory. There will be an O&M contract between us and the appropriate Operating Company for the facilities located in such Operating Company's service territory, which has been approved by the SEC. SCS may provide certain services on behalf of the Operating Company. The O&M responsibilities for our operating or under construction generating facilities are as follows:
Dahlberg.................................................... Georgia Power Company Wansley..................................................... Georgia Power Company Franklin 1 and Franklin 2................................... Georgia Power Company Harris 1 and Harris 2....................................... Alabama Power Company Stanton A................................................... SCS |
In order to control O&M costs, we executed Long-Term Service Agreements ("LTSAs") with GE to cover the major maintenance of major GE equipment at each of the facilities. Under the LTSAs, GE provides a number of significant services, including the procurement of initial spares and specified parts, scheduled and unscheduled maintenance services and an on-site technical advisor. The LTSAs have a fixed major maintenance cost on the equipment. Payments for maintenance costs under the LTSAs will be levelized over a period of 96,000 fired operating hours even though accounting recognition of the costs will occur as the work is actually performed. Under each LTSA, all major maintenance will be performed at intervals that are consistent with the published recommendations of GE. Furthermore, the LTSAs will control our costs by providing predictable escalators and outage planning and management, reducing inventory and carrying cost associated with major parts, and by reducing maintenance staffing levels over the life of the agreements. We and the O&M provider will continue to be responsible for O&M for all equipment not manufactured by GE or not covered by the LTSA.
TRANSMISSION AND INTERCONNECTION
For each facility located in the service territory of an Operating Company, we will have an Interconnection Agreement with the applicable Operating Company to govern the interconnected operation of each facility with the transmission facilities of such Operating Company. The Interconnection Agreements are expected to have 40-year terms. Interconnection Agreements require approval by the FERC. We currently have Interconnection Agreements with Georgia Power Company for Dahlberg, Wansley, Franklin 1 and Franklin 2 that have been approved by the FERC. We have Interconnection Agreements with Alabama Power Company for Harris 1 and Harris 2 that have been approved by the FERC. We will also have an Interconnection Agreement with the applicable transmission provider for each facility located outside of the Operating Companies' service territory. For Stanton A there is an Interconnection Agreement with OUC.
The FERC recently issued a notice of proposed rulemaking to standardize the interconnection process, terms and conditions of interconnection agreements and certain cost issues. Depending on when the FERC issues its final rule, the interconnection agreements for the other facilities may be subject to the new rule. The FERC currently requires the interconnecting generator to pay for the cost of any upgrades in the transmission network for reliability and stability purposes resulting from the interconnection; however, current FERC policy requires the transmitting utility with which the new generator is interconnected to provide a credit against the cost of future transmission service from the facility in the amount of such network upgrades for which the generator has paid. The SMD NOPR proposes circumstances where a separate charge for
transmission service may not be assessed because the generator has paid for all resulting network upgrades. In that instance (generally referred to as "participant funding"), the credit concept may prove to be inapplicable.
Each Operating Company is interconnected with the transmission facilities of the other Operating Companies and Southern Electric Generating Company ("SEGCO"), a subsidiary of Alabama Power Company and Georgia Power Company, by means of high-voltage lines. Operating contracts set forth arrangements between the Operating Company and principal neighboring utility systems relating to capacity exchanges, capacity purchases and sales, transfers of energy and other similar transactions. Additionally, the Operating Companies have entered into voluntary reliability agreements with the subsidiaries of Entergy Corporation, Florida Electric Power Coordinating Group, Tennessee Valley Authority, Carolina Power & Light Company, Duke Energy Corporation, Southern Carolina Electric Gas Company and Virginia Electric and Power Company, each of which provides for the establishment and periodic review of principles and procedures for planning and operating generation and transmission facilities, maintenance schedules, load retention programs, emergency operations, and other matters affecting the reliability of bulk power supply. The Operating Companies have joined with other utilities in the Southeast (including those referred to above) to form the Southeast Electric Reliability Council ("SERC") to augment further the reliability and adequacy of bulk power supply. The Operating Companies are represented on the National Electric Reliability Council through SERC.
In addition to interconnection of the generating facilities to the transmission systems of the Operating Companies and other non-affiliated utilities, transmission capacity over the applicable transmission system must be reserved so that the generator output can be delivered. All of our existing PPAs place this responsibility on the PPA Counterparty.
In December 1999, the FERC issued its final rule on RTOs. The order encouraged utilities owning transmission systems to form RTOs on a voluntary basis. Southern has submitted a series of status reports informing the FERC of progress toward the development of a Southeastern RTO. In these status reports, Southern has explained that it is developing a for-profit RTO known as SeTrans with a number of non-jurisdictional cooperative and public power entities. In addition, the FERC jurisdictional entities of Entergy Corporation and Cleco Power recently joined the SeTrans development process. In January 2002, the sponsors of SeTrans held a public meeting to form a Stakeholder Advisory Committee, which will participate in the development of the RTO. On April 25, 2002, the Stakeholder Advisory Committee met and selected the candidates that will be considered for the SeTrans ISA. Southern continues to work with the sponsors to develop the SeTrans RTO. On June 27, 2002, Southern and the other SeTrans sponsors submitted a Petition for Declaratory Order seeking the FERC's guidance on various issues. The petition asks for a response from the FERC by October 2002.
In July 2002, FERC issued its SMD NOPR which, among other things, (1) proposed to require an independent entity to operate the transmission facilities of jurisdictional entities (which may or may not be SeTrans) and (2) proposed a type of new transmission service and new mechanisms to handle transmission expansion and transmission congestion.
INTERCOMPANY INTERCHANGE CONTRACT
The Intercompany Interchange Contract ("IIC") among the Operating Companies and us is an arrangement on file with the FERC that provides for the coordinated operation of the Southern Pool. Participants in the Southern Pool enjoy economies of scale, share geographic load diversity and maintain lower reserve levels than would be required on a stand-along basis. The IIC provides that Southern Pool members share the benefits and obligations of pooled operation, including equalization of capacity reserves.
Our PPAs constitute our load, and we are responsible for committing to the Southern Pool operations our integrated capacity resources (including appropriate reserves) installed to serve those PPAs. We are able to buy and sell temporary shortages or surpluses of energy, enjoy the benefit of shared reserves, and our supply obligations will be served out of the Southern Pool under economic dispatch. If we are unable to generate
sufficient energy to meet our obligations, we can buy power from the Southern Pool at the marginal energy cost.
Under the IIC, a Southern Pool member has first call on its own generating resources, but if cheaper sources of generation are available on the system, a Southern Pool member has the right to purchase that lower variable cost energy to satisfy its higher, fixed-price obligations.
The IIC has been approved by the FERC.
REGULATION
FEDERAL POWER ACT
The Federal Power Act gives the FERC exclusive rate-making jurisdiction over wholesale sales of electricity in interstate commerce. Pursuant to the Federal Power Act, all public utilities subject to the FERC's jurisdiction are required to file rate schedules with the FERC with respect to wholesale sales or transmission of electricity. Because we sell power in the wholesale markets, we are deemed to be a public utility for purposes of the Federal Power Act and are required to obtain the FERC's acceptance of our rate schedules (e.g. PPAs) for wholesale sales of electricity. We have received authorization from the FERC to sell energy at market-based rates. Such authority to sell power at market-based rates contemplates pricing for wholesale energy sales based upon arms-length bargaining and market transactions, thereby permitting the opportunity to earn entrepreneurial returns and minimizing rate setting uncertainty and administrative cost. The FERC is also authorized to order refunds if it finds that market-based rates are unreasonable.
The FERC is undertaking an industry-wide effort to reserve the right to suspend market-based rate authority on a retroactive basis if it is subsequently determined that we or any of our affiliates exercised market power. If the FERC were to suspend our market-based rate authority, it would likely be necessary to obtain the FERC's acceptance of rate schedules on a cost justified basis. In addition, the loss of market-based rate authority would subject us to the accounting, record-keeping and reporting requirements that are imposed on public utilities with cost-based rate schedules.
The nature of regulation of the electric power industry is such that changes in regulatory policies that affect us may occur. For example, in order to retain market-based rate authority, every three years an entity granted market-based rate authority must conduct analyses prescribed by the FERC to demonstrate that the utility does not have market power. As discussed under "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION -- FERC Matters", the FERC has indicated that it may revise these required analyses required to support market-based rate authority. The FERC's acceptance of many of our PPAs as market-based rate schedules is based upon these analyses demonstrating a lack of market power. If the analyses are changed, it may be more difficult to demonstrate a lack of market power in certain markets. We are required to submit quarterly reports to the FERC listing specific transactional data for sales from the prior quarter.
Our market-based rate authority does not extend to wholesale sales to affiliates. To date, all such PPAs with the Operating Companies have resulted from our selection through a competitive bidding process supervised by the appropriate state PSCs. The FERC has accepted those PPAs as market-based transactions based upon its finding that the rates are competitive with those offered by competing suppliers.
HOLDING COMPANY ACT
We are subject to regulation under the Holding Company Act as a wholly owned subsidiary of Southern, which is a registered public utility holding company. Under the restrictions of the Holding Company Act, we cannot issue debt or equity securities or guarantees without the approval of the SEC. We currently have approval to issue up to an aggregate amount of $2.5 billion of commercial paper, preferred securities, long and short-term debt and other equity issuances. Southern currently has approval to fund our development and growth up to an aggregate amount not to exceed $1.7 billion. Under the Holding Company Act, generally, we can invest only in traditional electric and gas utility businesses and related businesses. Our investments in exempt wholesale generators and foreign utility companies, as defined in the Holding Company Act, are
limited by the authority granted to us for securities issuances and Southern's authority to fund our development and growth. The acquisition of the voting stock of other gas or electric utilities is subject to prior SEC approval. In addition, the Holding Company Act requires that all of a registered holding company's utility subsidiaries constitute a single system that can be operated in an efficient, coordinated manner. This does not extend, however, to exempt wholesale generators or foreign utilities companies which are excluded from the definition of an electric utility company and public utility company, respectively, under the Holding Company Act. The Holding Company Act also imposes restrictions on transactions among affiliates.
STATE UTILITY REGULATION
We will sell electric energy exclusively for resale in interstate commerce subject to regulation by the FERC. Therefore, state PSC will not have traditional utility-type regulatory authority over our rates. However, the respective state PSCs do have broad powers of supervision and regulation over the Operating Companies and, therefore, can oversee aspects of transactions between the Operating Companies and us. Georgia PSC approval is still required for the McIntosh 10 and McIntosh 11 PPAs executed in 2002, but the balance of the PPAs with the Operating Companies have been approved by the appropriate state PSC. Power generation construction and operation will be subject to state and local licensing and permitting laws, as well as environmental regulation.
ENVIRONMENTAL REGULATION
Our operations are subject to federal, state and local environmental requirements which, among other things, regulate air emissions, water discharges, and the management of hazardous and solid waste in order to adequately protect the environment. We expect to comply with such requirements, which generally are becoming increasingly stringent, through technical improvements, the use of appropriate fuels, addition of environmental control facilities, changes in control techniques and, if necessary, reduction of the operating levels of generating facilities.
Clean Air Act programs such as Title IV (acid rain), attainment of the National Ambient Air Quality Standards for various non-attainment areas (to include Atlanta and Birmingham), the regional nitrogen oxide "SIP Call" intended to reduce nitrogen oxide emissions in certain regions of the Southeastern and Midwestern United States, control strategies to reduce regional haze, Compliance Assurance Monitoring, and the development of an emissions control program for Hazardous Air Pollutants all are in various stages of development and/or implementation by both the regulatory agencies and the regulated community. Depending upon the location of our generating facilities and the stage of development of implementation of these Clean Air Act requirements, it is possible that these and other environmental compliance requirements could result in high costs to us. To a large extent, the final cost of these programs will not be able to be determined until the results of legal challenges to these program are known and/or state regulations implementing the programs are developed.
The EPA and state environmental regulatory agencies are also reviewing and evaluating various other matters including: limits on pollutant discharges to impaired waters; cooling water intake restrictions; and hazardous waste disposal requirements. The impact of any new standards will depend on the development and implementation of applicable regulations.
Several major pieces of environmental legislation are periodically considered for reauthorization or amendment by Congress. These include: the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation and Liability Act; and the Endangered Species Act. Changes to these laws could affect many areas of our operations.
Compliance with possible additional legislation related to global climate change, electromagnetic fields, and other environmental and health concerns could significantly affect us. The impact of new legislation, if any, will depend on the subsequent development and implementation of applicable regulations. In addition, the potential exists for liability as a result of lawsuits alleging personal injury and property damages caused by potential impacts of electricity generation activities such as air pollution emissions, water pollution discharges or the presence of electric and magnetic fields.
We are unable to predict at this time what additional steps we may be required to take as a result of the implementation of existing or future control requirements for air, water and hazardous or toxic materials, but such steps could adversely affect operations and result in substantial additional costs. Failure to comply with such requirements could result in the complete shutdown of individual facilities not in compliance as well as the imposition of civil and criminal penalties.
EMPLOYEES
Currently, we do not have any employees. Employees of SCS, in coordination with our management who are also employees of SCS, currently run our day-to-day operations.
LITIGATION
Although we are not currently involved in any litigation, from time to time, we may be a party to various legal proceedings that arise in the ordinary course of business.
For a discussion of a mediation proceeding involving us and a former contractor and the resolution of such matter, please see Note 10 to our financial statements as of December 31, 2001 under "Contingencies" and Note M to our condensed consolidated financial statements as of June 30, 2002.
SUMMARY OF INDEPENDENT CONSULTANTS' REPORTS
In the preparation of the Independent Engineer's Report, the Independent Market Expert's Report and the opinions contained in the reports, the Independent Engineer and the Independent Market Expert have made the following qualifications about the information contained in their reports and the circumstances under which the reports were prepared: some information in the reports is necessarily based on predictions and estimates of future events and behaviors; such predictions or estimates may differ from that which other consultants specializing in the electricity industry might present; actual results may differ, perhaps materially, from those projected; the provision of the reports does not eliminate the need for you to make further inquiries as to the information included in the reports or to undertake your own analysis; the reports are not intended to be a complete and exhaustive analysis of the subject issues, and therefore may not consider some factors that are important to your decision; and nothing in the reports should be taken as a promise or guarantee as to the occurrence of any future events.
The Independent Engineer's Report and the Independent Market Expert's Report rely on assumptions regarding material contingencies and other matters that are not within our control or the control of Beck or PA Consulting or any other person. While each of Beck and PA Consulting believes its assumptions to be reasonable for purposes of preparing its respective report, these assumptions are inherently subject to significant uncertainties and actual results may differ materially from those projected. The predictions, estimates and assumptions that underlie these reports may also differ from those that other consultants specializing in the electric power industry might present.
SUMMARY OF THE INDEPENDENT ENGINEER'S REPORT
The Independent Engineer has prepared the Independent Engineer's Report dated June 13, 2002 a copy of which is attached as Annex A to this prospectus. Following is a summary of the conclusions reached by the Independent Engineer in the Independent Engineer's Report. The Independent Engineer's conclusions are subject to the assumptions and qualifications set forth in the Independent Engineer's Report, and you should read this summary in conjunction with the full text of the Independent Engineer's Report. All capitalized terms in this summary are defined in the attached Independent Engineer's Report.
The Independent Engineer has expressed the following opinions in the Independent Engineer's Report:
1. Provided Southern Power takes into account the recommendations in the geotechnical reports by Southern Geotech, the sites for the Generating Facilities are suitable for the construction and operation of the Generating Facilities.
2. Based on GE's previously demonstrated capability to address the issues similar to those related to the Frame 7FA described herein, the power generation technologies proposed for the Generating Facilities are sound, proven methods of energy recovery. If constructed, operated and maintained as proposed by Southern Power, the Generating Facilities should be capable of meeting the requirements of the Power Purchase Agreements and the currently applicable environmental permit requirements. Furthermore, all off-site requirements of the Generating Facilities have been adequately provided for, including fuel supply, water supply, wastewater disposal, and electrical interconnection.
3. The proposed method of design, construction, operation, and maintenance of the Generating Facilities has been developed in accordance with generally accepted industry practice and has taken into consideration the current environmental, license and permit requirements that the Generating Facilities must meet.
4. Based on Beck's review and provided that: (a) the units are operated and maintained by the operators in accordance with the policies and procedures as presented by Southern Power, (b) all required renewals and replacements are made on a timely basis as the units age, and (c) gas and oil burned by the units are within the expected range with respect to quantity and quality, the Generating Facilities should have useful lives of at least 20 years.
5. The performance guarantees proposed for the Generating Facilities under construction, if all the equipment contract guarantees are considered in their entirety, are similar to the performance tests of turnkey projects with which Beck is familiar.
6. The Generating Facilities should be capable of achieving the annual average output in full-pressure mode with power augmentation and the average annual net plant heat rates assumed in the Projected Operating Results.
7. The Generating Facilities should be capable of achieving the required average annual contract availabilities under the Power Purchase Agreements ranging from 96.5 to 97 percent, which exclude scheduled maintenance and allow Southern Power to replace the undelivered energy from another resource, and should also be capable of achieving an average annual availability of 92 percent, which includes provision for forced and scheduled maintenance.
8. The environmental site assessments performed by TTL, URS, ECT, and Williams related to the sites of the Generating Facilities were conducted in a manner consistent with industry standards, using comparable industry protocols for similar studies with which Beck is familiar.
9. Southern Power has identified the major permits and approvals necessary for the construction and operation of the Generating Facilities. While all of the required permits and approvals have not yet been obtained, Beck did not identify any technical or engineering circumstance that would prevent the issuance of the remaining permits and approvals.
10. Southern Power's estimates of the costs of operating and maintaining the Generating Facilities, including provision for major maintenance, are within the range of the costs of similar plants with which Beck is familiar.
11. For the Base Case Projected Operating Results, the projected revenues from the sale of electricity are adequate to pay annual operating and maintenance expenses (including major maintenance), fuel expense, and other operating expenses. Such revenues provide an annual interest coverage on the Debt of at least 3.28 times the annual interest requirement in each year during the term of the Notes and a weighted average coverage of 3.61 times the annual interest requirement on the Debt over the term of the Notes. There is insufficient cash available after the payment of interest to repay the entire principal due on the Debt upon maturity. Southern Power has assumed that the Debt will be refinanced upon maturity.
SUMMARY OF THE INDEPENDENT MARKET EXPERT'S REPORT
PA Consulting Group, Inc. ("PA Consulting"), the independent market consultant, has prepared an Independent Market Expert's Report dated June 5, 2002, a copy of which is attached as Annex B to this prospectus.
Southern Power owns or has ownership interests in companies with 4,777 MW of generation capacity. 4,366 MW are in the Southeastern Electric Reliability Council ("SERC") market and 411 MW are in the Florida Reliability Coordinating Council ("FRCC") market.
Some information in the report is necessarily based on predictions and estimates of future events and behaviors, such predictions or estimates may differ from that which other consultants specializing in the electricity industry might present, the provision of a report by PA Consulting does not obviate the need for potential investors to make further appropriate inquiries as to the accuracy of the information included therein, or to undertake an analysis of their own. The report is not intended to be a complete and exhaustive analysis of the subject issues and therefore will not consider some factors that are important to a potential investor's decision making. PA Consulting and its employees cannot accept liability for loss suffered in consequence of reliance on the Market Expert's Report. Nothing in PA Consulting's report should be taken as a promise or guarantee as to the occurrence of any future events.
Market Description
Over the past two decades, the structure of the electric power industry has been increasingly shaped by the emergence of a prevailing market trend in the networked industries, namely the introduction of competition in formerly regulated markets. The SERC and FRCC markets are both bilateral markets, whereby seller and purchasers come together via contracts for the delivery of capacity and/or energy and the associated ancillary services.
Forecasting Methodology
The following is PA Consulting's description of its forecasting methodology.
PA Consulting has developed a proprietary approach to market valuation and price forecasting. This market valuation process (MVP) applies best practice forecasting principles and leverages deep insight into energy market dynamics to deliver sound independent results. PA Consulting's proprietary Merchant Generation Database serves as the backbone of this process by ensuring that PA Consulting's opinion is supported by an accurate view of the ever-changing merchant energy market landscape.
For this study, PA Consulting utilized a 4 step process:
1. Review market characteristics.
2. Establish market assumptions.
3. Complete baseline fundamental analysis results in overall market projections.
4. Dispatch the plants against the prices developed in the fundamental model.
Key Assumptions
There are many important assumptions in the development of the price projections, including but not limited to demand growth, fuel prices, and capacity additions and retirements. Variations in these three factors, as well as other assumptions, can lead to significant variations in the end price results. PA Consulting has tested the forecasts for variations of these three assumptions, which represent the high fuel, low fuel, and overbuild sensitivity cases.
Another key fundamental assumption on which this analysis is based is the concept of a competitive wholesale market. These results are based on the assumptions that rational markets for electricity exist, that markets are attempting to adjust to economic equilibrium, and that market players make decisions based on sound economic judgment.
Results and Sensitivities
PA Consulting developed three sensitivity cases. These sensitivity cases are intended to provide an indication as to how changes in certain input parameters such as fuel prices and new capacity additions affect forecasted price results. These sensitivities are not intended to be bounding, or worst case scenarios. Their purpose is to determine the impact of an assumed change on the price forecast results. The magnitude of the changes in input parameters may be greater than or less than those assumed in the sensitivities. The three sensitivity cases evaluated are as follows:
- The low fuel case evaluates the effects of lower gas and oil prices represented as a $0.50/MMBtu reduction in the 2002 consensus gas and oil prices with escalation remaining unchanged (coal prices are not changed).
- The high fuel case evaluates the effects of higher gas and oil prices represented as a $0.50/MMBtu increase in the 2002 gas and oil prices with escalation remaining unchanged (coal prices are not changed).
- The overbuild case evaluates an over-exuberance of merchant plant development in the regions reviewed. In addition to the base case merchant capacity, the overbuild case assumes that additional capacity is constructed.
OUR MANAGEMENT
Our directors and executive officers and their ages are as follows:
NAME AGE POSITION
---- --- --------
W. Paul Bowers............................ 45 President, Chief Executive Officer and
Director
H. Allen Franklin......................... 57 Director
Gale E. Klappa............................ 51 Director
Charles D. McCrary........................ 50 Director
David M. Ratcliffe........................ 53 Director
Robert G. Moore........................... 52 Senior Vice President
Cliff S. Thrasher......................... 52 Vice President, Comptroller and Chief
Financial Officer
Anthony J. Topazi......................... 51 Vice President
|
Currently, some of our directors and executive officers are also directors and officers of Southern or one of its subsidiaries other than Southern Power Company.
W. Paul Bowers -- President, Chief Executive Officer and Director since May 2001; Executive Vice President of SCS since May 2001. Previously served as Senior Vice President of SCS and Chief Marketing Officer of Southern from March 2000 to May 2001; President and Chief Executive Officer of Western Power Distribution, a subsidiary of Mirant Corporation ("Mirant") located in Bristol, England from December 1998 to 2000; and Senior Vice President of Retail Marketing for Georgia Power Company from 1995 to 1998.
H. Allen Franklin -- Director since January 2001; Chairman, President and Chief Executive Officer of Southern since April 2001. Previously served as President and Chief Executive Officer from March 2001 to April 2001; President and Chief Operating Officer of Southern from June 1999 to March 2001; and Executive Vice President of Southern and President and Chief Executive Officer of Georgia Power Company from January 1994 to June 1999. Mr. Franklin is a director of SouthTrust Corporation, Vulcan Materials Company, and Southern System companies -- Southern, Alabama Power Company, Georgia Power Company and Gulf Power Company.
Gale E. Klappa -- Director since May 2001; Executive Vice President; Chief Financial Officer and Treasurer of Southern since May 2001. Previously served as Financial Vice President, Chief Financial Officer and Treasurer of Southern from March 2001 to May 2001; Senior Vice President and Chief Strategic Officer of Southern from October 1999 to March 2001; President of Mirant's North America Group and Senior Vice President of Mirant from December 1998 to October 1999; and President and Chief Executive Officer of Western Power Distribution, a subsidiary of Mirant located in Bristol, England, from September 1995 to December 1998.
Charles D. McCrary -- Director since January 2001; Executive Vice President of Southern since February 2002 and President and Chief Executive Officer of Alabama Power Company since January 2002. Previously served as President and Chief Operating Officer of Alabama Power Company from May 2001 to October 2001; Vice President of Southern from February 1998 to April 2001; and Executive Vice President of Alabama Power Company from April 1994 to February 1998. Mr. McCrary is a director of AmSouth Banccorporation and Alabama Power Company.
David M. Ratcliffe -- Director since January 2001; Executive Vice President of Southern since 1999 and President and Chief Executive Officer of Georgia Power Company since June 1999. Previously served as Executive Vice President, Treasurer and Chief Financial Officer of Georgia Power Company from March 1998 to June 1999; and Senior Vice President of Southern from March 1995 to March 1998. Mr. Ratcliffe is a director of Mississippi Chemical Company and Georgia Power Company.
Robert G. Moore -- Senior Vice President since January 2002; Vice President of Gulf Power Company since July 1997; and Vice President of Fossil Generation of SCS since July 1998. Previously served as Plant Manager of Plant Bowen at Georgia Power Company from March 1993 to August 1997.
Cliff S. Thrasher -- Vice President, Comptroller and Chief Financial Officer since June 2002; Vice President of SCS since June 2002; Vice President, Comptroller and Chief Accounting Officer of Georgia Power Company since September 1995.
Anthony J. Topazi -- Vice President since March 2001; Vice President of SCS since December 1999. Previously served as Vice President of Alabama Power Company from April 1995 to December 1999.
EXECUTIVE COMPENSATION
EMPLOYMENT, CHANGE IN CONTROL, AND SEPARATION AGREEMENTS
Our officers are employees of SCS. As a result, the Southern Company Executive Change in Control Severance Plan, is applicable to certain of our officers. We have entered into an individual Change in Control Agreement with Mr. Bowers. If an executive officer is involuntarily terminated, other than for cause, within two years following a change in control of our company, the agreements provide for:
- lump sum payment of two or three times annual compensation,
- up to five years' coverage under group health and life insurance plans,
- immediate vesting of all stock options previously granted,
- payment of any accrued long-term and short-term bonuses and dividend equivalents, and
- payment of any excise tax liability incurred as a result of payments made under the agreement.
A change in control is defined under the agreements as:
- acquisition of at least 20 percent of Southern's stock,
- a change in the majority of the members of Southern's Board of Directors,
- a merger or other business combination that results in Southern's stockholders immediately before the merger owning less than 65 percent of the voting power after the merger, or
- a sale of substantially all the assets of Southern.
If a change in control affects only a subsidiary of Southern, these payments would only be made to executives of the affected subsidiary who are involuntarily terminated as a result of that change in control.
SUMMARY COMPENSATION TABLE
This table shows information concerning our executive officers serving during 2001.(1)
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION NUMBER OF
-------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($) (#) ($)(2)
------------------ ---- ------- ------- ------------ ------------- ------------
W. Paul Bowers................... 2001 273,758 273,630 3,072 51,740 39,542
President & Chief Executive
Officer
Carson B. Harreld Jr.(3)......... 2001 204,132 123,944 811 47,616 110,053
Vice President, Comptroller &
Chief Financial Officer
Robert G. Moore.................. 2001 189,095 146,694 10,253 31,589 27,965
Senior Vice President
Anthony J. Topazi................ 2001 237,095 185,293 112,839 49,800 213,144
Vice President
Cliff S. Thrasher(4)............. 2001 171,357 128,636 1,807 32,665 8,559
Vice President, Comptroller and
Chief Financial Officer
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(1) This table reports compensation of the named executives for all of 2001, our first fiscal year.
(2) Contributions in 2001 to the Employee Savings Plan and Employee Stock Ownership Plan, non-pension related accruals under the Supplemental Benefit Plan, and tax sharing benefits paid to participants who elected receipt of dividends on Southern common stock held in the Employee Savings Plan are provided in the following table:
ESP TAX
SHARING
BENEFIT ESP($) ESOP($) SBP($)
------- ------ ------- ------
W. Paul Bowers..................................... -- 5,598 764 8,440
Carson B. Harreld Jr............................... 1,053 6,600 -- 2,400
Robert G. Moore.................................... 2,939 6,853 764 2,409
Anthony J. Topazi.................................. 748 6,853 764 4,779
Cliff S. Thrasher.................................. -- 6,646 764 1,149
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This amount also includes additional incentive compensation for Messers. Bowers, Harreld, Moore and Topazi of $24,380, $100,000, $15,000 and $200,000, respectively.
(3) Mr. Harreld was an executive officer of our company on December 31, 2001; however, he has not served as an executive officer since June 9, 2002. On May 28, 2002, he was elected Senior Vice President of SCS.
(4) During 2001, Mr. Thrasher served as Vice President, Comptroller and Chief Accounting Officer of Georgia Power Company.
STOCK OPTION GRANTS IN 2001
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF
SECURITIES PERCENT OF TOTAL GRANT
UNDERLYING OPTIONS GRANTED EXERCISE OF DATE
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR(2) ($/SH)(1) DATE(1) VALUE($)(3)
---- ----------- ---------------- ----------- ---------- -----------
W. Paul Bowers................... 25,561 .19 19.08 2/16/2011 135,491
26,179 .19 22.43 4/16/2011 138,749
Carson B. Harreld Jr. ........... 20,968 .15 19.08 2/16/2011 111,145
26,648 .20 22.43 4/16/2011 141,253
Robert G. Moore.................. 16,640 .12 19.08 2/16/2011 88,192
14,949 .11 22.43 4/16/2011 79,230
Anthony J. Topazi................ 25,077 .18 19.08 2/16/2011 132,908
24,723 .18 22.43 4/16/2011 131,032
Cliff S. Thrasher................ 15,880 .12 19.08 2/16/2011 84,164
16,785 .12 22.43 4/16/2011 88,961
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(1) Southern stock option grants were made on February 16, 2001 and April 16, 2001, and vest annually at a rate of one-third on the anniversary date of the grant. Grants fully vest upon termination as a result of death, total disability, or retirement and expire five years after retirement, three years after death or total disability, or their normal expiration date if earlier. Exercise price is the average of the high and low price of Southern's common stock on the date granted. Options may be transferred to certain family members, family trusts, and family limited partnerships. The number of options granted on February 16, 2001, and the exercise price thereof were adjusted after the spin off of Mirant Corporation under the anti-dilution provisions of the plan such that the options had the same aggregate intrinsic value on the day of the spin off as the day before.
(2) A total of 13,623,507 stock options were granted in 2001 by Southern.
(3) Value was calculated using the Black-Scholes option valuation model. The actual value, if any, ultimately realized depends on the market value of Southern's common stock at a future date. Significant assumptions are shown below:
DISCOUNT FOR
FORFEITURE RISK:
-----------------------------
GRANT RISK-FREE RATE DIVIDEND BEFORE BEFORE
DATE VOLATILITY OF RETURN OPPORTUNITY TERM VESTING EXPIRATION
----- ---------- -------------- ----------- ---- ---------------- ----------
2/16/2001 27.34% 5.10% 50% 10 7.79% 12.45%
4/16/2001 26.11% 5.14% 50% 10 7.79% 11.77%
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These assumptions reflect the effects of cash dividend equivalents paid to participants under the Omnibus Incentive Compensation Plan assuming targets are met.
AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF VALUE OPTIONS AT YEAR-END(#) YEAR-END($)(2)
SHARES ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
W. Paul Bowers........ 10,570 104,401 45,004 74,783 459,597 475,106
Carson B. Harreld
Jr. ................ 20,377 193,681 19,037 44,326 97,010 266,720
Robert G. Moore....... Not exercised -- 28,209 48,274 279,385 319,857
Anthony J. Topazi..... 15,703 173,654 35,825 72,517 355,546 464,810
Cliff S. Thrasher..... 13,532 124,580 124,972 44,569 248,099 270,379
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(1) The "Value Realized" is ordinary income, before taxes, and represents the amount equal to the excess of the fair market value of the shares at the time of exercise above the exercise price.
(2) These columns represent the excess of the fair market value of Southern's common stock of $25.35 per share, as of December 31, 2001, above the exercise price of the options. The amounts under the Exercisable column report the "value" of options that are vested and therefore could be exercised. The Unexercisable column reports the "value" of options that are not vested and therefore could not be exercised as of December 31, 2001.
PENSION PLAN TABLE
YEARS OF ACCREDITED SERVICE
COMPENSATION 15 20 25 30 35 40 45 ------------ -------- -------- -------- -------- -------- -------- -------- $100,000 $ 25,500 $ 34,000 $ 42,500 $ 51,000 $ 59,500 $ 68,000 $ 76,500 300,000 76,500 102,000 127,500 153,000 178,500 204,000 229,500 500,000 127,500 170,000 212,500 255,000 297,500 340,000 382,500 700,000 178,500 238,000 297,500 357,000 416,500 476,000 535,500 900,000 229,500 306,000 382,500 459,000 535,500 612,000 688,500 |
This table shows the estimated annual pension benefits payable at normal retirement age under Southern's qualified Pension Plan, as well as non-qualified supplemental benefits, based on the stated compensation and years of service with Southern's subsidiaries. Compensation for pension purposes is limited to the average of the highest three of the final 10 years' compensation. Compensation is base salary plus the excess of annual incentive compensation over 15 percent of base salary. These compensation components are reported under the columns titled "Salary" and "Bonus" in the Summary Compensation Table on page .
As of December 31, 2001, the applicable compensation levels and accredited service for determination of pension benefits would have been:
ACCREDITED
COMPENSATION SERVICE
------------ ----------
W. Paul Bowers.............................................. 414,907 22
Carson B. Harreld Jr.(1) ................................... 320,484 28
Robert G. Moore............................................. 287,068 28
Anthony J. Topazi........................................... 355,864 31
Cliff S. Thrasher........................................... 254,256 30
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The amounts shown in the table were calculated according to the final average pay formula and are based on a single life annuity without reduction for joint and survivor annuities or computation of Social Security offset that would apply in most cases.
(1) The number of years of accredited service includes 10 years credited to Mr. Harreld pursuant to a supplemental pension agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPANTS
We do not have a compensation committee and there is no other committee of the board that performs similar functions. The Compensation and Management Succession Committee of the Southern board considered compensation matters with respect to our executive officers. None of our executive officers serve on the boards of other Southern subsidiaries whose executive officers serve on our board.
DIRECTOR COMPENSATION
The members of the board are officers of SCS or other subsidiaries of Southern, and they do not receive any compensation for serving on our board.
STOCK OWNERSHIP TABLE
This table shows the number of shares of Southern's common stock owned by directors, nominees, and executive officers as of June 30, 2002. The shares owned by all directors, nominees, and executive officers as a group constitute less than one percent of the total number of shares of the class. The number of shares of Southern common stock outstanding as of June 30, 2002 was 708,105,837.
SHARES
BENEFICIALLY
OWNED
INCLUDE:
--------------
SHARES
INDIVIDUALS
SHARES HAVE RIGHTS TO
BENEFICIALLY ACQUIRE WITHIN
TITLE OF SECURITY OWNED(1) 60 DAYS(2)
--------------------- ------------ --------------
W. Paul Bowers............................... Southern Common Stock 66,537 60,083
H. Allen Franklin............................ Southern Common Stock 476,036 437,551
Gale E. Klappa............................... Southern Common Stock 116,511 92,620
Charles D. McCrary........................... Southern Common Stock 130,991 128,028
Robert G. Moore.............................. Southern Common Stock 44,454 30,295
David M. Ratcliffe........................... Southern Common Stock 163,082 151,025
Cliff S. Thrasher............................ Southern Common Stock 20,625 16,115
Anthony J. Topazi............................ Southern Common Stock 70,265 57,009
Directors, Nominees, and Executive Officers Southern Common Stock 1,088,501 972,726
as a Group (8 people)......................
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(1) "Beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or investment power with respect to a security, or any combination thereof.
(2) Indicates shares of Southern's common stock that directors and executive officers have the right to acquire within 60 days. Shares indicated are included in the Shares Beneficially Owned column.
THE OPERATING COMPANIES
The Operating Companies consist of Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company and Savannah Electric and Power Company, each of which is an operating public utility company and a wholly owned subsidiary of Southern.
Alabama Power Company is engaged, within the State of Alabama, in the generation and purchase of electricity and the distribution and sale of such electricity at retail in over 1,000 communities and at wholesale to 15 municipally owned electric distribution systems and two rural distributing cooperative associations. Alabama Power Company serves 1.3 million homes, businesses and industries in the southern two-thirds of Alabama. More than 78,000 miles of power lines carry electricity to customers throughout 44,500 square miles.
Georgia Power Company is engaged in the generation and purchase of electric energy and the distribution and sale of such electricity within the State of Georgia at retail in over 600 communities, as well as in rural areas, and at wholesale currently to 39 rural cooperative associations and to 50 municipalities. Georgia Power Company serves customers in 57,000 of the state's 59,000 square miles. Georgia Power Company's 1.8 million customers are in all but six of Georgia's 159 counties.
Gulf Power Company is engaged in the generation and purchase of electricity and the distribution and sale of such electricity in Northwest Florida at retail to more than 373,000 customers directly and 13,000 indirectly through a nonaffiliated utility and a municipality. Gulf Power Company maintains 139 substations, 1,562 miles of transmission lines and 6,673 miles of distribution lines.
Mississippi Power Company is engaged in the generation and purchase of electricity and the distribution and sale of such energy to more than 191,000 customers in 23 counties in Southeastern Mississippi, at retail in 123 communities, as well as in rural areas, and at wholesale to one municipality, six rural electric distribution cooperative associations and one generating and transmitting cooperative. To deliver electricity to its customers, Mississippi Power Company maintains 157 substations, more than 2,080 miles of transmission lines, 6,854 miles of primary overhead lines, and 390 miles of primary underground lines.
Savannah Electric and Power Company is engaged in the generation and purchase of electricity and the distribution and sale of electricity at retail and the transmission and sale of wholesale energy. Savannah Electric and Power Company has approximately 250,000 customers in a five-county, 2,000 square-mile region in Eastern Georgia, including the City of Savannah and its surrounding area. Savannah Electric and Power Company maintains 89 substations, 457 miles of transmission lines and 3,243 miles of distribution lines.
Alabama Power Company and Georgia Power Company each own 50% of the outstanding stock of Southern Electric Generating Company ("SEGCO"). SEGCO owns electric generating units near Wilsonville, Alabama with an aggregate capacity of approximately 1,020 megawatts. Alabama Power Company and Georgia Power Company are each entitled to one-half of SEGCO's capacity and energy.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSFER OF ASSETS
Substantially all of our operating or under construction generating facilities were transferred from the Operating Companies. The Dahlberg units were transferred to us from Georgia Power Company in July 2001. In connection with such transfer, the PPAs with LEM and Dynegy Power for Dahlberg were assigned to us.
In June 2001, Alabama Power Company transferred the Harris plant site and assigned the related vendor contracts to us. Alabama Power Company also transferred its interest in the Goat Rock site (which was subsequently renamed the Franklin site) to us at that time. In July 2001, Georgia Power Company transferred Dahlberg to us and assigned us three related PPAs with non-affiliated entities. In November 2001, Georgia Power Company transferred to us its interests in the Franklin site, including land and construction work in progress and assigned us the related vendor contracts. In January 2002, Georgia Power Company transferred the construction work in progress for Wansley 6 and 7 to us. See Notes B and I to our condensed consolidated financial statements and Note 2 to our consolidated financial statements herein for additional information related to these asset transfers.
Certain keep-well agreements were created to facilitate the assignment of specific partially executory vendor contracts to our company. As of June 30, 2002, Southern keep-well agreements were in place to facilitate the transfer of specific vendor contracts from Alabama Power Company to our company related to the Harris construction. Southern keep-wells are also in place for the transfer of specific vendor contracts from Georgia Power Company to the company for the operation of Dahlberg and construction at the Franklin and Stanton sites. As of June 30, 2002, the keep-well agreements have estimated values of $2 million for the Alabama Power Company contracts and $32.6 million related to the Georgia Power Company contracts.
POWER PURCHASE AGREEMENTS
Several of the Operating Companies are parties to PPAs with us. See "OUR BUSINESS -- Existing and Approved Power Purchase Agreements" and "-- Power Purchase Agreements and Requirements Agreements Subject to Approval."
SERVICES AGREEMENTS
We have signed a services agreement with SCS to provide administrative services, including project management of the construction process for each of our generating facilities. See "OUR BUSINESS -- Southern Company Services Management of Construction." As each new facility is placed into commercial operation in an Operating Company's service territory, such Operating Company will provide O&M services at cost under the terms of an O&M contract. SCS may provide O&M services for facilities outside of the Operating Companies' service territory similar to that provided for Stanton A. See "OUR BUSINESS -- Operation and Maintenance."
INTERCONNECTION AGREEMENTS
For each new generating facility, we will have an Interconnection Agreement with the applicable transmission provider. See "OUR BUSINESS -- Transmission and Interconnection." Southern has guaranteed our obligations to Alabama under Interconnection Agreements for Franklin 1, Franklin 2, Harris 1, Harris 2, Wansley 6, Wansley 7 and the aggregate amount of these guarantees is $13.4 million.
INTERCOMPANY INTERCHANGE CONTRACT
As a member of the Southern Pool, we are a party to the IIC and share in the benefits and obligations of that arrangement. See "OUR BUSINESS -- Intercompany Interchange Contract."
CAPITAL CONTRIBUTIONS, SUBORDINATED LOANS AND GUARANTEES
The total capital contributions and subordinated loans to us from Southern were $894 million as of June 30, 2002. We have not paid any dividends to Southern since the date of our incorporation. Additionally, Southern has (i) guaranteed certain obligations of Southern Power-Florida under the PPAs related to Stanton and (ii) executed the Completion Guarantee in connection with our Credit Facility. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- LIQUIDITY AND CAPITAL RESOURCES."
TAX SHARING AGREEMENT
We file a consolidated federal tax return with Southern and Southern's subsidiaries. The consolidated tax liability is allocated among the parties in accordance with an Income Tax Allocation Agreement. The agreement provides an equitable method for determining the share of each party's consolidated federal tax burdens and benefits to be attributed to each party.
OTHER KEEP-WELL ARRANGEMENTS
Certain other keep-well arrangements were entered into in order to enhance the efficiency and flexibility of the energy sales and related natural gas procurements function. Acting as agent for the Operating Companies and our company under agency agreements ("Agreements"), SCS may enter into various types of wholesale energy and natural gas contracts. Under such Agreements, each of the Operating Companies may be jointly and severally liable for the obligations of each of the other Operating Companies and us. In that regard, the creditworthiness of our company is currently inferior to the creditworthiness of the other Operating Companies. To insure that such other Operating Companies will not subsidize or be responsible for any costs, losses, liabilities or damages arising out of or resulting from our company's inclusion as a contracting party under the Agreements, Southern has entered into a keep-well agreement with each of the other Operating Companies.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We sold the Original Senior Notes on June 18, 2002 to the initial purchasers with further distribution permitted only to (i) "qualified institutional buyers" under Rule 144A under the Securities Act, (ii) "institutional accredited investors" under Rule 501(a)(1), (2), (3) or (7) under the Securities Act and (iii) non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act. In connection with the sale of the Original Senior Notes, we and the initial purchasers entered into a Registration Rights Agreement, dated June 18, 2002, which requires us to use our best efforts to consummate a registered offer to exchange the Original Senior Notes for Exchange Senior Notes, identical in all material respects to the Original Senior Notes except for certain transfer restrictions and registration rights related to the outstanding Original Senior Notes. We will keep the Exchange Offer open for not less than 20 business days and not more than 30 business days after the date notice of the Exchange Offer is mailed to the holders. A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement of which this prospectus is a part. The Exchange Offer is being made pursuant to the Registration Rights Agreement to satisfy our obligations thereunder.
Based on SEC staff interpretations contained in several no-action letters regarding similar exchange offers, we believe that, except as described below, the Exchange Senior Notes issued pursuant to the Exchange Offer in exchange for Original Senior Notes may be offered for resale, resold and otherwise transferred by any holder of the Exchange Senior Notes (other than any holder which is a broker-dealer or an
"affiliate" of our company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:
(i) you acquired such Exchange Senior Notes in the ordinary course of your business;
(ii) you have no arrangement or understanding with any person to participate in the distribution of such Exchange Senior Notes; and
(iii) you are not engaged in, and do not intend to engage in, a distribution of such Exchange Senior Notes.
By tendering Original Senior Notes for Exchange Senior Notes, you will represent to us that, among other things:
(i) the Exchange Senior Notes issued in the Exchange Offer are being acquired in the ordinary course of business of the person receiving the Exchange Senior Notes, whether or not such person is the holder;
(ii) neither you nor any such other person is engaging in or intends to engage in or has an arrangement or understanding with any person to participate in a distribution of such Exchange Senior Notes within the meaning of the Securities Act;
(iii) neither you nor any such other person is an affiliate of our company, or if you or such other person is an affiliate of our company, you or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; and
(iv) you are not a broker-dealer, or if you are a broker-dealer, that you will receive the Exchange Senior Notes for your own account, you will deliver a prospectus on resale of your Exchange Senior Notes and you acquired your Original Senior Notes as a result of market-making activities or other trading activities.
In the event that you cannot make the requisite representations to us, you cannot rely on such interpretations by the staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Unless an exemption from registration is otherwise available, any such resale transaction should be covered by an effective registration statement containing the selling securityholder information required by Item 507 of Regulation S-K under the Securities Act. This prospectus may be used for an offer to resell, resale or other retransfer of Exchange Senior Notes only as specifically set forth herein.
As noted above, we base our belief on interpretations by the SEC staff in no-action letters issued to other issuers in exchange offers like ours. We have not, however, asked the SEC to consider this particular Exchange Offer in the context of a no-action letter. Therefore, you cannot be sure that the SEC will treat this Exchange Offer in the same way it has treated other exchange offers in the past. If our belief is wrong, you could incur liabilities under the Securities Act. We will not protect you against any loss incurred as a result of this liability under the Securities Act.
Each broker-dealer that receives Exchange Senior Notes for its own account in exchange for Original Senior Notes, where such Original Senior Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Senior Notes. See "PLAN OF DISTRIBUTION."
Pursuant to the Registration Rights Agreement, there are circumstances where we are required to file a shelf registration statement for resale of Original Senior Notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus and in the Letter of Transmittal, we will accept for exchange any and all Original Senior Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. You should read
"-- Expiration Date; Extensions; Amendments" below for an explanation of how the Expiration Date may be amended.
Holders may exchange some or all of their Original Senior Notes in denominations of $1,000 and integral multiples thereof. We will issue and deliver $1,000 principal amount of Exchange Senior Notes in exchange for each $1,000 principal amount of outstanding Original Senior Notes accepted in the Exchange Offer.
The form and terms of the Exchange Senior Notes will be the same as the form and terms of the Original Senior Notes except the Exchange Senior Notes will be registered under the Securities Act and therefore will not bear legends restricting the transfer thereof. The Exchange Senior Notes will evidence the same debt as the Original Senior Notes. The Exchange Senior Notes will be issued under and entitled to the benefits of the Indenture, dated June 1, 2002 between us and The Bank of New York, as Trustee, and supplemented by the First Supplemental Indenture dated June 18, 2002 which also authorized the issuance of the Original Senior Notes, such that both series will be treated as a single class of debt securities under the Indenture.
As of the date of this prospectus, $575 million aggregate principal amount of the Original Senior Notes is outstanding. This prospectus, together with the Letter of Transmittal, is being sent to all registered holders of Original Senior Notes. There will be no fixed record date for determining registered holders of Original Senior Notes entitled to participate in the Exchange Offer. The Exchange Offer is not conditioned upon any minimum principal amount of Original Senior Notes being tendered for exchange. However, the obligation to accept Original Senior Notes for exchange pursuant to the Exchange Offer is subject to certain conditions, as described under "-- Conditions."
We intend to conduct the Exchange Offer in accordance with the provisions of the Registration Rights Agreement and the applicable requirements of the Exchange Act, and the rules and regulations of the SEC thereunder. Original Senior Notes which are not tendered for exchange in the Exchange Offer will remain outstanding and continue to accrue interest and will be entitled to the rights and benefits such holders have under the Indenture and the Registration Rights Agreement.
We will be deemed to have accepted for exchange properly tendered Original Senior Notes when, as and if we have given oral or written notice thereof to the Exchange Agent and complied with the provisions of the Indenture. The Exchange Agent will act as agent for the tendering holders for the purposes of receiving the Exchange Senior Notes from us.
If you tender Original Senior Notes in the Exchange Offer you will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Original Senior Notes pursuant to the Exchange Offer. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on , 200 , unless we, in our sole discretion, extend the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date to which the Exchange Offer is extended. If the Exchange Offer is not completed by March 17, 2003, the interest rate on the Original Senior Notes shall be increased by 50 basis points per annum. We will pay such additional interest on regular interest payment dates. Such additional interest will be in addition to any other interest payable from time to time with respect to the Original Senior Notes.
If we extend the Exchange Offer, we will notify the Exchange Agent of any extension by oral or written notice and will mail to the holders an announcement thereof, prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date.
We reserve the right, in our sole discretion, (i) to delay accepting any Original Senior Notes, to extend the Exchange Offer or to terminate the Exchange Offer and not permit acceptance of Original Senior Notes
not previously accepted, if any of the conditions set forth below under "-- Conditions" have not been satisfied, by giving oral or written notice of the delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner which, in our good faith judgment, is advantageous to the holders of the Original Senior Notes, whether before or after any tender of the Exchange Senior Notes. Any delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the holders. If the Exchange Offer is amended in a manner determined by us to constitute a material change, we will promptly notify holders of the amendment by means of a prospectus supplement that will be distributed to the registered holders, if required by law, and we will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period.
INTEREST ON THE EXCHANGE SENIOR NOTES
The Exchange Senior Notes will bear interest at 6.25% per year. Interest on the Exchange Senior Notes will be payable semi-annually, in arrears, on January 15 and July 15 of each year, commencing on January 15, 2003. Interest on the Exchange Senior Notes will accrue from the last interest payment date on which interest was paid on the Original Senior Notes surrendered in exchange therefor or, if no interest has been paid on the Original Senior Notes, from the date of the original issuance of the Original Senior Notes.
CONDITIONS
Prior to the Expiration Date, we may terminate the Exchange Offer if:
(a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in our judgment, might materially impair our ability to proceed with the Exchange Offer, or
(b) any law, statute, rule or regulation is proposed, adopted or enacted, or any existing law, statute, rule or regulation is interpreted by the staff of the SEC, which, in our judgment, might materially impair our ability to proceed with the Exchange Offer, or
(c) any governmental approval has not been obtained, which approval we shall, in our discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby.
If we determine in our discretion that any of these conditions are not satisfied, we may (i) refuse to accept any Original Senior Notes and return all tendered Original Senior Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Original Senior Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders who tendered such Original Senior Notes to withdraw their tendered Original Senior Notes, or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Original Senior Notes which have not been withdrawn.
The foregoing conditions are for our benefit and may be asserted by us regardless of the circumstances giving rise to any such condition or may be waived by us in whole or in part at any time and from time to time in our discretion prior to the Expiration Date. Our failure at any time to exercise any of our rights shall not be deemed a waiver of any such right, and each such right will be deemed an ongoing right which may be asserted at any time and from time to time.
PROCEDURES FOR TENDERING
BOOK-ENTRY INTERESTS
The Original Senior Notes sold to "qualified institutional buyers" under Rule 144A under the Securities Act and to non-U.S. persons in offshore transactions under Regulation S under the Securities Act were issued as global securities in fully registered form without interest coupons. Beneficial interests in the global securities, held by direct or indirect participants in DTC, are shown on, and transfers of these interests are effected only through, records maintained in book-entry form by DTC with respect to its participants.
If you hold your Original Senior Notes in the form of book-entry interests and you wish to tender your Original Senior Notes for exchange pursuant to the Exchange Offer, you must transmit to the Exchange Agent on or prior to the Expiration Date either:
(1) a written or facsimile copy of a properly completed and duly executed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to the Exchange Agent at the address set forth on the cover page of the Letter of Transmittal; or
(2) a computer-generated message transmitted by means of DTC's Automated Tender Offer Program system and received by the Exchange Agent and forming a part of a confirmation of book-entry transfer, in which you acknowledge and agree to be bound by the terms of the Letter of Transmittal.
In addition, in order to deliver Original Senior Notes held in the form of book-entry interests:
(1) a timely confirmation of book-entry transfer of such Original Senior Notes into the Exchange Agent's account at DTC pursuant to the procedure for book-entry transfers described below under "-- Book-Entry Transfer" must be received by the Exchange Agent prior to the Expiration Date; or
(2) you must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF ORIGINAL SENIOR NOTES AND THE LETTER OF TRANSMITTAL FOR YOUR ORIGINAL SENIOR NOTES AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR ORIGINAL SENIOR NOTES TO US. YOU MAY REQUEST YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY, OR NOMINEE TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.
CERTIFICATED ORIGINAL SENIOR NOTES
The Original Senior Notes sold to "institutional accredited investors" under Rule 501(a)(1), (2), (3) or (7) under the Securities Act were issued in certificated fully registered form without coupons. Only registered holders of certificated Original Senior Notes may tender those Original Senior Notes in the Exchange Offer. If your Original Senior Notes are certificated and you wish to tender those Original Senior Notes for exchange pursuant to the Exchange Offer, you must transmit to the Exchange Agent on or prior to the Expiration Date a written or facsimile copy of a properly completed and duly executed Letter of Transmittal, including all other required documents, to the the Exchange Agent at the address set forth on the cover page of the Letter of Transmittal. In addition, in order to validly tender your certificated Original Senior Notes:
(1) the certificates representing your Original Senior Notes must be received by the Exchange Agent prior to the Expiration Date; or
(2) you must comply with the guaranteed delivery procedures described below.
PROCEDURES APPLICABLE TO ALL HOLDERS
If you properly tender an Original Senior Note and you do not withdraw the tender prior to the Expiration Date, you will have made an agreement with us in accordance with the terms and subject to the conditions set forth in this prospectus and in the Letter of Transmittal.
If your Original Senior Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your Original Senior Notes, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the Letter of Transmittal and delivering your Original Senior Notes, either make appropriate arrangements to register ownership of the Original Senior Notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal must be guaranteed by an eligible institution unless:
(1) Original Senior Notes tendered in the Exchange Offer are tendered either
(A) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the holder's Letter of Transmittal or
(B) for the account of an eligible institution; and
(2) the box entitled "Special Issuance Instructions" on the Letter of Transmittal has not been completed.
If signatures on a Letter of Transmittal or a notice of withdrawal are required to be guaranteed, the guarantee must be by a financial institution, which includes most banks, savings and loan associations and brokerage houses, that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Program or the Stock Exchanges Medallion Program.
If the Letter of Transmittal is signed by a person other than you, your Original Senior Notes must be endorsed or accompanied by a properly completed bond power and signed by you as your name appears on those Original Senior Notes.
If the Letter of Transmittal or any Original Senior Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, those persons should so indicate when signing. Unless we waive this requirement, in this instance you must submit with the Letter of Transmittal proper evidence satisfactory to us of their authority to act on your behalf.
We will determine, in our sole discretion, all questions regarding the validity, form, eligibility, including time of receipt, acceptance and withdrawal of tendered Original Senior Notes. This determination will be final and binding. We reserve the absolute right to reject any and all Original Senior Notes not properly tendered or any Original Senior Notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular Original Senior Notes. Our interpretation of the terms and conditions of the Exchange Offer, including the instructions in the Letter of Transmittal, will be final and binding on all parties.
You must cure any defects or irregularities in connection with tenders of your Original Senior Notes within the time period we will determine unless we waive that defect or irregularity. Although we intend to notify you of defects or irregularities with respect to your tender of Original Senior Notes, neither we, the Exchange Agent nor any other person will incur any liability for failure to give this notification. Your tender will not be deemed to have been made and your Original Senior Notes will be returned to you if:
(1) you improperly tender your Original Senior Notes;
(2) you have not cured any defects or irregularities in your tender; and
(3) we have not waived those defects, irregularities or improper tender.
The Exchange Agent will return your Original Senior Notes, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the expiration of the Exchange Offer.
In addition, we reserve the right in our sole discretion to:
(1) purchase or make offers for, or offer registered Notes for, any Original Senior Notes that remain outstanding subsequent to the expiration of the Exchange Offer;
(2) terminate the Exchange Offer; and
(3) to the extent permitted by applicable law, purchase Original Senior Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any of these purchases or offers could differ from the terms
of the Exchange Offer.
In all cases, issuance of Exchange Senior Notes for Original Senior Notes that are accepted for exchange in the Exchange Offer will be made only after timely receipt by the Exchange Agent of certificates for your Original Senior Notes or a timely book-entry confirmation of your Original Senior Notes into the Exchange Agent's account at DTC, a properly completed and duly executed Letter of Transmittal, or a computer-generated message instead of the Letter of Transmittal, and all other required documents. If any tendered Original Senior Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Original Senior Notes are submitted for a greater principal amount than you desire to exchange, the unaccepted or non-exchanged Original Senior Notes, or Original Senior Notes in substitution therefor, will be returned without expense to you. In addition, in the case of Original Senior Notes tendered by book-entry transfer into the Exchange Agent's account at DTC pursuant to the book-entry transfer procedures described below, the non-exchanged Original Senior Notes will be credited to your account maintained with DTC, as promptly as practicable after the expiration or termination of the Exchange Offer.
Each broker-dealer that receives Exchange Senior Notes for its own account in exchange for Original Senior Notes, where such Original Senior Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Senior Notes. See "PLAN OF DISTRIBUTION."
GUARANTEED DELIVERY PROCEDURES
If you desire to tender your Original Senior Notes and time will not permit your required documents to reach the Exchange Agent by the Expiration Date, or the procedure for book-entry transfer cannot be completed on time, you may tender if:
(1) you tender through an eligible financial institution;
(2) on or prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent receives from an eligible institution a written or facsimile copy of a properly completed and duly executed Letter of Transmittal and Notice of Guaranteed Delivery, substantially in the form provided by us; and
(3) the certificates for all certificated Original Senior Notes, in proper form for transfer, or a book-entry confirmation, and all other documents required by the Letter of Transmittal, are received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be sent by facsimile transmission, mail or hand delivery. The Notice of Guaranteed Delivery must set forth:
(1) your name and address;
(2) the amount of Original Senior Notes you are tendering; and
(3) a statement that your tender is being made by the Notice of Guaranteed Delivery and that you guarantee that within three New York Stock Exchange trading days after the execution of the Notice of Guaranteed Delivery, the eligible institution will deliver the following documents to the Exchange Agent:
(A) the certificates for all certificated Original Senior Notes being tendered, in proper form for transfer or a book-entry confirmation of tender;
(B) a written or facsimile copy of the Letter of Transmittal, or a book-entry confirmation instead of the Letter of Transmittal; and
(C) any other documents required by the Letter of Transmittal.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the book-entry interests at DTC for purposes of the Exchange Offer promptly after the date of this prospectus. You must deliver your book-entry
interest by book-entry transfer to the applicable account maintained by the Exchange Agent at DTC. Any financial institution that is a participant in DTC's systems may make book-entry delivery of book-entry interests by causing DTC to transfer the book-entry interests into the Exchange Agent's applicable account at DTC in accordance with DTC's procedures for transfer.
If one of the following situations occurs:
(1) you cannot deliver a book-entry confirmation of book-entry delivery of your book-entry interests into the Exchange Agent's applicable account at DTC; or
(2) you cannot deliver all other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date,
then you must tender your book-entry interests according to the Guaranteed Delivery Procedures discussed above.
WITHDRAWAL RIGHTS
You may withdraw tenders of your Original Senior Notes at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For your withdrawal to be effective, the Exchange Agent must receive a written or facsimile transmission notice of withdrawal at its address set forth below under "-- Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date.
The notice of withdrawal must:
(1) state your name;
(2) identify the specific Original Senior Notes to be withdrawn, including the certificate number or numbers, if any, and the principal amount of withdrawn Original Senior Notes;
(3) be signed by you in the same manner as you signed the Letter of Transmittal when you tendered your Original Senior Notes, including any required signature guarantees or be accompanied by documents of transfer sufficient for the Exchange Agent to register the transfer of the Original Senior Notes into your name; and
(4) specify the name in which the Original Senior Notes are to be registered, if different from yours.
We will determine all questions regarding the validity, form and eligibility, including time of receipt, of withdrawal notices. Our determination will be final and binding on all parties. Any Original Senior Notes withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Original Senior Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to you without cost as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Original Senior Notes may be retendered by following one of the procedures described under "-- Procedures for Tendering" above at any time on or prior to 5:00 p.m., New York City time, on the Expiration Date.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent of the Exchange Offer. Questions and requests for assistance, requests for additional copies of this prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows:
BY HAND DELIVERY, REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY:
The Bank of New York
Corporate Trust Operations
Reorganization Unit
101 Barclay Street - 7E
New York, New York 10286
Attn: Ms. Carolle Montreuil
BY FACSIMILE:
(212) 298-1915
FOR INFORMATION OR CONFIRMATION BY TELEPHONE:
(212) 815-5920
FEES AND EXPENSES
We will pay the expenses of soliciting tenders. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telephone, facsimile, or in person by officers and our regular employees and our affiliates.
We have not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. However, we will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. We may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of the prospectus and related documents to the beneficial owners of the Original Senior Notes and in handling or forwarding tenders for exchange.
We will pay the cash expenses to be incurred in connection with the Exchange Offer, which we estimate to be approximately $850,000 in the aggregate. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of Original Senior Notes pursuant to the Exchange Offer. If, however, Exchange Senior Notes or Original Senior Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the holder of the Original Senior Notes tendered, or if tendered Original Senior Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Original Senior Notes pursuant to the Exchange Offer, then the amount of any transfer taxes (whether imposed on the holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Senior Notes who do not exchange their Original Senior Notes for Exchange Senior Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Original Senior Notes as set forth in the legend on the Original Senior Notes and in the Indenture. In general, the Original Senior Notes may not be offered or sold, unless registered under the Securities Act, except under an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and
applicable state securities laws. We do not currently anticipate that we will
register under the Securities Act the resale of any Original Senior Notes that
remain outstanding after consummation of the Exchange Offer. However, generally,
(i) due to any change in law or applicable interpretations thereof by the SEC's
staff, we determine that we are not permitted to effect the Exchange Offer, (ii)
for any reason the Exchange Offer is not consummated within 270 days from June
18, 2002, (iii) if any initial purchaser so requests with respect to Original
Senior Notes not eligible to be exchanged for Exchange Senior Notes in the
Exchange Offer and held by it following consummation of the Exchange Offer or
(iv) if any holder of Original Senior Notes (except certain broker dealers) is
not eligible to participate in the Exchange Offer or, in the case of any holder
of Original Senior Notes (except certain broker-dealers) that participates in
the Exchange Offer, does not receive freely tradeable Exchange Senior Notes in
exchange for Original Senior Notes, we are obligated to file a registration
statement on the appropriate form under the Securities Act relating to the
Original Senior Notes held by such persons.
ACCOUNTING TREATMENT
The Exchange Senior Notes will be recorded at the same carrying value as the Original Senior Notes as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize a gain or loss for accounting purposes. The expenses of the Exchange Offer will be amortized over the term of the Exchange Senior Notes.
DESCRIPTION OF THE EXCHANGE SENIOR NOTES AND THE INDENTURE
GENERAL
We issued the Original Senior Notes and we will issue the Exchange Senior Notes under an indenture between us and The Bank of New York, as trustee, and a supplemental indenture thereto relating to the Original Senior Notes and Exchange Senior Notes (collectively, the "Indenture"). The aggregate principal amount of bonds, debentures, promissory notes or other evidences of indebtedness which may be issued under the Indenture is unlimited. Subject to the terms of the Indenture, we may issue additional senior notes under the Indenture in the future at our discretion. Issuances of individual series of senior notes, including this offering, will be governed by the Indenture and the corresponding series supplemental indenture. We may, without the consent of holders of the Exchange Senior Notes, issue additional senior notes having the same ranking and the same interest rate, maturity and other terms (except the issue price and issue date) as the Exchange Senior Notes. Any additional senior notes having such terms will constitute one single series of senior notes.
The following summaries of certain provisions of the Exchange Senior Notes and the Indenture do not purport to be complete and are subject, and qualified in their entirety by reference, to all of the provisions of the Exchange Senior Notes and the Indenture, including the definitions of certain terms therein. The definitions of certain capitalized terms used in the following summary are set forth below under "-- Certain Definitions."
The Exchange Senior Notes will not be guaranteed by, or otherwise be obligations of, Southern or any of its direct or indirect subsidiaries other than our company.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Senior Notes will be initially issued in the aggregate principal amount of $575,000,000. The entire principal amount of the Exchange Senior Notes will mature and become due and payable, together with all accrued interest thereon, on July 15, 2012. The Exchange Senior Notes are not subject to any sinking fund provision. The Exchange Senior Notes will be issued in denominations of $1,000 and integral multiples thereof.
Each Exchange Senior Note shall bear interest at the rate of 6.25% per annum from the date of original issuance, payable semiannually in arrears on January 15 and July 15 of each year to the person in whose name such Exchange Senior Notes are registered at the close of business on the fifteenth calendar day prior to such payment date. The initial interest payment date is January 15, 2003. The amount of interest payable will be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Exchange Senior Notes is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on such date. "Business Day" means a day other than a (i) Saturday or Sunday, (ii) a day on which banks in New York, New York are authorized or obligated by law or executive order to remain closed, or (iii) a day on which the trustee's corporate trust office is closed.
For so long as the Exchange Senior Notes are issued in book-entry form, payments of principal and interest shall be made in immediately available funds by wire transfer to DTC or its nominee. If the Exchange Senior Notes are issued in certificated form to a Holder (as defined below) other than DTC, payments of principal and interest shall be made by check mailed to such Holder at such Holder's registered address or, upon written application by a Holder of $1,000,000 or more in aggregate principal amount of the Exchange Senior Notes to the trustee in accordance with the terms of the Indenture, by wire transfer of immediately available funds to an account maintained by such Holder with a bank or other financial institution. Default interest will be paid in the same manner to Holders as of a special record date established in accordance with the Indenture.
All amounts paid by us for the payment of principal, premium (if any) or interest on any Exchange Senior Notes that remain unclaimed at the end of two years after such payment has become due and payable will be repaid to us, and the Holders of such Exchange Senior Notes will thereafter look only to us for payment thereof.
RANKING
The Exchange Senior Notes will be issued as unsecured senior debt securities under the Indenture and will rank equally with all of our unsecured and unsubordinated debt. We have not issued, nor do we have any arrangements to issue, any significant indebtedness that would be senior to the Exchange Senior Notes.
OPTIONAL REDEMPTION
At any time and at our option, we may redeem the Exchange Senior Notes, in whole or in part (if in part, by lot or by such other method as the trustee shall deem fair or appropriate) at the redemption price of 100% of principal amount of such Exchange Senior Notes, plus accrued interest on the principal amount of such Exchange Senior Notes, if any, to the redemption date, plus the Make-Whole Premium.
Notice of redemption to the Holders of Exchange Senior Notes to be redeemed will be given by us by mailing notice of such redemption by first class mail at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Exchange Senior Notes at their last addresses as they shall appear in the securities register. Failure to give notice by mail, or any defect in the notice to the Holder of any Exchange Senior Note designated for redemption as a whole or in part will not affect the validity of the proceedings for the redemption of any other Exchange Senior Note. The notice of redemption to each Holder will specify that the Exchange Senior Notes are being redeemed pursuant to the Indenture, the date fixed for redemption, the place or places of payment, the CUSIP and ISIN numbers (as applicable), that payment will be made upon presentation and surrender of the Exchange Senior Notes, that interest accrued to the date fixed for redemption will be paid as specified in the Indenture and that, on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue.
REPORTING OBLIGATIONS; INFORMATION TO HOLDERS
We will furnish to the trustee:
(i) unless we are then filing comparable reports pursuant to the reporting requirements of the Exchange Act, as soon as practicable and in any event within 45 days after the end of the first, second and third quarterly accounting periods of each fiscal year (commencing with the quarter ending June 30, 2002), our unaudited consolidated balance sheet as of the last day of such quarterly period and the related consolidated statements of income and cash flows during such quarterly period prepared in accordance with GAAP and (in the case of second and third quarterly periods) for the portion of the fiscal year ending with the last day of such quarterly period, setting forth in each case in comparative form corresponding unaudited figures from the preceding fiscal year (except in the case where the preceding fiscal year includes periods prior to our formation) and accompanied by (A) a written statement of our authorized representative to the effect that such financial statements fairly represent in all material respects our financial condition and results of operations at and as of their respective dates and (B) a section substantially similar to the "Management's Discussion and Analysis" ("MD&A") section of an SEC Form 10-Q (without any comparison to periods prior to our formation);
(ii) unless we are then filing comparable reports pursuant to the reporting requirements of the Exchange Act, as soon as practicable and in any event within 90 days after the end of each fiscal year (commencing with the fiscal year ending December 31, 2002), our consolidated balance sheet as of the end of such year and the related consolidated statements of income, cash flows, and retained earnings during such year setting forth in each case in comparative form corresponding figures from the preceding fiscal year (except in the case where the preceding fiscal year includes periods prior to our formation), accompanied by (A) an audit report thereon of a firm of independent public accountants of recognized
national standing and (B) a section substantially similar to the MD&A section of an SEC Form 10-K (without any comparison to periods prior to our formation);
(iii) at the time of the delivery of the report provided for in clause
(ii) above (or at the time of the filing of the comparable report pursuant
to the Exchange Act), an officer's certificate to the effect that, to the
best of such officer's knowledge, no default or event of default under the
Exchange Senior Notes or the Indenture has occurred and is continuing or,
if any default or event of default thereunder has occurred and is
continuing, specifying the nature and extent thereof and what action we are
taking or propose to take in response thereto; and
(iv) promptly after we obtain actual knowledge of the occurrence thereof, written notice of the occurrence of any event or condition which constitutes an event of default, and an officer's certificate of our company specifically stating that such event of default has occurred and setting forth the details thereof and the action which we are taking or propose to take with respect thereto.
All such information provided to the trustee as indicated above also will be provided by the trustee upon written request to the trustee (which may be a single continuing request), to (x) Holders, (y) holders of beneficial interests in the Exchange Senior Notes or (z) prospective purchasers of the Exchange Senior Notes or beneficial interests in the Exchange Senior Notes. We will furnish to the trustee, upon its request, sufficient copies of all such information to accommodate the requests of such holders and prospective holders of beneficial interests in the Exchange Senior Notes.
Upon the request of any Holder, any holder of a beneficial interest in the Exchange Senior Notes, or the trustee (on behalf of a Holder or a holder of a beneficial interest in the Exchange Senior Notes), we will furnish such information as is specified in paragraph (d)(4) of Rule 144A to Holders (and to holders of beneficial interests in the Exchange Senior Notes), prospective purchasers of the Exchange Senior Notes (and of beneficial interests in the Exchange Senior Notes) who are qualified institutional buyers or "institutional accredited investors" or to the trustee for delivery to such Holder or prospective purchasers of the Exchange Senior Notes or beneficial interests therein, as the case may be, unless, at the time of such request, we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.
CERTAIN COVENANTS
CONSOLIDATION, MERGER AND SALE
We shall not consolidate with or merge into any other corporation or convey, transfer or lease our properties and assets substantially as an entirety to any person, unless (1) such other corporation or person is a corporation organized and existing under the laws of the United States, any state thereof or the District of Columbia and such other corporation or person expressly assumes, by supplemental indenture executed and delivered to the trustee, the payment of the principal of (and premium, if any) and interest on all senior notes and the performance of every covenant of the Indenture on the part of our Company to be performed or observed; (2) immediately after giving effect to such transaction, no Event of Default shall have happened and be continuing; and (3) we delivered to the trustee an officer's certificate and an opinion of counsel, each stating that such transaction complies with the provisions of the Indenture governing consolidation, merger, conveyance, transfer or lease and that all conditions precedent thereto have been complied with.
LIMITATION ON ASSET SALES
Except for the sale of our properties and assets substantially as an entirety as described in "-- Consolidation, Merger and Sale" above, and other than assets required to be sold to conform with governmental regulations, we will not, and will not permit any of our Subsidiaries to, consummate any Asset Sale, if the aggregate net book value of all such Asset Sales consummated during the most recent twelve month period would exceed 10% of our Consolidated Tangible Assets as of the beginning of our most recently ended full fiscal quarter preceding such Asset Sale; provided, however, that any such Asset Sale will be disregarded for purposes of the 10% limitation specified above if the proceeds thereof (i) are, within 18 months of such Asset Sale, invested or reinvested by us or any Subsidiary in a Permitted Business, (ii) are
used by us or a Subsidiary to repay Indebtedness of our company or such Subsidiary or (iii) are retained by us or a Subsidiary.
LIMITATION ON LIENS
We shall not, and shall not permit any of our Subsidiaries to, issue, assume, guarantee or permit to exist any Indebtedness for borrowed money secured by any lien on any property of our company or our Subsidiaries, whether owned on the date that the Original Senior Notes were issued or thereafter acquired, without in any such case effectively securing the outstanding Exchange Senior Notes (together with, if we shall so determine, any other Indebtedness of or guaranteed by our company ranking equally with the Exchange Senior Notes) equally and ratably with such Indebtedness (but only so long as such Indebtedness is so secured); provided, however, that the foregoing restriction shall not apply to the following liens:
(i) liens, if any, in existence on the date the Original Senior Notes were issued,
(ii) pledges or deposits in the ordinary course of business in connection with bids, tenders, contracts or statutory obligations or to secure surety or performance bonds,
(iii) liens imposed by law, such as carriers', warehousemen's and mechanics' liens, arising in the ordinary course of business,
(iv) liens for taxes being contested in good faith,
(v) minor encumbrances, easements or reservations which do not in the aggregate materially adversely affect the value of the properties or impair their use,
(vi) liens on any property existing at the time of acquisition thereof by us or any of our Subsidiaries,
(vii) liens on any property (other than Existing Assets) securing (a) all or any portion of the cost of acquiring, constructing, altering, improving or repairing any real or personal property or improvements used or to be used in connection with such property or (b) Indebtedness incurred by us or any of our Subsidiaries prior to, at the time of, or within one year after the later of the acquisition, the completion of construction (including any improvements on an existing property), alteration, improvement, repair or the commencement of commercial operation of the property, which Indebtedness is incurred for the purpose of financing or refinancing all or any part of the purchase price, construction, improvements, alterations or repairs,
(viii) liens to secure purchase money Indebtedness not in excess of the cost or value of the property acquired,
(ix) mortgages securing obligations issued by a state, territory or possession of the United States, or any political subdivision of any of the foregoing or the District of Columbia, to finance the acquisition or construction of property, and on which the interest is not, in the opinion of tax counsel of recognized standing or in accordance with a ruling issued by the Internal Revenue Service, includible in gross income of the holder by reason of Section 103(a)(1) of the Internal Revenue Code (or any successor to such provision) as in effect at the time of the issuance of such obligations,
(x) other liens to secure Indebtedness for borrowed money or in connection with a project financing (including a sale-leaseback transaction) in an aggregate principal amount which does not at the time such Indebtedness is incurred exceed 20% of our Consolidated Tangible Assets, or
(xi) liens granted in connection with extending, renewing, replacing
or refinancing (or successive extensions, renewals, replacements or
refinancings) any of the Indebtedness (so long as there is no increase in
the principal amount of the Indebtedness) described in clauses (i) through
(x) above.
In the event that we shall propose to pledge, mortgage or hypothecate any property, other than as permitted by clauses (i) through (xi) of the previous paragraph, we shall (prior thereto) give written notice thereof to the trustee, who shall give notice to the Holders, and we shall, prior to or simultaneously with such
pledge, mortgage or hypothecation, effectively secure all the Exchange Senior
Notes equally and ratably with such Indebtedness. This covenant does not
restrict our ability or the ability of any of our Subsidiaries to pledge,
mortgage, hypothecate or permit to exist any mortgage, pledge or lien upon any
assets (other than an Existing Asset, except to the extent permitted by clauses
(i) through (xi) above) in connection with project financings or otherwise.
RESTRICTIONS ON SUBSIDIARY INDEBTEDNESS
Except to the extent permitted under "Limitations on Liens", we shall not permit any Subsidiary which owns any Existing Asset to create or incur or suffer to exist any Indebtedness for borrowed money.
MINIMUM CONTRACT MAINTENANCE COVENANT
We will not declare or pay any dividends or make any other distributions (except dividends payable or distributions made in shares of our common stock and dividends payable in cash in cases where, concurrently with the payment of the dividend, an amount in cash equal to the dividend is received by us as a capital contribution or as the proceeds of the issue and sale of shares of our common stock) on our common stock, or purchase or permit any of our Subsidiaries to purchase any shares of our common stock or make any payment on Affiliate Subordinated Indebtedness, unless (i) the percentage derived from dividing Contracted Operating Cash Flows by Total Operating Cash Flows is at least 80%, or (ii) the ratio of Recourse Indebtedness to Total Capitalization is 60% or less.
CERTAIN DEFINITIONS
"Affiliate Subordinated Indebtedness" means the Southern Subordinated Note and any other borrowings by us from Southern, or an affiliate of Southern, provided that such borrowings are subordinated on terms substantially similar to the terms of subordination set forth in the Southern Subordinated Note.
"Asset Sale" means any sale, lease, sale and leaseback transfer, conveyance or other disposition of any assets including by way of the issue by us or any of our Subsidiaries of equity interests in such Subsidiaries which own any assets, except (a) in the ordinary course of business to the extent that such property is worn out or is no longer useful or necessary in connection with the operation of our business or sale of inventory, (b) if, prior to such conveyance or disposition, each Rating Agency provides a Ratings Reaffirmation of the Senior Notes after giving effect to such transaction, or (c) sale and leaseback or similar transfers of assets (other than Existing Assets).
"Consolidated Tangible Assets" means, at any date of determination, the total assets of our company and our Subsidiaries determined in accordance with GAAP, excluding, however, from the determination of total assets (a) goodwill, organizational expenses, research and product development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles, (b) all deferred charges or unamortized debt discount and expenses, (c) all reserves carried and not deducted from assets, (d) securities which are not readily marketable, (e) cash held in sinking or other analogous funds established for the purpose of redemption, retirement or prepayment of capital stock or other equity interests or debt, (f) any write-up in the book value of any assets resulting from a revaluation thereof subsequent to March 31, 2002, and (g) any items not included in clauses (a) through (f) above which are treated as intangibles in conformity with GAAP, plus the aggregate net book value of all asset sales or dispositions made by our company and any of our Subsidiaries since the original issue date of the Original Senior Notes to the extent that the proceeds thereof or other consideration received therefor are not invested or reinvested in a Permitted Business, or are not retained by us or our Subsidiaries.
"Contracted Operating Cash Flow" means the projection done at the end of
each fiscal quarter of the next four fiscal quarters of our and our
Subsidiaries' (other than Unrestricted Subsidiaries) total cash flow available
for debt service from fixed-price capacity power contracts, each contract having
a term from initial commencement to expiry of at least five years; provided,
however, that up to 12.5% of the Contracted Operating Cash Flows may be derived
from fixed-price capacity power contracts that have contract terms of at least
two years but less than five years from initial commencement to expiry. The
projection shall be
consistent with our financial reporting procedures. The term fixed-price capacity PPA includes any PPA that states the base capacity price on a per unit basis (for example, in dollars per megawatt) and which may allow for adjustments to that base price that are generally encompassed within the our company's or the electric generation industry's commercial expectations for a PPA of a similar duration (including but not limited to adjustments to accommodate changed capacity purchase levels, variations in expected or actual construction costs or demonstrated capability levels, changes in equipment or law and force majeure); provided, however, that a PPA will not be considered to be a fixed-price capacity PPA if a material portion of the capacity price varies based upon a market index for electric capacity or energy, fuel, weather or other factor that is external to the facility and the transaction between the Company and its customer. The method of calculating the energy price shall not be considered in assessing whether a PPA is a fixed-priced capacity PPA.
"Existing Assets" means the following of our generating facilities: (i) Dahlberg Units 1-10; (ii) Wansley 6 and Wansley 7; (iii) Franklin 1 and Franklin 2; (iv) Harris 1 and Harris 2; and (v) Stanton A.
"GAAP" means U.S. generally accepted accounting principles.
"Holder" means a registered holder of an Exchange Senior Note.
"Indebtedness" of any person means (i) all indebtedness of such person for
borrowed money, (ii) all obligations of such person evidenced by bonds,
debentures, notes, or other similar instruments, (iii) all obligations of such
person to pay the deferred purchase price of property or services (other than
trade accounts obtained on normal commercial terms in the ordinary course of
business or practice), (iv) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (v) all capital lease obligations of such person that
are required to be accounted for as a capital lease in accordance with GAAP,
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other persons which such person is responsible for as guarantor, and (vii) all
Indebtedness of the type referred to in clauses (i) through (vi) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any lien or security interest on
property.
"Make-Whole Premium" means, with respect to the Exchange Senior Notes, a computation as of a date not more than five days prior to the redemption date of the following:
(i) the average life of the remaining scheduled payments of principal in respect of outstanding Exchange Senior Notes (the "Remaining Average Life") as of the redemption date;
(ii) the yield to maturity for the United States treasury security having an average life equal to the Remaining Average Life and trading in the secondary market at the price closest to the principal amount thereof (the "Primary Issue") (subject to extrapolation if no United States treasury security has an average life equal to the Remaining Average Life); and
(iii) the discounted present value of the then-remaining scheduled payments of principal and interest (but excluding that portion of any scheduled payment of interest that is actually due and paid on the redemption date) in respect of outstanding Exchange Senior Notes as of the redemption date using a discount factor equal to the sum of (x) the yield to maturity for the Primary Issue, plus (y) 25 basis points.
The amount of Make-Whole Premium in respect of Exchange Senior Notes to be redeemed shall be an amount equal to (x) the discounted present value of such Exchange Senior Notes to be redeemed determined in accordance with clause (iii) above, minus (y) the unpaid principal amount of such Exchange Senior Notes; provided, however, that the Make-Whole Premium shall not be less than zero.
"Permitted Business" means a business that is the same as or similar to our business as of the date that the Original Senior Notes were issued under the Indenture, or any business reasonably related thereto.
"Rating Agencies" means Moody's Investors Service, Inc. and Standard & Poor's Ratings Services.
"Ratings Reaffirmation" means a reaffirmation by a rating agency of the higher of its minimum investment grade rating or the then current credit ratings (as applicable) of any of the Exchange Senior Notes outstanding, giving effect to the transaction giving rise to such request for such reaffirmation.
"Recourse Indebtedness" means all Indebtedness (other than Affiliate Subordinated Indebtedness) of our company and of our Subsidiaries (other than Unrestricted Subsidiaries).
"Subsidiary" means any corporation or other entity of which sufficient voting stock or other ownership or economic interests having ordinary voting power to elect a majority of the board of directors (or equivalent body) are at the time directly or indirectly held by us.
"Total Capitalization" means the sum of (a) the aggregate of the capital stock and other equity accounts (including retained earnings and paid-in-capital) of our company and Subsidiaries (other than Unrestricted Subsidiaries; provided, however, that retained earnings of Unrestricted Subsidiaries shall be included); (b) all Recourse Indebtedness; and (c) Affiliate Subordinated Indebtedness.
"Total Operating Cash Flow" means the projection done at the end of each fiscal quarter of the next four fiscal quarters of our and our Subsidiaries' (other than Unrestricted Subsidiaries) total cash flow available for debt service, as projected consistent with our financial reporting procedures.
"Unrestricted Subsidiary" means any Subsidiary of our company all the Indebtedness of which (a) is nonrecourse to our company or any of our Subsidiaries (other than any other Unrestricted Subsidiary), other than with respect to stock or other ownership interest of our company or any of our Subsidiaries in such Subsidiary, and (b) is not secured by any property of our company or any of our Subsidiaries (other than the property of, or stock or other ownership interest in, an Unrestricted Subsidiary).
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described events with respect to the Exchange Senior Notes, which has occurred and is continuing, constitutes an "Event of Default" with respect to the Exchange Senior Notes:
(a) failure for 30 days to pay interest on the Exchange Senior Notes, when due on an interest payment date other than at maturity or upon earlier redemption; or
(b) failure to pay principal or premium, if any, or interest on the Exchange Senior Notes when due at maturity or upon earlier redemption; or
(c) an event of default, as defined in any of our instruments under which there may be issued, or by which there may be secured or evidenced, of any Indebtedness of our company that has resulted in the acceleration of such Indebtedness, or any default occurring in payment of any such Indebtedness at final maturity (and after the expiration of any applicable grace periods), other than such Indebtedness the principal of which does not individually, or in the aggregate, exceed $50,000,000; or
(d) our failure to perform or observe any covenant or agreement (while such covenant or agreement is effective) under the Indenture and such failure shall continue uncured for more than thirty (30) days after we have actual knowledge of such failure; or
(e) one or more final judgments, decrees or orders of any court, tribunal, arbitrator, administrative or other governmental body or similar entity for the payment of money shall be rendered against us or any of our properties in an aggregate amount in excess of $50,000,000 (excluding the amount thereof covered by insurance) and such judgment, decree or order shall remain unvacated, undischarged, unsatisfied and unstayed for more than sixty (60) consecutive days, except while being contested in good faith by appropriate proceedings; or
(f) certain events of bankruptcy, insolvency or reorganization involving our company or a Subsidiary.
If an Event of Default (other than an Event of Default based on an event of our bankruptcy, insolvency or reorganization) shall occur and be continuing, either the trustee or the Holders of not less than 25% in aggregate principal amount of the Exchange Senior Notes may, by written notice to us (and to the trustee if given by Holders), declare the principal of and accrued interest on all Exchange Senior Notes outstanding under the Indenture to be immediately due and payable, but upon certain conditions such declaration may be annulled and past defaults (except, unless theretofore cured, a default in payment of principal, premium or interest) may be waived by the Holders of a majority in aggregate principal amount of Exchange Senior Notes then outstanding under the Indenture. If an Event of Default due to our bankruptcy, insolvency or reorganization occurs, all unpaid principal, premium, if any, and interest in respect of the Exchange Senior Notes issued under the Indenture will automatically become due and payable without any declaration or other act on the part of the trustee or any Holder. The occurrence of an event described in paragraph (f) of this section with respect to a Subsidiary shall not constitute an Event of Default if (x) the creditors of such Subsidiary have no recourse to our company or (y) such Subsidiary is not a "significant subsidiary" as defined in Regulation S-X under the Securities Act.
The Holders of a majority in principal amount of the Exchange Senior Notes then outstanding under the Indenture shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee under the Indenture, subject to certain limitations specified in the Indenture, provided that the Holders shall have offered to the trustee reasonable indemnity against expenses and liabilities.
MODIFICATION
The Indenture contains provisions permitting us and the trustee, with the consent of the holders of not less than a majority in principal amount of the outstanding senior notes of each series affected thereby, to modify the Indenture or the rights of the holders of the senior notes of such series; provided, that no such modification may, without the consent of the holder of each outstanding senior note affected thereby, (i) change the stated maturity of the principal of, or any installment of principal of or interest on, any senior note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the method of calculating the rate of interest thereon, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption date), or (ii) reduce the percentage of principal amount of the outstanding senior notes of any series, the consent of whose holders is required for any such supplemental indenture, or the consent of whose holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences) provided for in the Indenture, or (iii) modify any of the provisions of the Indenture relating to supplemental indentures, waiver of past defaults, or waiver of certain covenants, except to increase any such percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the holder of each outstanding senior note affected thereby.
In addition, we and the trustee may execute, without the consent of any holders of senior notes, any supplemental indenture for certain other usual purposes, including the creation of any new series of senior notes.
SATISFACTION AND DISCHARGE AND COVENANT DISCHARGE
SATISFACTION AND DISCHARGE
The Indenture provides that upon our request the Indenture will cease to be of further effect and the trustee shall execute proper instruments acknowledging satisfaction and discharge of the Indenture when: (A) either (i) all senior notes outstanding under the Indenture have been delivered to the trustee for cancellation; or (ii) all senior notes outstanding under the Indenture that have not been delivered to the trustee for cancellation have become due and payable or have been called for redemption and we have deposited or caused to be deposited with the trustee as funds in trust an amount sufficient to pay and discharge the entire indebtedness on such senior notes not delivered to the trustee for cancellation, for principal (and premium, if
any) and interest to the date of stated maturity, redemption date or the date of payment; (B) we have paid or caused to be paid all sums payable under the Indenture; and (C) we have delivered to the trustee an officer's certificate and opinion of counsel, each stating that all conditions precedent relating to the satisfaction and discharge of the Indenture have been complied with.
DISCHARGE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
The provisions of the supplemental indenture relating to the Exchange Senior Notes will cease to be applicable with respect to (i) the covenants described under "Certain Covenants -- Limitation on Asset Sales," "-- Limitation on Liens," "-- Restrictions on Subsidiary Indebtedness" and "-- Minimum Contract Maintenance Covenant" and (ii) clause (d) under "Events of Default" with respect to such covenants and clauses (c) and (e) under "Events of Default" when (A) we have deposited with the trustee, as funds held in trust, money and/or U.S. Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal, premium, if any, and accrued interest on the Exchange Senior Notes; (B) we have delivered to the trustee an officer's certificate and an opinion of counsel, each stating that all conditions precedent relating to the discharge of the certain covenants and certain events of default have been complied with; and (C) we have delivered to the trustee an opinion of counsel, among other things, to the effect that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and discharge of certain covenants and Events of Default and will be subject to federal income tax on the same amount and in the same manner and at the same time as would have been the case if such deposit and discharge had not occurred.
DISCHARGE AND CERTAIN OTHER EVENTS OF DEFAULT
If we exercise our option to omit compliance with certain covenants and provisions of the supplemental indenture with respect to the Exchange Senior Notes as described in the immediately preceding paragraph and the Exchange Senior Notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of funds on deposit with the trustee will be sufficient to pay amounts due on the Exchange Senior Notes, at the time of their stated maturity, but may not be sufficient to pay amounts due on the Exchange Senior Notes at the time of acceleration resulting from such Event of Default. We shall remain liable for such payments.
REGISTRATION AND TRANSFER
We are not required to (i) issue, register the transfer of or exchange
Exchange Senior Notes during a period of 15 days immediately preceding the date
notice is given identifying the Exchange Senior Notes called for redemption, or
(ii) register the transfer of or exchange any Exchange Senior Notes so selected
for redemption, in whole or in part, except the unredeemed portion of any
Exchange Senior Note being redeemed in part.
INFORMATION CONCERNING THE SENIOR NOTE INDENTURE TRUSTEE
The trustee, prior to an Event of Default with respect to senior notes of any series, undertakes to perform, with respect to senior notes of such series, only such duties as are specifically set forth in the Indenture and, in case an Event of Default with respect to senior notes of any series has occurred and is continuing, shall exercise, with respect to senior notes of such series, the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the trustee is under no obligation to exercise any of the powers vested in it by the Indenture at the request of any holder of senior notes of any series, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The trustee is not required to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties if the trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it.
BOOK-ENTRY, DELIVERY AND FORM
GENERAL
The Exchange Senior Notes initially will be issued in the form of one or more fully registered Exchange Senior Notes in global form (the "Global Notes"). The Global Notes will be deposited upon issuance with the Trustee as custodian for DTC and registered in the name of DTC or its nominee, in each case for credit to the accounts of institutions that have accounts with DTC or its nominee (the "DTC participants") and to the accounts of institutions that have accounts with Euroclear or its nominee participants (the "Euroclear participants" and, collectively with the DTC participants, the "participants"). Each of DTC and Euroclear is referred to herein as a "Book Entry Facility." Ownership of beneficial interests in the Global Notes will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the Global Notes will be shown on, and the transfer of that ownership will be effected only through, records maintained by a Book Entry Facility or its nominee (with respect to participants' interests) for such Global Notes or by participants or persons that hold interests through participants (with respect to beneficial interests of persons other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to transfer or pledge beneficial interests in the Global Notes.
So long as DTC, or its nominee, is the registered holder of the Global Notes, DTC or such nominee, as the case may be, will be considered the sole legal owner and holder of the Exchange Senior Notes represented by such Global Notes for all purposes under the Indenture and the Exchange Senior Notes. Except as set forth below, owners of beneficial interests in the Global Notes will not be entitled to have such Global Notes or any Exchange Senior Notes represented thereby registered in their names, will not receive or be entitled to receive physical delivery or certificated Exchange Senior Notes in exchange therefor and will not be considered to be the owners or holders of such Global Notes or any Notes represented thereby for any purpose under the Exchange Senior Notes or the Indenture. We understand that under existing industry practice, in the event an owner of a beneficial interest in a Global Note desires to take any action that DTC, as the holder of such Global Notes, is entitled to take, DTC would authorize the participants to take such action, and that the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them.
Any payment of principal or interest due on the Exchange Senior Notes on any interest payment date or at maturity will be made available by us to the Trustee by such date. As soon as possible thereafter, the Trustee will make such payments to DTC or its nominee, as the case may be, as the registered owner of the Global Notes representing such Exchange Senior Notes in accordance with existing arrangements between the Trustee and DTC.
We expect that DTC or its nominee, upon receipt of any payment of principal or interest in respect of the Global Notes will credit immediately the accounts of the related participants with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Notes as shown on the records of DTC. We also expect that payments by participants to owners of beneficial interests in the Global Notes held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants.
None of us, the Trustee or any payment agent for the Global Notes will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for other aspects of the relationship between DTC and its participants or the relationship between such participants and the owners of beneficial interests in the Global Notes owning through such participants.
Because of time zone differences, the securities account of a Euroclear participant purchasing an interest in a Global Note from a DTC participant will be credited, and any such crediting will be reported to the relevant Euroclear participant, during the securities settlement processing day (which must be a business day
for Euroclear) immediately following the DTC settlement date. Cash received in Euroclear as a result of sales of interests in a Global Note by or through a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Euroclear cash account only as of the business day following settlement in DTC.
Unless and until exchanged in whole or in part for Exchange Senior Notes in definitive form in accordance with the terms of the Exchange Senior Notes, the Global Notes may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor of DTC or a nominee of each successor.
Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Notes among participants of a Book Entry Facility, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of us or the Trustee will have any responsibility for the performance by a Book Entry Facility or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. We and the Trustee may conclusively rely on, and shall be protected in relying on, instructions from a Book Entry Facility for all purposes.
CERTIFICATED NOTES
The Global Notes shall be exchangeable for corresponding Exchange Senior Notes in certificated fully registered form ("Certificated Notes") registered in the name of persons other than DTC or its nominee only if (A) DTC (i) notifies us that it is unwilling or unable to continue as depositary for the Global Note and we fail to appoint a successor depository within 90 days after receipt of such notice or (ii) at any time ceases to be a clearing agency registered under the Exchange Act, and we fail to appoint a successor depository within 90 days after we became aware of such cessation or (B) there shall have occurred and be continuing an Event of Default (as defined in the Indenture) or any event which after notice or lapse of time or both would be an Event of Default under the Indenture and payment of principal and interest has been accelerated. Any Certificated Notes will be issued only in fully registered form, and shall be issued without coupons in denominations of $1,000 and integral multiples thereof. Any Certificated Notes so issued will be registered in such names and in such denominations as DTC shall request.
THE CLEARING SYSTEM
DTC has advised us as follows: DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and "a clearing agency" registered pursuant to the provisions of section 17A of the Exchange Act. DTC was created to hold securities of institutions that have accounts with its participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of participants, thereby eliminating the need for physical movement of securities certificates. DTC's participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Access to DTC's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, whether directly or indirectly.
THE TRUSTEE
The Bank of New York is the trustee under the Indenture.
GOVERNING LAW
The Indenture and the Senior Notes are governed by, and construed in accordance with, the laws of the State of New York.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material U.S. federal income tax considerations relevant to the exchange of Original Senior Notes for Exchange Senior Notes pursuant to the Exchange Offer. This discussion is based upon currently existing provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly on a retroactive basis. There can be no assurance that the Internal Revenue Service will not take positions contrary to those taken in this discussion, and no ruling from the Internal Revenue Service has been or will be sought. This discussion does not address all of the U.S. federal income tax considerations that may be important to holders of the Original Senior Notes in light of their individual circumstances, nor does it address the U.S. federal income tax considerations that may be important to holders subject to special rules, including banks and other financial institutions, insurance companies, tax-exempt entities, dealers in securities or foreign currencies, partnerships or other entities classified as partnerships for U.S. federal income tax purposes, certain former citizens or former long-term residents of the United States, hybrid entities, persons holding the Original Senior Notes as part of a hedging or conversion transaction or a straddle, or holders that are U.S. persons, as defined by the Code, that have a functional currency other than the U.S. dollar.
Beneficial owners of the Original Senior Notes are urged to consult their own tax advisors as to the particular U.S. federal income tax law consequences to them of exchanging Original Senior Notes for Exchange Senior Notes, as well as the tax consequences under state, local, foreign, and other tax laws, and the possible effects of changes in tax laws.
The exchange of Original Senior Notes for Exchange Senior Notes pursuant to the Exchange Offer will not be treated as an "exchange" for U.S. federal income tax purposes. A holder that exchanges Original Senior Notes for Exchange Senior Notes pursuant to the Exchange Offer will not recognize taxable gain or loss on such exchange, such holder's adjusted tax basis in the Exchange Senior Notes will be the same as its adjusted tax basis in the Original Senior Notes exchanged therefor immediately before such exchange, and such holder's holding period for the Exchange Senior Notes will include the holding period for the Original Senior Notes exchanged therefor. There will be no U.S. federal income tax consequences to holders that do not exchange their Original Senior Notes pursuant to the Exchange Offer.
RATINGS
Moody's Investors Service, Inc., Standard and Poor's Ratings Services and Fitch Ratings have assigned the Exchange Senior Notes the ratings set forth under "SUMMARY OF THE OFFERING -- Ratings." Such ratings reflect only the views of these organizations, and an explanation of the significance of each such rating may be obtained from Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007, Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10004 and Fitch Ratings, One State Street Plaza, New York, New York 10004. There is no assurance that such rating will continue for any given period of time or that they will not be revised downward or withdrawn entirely by such rating agencies or either of them, if, in their judgment, circumstances so warrant. A downward change in or withdrawal of such ratings by any of them may have an adverse effect on the market price of the Exchange Senior Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Senior Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Senior Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Senior Notes received in exchange for Original Senior Notes where such Original Senior Notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a 270-day period following the consummation of the Exchange Offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 200 , all dealers effecting transactions in the Exchange Senior Notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of Exchange Senior Notes by broker-dealers. Exchange Senior Notes received by broker-dealers for their own account as a result of the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Senior Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to the prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Senior Notes. Any broker-dealer that resells Exchange Senior Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Senior Notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of Exchange Senior Notes and any commissions or concessions received by any of these persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 270 days following the consummation of the Exchange Offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. We have agreed to pay all expenses incident to this Exchange Offer (including the expenses of one counsel for the holder of the Exchange Senior Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Exchange Senior Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.
EXPERTS
The financial statements of Southern Power Company as of December 31, 2001 and for the period from January 8, 2001 (inception) through December 31, 2001 and Plant Dahlberg (a wholly-owned carve-out entity of Georgia Power Company), as of and for the seven month period ended July 31, 2001, as of and for the year ended December 31, 2000 and for the year ended December 31, 1999 included in this prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports appearing herein. We have included our financial statements in this prospectus and elsewhere in the Registration Statement of which this prospectus forms a part in reliance on Deloitte & Touche LLP's reports (which report on Plant Dahlberg expresses an unqualified opinion and includes an explanatory paragraph referring to the carve-out from Georgia Power Company), given on their authority as experts in accounting and auditing.
INDEPENDENT ENGINEER
The Independent Engineer's Report included as Annex A to this prospectus has been prepared by R.W. Beck and is included in this prospectus in reliance upon the authority of R.W. Beck and its affiliates as experts in the review of the design and operation of electric generating facilities and the preparation of financial projections.
INDEPENDENT MARKET EXPERT
The Independent Market Expert's Report included as Annex B to this prospectus has been prepared by PA Consulting and is included in this prospectus in reliance upon the authority of that firm as experts in the analysis of power markets, including future market demand, future market prices for electric energy and capacity and related matters, for electric generating facilities.
LEGAL MATTERS
The validity of the Exchange Senior Notes will be passed upon for us by Balch & Bingham LLP, Birmingham, Alabama, our counsel, relying on the opinion of Dewey Ballantine LLP, New York, New York, with respect to matters of New York law.
INDEX TO FINANCIAL STATEMENTS
PAGE
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SOUTHERN POWER COMPANY
Condensed Consolidated Balance Sheets as of June 30, 2002
and December 31, 2001 (Unaudited)......................... F-2
Condensed Consolidated Statements of Income for the
Six-Month Periods Ended June 30, 2002 and 2001
(Unaudited)............................................... F-3
Condensed Consolidated Statement of Stockholder's Equity for
the Six-Month Period Ended June 30, 2002 (Unaudited)...... F-4
Condensed Consolidated Statements of Comprehensive Income
(Loss) for the Six-Month Periods Ended June 30, 2002 and
2001 (Unaudited).......................................... F-5
Condensed Consolidated Statements of Accumulated Other
Comprehensive Income (Loss) (Unaudited) as of June 30,
2002 and December 31, 2001................................ F-5
Condensed Consolidated Statements of Cash Flows for the
Six-Month Periods Ended June 30, 2002 and 2001
(Unaudited)............................................... F-6
Notes to Condensed Consolidated Financial Statements
(Unaudited) for the Six-Month Periods Ended June 30, 2002
and 2001.................................................. F-7
Independent Auditors' Report................................ F-10
Consolidated Balance Sheet as of December 31, 2001.......... F-11
Consolidated Statement of Income for the Period from January
8, 2001 (Inception) to December 31, 2001.................. F-12
Consolidated Statement of Stockholder's Equity for the
Period from January 8, 2001 (Inception) to December 31,
2001...................................................... F-13
Consolidated Statement of Comprehensive Income for the
Period from January 8, 2001 (Inception) to December 31,
2001...................................................... F-14
Consolidated Statement of Cash Flows for the Period from
January 8, 2001 (Inception) to December 31, 2001.......... F-15
Notes to Consolidated Financial Statements.................. F-16
PLANT DAHLBERG
(A WHOLLY OWNED CARVE-OUT ENTITY OF GEORGIA POWER COMPANY)
Independent Auditors' Report................................ F-28
Balance Sheets as of July 31, 2001 and December 31, 2000.... F-29
Statements of Income for the Six Months Ended June 30, 2001
(unaudited), the Seven Months Ended July 31, 2001 and Year
Ended December 31, 2000................................... F-30
Statements of Cash Flows for the Six Months Ended June 30,
2001 (unaudited), the Seven Months Ended July 31, 2001,
and the Years Ended December 31, 2000 and 1999............ F-31
Notes to Financial Statements............................... F-32
|
SOUTHERN POWER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, 2002 DECEMBER 31, 2001
------------- -----------------
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 5,361 $ 3,711
Receivables:
Accounts receivable..................................... 8,083 3,416
Affiliated companies.................................... 35,256 1,965
Derivative instruments.................................... 3,656 9,208
Fossil fuel stock, at average cost........................ 3,083 3,425
Materials and supplies, at average cost................... 5,068 5,731
Prepayments............................................... 74 183
---------- --------
Total current assets................................ 60,581 27,639
---------- --------
PROPERTY, PLANT, AND EQUIPMENT.............................. 886,239 265,153
LESS ACCUMULATED DEPRECIATION............................... (8,775) (3,291)
---------- --------
877,464 261,862
CONSTRUCTION WORK IN PROGRESS............................... 729,841 500,358
---------- --------
Total property, plant, and equipment, net........... 1,607,305 762,220
DERIVATIVE INSTRUMENTS...................................... -- 9,059
DEFERRED INCOME TAXES....................................... 30,698 11,915
OTHER DEFERRED CHARGES...................................... 15,168 12,024
---------- --------
Total Assets........................................ $1,713,752 $822,857
========== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Note payable to parent.................................... $ 186,342 $ 950
Accounts payable:
Affiliated companies.................................... 18,364 26,135
Other................................................... 9,329 4,278
Accrued income taxes payable.............................. 11,174 394
Other..................................................... 2,918 886
---------- --------
Total current liabilities........................... 228,127 32,643
---------- --------
LONG-TERM DEBT.............................................. 732,401 293,205
---------- --------
DEFERRED CREDITS AND OTHER LIABILITIES:
Due to affiliated companies............................... 24,332 23,415
Other..................................................... 10,606 6,601
Derivative instruments.................................... 10,362 --
---------- --------
Total deferred credits and other liabilities............ 45,300 30,016
---------- --------
Total liabilities......................................... 1,005,828 355,864
---------- --------
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; 1,000,000 shares authorized;
1,000 shares issued and outstanding..................... -- --
Paid-in capital........................................... 705,869 452,097
Accumulated other comprehensive income (loss)............. (19,465) 6,689
Retained earnings......................................... 21,520 8,207
---------- --------
Total common stockholder's equity....................... 707,924 466,993
---------- --------
Total Liabilities and Stockholder's Equity.............. $1,713,752 $822,857
========== ========
|
See notes to condensed consolidated financial statements.
SOUTHERN POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
FOR THE SIX MONTHS
ENDED JUNE 30,
-------------------
2002 2001
-------- --------
(IN THOUSANDS)
OPERATING REVENUES:
Electricity sales:
Nonaffiliates.......................................... $42,842 $ --
Affiliates............................................. 34,147 --
Other revenues............................................ 87 --
------- -------
Total operating revenues.......................... 77,076 --
------- -------
OPERATING EXPENSES:
Fuel...................................................... 21,165 --
Purchased power:
Nonaffiliates.......................................... 10,725 --
Affiliates............................................. 4,791 --
General and administrative................................ 7,452 1,692
Operations and maintenance................................ 1,821 --
Depreciation.............................................. 5,485 --
Taxes other than income taxes............................. 1,503 --
------- -------
Total operating expenses.......................... 52,942 1,692
------- -------
OPERATING INCOME (LOSS)..................................... 24,134 (1,692)
OTHER INCOME (LOSS):
Interest income........................................... 229 15
Other, net................................................ (1,449) --
------- -------
Total other income (loss)......................... (1,220) 15
INTEREST EXPENSE, NET....................................... 1,195 1
------- -------
INCOME (LOSS) BEFORE INCOME TAXES........................... 21,719 (1,678)
------- -------
INCOME TAXES................................................ 8,406 (655)
------- -------
NET INCOME (LOSS)........................................... $13,313 $(1,023)
======= =======
|
See notes to condensed consolidated financial statements.
SOUTHERN POWER COMPANY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2002
(UNAUDITED)
ACCUMULATED
COMMON STOCK OTHER
--------------- PAID-IN COMPREHENSIVE RETAINED
SHARES AMOUNT CAPITAL INCOME (LOSS) EARNINGS TOTAL
------ ------ -------- ------------- -------- --------
(IN THOUSANDS, EXCEPT SHARES)
BALANCE, January 1, 2002........ 1,000 $ -- $452,097 $ 6,689 $ 8,207 $466,993
Capital contributions from
parent..................... 253,772 253,772
Other comprehensive income
(loss)..................... (26,154) (26,154)
Net income.................... 13,313 13,313
----- ---- -------- -------- ------- --------
BALANCE, June 30, 2002.......... 1,000 $ -- $705,869 $(19,465) $21,520 $707,924
===== ==== ======== ======== ======= ========
|
See notes to condensed consolidated financial statements.
SOUTHERN POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
(IN THOUSANDS)
FOR THE SIX MONTHS
ENDED JUNE 30
------------------
2002 2001
-------- -------
NET INCOME (LOSS)........................................... $ 13,313 $(1,023)
CHANGES IN FAIR VALUE OF QUALIFYING CASH FLOW HEDGES, NET
OF TAX OF $(16,572)....................................... (26,154) --
LESS: RECLASSIFICATION ADJUSTMENT FOR AMOUNTS INCLUDED IN
NET INCOME, NET OF TAX OF $24............................. 38 --
-------- -------
COMPREHENSIVE INCOME (LOSS)................................. $(12,803) $(1,023)
======== =======
|
SOUTHERN POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(IN THOUSANDS)
AT
AT JUNE 30, DECEMBER 31,
2002 2001
----------- ------------
Balance at beginning of period.............................. $ 6,689 $ --
Change in current period.................................... (26,154) 6,689
-------- -------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)......... $(19,465) $ 6,689
======== =======
|
See notes to condensed consolidated financial statements.
SOUTHERN POWER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
(IN THOUSANDS)
FOR THE SIX MONTHS
ENDED JUNE 30,
---------------------
2002 2001
--------- ---------
OPERATING ACTIVITIES:
Net income (loss)......................................... $ 13,313 $ (1,023)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and Amortization........................... 6,871 --
Deferred income taxes................................... (1,888) --
Unrealized losses on derivative instruments, net........ 1,960 --
Cash received in excess of levelized revenues............. 5,019 --
Changes in assets and liabilities:
Receivables............................................. (37,958) --
Prepayments............................................. 109 (654)
Fossil fuel stock....................................... 342 --
Materials and supplies.................................. 663 --
Accounts payable........................................ 17,126 1,693
Accrued income taxes payable............................ 10,780 --
Miscellaneous current and accrued liabilities........... 1,278 --
Prepaid capacity revenues............................... (710) --
--------- ---------
Net cash provided from operating activities........ 16,905 16
INVESTING ACTIVITIES:
Gross property additions.................................. (853,256) (101,985)
Decrease in construction-related payables................. (20,390) --
Deferred project development costs........................ 1,243 --
Acquired premium on derivative instrument................. (1,576) --
--------- ---------
Net cash used in investing activities.............. (873,979) (101,985)
FINANCING ACTIVITIES:
Capital contributions from parent......................... 253,772 99,964
Proceeds from issuance of original senior notes........... 574,189 --
Revolving credit facility................................. 417,000 --
Redemptions of revolving credit facility.................. (552,000) --
Proceeds from subordinated notes payable to parent........ 185,392 10,889
Deferred payable to affiliate............................. 1,049 --
Deferred financing costs.................................. (5,973) --
Settlement of interest rate swap on senior note........... (16,884) --
Other..................................................... 2,179 --
--------- ---------
Net cash provided from financing activities........ 858,724 110,853
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 1,650 8,884
CASH AND CASH EQUIVALENTS, beginning of period.............. 3,711 --
--------- ---------
CASH AND CASH EQUIVALENTS, end of period.................... $ 5,361 $ 8,884
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid (received) during the period for interest (net
of amount capitalized).................................. $ -- $ --
========= =========
Cash paid during the period for income taxes.............. $ 724 $ --
========= =========
|
See notes to condensed consolidated financial statements.
SOUTHERN POWER COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2002 AND 2001
A. The Company has prepared the condensed consolidated financial statements included herein, without audit, pursuant to the rules and regulations of the SEC. In the opinion of management, the information furnished herein reflects all adjustments necessary to present fairly the results of operations for the periods ended June 30, 2002 and 2001. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures regarding such registrant are adequate to make the information presented not misleading. Therefore, it is suggested that these condensed financial statements be read in conjunction with the Company's consolidated financial statements as of and for the period from January 8, 2001 (inception) to December 31, 2001 and the notes thereto included herein. Due to seasonal variations in the demand for energy, operating results for the period presented do not necessarily indicate operating results for the entire year.
B. In January 2002, Georgia Power Company transferred the Plant Wansley combined cycle facility under construction to the Company. In accordance with the Affiliate Transaction Rule of the Public Utility Holding Company Act of 1935 the plant was transferred at Georgia Power Company's net carrying cost of ($389.9 million) and recorded as construction work in progress in the accompanying condensed consolidated balance sheet. Included in the carrying costs for Wansley were $1.6 million in derivative assets relating to electric and gas forward positions in effect at the date of the transfer. Such forward contracts were recorded at fair value on the date of transfer which was equal to Georgia Power Company's carrying amount. Following the transfer, these contracts are marked to market until realized and settled. See Note 2, "Asset Transfers and Construction Program," in the notes to the Consolidated Financial Statements herein.
C. In 2002, the Company executed additional long-term power sales agreements whereby the Company will sell capacity and energy from planned generating facilities. These contracts begin in 2005 and are subject to regulatory approval. These respective obligations are described below:
BEGINNING
FACILITIES PLANNED MEGAWATTS DATE END DATE
------------------ --------- --------- --------
Franklin 3............................................ 615 6/1/05 5/31/30
McIntosh 10 and 11.................................... 1,040 6/1/05 5/31/19
200 6/1/05 5/31/19
|
Under these contracts, we have the right, at our sole discretion, to supply capacity and energy under these arrangements from any resource available to us as part of the Southern Pool.
See Note 7, "Long-Term Power Sales Contracts," in the notes to the Consolidated Financial Statements.
D. In 2002, we executed agreements to coordinate the generating resources and meet the additional capacity requirements ("Requirement Agreements") of 11 Georgia Electric Membership Corporations ("EMCs"). These Requirement Agreements went into effect in June 2002. Under these agreements, both the loads and the resources of the EMCs will be integrated into the Southern Pool.
E. On June 18, 2002, we issued $575 million of 6.25% Senior Notes, Series A due July 15, 2012. The proceeds of the issue were used to reduce the amount outstanding of the revolving credit facility and note payable to Southern.
F. During 2002, the Company created several wholly owned subsidiaries as limited liability companies for the purchase of land, land options and development of potential sites for future generating units.
G. Effective June 1, 2002, the Company changed Plant Dahlberg's estimated useful life from 35 to 40 years, resulting in a $79,000 monthly decrease in depreciation expense. The change is the result of a
recent actuarial study that estimated the useful life of a gas turbine electric generating unit to be at least 40 years. The Company continues to depreciate combined-cycle electric generating facilities over 35 years.
H. Southern has committed to directly fund 40% of the construction costs of the facilities funded under the revolving credit facility. In addition, Southern has guaranteed the timely completion of Company projects currently financed under a revolving credit facility. In this guarantee, Southern agrees to pay for cost overruns to the extent that the Company's own cash flow is insufficient. Southern also agrees to prepay any portion of the credit facility used for Company projects not completed within two years of the proposed projects' completion dates. At June 30, 2002, the outstanding amount of this revolving credit facility related to projects under construction was $158 million.
I. Certain keep-well agreements were created to facilitate the assignment of specific partially executory vendor contracts to the Company. As of June 30, 2002, Southern keep-well agreements were in place to facilitate the transfer of specific vendor contracts from Alabama Power Company to the Company related to the Harris construction. Southern keep-wells are also in place for the transfer of specific vendor contracts from Georgia Power Company to the Company for the operation of Plant Dahlberg and construction at the Franklin and Stanton sites. As of June 30, 2002, the keep-well agreements have an estimated value of $32.6 million related to the Georgia Power Company contracts.
Certain other keep-well arrangements were entered into in order to enhance the efficiency and flexibility of the energy sales and related natural gas procurements function. Acting as agent for Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company and Savannah Electric and Power Company (collectively, the "Operating Companies") and the Company under agency agreements ("Agreements"), Southern Company Services, Inc. ("SCS") may enter into various types of wholesale energy and natural gas contracts. Under such Agreements, each of the Operating Companies may be jointly and severally liable for the obligations of each of the other Operating Companies and the Company. In that regard, the creditworthiness of the Company is currently inferior to the creditworthiness of the other Operating Companies. To insure that such other Operating Companies will not subsidize or be responsible for any costs, losses, liabilities or damages arising out of or resulting from the Company's inclusion as a contracting party under the Agreements, Southern has entered into a keep-well agreement with each of the other Operating Companies.
Based on the Company's share of natural gas and wholesale energy purchase commitments, Southern's maximum exposure under the Agreements was $36.8 million as of June 30, 2002.
J. As the Company has no employees, all employee-related charges are rendered at cost under agreements with SCS or the Operating Companies. Costs for these services amounted to approximately $13.1 million for the period ended June 30, 2002, of which approximately $5.7 million is included in general and administrative expenses in the accompanying statements of income; the remainder was capitalized to construction work in progress.
Southern Power has an agreement with Georgia Power Company to provide operation and maintenance services for Plants Dahlberg, Wansley and Franklin. These services are billed at cost on a monthly basis and are recorded as operations and maintenance expense in the accompanying statements of income. For the period ended June 30, 2002, these services totaled approximately $1.6 million.
K. Project costs for Plant Wansley (Units 6 & 7) and Plant Franklin (Unit 1), which were placed in service on June 1, 2002, reflect the recording of revenues and cost during the test period for these units. Revenues for test period generation charged to the project were approximately $25.2 million and total costs were approximately $27.3 million.
Additionally, in accordance with Financial Accounting Standard No. 133, gains and losses on electric and gas forward contracts related to these units that were realized during the test period were charged to Other Comprehensive Income.
L. In addition to the fixed price electric and gas contracts used to mitigate exposure to volatile energy prices (see "Market Price Risk" in MANAGEMENT'S DISCUSSION AND ANALYSIS), the Company has entered into interest rate swaps to hedge exposure to interest rate changes. These swaps related to forecasted issuances of long-term debt and are accounted for as cash flow hedges. The swaps were structured to mirror the terms of the hedged debt instruments; therefore, no ineffectiveness has been recorded in earnings. As of June 30, 2002, the following swaps were outstanding:
CASH FLOW HEDGES
WEIGHTED
AVERAGE FAIR VALUE
NOTIONAL VARIABLE RATE FIXED RATE MATURITY JUNE 30, 2002
AMOUNT RECEIVED PAID DATE (INCLUDED IN OCI)
-------- ------------- ---------- --------- -----------------
$350 million 1-month LIBOR 6.2348% June 2013 $(9,755,000)
$100 million 1-month LIBOR 6.1863% June 2008 $(3,557,000)
|
For the six month period ended June 30, 2002, approximately $0.1 million was reclassified from other comprehensive income to interest expense. For the 12-month period ended June 2003, approximately $1.7 million is expected to be reclassified.
M. See Note 10, "Contingencies," in the notes to the Consolidated Financial Statements herein for information regarding a dispute with a former contractor at Plants Wansley and Franklin. This dispute and the related lien was settled in July 2002 for a total of $6.9 million. The payment will be capitalized as a cost of the plants.
N. General and administrative expenses included the write-off in May 2002 of $2.9 million in previously deferred site investigation and development costs, such that certain amounts billed by SCS that were previously capitalized as project development costs are being expensed as incurred. Effective May 2002, the Company modified its policy regarding deferred project development costs, such that certain amounts billed by SCS that were previously capitalized as project development costs are being expensed as incurred. See Note 1 to the consolidated financial statements where deferred project development costs are described.
INDEPENDENT AUDITORS' REPORT
To Southern Power Company:
We have audited the accompanying consolidated balance sheet of Southern Power Company and subsidiary (the "Company") as of December 31, 2001 and the related consolidated statements of income, stockholder's equity, comprehensive income, and cash flows for the period from January 8, 2001 (inception) to December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2001 and the results of its operations and its cash flows for the period from January 8, 2001 (inception) to December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP Atlanta, Georgia May 31, 2002 |
SOUTHERN POWER COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 3,711
Receivables:
Accounts receivable..................................... 3,416
Affiliated companies.................................... 1,965
Derivative instruments (Note 3)........................... 9,208
Fossil fuel stock, at average cost........................ 3,425
Materials and supplies, at average cost................... 5,731
Prepayments............................................... 183
--------
Total current assets............................... 27,639
--------
PROPERTY, PLANT AND EQUIPMENT............................... 265,153
LESS ACCUMULATED DEPRECIATION............................... (3,291)
--------
261,862
CONSTRUCTION WORK IN PROGRESS............................... 500,358
--------
Total property, plant, and equipment, net.......... 762,220
DERIVATIVE INSTRUMENTS (Note 3)............................. 9,059
DEFERRED INCOME TAXES, NET.................................. 11,915
OTHER DEFERRED CHARGES...................................... 12,024
--------
Total Assets....................................... $822,857
========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Note payable to parent.................................... $ 950
Accounts payable:
Affiliated companies.................................... 26,135
Other................................................... 4,278
Accrued income taxes payable.............................. 394
Other..................................................... 886
--------
Total current liabilities.......................... 32,643
--------
LONG-TERM DEBT (Note 9)..................................... 293,205
--------
DEFERRED CREDITS AND OTHER LIABILITIES:
Due to affiliated companies (Notes 1 and 8)............... 23,415
Other..................................................... 6,601
--------
Total deferred credits and other liabilities....... 30,016
--------
Total liabilities.................................. 355,864
--------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, 5, and 10)
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; 1,000,000 shares authorized;
1,000 shares issued and outstanding in 2001............. --
Paid-in capital........................................... 452,097
Accumulated other comprehensive income.................... 6,689
Retained earnings......................................... 8,207
--------
Total stockholder's equity......................... 466,993
--------
Total Liabilities and Stockholder's Equity......... $822,857
========
|
See notes to consolidated financial statements.
SOUTHERN POWER COMPANY
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD FROM JANUARY 8, 2001 (INCEPTION) TO DECEMBER 31, 2001
(IN THOUSANDS)
OPERATING REVENUES:
Electricity sales:
Nonaffiliates.......................................... $26,390
Affiliates............................................. 2,906
Other revenues............................................ 5
-------
Total operating revenues.......................... 29,301
-------
OPERATING EXPENSES:
Fuel...................................................... 3,779
Purchased power:
Nonaffiliates.......................................... 1,209
Affiliates............................................. 3,517
General and administrative................................ 5,615
Operations and maintenance................................ 1,010
Depreciation.............................................. 3,291
Taxes, other than income taxes............................ 393
-------
Total operating expenses.......................... 18,814
-------
OPERATING INCOME............................................ 10,487
OTHER INCOME:
Interest income........................................... 78
Other, net................................................ 580
-------
Total other income................................ 658
INTEREST EXPENSE, NET....................................... 427
-------
INCOME BEFORE INCOME TAXES.................................. 10,718
INCOME TAXES (Note 8)....................................... 2,511
-------
NET INCOME.................................................. $ 8,207
=======
|
See notes to consolidated financial statements.
SOUTHERN POWER COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM JANUARY 8, 2001 (INCEPTION) TO DECEMBER 31, 2001
ACCUMULATED
COMMON STOCK OTHER
--------------- PAID-IN COMPREHENSIVE RETAINED
SHARES AMOUNT CAPITAL INCOME EARNINGS TOTAL
------ ------ -------- ------------- -------- --------
(IN THOUSANDS, EXCEPT SHARES)
BALANCE, January 8, 2001
(Inception).................... -- $ -- $ -- $ -- $ -- $ --
Initial capitalization......... 1,000 -- --
Capital contributions from
parent...................... 452,097 452,097
Other comprehensive income..... 6,689 6,689
Net income..................... 8,207 8,207
----- ----- -------- ------ -------- --------
BALANCE, December 31, 2001....... 1,000 $ -- $452,097 $6,689 $ 8,207 $466,993
===== ===== ======== ====== ======== ========
|
See notes to consolidated financial statements.
SOUTHERN POWER COMPANY
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM JANUARY 8, 2001 (INCEPTION) TO DECEMBER 31, 2001
(IN THOUSANDS)
NET INCOME.................................................. $ 8,207
CHANGES IN FAIR VALUE OF QUALIFYING CASH FLOW HEDGES, NET
OF TAX OF $4,219.......................................... 6,689
-------
COMPREHENSIVE INCOME........................................ $14,896
=======
|
See notes to consolidated financial statements.
SOUTHERN POWER COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 8, 2001 (INCEPTION) TO DECEMBER 31, 2001
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net income................................................ $ 8,207
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation and amortization.......................... 3,291
Deferred income taxes.................................. 3,534
Unrealized gains on derivative instruments, net........ (580)
Changes in assets and liabilities:
Receivables............................................ (5,381)
Prepayments............................................ (183)
Fossil fuel stock...................................... (3,425)
Materials and supplies................................. (5,731)
Accounts payables...................................... 2,242
Accrued income taxes payable........................... 394
Prepaid capacity revenues.............................. 4,255
Cash revenues in excess of levelized revenues.......... 1,731
Other.................................................. 250
---------
Net cash provided from operating activities....... 8,604
---------
INVESTING ACTIVITIES:
Gross property additions.................................. (765,511)
Increase in construction-related payables................. 28,171
Deferred project development costs........................ (4,509)
Acquired derivative assets................................ (5,617)
---------
Net cash used in investing activities............. (747,466)
---------
FINANCING ACTIVITIES:
Capital contributions..................................... 452,097
Long-term debt............................................ 293,205
Note payable to parent.................................... 950
Deferred financing costs.................................. (7,306)
Deferred payable to affiliate............................. 3,792
Other..................................................... (165)
---------
Net cash provided from financing activities....... 742,573
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 3,711
CASH AND CASH EQUIVALENTS, beginning of period.............. --
---------
CASH AND CASH EQUIVALENTS, end of period.................... $ 3,711
=========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest (net of amount
capitalized)........................................... $ 427
=========
Cash received during the period for income taxes.......... $ (423)
=========
|
See notes to consolidated financial statements.
SOUTHERN POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization -- Southern Power Company ("Southern Power") is a wholly owned subsidiary of Southern Company ("Southern"). Southern Power created a wholly owned subsidiary, Southern Company Florida-LLC ("SCF") to own, operate and maintain Plant Stanton Unit A, a jointly owned generating facility. See Note 6, Joint Ownership Agreements for further information. Southern Power and its subsidiary were established to construct, own, and manage Southern's competitive contract-based wholesale generation assets which operate outside of traditional state regulation, and to sell electricity at market-based rates in the wholesale market. Southern Power provides energy and capacity to various third-party purchasers and affiliates under long-term contracts.
Southern is the parent company of five operating companies, Southern Company Services ("SCS"), Southern Communications Services ("Southern LINC"), Southern Nuclear Operating Company ("Southern Nuclear"), Southern Power, and other direct and indirect subsidiaries. The operating companies, consisting of Alabama Power Company ("APC"), Georgia Power Company ("GPC"), Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company (collectively, the "Operating Companies") provide electric service in four southeastern states. Contracts among the Operating Companies and Southern Power, including those related to jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power, are regulated by the Federal Energy Regulatory Commission ("FERC") and/or the Securities and Exchange Commission ("SEC"). SCS provides, at cost, specialized services to Southern Company and subsidiary companies. Southern Nuclear provides services to Southern's nuclear power plants.
Southern is registered as a holding company under the Public Utility Holding Company Act of 1935, as amended ("PUHCA"). Southern, Southern Power, and the Operating Companies are subject to the regulatory provisions of PUHCA. Southern Power is also subject to regulation by the FERC.
Formation of Southern Power and Initiation of Commercial Operations -- Southern Power was formed on January 8, 2001. Southern Power began commercial operations in August 2001 after GPC transferred its interest in Plant Dahlberg Units 1 through 10. See Note 2, Asset Transfers and Construction Program, for further information regarding asset transfers from affiliates.
Basis of Presentation -- The consolidated financial statements of Southern Power present the historical financial position as of December 31, 2001 and results of operations and cash flows for the period from January 8, 2001 (inception) through December 31, 2001, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("generally accepted accounting principles"). The results of operations of the Plant Dahlberg assets (Note 2) are incorporated into Southern Power's consolidated results of operations beginning August 1, 2001.
Principles of Consolidation -- The consolidated financial statements include the accounts of Southern Power and its wholly owned subsidiary, SCF. All intercompany accounts and transactions have been eliminated in consolidation.
Related Party and Affiliate Transactions -- Southern Power along with the Operating Companies are members of and share the benefits and obligations of the Southern system power pool ("Southern Pool"). The Southern Pool is operated by SCS. As a member of the Southern Pool, Southern Power's units will be economically dispatched with the generating facilities of the Operating Companies to serve the members' aggregate load requirements. A member of the Southern Pool has the first call on its own generating resources, but if lower cost generation resources are available within the Southern system, a Southern Pool member has the right to purchase that lower variable cost energy to satisfy its obligations. Additionally, if a Southern Pool member is unable to generate sufficient capacity and energy to meet its obligations, it can buy
power from the Southern Pool at the marginal energy cost. The Southern Pool is governed by the Intercompany Interchange Contract ("IIC"), which has been approved by the FERC.
Southern Power has an agreement with SCS under which the following services are rendered to Southern Power at cost: Southern Pool operations, construction, general and design engineering, purchasing, accounting and statistical, finance and treasury, tax, information resources, marketing, auditing, insurance and pensions, human resources, systems and procedures, and other services with respect to business operations and power pool management. SCS also enters into fuel purchase and transportation arrangements and contracts, financial instruments for purposes of hedging, and wholesale energy purchase and sale transactions for the benefit of Southern Power. As Southern Power has no employees, all employee related charges are rendered at cost under agreements with SCS or the Operating Companies. Costs for these services from SCS amounted to approximately $12 million for the period ended December 31, 2001, of which approximately $4.7 million was general and administrative expenses; the remainder was capitalized to construction work in progress.
Southern Power has an agreement with GPC to provide operation and maintenance services for Plant Dahlberg. These services are billed at cost on a monthly basis and are recorded as operations and maintenance expense in the accompanying statements of income. For the period ended December 31, 2001, these services totaled approximately $1.0 million.
Additionally, Southern Power has agreements with APC and GPC to provide procurement, payables, and other accounting functions related to the construction at Plants Harris and Goat Rock in Alabama and Plant Wansley in Georgia. Cost for these services are billed monthly.
Southern Power sells the output of its generating assets under long-term, market-based contracts both to unaffiliated wholesale purchasers as well as the Operating Companies (under power purchase agreements approved by the respective public service commissions).
Southern Power and its affiliates generally settle amounts related to the above transactions on a monthly basis in the month following the performance of such services or the purchase or sale of electricity. See Notes 2, 3, 4, 6, and 9 for additional discussion of certain related party and affiliate transactions.
Revenues -- Revenues include capacity and energy sales and are recorded based on output and energy delivery. Capacity is sold at rates specified under contractual terms, and is recognized on a levelized basis over the respective contract periods. Energy is generally sold at market-based rates and is recognized as delivered. Significant portions of Southern Power's revenues have been derived from certain customers. LG&E Energy Marketing, Inc. and Dynegy Power Marketing Inc. accounted for approximately 66% and 21% of revenues, respectively, for the period ended December 31, 2001.
The Emerging Issues Task Force ("EITF") is currently addressing the question of how to determine whether an arrangement, including purchase power agreements, constitutes a lease within the scope of Statement of Financial Accounting Standards ("SFAS") No. 13, in Issue 01-08, Determining Whether an Arrangement is a Lease. Final conclusions reached by the EITF may impact the consolidated financial statements of Southern Power; however, such impact cannot yet be determined.
Fuel Costs -- Fuel costs are expensed as the fuel is consumed.
Depreciation -- Depreciation of the original cost of assets is computed under the straight-line method based on the assets' estimated useful lives determined by Southern Power. The primary asset in property, plant and equipment is a power plant which has an estimated useful life of 35 years.
Income Taxes -- Southern Power uses the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Additionally, Southern Power joins in the filing of a consolidated federal income tax return by Southern. Southern Power records its tax liabilities as though it was filing separate returns and records tax benefits to the extent that Southern is able to receive those benefits. Southern Power uses the flow-through method of accounting for State of Georgia Manufacturer's Tax Credit. See Note 8, Income Taxes, for additional discussion.
Property, Plant and Equipment -- Property, plant and equipment are stated at original cost. Original cost includes materials, direct labor incurred by affiliated companies, minor items of property, and appropriate administrative costs. Interest is capitalized on qualifying projects during the development and construction period. For the period ended December 31, 2001, approximately $2.9 million of interest was capitalized in connection with the development and construction of power plants. Upon commencement of plant operations, capitalized interest is amortized over the estimated useful life of the plant. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense as incurred. The cost of replacements of property that extend the useful life of the plant, exclusive of minor items of property, is capitalized.
Construction work in progress is recorded at cost, which includes materials, direct labor incurred by affiliated companies, appropriate administrative costs, and capitalized interest.
Fair Values -- SFAS No. 107, Disclosures About Fair Value of Financial Instruments, requires the disclosure of the fair value of all financial instruments. At December 31, 2001, financial instruments recorded at contractual amounts that approximate market or fair value include cash and cash equivalents, accounts receivable, accounts payable and variable rate debt. The market values of such items are not materially sensitive to shifts in market interest rates because of the limited term to maturity of many of these instruments and/or their variable interest rates.
Impairment of Long-Lived Assets -- Long-lived assets held and used by Southern Power are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, as compared to the carrying value of the assets. If the carrying amount of the asset exceeds the expected future cash flows expected to be generated by the asset, an impairment loss is recognized, and the asset is written down to its estimated fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Cash and Cash Equivalents -- For purposes of the consolidated financial statements, temporary cash investments are considered cash equivalents. Temporary cash investments are securities with original maturities of 90 days or less.
Deferred Project Development Costs -- Southern Power capitalizes project development costs once it is determined that it is probable that a specific site will be acquired and a power plant constructed. These costs include professional services, permits and other costs directly related to the construction of a new project. Certain amounts billed by SCS are also capitalized as project development costs as SCS serves in a manner similar to an external third party. These costs are generally transferred to construction work in progress upon commencement of construction. The total deferred project development costs at December 31, 2001 were $4.5 million.
Deferred Financing Costs -- Financing costs, consisting primarily of bank fees, legal fees and other direct costs incurred to obtain financing, are deferred and amortized over the financing term.
Major Maintenance -- The Company expenses major maintenance costs as incurred. See Note 5, Long Term Service Agreements, for additional discussion.
Comprehensive Income -- Southern Power's comprehensive income consists of income and changes in the fair value of qualifying cash flow hedges, net of income taxes.
Use of Estimates -- The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Also, such estimates relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
The Company's construction program is subject to periodic review and revision. Actual construction costs may vary from estimates because of numerous factors, including, but not limited to, changes in business conditions, load growth estimates, environmental regulations, and regulatory requirements.
The Company, through SCS as its agent, uses derivative financial instruments primarily to hedge exposures to fluctuations in interest rates, foreign currency exchange rates and commodity prices. In measuring the fair value of such instruments, SCS as the Company's agent, uses estimates. Such estimates of fair value are generally based on prevailing market prices and financial models using market data and certain assumptions. The use of different assumptions or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented herein are not necessarily indicative of the amount the Company could actually realize as the transactions are terminated or settled.
Derivative Instruments -- Southern Power applies SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 requires that companies recognize all derivatives as either assets or liabilities measured at fair value on the statement of financial position. SFAS No. 133 provides an exception for certain contracts that qualify as "normal purchases and sales." To qualify for this exception, certain criteria must be met, including that it must be probable that the contract will result in physical delivery. See Note 3 Financial and Other Derivative Instruments.
New Accounting Pronouncements -- Asset Retirement Obligations -- In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement requires that the fair value of an asset retirement obligation be recognized in the period in which it is incurred. The associated asset retirement costs would be capitalized as part of the carrying amount of the long-lived asset and depreciated over the asset's useful life. Changes in the liability resulting from the passage of time will be recognized as operating expenses. It would apply to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. Southern Power has not yet determined the impact of this statement on its consolidated financial statements.
Long-Lived Assets -- In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement establishes a single accounting model for long-lived assets to be disposed of by sale, whether previously held and used, or newly acquired. This statement is effective for financial statements issued for fiscal years beginning after December 15, 2001. Southern Power adopted this statement on January 1, 2002, with no impact on the consolidated financial statements.
Business Segments -- SFAS No. 131, Disclosures About Segments at an Enterprise and Related Information, require that companies report certain financial and descriptive information about operating segments in their financial statements. Southern Power operates as a single reportable segment, as defined by SFAS No. 131 as the primary vehicle to own, construct, acquire, and manage Southern's competitive, contract-based wholesale generation assets.
2. ASSET TRANSFERS AND CONSTRUCTION PROGRAM
On July 31, 2001, GPC transferred its interests in Plant Dahlberg Units 1 through 10 and related working capital to Southern Power. In accordance with the affiliate transaction rules of PUHCA, these assets were transferred at GPC's net carrying costs of $260.1 million. The transferred assets consist primarily of 10 combustion turbine units (810 MW) in operation, all located in Jackson County, Georgia. In connection with the asset transfer, GPC also assigned to Southern Power its interest in three power purchase agreements related to Dahlberg. Southern Power effected the transfer of these assets using equity contributions and subordinated loans from Southern.
The following projects, which were under construction, were transferred from APC and GPC to Southern Power:
TRANSFERRED
PLANT FROM DATE AMOUNT
----- ----------- --------- -------------
(IN MILLIONS)
Harris 1 and 2.................................... APC June 2001 $ 91.4
Goat Rock 1 and 2................................. GPC/APC Nov 2001 $267.9
Wansley 6 and 7................................... GPC Jan 2002 $389.9
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These assets were recorded by Southern Power at the respective affiliate's book value and are included in construction work in progress in the accompanying consolidated balance sheet at December 31, 2001. The results of operations of Plant Dahlberg are included in the financial statements from August 1, 2001.
In conjunction with these transfers, APC and GPC have assigned certain vendor contracts related to the on-going construction of these facilities to Southern Power. Southern has entered into limited keep-well arrangements with APC and GPC whereby Southern will contribute funds to Southern Power via loans or capital contributions to fund the performance of Southern Power as equipment purchaser under certain arrangements. As of December 31, 2001, Southern Power's remaining purchase obligations to equipment vendors totaled $132 million.
Southern Power's obligations for construction of transmission interconnection facilities to these plants by APC and GPC totaled $13 million at December 31, 2001, and are also guaranteed by Southern.
Additionally, Southern Power is constructing Plant Stanton Unit A, a jointly owned combined cycle facility located near Orlando, Florida. Southern has agreed to grant performance guarantees on behalf of Southern Power and its subsidiary, SCF, for SCF's payment obligations under construction and power purchase agreements associated with the Orlando project. Southern Power's maximum exposure is $53 million under the construction and ownership agreement and $20 million under the power purchase agreement. See Note 6 Joint Ownership Agreements.
3. FINANCIAL AND OTHER DERIVATIVE INSTRUMENTS
Southern Power, through SCS as its agent, uses derivative financial instruments to hedge exposures to fluctuations in interest rates, foreign currency exchange rates, and certain commodity prices. Fluctuations in fair market value on qualifying hedges are recorded in other comprehensive income ("OCI") and recognized into income when the underlying transaction settles or the hedge is no longer effective.
At December 31, 2001, Southern Power had interest rate swaps with four counterparties related to planned debt issuances in 2002 ($250 million) and 2003 ($200 million), scheduled to coincide with the anticipated in-service date of units under construction. These swaps have been designated as cash flow hedges. There is no ineffectiveness related to these swaps for the period ended December 31, 2001. Southern Power's interest rate swaps have maturity dates between 2012 and 2013. The range of fixed interest rates Southern Power will pay on the swaps are between 5.47% and 6.3%. At December 31, 2001, Southern Power had derivative hedging assets of approximately $11.5 million, $4.3 million current and $7.2 million long-term, with corresponding amounts recorded in OCI ($7 million) and deferred income taxes ($4.5 million) on the accompanying consolidated balance sheet. The fair value of interest rate swaps is determined based on the estimated amount that Southern Power would receive or pay to terminate the swap agreement at the reporting date based on third-party quotations. If it becomes probable that the anticipated transaction will not occur, any deferred gains and losses recorded in accumulated other comprehensive income will be realized into income.
Southern Power has firm purchase commitments for equipment that require payment in Euros. As a hedge against fluctuations in the exchange rate for Euros, Southern Power entered into forward contracts to purchase Euros. Southern Power has designated these contracts as fair value hedges of an unrecognized firm commitment. The total notional amount is 48 million Euros, with 42 million maturing in 2002 and 6 million maturing in 2003. The forward contracts to purchase Euros are on the same dates and in the same amounts as
the Euro payments that Southern Power owes for the equipment. As all of the critical terms of the forward Euro purchases (dates and amounts) match those of the Euro payment obligations, the changes in fair value attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. Therefore, there is no ineffectiveness related to this hedge.
Additionally, in connection with the transfer of Plant Goat Rock from GPC (see Note 2, Asset Transfers and Construction Programs), GPC transferred approximately $5.6 million in derivative assets relating to electric forward positions in effect at the date of the transfer. Such forwards were recorded at fair value on the date of transfer, which was equal to GPC's carrying amount, and were subsequently marked-to-market.
SCS, acting as agent for Southern Power and the Operating Companies, enters into commodity related forward and option contracts to limit exposure to changing prices on certain fuel purchases and electricity purchases and sales. Substantially all of SCS's bulk energy purchases and sales contracts meet the definition of a derivative under the SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. In many cases, these fuel and electricity contracts qualify for normal purchase and sale exceptions under SFAS No. 133 and are accounted for under the accrual method. Other contracts qualify as cash flow hedges of anticipated transactions, resulting in the deferral of related gains and losses, and are recorded in other comprehensive income until the hedged transactions occur. Any ineffectiveness is recognized currently in net income. Ineffectiveness is immaterial for the period ended December 31, 2001. Contracts that do not qualify for the normal purchase and sale exception that have not been designated as hedges or that do not meet the hedge requirements are marked to market through current period income. SCS allocates gains and losses on fuel and electricity derivative contracts to the Operating Companies and Southern Power under the terms of the IIC (See Note 1).
At December 31, 2001, Southern Power had net derivative assets of approximately $5.5 million related to commodity related hedging financial instruments. The fair value of these forward contacts is calculated based on closing exchange or over-the-counter market price quotations. Certain of these forwards did not meet the hedge criteria. For the period from January 8, 2001 (inception) through December 31, 2001, Southern Power has recorded a net unrealized gain on these transactions of approximately $580 thousand. This amount is reported in other income on the accompanying consolidated income statement.
The following table summarizes Southern Power's derivative and hedging activity for the period from January 8, 2001 (inception) to December 31, 2001 (in thousands):
INTEREST ELECTRIC AND
RATE GAS FORWARD EURO
SWAPS CONTRACTS FORWARDS TOTAL
-------- ------------ -------- -------
Unrealized gains............................ $11,521 $ 6,542 $ 204 $18,267
Unrealized losses........................... -- (1,046) (204) (1,250)
------- ------- ----- -------
Net derivative asset........................ $11,521 $ 5,496 $ -- $17,017
======= ======= ===== =======
OCI, net of income tax effects.............. $ 7,065 $ (376) $ -- $ 6,689
Purchased derivative assets................. -- 5,617 -- 5,617
Other income................................ -- 580 -- 580
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Southern Power is exposed to losses related to financial instruments in the event of counterparties' nonperformance. SCS, in its capacity as agent for the Operating Companies and Southern Power, has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate its exposure to counterparty credit risk.
4. FUEL COMMITMENTS
SCS, as agent for the Operating Companies and Southern Power, has entered into various fuel transportation and procurement agreements to supply a portion of the fuel (primarily natural gas) requirements for the operating facilities. In most cases, these contracts contain provisions for firm transportation costs, storage costs, minimum purchase levels, and other financial commitments. At December 31, 2001, total estimated long-term fuel commitments related to Southern Power's generating units, based on contractual terms, were as follows (in millions):
2002........................................................ $ 2
2003........................................................ 8
2004........................................................ 4
2005........................................................ --
2006........................................................ --
2007 and thereafter......................................... 260
----
Total............................................. $274
====
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In addition, SCS acts as agent for Southern Power and the Operating Companies with regard to natural gas purchases. Natural gas purchases (in dollars) are based on various indices at the actual time of delivery; therefore, only the volume commitments are firm. At December 31, 2001, the committed volumes (in MMBTU) allocated to Southern Power based on projected usage for its units are as follows:
MMBTU
----------
2002........................................................ 7,997,028
2003........................................................ 13,212,489
2004........................................................ 1,649,892
2005........................................................ 300,471
2006........................................................ 201,550
2007 and thereafter......................................... 87,056
----------
Total....................................................... 23,448,486
==========
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Purchases of natural gas from SCS were approximately $3.6 million for the period ended December 31, 2001.
5. LONG TERM SERVICE AGREEMENTS
Southern Power has entered into several Long-Term Service Agreements ("LTSAs") with General Electric International, Inc. ("GEII") for the purpose of securing maintenance support for its Combined Cycle ("CC") and Combustion Turbine ("CT") generating facilities. In summary, the LTSAs stipulate that for a fee, GEII will perform all planned maintenance on the covered equipment, which includes the cost of all labor and materials. The planned maintenance events are Combustion Inspections, Hot Gas Path Inspections, and Major Inspections. These maintenance events are to take place at intervals outlined in the published recommendations of GEII. GEII is also obligated to cover the costs of unplanned maintenance on the covered equipment subject to a limit specified in each contract.
In general, except for the Dahlberg units, these agreements are in effect through the second Major Inspection, which is to occur at approximately 96,000 fired operating hours ("FOH") per unit with a termination option available at 48,000 FOH and in some cases at 72,000 FOH. The Dahlberg agreement is in effect through the first Hot Gas Path Inspection of each unit, which is to occur at approximately 1,200 factored starts on a unit with a cancellation option available after the first Combustion Inspection. Scheduled payments to GEII are made at various intervals based on actual FOH. Total payments to GEII under these agreements are $852 million over the life of the agreements (estimated to be 28 to 30 years per unit) or $370 million if Southern Power terminates the agreement after 48,000 FOH.
Southern Power is obligated to pay the cost of planned maintenance under these agreements at Plant Dahlberg through balloon payments. GEII will bill the balloon payments no earlier than 6 months prior to the scheduled commencement of any planned maintenance. Payments made under this arrangement will be recorded as a prepayment on the consolidated balance sheet. The first outage is scheduled for 2003.
At the time of a planned maintenance, these costs will be capitalized or charged to expense based on the nature of the work performed. Any amounts capitalized will be added to the applicable retirement unit and depreciated over the remaining life of the plant.
6. JOINT OWNERSHIP AGREEMENTS
Southern Power, through its wholly owned subsidiary SCF, is a 65% owner of Plant Stanton Unit A ("Stanton A"), a combined-cycle project that will total 633 MW upon completion. The unit is co-owned by Orlando Utilities Commission ("OUC") (28%), Florida Municipal Power Agency ("FMPA") (3.5%), and Kissimmee Utility Authority ("KUA") (3.5%). Southern Power has a services agreement with SCS where SCS will be responsible for the operation and maintenance of Stanton A. Additionally, under the terms of the services agreement, SCS will perform overall project management of the construction process.
Construction on Stanton A began in October 2001 with an expected completion date of October 1, 2003. At December 31, 2001, Southern Power's share of construction costs for Stanton A of $31.4 million, which are net of joint participant payments, are recorded in construction work in progress.
7. LONG-TERM POWER SALES CONTRACTS
Southern Power has also entered into long-term power sales contracts for portions of its generating unit capacity, as follows:
MEGAWATTS CONTRACT
PROJECT (MW) TERM
------- --------- -----------
Dahlberg Units 1-7.......................................... 578 6/00-12/04
Dahlberg Unit 8-10.......................................... 225 6/00-5/05
Goat Rock 1................................................. 571(1) 6/02-5/10
Goat Rock 2................................................. 615(2) 6/02-5/11
Wansley 6 and Wansley 7..................................... 1,134 6/02-12/09
Harris 1.................................................... 618 6/02-5/10
Harris 2.................................................... 618(3) 6/04-5/19
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(1) 370MW During the first year
(2) 400MW During the first year
(3) Contract does not begin until second year of operation
In addition, in connection with the Stanton A joint ownership agreements (Note 6), Southern Power has entered into a long-term power sale agreement, which provides for payment of fixed capacity and energy for specified periods. OUC, KUA, and FMPA will purchase all of the capacity owned by Southern Power pursuant to purchase power agreements with 10-year terms. These agreements provide OUC, KUA, and FMPA the unilateral option to acquire Southern Power's capacity for up to four extensions, each with five-year terms, to a maximum of 30 years. Such agreements will go into effect upon completion of construction of Stanton A.
Capacity revenues from these power sales agreements amounted to $18.6 million for the period ended December 31, 2001. Future capacity payments to be received under these power sales agreements as of December 31, 2001 are as follows (in millions):
2002........................................................ $ 125.6
2003........................................................ 226.1
2004........................................................ 317.2
2005........................................................ 358.9
2006........................................................ 369.0
2007 and Thereafter......................................... 2,774.8
--------
Total............................................. $4,171.6
========
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Capacity revenues under these power sales agreements are recognized on a levelized basis over the life of the contracts. At December 31, 2001, Southern Power had received $1.7 million more in payments than was recognized in revenues. The amount is recorded in other deferred credits on the accompanying consolidated balance sheets.
Additionally, GPC required that certain counterparties to the Dahlberg Purchase Power Agreements make prepayments for operational rights to the units. These prepayments were recorded as liabilities by GPC and were transferred to Southern Power in connection with the Plant Dahlberg transfer. At December 31, 2001, these amounts totaled $4.2 million and are being amortized into income over the life of the agreements.
8. INCOME TAXES
Details of the income tax provision (benefit) for the period from inception (January 8, 2001) through December 31, 2001 are as follows (in thousands):
Federal:
Current................................................... $ 1,402
Deferred.................................................. 3,017
-------
4,419
-------
State:
Current................................................... 240
Deferred.................................................. 517
State manufacturer's tax credits.......................... (2,665)
-------
(1,908)
-------
Total............................................. $ 2,511
=======
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Southern Power recorded a reduction in 2001 tax expense of approximately $2.7 million under the flow-through method of accounting for the State of Georgia manufacturer's tax credits. The State of Georgia provides a tax credit for qualified investment property to manufacturing companies that construct new facilities. The credit ranges from 1% to 5% of construction expenditures depending upon the county in which the new facility is located. Southern Power's policy is to recognize these credits when management believes they are more likely than not to be allowed by the Georgia Department of Revenue.
The tax effects of temporary differences between the carrying amounts of assets in the financial statements and their respective tax bases which give rise to deferred tax assets and liabilities as of December 31, 2001 are as follows (in thousands):
Deferred tax liabilities:
Accelerated depreciation.................................. $(3,451)
Other..................................................... (4,444)
-------
Total............................................. (7,895)
-------
Deferred tax asset -- book/tax basis difference on asset
transfer.................................................. 19,810
-------
Accumulated net deferred income tax assets.................. $11,915
=======
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Deferred tax liabilities were primarily the result of property related timing differences and derivative hedging instruments. Deferred tax assets were primarily the result of a deferred tax gain related to the transfer of Plant Dahlberg from GPC. Southern Power has recognized a payable to GPC for GPC's deferred tax liability resulting from this gain of approximately $19.8 million at December 31, 2001, which is recorded in due to affiliates on the accompanying consolidated balance sheet.
The provision for income taxes differs from the amount of income taxes determined by applying the applicable federal statutory rate to earnings before income taxes, as a result of the following:
Income taxes at statutory rate.............................. 35.0%
State taxes, net of federal benefit......................... 4.6
State manufacturer's tax credits, net of federal effect..... (16.2)
-----
Total income tax provision........................ 23.4%
=====
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Southern files a consolidated federal income tax return. Under a joint consolidated income tax agreement, each subsidiary's current and deferred tax expense is computed on a stand-alone basis. In accordance with Internal Revenue Service regulations, each company is jointly and severally liable for the tax liability of Southern.
9. CAPITALIZATION AND REVOLVING CREDIT FACILITIES
Southern Power has authorized common stock of 1 million shares at $.01 par value per share. One thousand shares have been issued to Southern and are outstanding at December 31, 2001.
Southern Power uses both external funds and equity capital from Southern to finance its construction program. Southern, through its equity contribution agreement with Southern Power, has committed to fund directly at least 40% of the construction costs of facilities funded under the revolving credit facility, approximately $677 million. Capital contributions from Southern through December 31, 2001 totaled approximately $452 million. In addition, Southern executed a guarantee of completion of construction of each generating facility that is financed in part by the lenders under the credit facility (the "Completion Guarantee"). Under the terms of the Completion Guarantee, Southern guarantees timely completion of construction of the facilities under the credit facility, agrees to fund any associated construction cost overruns to the extent Southern Power's cash flow is insufficient, and agrees to pay down debt if certain performance standards at completion are not met.
Southern is currently authorized by the SEC under the PUHCA to fund the development of Southern Power up to an aggregate amount not to exceed $1.7 billion, which may take the form of purchases or contributions of equity interests, loans and guarantees issued in support of Southern Power's securities or obligations. Southern Power has SEC approval under the PUHCA to issue up to an aggregate amount of $2.5 billion of preferred securities, long and short-term debt and other equity issuances.
During 2001, Southern Power entered into an intercompany note payable with Southern. The note is payable on demand and bears interest at a variable rate. At December 31, 2001, $950 thousand was outstanding with an interest rate of 3.27%.
In November 2001, Southern Power entered into an $850 million unsecured syndicated revolving credit facility (the "Facility"). The purpose of the Facility is to finance the acquisition and construction costs related to gas-fired electric generating facilities, general corporate purposes (subject to a $25 million limit) and to pay or back-stop commercial paper used to fund construction of facilities. At December 31, 2001, Southern Power had borrowed approximately $293 million under the Facility leaving an unused borrowing authority of approximately $557 million. Borrowings under the Facility bear interest at Southern Power's option equal to either the Eurodollar rate plus a specified margin ranging from 1.125% to 2.875%, depending on Southern Power's credit rating, or a base rate plus a specified margin. The interest rate and average interest rate on the Facility were 3.44% and 3.61%, respectively, at December 31, 2001 and during the period then ended, based on the Eurodollar rate option. Southern Power is required to pay a commitment fee on the unused balance of the Facility. The commitment fee ranges from 0.3% to 0.45% depending on Southern Power's credit rating. For the period ended December 31, 2001, Southern Power paid approximately $147 thousand in commitment fees. All borrowings outstanding under the Facility are due in November 2004.
The Facility contains certain financial covenants relating to Southern Power's debt capitalization which require that additional debt incurred by Southern Power must generally be unsecured and Southern Power must have its ratings reaffirmed at investment grade including the new debt. The Facility also contains restrictions related to the assumption of additional debt, which require a maximum 60% debt ratio. Southern Power is in compliance with such covenants at December 31, 2001.
In 2001, Southern Power entered into a financial arrangement with Westdeutsche Landesbank Girozentrale ("WestLB"). Under this agreement, Southern Power may assign up to $125 million in vendor contracts for equipment to WestLB. For accounting purposes, WestLB is the owner of the contracts. Southern Power acts as an agent for WestLB and instructs WestLB when to make payments to the vendors. At December 31, 2001, approximately $47 million of such vendor equipment contracts had been assigned to WestLB. This agreement was terminated on March 22, 2002 and Southern Power repurchased the equipment at original cost, which totaled approximately $61 million, using funds from an intercompany loan with Southern.
10. CONTINGENCIES
Southern Power is in mediation with a former contractor who has filed a lien against Plant Wansley Units 6 and 7 for approximately $17.0 million as compensation for cost over-runs in building the plant. Also, the contractor is claiming approximately $10.0 million in additional charges related to construction cost over-runs for Goat Rock Unit 1. The outcome of this matter cannot now be determined. Management believes that the ultimate outcome of this matter will not have a material adverse affect on Southern Power's financial condition or results of operations. Any amounts ultimately paid would be capitalized as a cost of the project.
11. SUBSEQUENT EVENTS
In January 2002, GPC transferred to Southern Power the construction work in progress balance for Plant Wansley Units 6 and 7 at net book value of approximately $390 million.
In 2002, Southern Power executed three additional long-term sales agreements for the capacity of specific generating facilities. These agreements are still subject to regulatory approval.
Also, in 2002, Southern Power executed agreements to coordinate the generating resources and meet the additional capacity requirements of 11 Georgia Electric Membership Corporations.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Southern Power was created on January 8, 2001. Commercial operations began in August with the transfer of Plant Dahlberg. First and second quarter operating income and net income data reflect start up and organizational costs incurred prior to commercial operations:
Operating revenues:
First quarter (1/8/01 -- 3/31/01)......................... $ --
Second quarter............................................ --
Third quarter............................................. 14,604
Fourth quarter............................................ 14,697
-------
Fiscal year................................................. $29,301
=======
Operating income (loss):
First quarter (1/8/01 -- 3/31/01)......................... $ (107)
Second quarter............................................ (1,569)
Third quarter............................................. 7,056
Fourth quarter............................................ 5,107
-------
Fiscal year................................................. $10,487
=======
Net income (loss):
First quarter (1/8/01 -- 3/31/01)......................... $ (65)
Second quarter............................................ (949)
Third quarter............................................. 5,957
Fourth quarter............................................ 3,264
-------
Fiscal year................................................. $ 8,207
=======
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INDEPENDENT AUDITORS' REPORT
To Southern Power Company:
We have audited the accompanying balance sheets of Plant Dahlberg (a wholly owned carve-out entity of Georgia Power Company, an affiliate company) ("Plant Dahlberg") as of July 31, 2001 and December 31, 2000, and the related statements of income for the seven months ended July 31, 2001 and the year ended December 31, 2000, and of cash flows for the seven months ended July 31, 2001 and the years ended December 31, 2000 and 1999. These financial statements are the responsibility of Southern Power Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared from the separate records maintained by Georgia Power Company and affiliates and may not necessarily be indicative of the conditions that would have existed or the results of operations if Plant Dahlberg had been operated as an unaffiliated company. Portions of certain income and expenses represent allocations made from affiliate company items applicable to the Georgia Power Company and affiliates as a whole.
In our opinion, such financial statements referred to above present fairly, in all material respects, the financial position of Plant Dahlberg as of July 31, 2001 and December 31, 2000, and the results of its operations for the seven months ended July 31, 2001 and the year ended December 31, 2000 and its cash flows for the seven months ended July 31, 2001 and the years ended December 31, 2000 and 1999 in conformity with accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP Atlanta, Georgia May 31, 2002 |
PLANT DAHLBERG
(A WHOLLY OWNED CARVE-OUT ENTITY OF GEORGIA POWER COMPANY)
BALANCE SHEETS
AS OF JULY 31, AS OF DECEMBER 31,
2001 2000
-------------- ------------------
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Accounts receivable....................................... $ 7,647 $ 10,861
Fossil fuel stock, at average cost........................ 3,378 3,019
-------- --------
Total current assets.............................. 11,025 13,880
-------- --------
PROPERTY, PLANT, AND EQUIPMENT.............................. 220,112 220,112
LESS ACCUMULATED DEPRECIATION............................... (7,738) (3,723)
-------- --------
212,374 216,389
CONSTRUCTION WORK IN PROGRESS............................... 47,228 42,298
-------- --------
Total property, plant, and equipment, net......... 259,602 258,687
-------- --------
Total assets...................................... $270,627 $272,567
======== ========
LIABILITIES AND ACCUMULATED EARNINGS
CURRENT LIABILITIES:
Note payable to Southern (Note 5)......................... $160,404 $157,446
Accrued income taxes payable.............................. 4,345 5,128
-------- --------
Total current liabilities......................... 164,749 162,574
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes..................................... 4,841 2,774
Other..................................................... 6,770 6,034
-------- --------
Total deferred credits and other liabilities...... 11,611 8,808
-------- --------
Total liabilities................................. 176,360 171,382
-------- --------
DUE TO GEORGIA POWER COMPANY................................ 72,796 89,331
ACCUMULATED EARNINGS........................................ 21,471 11,854
-------- --------
Total Liabilities and Accumulated Earnings........ $270,627 $272,567
======== ========
|
See notes to financial statements.
PLANT DAHLBERG
(A WHOLLY OWNED CARVE-OUT ENTITY OF GEORGIA POWER COMPANY)
STATEMENTS OF INCOME
FOR THE
SIX MONTHS FOR THE
ENDED SEVEN MONTHS FOR THE
JUNE 30, ENDED YEAR ENDED
2001 JULY 31, 2001 DECEMBER 31, 2000
------------- ------------- -----------------
(UNAUDITED)
(IN THOUSANDS)
OPERATING REVENUES:
Electricity sales:
Nonaffiliates................................... $30,311 $36,532 $59,124
Affiliates...................................... 4,114 4,621 10,989
Other revenues..................................... -- 0 3
------- ------- -------
Total operating revenues................... 34,425 41,153 70,116
------- ------- -------
OPERATING EXPENSES:
Fuel............................................... 5,506 6,762 27,339
Purchased power from affiliates.................... 6,414 7,844 11,923
General and administrative......................... 310 354 299
Operations and maintenance......................... 1,240 1,511 1,088
Depreciation....................................... 3,439 4,015 3,723
Taxes, other than income taxes..................... 629 734 539
------- ------- -------
Total operating expenses................... 17,538 21,220 44,911
------- ------- -------
OPERATING INCOME..................................... 16,887 19,933 25,205
INTEREST EXPENSE, NET................................ 3,360 3,904 5,449
------- ------- -------
INCOME BEFORE INCOME TAXES........................... 13,527 16,029 19,756
INCOME TAXES (Note 4)................................ 5,411 6,412 7,902
------- ------- -------
NET INCOME........................................... 8,1$16..... $ 9,617 $11,854
======= ======= =======
|
See notes to financial statements.
PLANT DAHLBERG
(A WHOLLY OWNED CARVE-OUT ENTITY OF GEORGIA POWER COMPANY)
STATEMENTS OF CASH FLOWS
SIX MONTHS SEVEN
ENDED MONTHS
JUNE 30, 2001 ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) JULY 31, 2001 DECEMBER 31, 2000 DECEMBER 31, 1999
------------- ------------- ----------------- -----------------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net income....................... $ 8,116 $ 9,617 $ 11,854
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation.................. 3,439 4,015 3,723
Deferred income taxes......... 1,772 2,067 2,774
Changes in current assets and
liabilities:
Receivables................... 2,755 3,214 (10,861)
Fossil fuel stock............. (308) (359) (3,019)
Taxes accrued................. (671) (783) 5,128
Prepaid capacity revenues..... (708) (826) 5,674
Other deferred credits........ 1,339 1,562 360 $ --
-------- -------- --------- ---------
Net cash provided from
operating activities... 15,734 18,507 15,633 --
INVESTING ACTIVITIES:
Gross property additions......... (4,226) (4,930) (262,410) (146,566)
-------- -------- --------- ---------
Net cash used in
investing activities... (4,226) (4,930) (262,410) (146,566)
FINANCING ACTIVITIES:
Changes in due to Georgia Power
Company....................... (14,043) (16,535) 89,331 58,626
Notes payable.................... 2,535 2,958 157,446 87,940
-------- -------- --------- ---------
Net cash provided by
(used in) financing
activities............. (11,508) (13,577) 246,777 146,566
NET INCREASE IN CASH AND CASH
EQUIVALENTS...................... $ 0 $ -- $ -- $ --
CASH AND CASH EQUIVALENTS,
beginning of period.............. -- -- -- --
-------- -------- --------- ---------
CASH AND CASH EQUIVALENTS, end of
period........................... -- -- -- --
======== ======== ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid (received) during the
year for interest (net of
amount capitalized)........... $ -- $ -- $ -- $ --
======== ======== ========= =========
Cash paid (received) during the
year for income taxes
(refund)...................... $ -- $ -- $ -- $ --
======== ======== ========= =========
|
See notes to financial statements.
PLANT DAHLBERG
(A WHOLLY OWNED CARVE-OUT ENTITY OF GEORGIA POWER COMPANY)
NOTE TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2001
A. The financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the SEC. In the opinion of management, the information furnished herein reflects all adjustments necessary to present fairly the results of operations for the period ended June 30, 2001. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures regarding such registrant are adequate to make the information presented not misleading. Therefore, it is suggested that these condensed financial statements be read in conjunction with the financial statements as of July 31, 2001 and December 31, 2000 and for the periods then ended and the notes thereto included herein.
PLANT DAHLBERG
(A WHOLLY OWNED CARVE-OUT ENTITY OF GEORGIA POWER COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF JULY 31, 2001, AND DECEMBER 31, 2000
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The accompanying carve-out financial statements present the financial position and the results of operations of Georgia Power Company's Plant Dahlberg ("Plant Dahlberg"), a component of the competitive contract-based wholesale generation-related business of Georgia Power Company ("GPC"). The financial statements include Plant Dahlberg's financial position as of July 31, 2001 and December 31, 2000, and its results of operations for the period from January 1, 2001 to July 31, 2001 and for the year ended December 31, 2000 and Plant Dahlberg's cash flows for the seven months ended July 31, 2001 and the years ended December 31, 2000 and 1999.
GPC began construction of Plant Dahlberg in December 1998, and commercial operations for units 1-8 commenced in June 2000. Units 9-10 were placed into service in 2001. Operations of Plant Dahlberg prior to June 2000 consisted solely of construction related activities. GPC transferred Plant Dahlberg to Southern Power Company ("Southern Power") on July 31, 2001 (the "Transfer"). Southern Power is a wholly owned subsidiary of Southern Company ("Southern"). Southern is the parent company of five operating companies, Southern Company Services ("SCS"), Southern Communications Services ("Southern LINC"), Southern Nuclear Operating Company ("Southern Nuclear"), Southern Power Company, and other direct and indirect subsidiaries. The operating companies, consisting of Alabama Power Company ("APC"), Georgia Power Company ("GPC"), Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company (collectively, the Operating Companies) provide electric service in four southeastern states. Contracts among the Operating Companies and Southern Power, including those related to jointly owned generating facilities, interconnecting transmission lines, and the exchange of electric power, are regulated by the Federal Energy Regulatory Commission ("FERC") and/or the Securities and Exchange Commission ("SEC"). SCS provides, at cost, specialized services to Southern Company and subsidiary companies. Southern Nuclear provides services to Southern's nuclear power plants.
Southern is registered as a holding company under the Public Utility Holding Company Act of 1935 as amended ("PUHCA"). Southern, Southern Power, and the Operating Companies are subject to the regulatory provisions of PUHCA. Southern Power is also subject to regulation by the FERC.
Plant Dahlberg is not a separate subsidiary, division, or segment of GPC. Such financial information of Plant Dahlberg is not necessarily indicative of the financial position, results of operations or cash flows that would have existed had Plant Dahlberg been an independent company during the periods presented.
Certain information in these financial statements relating to the results of operations and financial condition of Plant Dahlberg was derived from the historical financial statements of GPC, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("generally accepted accounting principles"). Various allocation methodologies were employed to separate the results of operations and financial condition of Plant Dahlberg from GPC's historical financial statements prior to the Transfer. Prior to the Transfer, revenues included the generation component of revenue from GPC's operations and any generation-related revenues, such as ancillary services and wholesale energy activity. Expenses, such as energy costs, operations and maintenance and depreciation, and assets, such as property, plant and equipment, and fuel, were specifically identified by function and reported accordingly for Plant Dahlberg's operations. Various allocations were used to disaggregate other common expenses, assets and liabilities between Plant Dahlberg and GPC's regulated generation, transmission and distribution operations. Interest was calculated based upon an allocation methodology that charged Plant Dahlberg with financing costs from GPC in proportion to its share of total net property, plant and equipment. These methodologies use the assumption that Plant Dahlberg had operated as a separate, non-regulated company prior to the Transfer.
Management believes that these allocation methodologies are reasonable. Had Plant Dahlberg actually existed as a separate company, its results could have significantly differed from those presented herein. In addition, future results of operations, financial position and cash flows could materially differ from the historical results presented.
Affiliate Transactions -- GPC (including Plant Dahlberg) along with the other Operating Companies and Southern Power are members of and share the benefits and obligations of the Southern system power pool ("Southern Pool"). The Southern Pool is operated by SCS. As a member of the Southern Pool, Plant Dahlberg will be economically dispatched with the generating facilities of the Operating Companies to serve the members' aggregate load requirements. A member of the Southern Pool has the first call on its own generating resources, but if lower cost generation resources are available within the Southern system, a Southern Pool member has the right to purchase that lower variable cost energy to satisfy its obligations. Additionally, if a Southern Pool member is unable to generate sufficient capacity and energy to meet its obligations, it can buy power from the Southern Pool at the marginal energy cost. The Southern Pool is governed by the provisions in the Intercompany Interchange Contract ("IIC"), which has been approved by the FERC.
GPC (including Plant Dahlberg) has an agreement with SCS under which certain services are rendered at cost. These services may include Southern Pool operations, construction, general and design engineering, purchasing, accounting and statistical, finance and treasury, tax, information resources, marketing, auditing, insurance and pensions, human resources, systems and procedures, and other services with respect to business operations and power pool management. SCS also enters into fuel purchase and transportation arrangements and contracts, financial instruments for purposes of hedging, and wholesale energy purchase and sale transactions for the benefit of GPC. Purchases of natural gas from SCS at market prices were approximately $5.8 million and $26.6 million for the periods ended July 31, 2001 and December 31, 2000, respectively.
Plant Dahlberg sells its output under long-term, market-based contracts both to unaffiliated wholesale purchasers as well as the Operating Companies (under power purchase agreements approved by the respective public service commissions). Plant Dahlberg is not included in the Operating Companies' rate bases.
GPC provides operation and maintenance services for Plant Dahlberg. These services are provided at cost and are recorded as operations and maintenance expense in the accompanying statements of income. For the period ended July 31, 2001, and the year ended December 31, 2000, these services totaled approximately $1.5 million and $1.1 million, respectively.
Revenues -- Revenues include capacity and energy sales, and are recorded based on output and energy delivery. Capacity output is sold at rates specified under contractual terms, and is recognized ratably over the respective contract periods. Energy is generally sold at market-based rates and is recognized as delivered. Significant portions of Plant Dahlberg's revenues have been derived from certain customers. LG&E Energy Marketing Inc. and Dynegy Power Marketing Inc. accounted for approximately 88.7% and 84.3% of revenues, respectively, for the period ended July 31, 2001 and year ended December 31, 2000.
Fuel Costs -- Fuel costs are expensed as the fuel is consumed. As of July 31, 2001 and December 31, 2000, there were no long-term fuel commitments for Plant Dahlberg.
Depreciation -- Depreciation of the original cost of plants is computed under the straight-line method based on the assets' estimated useful lives. The estimated useful lives are approximately 35 years for plant.
Income Taxes -- Plant Dahlberg is not a taxable entity. The accompanying carve-out financial statements reflect Plant Dahlberg tax liabilities as though it was filing a separate return and accordingly, Plant Dahlberg has applied the liability method of accounting for deferred income taxes and provides deferred income taxes for all significant income tax temporary differences. Deferred income taxes are reflected for the temporary differences between book and taxable income, resulting primarily from the use of accelerated depreciation for tax purposes.
Property, Plant, and Equipment -- Property, plant, and equipment are stated at original cost. Original cost includes materials, direct labor incurred by affiliated companies, minor items of property, and appropriate
administrative costs. Interest is capitalized on qualifying projects during the development and construction period. For the period ended July 31, 2001 and years ended December 31, 2000 and 1999, approximately $1.0 million, $5.8 million and $3.2 million, respectively of interest was capitalized in connection with the development and construction of Plant Dahlberg. Upon commencement of plant operations, capitalized interest is amortized over the estimated useful life of the plant. The cost of maintenance, repairs, and replacement of minor items of property is charged to maintenance expense as incurred. The cost of replacements of property that extend the useful life of the plant, exclusive of minor items of property, is capitalized.
Construction work in progress is recorded at cost, which includes, materials, labor, appropriate administrative costs, and the capitalized interest on funds used during construction.
Impairment of Long-Lived Assets -- GPC reviews Plant Dahlberg for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, as compared to the carrying value of the assets. If the carrying amount of the asset exceeds the expected future cash flows expected to be generated by the asset, an impairment loss is recognized, and the asset is written down to its estimated fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Use of Estimates -- The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Also, such estimates relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. In addition to these estimates, see Basis of Presentation for a discussion of the estimates used and methodologies employed to derive Plant Dahlberg's historical financial statements.
New Accounting Pronouncements -- Derivatives -- Effective January 1, 2001, Plant Dahlberg adopted Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, and interpreted. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 requires that companies recognize all derivatives as either assets or liabilities measured at fair value on the statement of financial position. SFAS No. 133 provides an exception for certain contracts that qualify as "normal purchases and sales." To qualify for this exception, certain criteria must be met, including that it must be probable that the contract will result in physical delivery. There were no derivative instruments as of and for the period ended July 31, 2001 and the year ended December 31, 2000.
2. LONG TERM SERVICE AGREEMENTS
GPC has entered into a Long-Term Service Agreement ("LTSA") with General Electric International, Inc. ("GEII") for the purpose of securing maintenance support for Plant Dahlberg. In summary, the LTSA stipulates that for a fee, GEII will perform all planned maintenance on the covered equipment, which includes the cost of all labor and materials. The planned maintenance events are Combustion Inspections, Hot Gas Path Inspections, and Major Inspections. These maintenance events are to take place at intervals outlined in the published recommendations of GEII. GEII is also obligated to cover the costs of unplanned maintenance on the covered equipment subject to a limit specified in each contract.
The Dahlberg agreement is in effect through the first Hot Gas Path Inspection of each unit, which is to occur at approximately 1,200 factored starts on a unit with a cancellation option available after the first Combustion Inspection. Scheduled payments to GEII are made at various intervals based on actual fired operating hours ("FOH"). Total payments to GEII under these agreements are $852 million over the life of the agreements (estimated to be 28 to 30 years per unit) or $370 million if Southern Power terminates the agreement after 48,000 FOH.
GPC is obligated to pay the cost of planned maintenance through balloon payments. GEII will bill the balloon payments no earlier than 6 months prior to the scheduled commencement of any planned maintenance. Payments made under this arrangement will be recorded as a prepayment on the consolidated balance sheet. The first outage is scheduled for 2003.
At the time of a planned maintenance, these costs will be capitalized or charged to expense based on the nature of the work performed. Any amounts capitalized will be added to the applicable retirement unit and depreciated over its remaining life of the plant.
GPC pays GEII fixed quarterly payment to cover the costs of continuous monitoring at Plant Dahlberg. Such costs are recorded as operations and maintenance expense as the monitoring service is provided.
3. LONG TERM POWER SALES
GPC has entered into long-term power sales contracts for portions of Plant Dahlberg's generating unit capacity, as follows:
MEGAWATTS END
PROJECT (MW) DATE
------- --------- --------
Dahlberg Units 1-7.......................................... 578 12/31/04
Dahlberg Unit 8-10.......................................... 225 5/31/05
|
Capacity revenues from these power sales agreements amounted to $22.4 million and $20.2 million for the periods ended July 31, 2001 and December 31, 2000, respectively. Future capacity payments from these power sales agreements as of July 31, 2001 are as follows (in millions):
2001 (August -- December)................................... $ 18.6
2002........................................................ 44.9
2003........................................................ 45.6
2004........................................................ 44.3
2005........................................................ 2.6
------
Total............................................. $156.0
======
|
Capacity revenues are recognized on a levelized basis over the life of the contract. At July 31, 2001 and December 31, 2000, Plant Dahlberg had received $1.6 million and $0.4 million more in payments than was recognized in revenues, respectively. These amounts are recorded in other deferred credits on the accompanying consolidated balance sheets.
4. INCOME TAXES
Details of the income tax provision (benefit) allocated to Plant Dahlberg for the period from January 1, 2001 to July 31, 2001 and for the year ended December 31, 2000 are as follows (in thousands):
JULY 31, 2001 DECEMBER 31, 2000
------------- -----------------
Federal:
Current payable....................................... $3,824 $4,513
Deferred.............................................. 1,787 2,402
------ ------
5,611 6,915
------ ------
State:
Current payable....................................... 521 615
Deferred.............................................. 280 372
------ ------
801 987
------ ------
Total......................................... $6,412 $7,902
====== ======
|
Deferred tax liabilities were primarily the result of property related timing differences, and totaled $2.1 million and $2.8 million at July 31, 2001 and December 31, 2000, respectively.
5. NOTE PAYABLE TO SOUTHERN
At July 31, 2001 and December 31, 2000, GPC had no debt financing directly related to Plant Dahlberg. However, because Southern has an equity contribution agreement with Southern Power under which it had committed to fund directly at least 40% of the construction costs of certain projects, the accompanying carve- out financial statements reflect a capital structure of 40% equity (due to Georgia Power Company) and 60% debt. The debt is included in "Note Payable to Southern" on the accompanying financial statements, and is assumed to accrue interest at a rate that is the higher of the average effective interest cost of Southern's outstanding obligation for borrowed money or the applicable Federal Rate for short-term loans published by the Internal Revenue Service. The interest rates on outstanding amounts allocated to Plant Dahlberg were 4.07% and 6.1% at July 31, 2001 and December 31, 2000, respectively.
6. TRANSFER OF PLANT DAHLBERG TO SOUTHERN POWER
On July 31, 2001, Plant Dahlberg Units 1 through 10 and related working capital was transferred to Southern Power from GPC. These assets were transferred at book value of $260.1 million.
ANNEX A
INDEPENDENT ENGINEER'S REPORT
SOUTHERN POWER COMPANY
GENERATING FACILITIES
[R.W. BECK LOGO]
[THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
ANNEX A
INDEPENDENT ENGINEER'S REPORT
SOUTHERN POWER GENERATING FACILITIES
TABLE OF CONTENTS
PAGE
----
INTRODUCTION.....................................................................................................A-1
THE GENERATING FACILITIES........................................................................................A-5
The Project Sites.............................................................................................A-6
Description of the Facilities.................................................................................A-9
Off-Site Requirements........................................................................................A-11
Fuel Supply...............................................................................................A-11
Water Supply and Treatment................................................................................A-12
Wastewater Disposal.......................................................................................A-13
Electrical Interconnection................................................................................A-13
Review of Technologies.......................................................................................A-15
GE 7FA CT.................................................................................................A-15
GE 7EA CT.................................................................................................A-18
Summary...................................................................................................A-19
Estimated Useful Life........................................................................................A-19
Performance Tests and Guarantees.............................................................................A-19
Operating History............................................................................................A-21
Capacity and Heat Rate.......................................................................................A-22
Availability.................................................................................................A-26
Construction Status..........................................................................................A-28
ENVIRONMENTAL ASSESSMENTS.......................................................................................A-28
Environmental Site Assessments...............................................................................A-28
Status of Permits and Approvals..............................................................................A-31
Regulatory Compliance........................................................................................A-33
PROJECTED OPERATING RESULTS.....................................................................................A-34
Annual Operating Revenues....................................................................................A-35
Revenue from Power Purchase Agreements....................................................................A-35
Other Revenues from Electricity Sales.....................................................................A-38
Annual Operating Expenses....................................................................................A-39
Fuel Costs................................................................................................A-39
Operating and Maintenance Costs...........................................................................A-39
Purchased Power...........................................................................................A-40
Emissions Allowances......................................................................................A-40
General and Administrative and Other Expenses.............................................................A-40
Annual Interest..............................................................................................A-40
Interest Coverage............................................................................................A-40
Sensitivity Analyses.........................................................................................A-41
Summary Comparison of Projected Operating Results............................................................A-41
|
ANNEX A
INDEPENDENT ENGINEER'S REPORT
SOUTHERN POWER GENERATING FACILITIES
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
PRINCIPAL CONSIDERATIONS AND ASSUMPTIONS
USED IN THE PROJECTION OF OPERATING RESULTS.....................................................................A-42
CONCLUSIONS.....................................................................................................A-44
EXHIBITS
EXHIBIT A-1 Base Case Projected Operating Results.........................................................A-46
EXHIBIT A-2 Sensitivity A - Low Gas Market Price Scenario.................................................A-59
EXHIBIT A-3 Sensitivity B - High Gas Market Price Scenario................................................A-62
EXHIBIT A-4 Sensitivity C - Capacity Overbuild Market Price Scenario......................................A-65
EXHIBIT A-5 Sensitivity D - Reduced Output................................................................A-68
EXHIBIT A-6 Sensitivity E - Reduced Availability..........................................................A-71
EXHIBIT A-7 Sensitivity F - Increased Heat Rate...........................................................A-74
EXHIBIT A-8 Sensitivity G - Increased Operating Expenses..................................................A-77
|
Copyright (C) 2002 R. W. Beck, Inc. All Rights Reserved
(R.W. BECK LOGO)
June 13, 2002
Southern Power Company
2700 Peachtree Street NW
Suite 2000
Atlanta, Georgia 30303
Subject: INDEPENDENT ENGINEER'S REPORT ON THE
SOUTHERN POWER GENERATING FACILITIES
Ladies and Gentlemen:
INTRODUCTION
Presented herein is the report (the "Report") of our review and analyses of the generating facilities owned by Southern Power Company ("Southern Power"), a wholly-owned subsidiary of The Southern Company ("Southern"). Southern Power intends on issuing $575,000,000 of 6.25% Senior Notes, due July 15, 2012 (the "Notes").
The generating facilities reviewed, totaling 4,777 megawatts ("MW")
(net), are summarized in Table 1 and consist of the 810 MW (net) Dahlberg
simple-cycle power plant in operation near Athens, Georgia consisting of ten
units (the "Dahlberg Facility"); the 1,186 MW (net) Goat Rock combined-cycle
power plant in Lee County, Alabama consisting of two units ("Goat Rock 1" and
"Goat Rock 2", and, collectively, the "Goat Rock Facility"); the 1,236 MW (net)
Harris combined-cycle power plant in Autauga County, Alabama consisting of two
units ("Harris 1" and "Harris 2", and, collectively, the "Harris Facility");
Southern Power's 65 percent ownership interest in the 633 MW (net) Stanton
combined-cycle power plant in Orlando, Florida (the "Stanton Facility"); and
the 1,134 MW (net) Wansley combined-cycle power plant in Heard County, Georgia
consisting of two units ("Wansley 6" and "Wansley 7", and, collectively, the
"Wansley Facility" and, together with the Dahlberg, Goat Rock, Harris and
Stanton Facilities, the "Generating Facilities"). Dahlberg 1-8 have been
operational since May 2000. Dahlberg 9-10 have been operation since May 2001.
Goat Rock 1 entered into commercial operation on June 1, 2002 and Goat Rock 2
is under construction and scheduled to be completed in June 2003. Harris 1 and
2 are under construction and are assumed to enter into commercial operation in
June 2003. The Stanton Facility is under construction and is scheduled to enter
into commercial operation in October 2003. The Wansley Facility entered into
commercial operation on June 1, 2002.
Southern Power was formed to develop, construct and own electric power generation facilities that provide power predominantly to Southern's regulated utilities: Alabama Power Company ("Alabama Power"), Georgia Power Company ("Georgia Power"); Gulf Power Company ("Gulf Power"); Mississippi Power Company ("Mississippi Power"); and Savannah Electric and Power Company ("Savannah Electric"). The Generating Facilities will sell power to these entities, as well as others, under the various terms of individual power purchase agreements (collectively, the "Power Purchase Agreements"). Southern Power intends to derive at least 80 percent of operating cash flow under long-term power purchase agreements.
FIGURE A-1
SOUTHERN POWER GENERATING FACILITIES
SITE LOCATIONS
[MAP]
Southern, through its subsidiary Southern Company Services, Inc. ("SCS"), is overseeing the design, procurement, and construction of the Generating Facilities, with the exception of units 1 through 8 at the Dahlberg Facility, which were constructed and completed on a turnkey basis by GE Power Systems, Inc. ("GE"). SCS has developed a standard design for combined-cycle facilities ("CCs"). Certain of the Generating Facilities are based on SCS's second generation standard design ("Gen 2") while others are based on their third generation design ("Gen 3"). The combustion turbine generators ("CTs") for the Generating Facilities are to be supplied by GE. To control the formation of oxides of nitrogen ("NO(x)"), the CTs are equipped with dry low-NO(x) combustors.
Construction of the Generating Facilities is being funded through a construction loan from a syndicate of commercial banks (the "Commercial Construction Revolver"). Southern Power is issuing the Notes to pay off the portion of the Commercial Construction Revolver associated with the Dahlberg Facility, Goat Rock 1 and the Wansley Facility, as well as general corporate purposes. Under the terms of the Commercial Construction Revolver, Southern is guaranteeing the completion and the performance of the Generating Facilities. The completion guarantee from Southern includes: (a) that Southern will cover any construction cost over-runs and related interest expense; and (b) Southern is obligated to repay the portion of the Commercial Construction Revolver allocated to one of the Generating Facilities if such facility fails to achieve completion or if the guaranteed capacity and heat rate are not achieved.
A portion of the output of the Dahlberg Facility is sold to LG&E Energy Marketing, Inc. ("LEM") through December 31, 2004 under two Purchased Power Agreements assigned to Southern Power by Georgia Power effective July 31, 2001 (the "1998 LEM Power Purchase Agreement" and the "1999 LEM Power Purchase Agreement", and, collectively, the "LEM Power Purchase Agreements"). The remainder of the output is sold to Dynegy Power Marketing ("Dynegy") through May 31, 2005 under a Purchased Power Agreement dated March 2, 2000 (the "Dynegy Power Purchase Agreement").
The output of the Goat Rock Facility will be sold to Georgia Power through May 31, 2010 for Goat Rock 1 and May 31, 2011 for Goat Rock 2 under the terms of a Power Purchase Agreement dated March 30, 2001 (the "Goat Rock Power Purchase Agreement").
The Harris 1 output will be sold through May 31, 2010 to Alabama Power under the terms of a Power Purchase Agreement dated June 1, 2001 (the "Harris 1 Power Purchase Agreement"). The Harris 2 output will be sold through May 31, 2019 to Georgia Power under the terms of a Power Purchase Agreement dated August 6, 2001 (the "Harris 2 Power Purchase Agreement" and, together with the Harris 1 Power Purchase Agreement, the "Harris Power Purchase Agreements").
Southern Power's share of the output of the Stanton Facility will be sold to the Orlando Utilities Commission ("OUC"), Kissimmee Utility Authority ("KUA"), and Florida Municipal Power Authority ("FMPA") through, assuming an effective date of October 1, 2003, October 31, 2013 under the terms of three similar Power Purchase Agreements dated March 19, 2001 (the "Stanton Power Purchase Agreements"). Southern Power is participating in the Stanton Facility with OUC, KUA and FMPA through its subsidiary, Southern Company Florida, LLC ("Southern Company Florida"), under the terms of an Construction and Ownership Participation Agreement dated March 19, 2001 (the "Stanton Ownership Agreement").
The output of the Wansley Facility will be sold to Georgia Power and Savannah Electric through December 31, 2009 under two Contracts for the Purchase of Firm Capacity and Energy dated July 31, 2001 (the "Wansley Power Purchase Agreements").
Georgia Power will operate and maintain the Dahlberg, Goat Rock, and Wansley Facilities pursuant to the terms and conditions of an Amended Operating Agreement dated January 18, 2002, with Southern Power. Alabama Power will operate and maintain the Harris Facility pursuant to the terms and conditions of an Operating Agreement with Southern Power dated June 30, 2001. SCS, on behalf of Southern Company Florida, will operate and maintain the Stanton Facility under the terms of a Service Agreement between Southern Power and SCS dated January 10, 2001. Georgia Power and Alabama Power provide similar services for their respective utility power
generation facilities. Southern Power has entered into Long Term Service Agreements ("LTSAs") with General Electric International, Inc. ("GEI") for the maintenance and overhaul of the CTs at all the Generating Facilities and the steam turbine generators ("STs") at Goat Rock 1 and the Wansley Facility.
A summary of general information related to the Generating Facilities is presented in Table 1.
TABLE 1
SOUTHERN POWER GENERATING FACILITIES
GENERAL INFORMATION
TOTAL COMMERCIAL TERM
FUEL UNIT CAPACITY DISPATCH OPERATION OF
FACILITY LOCATION TYPE TYPE (MW)(1) TYPE POWER PURCHASER DATE PPA
-------- -------- ---- ---- -------- -------- --------------- ---------- -----
Dahlberg 1-7 Athens, GA Oil/ Natural Gas CT 567 Peaking LEM 5/00 2004
Dahlberg 8 Athens, GA Oil/ Natural Gas CT 81 Peaking Dynegy 5/00 2004
Dahlberg 9-10 Athens, GA Oil/ Natural Gas CT 162 Peaking Dynegy 5/01 2005
Goat Rock 1 Lee County, AL Natural Gas CC 571 Intermediate Georgia Power 6/02 2010
Goat Rock 2 Lee County, AL Natural Gas CC 615 Intermediate Georgia Power 6/03 2011
Harris 1 Autauga County, AL Natural Gas CC 618 Intermediate Alabama Power 6/03 2010
Harris 2 Autauga County, AL Natural Gas CC 618 Intermediate Georgia Power 6/03 2019
Stanton Orlando, FL Oil/ Natural Gas CC 411(2) Intermediate OUC/KUA/FMPA 10/03 2013
Wansley Heard County, GA Natural Gas CC 1134 Intermediate Georgia Power/ 6/02 2009
Savannah Electric
Total 4,777
|
(1) Represents guaranteed new and clean summer rating with duct firing
and steam injection (as described later in the Report), with the
exception of the Stanton Facility which is based on an average
ambient temperature of 70(Degree)F.
(2) Represents Southern Power's 65 percent ownership interest in the
Stanton Facility.
During the preparation of this Report, we reviewed the various agreements related to the construction, operation, maintenance and management of the Generating Facilities to which Southern Power is a party. These agreements and documents set forth the obligations of each of the parties with respect to the construction, testing, operation, maintenance and management of the Generating Facilities. As Independent Engineer, we have made no determination as to the validity and enforceability of these agreements; however, for the purposes of this Report, we have assumed these agreements will be fully enforceable in accordance with their terms and that all parties will comply with the provisions of their respective agreements.
In addition, we have reviewed: (1) the status of permits and approvals and reviewed the status of permit compliance for the Dahlberg Facility, the only plant with significant operating history; (2) geotechnical reports and environmental assessment reports with respect to the sites of the Generating Facilities; (3) the historic and projected levels of production of the Generating Facilities; (4) the historic and projected operating and maintenance expenses of the Generating Facilities; (5) the projected revenues of the Generating Facilities; (6) historical operating records of the Generating Facilities, and (7) operating programs and procedures. Based on our review, we have prepared a projection of revenues and expenses of the Generating Facilities and interest coverage ratios, which are attached as Exhibits A-1 through A-8 to this Report (the "Projected Operating Results").
During the course of our review, we visited and made general field observations of the Generating Facilities and the sites of the Generating Facilities. The general field observations were visual, above-ground examinations of selected areas which we deemed adequate to comment on the existing condition of the sites but which were not in the level of detail necessary to reveal conditions with respect to geological or environmental conditions, the internal physical condition of any equipment, or the conformance with agreements, codes, permits, rules, or regulation of any party having jurisdiction with respect to the sites.
Following the terrorist attacks of September 11, 2001, increased emphasis has been placed on addressing security measures for the infrastructure systems and facilities in the United States. Terrorist activities aimed at the Generating Facilities could interfere with the ability of Southern Power to generate revenues. Additionally, terrorist activities have the potential to affect organizations, other than Southern Power, that are critical to the continuing operation of the Generating Facilities. We have not conducted any independent evaluations or on-site reviews to ascertain the effectiveness of the measures Southern Power has undertaken to address the security issues.
In developing the Projected Operating Results, we have relied upon a report by PA Consulting, Inc. ("PA Consulting") attached as Annex B to the Confidential Offering Circular, of which this Report is a part, for projections of the Generating Facilities' electricity sales, market electricity prices when the Power Purchase Agreements are not in effect, fuel costs, and emissions allowance prices. We have not reviewed PA Consulting's methodology and approach in its development of these projections but instead have based our reliance upon their previous experience developing similar projections.
THE GENERATING FACILITIES
The Dahlberg Facility is an 810 MW peaking, simple-cycle facility consisting of ten PG7121EA ("GE 7EA") CTs. The CTs are dual-fuel units (natural gas and No. 2 fuel oil) and incorporate dry low-NO(x) technology to control the formation of NO(x).
The Goat Rock Facility is a 1,186 MW (net) combined-cycle power plant
consisting of two gas-fired electric generating plants. Goat Rock 1 is a 571 MW
combined-cycle plant based on the SCS Gen 2 design, which incorporates two GE
PG7241FA ("GE 7FA") CTs, two Vogt-NEM ("Vogt") heat recovery steam generators
("HRSGs"), and a GE ST. Goat Rock 1 includes duct firing ("full-pressure mode")
and steam injection ("power augmentation") capabilities to help increase power
output when compared to normal base load operation. Goat Rock 2 is a 615 MW
combined-cycle plant based on the SCS Gen 3 design, which incorporates two GE
7FA CTs, two Deltak HRSGs, and an Alstom Power, Inc. ("Alstom") ST. Goat Rock 2
also includes duct firing and steam injection capabilities.
The Harris Facility is a 1,236 MW (net) combined-cycle power plant consisting of two SCS Gen 3 gas-fired electric generating units, Harris 1 and 2, each consisting of two 618 MW GE 7FA CTs, two Deltak HRSGs, and an Alstom ST. The Harris Facility includes duct firing and steam injection capabilities.
The Stanton Facility is a 633 MW (net) combined-cycle power plant consisting of an SCS Gen 3 combined-cycle power generation plant consisting of two dual-fuel (natural gas and No. 2 fuel oil) GE 7FA CTs, two Deltak HRSGs, and an Alstom ST. Southern Power has a 65 percent ownership interest in the Stanton Facility, or 411 MW. The Stanton Facility includes duct firing and steam injection capabilities.
The Wansley Facility is a 1,134 MW (net) combined-cycle power plant consisting of two 567 MW SCS Gen 2 combined-cycle power generation plants, Wansley 6 and 7, each consisting of two GE 7FA CTs, two Vogt HRSGs, and a GE ST. The Wansley Facility includes duct firing and steam injection capabilities.
TABLE 2
SOUTHERN POWER GENERATING FACILITIES
MAJOR EQUIPMENT AND CHARACTERISTICS
TOTAL CAPACITY HEAT RATE
FACILITY SCS DESIGN CT HRSG ST (MW)(1) (BTU/KWH)(2)
-------- ---------- ------ ---- ------ -------------- ------------
Dahlberg N/A (3) GE 7EA N/A N/A 810(4) (4)
Goat Rock 1 Gen 2 GE 7FA Vogt GE 571 6,711
Goat Rock 2 Gen 3 GE 7FA Deltak Alstom 615 6,728
Harris 1 Gen 3 GE 7FA Deltak Alstom 618 6,730
Harris 2 Gen 3 GE 7FA Deltak Alstom 618 6,730
Stanton Gen 3 GE 7FA Deltak Alstom 411(5) 6,756
Wansley(6) Gen 2 GE 7FA Vogt GE 1,134 6,706
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THE PROJECT SITES
THE DAHLBERG PROJECT SITE
The Dahlberg Facility is located on a continuous parcel of land totaling approximately 270 acres in an unincorporated area of Jackson County, in northeast Georgia, approximately 15 miles northwest of Athens, Georgia, and approximately 65 miles northeast of Atlanta, Georgia (the "Dahlberg Project Site"). Highway access to the Dahlberg Project Site is convenient over national highways, state routes and city and county roads.
THE GOAT ROCK PROJECT SITE
The Goat Rock Facility property is a continuous parcel of land totaling 709 acres located in an unincorporated area of Lee County, in east central Alabama near the Georgia border, approximately one mile west of the Chattahoochee River, about 30 miles northwest of Columbus, Georgia and 10 miles northeast of Auburn, Alabama (the "Goat Rock Project Site"). The Goat Rock Dam is located on the Chattahoochee River. Highway access to the Goat Rock Project Site is convenient over national highways, state routes and city and county roads.
Southern Geotech performed the subsurface investigation and prepared a report titled Goat Rock Units 1-4 Geotechnical Investigation, Report for Combined Cycle Foundations (the "Goat Rock Geotechnical Report") dated May 2000. The Goat Rock Geotechnical Report included the Goat Rock 2 power block.
Southern Geotech performed the subsurface investigation in four phases starting in June 1999 and concluding in February 2000. The initial phase of the investigation included test borings to determine site acceptability followed by supplementary phases focusing on borrow material availability and determination of depth to top of rock. The final phase included a detailed drilling program focusing on transition areas where individual foundations were and are to be located. These transition areas are defined as critical locations where the subsurface conditions change from soil to rock.
The investigations conducted by Southern Geotech indicated that the
Goat Rock Project Site is characterized as having three subsurface conditions:
an upper zone consisting of reddish-brown silty and sandy plastic clay several
feet thick; a middle zone of highly to moderately weathered rock of
gray-olive-tan silt and clay with varying amounts of rock fragments; and a
lower zone of metamorphic unweathered rock which when tested in the
laboratory yielded break strength (unconfined compression test) results of about 7,500 psi up to 25,000 psi which indicates a very hard, tight rock formation.
Southern Geotech noted that groundwater was not identified in soil borings during drilling or in select borings 24 hours after drilling. They did note, however, that water was observed in the rock-cored section of select boreholes at elevations less than the recommended subgrade.
Because of the complexity of the subsurface conditions, Southern Geotech developed foundation recommendations for each individual piece of major equipment. Auger-cast piles with H-piles at select locations were recommended for the Goat Rock 2 ST while recommendations for a concrete mat bearing directly on the exposed rock were made for both CTs in the Goat Rock 2 power block. For the cooling towers, foundations placed on engineered backfill were recommended as well as requirements for moisture conditioning, placing, and compacting the backfill material such that a 2,000 pounds per square foot ("psf") bearing capacity can be achieved. Differential settlement and total settlement, estimated by Southern Geotech and as reported in the Goat Rock Geotechnical Report, are consistent with settlement estimations we have seen on other similar projects.
During construction, if Southern Power encounters subsurface conditions that are materially different from that which is indicated in the Goat Rock Geotechnical Report, and if these conditions impact the construction cost or schedule, then such impacts and associated costs will be borne by Southern Power and covered under the Southern completion guarantee.
THE HARRIS PROJECT SITE
The Harris Facility property is a contiguous piece of land totaling 759 acres, located in Autauga County, Alabama, approximately three miles west of Autaugaville, Alabama, and approximately 20 miles northwest of Montgomery, Alabama (the "Harris Project Site"). The Harris Project Site is located in an unincorporated area of Autauga County, in central Alabama directly north of the Alabama River. Highway access to the Harris Project Site is convenient over national highways, state routes and county roads.
Southern Geotech performed the subsurface investigation and prepared a report titled Autaugaville Units 1 and 2 Combined Cycle Facility Geotechnical Investigation Report dated January 2001 (the "Harris Geotechnical Report"). The Harris Geotechnical Report included the evaluation of two power block areas for Harris 1 and Harris 2.
Southern Geotech performed the subsurface investigation in three phases. The initial phase was conducted in September 1999 and February 2000 to assess the feasibility of constructing the Harris Facility at the present location. The second phase was performed in May and June of 2000 to further characterize the soils and their suitability for foundations. The third investigation was conducted during August and September 2000. The Harris Geotechnical Report summarizes the soil data pertaining to the latest investigation and the configuration of major equipment as described in other sections of this Report.
Because Southern Power is self-performing the construction of the Harris Facility, they are assigned the subsurface risk. During construction, if Southern Power encounters subsurface conditions that are materially different from the conditions indicated in the Harris Geotechnical Report, and if these conditions impact the construction cost or schedule, then the differing conditions and resulting budget impacts are to be borne by Southern Power. It is our understanding that any associated cost overrun and schedule delay are covered under the Southern completion guarantee.
According to the Harris Geotechnical Report the subsurface soil conditions encountered at the boring locations generally consisted of layers of clays in the upper strata, medium dense sand in the middle strata, and very dense clayey fine- to medium-grained sand in the lower strata. Marine sands of the Eutaw Formation underlie the terrace materials at the northern edge of the Harris Project Site and floodplain deposits were located at the southern edge of the property, which are associated with the historical meandering patterns of the Alabama River. Southern
Geotech notes that the lower strata is considered to be the marker bed across the Harris Project Site and that rock formations were not encountered during the investigation.
Based on groundwater observations taken during the subsurface investigation, Southern Geotech indicated that perched groundwater could be encountered during site preparation activity in the areas where the deepest cuts will be required. Southern Geotech further contended that groundwater should not pose a problem to foundation construction for the main power block equipment, as they are located south of the deep cut areas. Groundwater was encountered between elevations 129.5 feet mean sea level ("msl") and 139.5 feet msl in August 2000. Due to saturation softening of the soils on-site, Southern Geotech recommended that surface water control measures be enforced to minimize ponding effects on the finished grade.
Based on their geotechnical analysis, Southern Geotech indicates that shallow foundations should provide adequate support for the cooling towers, generator step-up transformers, condensate water storage tank, water treatment plant building, switchyard foundations, pipe support structures, and balance of plant equipment provided that earthwork and site preparation activities are performed as recommended by its report. Auger-cast piles are recommended for the power block equipment with an allocation for use of H-piles to support the equipment where deemed necessary by the foundation design engineer.
The Harris Geotechnical Report includes criteria for site preparation and grading, erosion protection for cut slopes, surface water control, construction of the foundations including subgrade preparation, engineered fill classifications, allowable bearing pressure on structural fill, and soil properties for dynamic analysis of the machine foundations. Southern Geotech also provided settlement estimates for the cooling towers and the condensate water storage tank. The anticipated amount of settlement is within the range we would expect for the given structures.
The Harris Geotechnical Report did not provide recommendations for additional geotechnical investigations prior to or during the detailed design of the Harris Facility.
THE STANTON PROJECT SITE
The Stanton Facility is being constructed on property totaling approximately 60 acres just north of the two existing Stanton Energy Center ("SEC") coal-burning units owned and operated by the OUC. The Stanton Facility is located in Orange County, Florida, approximately 10 miles east of Orlando, Florida (the "Stanton Project Site"). The Stanton Project Site is located in an area zoned A-2 with a special exemption consistent with that of the existing SEC.
Highway access to the Stanton Facility is convenient over national highways, state routes and county roads. Southern Power reports that upgrades to the existing access road will not be required to facilitate ingress and egress to and from the Stanton Project Site and the existing road should be adequate to support delivery of the Stanton Facility's equipment not requiring heavy haul facilities. Southern Power noted that delivery of the Stanton Facility's heavy equipment is to be made via the existing rail spur that services the SEC. Southern Power anticipates no additional improvements will be required to the rail spur to facilitate delivery of the large equipment.
Southern Geotech performed a subsurface investigation and prepared a report titled Stanton Energy Center Combined Cycle Unit A Subsurface Investigation Report dated July 17, 2001 (the "Stanton Geotechnical Report"). The Stanton Geotechnical Report included summaries of the investigation; compilation of select laboratory results used for compaction recommendations; and provided recommendations for development work, foundations and foundation systems, allowable bearing capacities for equipment foundations; and provided guidance on estimated settlement of foundations due to static and dynamic loading.
Based on their geotechnical analysis, Southern Geotech recommends that pile foundations support the Stanton Facility's more heavily loaded equipment, including the ST, CTs, and HRSGs. Southern Geotech further recommends that piles in areas located proximate to the silty clay to soft plastic clay layer (at approximately 52 feet to 74 feet below ground surface) be founded on the deeper, very dense sand layer (at approximately 100 feet to 110 feet below ground surface according to the Stanton Geotechnical Report.) Southern Geotech further indicated that shallow
foundations may be considered for the demineralized water storage tank, the fuel oil tank, the cooling tower, the electrical building, transformers, the warehouse and administration building, and other miscellaneous foundations.
The Stanton Geotechnical Report includes criteria for site development, compaction, allowable bearing pressure, and surface and ground water control. Southern Geotech also provided settlement estimates for the equipment to be installed on shallow foundations. Information provided by Southern Power noted that two additional borings and further evaluations of settlement potential were conducted at the Stanton Facility. Results of this further investigation and analysis yielded smaller settlement estimations for the tanks and cooling tower. Southern Power noted that the settlement estimations reported above were reviewed by and deemed acceptable to the tank suppliers contingent upon proper construction practices. With respect to the demineralized water storage tank, we note that the Stanton Geotechnical Report states, based on their experience with similar tank structures, Southern Geotech considers these magnitudes of settlement tolerable, provided the pipe connections are properly accounted for. Finally, the remainder of the settlement estimations presented in the Stanton Geotechnical Report appear to be within the range we would expect for the given structures. We note that no foundation recommendations were made for the structures located within the switchyard; however, we understand that a detailed investigation has been completed for the switchyard. Based on information from Southern Power, it is our understanding that there are no additional foundation requirements for the switchyard structures.
The Stanton Geotechnical Report did not provide recommendations for additional geotechnical investigations prior to or during the detailed design of the Stanton Facility nor did it provide information relating to corrosion potential and resistivity of the soils. However, subsequent investigations were conducted, including additional borings, evaluations of soil corrosion potential, and resistivity testing. According to Southern Power, no additional recommendations were made as a result of these subsequent investigations.
THE WANSLEY PROJECT SITE
The Wansley Facility was constructed on land totaling approximately 25 acres, located in Heard County, Georgia near Carrollton, Georgia and approximately 30 miles southwest of Atlanta (the "Wansley Project Site"). The Wansley Project Site is located in an incorporated area of Heard County, in western Georgia directly north of the Chattahoochee River. Highway access to the Wansley Project Site is convenient over national highways, state routes, and county roads.
SUMMARY
Based on our review, we are of the opinion that, provided Southern Power takes into account the recommendations in the geotechnical reports by Southern Geotech, the sites for the Generating Facilities are suitable for the construction and operation of the Generating Facilities.
DESCRIPTION OF THE FACILITIES
The following section describes the equipment and systems either in place or proposed for the respective Generating Facilities. Our review of the technical aspects of the equipment included in the Generating Facilities is included in the section entitled "Review of Technology," presented later herein.
The Goat Rock, Harris, Stanton and Wansley Facilities are combined-cycle facilities. Each will incorporate GE 7FA CTs. The CTs are to be base-mounted units equipped with dry low-NO(x) combustors to control the formation of NO(x) emissions and an evaporative cooling system to improve performance during the summer months. All units are single-fueled (natural gas) with the exception of the Stanton Facility, which can also burn No. 2 oil. Each CT is designed to deliver in the range of 172 to 176 MW of electric power at 95(degree)F and approximately 45 percent relative humidity at approximate site elevations and corresponding barometric pressures with the inlet evaporative cooler and power augmentation operational. An inlet air filtration system is provided to remove particles in the inlet airstream. An inlet evaporative cooling system is provided to cool the inlet airstream and improve CT performance. NO(x) emissions are guaranteed by GE to 9 parts per million volume, dry basis corrected to 15 percent oxygen ("ppmvd") at the CT exhaust, over an ambient temperature range from 0(degree)F to 105(degree)F and over a range of
50 percent to 100 percent of base load by the use of dry low-NO(x) combustors without power augmentation. With power augmentation, NO(x) emissions are guaranteed by GE to 12 ppmvd at base load. Carbon moNO(x)ide ("CO") emissions are guaranteed by GE to 9 ppmvd between base load and 50 percent of base load without power augmentation for the Harris and Stanton Facilities when firing natural gas. With power augmentation, CO emissions are guaranteed by GE to 15 ppmvd for the Goat Rock, Harris, Stanton, and Wansley Facilities. The CT control and instrumentation system senses, computes, records and displays pertinent CT operational information for use by plant operators and control systems. It also provides protection to the CT against potentially dangerous operating conditions.
The high-pressure ("HP") superheated steam from each HRSG will be delivered to an ST to generate additional electricity. The STs for the Goat Rock 2, Harris, and Stanton Facilities are combined, double flow turbines, operating at 3,600 RPM, with reheat, and are single-shaft condensing machines with separate HP, intermediate pressure ("IP"), and low pressure ("LP") sections, and are each nominally rated at 282 MW. The STs for the Goat Rock 1 and Wansley Facilities are reheat, multi-stage, axial exhausting condensing STs suitable for sliding inlet pressure operation, and are each nominally rated at 190 MW. The manufacturers of the HRSGs and STs include Deltak, Vogt, Alstom, and GE.
Exhaust gas from each CT is directed to an HRSG, where the energy in the exhaust gas is converted into steam. HP steam is produced by the HRSG and piped to the HP section of the ST. The HP steam is also piped to the CT for power augmentation. The HP ST exhaust is combined with IP steam from the HRSG and returned to the reheat section of the HRSG where it is reheated and then returned to the IP/LP section of the ST. LP steam is produced by the HRSG and supplied to the LP section of the turbine. There, the steam is further expanded and exhausted to a surface condenser.
The CTs are equipped with dry low-NO(x) 2.6 ("DLN-2.6") combustors for control of NO(x) emissions. Dry low-NO(x) technology premixes fuel and air to provide a lean flame with a more uniform and lower burning temperature than a conventional burner. Additionally, the dry low-NO(x) combustor has a shorter, lower residence time flame. Both lower temperature and shorter time contribute to NO(x) emissions equal to or lower than that achieved by conventional steam and water injection.
Each HRSG is to be equipped with selective catalytic reduction ("SCR") to further reduce the NO(x) emissions from the CTs and the HRSG duct burners. Anhydrous ammonia is vaporized and sprayed into the exhaust gas of the CT in the HRSGs upstream of the SCR and reacts with the exhaust gas in the presence of the catalyst to form nitrogen ("N2") and water vapor.
The Dahlberg Facility is designed to be an 810 MW nominal simple-cycle power generation facility consisting of ten separate simple-cycle units. The term "simple-cycle" refers to the Brayton cycle, in which hot combustion gases are expanded through a gas turbine-generator. The major equipment components of the Dahlberg Facility include ten GE PG 7121EA CTs and other typical and necessary auxiliary equipment. In the simple-cycle arrangement, natural gas is fired in the CT for production of power output. Hot exhaust gas from each CT is passed through the exhaust ducting and out through its own stack. The CTs do not use fuel gas heaters to preheat the natural gas for performance enhancements.
The CTs are provided with inlet cooling using an evaporative cooling
system to improve performance during the summer months. As the CT is a constant
volume machine, it is subject to variation in output depending on the density of
the air, as affected by temperature and humidity. Output will decrease in warm
weather and will increase in cold weather. The CTs are base mounted, dual fuel
(natural gas and No. 2 fuel oil) units equipped with dry low NO(x)-I ("DLN-I")
combustors for dry control of NO(x) emissions when burning natural gas and
incorporate water injection for control of NO(x) emissions when burning No. 2
distillate fuel oil.
Each CT is designed to deliver approximately 75 MW (nominal base load) of electric power at 95(degree)F, 14.32 psia and 45 percent relative humidity with evaporative cooling when burning natural gas. In the peak operation mode, the output of each CT increases to 81 MW. Each CT burns natural gas as its primary fuel and No. 2 distillate
fuel oil as its backup fuel. An inlet air filtration system is provided to remove particles in the inlet airstream. Air inlet silencing features are included to control far field sound levels.
NO(x) emissions are guaranteed to 9 ppmvd (at 95(degree)F, 14.32 psia, and 45 percent relative humidity) by the use of dry low-NO(x) combustors while burning natural gas. NO(x) emissions while burning No. 2 distillate fuel oil are guaranteed to 42 ppmvd (at 95(degree)F, 14.32 psia, and 45 percent relative humidity) by the use of water injection. Operation on fuel oil is limited to no more than 1,000 hours per year per turbine and only during times that natural gas is unavailable.
The CTs are equipped with DLN-I combustors for control of NO(x) emissions while burning natural gas. Traditional control for CTs was comprised of water injection into the combustors to cool the flame and inhibit NO(x) formation, whereas dry low-NO(x) technology premixes fuel and air to provide a lean flame with a more uniform and lower burning temperature than a conventional burner. Additionally, the dry low-NO(x) combustor has a shorter, lower residence time flame. Both lower temperature and shorter time contribute to NO(x) emissions equal to or lower than that achieved by conventional steam and water injection. Control of NO(x) while burning No. 2 distillate fuel oil is performed by injection of demineralized water into the combustion chamber.
OFF-SITE REQUIREMENTS
FUEL SUPPLY
The Dahlberg Facility is located approximately two miles east of a pipeline owned by Transcontinental Gas Pipe Line Corporation ("Transco"). Georgia Power has constructed a 20-inch diameter by 2-mile lateral connecting to the Transco line. Although Georgia Power has reimbursed Transco for the construction of the tap facilities, Transco owns and operates these facilities. Gas transportation service is supplied on a seasonal or daily basis through the Transco line. The lateral is of sufficient capacity to support the ten simple-cycle units at the Dahlberg Facility. In the event of an interruption in natural gas, the Dahlberg Facility has a 3.6 million-gallon, No. 2 fuel oil storage tank on the site. The tank is of sufficient capacity to operate all ten units at base load for over 2 days.
Natural gas fuel for the Goat Rock Facility is to be delivered to the Goat Rock Project Site through a 20-inch pipeline lateral extending from the SNG main line located approximately 5.5 miles south of the Goat Rock Project Site. Construction of the 20-inch lateral was completed in September 2001. Southern Power will own and operate the meter station which is to be located adjacent to the pipeline tap location. SCS will purchase natural gas from Gulf Coast for delivery to the Goat Rock Facility.
The natural gas pipeline to the Harris Project Site will be 24 inches in diameter and approximately 12 miles in length. The pipeline is to be constructed by Southern and run parallel to the existing 500 kV power transmission line. The pipeline will tie into an existing pipeline owned and operated by Southern Natural Gas ("SNG"), a company that is not affiliated with Southern. SCS will purchase natural gas from Gulf Coast Natural Gas for delivery by SNG to the plant. A metering station will be constructed adjacent to the pipeline tap location and a gas conditioning station will be constructed on-site.
The natural gas pipeline to the Stanton Facility is to be 16 inches in diameter and approximately 5.2 miles in length. The pipeline will tie into an existing pipeline owned and operated by Florida Gas Transmission Company. All the gas delivered to the Stanton Facility will be filtered, metered and reduced in pressure at the gas conditioning area, located at the property boundary. The gas will be preheated and flow through a final filter/separator prior to use in the CTs. No. 2 oil is the standby fuel to permit operation in the event of an interruption in the supply of natural gas. No. 2 oil is stored in a tank that will hold approximately 1.7 million gallons of fuel. This is enough fuel for approximately 2.5 days of operation with both CTs at full load output. The fuel oil system includes three truck unloading stations, a storage tank, forwarding pumps and filter.
The natural gas pipeline to the Wansley Facility is 30 inches in diameter and will be owned by Southern Power. The gas pipeline connects to the existing Transco system located approximately 6.5 miles south of the Wansley Facility. Southern Power is to reimburse Transco for the construction of the tap and metering facilities
and Transco will retain ownership and operation responsibilities for the newly installed system in accordance with the Interconnect, Reimbursement and Operating Agreement. SCS will purchase Gulf Coast natural gas supplies for delivery of the Wansley Facility's projected peak day gas requirements.
Additionally, Southern Power has executed a gas storage contract with Petal Gas Storage Company ("Petal"), to provide fuel storage for all of the Generating Facilities except the Stanton Facility. This contract provides 700,000 million British thermal units ("MMBtu") per day up to a total of 7,000,000 MMBtu for up to ten days if gas flow is interrupted.
WATER SUPPLY AND TREATMENT
The Jackson County Water and Sewage Authority (the "Water Authority") supplies potable water for use by the Dahlberg Facility personnel for drinking and sanitary purposes. The Dahlberg Facility is limited to a maximum water take of 0.5 million gallons per day ("mgd") at a flow rate of 450 gallons per minute ("gpm") and a pressure of 100 psi until termination of the contract on June 30, 2019. Upon completion of a new reservoir for Jackson County, which has been completed and is expected to be in service by July 1, 2002, the Water Authority will be capable of providing a flow rate of 900 gpm. Demineralized water is supplied by trailer-mounted mobile units through an agreement with Ecolochem, Inc. ("Ecolochem"). Demineralized water is stored in a 2.4 million-gallon storage tank on-site. This storage capacity provides approximately 1.4 days of full load operation while firing No. 2 fuel oil.
Primary water usage for the Goat Rock Facility will be for the cooling water system and steam cycle makeup. Expected major water usages during continuous operation include: cooling tower blowdown, cooling tower evaporation, CT evaporative cooler evaporation, CT evaporative cooler blowdown, HRSG blowdown, CT on-line compressor wash water, and CT steam injection losses (during power augmentation operations only). The cooling water system has the greatest water need of all the systems. Raw water will be taken from the Chattahoochee River via an existing unused penstock located within the Goat Rock Dam. Wastewater will be discharged in the tailrace of the same dam. Demineralized water for the Goat Rock Facility will be provided by Water & Power Technologies. The raw water needs of the Goat Rock Facility will be supplied through the existing Goat Rock Dam located approximately one mile east of the plant.
The water supply for the Harris Facility will be obtained from two different locations. The primary source of process water is the Alabama River located at the southern edge of the property and will be used for cooling water, makeup water, and fire protection water. The second source of water will be from a nearby municipal water supply system and will be the sole source for the Harris Facility's potable and sanitary water needs. An on-site water treatment system will prepare the river water for use by the plant. Primary uses of the plant's process water will be for the cooling water system and steam cycle makeup. Southern Power estimates a total water demand of approximately 9.5 mgd (which corresponds with the quantity of water Southern Power has applied for withdrawal from the Alabama River), based on an annual average including plant makeup water, for the two power blocks. Filtered water will be used for fire protection purposes and the source for the Harris Facility's demineralized water needs. Demineralized water will be used for on-line CT compressor wash water, steam injection, and general steam cycle makeup. The Harris Facility will include a 1.0 million-gallon demineralized water storage tank and a 300,000-gallon filtered water storage tank.
The raw water supply for the Stanton Facility cooling tower makeup is to be pumped, via the installation of new raw water pumps, from OUC's existing makeup pond located at the Stanton Project Site to a distribution system. Demineralized water will be used for on-line CT compressor wash water, water injection during operation on No. 2 fuel oil, source for steam injection (power augmentation), and general steam cycle makeup. Demineralized water is to be provided by OUC from the demineralizer at the SEC coal unit. The SEC demineralized water plant is to be expanded to accommodate the Stanton Facility's anticipated demineralized water requirements. A 1.6 million-gallon tank is to be constructed to provide the necessary storage requirements. Potable water, which is to be used for domestic, washdown, and sanitary purposes is to be provided via an extension of the existing potable water system at the SEC, which is supplied from a nearby municipal potable water system.
The water supply for the Wansley Facility is obtained from the Plant Wansley reservoir located northeast of the Wansley Project Site. A new 60-inch suction header has been installed at the existing reservoir to supply water to the Wansley Facility via an expanded pumping station located at the toe of the reservoir embankment approximately 2 miles northeast of the Wansley Facility. As a result of the proximity of the reservoir to the Wansley Facility, the need for an on-site raw water storage tank is eliminated. Southern Power entered into a ten-year extended term agreement with Ecolochem to build, own, operate, and maintain a water treatment facility for the Wansley Facility. Ecolochem is to supply all water production, filtered and demineralized, for the project. The water treatment system has been sized to accommodate water usage requirements of the Wansley Facility. Two demineralized water storage tanks have been constructed at the Wansley Facility, each one with storage capacity of a million gallons. It should be noted that there are some discrepancies between the water quality requirements set forth in the Wansley Facility LTSA and HRSG contract with respect to total organic carbon ("TOC"). SCS noted that the TOC levels cited for makeup water, feedwater, and steam purity are consistent with industry standards and that TOC is to be removed from the system via HRSG blowdown. Based on discussions with SCS, the anticipated TOC concentration in the make-up water, and the effects dilution will have on the overall TOC concentration, it is our understanding that the anticipated TOC concentration levels will satisfy the LTSA and HRSG water quality requirements.
WASTEWATER DISPOSAL
Treated wastewater will be conveyed from the Goat Rock Project Site to the tailrace of the Goat Rock Dam via a piping system installed along the transmission tower corridor. The ultimate disposition of the treated wastewater is the Chattahoochee River. Surface water will be channeled directly to an on-site retention pond where it will be allowed time to settle and equalize prior to discharge to the surrounding environment. Process wastewater is pumped to the tailrace of the Goat Rock Dam for discharge. Southern Power notes that while some dilution effects will be realized by the discharge to the tailrace, a specifically-designed dilution system will not be included as part of the wastewater system, which is consistent with the approved water discharge permit for the Goat Rock Facility.
The Harris Facility's plant wastewater drains are to be pumped to a wastewater holding pond. HRSG blowdown is to be drained by gravity to the cooling tower basin along with ST start-up drain tank effluent. Wastewater collected in drains throughout the plant that has the potential for containing oil contamination will be collected and treated through an oil/water separator. Surface water from storm events will be collected in an on-site retention pond where it will be allowed to overflow to the Alabama River.
Plant wastewater drains at the Stanton Facility are collected in sumps and pumped to a low volume sump, which drains to the SEC existing recycle basin. HRSG blowdown is sent to the cooling tower basin. Wastewater collected in drains throughout the plant that has the potential for containing oil contamination will be collected and treated through an oil/water separator. Surface water from storm events will be directed to the existing facilities at the SEC.
Wastewater from the Wansley Facility is to be transferred to the existing ash pond located approximately one mile directly north of the plant. The wastewater will intermingle with the Plant Wansley wastewater discharge in the ash pond. The ash pond was originally constructed to allow for settling of fine particulates prior to discharge to the retention pond. From the outlet of the ash pond, the wastewater gravity feeds to a retention pond located south of the Wansley Project Site where it overflows to the Chattahoochee River. Surface water will be channeled directly to the retention pond and then to the Chattahoochee River.
ELECTRICAL INTERCONNECTION
The Dahlberg 230 kV Switchyard consists of one bus with five step-up transformer positions and one ongoing transmission line position. An approximate one-mile, two-conductor 230 kV transmission line connects the switchyard to Georgia Power's Center Substation.
The Goat Rock 230 kV Switchyard consists of a single bus, single breaker arrangement with three transformer positions each for Goat Rock 1 and 2, and one transmission line position. The Goat Rock 230 kV
Switchyard is to be interconnected via a transmission line to the Southern transmission system at the existing ring bus arranged 230 kV Goat Rock Substation, located approximately 1.5 miles from the Goat Rock Project Site.
The Harris 1 230 kV plant switchyard is a single bus, single breaker arrangement with three transformer positions and one transmission line position. The Harris 2 500 kV plant switchyard is a single bus, single breaker arrangement with three transformer positions and one transmission line position. Short transmission lines for Harris 1 and 2 of approximately 0.15 and 0.5 miles in length, respectively, are to be routed from the plant switchyards to new Alabama Power 230 kV and 500 kV switchyards.
The 230 kV switchyard at the Stanton Facility consists of a single bus, single breaker arrangement with three transformer positions for generator step-up transformers and one transmission line position. The 230 kV switchyard is to be interconnected to the OUC transmission system at the existing bay, breaker-and-a-half, Stanton Substation No. 17, located approximately one mile from the Stanton Project Site.
The Wansley 500 kV Switchyard consists of a single bus, single breaker arrangement with three transformer positions for Wansley 6, three transformer positions for Wansley 7, and one transmission line position. The 500 kV switchyard is to be interconnected to the Georgia Power transmission system at the existing four-bay, breaker-and-a-half Wansley 500 kV Switchyard, located approximately one mile from the Wansley Project Site.
We have reviewed interconnection studies for Goat Rock 2 and the Harris Facility. The interconnection studies performed by SCS consisted of two parts, one part to identify modifications and system improvements for the interconnection, and the other to evaluate the capability of the respective transmission systems to receive the output of Goat Rock 2 and the Harris Facility, assuming the power is utilized within the Southern Control Area. The interconnection studies assumed some transmission network improvements. The results of the interconnection study for Goat Rock 2 indicate no stability problems exist for the addition of Goat Rock 2 generation provided particular relaying and breaker upgrades for the interconnection are implemented. The interconnection study assumed transmission improvements with scheduled in-service dates in 2002 and 2003. Southern Power reports that, due to the classification of Goat Rock 2 as a "Native Load Resource," it will make the required improvements to meet the scheduled service dates. The results of the interconnection study for the Harris Facility indicate that the plant does not cause any thermal or voltage problems at the point of interconnection, assuming the new 230 kV Autaugaville-County Line Road transmission line is in place. To maintain stability, the interconnection study recommended that, among other breaker and relaying upgrades, the County Line Road Substation and that the Monty Substation 230 kV lines not be adjacent to the Alabama Power 230 kV switchyard. The analysis performed as part of the interconnection study noted that a 500 kV system improvement is required, and without such improvement, additional transmission service beyond current confirmed transmission service on the South Bessemer-Snowdoun line would be limited. The interconnection study also recommended power system stabilizers for the Harris Facility generators.
Although a formal interconnection study was not conducted for the Stanton Facility, OUC performed a series of studies to evaluate the impact of interconnecting the Stanton Facility to the OUC 230-kV transmission system. The studies performed included a short circuit study to identify system improvements required for purposes of the interconnection and a study to evaluate the capability of the transmission system to receive the output from the Stanton Facility. The results of the short circuit study indicated that with the Stanton Facility connected, the available fault current levels at the SEC and several other OUC substations would equal or exceed the interrupting capacity rating of the circuit breakers. As an alternative to replacing the circuit breakers, OUC conducted a separate study to evaluate splitting the bus of the modified OUC Stanton Substation. This would create two separate 230 kV breaker-and-one-half substations tied together by breakers with one substation connected to OUC's existing generation at the SEC site and the other connected to the Stanton Facility. OUC has verbally committed that this work will be completed prior to initial synchronization of the Stanton Facility. The study performed to evaluate the capability of the OUC transmission system identified only one upgrade that was required to an existing 230 kV transmission line. This upgrade required the removal of several swing brackets on the steel structures of the existing line. Southern Power has submitted a request for OUC to perform a stability study to determine whether the integration of the Stanton Facility causes any stability problems on the OUC system. OUC has indicated that it intends to perform the stability study
prior to initial synchronization of the Stanton Facility. The stability impacts of the integration of the Stanton Facility on the OUC transmission system will be determined by the stability study.
REVIEW OF TECHNOLOGIES
The following section contains a discussion of our review of the critical areas of the Generating Facilities' design and the ability of the equipment and design to meet the projected performance, operating cost, and environmental permit requirements. CT and ST technology has been used in electrical generation and energy recovery for over four decades. The development and operating histories of the specific models utilized by the Generating Facilities are described herein to promote an understanding of the risks associated with these models.
GE 7FA CT
The Goat Rock, Harris, Stanton, and Wansley Facilities utilize the GE Frame 7241FA CT (the "7241FA"), which represents the fourth technology/operational improvement in the Frame 7F evolution since its introduction to the market in June 1987. The Frame 7F engine design was based on its successful predecessor, the Frame 7E/EA, which has over 775 units installed and has accrued over 15 million operating hours. While the Frame 7F/FA is considered mature technology with over 300 units installed, 3.1 million fired hours, and over 78,000 fired starts fleet-wide, of the 220 7241FA units currently in operation as of April 2002, the fleet leader has only accumulated approximately 16,000 fired hours and 480 fired starts.
The GE Frame 7F/FA CT, including the 7241FA, is a two-bearing machine, using a single rotor comprised of a compressor and turbine sections with cold end (compressor side) electric generator drive. Each section consists of a series of discs or wheels and spacers held together with tie bolts. The following discussion presents an overview of the technical development of the 7241FA and identifies the potential risks and risk mitigation strategies for that model. This is followed by a description of serial problems that the 7F/FA fleet has experienced or that GE is in the process of correcting in the last three years, which have the potential to apply to the 7241FA and consequently affect the Projected Operating Results ("Certain Operational Issues").
TECHNICAL DEVELOPMENT
Since the market inception of the GE Frame 7F in 1987, there have been five product offerings within the Frame 7F family, based on technology or operational changes. The fourth of these is the 7241FA used by the Goat Rock, Harris, Stanton, and Wansley Facilities. GE's approach to CT development has traditionally followed the philosophy of evolution of designs, by making incremental changes from one frame or model designation to the next. Using this design philosophy in combination with component and full-scale engine shop and field testing, GE is able to retain its previously designed products' most successful attributes, while exercising the full performance capabilities of its new design. It is through full-scale engine testing that GE was able to recognize the potential of the Frame 7F/FA compressor and the impacts of raising the firing temperature to its current level, each of which resulted in developments incorporated into the 7241FA design.
PERFORMANCE CHARACTERISTICS
In general, GE has improved the performance of its engines with airflow and firing temperature increases, as well as implementing improvements in turbine cooling, and compressor and turbine sealing. Firing temperature refers to rotor inlet temperature, which is experienced at the upstream side of the row one turbine blades. GE also uses advances in material technology throughout the entire CT to enable the performance improvements sought, and to increase the engine reliability by employing materials that are more robust at the temperatures and operational characteristics of the given design. Table 3 compares the major operational characteristics and hours of operation of the Frame 7F evolution through the 7241FA, as of April 2002.
TABLE 3
FRAME 7 F/FA
OPERATIONAL CHARACTERISTICS
7191F 7221FA 7231FA 7241FA
------ ------ ------ ------
ISO Output (MW) 150 159 167.8 171.7
ISO Heat Rate (LHV)(Btu/kWh) 9,880 9,500 9,380 9,360
Firing Temperature(degree)F 2,300 2,350 2,400 2,420
Pressure Ratio 13.5:1 15.1:1 14.9:1 15.5:1
Units in Service(1) 16 44 30 220
Fleet Leader Operating Hours(1) 53,000+ 68,000+ 33,000+ 16,000+
Fleet Leader Commercial Operation Date 1991 1993 1997 1999
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(1) As of April 2002.
KEY FEATURES
The specific changes made to the 7231FA model design that result in the 7241FA designation are the following: (1) firing temperature increase from 2,400(o)F to 2,420(degree)F; (2) increase in compressor airflow and pressure ratio by modulating the compressor inlet guide vanes to a new position; (3) the use of directionally-solidified row one turbine blades; (4) new thermal barrier coatings on the first stage turbine vanes and blades; and (5) the use of improved cooling and sealing throughout the hot gas path.
In addition to changes (1) through (5) delineated above, GE has modified the compressor section of all 7241FA CTs, which have been shipped after September 12, 2000 (which include the CTs utilized by the Goat Rock, Harris, Stanton, and Wansley Facilities) by incorporating the following features: (a) the outer diameters of the first five stages of compressor blades have been flared to a slightly larger diameter, adding 0.35 inches to the radius of the first stage compressor blade, tapering to a zero inch increase by the stage six blade; (b) the compressor casing and stage one through stage five compressor vanes, also referred to in the industry as diaphragms, have been modified to accommodate the flaring in the first five stages of compressor blading; and (c) the inlet casing (the casing upstream of the compressor section's inlet guide vane) and the inlet guide vane aerodynamics have been further optimized to reduce inlet aerodynamic losses. GE reports that modifications (a), (b), and (c) have been made to increase commonality with the GE 7251FB (GE's newest Frame 7F product offering). This allows GE to better optimize its manufacturing production cycles. These modifications have not resulted in a re-rating of the 7241FA's base thermodynamic performance, as compared to the 7241FAs shipped prior to September 12, 2000. GE further reports that modifications (a), (b), and (c) have been tested at full-speed-no-load at its Greenville, South Carolina manufacturing facility, and have been successfully operated in the field at several commercial facilities. Though the 7241FA fleet leader has operated in excess of 16,000 fired hours, the effects of long-term operational issues related to most of these changes have not yet been validated by field experience.
COMBUSTION SYSTEM
The Goat Rock, Harris, Stanton, and Wansley Facilities utilize the GE DLN-2.6 combustion system as the primary emissions control mechanism. The DLN-2.6 is the latest development in the GE low emissions combustion technology, and the third major technology and operational change made in the dry low-NO(x) evolution at GE. The DLN-2.6 is a can-annular design (containing 14 individual combustor baskets and transition pieces on the 7241FA), which has six premixed fuel nozzles per combustor, five on the periphery and one in the center. For the 7241FA, GE offers a standard NO(x) guarantee of 9 parts per million ("ppm") when firing natural gas fuel over a range of 50 percent to 100 percent of base load. The DLN-2.6 is an incremental technology improvement over its predecessor the DLN-2.0, which lacks the sixth premixed fuel nozzle in the center of each combustor. The DLN-2.0 design was first operated in commercial service in February 1994, and the DLN-2.6 was placed into service in March 1996. As of April 2002, GE reports over 380 units operating with its dry low-NO(x) technology with over 4.7
million fired hours, of which 1,000,000 hours were on Frame 7F machines. DLN-2.6 in all its applications has almost accumulated 895,000 fired hours. Of the DLN-2.6 systems currently operating at 2,420(degree)F, the nominal firing temperature of the 7241FA, the fleet leader has in excess of 16,000 fired hours as of April 2002.
The sixth fuel nozzle in the center of the DLN-2.6 combustor design was added to the DLN-2.0 design to allow 9 ppm NO(x) control from 100 percent down to 50 percent of base load, which was unachievable over that entire range without the change. In addition, the DLN-2.6 operates over the entire load range without the requirement of a diffusion flame, whereas the DLN-2.0 utilizes a diffusion flame at low loads. This allows GE to maintain the four fuel manifold system of the DLN-2.0, whereas a diffusion flame stage in the DLN-2.6 would have necessitated a fifth manifold. Though the DLN-2.6 has demonstrated 9 ppm NO(x) between 50 and 100 percent of base load during recent 7241FA commissioning, GE's long-term parts life projections for the DLN-2.6 related to the firing temperature increase and the addition of the sixth fuel nozzle have not yet been confirmed by long-term operation.
OPERATIONAL ISSUES
In the last three years, GE Frame 7F/FA machines have experienced certain operational problems or GE is in the process of correcting prior problems in its compressor and combustion sections for that Frame. Some of these problems are related to characteristics of the earlier Frame 7F/FA designs, and GE reports that all 7241FA machines will include the appropriate changes to prevent these problems found on earlier model 7F/FA machines from reoccurring on the 7241FAs utilized by the Goat Rock, Harris, Stanton, and Wansley Facilities. A brief description of the problems and the subsequent resolutions are given below.
Compressor Section. In the first quarter of 2001, failed seventeenth stage diaphragms were discovered in two 7241FAs at one project while inspecting the CTs during a boroscope inspection following high vibration levels in one of the CTs. GE reported that the root cause of the cracking was high aerodynamic stresses caused by a flow separation downstream of a recessed area in the diaphragm. GE explained that the recessed areas were machined into the diaphragms for bolting the four seventeenth stage compressor segments of the diaphragms together. GE further reported that the aerodynamic stresses were exacerbated by high mass flows through the compressor at the site where the cracking was found, as the cracking is believed to have occurred while commissioning the plant during cold temperatures. GE reported that its permanent remedy to this issue involves covering the bolt hole recession with a blank of the same contour as the diaphragm to eliminate the aerodynamic separation which GE reports excited the compressor diaphragms. GE reported that its interim solution is to utilize inlet bleed heat at a higher temperature than it had employed for such heating prior to this issue being encountered. Inlet bleed heating is the process of diverting intra-stage compressor air to the compressor's inlet to blend the incoming cold ambient air with the warmer compressor intra-stage air. GE believes that these remedies have mitigated the flow separation issue that led to the high aerodynamic stresses, and that similar issues should not occur on subsequent units that include these remedies.
On August 23, 2001, GE reported to its customers via a Technical Information Letter, that the first row (referred to as Row 0 by GE) and possibly several other of the first few stages of its 7F/FA and 9F/FA compressors are susceptible to erosion, cracking, and potentially failure due to the effects of performing online compressor water washes. Many operators utilize online water washing of the compressor as a time effective process for reducing the thermodynamic performance effects of compressor fouling, since this type of cleaning may be performed when a unit is at load, selling its power to the grid. Through this Technical Information Letter, GE has limited its customers to less than 100 hours of online water washing, prior to a GE service representative performing an inspection of the given unit, at which point the service representative may either allow the given unit to resume online water washing, or may prescribe some remediation to affected blades, if any exist.
GE reported that a failure in the first stage blade of a 9FA compressor was the result of excessive use of the online water washing system (i.e., operation not commensurate with the GE operations and maintenance manuals). GE has additionally reported that it is currently designing a modified water washing system that would help reduce the erosion that occurs due to online water washing under prescribed methods for operations and maintenance, as well as making it less likely to result in damage to the compressor under conditions where an owner chooses to
operate the machine in a manner inconsistent with such methods. GE reported that it is confident that if the owners of 7F/FA and 9F/FA machines operate the water washing system in accordance with the operations and maintenance manuals that excessive erosion and/or cracking of the compressor blades would not likely result; however, a risk potentially exists that maintenance of the first few stages of the compressor blades may be required more frequently than predicted by typical GE maintenance intervals for such parts if the facilities expect to regularly utilize its online water washing system. GE did not state when it expects to either remove the limitations imposed by the Technical Information Letter or provide an alternative water washing system that minimizes the likelihood of damage to 7F/FA and 9F/FA compressors.
DLN-2.6 Combustion System. Flashback has occurred in some Frame 7F/FAs, and to a greater degree in Frame 9F/FA combustors. Flashback occurs when the flame moves backward into the fuel nozzle premix zone (an area not designed to tolerate high temperatures), thus overheating and subsequently damaging the nozzle tips. GE formed a task force to identify all of the causes of flashback and to determine solutions to the problem, and has tested various combustor configurations to reduce the risk of flashback. GE deduced that one cause of flashback was recirculation zones that allowed flame to attach just downstream of the fuel nozzle premix zone during transient conditions (e.g., load changes). Since then, GE has selected a dry low-NO(x) fuel-air-staged, faired nozzle combustor design, and is equipping all of its current and future Frame 7F/FA units with this design, including the Goat Rock, Harris, Stanton, and Wansley Facilities. GE reports no flashback events since installation of the faired nozzle design, which has accumulated over 485,000 fired hours in Frame 7F/FA machines as of April 2002. In addition, GE is recommending installation of its on-site monitoring service to assist the user in monitoring the occurrence of flashback, which enables GE to alert the customer if a flashback incident has occurred so that corrective action can be taken.
Condensation of liquid hydrocarbons in gas fuel has been identified as another cause of flashback. To mitigate this potential problem, the design of the Goat Rock, Harris, Stanton, and Wansley Facilities incorporates a heater in the gas supply line to raise the temperature of the incoming fuel gas above the liquid dewpoint, before the gas enters the feed lines to the CT.
GE 7EA CT
The Dahlberg Facility utilizes a GE 7EA CT set equipped with dry low-NO(x) combustors. The 7EA is a 3,600-rpm heavy-duty CT with a 17-stage axial flow compressor and a 3-stage power turbine designed to serve the 60 Hz power generation needs for utility and industrial service.
TECHNOLOGY EVOLUTION
GE's approach to CT development is discussed in the GE 7FA CT section of this Report. As mentioned in that section, over 775 GE Frame 7E/EA units are in operation worldwide, and have accumulated over 15 million hours of operation since the initial introduction in the 1970s. The 7EA product offering first achieved commercial operation in the mid-1980s.
While the 7EA, an upgrade of the GE 7E CT, has evolved during its approximate 20-year operating history, the base design of the current 7EA is largely unchanged from its predecessors. Some of the key features utilized in the current 7EA CT are a 2,035(Degree)F firing temperature, certain improved hot gas path part alloys, better sealing, increased compressor massflow, and the use of thermal barrier coatings.
Additionally, the Dahlberg Facility CTs utilize GE dry low-NO(x) combustion technology. GE has reported that its GE 7EA dry low-NO(x) combustion system has consistently achieved 9 ppmvd NO(x) control while operating on natural gas at the nominal GE 7EA firing temperature of 2,035(Degree)F.
OPERATING EXPERIENCE
The 7EA is a heavy-duty gas turbine designed for 60 Hz applications. GE reports that over 775 units are currently in service and the Frame 7 models have accumulated more than 15 million hours of service.
Based on information provided by the Operational Reliability Analysis Program ("ORAP") data system, which is owned and managed by Strategic Power Systems, Inc., Table 4 summarizes the simple-cycle plant level availability and starting reliability of the 7EA units for the period 1994 through 1999.
TABLE 4
SIMPLE-CYCLE PLANT AVAILABILITY AND STARTING RELIABILITY
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
Number of Units Reporting 38 39 41 46 53 54
Availability 96.5 93.3 96.1 94.5 97.0 97.1
Starting Reliability(%) 97.7 96.5 96.1 96.5 97.4 97.9
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In general, CT availability should be considered over the typical 6-year maintenance cycle of units in base load service. In addition, other business factors, including dual-fuel operation and emphasis on seasonal or daily peak operation, can influence expected availability. Overall, the GE availability values support an expectation of availability approaching 95 percent for a frame 7EA based facility.
SUMMARY
Based on our review, we are of the opinion that, based on GE's previously demonstrated capability to address the issues similar to those related to the Frame 7FA described herein, the power generation technologies proposed for the Generating Facilities are sound, proven methods of energy recovery. If constructed, operated and maintained as proposed by Southern Power, the Generating Facilities should be capable of meeting the requirements of the Power Purchase Agreements and the currently applicable environmental permit requirements. Furthermore, all off-site requirements of the Generating Facilities have been adequately provided for, including fuel supply, water supply, wastewater disposal, and electrical interconnection.
In addition, the proposed method of design, construction, operation, and maintenance of the Generating Facilities has been developed in accordance with generally accepted industry practice and has taken into consideration the current environmental, license and permit requirements that the Generating Facilities must meet.
ESTIMATED USEFUL LIFE
We have reviewed the quality of equipment installed at the Generating Facilities and the general plans for operating and maintaining the Generating Facilities. Based on our review and provided that: (a) the units are operated and maintained by the operators in accordance with the policies and procedures as presented by Southern Power, (b) all required renewals and replacements are made on a timely basis as the units age, and (c) gas and oil burned by the units are within the expected range with respect to quantity and quality, we are of the opinion that the Generating Facilities should have useful lives of at least 20 years.
PERFORMANCE TESTS AND GUARANTEES
The Goat Rock, Harris, Stanton, and the Wansley Facilities were or are being constructed under an owner construction management approach rather than having a turnkey, engineer, procure, and construct ("EPC") type contractor provide the respective services. Under the construction management approach, Southern Power accepts more responsibility for ensuring that these projects are engineered, designed, constructed, and commissioned properly. The construction management approach also requires Southern Power to be more responsible for contract interface issues and the associated impacts on project cost and schedule. Under a traditional EPC contract, an owner of a project would place all these responsibilities on the EPC contractor, which increases the contract cost to account for the added risk exposure the contractor assumes. Southern Power, through SCS, is assuming this responsibility for the performance of the Goat Rock, Harris, Stanton, and the Wansley Facilities. A description of the performance tests and Southern completion guarantees for these units are presented below.
Table 5 indicates the performance guarantees provided by Southern for Goat Rock, Harris, Stanton, and the Wansley Facilities, as set forth in Credit Agreement for the Commercial Construction Revolver dated November 1, 2001 (the "Construction Revolver Credit Agreement"). Goat Rock 1 and the Wansley Facility declared commercial operation under their respective Power Purchase Agreements on June 1, 2002. Southern Power reports that: (1) the Wansley Facility has completed its initial net plant output test under the Wansley Power Purchase Agreements; and (2) Goat Rock 1 underwent a preliminary net plant output test sufficient to demonstrate the initial capacity to be sold under the Goat Rock Power Purchase Agreement, but approximately 10 MW less than the guaranteed output under the Construction Revolver Credit Agreement. Southern Power plans to retest Goat Rock 1 in the near future and believes it has identified the cause of the lower than guaranteed performance.
TABLE 5
SOUTHERN PERFORMANCE GUARANTEES
OUTPUT HEAT RATE
(MW)(1) (BTU/KWH)(2)
------- ------------
Goat Rock 1(3) 571 6,711
Goat Rock 2 615 6,728
Harris 1 618 6,730
Harris 2 618 6,730
Stanton 633(4) 6,756
Wansley(3) 1,134 6,706
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As a result of Southern Power's construction management approach to engineering, design, procurement and construction of the Generating Facilities (instead of hiring a turnkey contractor), the only performance test program to verify project output and heat rate are the performance tests Southern Power is required to perform in the Power Purchase Agreements and the Construction Revolver Credit Agreement. Under the terms of the Construction Revolver Credit Agreement, the heat rate and output tests are to be conducted in accordance with the guidelines established in the applicable American Society of Mechanical Engineer's Power Test Codes, prudent utility practices, and routine operating conditions.
Emissions testing is to be performed in accordance with the air permit and CT and HRSG purchase agreements. Successful demonstration of emissions with air permit requirements is part of achieving Substantial Completion as defined in the Construction Revolver Credit Agreement. The equipment manufacturers (GE, Deltak, and Vogt) offer certain emissions guarantees for their respective equipment. These guarantees, in some cases, are not consistent with the emission limits set forth in the air permits. Notwithstanding the apparent inconsistencies in the guarantees, the design of each of the Generating Facilities includes provision for the installation of an oxidation catalyst should one be required to comply with air permit limits for CO and volatile organic compounds ("VOCs").
The performance test program that Southern Power is to perform includes a 7-day reliability test which is intended to demonstrate that the facilities are capable of continuous, reliable operation at various load points. The reliability test is to be conducted during a continuous 168-hour period during which the relevant project shall, among other things, achieve an equivalent availability factor of 97 percent, operate for at least 24 hours in the Summer Peak Output mode for such project (providing ambient conditions allow for such operation and, in any event, at least 6
continuous hours of operation in that mode is required), and operate for an additional 100 hours in either the "Base Mode Heat Rate" mode or the "Summer Peak Output" mode (or at a point between these two operating modes). During the reliability test, the facility is to be operated in accordance with prudent utility practice and all laws, permits and regulations applicable to such project including all emissions requirements imposed by the air permit.
The Power Purchase Agreements for the Goat Rock, Harris, and Wansley Facilities require the facilities to be capable of "producing energy and delivering same to the Transmission System through the Interconnection Point on a reliable basis." The Power Purchase Agreements do not address how Southern Power is to demonstrate a reliable basis prior to entering into commercial operation. Based on discussions with Southern Power, it is our understanding that SCS determines when a respective plant is ready for commercial operation based on the success of the commissioning program, CT and HRSG component tests, and overall plant performance tests. Southern Power represented that once they have completed the commissioning program, including the reliability test discussed above, that most of the potential reliability problems should have been identified and corrected, and that it should be able to produce and deliver energy to the transmission system of the power purchaser on a reliable basis.
Individual CT, ST, and HRSG component tests are typically not conducted on projects constructed using a turnkey approach. SCS has included such tests in the respective equipment purchase orders/agreements. As such, the commissioning program SCS is to perform on the facilities incorporates more equipment testing than what is typically provided for on turnkey projects.
Based on our review, we are of the opinion that the performance guarantees proposed for the Generating Facilities under construction, if all the equipment contract guarantees are considered in their entirety, are similar to the performance tests of turnkey projects with which we are familiar.
OPERATING HISTORY
Dahlberg 1-8 have been in operation since May 2000 and Dahlberg 9-10 have been in operation since May 2001. A summary of the Dahlberg Facility operating history is presented below. Goat Rock 1 and the Wansley Facility declared commercial operation under their respective Power Purchase Agreements on June 1, 2002. As such, no operating results are available for these facilities.
Table 6 provides operating history for the Dahlberg Facility from the period of May 1, 2000 through April 1, 2002.
TABLE 6
DAHLBERG OPERATING HISTORY(1)
NET ACTUAL STARTS
EAF GENERATION HEAT RATE NET CAPACITY / ATTEMPTED
UNIT (%) (MWH) (BTU/KWH)(2) FACTOR(%)(3) STARTS
---- ----- ---------- ------------ ------------ -------------
Dahlberg 1 92.51 98,227 12,178 7.22 213/213
Dahlberg 2 85.84 95,635 12,390 7.03 195/195
Dahlberg 3 86.86 97,848 12,231 7.19 208/208
Dahlberg 4 77.03 95,474 12,278 7.02 209/209
Dahlberg 5 94.98 101,739 12,141 7.48 211/211
Dahlberg 6 93.77 97,144 12,108 7.14 193/193
Dahlberg 7 61.21 73,494 12,081 5.40 137/137
Dahlberg 8 89.37 89,951 12,311 6.61 169/169
Dahlberg 9 94.34 16,858 13,264 2.19 45/45
Dahlberg 10 95.64 19,596 12,940 2.55 46/46
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CAPACITY AND HEAT RATE
Each of the respective Power Purchase Agreements includes specific capacity designation and testing criteria as described below. The capacity payments included in the Projected Operating Results presented later herein are based upon the contractual capacity requirements in the Power Purchase Agreements through their respective terms. Based on these capacity values, PA Consulting has estimated the energy generation and fuel consumption of the Generating Facilities based upon its projection of seasonal operation at various load levels and modes of operation.
THE DAHLBERG FACILITY
Under the terms of the LEM Power Purchase Agreements, the Dahlberg Facility is required to provide a total contract capacity of 577.5 MW during the summer months and 646.8 MW when firing natural gas during the winter months. Energy payments are based on a heat rate of 12,300 Btu/kWh during the summer months and 11,931 Btu/kWh when firing natural gas during the winter months. These output and heat rate values are subject to degradation as set forth in the LEM Power Purchase Agreements.
Under the terms of the Dynegy Power Purchase Agreement, the Dahlberg Facility is required to provide a total contract capacity of 225 MW. Energy payments are based on a heat rate of 12,500 Btu/kWh during the summer months and 12,100 Btu/kWh during the winter months.
Based on information provided by Southern Power, we have estimated the long-term annual average capacity to be 401 MW for Dahlberg 1-5, 160 MW for Dahlberg 6-8, and 241 MW for Dahlberg 9-10. This estimate includes a levelized allowance for long-term degradation.
Under the terms of the LEM Power Purchase Agreements, fuel is purchased by Southern Power and reimbursed by LEM according to the summer and winter heat rate curves in the LEM Power Purchase Agreements. Heat rate degradation is provided for in the LEM and Dynegy Power Purchase Agreements. Dynegy is responsible for purchasing fuel under the terms of the Dynegy Power Purchase Agreement. Based on information provided by Southern Power, we have estimated the long-term, full-load heat rate, including a levelized allowance for long-term degradation, to be 12,352 Btu/kWh for the Dahlberg Facility. For the purposes of the Projected Operating Results, we
have assumed that the heat rate of the Dahlberg Facility will be in accordance with the heat rate curves in the LEM and Dynegy Power Purchase Agreements and no heat rate penalties will be incurred or bonuses achieved.
THE GOAT ROCK FACILITY
The monthly capacity payments under the Goat Rock Power Purchase Agreement are based on the "Designated Capacity" for that annual period. The Designated Capacity is adjusted by a monthly capacity payment factor of 0.15 for the months of June through September and 0.05 for all other months. The Designated Capacity is defined as the output nominated by Southern Power at the reference conditions or "Rated Conditions," which are 95(degree)F and 45 percent relative humidity. The Demonstrated Capability is determined by test upon commercial operation as the amount of capacity Goat Rock 1 and 2 are able to provide at each mode of operation corrected to "Rated Conditions" of 95(degree)F and 45 percent relative humidity: "normal mode", "full-pressure mode", and "full-pressure mode with power augmentation". Southern Power cannot nominate more than the Demonstrated Capability at "full-pressure mode with power augmentation" as the Designated Capacity.
All capacity testing will be adjusted to the Rated Conditions using correction curves supplied by SCS. The Demonstrated Capability of the Goat Rock Facility will be measured by the installed metering system. No test tolerances or measurement uncertainties are to be permitted. All auxiliary equipment must be operated in a normal manner consistent with prudent utility practices.
On the date of the capacity tests, Southern Power is to bring the Goat Rock Facility to maximum normal capability. The tests will be scheduled between the weekday hours of 11:00 a.m. and 7:00 p.m. and will be conducted over an eight consecutive hour period, or less, at the respective power purchaser's request. The capacity test will establish the Demonstrated Capability and will be based on the average demonstrated net hourly output, corrected to Rated Conditions, by use of correction curves supplied by SCS. The Demonstrated Capability of the unit will be the average net output over the test period corrected to Rated Conditions.
In the event that the Goat Rock Facility is unable to supply the
Designated Capability, Southern Power may supply the requested output from
alternate resources. The Demonstrated Capability will be determined prior to
degradation of the Goat Rock Facility; therefore, we have assumed that Southern
Power will nominate a Designated Capacity equal to the Demonstrated Capability
in full-pressure mode with power augmentation less allowances for
non-recoverable degradation, fouling, and other operational factors that make
it difficult to achieve tested values on a day-to-day basis. Based on
information provided by Southern Power, we have estimated the long-term
Demonstrated Capability to be 564 MW for Goat Rock 1 and 595 MW for Goat Rock
2. This estimate includes a levelized allowance for long-term degradation.
Southern Power has reported that Goat Rock 1 underwent a preliminary net plant
output test sufficient to demonstrate the initial capacity to be sold under the
Goat Rock Power Purchase Agreement, but approximately 10 MW less than the
guaranteed output under the Construction Revolver Credit Agreement. Southern
Power plans to retest Goat Rock 1 in the near future and believes it has
identified the cause of the lower than guaranteed performance. Southern Power
has 90 days from June 1, 2002 to retest Goat Rock 1 and establish its initial
capacity under the terms of the Goat Rock Power Purchase Agreement. For the
purpose of the Projected Operating Results, we have assumed that retesting of
Goat Rock 1 will demonstrate conformance with the guaranteed output.
Under the terms of the Goat Rock Power Purchase Agreement, fuel is purchased by Georgia Power. Southern Power guarantees summer and winter heat rate curves in the Goat Rock Power Purchase Agreement and will reimburse Georgia Power if these guarantees are not met. The demonstrated normal-mode and full-pressure mode capabilities will determine the breakpoints at which the heat rates will be applied to the various operating modes. Heat rate degradation is provided for in the Goat Rock Power Purchase Agreement. Based on information provided by Southern Power, we have estimated the long-term, full-load heat rate, including a levelized allowance for long-term degradation, to be 6,919 Btu/kWh for Goat Rock 1 and 6,858 Btu/kWh for Goat Rock 2. For the purposes of the Projected Operating Results, we have assumed that the heat rate of the Goat Rock Facility will be in accordance with the heat rate curves in the Goat Rock Power Purchase Agreement and no heat rate penalties will be incurred or bonuses achieved.
THE HARRIS FACILITY
The monthly capacity payments under the Harris Power Purchase Agreements are based on the "Designated Capacity" for that annual period. The Designated Capacity is adjusted by a monthly capacity payment factor of 0.15 for the months of June through September and 0.05 for all other months. The Designated Capacity is defined as the output nominated by Southern Power at the reference conditions or "Rated Conditions," which are 95(degree)F and 45 percent relative humidity. The Demonstrated Capability is determined by test upon commercial operation as the amount of capacity Harris 1 and 2 are able to provide at each mode of operation corrected to "Rated Conditions" of 95(degree)F and 45 percent relative humidity: "normal mode", "full-pressure mode", and "full-pressure mode with power augmentation." Southern Power cannot nominate more than the Demonstrated Capability at "full-pressure mode with power augmentation" as the Designated Capacity.
All capacity testing will be adjusted to the Rated Conditions using correction curves supplied by SCS. The Demonstrated Capability of the Harris Facility will be measured by the installed metering system. No test tolerances or measurement uncertainties are to be permitted. All auxiliary equipment must be operated in a normal manner consistent with prudent utility practices.
On the date of the capacity tests, Southern Power is to bring the Harris Facility to maximum normal capability. The tests will be scheduled between the weekday hours of 11:00 a.m. and 7:00 p.m. and will be conducted over an eight consecutive hour period, or less, at the respective power purchaser's request. The capacity test will establish the Demonstrated Capability and will be based on the average demonstrated net hourly output, corrected to Rated Conditions, by use of correction curves supplied by SCS. The Demonstrated Capability of the unit will be the average net output over the test period corrected to Rated Conditions.
In the event that the Harris Facility is unable to supply the Designated Capability, Southern Power may supply the requested output from alternate resources. The Demonstrated Capability will be determined prior to degradation of the Harris Facility; therefore, we have assumed that Southern Power will nominate a Designated Capacity equal to the Demonstrated Capability in full-pressure mode with power augmentation less allowances for non-recoverable degradation, fouling, and other operational factors that make it difficult to achieve tested values on a day-to-day basis. Based on information provided by Southern Power, we have estimated the long-term Demonstrated Capability to be 595 MW for Harris 1 and 595 MW for Harris 2. This estimate includes a levelized allowance for long-term degradation.
Under the terms of the Harris Power Purchase Agreements, fuel is purchased by Alabama Power and Georgia Power. Southern Power guarantees summer and winter heat rate curves in the Harris Power Purchase Agreements and will reimburse Alabama Power and Georgia Power if these guarantees are not met. The demonstrated normal-mode and full-pressure mode capabilities will determine the breakpoints at which the heat rates will be applied to the various operating modes. Heat rate degradation is provided for in the Harris Power Purchase Agreements. Based on information provided by Southern Power, we have estimated the long-term, full-load heat rate, including a levelized allowance for long-term degradation, to be 6,871 Btu/kWh for Harris 1 and Harris 2. For the purposes of the Projected Operating Results, we have assumed that the heat rate of the Harris Facility will be in accordance with the heat rate curves in the Harris Power Purchase Agreements and no heat rate penalties will be incurred or bonuses achieved.
THE STANTON FACILITY
Under the terms of the Stanton Power Purchase Agreements, the capacity payment is the product of the "Demonstrated Capability" times the Annual Capacity Charge. The "Designated Capability" is defined as the net capacity of the project, determined by a periodic capacity test, adjusted to 70(degree)F and 45 percent relative humidity.
On the date of the capacity tests, Southern Power is to bring the Stanton Facility to maximum normal capability. The tests will be scheduled between the weekday hours of 11:00 a.m. and 7:00 p.m. and will be conducted over an eight consecutive hour period, or less, at the respective power purchaser's request. The capacity test will establish the Demonstrated Capability and will be based on the average demonstrated net hourly output, corrected to
Rated Conditions, by use of correction curves supplied by SCS. The Demonstrated Capability of the unit will be the average net output over the test period corrected to Rated Conditions. Based on information provided by Southern Power, we have estimated the long-term Demonstrated Capability to be 621 MW for the Stanton Facility. This estimate is based on the output at an ambient temperature of 70(degree)F and includes a levelized allowance for long-term degradation. The long-term output at the average annual temperature, including an allowance for degradation, is estimated to be 606 MW.
Under the terms of the Stanton Power Purchase Agreements, fuel is purchased by OUC and reimbursed by the power purchasers at cost. The demonstrated normal-mode and full-pressure mode capabilities will determine the breakpoints at which the heat rates will be applied to the various operating modes. Heat rate degradation is provided for in the Stanton Power Purchase Agreements. Based on information provided by Southern Power, we have estimated the long-term, full-load heat rate, including a levelized allowance for long-term degradation, to be 6,936 Btu/kWh for the Stanton Facility. For the purposes of the Projected Operating Results, we have assumed that the heat rate of the Stanton Facility will be in accordance with the heat rate curves in the Stanton Power Purchase Agreements and no heat rate penalties will be incurred or bonuses achieved.
THE WANSLEY FACILITY
The monthly capacity and fixed operating and maintenance ("O&M") payments under the Wansley Power Purchase Agreements are based on the "Contract Capacity Rating" for that annual period. The Contract Capacity Rating will be based on the actual demonstrated capability following performance testing corrected to 95(Degree)F and 45 percent relative humidity. The Contract Capacity Rating is to be declared each year thereafter. The capacity dedicated to Georgia Power is to be 82.33 percent of the Contract Capacity Rating, with the remaining output dedicated to Savannah Electric. Also to be declared is the minimum normal capability, the maximum normal capability, over-pressure mode (similar to full-pressure mode on the other Generating Facilities) capability and capability in over-pressure mode with power augmentation. During the months of June through September, the capability in over-pressure mode with power augmentation is not to be less than the Contract Capacity Rating.
In the event that the Wansley Facility is unable to supply the Contract Capacity Rating, Southern Power may supply the requested output from alternate resources. The demonstrated capability will be determined prior to degradation of the Wansley Facility; therefore, we have assumed that Southern Power will nominate a Contract Capacity Rating equal to the demonstrated capability in over-pressure mode with power augmentation less allowances for non-recoverable degradation, fouling, and other operational factors that make it difficult to achieve tested values on a day-to-day basis. Based on information provided by Southern Power, we have estimated the long-term Contract Capacity Rating to be 1,123 MW for the Wansley Facility. This estimate includes a levelized allowance for long-term degradation.
Under the terms of the Wansley Power Purchase Agreements, fuel is purchased by Southern Power and reimbursed by Georgia Power and Savannah Electric according to the summer and winter heat rate curves in the Wansley Power Purchase Agreements. Fuel payments are based on the "Contract Heat Rate", which is based on the delivered output for each unit in each hour. The Contract Heat Rate is determined pursuant to heat rate curves included in the Wansley Power Purchase Agreements for normal operation with the actual output to fall between the minimum normal capability and the maximum normal capability. Summer (May through September) and winter (October through April) heat rate curves are included which specify the heat rate at any given output. If the output is between the maximum normal capability and the over-pressure mode capability, the unit output is to be calculated assuming a 50 MW block at a heat rate of 9,100 Btu per kWh, plus the remaining output calculated using the heat rate curves. If the output is between the over-pressure mode capability and the capability in over-pressure mode with power augmentation, the unit output is to be calculated assuming a 25 MW block at a heat rate of 13,000 Btu per kWh plus the 50 MW block of over-pressure output at 9,100 Btu per kWh plus the remaining output using the heat rate curves. Power augmentation is not available at temperatures below 59(Degree)F and is limited to 1,000 hours per year. Based on information provided by Southern Power, we have estimated the long-term, full-load heat rate, including a levelized allowance for long-term degradation, to be 6,923 Btu/kWh for the Wansley Facility. For the purposes of the Projected
Operating Results, we have assumed that the heat rate of the Wansley Facility will be in accordance with the heat rate curves in the Wansley Power Purchase Agreements and no heat rate penalties will be incurred or bonuses achieved.
SUMMARY
Based on our review, we are of the opinion that, if operated and maintained as currently proposed by the operators of the Generating Facilities, the Generating Facilities should be capable of achieving the annual average output in full-pressure mode with power augmentation and the average annual net plant heat rates assumed in the Projected Operating Results. These estimates include allowance for corrections to reference conditions and long-term degradation of output and heat rate. These assumptions represent the average long-term performance over the term of the Notes. There may be years when the actual performance is above or below the average performance stipulated herein. However, for the purpose of the Projected Operating Results, we have utilized these average performance assumptions.
AVAILABILITY
A number of the Power Purchase Agreements include contractual availability requirements which impact the level of capacity payments under those contracts, as discussed below. In general, the definitions of contractual availability exclude scheduled maintenance, which reduced the actual availability of the Generating Facilities. We have performed an analysis of Southern Power's proposed operations and maintenance plan through the operating agreements with the respective operators, taking into consideration the planned outages, as well as actual industry operating experience regarding forced outage rates as reported by various major equipment vendors, plant operators, and industry monitoring sources (including NERC Generating Availability Data System) selected for applicability to the Generating Facilities.
THE DAHLBERG FACILITY
Under the terms of the LEM Power Purchase Agreements, Southern Power will receive bonus payments in the event that the Dahlberg Facility achieves contract availabilities in excess of certain levels. Southern Power can meet this contract availability through energy from alternate resources. Southern Power can earn an annual availability bonus for Dahlberg 1-5 ranging from $100,000 for a contract availability of 98.6 percent to $1,000,000 for a contract availability of 100 percent. Southern Power can earn an annual availability bonus for Dahlberg 6-7 of $200,000 for a contract availability of 100 percent. No bonus is available for Dahlberg 6-7 for contract availability levels below 100 percent. There are no minimum availability levels in the LEM Power Purchase Agreements. In the event that the Dahlberg Facility is unable to meet the requirements of the LEM Power Purchase Agreements, Southern Power must provide the requested energy from other resources.
The Dynegy Power Purchase Agreement does not set a required availability level, but instead requires that, when unavailable, Southern Power either provide an alternative resource, pay specified replacement costs, or declare an excused non-delivery hour. Southern Power is allowed approximately 600 excused non-delivery hours per year.
THE GOAT ROCK FACILITY
Under the terms of the Goat Rock Power Purchase Agreement, an availability adjustment is made to the amount paid for Designated Capacity. The adjustment can result in either an increase or decrease in the capacity payments. The availability adjustment is based upon a "Capacity Adjustment Factor" adjusted by a factor of 0.15 for the months of June through September and 0.05 for all other months. The Capacity Adjustment Factor is based on a contract availability factor called the "Seasonal Availability Factor", which excludes scheduled maintenance and allows Southern Power to replace the undelivered energy from another resource. The Capacity Adjustment Factor results in a reduction in capacity payments in the event that the Goat Rock 1 and 2 contract availabilities are less than 96.5 percent. The capacity payments can increase by 1.0 to 3.5 percent of the annual capacity payments for a contract availability ranging from 96.5 to 99.5 percent. Southern Power can meet this contract availability through energy from alternate resources.
THE HARRIS FACILITY
Under the terms of the Harris Power Purchase Agreements, an availability adjustment is made to the amount paid for Designated Capacity. The adjustment can result in either an increase or decrease in the capacity payments. The availability adjustment is based upon a "Capacity Adjustment Factor" adjusted by a factor of 0.15 for the months of June through September and 0.05 for all other months. The Capacity Adjustment Factor is based on a contract availability factor, called the "Actual Demand Availability" in the Harris 1 Power Purchase Agreement and the "Seasonal Availability Factor" in the Harris 2 Power Purchase Agreement, which excludes scheduled maintenance and allows Southern Power to replace the undelivered energy from another resource. The Capacity Adjustment Factor results in a reduction in capacity payments in the event that the Harris 1 and 2 contract availability factors are less than 96 and 96.5 percent, respectively. The capacity payments can be increased by 1.5 to 4.0 percent of the annual capacity payments for a contract availability ranging from 97.0 to 99.0 percent for Harris 1 and by 1.0 to 3.5 percent of the annual capacity payments for a contract availability ranging from 96.5 to 99.5 percent for Harris 2. Southern Power can meet these contract availabilities through energy from alternate resources.
THE STANTON FACILITY
Under the terms of the Stanton Power Purchase Agreements, an availability adjustment is made to the amount paid for the Demonstrated Capacity. If the availability of the Stanton Facility is less than the guaranteed availability, capacity payments are reduced by the "Availability Damages". Availability Damages are calculated as the difference between the actual availability and 97 percent times the sum of the capacity payment for the appropriate period, adjusted by one-half for the off-peak period. The Stanton Facility will also be entitled to an availability incentive payment of 3 percent of the peak period capacity payments for a contract availability in excess of 99 percent and 1.5 percent of the off-peak capacity payments for an off-peak contract availability in excess of 99 percent. The Stanton Facility will also be penalized by 2 percent of the peak period capacity payments for a peak contract availability of 95 percent and an additional 1 percent for each percentage of contract availability less than 95 percent. The off-peak contract availability penalty is 1 percent of the off-peak capacity payments for an off-peak contract availability of 95 percent and an additional 0.5 percent for each percentage of off-peak contract availability less than 95 percent.
THE WANSLEY FACILITY
Under the terms of the Wansley Power Purchase Agreements, an availability adjustment is made to the amount paid for the Contract Capacity Rating. The adjustment can result in either an increase or decrease in the capacity payments. The adjustment is based on a contract availability factor called the "Seasonal Availability Factor", which excludes scheduled maintenance and allows Southern Power to replace the undelivered energy from another resource. A reduction in capacity payments results in the event that the Seasonal Availability Factor is less than 96.5 percent. The capacity payments can increase by 1.0 to 3.5 percent of the annual capacity payments for a contract availability ranging from 96.6 to 99.5 percent. Southern Power can meet this contract availability through energy from alternate resources.
SUMMARY
Based on our review, we are of the opinion that the Generating Facilities should be capable of achieving the required average annual contract availabilities under the Power Purchase Agreements ranging from 96.5 to 97 percent, which exclude scheduled maintenance and allow Southern Power to replace the undelivered energy from another resource, and should also be capable of achieving an average annual availability of 92 percent, which includes provision for forced and scheduled maintenance. The stipulated availability factors represent the projected average availabilities over the term of the Notes. There may be years when the actual availability factors are above or below the average availability factors stipulated herein.
For the purpose of the Projected Operating Results, Southern Power has assumed that it will provide energy from alternate resources in order to achieve the contract availabilities required to obtain the maximum amount of capacity payments under the Power Purchase Agreements.
CONSTRUCTION STATUS
We were provided summary schedules comprised of engineering, procurement, construction, and turnover activities to support the assumed commercial operations dates of Goat Rock 2, the Harris Facility, and the Stanton Facility. In addition, we have been provided an estimated cost to complete these facilities. The estimated remaining construction cost of these facilities is expected to be funded from the Commercial Construction Revolver and Southern equity.
Commercial operation of Goat Rock 2 is currently scheduled for June 1, 2003. According to the schedule provided, construction was approximately 26 percent complete as of March 31, 2002, with the first fire of the first CT and synchronization of the generator to the power grid scheduled to take place in January 2003. The total construction cost is estimated by Southern Power to be $246 million.
Commercial operation of both Harris 1 and 2 is currently scheduled for May 1, 2003 and June 1, 2003, respectively; however, for the purposes of the Projected Operating Results, we have assumed both units would begin commercial operation on June 1, 2003. According to the schedule provided, as of April 1, 2002, overall engineering was approximately 81 percent complete, procurement was 90 percent complete, and construction was approximately 24 percent complete. Erection of the HRSGs was in progress and the first CT and both STs have been delivered to the site. First fire of the CTs is scheduled to take place in December 2002, with synchronization of the generator to the power grid to take place in February 2003. The total construction cost is estimated by Southern Power to be $513 million.
Commercial operation of the Stanton Facility is currently scheduled for October 1, 2003. According to the schedule, overall engineering was approximately 79 percent complete as of May 9, 2002, and work continues with the placement of equipment foundations and erection of the HRSGs. The ST is scheduled to arrive on site July 1, 2002. First fire of the first CT and synchronization of the generator to the power grid are scheduled to take place in May 2003. The total construction cost is estimated by Southern Power to be $262 million, of which Southern Power's share is 65 percent.
ENVIRONMENTAL ASSESSMENTS
ENVIRONMENTAL SITE ASSESSMENTS
THE DAHLBERG FACILITY
We have reviewed the "Environmental Property Assessment" regarding the Dahlberg Project Site completed August 4, 1997, by Georgia Power and the "Phase I Environmental Site Assessment, Plant Dahlberg" dated April 20, 2001, prepared for SCS by URS Corporation ("URS"). The approximately 270-acre subject property has historically been used for agricultural and silvicultural activities. At the time of Georgia Power's 1997 assessment, the property was undeveloped woodlands and farm fields, with some use for silvicultural activities with an overhead electric transmission line traversing the property. Historical aerial photos (1944-1980) showed several structures related to residential and agricultural purposes located on the property. According to information provided by Southern Power, Dames & Moore's "Phase I Environmental Survey, Wetland Delineations, and Threatened and Endangered Species Survey" dated January 9, 1995, prepared for Georgia Power, Dames & Moore did not identify any environmental concerns at the Dahlberg Facility regarding site contamination during their 1995 investigation. During their 1997 site visit, Georgia Power did not identify any signs of spills, stained soils, waste disposal, chemical storage, tanks, drums, or other indicators of potential site-contamination issues. At the time of URS's April 2001 site visit, construction of eight CT units (and associated equipment and amenities) at the Dahlberg Facility had been completed, and additional construction of Units 9 and 10 was near completion. The power plant area occupies approximately 75 acres of the Dahlberg Facility Project Site. Georgia Power and URS determined that the property was not documented on any state or federal environmental database that lists known or suspected contaminated sites or hazardous waste activity. Neither Georgia Power's nor URS's assessments identified any potential impacts to the property from adjoining properties. As a result of their 1997 investigation, Georgia Power concluded, "there were no significant environmental concerns identified which would prohibit the purchase of the property." During their
April 2001 site visit, URS examined several areas of fuel storage and use of other hazardous substances, but reported no soil stains or other observable concerns associated with these areas. URS reported an accidental release of 16,900 gallons of No. 2 fuel oil within the bermed area for the 3.5 million-gallon fuel tank (as well as three other minor historical fuel/hydraulic oil releases associated with plant construction and operations). URS provided documentation that all of the spill areas had been cleaned-up and contaminated soils had been disposed of at a permitted landfill. URS concluded that their investigation revealed no on-site recognizable environmental concerns.
THE GOAT ROCK FACILITY
We have reviewed the "Environmental Property Assessment" regarding the Goat Rock Project Site completed August 31, 1998, by Alabama Power and the "Phase I Environmental Site Assessment (Revised)" dated May 3, 2001, prepared for Alabama Power by TTL, Inc. ("TTL"). The approximately 709-acre subject property has historically been used for hunting and silvicultural activities. At the time of Alabama Power's 1998 assessment, the property was undeveloped timberland and fields, with prior land use for hunting and silvicultural activities. During their 1998 site visit, Alabama Power encountered no substantial structures on the property, and did not identify any signs of spills, stained soils, waste disposal, chemical storage, tanks, drums, or other indicators of potential site-contamination issues. At the time of TTL's April 2001 site visit, the subject property was undeveloped, with the exception of power plant construction activity on the northeast corner of the site. TTL observed an 8,000-gallon above-ground storage tank for diesel fuel with no evidence of fuel releases, observed minor areas of debris that they described as benign, and encountered a small on-site cemetery. TTL reported no issues of concern associated with the power plant construction area. Alabama Power and TTL determined that the property was not documented on any state or federal environmental database that lists known or suspected contaminated sites or hazardous waste activity. Neither Alabama Power's nor TTL's assessments identified any potential impacts to the property from adjoining properties. As a result of their 1998 investigation, Alabama Power concluded, "there were no significant environmental concerns identified, which would prohibit the purchase of the property." TTL's conclusions did not indicate any issues of significant environmental concern for the subject property.
THE HARRIS FACILITY
We have reviewed the following: (1) the "Environmental Property
Assessment" regarding the Harris Project Site completed February 18, 2000, by
Alabama Power; (2) the "Phase I Environmental Site Assessment (Revised),
Autaugaville Site" dated May 3, 2001, prepared for Alabama Power by TTL; and
(3) the "Phase I Environmental Site Assessment, Approximate 291.37-acre Parcel"
dated May 18, 2001, prepared for Alabama Power by TTL. These reports cover the
467.66-acre and 291.37-acre contiguous parcels for the Harris Facility,
totaling approximately 759 acres. According to TTL, the subject properties have
been historically used for agricultural purposes and timber production. At the
time of Alabama Power's February 2000 assessment, the properties were
undeveloped farmland and wooded tracts. At the time of TTL's April/May 2001
site visits, initial construction activities for the Harris Facility had begun
on the 468-acre parcel and construction of a substation was underway on the
291-acre parcel. TTL observed temporary trailers at the power plant
construction site and above-ground storage tanks for diesel fuel on both
construction sites. TTL reported no spills or stained soils of regulatory
consequence associated with the fuel storage. During their site reconnaissance
of the two properties, TTL observed abandoned rusting vehicles, several debris
sites, abandoned houses/barn/sheds, and several former domestic wells. Alabama
Power and TTL determined that the subject properties were not documented on any
state or federal environmental database that lists known or suspected
contaminated sites or hazardous waste activity. Neither Alabama Power's nor
TTL's assessments identified any potential impacts to the Harris Project Site
from adjoining properties. Alabama Power concluded that their assessment
"revealed no environmental conditions which would preclude the purchase of this
property." With the exception of solid waste disposal on various portions of
the properties, TTL reported no other conditions of potentially significant
concern during their site reconnaissance. TTL recommended: (1) properly
abandoning the domestic wells (on the 291-acre parcel) by filling them with
cement and clay; (2) that debris/trash piles on the 468-acre property be
removed and disposed of off-site, followed by sampling and analysis of soil
beneath the debris piles; (3) removal and off-site disposal of Trash Area No. 1
from the 291-acre property, followed by soils sampling if staining was observed
during the removal process; and (4) citing the presence of potentially
hazardous materials such as oil containers, oil filters, and car batteries, TTL
recommended removal and off-site disposal of Trash
Area No. 2 from the 291-acre property, followed by soil sampling to evaluate baseline environmental conditions in this area. In accordance with their normal practices, Alabama Power has reported their intent to abandon the aforementioned domestic wells by filling the wells with appropriate materials. Further, Alabama Power indicates that the various debris piles and trash areas will be removed and evaluated for proper disposal, depending on the content of the piles. After debris removal, Alabama Power plans to assess the areas and conduct soil sampling and additional soil removal, as necessary, if such areas have been severely impacted.
THE STANTON FACILITY
We have reviewed the Phase I Environmental Site Assessment, Stanton Energy Plant dated April 2001, prepared for OUC by Environmental Consulting & Technology, Inc. ("ECT") and the Limited Phase II Environmental Site Assessment, Stanton Energy Center dated June 29, 2001, prepared for OUC by ECT. The environmental site assessments were conducted on a 7-acre portion of the 60 acres leased to Southern Power Florida, OUC, and FMPA. According to ECT, the 7-acre property has been used historically as a construction laydown yard during construction of the adjacent SEC power plant and as a fueling facility for fleet vehicles. At the time of their March-May 2001 site visits, the property contained two small structures, a concrete foundation for a former structure, an out-of-service electrical substation, and an active fueling facility. Areas adjacent to the property included citrus groves to the north, the SEC to the south, and OUC's fleet vehicle maintenance facility also located to the south. ECT observed disposed sand blasting material on the south side of the property; a storage building with discarded industrial batteries (with evidence of the concrete floor stained by battery acid); a storage building at the fueling facility containing five above-ground tanks for gasoline and diesel (with no evidence of releases) and associated above-ground piping and fuel dispenser; and several on-site piles of solid waste/construction debris (containing concrete, scrap wood, steel glass piping, metal grating, and miscellaneous railroad debris). With the exception of stained gravel beneath a transformer (labeled non-PCB) at the out-of-service substation, ECT observed no evidence of stained soils at the property. ECT concluded that their assessment revealed no evidence of recognized environmental conditions except the aforementioned issues associated with possible releases to soil or groundwater at the out-of-service substation, the fueling facility, and discarded sand blasting material located on the property; and the vehicle maintenance facility located south of the property. ECT recommended removal of the solid waste/debris areas, sand blasting materials, and discarded batteries (at the substation); and limited soil and groundwater testing at the site. During May 2001, ECT collected a sample of the sand blasting materials for laboratory analysis of metals by toxicity characteristic leaching procedure ("TCLP") and conducted limited sampling of soil and groundwater at the property including selected analyses of VOCs, polynuclear aromatic hydrocarbons, ("PAHs"), total petroleum hydrocarbons, metals, and pH. Soil and groundwater samples from four temporary monitoring wells were installed near the battery storage building, in the sand blasting materials area, at the fueling facility, and at the south property boundary bordering the OUC vehicle maintenance facility. Metals were not detected in the TCLP sample of sand blasting materials. Fuel related compounds were detected in soil associated with the fueling facility and the south boundary sampling location (north of the off-site vehicle maintenance facility), but none of the concentrations in any of the soil samples exceeded the applicable cleanup standards promulgated by the Florida Department of Environmental Protection ("FDEP"). Fuel related compounds and metals were detected in groundwater samples associated with the sand blasting area, the fueling facility, or the boundary sampling location, but none of the concentrations in any of the samples exceeded the applicable cleanup standards with the exception of one groundwater sample at the fueling facility. Benzene at 2.2 parts per billion ("ppb") and total xylenes at 50 ppb exceeded the FDEP regulatory standard for groundwater cleanup of 1 ppb and 20 ppb, respectively at the fueling facility. Due to the elevated levels of benzene and xylenes at the fueling facility, ECT recommended additional investigations consisting of installation of piezometers (to determine groundwater flow direction) and installation of permanent groundwater monitoring wells for analysis of fuel related organic compounds. We have not reviewed any additional reports regarding this issue and we have not received any documentation from Southern Power addressing disposal of potentially contaminated groundwater from dewatering activities. However, pursuant to the Stanton Ownership Agreement, OUC is responsible for any pre-construction environmental issues.
The environmental site assessments were conducted on a 7-acre portion of the 60 acres leased to Southern Power Florida, OUC, and FMPA. We are of the opinion that the environmental site assessment investigations performed by ECT for the 7-acre power plant construction site were conducted in a manner consistent
with industry standards, using comparable industry protocols for similar studies with which we are familiar. Although we have not reviewed any environmental site assessments for the remaining 53 acres of the 60-acre leased area, under the Stanton Ownership Agreement, OUC is responsible for any pre-construction environmental issues that would need to be addressed on the entire 60-acre leased area. We have not been provided with any information regarding the status of the site's environmental condition since issuance of ECT's most recent report in June 2001. If groundwater remediation is ever required at the Stanton Project Site in the future to address the exceedances of groundwater contaminants identified by ECT's investigations; such remediation activities would not likely significantly impact the ability of the Stanton Facility to conduct normal operations.
THE WANSLEY FACILITY
We have reviewed the "Phase I Environmental Site Assessment" dated April 20, 2001, prepared for SCS by URS and the "Plant Wansley Petroleum Release and Remediation Summary" dated May 7, 2001, prepared for SCS by Williams Environmental Services ("Williams"). According to URS, the Wansley Project Site and construction laydown area were previously used by Georgia Power as a support and maintenance facility for Georgia Power operations. Prior to 1970, the subject property was wooded and agricultural, and was reportedly occupied by homesteads, a church, and several cemeteries. Development at the subject property after 1970 included a railcar maintenance shop, a concrete plant, and two warehouses. At the time of URS's April 2001 site visit, the Wansley Facility was under construction, with demolition of historical structures either completed, underway, or scheduled. Structural debris was in the process of being removed subsequent to demolition of one of the warehouses. The coal-fired Units 1 and 2 of Plant Wansley are immediately adjacent to the Wansley Project Site. URS did not identify the existing coal-fired Plant Wansley or any other adjacent areas as having any potential to impact the Wansley Project Site. URS observed several above-ground fuel storage tanks and 55-gallon drums on the subject property, as well as storage areas for machinery, parts, and miscellaneous equipment and materials. URS also observed staging areas for scrap wood and waste construction materials, but did not observe any generation of hazardous waste. URS noted that several temporary fuel storage tanks and drums were without secondary containment. Southern Power has provided a lined secondary containment storage area for the temporary fuel storage tanks that are being used during construction.
URS identified two areas on the property with soil staining, particularly in the vicinity of fuel tank and drum storage areas. URS recommended excavation and disposal of the stained soils, followed by confirmatory soil sampling. URS also recommended sediment sampling in a ditch, which had potential to receive stormwater runoff from soil stained areas. In April/May 2001, Williams was contracted to complete the soil excavations recommended by URS. The two areas of soil staining (including a one-foot perimeter buffer) identified by URS were excavated and disposed of off-site. While we note that the soil sampling recommended by URS for the ditch was not conducted, confirmatory soil sampling from the two excavated areas by Williams indicated that removal of the contaminated soils was completed.
SUMMARY
Based on our review, we are of the opinion that the environmental site assessments performed by TTL, URS, ECT, and Williams related to the sites of the Generating Facilities were conducted in a manner consistent with industry standards, using comparable industry protocols for similar studies with which we are familiar.
STATUS OF PERMITS AND APPROVALS
The Generating Facilities must be operated in accordance with applicable environmental laws, regulations, policies, codes and standards. Table 8 identifies the key permits and approvals required for the operation of the Generating Facilities. Based on our review, we are of the opinion that Southern Power has identified the major permits and approvals necessary for the construction and operation of the Generating Facilities. While all of the required permits and approvals have not yet been obtained, we did not identify any technical or engineering circumstance that would prevent the issuance of the remaining permits and approvals.
TABLE 8
STATUS OF KEY PERMITS AND APPROVALS REQUIRED FOR OPERATION
==================================================================================================================================
DAHLBERG GOAT ROCK HARRIS STANTON WANSLEY
PERMIT/APPROVAL FACILITY FACILITY FACILITY FACILITY FACILITY
==================================================================================================================================
1. Air Construction Issued 8/9/99 by Issued 4/10/00 Issued 1/8/01 by Issued 9/21/01 by Issued 7/28/00
Permits Georgia by Alabama ADEM. FDEP. by GEPD;
Environmental Department of finalized
Protection Environmental 11/6/00.
Division ("GEPD"). Management
("ADEM"),
revised 4/6/01.
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2. Title IV Acid Issued 8/31/99 by Issued 5/7/01 by Application Application Issued 7/28/00
Rain Permits GEPD. ADEM. submitted deemed complete by GEPD;
12/14/00 to 4/24/02. finalized
ADEM; permit 11/6/00.
pending.
----------------------------------------------------------------------------------------------------------------------------------
3. Title V Application Application to Application to Application Issued 7/28/00
Operating Permits submitted 3/5/01 be submitted to be submitted to submitted. by GEPD;
to GEPD; permit ADEM within 12 ADEM within 12 finalized
pending. months of the months of the 11/6/00; amended
start of start of 2/4/02 to remove
operations. operations. future units.
----------------------------------------------------------------------------------------------------------------------------------
4. National N/A Final NPDES Issued 12/20/01; Not required. Issued 7/31/00
Pollutant Permit issued effective 1/1/02. by GEPD.
Discharge 12/27/00 by ADEM.
Elimination
System ("NPDES")
Permits for
Wastewater
Discharges
----------------------------------------------------------------------------------------------------------------------------------
5. Notice of Submitted 8/11/00 Issued 12/17/99 Issued 12/1/00 Submitted to FDEP Submitted
Intent/General to GEPD (only by ADEM. by ADEM. 6/2/02. 8/10/00 to GEPD.
Permits- covers Units 9
Construction and 10).
Stormwater
Discharges
----------------------------------------------------------------------------------------------------------------------------------
6. Notice of Not required. To be obtained Not required - To be obtained To be obtained
Intent/NPDES prior to the stormwater prior to start of prior to the
General start of discharges operations. start of
Permits-Operational operations. covered under operations.
Activities NPDES Wastewater
Stormwater Discharge Permit.
Discharges
----------------------------------------------------------------------------------------------------------------------------------
7. Clean Water Act Wetlands Issued 1/12/00 Issued 11/4/00 Issued 11/6/01 Issued 4/21/00
Section 404 Delineation for the for gas for the for gas line
Permits- Corps Survey 2/24/99. construction of pipeline; issued construction of crossing river;
of Engineers A Project natural gas 12/20/00 for the substation also, a Stream
("COE") Completion Report pipeline. intake and expansion, the Buffer Variance
was submitted to discharge electric from GEPD was
COE on 7/20/01. structures. transmission issued 10/5/00
line, and the gas for construction
pipeline. of gas pipeline.
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TABLE 8
STATUS OF KEY PERMITS AND APPROVALS REQUIRED FOR OPERATION
==================================================================================================================================
DAHLBERG GOAT ROCK HARRIS STANTON WANSLEY
PERMIT/APPROVAL FACILITY FACILITY FACILITY FACILITY FACILITY
==================================================================================================================================
8. Water Withdrawal N/A Issued 4/30/00 Certificate of Water to be Issued 10/31/00
Permits by GEPD to Beneficial Use provided by OUC by GEPD;
withdraw water from the Alabama pursuant to petition filed
from Goat Rock Department of agreement OUC has against Permit;
Reservoir. Economic and with Orange appeals hearing
Also, the Community County, Florida. began 7/16/01;
Federal Energy Affairs to be OUC's plan is Administrative
Regulatory obtained prior currently under Law Judge issued
Commission to the start of review by an amended order
issued approval operations. St. John's River 4/24/02. GEPD
on 10/10/00 to Southern Power Water management is in process of
withdraw submitted District. re-issuing
additional water Declaration of permit in
through an Beneficial Use accordance with
existing on 3/29/01. amended order.
penstock in Goat
Rock Dam.
----------------------------------------------------------------------------------------------------------------------------------
9. Federal Aviation Issued 7/15/99; Issued 4/25/00. On 5/30/01, FAA Not required. Issued 12/12/00.
Administration extended 7/19/00. issued a
("FAA") Notice determination
of Construction that the stacks
or Alteration are not a hazard
Permits for to navigation.
Stacks
----------------------------------------------------------------------------------------------------------------------------------
10. Order of N/A N/A N/A Issued 9/11/01 by N/A
Certification the State of
Florida Siting
Board.
----------------------------------------------------------------------------------------------------------------------------------
11. Spill Prevention Finalized on To be prepared To be prepared Existing plan to To be modified.
Control and 9/27/00. within six within six be amended to
Countermeasure months after months after include new unit.
("SPCC") Plan start of start of
operation. operation.
==================================================================================================================================
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REGULATORY COMPLIANCE
We note the following circumstances relative to compliance with permits and approvals and other regulatory requirements that could have an impact on future operations:
- In 1998, the United States Environmental Protection Agency ("USEPA") promulgated the "NO(x) State Implementation Plan ("SIP") Call Rule" for the purpose of controlling NO(x), a precursor to ozone, and a pollutant of concern. As required by the USEPA rules, Alabama and Georgia are subject to the NO(x) SIP Call, which will impose NO(x) allowance obligations on certain emission sources. The USEPA has approved Alabama's SIP that includes the Goat Rock and Harris Facilities. As such, each facility will be required to obtain allowances to cover annual NO(x) emissions starting in 2004. Calculations performed by the Alabama Department of Environmental Management ("ADEM") propose 35 tons of NO(x) allocations to each Harris Facility CT train for a total of 140 tons for the four trains and 33 tons of NO(x) allocations to each Goat Rock Facility CT train for a total of 264 tons for the eight trains (note there are two CT trains per unit) for 2004 through 2006, with subsequent allocations recalculated every three years (e.g., calculated in 2004 for the years 2007-2009). Based on the March 3, 2000, decision by the U.S. Court of Appeals for the District of Columbia Circuit ("Court"), certain portions of the USEPA rules that affect the entire state of Georgia were remanded. The Court found that USEPA's modeling demonstrated that the entire state of Georgia should not be included in the SIP Call. In response to the Court, the USEPA proposed revisions to their rules to include a NO(x) budget for Georgia for the northern portion of the state. Based on the USEPA proposed amended rules the state is required to submit a SIP by no later than April 1, 2003 with a May 1, 2005 compliance date. As such, the Georgia Environmental Protection Division ("GEPD") has not yet amended Georgia's SIP. GEPD is still considering options for revising their SIP and determining future allocations. It is anticipated that the
Dahlberg and Wansley Facilities will be included within the area that will be subject to the NO(x) SIP Call Rule. Since the manner in which the NO(x) allocations will be structured has not been determined by GEPD, we are unable to accurately estimate the likely number of allowances that may be allocated to the Dahlberg and Wansley Facilities. The exact number of allowances to be required in the future will depend on the utilization of the units in the future and the finalization of the SIP. For the purposes of the Projected Operating Results, we have assumed that the Generating Facilities would be allocated allowances based on the Alabama SIP and no allowances were assumed for the Dahlberg and Wansley Facilities, both located in Georgia. The future cost of NO(x) allowances will be market dependent and could be lower or higher than the current values for such allowances. The allowance costs assumed in the Projected Operating Results are presented later in this Report.
- The Generation Facilities are subject to Title IV of the Clean Air Act (Acid Rain Provisions) whereby each unit must possess sulfur dioxide ("SO(2)") allowances to cover its emissions beginning in 2000. The future cost of SO(2) allowances will be market dependent and could be lower or higher than the current values for such allowances. The exact number of allowances to be required in the future will depend on the utilization of the units. The allowance costs assumed in the Projected Operating Results are presented later in this Report. Since the facilities will operate primarily on natural gas, the actual cost for purchasing allowances should be relatively small. In addition, since the facilities are operated on natural gas, they are not subject to the NO(x) requirements under the Acid Rain Program.
- For the purpose of estimating NO(x) and SO(2) allowance costs in the Projected Operating Results, actual emissions testing results have been assumed for the Dahlberg Facility, and air permit limits have been assumed for the other Generating Facilities with no significant operating history. Based on firing natural gas, a NO(x) emission level of 0.24 lb/MMBtu was used for the Dahlberg Facility and 0.013 lb/MMBtu was assumed for the other Generating Facilities. An SO(2) emission level of 0.001 lb/MMBtu was assumed for all of the Generating Facilities while firing natural gas.
- Southern Power has reported that there have been no Notices of Violation issued by regulatory agencies against any of the Facilities.
- There are a number of potential future regulations that, if promulgated, could increase capital expenditures and O&M costs at the Generating Facilities. Such potential regulations include mercury control, particulate matter of 2.5 microns or less ("PM(2.5)"), regional haze, regional visibility, water intake structure regulations, and potential ratcheting of SO(2) allowances beyond 2009. The schedule and specific regulations to be promulgated are not presently known; therefore, the impact of such potential regulations has not been incorporated into the Projected Operating Results. Since the Generating Facilities are primarily fired on natural gas, the impact of these potential future regulations is not expected to be significant.
PROJECTED OPERATING RESULTS
We have reviewed the historical operating information, estimates and projections of electrical generating capacity, fuel consumption, and capital and operating costs of the Generating Facilities made available to us by Southern Power. On the basis of such data, we have prepared the Projected Operating Results. Southern Power will sell electricity generated from the Generating Facilities to various entities under the terms of the Power Purchase Agreements, which vary in term. For the purposes of the Projected Operating Results, we have assumed that all of the Power Purchase Agreements will expire at the end of their respective initial terms and will not be renewed. After expiration of the Power Purchase Agreements, Southern Power intends on entering into long-term power purchase agreements at prices reflective of then-current market rates in the Southeastern Electric Reliability Council ("SERC") and Florida Reliability Coordinating Council ("FRCC") markets. For the purpose of the Projected Operating Results, we have assumed that the prices under these long-term contracts will be equivalent to the projected market prices for those markets as projected by PA Consulting. PA Consulting was also responsible for providing monthly dispatch hours, starts per month for each unit, monthly heat rates per unit and projected natural gas prices. Expenses for the plants consist primarily of the delivered costs of fuel, including transportation, as estimated by PA Consulting, and operations and maintenance expenses, as estimated by Southern Power. During the terms of the respective Power Purchase Agreements, the cost of fuel is reimbursed by, or purchased directly by, the power purchasers. Emissions
allowances are also the responsibility of the power purchasers. The interest on the Notes and future debt issuances by Southern Power, as described herein, has been estimated by Lehman Brothers and Salomon Smith Barney (the "Representatives of the Initial Purchasers"). The Notes mature on July 15, 2012. Southern Power has assumed that the Notes will be refinanced upon maturity; therefore, the Projected Operating Results are presented for each calendar year beginning June 1, 2002 through December 31, 2022, a period approximately ten years beyond the term of the Notes. Projected revenues and expenses have been set forth in the Projected Operating Results presented in Exhibit A-1. The "Base Case" Projected Operating Results have been prepared using assumptions and considerations set forth in this Report and the footnotes to Exhibit A-1.
ANNUAL OPERATING REVENUES
REVENUE FROM POWER PURCHASE AGREEMENTS
All of the Generating Facilities have Power Purchase Agreements that have various terms and conditions. Several facilities have more than one Power Purchase Agreement, as they apply to specific units. Most of the Power Purchase Agreements provide payment for capacity, start-up charges and variable O&M charges. The power purchasers and terms for each individual Power Purchase Agreement are presented in Table 9.
TABLE 9
POWER PURCHASE AGREEMENTS
TOTAL CONTRACT
POWER CAPACITY CAPACITY POTENTIAL
UNIT(S) PURCHASER(S) (MW)(1) (MW)(2) START DATE END DATE EXTENSION
------- ------------ -------- -------- ---------- -------- ---------
Dahlberg 1-7 LEM 561(3) 578(3) June 1, 2000 December 31, 2004 December 31, 2009
Dahlberg 8 Dynegy 80(3) 75(3) June 1, 2000 May 31, 2005 N/A
Dahlberg 9-10 Dynegy 160(3) 150(3) June 1, 2001 May 31, 2005 N/A
Goat Rock 1 Georgia Power 564 564(4) June 1, 2002 May 31, 2010 N/A
Goat Rock 2 Georgia Power 595 595(4) June 1, 2003 May 31, 2011 N/A
Harris 1 Alabama Power 595 595 June 1, 2003 May 31, 2010 N/A
Harris 2 Georgia Power 595 595 June 1, 2004 May 31, 2019 N/A
Stanton OUC, KUA, FMPA 394(5) 404 October 1, 2003 October 31, 2013 October 31, 2033
Wansley Georgia Power 925 925 June 1, 2002 December 31, 2009 N/A
Wansley Savannah Electric 198 198 June 1, 2002 December 31, 2009 N/A
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THE DAHLBERG FACILITY
Dahlberg 1 through 5 are currently in operation and are realizing revenue under the terms of the 1998 LEM Power Purchase Agreement. LEM has the right to extend the term of this 1998 LEM Power Purchase Agreement to December 31, 2009; however, we have assumed for the purposes of the Projected Operating Results that this 1998 LEM Power Purchase Agreement will expire December 31, 2004. Southern Power will receive revenues from Dahlberg 1 through 5 for capacity, start-up and variable operations from LEM. The monthly capacity revenues range from $1,878,033 to $2,045,013 during the applicable portion of the initial term of the 1998 LEM Power Purchase Agreement. Start-up charges range over the term of the 1998 LEM Power Purchase Agreement from $3,292/start to $3,585/start for starts in excess of 750 over the initial term of the 1998 LEM Power Purchase Agreement. The variable O&M payment ranges from $3.36 per MWh to $3.66 per MWh of energy delivered to LEM during the initial term of
the 1998 LEM Power Purchase Agreement. These prices are provided in the 1998 LEM Power Purchase Agreement. Based on our discussion with Southern Power and the review of the plant design and technology, we have assumed that Southern Power will achieve its contract capacity of 412.5 MW by utilizing peak firing and power from the other Dahlberg Facility units. Additional capacity payments are available for contract availability above 98.6 percent. Southern Power has indicated that it would provide energy from alternate resources in order to receive the maximum capacity payment under the 1998 LEM Power Purchase Agreement. We have assumed the contract availability is equal to 100 percent based upon the purchase of replacement energy from the market, resulting in additional capacity payments of $1,000,000 per year.
Dahlberg 6 and 7 are currently in operation and are realizing revenue under the terms of the 1999 LEM Power Purchase Agreement. As with the 1998 LEM Power Purchase Agreement, LEM has the right to extend this contract; however, we have assumed for the purposes of the Projected Operating Results that the 1999 LEM Power Purchase Agreement will expire on December 31, 2004. Revenues from operations of these units include capacity payments, start-up charges and variable operations payments. Capacity payments range from monthly charges of $709,500 to $732,600 during the initial term of the 1999 LEM Power Purchase Agreement. Start-up payments range from $51.50 to $56.28 per MW per start. Variable O&M payments range from $3.36 per MWh to $3.66 per MWh of energy delivered to LEM during the initial term of the 1999 LEM Power Purchase Agreement. These prices are provided in the 1999 LEM Power Purchase Agreement. Based on our discussion with Southern Power and the review of the plant design and technology, we have assumed that Southern Power will achieve its contract capacity of 165 MW by utilizing peak firing and power from the other Dahlberg Facility units. Additional capacity payments are available for contract availability of 100 percent. Southern Power has indicated that it would provide energy from alternate resources in order to receive the maximum capacity payment under the 1999 LEM Power Purchase Agreement. We have assumed the contract availability is equal to 100 percent based upon the purchase of replacement energy from the market, resulting in additional capacity payments of $200,000 per year.
Under the terms of the Dynegy Power Purchase Agreement, power from Dahlberg 8-10 will be sold in three 75 MW blocks. The Dynegy Power Purchase Agreement expires on May 31, 2005. The Monthly Capacity Payment is adjusted by a monthly adjustment factor that is weighted such that approximately 63 percent of the payments occur in the months of June through September. Monthly capacity payments, before adjustment, range from $1,136,250 to $888,750. Start-up charges range from $3,851 to $4,172 per block per start. Variable O&M payments range from $1.34 per MWh to $1.45 per MWh of energy delivered to Dynegy. These prices are provided in the Dynegy Power Purchase Agreement.
THE GOAT ROCK FACILITY
The Goat Rock Power Purchase Agreement includes provisions for selling
capacity and associated energy from Goat Rock 1 and Goat Rock 2 to Georgia
Power. The term associated with Goat Rock 1 is June 1, 2002 to May 31, 2010.
The term associated with Goat Rock 2 is June 1, 2003 to May 31, 2011. For Goat
Rock 1 and Goat Rock 2, the annual average projected capacities are 564 and 595
MW, respectively. Average contract capacity values range from 370 MW (for the
first year) to 564 MW for Goat Rock 1 and from 400 MW to 595 MW for Goat Rock
2. The excess energy generation has been assumed to be sold to the market as
forward contracts and spot market sales, as discussed later herein. The annual
contract capacity price is $74.40 per kW-year for Goat Rock 1 and $76.20 per
kW-year for Goat Rock 2 for the term of the Goat Rock Power Purchase Agreement.
These capacity prices are weighted such that 60 percent of the payments occur
in the summer months. Additional capacity payments are available for contract
availability above 96.5 percent. Southern Power has indicated that it would
provide energy from alternate resources in order to receive the maximum
capacity payment under the Goat Rock Power Purchase Agreement. We have assumed
the contract availability is equal to 99.5 percent based upon the purchase of
replacement energy from the market, resulting in an increase in capacity
payments of 3.5 percent. Variable O&M charges are $2.80 per MWh for Goat Rock 1
and $2.60 per MWh for Goat Rock 2 in 2001, indexed to 1999 Gross Domestic
Product - Implicit Price Deflator ("GDP-IPD"). We have assumed GDP-IPD will
increase at 2.7 percent from 2002. Start-up charges are per unit per start and
range from $6,000 for starts 1 through 50, to $20,000 for starts 51 through 100
and $50,000 for starts greater than 100. Under the terms of the Goat Rock Power
Purchase Agreement, the start-up charges are indexed to both the January 1,
1999 U.S. City Average Consumer Price Index for All Urban
Consumers ("CPI") and $2.25 per MMBtu as a base to the "Daily Price Survey" midpoint as published in Gas Daily. For the purposes of the Projected Operating Results, we have assumed that CPI will escalate at 2.7 percent after January 1, 2002 and the midpoint in the "Daily Price Survey" will be as projected by PA Consulting in their delivered fuel forecast.
THE HARRIS FACILITY
Harris 1 and 2 are to sell power under separate Power Purchase Agreements to Alabama Power and Georgia Power with terms beginning on June 1, 2003 and June 1, 2004 and ending on May 31, 2010 and May 31, 2019, respectively. Prior to commencement of the Harris 2 Power Purchase Agreement, Southern Power has assumed that electricity from Harris 2 will be sold on a merchant basis at quantities and prices estimated by PA Consulting. Annual average contract capacity is equal to 595 MW per unit. Monthly revenues are generated from a capacity payment of $79.80 per kW-year and $85.56 per kW-year for each of Harris 1 and 2, respectively, which is adjusted by a monthly capacity payment factor that is weighted such that 60 percent of the payment occurs during the summer months. Additional capacity payments are available for contract availability above 97.0 percent for Harris 1 and 96.5 percent for Harris 2. Southern Power has indicated that it would provide energy from alternate resources in order to receive the maximum capacity payment under the Harris Power Purchase Agreements. We have assumed the contract availability is equal to 99.0 percent for Harris 1 and 99.5 percent for Harris 2 based upon the purchase of replacement energy from the market, resulting in additional capacity payments of 4.0 and 3.5 percent, respectively. Revenues are also generated from a variable O&M charge of $2.65 per MWh for Harris 1 and $2.60 per MWh for Harris 2 indexed to 1999 GDP-IPD. We have assumed that GDP-IPD and all inflation-related indices will increase at 2.7 percent from 2002, based on a March 10, 2002 projection prepared by Blue Chip Economic Indicators. The start-up charge is equal to $6,000 per start for the first 50 starts, $20,000 per start for the next 50 starts, and $50,000 for all starts in excess of 100 starts. Under the terms of the Harris 1 and 2 Power Purchase Agreements, the start-up charges are indexed to both the January 1, 1999 CPI and $2.25 per MMBtu as a base to the "Daily Price Survey" midpoint as published in Gas Daily. For the purposes of the Projected Operating Results, we have assumed that CPI will escalate at 2.7 percent after January 1, 2002 and the midpoint in the "Daily Price Survey" will be as projected by PA Consulting in their delivered fuel forecast.
THE STANTON FACILITY
Under the terms of the Stanton Power Purchase Agreements, 52 percent of the Stanton Facility's generation is allocated to OUC, 6.5 percent of the generation is allocated to KUA, and the remaining 6.5 percent is allocated to FMPA. Sale of power under the Stanton Power Purchase Agreements commences upon commercial operation of the Stanton Facility. For the purposes of the Projected Operating Results, we have assumed that the Stanton Power Purchase Agreements will have an effective date of October 1, 2003 and will expire on October 31, 2013. Each of the agreements has similar terms and conditions. Southern Company Florida will receive capacity, energy and start payments. OUC is the fuel agent and is responsible for the delivery of fuel. The power purchasers will be obligated for the payment of fuel used to produce energy.
OUC, KUA, and FMPA shall have the irrevocable right to jointly reduce the total of their combined capacity nominations beginning with the sixth contract year and ending with the tenth contract year. OUC, KUA, and FMPA can reduce their nominations in 25 MW blocks; however, no reduction can total more than 50 MW in any given year and 200 MW in the aggregate. The decrease in capacity nominations will be effective through the initial term and any subsequent extensions. For the purposes of the Projected Operating Results, we have assumed that OUC, KUA, and FMPA will not elect to reduce their capacity nominations.
The capacity payment during each month of the operating period shall be an amount equal to the product of the purchasers' annual capacity nomination multiplied by the annual capacity charge of $77.85 per kW-year. The Stanton Facility will also be entitled to an availability incentive payment of 3 percent of the peak period capacity payments for a contract availability in excess of 99 percent and 1.5 percent of the off-peak capacity payments for an off-peak contract availability in excess of 99 percent. The Stanton Facility will also be penalized by 2 percent of the peak period capacity payments for a peak contract availability of 95 percent and an additional 1 percent for each
percentage of contract availability less than 95 percent. The off-peak contract availability penalty is 1 percent of the off-peak capacity payments for an off-peak contract availability of 95 percent and an additional 0.5 percent for each percentage of off-peak contract availability less than 95 percent. For the purpose of the Projected Operating Results, we assumed an annual, peak, and off-peak contract availability of 99.01 percent, based upon the purchase of replacement energy from the market, resulting in additional capacity payments of 2.375 percent. The capacity payment will increase or decrease by $0.42 per kW-year for every $350,000 increase or decrease in "BOP Capital Cost Range" or "Fixed Amount" as referenced in the Stanton Ownership Agreement. For the purposes of the Projected Operating Results, we have assumed that there will be no increase or decrease in the BOP Capital Cost Range and Fixed Amount.
The variable energy charge will consist of three components: (1) a variable O&M charge of $0.73 per MWh; (2) an hourly variable O&M charge while firing natural gas of between $986 and $7,149 per hour, based on the annual capacity factor; and (3) an hourly variable O&M charge while firing No. 2 oil of three times the corresponding rate while firing natural gas. The annual capacity factor is defined as the annual scheduled hours divided by the period hours minus the outage hours. Outage hours include both the 58 hours of allowable scheduled maintenance and the total hours of forced outages. Each component is indexed to the CPI for January 1, 2003, and contractually escalated each January 1 at the rate of change in the CPI. For the purposes of the Projected Operating Results, we have assumed that the rate of change of CPI will be 2.7 percent per year. The Stanton Facility will receive the applicable variable O&M components and cost of fuel for any energy delivered from an alternate resource.
The Stanton Facility will also receive a start charge for each unit start over 65 starts. For each start between 65 and 99, the start charge is equal to $9,783 per start. For each start greater than 99, the start charge is equal to $16,307 per start. The start charges are indexed to the CPI for January 1, 2003 and contractually escalated each January 1 at the rate of change in CPI. For the purposes of the Projected Operating Results, we have assumed that the rate of change of CPI will be 2.7 percent per year.
THE WANSLEY FACILITY
The Wansley Power Purchase Agreements include provisions for selling
capacity and associated energy generated by Wansley to Georgia Power and
Savannah Electric. Under the terms of the Wansley Power Purchase Agreements,
energy sales start on June 1, 2002 and expire December 31, 2009. Contract
capacity and associated energy from Wansley are sold as blocks, each rated at
561.5 MW. The contract capacity equals the projected annual average capacity.
Capacity pricing varies by month with 60 percent of the annual capacity payment
occurring during June-September and 40 percent occurring in the months
remaining. Capacity pricing includes a capacity charge, a fixed O&M charge and
a transmission interconnection charge. Additional capacity payments are
available for contract availability above 96.6 percent. Southern Power has
indicated that it would provide energy from alternate resources in order to
receive the maximum capacity payment under the Wansley Power Purchase
Agreements. We have assumed the contract availability is equal to 99.5 percent
based upon the purchase of replacement energy from the market, resulting in an
increase in capacity payments of 3.5 percent. The annual capacity charge,
without the bonus, averages approximately $72 per kW-year. Start-up charges are
$20,000 per start per unit in excess of 50 starts per year indexed to 1999
GDP-IPD. We have assumed that GDP-IPD will increase at 2.7 percent from 2002.
Variable O&M payments are $2.39 per MWh and are also indexed to 1999 GDP-IPD.
OTHER REVENUES FROM ELECTRICITY SALES
Southern Power has assumed that a portion of the capacity and associated energy from Goat Rock 1, Goat Rock 2, and Harris 2 will be sold into the market before initiation of their respective Power Purchase Agreements. Market prices have been estimated by PA Consulting in 2001 dollars and have been adjusted for inflation. For the purposes of the Projected Operating Results, the general inflation rate has been assumed to be 2.7 percent per year. PA Consulting also provided monthly dispatch hours for each of these facilities during this period.
In addition to the market sales by the Goat Rock Facility before initiation of the Goat Rock Power Purchase Agreement, a portion of the output from Goat Rock 1 and Goat Rock 2 is to be sold to third parties pursuant to contracts entered into by Southern Power. During the period from 2002 to 2003, net revenues associated with these
third-party contract sales are approximately $14,900,000 based on the executed contracts as reported by Southern Power.
After the expiration of the Power Purchase Agreements, Southern Power intends on entering into long-term power purchase agreements representing at least 80 percent of its cash flow at prices reflective of then-current market rates. For the purposes of the Projected Operating Results, we have utilized a projection of market prices prepared by PA Consulting as an estimate of those contract rates. Market prices include separate charges for capacity and electricity sold into the SERC and FRCC markets, as estimated by PA Consulting. PA Consulting also provided monthly dispatch hours for each of the Generating Facilities.
ANNUAL OPERATING EXPENSES
FUEL COSTS
Substantially all of the commodity component of the fuel costs associated with the terms of the respective Power Purchase Agreements are the obligation of the buyer of the energy and have not been included in the Projected Operating Results as expenses to Southern Power. Commodity fuel costs are incurred during periods of market sales, either before the Power Purchase Agreements begin, after they expire, or at times when annual average capacity is greater or less than contract capacity. Commodity fuel cost projections have been estimated by PA Consulting based upon the appropriate annual average heat rate for each unit, or group of units, for the respective Generating Facility. For the purposes of the Projected Operating Results, we have assumed fuel prices equal to the projections prepared by PA Consulting in 2001 dollars and adjusted for inflation at the assumed rate of 2.7 percent per year.
Non-commodity fuel charges, related to transportation and storage, are the obligation of the buyer of the energy during the term of the Power Purchase Agreements. These costs are incurred by Southern Power after the expiration of the Power Purchase Agreements. These charges have been estimated by Southern Power, as derived from their fuel plans for the Goat Rock, Harris, and Wansley Facilities.
OPERATING AND MAINTENANCE COSTS
For the purposes of developing the Projected Operating Results, operating and maintenance expenses for the Generating Facilities have been estimated by Southern Power. These estimates include annual costs for payroll, materials and supplies, outside services, including contractors, and variable operating and maintenance expenses. All operation and maintenance expenses have been provided in 2001 dollars and have been assumed to escalate at the general rate of inflation. PA Consulting has projected that the Generating Facilities will operate in the full-pressure mode with power augmentation over the course of the year, resulting in additional water costs.
Major maintenance expenses were estimated by Southern Power and include major maintenance, "recurring" capital expenditures, and LTSA charges. These expenses vary annually and have been assumed to escalate with the rate of inflation. Under the terms of the LTSAs, the cost of maintenance of the Generating Facilities increases if the Generating Facilities are operated in certain types of steam injection modes. The full-pressure mode with power augmentation assumed by Southern Power is not classified by GEI as a type of steam injection that would result in increased maintenance compared to base-load operation. As such, we have assumed no impact on the LTSA charges due the assumed mode of operation projected by PA Consulting.
We have reviewed the combined projection of operating and maintenance expenses and major maintenance costs in comparison to the costs of similar plants with which we are familiar. Based on our review, we are of the opinion that Southern Power's estimates of the costs of operating and maintaining the Generating Facilities, including provision for major maintenance, are within the range of the costs of similar plants with which we are familiar.
PURCHASED POWER
In order to maximize the capacity payments under the Power Purchase Agreements, Southern Power has indicated that it will provide replacement energy from alternate resources. We have assumed the replacement energy will be purchased from the market. Purchased power has been assumed to be available at market prices estimated by PA Consulting.
EMISSIONS ALLOWANCES
Southern Power has acquired or has been allocated the SO(2) and NO(x) allowances associated with the Generating Facilities. We have included the cost of allowances as an additional operating expense for the Generating Facilities. In the event that excess allowances are available for sale, we have assumed that Southern Power will sell the allowances at market prices. The deficit or excess of allowances has been estimated based on the assumed emission rates as estimated by Southern Power, the capacity factors projected by PA Consulting, and the allocated SO(2) and NO(x) allowances. In the event of a shortfall during the term of any of the various Power Purchase Agreements, the emissions allowance expense would be the contractual obligation of the buyer of the electricity, but excess allowances could be sold by Southern Power. The market NO(x) and SO(2) emissions allowance prices have been projected by PA Consulting in 2001 dollars and have been adjusted for the assumed rate of inflation.
GENERAL AND ADMINISTRATIVE AND OTHER EXPENSES
Southern Power has estimated certain general and administrative costs which have been included in the Projected Operating Results. These costs include, among other things, support services such as power marketing, computer systems and services, human resources, and accounting. These expenses have been assumed to increase at the general rate of inflation. In addition, Southern Power has estimated other expenses, which have also been included in the Projected Operating Results. Property taxes have been estimated by Southern Power for 2001 and have been assumed to escalate at the rate of inflation. Southern Power has also estimated annual financing costs of $270,000 per year.
ANNUAL INTEREST
We have included interest on the Notes and Southern Power's projection of an additional debt issuance which is assumed to pay off the balance of the Commercial Construction Revolver upon commercial operation of Goat Rock 2, the Harris Facility, and the Stanton Facility. In addition to the Notes, Southern Power has assumed that it will issue additional long-term debt of $650,000,000 on June 1, 2003 (together with the Notes, the "Debt"). We have included interest payments on the principal amount of the Debt at interest rates estimated by the Representatives of the Initial Purchasers resulting in a weighted average interest rate on the Debt over the term of the Notes of approximately 7.2 percent per year. The scheduled amortization of the Notes consists of a single payment due on July 15, 2012. Interest payments on the Notes are due each July 15 and January 15 beginning January 15, 2003. Southern Power has assumed that the Debt will be refinanced upon maturity at the same principal amounts and interest rates. No additional costs of issuance have been included. No amortization of the Debt has been assumed.
INTEREST COVERAGE
Interest coverage has been calculated as the cash available for debt service during the calendar year divided by interest on all Southern Power debt due on July 15 of that calendar year and January 15 of the next calendar year. On the basis of our studies and analyses of the Generating Facilities and the assumptions set forth in this Report, we are of the opinion that, for the Base Case Projected Operating Results, the projected revenues from the sale of electricity are adequate to pay annual operating and maintenance expenses (including major maintenance), fuel expense, and other operating expenses. Such revenues provide an annual interest coverage on the Debt of at least 3.28 times the annual interest requirement in each year during the term of the Notes and a weighted average coverage of 3.61 times the annual interest requirement on the Debt over the term of the Notes. There is insufficient cash available after the payment of interest to repay the entire principal due on the Debt upon maturity. Southern Power has assumed that the Debt will be refinanced upon maturity. The weighted average interest coverage has been calculated as the total
net operating revenues, as shown in Exhibit A-1, over the term of the Notes divided by the total interest payments on the Debt over the term of the Notes. Annual interest coverages are presented in Exhibit A-1.
SENSITIVITY ANALYSES
Due to the uncertainties necessarily inherent in relying on assumptions and projections, it should be anticipated that certain circumstances and events may differ from those assumed and described herein and that such will affect the results of our Base Case Projected Operating Results for the Generating Facilities. In order to demonstrate the impact of certain circumstances on the Base Case Projected Operating Results, certain sensitivity analyses have been developed. It should be noted that other examples could have been considered and those presented are not intended to reflect the full extent of possible impacts on the Generating Facilities. The sensitivities are not presented in any particular order with regard to the likelihood of any case actually occurring. In addition, no assurance can be given that all relevant sensitivities have been presented, that the level of each sensitivity is the appropriate level for testing purposes, or that only one (rather than a combination of more than one) of such variations or sensitivities could impact the Generating Facilities in the future.
These sensitivity analyses present the Projected Operating Results assuming, respectively, that: (a) the market prices, energy sales, and fuel prices are reduced according to the "Low Gas Price" scenario prepared by PA Consulting; (b) the market prices, energy sales, and fuel prices are reduced according to the "High Gas Price" scenario prepared by PA Consulting; (c) the market prices, energy sales, and fuel prices are reduced according to the "Capacity Overbuild" case prepared by PA Consulting; (d) the output of the Generating Facilities is reduced by 5 percent; (e) the availability of the Generating Facilities is reduced by 5 percentage points; (f) the heat rates of the Generating Facilities are 5 percent higher than that assumed in the Base Case; and (g) the non-fuel related operating expenses of the Generating Facilities are 10 percent higher than that assumed in the Base Case. The sensitivity analyses are presented as Exhibits A-2 through A-8 to this Report. For the purposes of (a) and (b), PA Consulting has prepared additional projections of dispatch and market prices. Based on discussions with PA Consulting, market sales and market prices have been assumed to be the same as the Base Case for the purposes of (d), (e), (f) and (g).
SUMMARY COMPARISON OF PROJECTED OPERATING RESULTS
A summary of the interest coverages for the Base Case Projected Operating Results and each sensitivity case is presented in Table 10.
TABLE 10
PROJECTED INTEREST COVERAGE (1)
BASE CASE SENSITIVITY CASES
A B C D E F G
---- ---- ---- ---- ---- ---- ----
CAPACITY
YEAR LOW GAS HIGH GAS OVERBUILD INCREASED
ENDING MARKET PRICE MARKET PRICE MARKET PRICE REDUCED REDUCED INCREASED OPERATING
DEC 31, SCENARIO SCENARIO SCENARIO OUTPUT AVAILABILITY HEAT RATE EXPENSES
---------- ------------ ------------ ------------ ------- ------------ --------- ---------
2002 5.05 4.91 5.29 5.05 4.84 4.96 4.81 4.91
2003 3.30 3.19 3.28 3.19 3.13 3.26 3.18 3.21
2004 3.40 3.34 3.41 3.35 3.23 3.35 3.26 3.31
2005 3.33 3.08 3.36 3.22 3.14 3.19 3.16 3.23
2006 3.31 3.00 3.43 3.23 3.12 3.14 3.12 3.20
2012 4.24 4.23 4.16 3.72 3.96 4.10 4.01 4.11
2017 4.31 4.45 4.14 4.16 4.01 4.18 4.11 4.18
2022 4.86 5.01 4.66 4.76 4.52 4.77 4.66 4.72
Minimum (2) 3.28 2.97 3.28 3.19 3.09 3.10 3.07 3.16
Average (3) 3.61 3.42 3.65 3.37 3.41 3.47 3.42 3.50
|
PRINCIPAL CONSIDERATIONS AND ASSUMPTIONS
USED IN THE PROJECTION OF OPERATING RESULTS
In the preparation of this Report and the opinions that follow, we have made certain assumptions with respect to conditions which may exist or events which may occur in the future. While we believe these assumptions to be reasonable for the purpose of this Report, they are dependent upon future events, and actual conditions may differ from those assumed. In addition, we have used and relied upon certain information provided to us by sources which we believe to be reliable. While we believe the use of such information and assumptions to be reasonable for the purposes of our Report, we offer no other assurances thereto and some assumptions may vary significantly due to unanticipated events and circumstances. To the extent that actual future conditions differ from those assumed herein or provided to us by others, the actual results will vary from those projected herein. This Report summarizes our work up to the date of the Report. Thus, changed conditions occurring or becoming known after such date could affect the material presented to the extent of such changes.
The principal considerations and assumptions made by us in developing the Base Case Projected Operating Results and the principal information provided to us by others include the following:
1. As Independent Engineer, we have made no determination as to the validity and enforceability of any contract, agreement, rule, or regulation applicable to the Generating Facilities and its operations. However, for purposes of this Report, we have assumed that all such contracts, agreements, rules, and regulations will be fully enforceable in accordance with their terms and that all parties will comply with the provisions of their respective agreements.
2. Our review of the design of the Generating Facilities was based on information developed by SCS and Southern Power and provided by Southern Power.
3. Southern Power, SCS, Alabama Power, and Georgia Power will maintain the Generating Facilities in accordance with good engineering practice, will perform all required major maintenance in a timely manner, and will not operate the equipment to cause it to exceed the equipment manufacturers' recommended maximum ratings.
4. The operators will employ qualified and competent personnel and will generally operate the Generating Facilities in a sound and businesslike manner.
5. Inspections, overhauls, repairs and modifications are planned for and conducted in accordance with manufacturers' recommendations, and with special regard for the need to monitor certain operating parameters to identify early signs of potential problems.
6. All licenses, permits and approvals, and permit modifications necessary to operate the Generating Facilities have been, or will be, obtained on a timely basis and any changes in required licenses, or permits and approvals will not require reduced operation of, or increased costs to, the Generating Facilities.
7. The CPI, GDP-IPD, general inflation and all inflation-related indices will increase at a rate of 2.7 percent per year based on a March 10, 2002 projection prepared by Blue Chip Economic Indicators.
8. Retesting of Goat Rock 1 will demonstrate an additional 10 MW over that demonstrated during the preliminary net output test and will conform to the guaranteed output under the Construction Revolver Credit Agreement.
9. The actual performance of the Generating Facilities in each year will be equal to the long-term average estimates included in the Projected Operating Results.
10. The Generating Facilities will sell the quantities of electricity pursuant to the Power Purchase Agreements as projected by PA Consulting, at prices determined in accordance with the relevant Power Purchase Agreements. After the term of the Power Purchase Agreements, Southern Power will enter into long-term power purchase agreements at prices equivalent to the market electricity prices projected by PA Consulting and will sell the quantities of electricity as projected by PA Consulting.
11. The Goat Rock Facility will earn the revenue from contract sales to third parties in 2002 and 2003 as reported by Southern Power.
12. Certain of the Generating Facilities will achieve contract availabilities under their respective Power Purchase Agreements sufficient to receive the maximum capacity payments by purchasing additional energy from the market at prices estimated by PA Consulting.
13. Except for during the term of the Power Purchase Agreements when the energy purchaser is responsible for the cost of fuel, the cost of fuel will be as projected by PA Consulting.
14. Southern Power will operate the Generating Facilities at the load levels projected by PA Consulting, resulting in the annual average heat rates assumed in the Projected Operating Results, resulting in no additional fuel cost under the Power Purchase Agreements.
15. The non-fuel operating and maintenance expenses, including the cost of major maintenance, will be consistent with the projection provided by Southern Power in 2001 dollars, and will increase at the assumed change in the general inflation rate, except for a portion of the administrative and general expenses.
16. The assumed quantity of emissions allowances will be allocated to Southern Power through the term of the Notes. The price of NO(x) and SO(2) emissions allowances will be as projected by PA Consulting, as adjusted for the assumed rate of inflation.
17. There will be no additional capital improvements to the Generating Facilities other than those assumed in the Projected Operating Results.
18. All revenue from the Generating Facilities beginning June 1, 2002 will be available to pay interest on the Notes.
19. The principal amount of the Notes will be $575,000,000. Additional Debt of $650,000,000 will be issued on June 1, 2003. The interest rates on the Debt will be as estimated by the Representatives of the Initial Purchasers, resulting in a weighted average interest rate over the term of the Notes of approximately 7.2 percent per year. The Debt will be refinanced upon maturity, as assumed by Southern Power, at the same respective principal amounts and interest rates, as estimated by the Representatives of the Initial Purchasers.
CONCLUSIONS
Set forth below are the principal opinions we have reached after our review of the Generating Facilities. For a complete understanding of the estimates, assumptions, and calculations upon which these opinions are based, the Report should be read in its entirety. On the basis of our review and analyses of the Generating Facilities and the assumptions set forth in this Report, we are of the opinion that:
1. Provided Southern Power takes into account the recommendations in the geotechnical reports by Southern Geotech, the sites for the Generating Facilities are suitable for the construction and operation of the Generating Facilities.
2. Based on GE's previously demonstrated capability to address the issues similar to those related to the Frame 7FA described herein, the power generation technologies proposed for the Generating Facilities are sound, proven methods of energy recovery. If constructed, operated and maintained as proposed by Southern Power, the Generating Facilities should be capable of meeting the requirements of the Power Purchase Agreements and the currently applicable environmental permit requirements. Furthermore, all off-site requirements of the Generating Facilities have been adequately provided for, including fuel supply, water supply, wastewater disposal, and electrical interconnection.
3. The proposed method of design, construction, operation, and maintenance of the Generating Facilities has been developed in accordance with generally accepted industry practice and has taken into consideration the current environmental, license and permit requirements that the Generating Facilities must meet.
4. Based on our review and provided that: (a) the units are operated and maintained by the operators in accordance with the policies and procedures as presented by Southern Power, (b) all required renewals and replacements are made on a timely basis as the units age, and (c) gas and oil burned by the units are within the expected range with respect to quantity and quality, the Generating Facilities should have useful lives of at least 20 years.
5. The performance guarantees proposed for the Generating Facilities under construction, if all the equipment contract guarantees are considered in their entirety, are similar to the performance tests of turnkey projects with which we are familiar.
6. The Generating Facilities should be capable of achieving the annual average output in full-pressure mode with power augmentation and the average annual net plant heat rates assumed in the Projected Operating Results.
7. The Generating Facilities should be capable of achieving the required average annual contract availabilities under the Power Purchase Agreements ranging from 96.5 to 97 percent, which exclude scheduled maintenance and allow Southern Power to replace the undelivered energy from another resource, and should also be capable of achieving an average annual availability of 92 percent, which includes provision for forced and scheduled maintenance.
8. The environmental site assessments performed by TTL, URS, ECT, and Williams related to the sites of the Generating Facilities were conducted in a manner consistent with industry standards, using comparable industry protocols for similar studies with which we are familiar.
9. Southern Power has identified the major permits and approvals necessary for the construction and operation of the Generating Facilities. While all of the required permits and approvals have not yet been obtained, we did not identify any technical or engineering circumstance that would prevent the issuance of the remaining permits and approvals.
10. Southern Power's estimates of the costs of operating and maintaining the Generating Facilities, including provision for major maintenance, are within the range of the costs of similar plants with which we are familiar.
11. For the Base Case Projected Operating Results, the projected revenues from the sale of electricity are adequate to pay annual operating and maintenance expenses (including major maintenance), fuel expense, and other operating expenses. Such revenues provide an annual interest coverage on the Debt of at least 3.28 times the annual interest requirement in each year during the term of the Notes and a weighted average coverage of 3.61 times the annual interest requirement on the Debt over the term of the Notes. There is insufficient cash available after the payment of interest to repay the entire principal due on the Debt upon maturity. Southern Power has assumed that the Debt will be refinanced upon maturity.
Respectfully submitted,
/S/ R. W. BECK, INC. |
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007 2008
------------------------ -------- ------- ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 2,489 4,678 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 37.2% 14.7% 21.0% 25.9% 31.5% 33.5% 31.5%
Contract Energy Sales (GWh)(4) 4,404 5,016 8,263 10,912 13,205 14,039 13,229
Other Energy Sales (GWh)(4) 268 1,053 541 0 47 45 44
-------- ------- ------- ------- ------- ------- -------
Total Energy Sales (GWh) 4,672 6,069 8,804 10,912 13,252 14,084 13,273
Fuel Consumption (BBtu) 33,408 46,663 66,407 82,283 99,399 104,941 99,572
Average Net Heat Rate (Btu/kWh)(5) 7,053 7,727 7,706 7,749 7,704 7,652 7,704
SO(2) Allowances Purchased (Tons)(6) 17 23 32 41 50 53 50
NO(x) Allowances Purchased (Tons)(7) 0 0 (95) 19 66 83 74
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 51.53 60.50 70.74 73.59 77.20 77.23 77.26
Contract Energy Price ($/MWh)(10) $ 3.72 6.65 6.32 7.38 6.95 6.78 7.42
Other Capacity Price ($/MWh)(11) $ 16.49 16.35 16.84 16.38 16.82 17.27 51.65
Other Energy Price ($/MWh)(11) $ 34.62 42.40 41.94 0.00 61.96 60.77 61.12
Fuel Price ($/MMBtu)(12) $ 3.94 4.83 4.61 0.00 3.32 3.45 3.56
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176 181
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800 1,849
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 29,314 46,845 45,510 2,666 0 0 0
Goat Rock(15) $ 38,262 80,211 102,807 115,807 118,340 120,728 120,302
Harris(15) $ 0 41,860 103,979 130,878 133,881 133,884 136,567
Stanton $ 0 9,970 43,098 44,343 44,734 45,020 45,450
Wansley $ 67,098 86,353 84,225 88,659 94,005 94,945 95,237
Other Electricity Revenues
Dahlberg $ 0 0 0 11,886 16,393 16,570 44,122
Goat Rock(15) $ 10,188 16,024 9,284 0 0 0 0
Harris $ 0 38,269 17,711 0 0 0 0
Stanton $ 0 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0 0
-------- ------- ------- ------- ------- ------- -------
Total Operating Revenues $144,862 319,533 406,614 394,239 407,353 411,147 441,678
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 0 0 0 0 1,747 1,771 1,782
Goat Rock $ 7,677 12,076 6,935 0 0 0 0
Harris $ 0 28,273 12,714 0 0 0 0
Stanton $ 0 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0 0
Emissions Allowances $ 0 0 (191) (108) (55) (34) (44)
Purchased Power $ 2,712 3,005 7,907 12,547 14,913 16,306 15,856
Operations & Maintenance $ 9,572 19,738 28,350 31,352 35,228 37,135 37,200
Major Maintenance $ 11,605 17,836 25,034 30,385 36,548 39,529 38,745
Administration $ 3,022 7,866 10,457 10,739 11,029 11,328 11,633
Insurance $ 756 1,995 2,676 2,748 2,821 2,899 2,978
Property Taxes $ 3,566 10,113 13,679 13,706 13,734 13,762 13,792
Other $ 90 216 270 270 270 270 270
-------- ------- ------- ------- ------- ------- -------
Total Operating Expenses $ 39,000 101,118 107,831 101,639 116,235 122,966 122,212
NET OPERATING REVENUES ($000) $105,862 218,415 298,783 292,601 291,118 288,181 319,466
ANNUAL INTEREST($000)(17) $ 20,964 66,271 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 5.05 3.30 3.40 3.33 3.31 3.28 3.63
2002-12 AVG INTEREST COVERAGE(19) 3.61
Year Ending December 31, 2009 2010 2011 2012
------------------------ ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 32.4% 32.2% 30.9% 29.6%
Contract Energy Sales (GWh)(4) 13,543 7,180 4,131 3,314
Other Energy Sales (GWh)(4) 98 6,195 8,623 8,942
------- ------- ------- -------
Total Energy Sales (GWh) 13,640 13,375 12,754 12,256
Fuel Consumption (BBtu) 102,438 102,287 98,157 94,697
Average Net Heat Rate (Btu/kWh)(5) 7,710 7,745 7,762 7,794
SO(2) Allowances Purchased (Tons)(6) 51 51 49 48
NO(x) Allowances Purchased (Tons)(7) 72 83 77 73
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 77.28 40.00 60.62 84.98
Contract Energy Price ($/MWh)(10) 7.45 8.10 11.19 10.30
Other Capacity Price ($/MWh)(11) 51.68 60.96 66.92 71.14
Other Energy Price ($/MWh)(11) 65.13 48.21 49.51 50.91
Fuel Price ($/MMBtu)(12) 3.67 4.63 4.78 4.95
SO(2) Allowances ($/Ton)(13) 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0
Goat Rock(15) 121,990 79,486 24,459 0
Harris(15) 135,147 87,426 72,017 72,338
Stanton 45,922 46,232 46,361 46,701
Wansley 97,381 0 0 0
Other Electricity Revenues
Dahlberg 47,808 57,322 64,136 67,506
Goat Rock(15) 0 87,654 224,321 275,993
Harris 0 94,299 141,055 142,338
Stanton 0 0 0 0
Wansley 0 225,029 231,031 231,168
------- ------- ------- -------
Total Operating Revenues 448,248 677,448 803,380 836,044
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 4,057 5,413 6,835 6,530
Goat Rock 0 47,765 120,080 148,195
Harris 0 52,219 76,505 76,796
Stanton 0 0 0 0
Wansley 0 117,408 115,791 112,603
Emissions Allowances (45) 163 160 156
Purchased Power 16,830 8,255 5,588 5,585
Operations & Maintenance 39,177 40,334 40,963 41,271
Major Maintenance 40,454 42,286 46,076 41,444
Administration 11,946 12,270 12,599 12,942
Insurance 3,057 3,140 3,224 3,311
Property Taxes 13,822 13,853 13,885 13,918
Other 270 270 270 270
------- ------- ------- -------
Total Operating Expenses 129,568 343,375 441,976 463,022
NET OPERATING REVENUES ($000) 318,680 334,073 361,404 373,022
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 3.62 3.80 4.11 4.24
2002-12 AVG INTEREST COVERAGE(19)
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EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2013 2014 2015 2016 2017 2018
------------------------ -------- ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,668 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 26.9% 24.5% 22.5% 21.8% 20.6% 19.8%
Contract Energy Sales (GWh)(4) 2,803 1,680 1,494 1,432 1,296 1,291
Other Energy Sales (GWh)(4) 8,281 8,395 7,737 7,533 7,172 6,829
-------- ------- ------- ------- ------- -------
Total Energy Sales (GWh) 11,084 10,075 9,231 8,965 8,469 8,120
Fuel Consumption (BBtu) 86,581 78,843 73,165 71,203 67,456 64,506
Average Net Heat Rate (Btu/kWh)(5) 7,844 7,859 7,958 7,974 7,996 7,976
SO(2) Allowances Purchased (Tons)(6) 43 39 37 34 34 32
NO(x) Allowances Purchased (Tons)(7) 48 31 7 (5) (23) (29)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 79.61 88.55 88.55 88.55 88.55 88.55
Contract Energy Price ($/MWh)(10) $ 11.92 11.02 12.47 12.98 13.20 14.50
Other Capacity Price ($/MWh)(11) $ 74.88 74.48 77.98 78.32 79.53 83.65
Other Energy Price ($/MWh)(11) $ 52.34 55.56 57.92 60.04 63.19 64.92
Fuel Price ($/MMBtu)(12) $ 5.17 5.52 5.74 5.97 6.20 6.38
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230 236
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350 2,413
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 0 0 0 0 0 0
Goat Rock (15) $ 0 0 0 0 0 0
Harris (15) $ 72,851 71,243 71,353 71,308 69,836 71,447
Stanton $ 40,086 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
Other Electricity Revenues
Dahlberg $ 68,758 65,363 70,529 68,676 66,445 68,791
Goat Rock (15) $271,900 266,857 259,513 259,723 256,662 262,136
Harris $141,858 135,894 133,067 131,352 133,374 136,753
Stanton $ 11,653 89,439 91,775 95,005 102,605 101,731
Wansley $218,882 212,190 210,896 216,560 218,032 214,655
-------- ------- ------- ------- ------- -------
Total Operating Revenues $825,988 840,986 837,133 842,624 846,954 855,513
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 5,398 3,557 5,036 3,886 1,875 1,352
Goat Rock $144,260 139,150 131,512 133,474 129,954 127,866
Harris $ 76,321 70,936 68,599 67,375 68,128 68,423
Stanton $ 7,449 54,155 54,935 57,058 61,212 60,221
Wansley $101,122 96,568 92,806 96,861 93,865 88,860
Emissions Allowances $ 109 73 24 (5) (50) (61)
Purchased Power $ 2,341 2,278 2,133 2,117 2,044 2,089
Operations & Maintenance $ 40,586 39,938 40,135 40,627 40,559 40,983
Major Maintenance $ 41,406 37,592 36,561 37,978 37,710 37,110
Administration $ 13,290 13,650 14,016 14,395 14,786 15,186
Insurance $ 3,400 3,493 3,587 3,684 3,784 3,887
Property Taxes $ 13,952 13,986 14,022 14,058 14,096 14,134
Other $ 270 270 270 270 270 270
-------- ------- ------- ------- ------- -------
Total Operating Expenses $449,904 475,648 463,637 471,778 468,235 460,320
NET OPERATING REVENUES ($000) $376,083 365,338 373,496 370,846 378,719 395,193
ANNUAL INTEREST($000) (17) $ 87,938 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 4.28 4.15 4.25 4.22 4.31 4.49
2002-12 AVG INTEREST COVERAGE (19) 3.61
Year Ending December 31, 2019 2020 2021 2022
------------------------ ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 18.8% 18.7% 17.2% 17.2%
Contract Energy Sales (GWh)(4) 393 0 0 0
Other Energy Sales (GWh)(4) 7,281 7,645 7,026 7,026
------- ------- ------- -------
Total Energy Sales (GWh) 7,674 7,645 7,026 7,026
Fuel Consumption (BBtu) 61,368 61,548 56,707 56,707
Average Net Heat Rate (Btu/kWh)(5) 7,997 8,050 8,071 8,071
SO(2) Allowances Purchased (Tons)(6) 30 30 28 28
NO(x) Allowances Purchased (Tons)(7) (32) (41) (48) (48)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 22.14 0.00 0.00 0.00
Contract Energy Price ($/MWh)(10) 9.07 0.00 0.00 0.00
Other Capacity Price ($/MWh)(11) 85.52 87.87 89.72 92.15
Other Energy Price ($/MWh)(11) 68.21 70.54 72.47 74.42
Fuel Price ($/MMBtu)(12) 6.57 6.83 7.06 7.22
SO(2) Allowances ($/Ton)(13) 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0
Goat Rock (15) 0 0 0 0
Harris (15) 16,750 0 0 0
Stanton 0 0 0 0
Wansley 0 0 0 0
Other Electricity Revenues
Dahlberg 72,445 73,371 75,626 77,671
Goat Rock (15) 263,922 263,158 261,061 268,112
Harris 226,790 281,380 267,973 275,211
Stanton 107,421 110,763 108,620 111,553
Wansley 209,232 220,843 214,741 220,541
------- ------- ------- -------
Total Operating Revenues 896,560 949,515 928,021 953,088
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 2,856 2,301 2,942 3,022
Goat Rock 125,097 125,325 122,136 124,957
Harris 109,565 137,165 126,738 129,657
Stanton 62,975 65,417 62,988 64,273
Wansley 82,184 90,313 85,366 87,275
Emissions Allowances (74) (99) (118) (122)
Purchased Power 0 0 0 0
Operations & Maintenance 41,642 42,659 42,912 44,072
Major Maintenance 36,643 37,586 36,218 37,196
Administration 15,595 16,015 16,447 16,893
Insurance 3,991 4,100 4,210 4,324
Property Taxes 14,174 14,214 14,256 14,299
Other 270 270 270 270
------- ------- ------- -------
Total Operating Expenses 494,917 535,266 514,364 526,115
NET OPERATING REVENUES ($000) 401,643 414,249 413,657 426,973
ANNUAL INTEREST($000) (17) 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 4.57 4.71 4.70 4.86
2002-12 AVG INTEREST COVERAGE (19)
|
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007 2008
------------------------ ------- ------ ------ ------ ------ ------ ------
DAHLBERG FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 802 802 802 802 802 802 802
Average Annual Contract Capacity (MW)(20) 803 803 803 225 0 0 0
Average Annual Other Capacity (MW)(20) 0 0 0 802 802 802 802
Capacity Factor(%)(3) 0.1% 0.0% 0.0% 0.0% 0.7% 0.6% 0.6%
Energy Generation (GWh) 5 0 0 0 47 45 44
Contract Energy Sales (GWh) 5 0 0 0 0 0 0
Other Energy Sales (Purchases)(GWh) 0 0 0 0 47 45 44
Net Heat Rate (Btu/kWh)(5) 11,362 0 0 0 11,219 11,471 11,332
Contract Fuel Consumption (BBtu) 53 0 0 0 0 0 0
Other Fuel Consumption (BBtu) 0 0 0 0 526 513 501
SO(2) Allowances Purchased (Tons)(6) 0 0 0 0 0 0 0
NO(x) Allowances Purchased (Tons)(7) 0 0 0 0 6 6 6
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) $ 62.57 58.37 56.71 11.85 0.00 0.00 0.00
Contract Energy ($/MWh) $ 4.72 0.00 0.00 0.00 0.00 0.00 0.00
Start Up Charge ($/Start) $ 0 0 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) $ 0.00 0.00 0.00 14.82 16.82 17.27 51.65
Other Energy ($/MWh) $ 0.00 0.00 0.00 0.00 61.96 60.77 61.12
Fuel ($/MMBtu)(12) $ 0.00 0.00 0.00 0.00 3.32 3.45 3.56
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176 181
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800 1,849
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues $29,291 46,845 45,510 2,666 0 0 0
Contract Energy Revenues $ 17 0 0 0 0 0 0
Contract VOM Hourly Revenues $ 0 0 0 0 0 0 0
Start-Up Charges Revenues $ 0 0 0 0 0 0 0
Heat Rate Adjustment Payment $ 0 0 0 0 0 0 0
Purchase Power Fuel Adjustment Payment $ 6 0 0 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues $ 0 0 0 11,886 13,488 13,852 41,420
Other Energy Revenues $ 0 0 0 0 2,905 2,718 2,702
------- ------ ------ ------ ------ ------ ------
Total Operating Revenues $29,314 46,845 45,510 14,552 16,393 16,570 44,122
OPERATING EXPENSES ($000)(16)
Fuel Costs $ 0 0 0 0 1,747 1,771 1,782
Emissions Allowances $ 0 0 0 0 11 11 11
Purchased Power $ 11 0 0 0 0 0 0
Operating and Maintenance $ 37 0 0 0 415 407 414
Major Maintenance $ 405 692 711 730 884 902 925
Administrative and General $ 2,991 5,206 5,289 5,374 5,459 5,549 5,640
Other $ 36 63 63 63 63 63 63
------- ------ ------ ------ ------ ------ ------
Total Operating Expenses $ 3,480 5,961 6,063 6,167 8,579 8,703 8,835
NET OPERATING REVENUES ($000) $25,834 40,884 39,447 8,385 7,814 7,867 35,287
Year Ending December 31, 2009 2010 2011 2012
------------------------ ------ ------ ------ ------
DAHLBERG FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 802 802 802 802
Average Annual Contract Capacity (MW)(20) 0 0 0 0
Average Annual Other Capacity (MW)(20) 802 802 802 802
Capacity Factor(%)(3) 1.4% 1.8% 2.2% 2.0%
Energy Generation (GWh) 98 126 153 141
Contract Energy Sales (GWh) 0 0 0 0
Other Energy Sales (Purchases)(GWh) 98 126 153 141
Net Heat Rate (Btu/kWh)(5) 11,318 11,284 11,282 11,324
Contract Fuel Consumption (BBtu) 0 0 0 0
Other Fuel Consumption (BBtu) 1,106 1,423 1,727 1,598
SO(2) Allowances Purchased (Tons)(6) 1 1 1 1
NO(x) Allowances Purchased (Tons)(7) 13 17 20 19
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) 0.00 0.00 0.00 0.00
Contract Energy ($/MWh) 0.00 0.00 0.00 0.00
Start Up Charge ($/Start) 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) 51.68 60.96 66.92 71.14
Other Energy ($/MWh) 65.13 66.87 68.38 74.06
Fuel ($/MMBtu)(12) 3.67 3.80 3.96 4.09
SO(2) Allowances ($/Ton)(13) 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues 0 0 0 0
Contract Energy Revenues 0 0 0 0
Contract VOM Hourly Revenues 0 0 0 0
Start-Up Charges Revenues 0 0 0 0
Heat Rate Adjustment Payment 0 0 0 0
Purchase Power Fuel Adjustment Payment 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues 41,444 48,890 53,668 57,056
Other Energy Revenues 6,364 8,432 10,468 10,450
------ ------ ------ ------
Total Operating Revenues 47,808 57,322 64,136 67,506
OPERATING EXPENSES ($000)(16)
Fuel Costs 4,057 5,413 6,835 6,530
Emissions Allowances 25 33 41 39
Purchased Power 0 0 0 0
Operating and Maintenance 937 1,243 1,550 1,466
Major Maintenance 1,116 1,237 5,780 1,370
Administrative and General 5,732 5,829 5,927 6,030
Other 63 63 63 63
------ ------ ------ ------
Total Operating Expenses 11,929 13,817 20,196 15,497
NET OPERATING REVENUES ($000) 35,879 43,505 43,940 52,009
|
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2013 2014 2015 2016 2017
------------------------ ------- ------ ------ ------ ------
DAHLBERG FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 802 802 802 802 802
Average Annual Contract Capacity (MW)(20) 0 0 0 0 0
Average Annual Other Capacity (MW)(20) 802 802 802 802 802
Capacity Factor (%)(3) 1.6% 1.1% 1.4% 1.1% 0.5%
Energy Generation (GWh) 115 74 100 74 35
Contract Energy Sales (GWh) 0 0 0 0 0
Other Energy Sales (Purchases)(GWh) 115 74 100 74 35
Net Heat Rate (Btu/kWh)(5) 11,318 11,239 11,274 11,255 11,264
Contract Fuel Consumption (BBtu) 0 0 0 0 0
Other Fuel Consumption (BBtu) 1,296 831 1,133 837 390
SO(2) Allowances Purchased (Tons)(6) 1 0 1 0 0
NO(x) Allowances Purchased (Tons)(7) 15 10 13 10 5
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) $ 0.00 0.00 0.00 0.00 0.00
Contract Energy ($/MWh) $ 0.00 0.00 0.00 0.00 0.00
Start Up Charge ($/Start) $ 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) $ 75.12 74.48 78.07 78.13 79.33
Other Energy ($/MWh) $ 74.30 76.19 78.80 80.94 81.59
Fuel ($/MMBtu)(12) $ 4.17 4.28 4.44 4.64 4.81
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues $ 0 0 0 0 0
Contract Energy Revenues $ 0 0 0 0 0
Contract VOM Hourly Revenues $ 0 0 0 0 0
Start-Up Charges Revenues $ 0 0 0 0 0
Heat Rate Adjustment Payment $ 0 0 0 0 0
Purchase Power Fuel Adjustment Payment $ 0 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues $60,250 59,730 62,610 62,657 63,620
Other Energy Revenues $ 8,508 5,633 7,919 6,019 2,825
------- ------ ------ ------ ------
Total Operating Revenues $68,758 65,363 70,529 68,676 66,445
OPERATING EXPENSES ($000)(16)
Fuel Costs $ 5,398 3,557 5,036 3,886 1,875
Emissions Allowances $ 32 21 30 23 11
Purchased Power $ 0 0 0 0 0
Operating and Maintenance $ 1,223 811 1,131 860 412
Major Maintenance $ 3,172 1,190 1,323 1,257 1,138
Administrative and General $ 6,133 6,241 6,351 6,464 6,581
Other $ 63 63 63 63 63
------- ------ ------ ------ ------
Total Operating Expenses $16,021 11,884 13,934 12,553 10,080
NET OPERATING REVENUES ($000) $52,737 53,479 56,595 56,123 56,365
Year Ending December 31, 2018 2019 2020 2021 2022
------------------------ ------- ------ ------ ------ ------
DAHLBERG FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 802 802 802 802 802
Average Annual Contract Capacity (MW)(20) 0 0 0 0 0
Average Annual Other Capacity (MW)(20) 802 802 802 802 802
Capacity Factor (%)(3) 0.3% 0.7% 0.5% 0.7% 0.7%
Energy Generation (GWh) 24 49 38 47 47
Contract Energy Sales (GWh) 0 0 0 0 0
Other Energy Sales (Purchases)(GWh) 24 49 38 47 47
Net Heat Rate (Btu/kWh)(5) 11,298 11,358 11,302 11,217 11,217
Contract Fuel Consumption (BBtu) 0 0 0 0 0
Other Fuel Consumption (BBtu) 273 553 428 529 529
SO(2) Allowances Purchased (Tons)(6) 0 0 0 0 0
NO(x) Allowances Purchased (Tons)(7) 3 7 5 6 6
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) 0.00 0.00 0.00 0.00 0.00
Contract Energy ($/MWh) 0.00 0.00 0.00 0.00 0.00
Start Up Charge ($/Start) 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) 83.30 85.07 87.42 89.12 91.53
Other Energy ($/MWh) 82.02 86.57 86.01 88.04 90.42
Fuel ($/MMBtu)(12) 4.95 5.16 5.38 5.56 5.71
SO(2) Allowances ($/Ton)(13) 236 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,413 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues 0 0 0 0 0
Contract Energy Revenues 0 0 0 0 0
Contract VOM Hourly Revenues 0 0 0 0 0
Start-Up Charges Revenues 0 0 0 0 0
Heat Rate Adjustment Payment 0 0 0 0
Purchase Power Fuel Adjustment Payment 0 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues 66,809 68,230 70,114 71,474 73,407
Other Energy Revenues 1,982 4,215 3,257 4,152 4,264
------ ------ ------ ------ ------
Total Operating Revenues 68,791 72,445 73,371 75,626 77,671
OPERATING EXPENSES ($000)(16)
Fuel Costs 1,352 2,856 2,301 2,942 3,022
Emissions Allowances 8 16 13 16 17
Purchased Power 0 0 0 0 0
Operating and Maintenance 295 610 487 623 640
Major Maintenance 1,127 1,257 1,246 1,332 1,368
Administrative and General 6,700 6,823 6,947 7,075 7,209
Other 63 63 63 63 63
------ ------ ------ ------ ------
Total Operating Expenses 9,545 11,626 11,057 12,052 12,319
NET OPERATING REVENUES ($000) 59,246 60,819 62,314 63,574 65,352
|
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
------------------------ ------- ------ ------- ------- ------- -------
GOAT ROCK FACILITY
PERFORMANCE
Average Annual Capacity(MW)(2) 564 1,159 1,159 1,159 1,159 1,159
Average Annual Contract Capacity (MW) 370 908 1,108 1,159 1,159 1,159
Average Annual Other Capacity (MW) 56 183 66 0 0 0
Capacity Factor (%)(3) 59.4% 26.3% 25.1% 34.7% 40.7% 43.0%
Energy Generation (GWh) 1,711 2,096 2,551 3,526 4,129 4,363
Contract Energy Sales(GWh) 1,301 1,719 2,375 3,616 4,235 4,475
Other Energy Sales (Purchases)(GWh) 268 330 203 0 0 0
Net Heat Rate (Btu/kWh)(5) 6,679 7,599 7,750 7,655 7,615 7,583
Contract Fuel Consumption(BBtu) 9,481 13,355 18,185 26,991 31,443 33,084
Other Fuel Consumption (BBtu) 1,950 2,571 1,586 0 0 0
SO(2) Allowances Purchased (Tons)(6) 6 8 10 13 16 17
NO(x) Allowances Purchased (Tons)(7) 0 0 (43) (27) (16) (10)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) $ 99.01 69.28 77.92 77.96 77.96 77.96
Contract Energy ($/MWh) $ 3.63 8.47 6.93 7.05 6.62 6.80
Start Up Charge ($/Start) $11,996 32,086 26,372 31,951 31,283 34,313
Forward Net Revenue ($000) $12,168 2,713 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) $ 16.50 16.35 16.85 0.00 0.00 0.00
Other Energy ($/MWh) $ 34.62 39.53 40.28 0.00 0.00 0.00
Fuel ($/MMBtu)(12) $ 3.09 3.46 3.52 0.00 0.00 0.00
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues $21,369 62,934 86,335 90,318 90,318 90,318
Contract Energy Revenues $ 3,926 5,180 7,266 11,360 13,664 14,848
Contract VOM Hourly Revenues $ 0 0 0 0 0 0
Start-Up Charges Revenues $ 799 9,384 8,469 12,077 12,156 13,152
Net Forward Revenue $12,168 2,713 0 0 0 0
Heat Rate Adjustment Payment $ 0 0 0 0 0 0
Purchase Power Fuel Adjustment Payment $ 0 0 737 2,052 2,202 2,410
Other Electricity Revenues
Other Capacity Revenues $ 924 2,992 1,112 0 0 0
Other Energy Revenues $ 9,264 13,032 8,172 0 0 0
------- ------ ------- ------- ------- -------
Total Operating Revenues $48,450 96,235 112,091 115,807 118,340 120,728
OPERATING EXPENSES ($000)(16)
Fuel Costs $ 7,677 12,076 6,935 0 0 0
Emissions Allowances $ 0 0 (87) (45) (27) (19)
Purchased Power $ 0 0 1,149 3,664 4,337 4,774
Operating and Maintenance $ 3,094 6,321 8,128 9,279 10,121 10,632
Major Maintenance $ 4,019 5,844 7,465 9,893 11,584 12,384
Administrative and General $ 2,442 6,765 8,663 8,751 8,842 8,936
Other $ 18 49 62 62 62 62
------- ------ ------- ------- ------- -------
Total Operating Expenses $17,249 31,055 32,315 31,603 34,919 36,770
NET OPERATING REVENUES ($000) $31,201 65,180 79,776 84,204 83,421 83,958
Year Ending December 31, 2008 2009 2010 2011 2012
------------------------ ------- ------- ------- ------- -------
GOAT ROCK FACILITY
PERFORMANCE
Average Annual Capacity(MW)(2) 1,159 1,159 1,159 1,159 1,159
Average Annual Contract Capacity (MW) 1,159 1,159 1,159 595 0
Average Annual Other Capacity (MW) 0 0 564 1,159 1,159
Capacity Factor (%)(3) 40.8% 42.2% 42.8% 40.0% 39.0%
Energy Generation (GWh) 4,146 4,288 4,348 4,058 3,955
Contract Energy Sales(GWh) 4,252 4,398 3,028 728 0
Other Energy Sales (Purchases)(GWh) 0 0 1,378 3,330 3,955
Net Heat Rate(Btu/kWh)(5) 7,613 7,604 7,618 7,618 7,661
Contract Fuel Consumption(BBtu) 31,562 32,607 22,672 5,574 0
Other Fuel Consumption (BBtu) 0 0 10,449 25,343 30,299
SO(2) Allowances Purchased (Tons)(6) 16 16 17 15 15
NO(x) Allowances Purchased (Tons)(7) (12) (16) (10) (16) (15)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) 77.96 77.96 49.87 47.32 0.00
Contract Energy ($/MWh) 7.05 7.20 7.17 17.47 0.00
Start Up Charge ($/Start) 33,512 35,142 23,559 25,480 0
Forward Net Revenue ($000) 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) 0.00 0.00 41.66 56.03 71.14
Other Energy ($/MWh) 0.00 0.00 46.58 47.87 48.94
Fuel ($/MMBtu)(12) 0.00 0.00 3.95 4.07 4.21
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues 90,318 90,318 57,774 11,731 0
Contract Energy Revenues 14,487 15,378 10,678 2,594 0
Contract VOM Hourly Revenues 0 0 0 0 0
Start-Up Charges Revenues 13,089 13,781 9,959 10,134 0
Net Forward Revenue 0 0 0 0 0
Heat Rate Adjustment Payment 0 0 0 0 0
Purchase Power Fuel Adjustment Payment 2,408 2,513 1,075 0 0
Other Electricity Revenues
Other Capacity Revenues 0 0 23,473 64,925 82,433
Other Energy Revenues 0 0 64,181 159,396 193,560
------- ------- ------- ------- -------
Total Operating Revenues 120,302 121,990 167,140 248,780 275,993
OPERATING EXPENSES ($000)(16)
Fuel Costs 0 0 47,765 120,080 148,195
Emissions Allowances (21) (30) (20) (31) (28)
Purchased Power 4,657 5,015 2,709 0 0
Operating and Maintenance 10,694 11,133 11,499 11,483 11,674
Major Maintenance 12,240 12,846 13,369 12,841 13,053
Administrative and General 9,032 9,130 9,231 9,334 9,441
Other 62 62 62 62 62
------- ------- ------- ------- -------
Total Operating Expenses 36,663 38,156 84,615 153,769 182,397
NET OPERATING REVENUES ($000) 83,639 83,834 82,525 95,011 93,596
|
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2013 2014 2015 2016 2017
------------------------ -------- ------- ------- ------- -------
GOAT ROCK FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 1,159 1,159 1,159 1,159 1,159
Average Annual Contract Capacity (MW) 0 0 0 0 0
Average Annual Other Capacity (MW) 1,159 1,159 1,159 1,159 1,159
Capacity Factor (%)(3) 36.3% 33.8% 29.9% 28.7% 26.7%
Energy Generation (GWh) 3,681 3,428 3,040 2,909 2,709
Contract Energy Sales (GWh) 0 0 0 0 0
Other Energy Sales (Purchases)(GWh) 3,681 3,428 3,040 2,909 2,709
Net Heat Rate (Btu/kWh)(5) 7,715 7,706 7,829 7,902 7,948
Contract Fuel Consumption (BBtu) 0 0 0 0 0
Other Fuel Consumption (BBtu) 28,395 26,418 23,798 22,990 21,532
SO(2) Allowances Purchased (Tons)(6) 14 13 12 11 11
NO(x) Allowances Purchased (Tons)(7) (23) (24) (35) (40) (47)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) $ 0.00 0.00 0.00 0.00 0.00
Contract Energy ($/MWh) $ 0.00 0.00 0.00 0.00 0.00
Start Up Charge ($/Start) $ 0 0 0 0 0
Forward Net Revenue ($000) $ 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) $ 75.13 74.48 78.07 78.13 79.33
Other Energy ($/MWh) $ 50.22 52.67 55.62 58.15 60.81
Fuel ($/MMBtu)(12) $ 4.33 4.45 4.60 4.83 5.04
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues $ 0 0 0 0 0
Contract Energy Revenues $ 0 0 0 0 0
Contract VOM Hourly Revenues $ 0 0 0 0 0
Start-Up Charges Revenues $ 0 0 0 0 0
Net Forward Revenue $ 0 0 0 0 0
Heat Rate Adjustment Payment $ 0 0 0 0 0
Purchase Power Fuel Adjustment Payment $ 0 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues $ 87,048 86,295 90,457 90,525 91,915
Other Energy Revenues $184,852 180,562 169,056 169,198 164,747
-------- ------- ------- ------- -------
Total Operating Revenues $271,900 266,857 259,513 259,723 256,662
OPERATING EXPENSES ($000)(16)
Fuel Costs $144,260 139,150 131,512 133,474 129,954
Emissions Allowances $ ( 45) (50) (75) (90) (109)
Purchased Power $ 0 0 0 0 0
Operating and Maintenance $ 11,664 11,673 11,504 11,652 11,703
Major Maintenance $ 12,640 12,249 11,800 12,145 11,724
Administrative and General $ 9,551 9,663 9,778 9,896 10,019
Other $ 62 62 62 62 62
-------- ------- ------- ------- -------
Total Operating Expenses $178,132 172,747 164,582 167,140 163,353
NET OPERATING REVENUES ($000) $ 93,768 94,110 94,931 92,583 93,309
Year Ending December 31, 2018 2019 2020 2021 2022
------------------------ ------- ------- ------- ------- -------
GOAT ROCK FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 1,159 1,159 1,159 1,159 1,159
Average Annual Contract Capacity (MW) 0 0 0 0 0
Average Annual Other Capacity (MW) 1,159 1,159 1,159 1,159 1,159
Capacity Factor (%)(3) 25.9% 24.7% 23.3% 22.0% 22.0%
Energy Generation (GWh) 2,626 2,510 2,364 2,233 2,233
Contract Energy Sales (GWh) 0 0 0 0 0
Other Energy Sales (Purchases)(GWh) 2,626 2,510 2,364 2,233 2,233
Net Heat Rate (Btu/kWh)(5) 7,902 7,904 7,976 7,999 7,999
Contract Fuel Consumption (BBtu) 0 0 0 0 0
Other Fuel Consumption (BBtu) 20,749 19,840 18,854 17,864 17,864
SO(2) Allowances Purchased (Tons)(6) 10 10 9 9 9
NO(x) Allowances Purchased (Tons)(7) (48) (48) (54) (54) (54)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) 0.00 0.00 0.00 0.00 0.00
Contract Energy ($/MWh) 0.00 0.00 0.00 0.00 0.00
Start Up Charge ($/Start) 0 0 0 0 0
Forward Net Revenue ($000) 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) 83.30 85.08 87.42 89.12 91.53
Other Energy ($/MWh) 63.07 65.87 68.47 70.65 72.56
Fuel ($/MMBtu)(12) 5.26 5.41 5.71 5.85 6.00
SO(2) Allowances ($/Ton)(13) 236 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,413 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues 0 0 0 0 0
Contract Energy Revenues 0 0 0 0 0
Contract VOM Hourly Revenues 0 0 0 0 0
Start-Up Charges Revenues 0 0 0 0 0
Net Forward Revenue 0 0 0 0 0
Heat Rate Adjustment Payment 0 0 0 0
Purchase Power Fuel Adjustment Payment 0 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues 96,523 98,577 101,297 103,265 106,056
Other Energy Revenues 165,613 165,345 161,861 157,796 162,056
------- ------- ------- ------- -------
Total Operating Revenues 262,136 263,922 263,158 261,061 268,112
OPERATING EXPENSES ($000)(16)
Fuel Costs 127,866 125,097 125,325 122,136 124,957
Emissions Allowances (113) (117) (137) (139) (143)
Purchased Power 0 0 0 0 0
Operating and Maintenance 11,903 12,067 12,185 12,322 12,655
Major Maintenance 11,691 11,595 11,348 11,168 11,469
Administrative and General 10,145 10,272 10,405 10,541 10,679
Other 62 62 62 62 62
------- ------- ------- ------- -------
Total Operating Expenses 161,554 158,976 159,188 156,090 159,679
NET OPERATING REVENUES ($000) 100,582 104,946 103,970 104,971 108,433
|
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
------------------------ ------- ------ ------- ------- ------- -------
HARRIS FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 0 1,191 1,191 1,191 1,191 1,191
Average Annual Contract Capacity (MW) 0 595 1,191 1,191 1,191 1,191
Average Annual Other Capacity (MW) 0 595 595 0 0 0
Capacity Factor (%)(3) 0.0% 24.9% 23.0% 32.3% 39.8% 42.7%
Energy Generation (GWh) 0 1,513 2,403 3,372 4,152 4,458
Contract Energy Sales (GWh) 0 806 2,091 3,450 4,248 4,561
Other Energy Sales (Purchases)(GWh) 0 723 339 0 0 0
Net Heat Rate (Btu/kWh)(5) 0 7,994 7,889 7,807 7,701 7,637
Contract Fuel Consumption (BBtu) 0 6,321 16,289 26,329 31,973 34,041
Other Fuel Consumption (BBtu) 0 5,775 2,672 0 0 0
SO(2) Allowances Purchased (Tons)(6) 0 6 9 13 16 17
NO(x) Allowances Purchased (Tons)(7) 0 0 (52) (37) (22) (15)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) $0.00 106.70 74.70 85.77 85.77 85.77
Contract Energy ($/MWh) $0.00 5.96 7.18 8.33 7.47 6.96
Start Up Charge ($/Start) $ 0 8,243 23,750 39,634 40,089 39,376
Forward Net Revenue ($000) $ 0 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) $0.00 11.17 5.33 0.00 0.00 0.00
Other Energy ($/MWh) $0.00 43.70 42.94 0.00 0.00 0.00
Fuel ($/MMBtu)(12) $0.00 3.58 3.52 0.00 0.00 0.00
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues $ 0 37,060 88,957 102,138 102,138 102,138
Contract Energy Revenues $ 0 2,364 6,254 10,577 13,369 14,743
Contract VOM Hourly Revenues $ 0 0 0 0 0 0
Start-Up Charges Revenues $ 0 1,967 8,031 16,222 16,299 14,772
Heat Rate Adjustment Payment $ 0 0 0 0 0 0
Purchase Power Fuel Adjustment Payment $ 0 469 737 1,941 2,075 2,231
Other Electricity Revenues
Other Capacity Revenues $ 0 6,651 3,175 0 0 0
Other Energy Revenues $ 0 31,618 14,536 0 0 0
----- ------ ------- ------- ------- -------
Total Operating Revenues $ 0 80,129 121,690 130,878 133,881 133,884
OPERATING EXPENSES ($000)(16)
Fuel Costs $ 0 28,273 12,714 0 0 0
Emissions Allowances $ 0 0 (104) (63) (38) (27)
Purchased Power $ 0 689 1,104 3,256 3,995 4,434
Operating and Maintenance $ 0 5,088 8,769 9,996 11,080 11,708
Major Maintenance $ 0 4,116 7,012 9,392 11,444 12,485
Administrative and General $ 0 4,066 7,062 7,155 7,252 7,350
Other $ 0 36 62 62 62 62
----- ------ ------- ------- ------- -------
Total Operating Expenses $ 0 42,268 36,618 29,798 33,795 36,012
NET OPERATING REVENUES ($000) $ 0 37,861 85,072 101,080 100,086 97,872
Year Ending December 31, 2008 2009 2010 2011 2012
------------------------ ------- ------- ------- ------- -------
HARRIS FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 1,191 1,191 1,191 1,191 1,191
Average Annual Contract Capacity (MW) 1,191 1,191 1,191 595 595
Average Annual Other Capacity (MW) 0 0 595 595 595
Capacity Factor (%)(3) 40.0% 40.6% 41.1% 40.0% 39.1%
Energy Generation (GWh) 4,174 4,234 4,286 4,175 4,079
Contract Energy Sales (GWh) 4,270 4,332 2,834 2,132 2,097
Other Energy Sales (Purchases)(GWh) 0 0 1,505 2,097 2,035
Net Heat Rate (Btu/kWh)(5) 7,701 7,674 7,681 7,722 7,727
Contract Fuel Consumption (BBtu) 32,144 32,488 21,440 16,063 15,810
Other Fuel Consumption (BBtu) 0 0 11,480 16,175 15,707
SO(2) Allowances Purchased (Tons)(6) 16 16 16 16 16
NO(x) Allowances Purchased (Tons)(7) (18) (21) (20) (22) (22)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) 85.77 85.77 54.65 88.55 88.55
Contract Energy ($/MWh) 8.06 7.62 7.88 9.05 9.35
Start Up Charge ($/Start) 43,097 41,986 28,113 24,524 25,154
Forward Net Revenue ($000) 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) 0.00 0.00 41.66 66.92 71.14
Other Energy ($/MWh) 0.00 0.00 46.19 48.27 49.14
Fuel ($/MMBtu)(12) 0.00 0.00 3.94 4.07 4.20
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues 102,138 102,138 65,078 52,725 52,725
Contract Energy Revenues 14,177 14,767 9,876 7,591 7,668
Contract VOM Hourly Revenues 0 0 0 0 0
Start-Up Charges Revenues 18,009 15,919 11,402 10,598 10,805
Heat Rate Adjustment Payment 0 0 0 0 0
Purchase Power Fuel Adjustment Payment 2,243 2,323 1,070 1,103 1,140
Other Electricity Revenues
Other Capacity Revenues 0 0 24,802 39,843 42,359
Other Energy Revenues 0 0 69,497 101,212 99,979
------- ------- ------- ------- -------
Total Operating Revenues 136,567 135,147 181,725 213,072 214,676
OPERATING EXPENSES ($000)(16)
Fuel Costs 0 0 52,219 76,505 76,796
Emissions Allowances (34) (39) (39) (43) (43)
Purchased Power 4,284 4,565 2,501 2,587 2,597
Operating and Maintenance 11,710 12,095 12,483 12,687 12,912
Major Maintenance 12,136 12,500 13,064 13,014 13,133
Administrative and General 7,451 7,556 7,664 7,773 7,887
Other 62 62 62 62 62
------- ------- ------- ------- -------
Total Operating Expenses 35,610 36,739 87,953 112,585 113,344
NET OPERATING REVENUES ($000) 100,957 98,408 93,772 100,487 101,332
|
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2013 2014 2015 2016 2017
------------------------ -------- ------- ------- ------- -------
HARRIS FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 1,191 1,191 1,191 1,191 1,191
Average Annual Contract Capacity (MW) 595 595 595 595 595
Average Annual Other Capacity (MW) 595 595 595 595 595
Capacity Factor (%)(3) 35.4% 32.0% 28.9% 27.3% 25.5%
Energy Generation (GWh) 3,696 3,336 3,011 2,851 2,656
Contract Energy Sales (GWh) 1,813 1,680 1,494 1,432 1,296
Other Energy Sales (Purchases)(GWh) 1,929 1,698 1,555 1,456 1,392
Net Heat Rate (Btu/kWh)(5) 7,836 7,868 7,964 7,970 8,048
Contract Fuel Consumption (BBtu) 13,902 12,881 11,634 11,163 10,168
Other Fuel Consumption (BBtu) 15,058 13,368 12,346 11,563 11,203
SO(2) Allowances Purchased (Tons)(6) 14 13 12 11 11
NO(x) Allowances Purchased (Tons)(7) (29) (38) (47) (49) (52)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) $ 88.55 88.55 88.55 88.55 88.55
Contract Energy ($/MWh) $ 11.10 11.02 12.47 12.98 13.20
Start Up Charge ($/Start) $ 26,059 25,095 26,077 27,687 24,980
Forward Net Revenue ($000) $ 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) $ 75.13 74.48 78.07 78.13 79.33
Other Energy ($/MWh) $ 50.36 53.92 55.69 58.28 61.89
Fuel ($/MMBtu)(12) $ 4.33 4.46 4.62 4.81 5.01
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues $ 52,725 52,725 52,725 52,725 52,725
Contract Energy Revenues $ 6,809 6,482 5,918 5,825 5,417
Contract VOM Hourly Revenues $ 0 0 0 0 0
Start-Up Charges Revenues $ 12,144 10,820 11,466 11,455 10,345
Heat Rate Adjustment Payment $ 0 0 0 0 0
Purchase Power Fuel Adjustment Payment $ 1,173 1,216 1,244 1,303 1,349
Other Electricity Revenues
Other Capacity Revenues $ 44,730 44,343 46,482 46,517 47,231
Other Energy Revenues $ 97,128 91,551 86,585 84,835 86,143
-------- ------- ------- ------- -------
Total Operating Revenues $214,709 207,137 204,420 202,660 203,210
OPERATING EXPENSES ($000)(16)
Fuel Costs $ 76,321 70,936 68,599 67,375 68,128
Emissions Allowances $ (59) (81) (103) (111) (122)
Purchased Power $ 2,341 2,278 2,133 2,117 2,044
Operating and Maintenance $ 12,778 12,656 12,567 12,686 12,754
Major Maintenance $ 12,539 11,732 11,053 11,340 11,366
Administrative and General $ 8,003 8,122 8,243 8,370 8,499
Other $ 62 62 62 62 62
-------- ------- ------- ------- -------
Total Operating Expenses $111,984 105,705 102,553 101,839 102,732
NET OPERATING REVENUES ($000) $102,725 101,432 101,867 100,821 100,478
Year Ending December 31, 2018 2019 2020 2021 2022
------------------------ ------- ------- ------- ------- -------
HARRIS FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 1,191 1,191 1,191 1,191 1,191
Average Annual Contract Capacity (MW) 595 595 0 0 0
Average Annual Other Capacity (MW) 595 1,191 1,191 1,191 1,191
Capacity Factor (%)(3) 25.2% 24.2% 24.5% 21.7% 21.7%
Energy Generation (GWh) 2,628 2,521 2,553 2,264 2,264
Contract Energy Sales (GWh) 1,291 393 0 0 0
Other Energy Sales (Purchases)(GWh) 1,370 2,128 2,553 2,264 2,264
Net Heat Rate (Btu/kWh)(5) 8,045 8,052 8,103 8,181 8,181
Contract Fuel Consumption (BBtu) 10,160 3,162 0 0 0
Other Fuel Consumption (BBtu) 10,984 17,136 20,685 18,518 18,518
SO(2) Allowances Purchased (Tons)(6) 11 10 10 9 9
NO(x) Allowances Purchased (Tons)(7) (53) (56) (57) (60) (60)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) 88.55 53.13 0.00 0.00 0.00
Contract Energy ($/MWh) 14.50 9.07 0.00 0.00 0.00
Start Up Charge ($/Start) 28,172 4,634 0 0 0
Forward Net Revenue ($000) 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) 83.30 71.61 87.42 89.12 91.53
Other Energy ($/MWh) 63.63 66.52 69.44 71.50 73.43
Fuel ($/MMBtu)(12) 5.28 5.49 5.73 5.84 6.00
SO(2) Allowances ($/Ton)(13) 236 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,413 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues 52,725 13,181 0 0 0
Contract Energy Revenues 5,540 1,734 0 0 0
Contract VOM Hourly Revenues 0 0 0 0 0
Start-Up Charges Revenues 11,756 1,835 0 0 0
Heat Rate Adjustment Payment 0 0 0 0
Purchase Power Fuel Adjustment Payment 1,426 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues 49,599 85,268 104,104 106,126 108,994
Other Energy Revenues 87,154 141,522 177,276 161,847 166,217
------- ------- ------- ------- -------
Total Operating Revenues 208,200 243,540 281,380 267,973 275,211
OPERATING EXPENSES ($000)(16)
Fuel Costs 68,423 109,565 137,165 126,738 129,657
Emissions Allowances (126) (138) (143) (155) (159)
Purchased Power 2,089 0 0 0 0
Operating and Maintenance 13,060 13,254 13,659 13,576 13,944
Major Maintenance 11,404 11,419 11,837 10,978 11,274
Administrative and General 8,631 8,767 8,907 9,051 9,200
Other 62 62 62 62 62
------- ------- ------- ------- -------
Total Operating Expenses 103,543 142,930 171,486 160,250 163,978
NET OPERATING REVENUES ($000) 104,657 100,610 109,894 107,723 111,233
|
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
------------------------ ------- ----- ------ ------ ------ ------
STANTON FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 0 404 404 404 404 404
Average Annual Contract Capacity (MW) 0 404 404 404 404 404
Average Annual Other Capacity (MW) 0 0 0 0 0 0
Capacity Factor (%)(3) 0.0% 30.4% 56.5% 43.8% 43.6% 42.9%
Energy Generation (GWh) 0 268 1,997 1,549 1,540 1,518
Contract Energy Sales (GWh) 0 274 2,087 1,619 1,610 1,586
Other Energy Sales (Purchases)(GWh) 0 0 0 0 0 0
Net Heat Rate (Btu/kWh)(5) 0 7,915 7,375 7,706 7,741 7,763
Contract Fuel Consumption (BBtu) 0 2,125 14,727 11,937 11,925 11,786
Other Fuel Consumption (BBtu) 0 0 0 0 0 0
SO(2) Allowances Purchased (Tons)(6) 0 1 7 6 6 6
NO(x) Allowances Purchased (Tons)(7) 0 0 0 0 0 0
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) $0.00 79.70 79.70 79.70 79.70 79.70
Contract Energy ($/MWh) $0.00 7.03 5.24 7.52 7.81 8.10
Start Up Charge ($/Start) $ 0 0 5,357 11,178 11,718 12,032
Other Electricity
Other Capacity ($/kW-yr) $0.00 0.00 0.00 0.00 0.00 0.00
Other Energy ($/MWh) $0.00 0.00 0.00 0.00 0.00 0.00
Fuel ($/MMBtu)(12) $0.00 0.00 0.00 0.00 0.00 0.00
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues $ 0 8,043 32,170 32,170 32,170 32,170
Contract Energy Revenues $ 0 200 1,564 1,246 1,273 1,288
Contract VOM Hourly Revenues $ 0 1,539 6,223 6,396 6,560 6,721
Start-Up Charges Revenues $ 0 0 619 2,510 2,737 2,808
Heat Rate Adjustment Payment $ 0 0 0 0 0 0
Purchase Power Fuel Adjustment Payment $ 0 188 2,522 2,021 1,994 2,033
Other Electricity Revenues
Other Capacity Revenues $ 0 0 0 0 0 0
Other Energy Revenues $ 0 0 0 0 0 0
----- ----- ------ ------ ------ ------
Total Operating Revenues $ 0 9,970 43,098 44,343 44,734 45,020
OPERATING EXPENSES ($000)(16)
Fuel Costs $ 0 0 0 0 0 0
Emissions Allowances $ 0 0 0 0 0 0
Purchased Power $ 0 245 3,694 3,072 3,093 3,203
Operating and Maintenance $ 0 909 4,495 4,238 4,345 4,443
Major Maintenance $ 0 589 4,326 3,513 3,569 3,605
Administrative and General $ 0 583 2,362 2,393 2,424 2,457
Other $ 0 5 20 20 20 20
----- ----- ------ ------ ------ ------
Total Operating Expenses $ 0 2,331 14,897 13,236 13,451 13,728
NET OPERATING REVENUES ($000) $ 0 7,639 28,201 31,107 31,284 31,292
Year Ending December 31, 2008 2009 2010 2011 2012
------------------------ ------ ------ ------ ------ ------
STANTON FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 404 404 404 404 404
Average Annual Contract Capacity (MW) 404 404 404 404 404
Average Annual Other Capacity (MW) 0 0 0 0 0
Capacity Factor (%)(3) 41.1% 37.4% 35.6% 34.4% 32.9%
Energy Generation (GWh) 1,455 1,323 1,260 1,216 1,165
Contract Energy Sales (GWh) 1,520 1,382 1,317 1,271 1,217
Other Energy Sales (Purchases)(GWh) 0 0 0 0 0
Net Heat Rate (Btu/kWh)(5) 7,800 7,919 7,979 7,989 8,047
Contract Fuel Consumption (BBtu) 11,348 10,475 10,056 9,716 9,374
Other Fuel Consumption (BBtu) 0 0 0 0 0
SO(2) Allowances Purchased (Tons)(6) 6 5 5 5 5
NO(x) Allowances Purchased (Tons)(7) 0 0 0 0 0
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) 79.70 79.70 79.70 79.70 79.70
Contract Energy ($/MWh) 8.73 9.95 10.68 11.17 11.94
Start Up Charge ($/Start) 12,583 13,350 13,811 14,080 14,443
Other Electricity
Other Capacity ($/kW-yr) 0.00 0.00 0.00 0.00 0.00
Other Energy ($/MWh) 0.00 0.00 0.00 0.00 0.00
Fuel ($/MMBtu)(12) 0.00 0.00 0.00 0.00 0.00
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues 32,170 32,170 32,170 32,170 32,170
Contract Energy Revenues 1,268 1,184 1,159 1,148 1,129
Contract VOM Hourly Revenues 6,929 7,157 7,313 7,469 7,755
Start-Up Charges Revenues 3,047 3,471 3,652 3,661 3,745
Heat Rate Adjustment Payment 0 0 0 0 0
Purchase Power Fuel Adjustment Payment 2,036 1,940 1,938 1,913 1,902
Other Electricity Revenues
Other Capacity Revenues 0 0 0 0 0
Other Energy Revenues 0 0 0 0 0
------ ------ ------ ------ ------
Total Operating Revenues 45,450 45,922 46,232 46,361 46,701
OPERATING EXPENSES ($000)(16)
Fuel Costs 0 0 0 0 0
Emissions Allowances 0 0 0 0 0
Purchased Power 3,175 3,071 3,045 3,001 2,988
Operating and Maintenance 4,504 4,502 4,563 4,642 4,716
Major Maintenance 3,572 3,313 3,258 3,240 3,210
Administrative and General 2,491 2,524 2,559 2,595 2,632
Other 20 20 20 20 20
------ ------ ------ ------ ------
Total Operating Expenses 13,762 13,430 13,445 13,498 13,566
NET OPERATING REVENUES ($000) 31,688 32,492 32,787 32,863 33,135
|
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2013 2014 2015 2016 2017
------------------------ ------- ------ ------ ------ -------
STANTON FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 404 394 394 394 394
Average Annual Contract Capacity (MW) 404 0 0 0 0
Average Annual Other Capacity (MW) 394 394 394 394 394
Capacity Factor (%)(3) 32.1% 29.0% 28.7% 28.8% 30.7%
Energy Generation (GWh) 1,137 1,001 990 992 1,060
Contract Energy Sales (GWh) 990 0 0 0 0
Other Energy Sales (Purchases)(GWh) 147 1,001 990 992 1,060
Net Heat Rate (Btu/kWh)(5) 8,022 8,105 8,144 8,122 8,077
Contract Fuel Consumption (BBtu) 7,940 0 0 0 0
Other Fuel Consumption (BBtu) 1,178 8,116 8,062 8,059 8,562
SO(2) Allowances Purchased (Tons)(6) 5 4 4 4 4
NO(x) Allowances Purchased (Tons)(7) 0 0 0 0 0
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) $ 79.70 0.00 0.00 0.00 0.00
Contract Energy ($/MWh) $ 13.41 0.00 0.00 0.00 0.00
Start Up Charge ($/Start) $11,084 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) $ 8.17 74.53 77.15 80.13 81.42
Other Energy ($/MWh) $ 57.44 60.00 62.00 63.93 66.53
Fuel ($/MMBtu)(12) $ 4.63 4.77 4.90 5.17 5.35
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues $26,809 0 0 0 0
Contract Energy Revenues $ 943 0 0 0 0
Contract VOM Hourly Revenues $ 9,547 0 0 0 0
Start-Up Charges Revenues $ 2,787 0 0 0 0
Heat Rate Adjustment Payment $ 0 0 0 0 0
Purchase Power Fuel Adjustment Payment $ 0 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues $ 3,218 29,363 30,396 31,570 32,078
Other Energy Revenues $ 8,435 60,076 61,379 63,435 70,527
------- ------ ------ ------ -------
Total Operating Revenues $51,739 89,439 91,775 95,005 102,605
OPERATING EXPENSES ($000)(16)
Fuel Costs $ 7,449 54,155 54,935 57,058 61,212
Emissions Allowances $ 0 1 1 1 1
Purchased Power $ 0 0 0 0 0
Operating and Maintenance $ 4,813 4,798 4,914 5,050 5,266
Major Maintenance $ 3,248 3,065 3,083 3,459 3,772
Administrative and General $ 2,670 2,710 2,749 2,790 2,833
Other $ 20 20 20 20 20
------- ------ ------ ------ -------
Total Operating Expenses $18,200 64,749 65,702 68,378 73,104
NET OPERATING REVENUES ($000) $33,539 24,690 26,073 26,627 29,501
Year Ending December 31, 2018 2019 2020 2021 2022
------------------------ ------- ------- ------- ------- -------
STANTON FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 394 394 394 394 394
Average Annual Contract Capacity (MW) 0 0 0 0 0
Average Annual Other Capacity (MW) 394 394 394 394 394
Capacity Factor(%)(3) 28.6% 29.1% 29.2% 27.1% 27.1%
Energy Generation (GWh) 988 1,004 1,008 934 934
Contract Energy Sales (GWh) 0 0 0 0 0
Other Energy Sales (Purchases)(GWh) 988 1,004 1,008 934 934
Net Heat Rate (Btu/kWh)(5) 8,147 8,164 8,178 8,181 8,181
Contract Fuel Consumption (BBtu) 0 0 0 0 0
Other Fuel Consumption (BBtu) 8,048 8,193 8,243 7,637 7,637
SO(2) Allowances Purchased (Tons)(6) 4 4 4 4 4
NO(x) Allowances Purchased (Tons)(7) 0 0 0 0 0
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Electricity
Contract Capacity ($/kW-yr)(9) 0.00 0.00 0.00 0.00 0.00
Contract Energy ($/MWh) 0.00 0.00 0.00 0.00 0.00
Start Up Charge ($/Start) 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) 86.92 90.35 92.67 96.23 98.83
Other Energy ($/MWh) 68.31 71.57 73.67 75.74 77.78
Fuel ($/MMBtu)(12) 5.57 5.81 6.07 6.23 6.40
SO(2) Allowances ($/Ton)(13) 236 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,413 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues 0 0 0 0 0
Contract Energy Revenues 0 0 0 0 0
Contract VOM Hourly Revenues 0 0 0 0 0
Start-Up Charges Revenues 0 0 0 0 0
Heat Rate Adjustment Payment 0 0 0 0
Purchase Power Fuel Adjustment Payment 0 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues 34,246 35,597 36,512 37,914 38,938
Other Energy Revenues 67,485 71,824 74,251 70,706 72,615
------- ------- ------- ------- -------
Total Operating Revenues 101,731 107,421 110,763 108,620 111,553
OPERATING EXPENSES ($000)(16)
Fuel Costs 60,221 62,975 65,417 62,988 64,273
Emissions Allowances 1 1 1 1 1
Purchased Power 0 0 0 0 0
Operating and Maintenance 5,321 5,484 5,638 5,694 5,847
Major Maintenance 3,602 3,761 3,872 3,696 3,796
Administrative and General 2,877 2,921 2,967 3,013 3,062
Other 20 20 20 20 20
------- ------- ------- ------- -------
Total Operating Expenses 72,042 75,162 77,915 75,412 76,999
NET OPERATING REVENUES ($000) 29,689 32,259 32,848 33,208 34,554
|
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
------------------------ ------- ------ ------ ------ ------ ------
WANSLEY FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 1,123 1,123 1,123 1,123 1,123 1,123
Average Annual Contract Capacity (MW) 1,123 1,123 1,123 1,123 1,123 1,123
Average Annual Other Capacity (MW) 0 0 0 0 0 0
Capacity Factor(%)(3) 52.6% 22.0% 16.9% 22.1% 30.9% 33.9%
Energy Generation (GWh) 3,021 2,162 1,666 2,171 3,035 3,331
Contract Energy Sales (GWh) 3,098 2,217 1,709 2,227 3,113 3,417
Other Energy Sales (Purchases)(GWh) 0 0 0 0 0 0
Net Heat Rate (Btu/kWh)(5) 7,258 7,641 7,770 7,842 7,753 7,660
Contract Fuel Consumption (BBtu) 21,924 16,516 12,948 17,026 23,532 25,517
Other Fuel Consumption (BBtu) 0 0 0 0 0 0
SO(2) Allowances Purchased (Tons)(6) 11 8 6 9 12 13
NO(x) Allowances Purchased (Tons)(7) 0 0 0 83 98 102
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity ($/kW-yr)(9) $ 84.66 66.17 66.25 66.34 66.43 66.52
Contract Energy ($/MWh) $ 3.76 5.43 5.75 6.36 6.23 5.92
Start Up Charge ($/Start) $14,096 17,768 17,513 19,477 20,666 20,989
Other Electricity
Other Capacity ($/kW-yr) $ 0.00 0.00 0.00 0.00 0.00 0.00
Other Energy ($/MWh) $ 0.00 0.00 0.00 0.00 0.00 0.00
Fuel ($/MMBtu)(12) $ 0.00 0.00 0.00 0.00 0.00 0.00
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues $55,460 74,307 74,403 74,502 74,603 74,707
Contract Energy Revenues $ 7,824 5,750 4,553 6,092 8,746 9,859
Contract VOM Hourly Revenues $ 0 0 0 0 0 0
Start-Up Charges Revenues $ 2,117 4,899 4,087 6,533 8,550 8,033
Heat Rate Adjustment Payment $ 0 0 0 0 0 0
Purchase Power Fuel Adjustment Payment $ 1,697 1,397 1,182 1,532 2,106 2,346
Other Electricity Revenues
Other Capacity Revenues $ 0 0 0 0 0 0
Other Energy Revenues $ 0 0 0 0 0 0
------- ------ ------ ------ ------ ------
Total Operating Revenues $67,098 86,353 84,225 88,659 94,005 94,945
OPERATING EXPENSES ($000)(16)
Fuel Costs $ 0 0 0 0 0 0
Emissions Allowances $ 0 0 0 0 0 0
Purchased Power $ 2,701 2,071 1,960 2,555 3,488 3,895
Operating and Maintenance $ 6,441 7,420 6,958 7,839 9,267 9,945
Major Maintenance $ 7,181 6,594 5,521 6,858 9,067 10,153
Administrative and General $ 1,911 3,354 3,436 3,520 3,607 3,697
Other $ 36 63 63 63 63 63
------- ------ ------ ------ ------ ------
Total Operating Expenses $18,270 19,502 17,938 20,835 25,492 27,753
NET OPERATING REVENUES ($000) $48,828 66,851 66,287 67,824 68,513 67,192
Year Ending December 31, 2008 2009 2010 2011 2012
------------------------ ------ ------ ------- ------- -------
WANSLEY FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 1,123 1,123 1,123 1,123 1,123
Average Annual Contract Capacity (MW) 1,123 1,123 1,123 0 0
Average Annual Other Capacity (MW) 0 0 1,123 1,123 1,123
Capacity Factor(%)(3) 31.6% 34.0% 32.4% 30.9% 28.6%
Energy Generation (GWh) 3,106 3,345 3,187 3,044 2,811
Contract Energy Sales (GWh) 3,186 3,431 (0) 0 0
Other Energy Sales (Purchases)(GWh) 0 0 3,187 3,044 2,811
Net Heat Rate (Btu/kWh)(5) 7,733 7,703 7,772 7,740 7,794
Contract Fuel Consumption (BBtu) 24,017 25,762 0 0 0
Other Fuel Consumption (BBtu) 0 0 24,767 23,559 21,909
SO(2) Allowances Purchased (Tons)(6) 12 13 12 12 11
NO(x) Allowances Purchased (Tons)(7) 98 96 96 95 91
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity ($/kW-yr)(9) 66.62 66.72 0.00 0.00 0.00
Contract Energy ($/MWh) 6.41 6.55 0.00 0.00 0.00
Start Up Charge ($/Start) 21,701 22,444 0 0 0
Other Electricity
Other Capacity ($/kW-yr) 0.00 0.00 60.96 66.92 71.14
Other Energy ($/MWh) 0.00 0.00 49.13 51.21 53.81
Fuel ($/MMBtu)(12) 0.00 0.00 3.95 4.09 4.25
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues 74,814 74,924 0 0 0
Contract Energy Revenues 9,439 10,440 0 0 0
Contract VOM Hourly Revenues 0 0 0 0 0
Start-Up Charges Revenues 8,696 9,465 0 0 0
Heat Rate Adjustment Payment 0 0 0 0 0
Purchase Power Fuel Adjustment Payment 2,288 2,552 0 0 0
Other Electricity Revenues
Other Capacity Revenues 0 0 68,457 75,148 79,894
Other Energy Revenues 0 0 156,572 155,883 151,274
------ ------ ------- ------- -------
Total Operating Revenues 95,237 97,381 225,029 231,031 231,168
OPERATING EXPENSES ($000)(16)
Fuel Costs 0 0 117,408 115,791 112,603
Emissions Allowances 0 0 189 193 188
Purchased Power 3,740 4,179 0 0 0
Operating and Maintenance 9,878 10,510 10,546 10,601 10,503
Major Maintenance 9,872 10,678 11,358 11,201 10,678
Administrative and General 3,789 3,883 3,980 4,079 4,181
Other 63 63 63 63 63
------ ------ ------- ------- -------
Total Operating Expenses 27,342 29,313 143,544 141,928 138,217
NET OPERATING REVENUES ($000) 67,895 68,068 81,485 89,103 92,951
|
EXHIBIT A-1
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
BASE CASE
Year Ending December 31, 2013 2014 2015 2016 2017
------------------------ -------- ------- ------- ------- -------
WANSLEY FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 1,123 1,123 1,123 1,123 1,123
Average Annual Contract Capacity (MW) 0 0 0 0 0
Average Annual Other Capacity (MW) 1,123 1,123 1,123 1,123 1,123
Capacity Factor (%)(3) 24.5% 22.3% 20.9% 21.4% 20.1%
Energy Generation (GWh) 2,411 2,193 2,052 2,101 1,977
Contract Energy Sales (GWh) 0 0 0 0 0
Other Energy Sales (Purchases)(GWh) 2,411 2,193 2,052 2,101 1,977
Net Heat Rate (Btu/kWh)(5) 7,803 7,857 7,890 7,895 7,893
Contract Fuel Consumption (BBtu) 0 0 0 0 0
Other Fuel Consumption (BBtu) 18,812 17,229 16,192 16,591 15,601
SO(2) Allowances Purchased (Tons)(6) 9 9 8 8 8
NO(x) Allowances Purchased (Tons)(7) 85 83 76 74 71
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity ($/kW-yr)(9) $ 0.00 0.00 0.00 0.00 0.00
Contract Energy ($/MWh) $ 0.00 0.00 0.00 0.00 0.00
Start Up Charge ($/Start) $ 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) $ 75.13 74.48 78.07 78.13 79.33
Other Energy ($/MWh) $ 55.80 58.62 60.04 61.30 65.24
Fuel ($/MMBtu)(12) $ 4.34 4.47 4.55 4.81 5.00
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues $ 0 0 0 0 0
Contract Energy Revenues $ 0 0 0 0 0
Contract VOM Hourly Revenues $ 0 0 0 0 0
Start-Up Charges Revenues $ 0 0 0 0 0
Heat Rate Adjustment Payment $ 0 0 0 0 0
Purchase Power Fuel Adjustment Payment $ 0 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues $ 84,366 83,637 87,670 87,736 89,083
Other Energy Revenues $134,516 128,553 123,226 128,824 128,949
-------- ------- ------- ------- -------
Total Operating Revenues $218,882 212,190 210,896 216,560 218,032
OPERATING EXPENSES ($000)(16)
Fuel Costs $101,122 96,568 92,806 96,861 93,865
Emissions Allowances $ 181 182 171 171 170
Purchased Power $ 0 0 0 0 0
Operating and Maintenance $ 10,108 10,000 10,019 10,379 10,424
Major Maintenance $ 9,807 9,357 9,302 9,777 9,710
Administrative and General $ 4,285 4,393 4,504 4,617 4,734
Other $ 63 63 63 63 63
-------- ------- ------- ------- -------
Total Operating Expenses $125,566 120,563 116,865 121,868 118,966
NET OPERATING REVENUES ($000) $ 93,316 91,627 94,031 94,692 99,066
Year Ending December 31, 2018 2019 2020 2021 2022
------------------------ ------- ------- ------- ------- -------
WANSLEY FACILITY
PERFORMANCE
Average Annual Capacity (MW)(2) 1,123 1,123 1,123 1,123 1,123
Average Annual Contract Capacity (MW) 0 0 0 0 0
Average Annual Other Capacity (MW) 1,123 1,123 1,123 1,123 1,123
Capacity Factor(%)(3) 18.5% 16.2% 17.1% 15.7% 15.7%
Energy Generation (GWh) 1,821 1,591 1,683 1,548 1,548
Contract Energy Sales (GWh) 0 0 0 0 0
Other Energy Sales (Purchases)(GWh) 1,821 1,591 1,683 1,548 1,548
Net Heat Rate (Btu/kWh)(5) 7,847 7,849 7,927 7,853 7,853
Contract Fuel Consumption (BBtu) 0 0 0 0 0
Other Fuel Consumption (BBtu) 14,292 12,484 13,338 12,159 12,159
SO(2) Allowances Purchased (Tons)(6) 7 6 7 6 6
NO(x) Allowances Purchased (Tons)(7) 69 65 65 60 60
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity ($/kW-yr)(9) 0.00 0.00 0.00 0.00 0.00
Contract Energy ($/MWh) 0.00 0.00 0.00 0.00 0.00
Start Up Charge ($/Start) 0 0 0 0 0
Other Electricity
Other Capacity ($/kW-yr) 83.30 85.08 87.42 89.12 91.53
Other Energy ($/MWh) 66.49 71.48 72.90 74.05 76.05
Fuel ($/MMBtu)(12) 5.19 5.41 5.67 5.82 5.97
SO(2) Allowances ($/Ton)(13) 236 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,413 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Contract Capacity Revenues 0 0 0 0 0
Contract Energy Revenues 0 0 0 0 0
Contract VOM Hourly Revenues 0 0 0 0 0
Start-Up Charges Revenues 0 0 0 0 0
Heat Rate Adjustment Payment 0 0 0 0
Purchase Power Fuel Adjustment Payment 0 0 0 0 0
Other Electricity Revenues
Other Capacity Revenues 93,549 95,540 98,176 100,083 102,788
Other Energy Revenues 121,106 113,692 122,667 114,658 117,753
------- ------- ------- ------- -------
Total Operating Revenues 214,655 209,232 220,843 214,741 220,541
OPERATING EXPENSES ($000)(16)
Fuel Costs 88,860 82,184 90,313 85,366 87,275
Emissions Allowances 169 163 167 158 162
Purchased Power 0 0 0 0 0
Operating and Maintenance 10,404 10,227 10,690 10,697 10,986
Major Maintenance 9,285 8,609 9,283 9,044 9,288
Administrative and General 4,854 4,977 5,103 5,233 5,366
Other 63 63 63 63 63
------- ------- ------- ------- -------
Total Operating Expenses 113,635 106,223 115,619 110,561 113,140
NET OPERATING REVENUES ($000) 101,020 103,009 105,224 104,180 107,401
|
FOOTNOTES TO EXHIBIT A-1
1. Represents seven months for the year 2002.
2. Represents annual average capacity for the Generating Facilities. Includes allowance for degradation. Reflects the commercial operation of Goat Rock 2, the Harris Facility, and the Stanton Facility in 2003.
3. Represents annual weighted average capacity factors of the Generating Facilities as projected by PA Consulting.
4. Energy sales both contractual and market are as projected by PA Consulting. Market sales assumed to be representative of long-term contracts Southern Power expects to enter into upon expiration of the Power Purchase Agreements.
5. Weighted average annual heat rate calculated as the sum of total fuel consumed by the Generating Facilities divided by the energy generated by the Generating Facilities, as projected by PA Consulting.
6. SO(2) allowances that Southern Power will have to purchase or have the ability to sell based on emission rates as provided by Southern Power and dispatch as projected by PA Consulting. During the term of the Power Purchase Agreements, we have assumed that any shortfall in emissions would be provided by the buyer of the generation. Upon expiration of the Power Purchase Agreements, we have assumed that Southern Power will purchase any allowances required or sell any excess allowances.
7. NO(x) allowances that Southern Power will have to purchase or have the ability to sell based on emission rates as provided by Southern Power and dispatch as projected by PA Consulting. During the Power Purchase Agreement period we have assumed that any shortfall in emissions would be provided by the buyer of the generation. Upon expiration of the Power Purchase Agreements, we have assumed that Southern Power will purchase any allowances required or sell any excess allowances.
8. Rate of change in general inflation and various inflation related escalators assumed to be 2.7 percent per year for the term of the Notes, based on the March 10, 2002 projection prepared by Blue Chip Economic Indicators.
9. Average contract capacity price calculated as the sum of the capacity revenues under the Power Purchase Agreements divided by the total annual contractual capacity from the various Power Purchase Agreements.
10. Average contract energy price calculated as the sum of the energy revenues under the Power Purchase Agreements divided by the total energy sold under the various Power Purchase Agreements as projected by PA Consulting.
11. Average other capacity and energy price calculated as the sum of the other electricity revenues of the Generating Facilities divided by the total energy or capacity sold as projected by PA Consulting. Assumed to be equivalent to the price of long-term contracts to be entered into by Southern Power upon expiration of the Power Purchase Agreements. Shown as zero in years during which there are no other capacity or energy sales.
12. Weighted average of fuel prices for the Generating Facilities calculated as sum of the fuel expenses divided by the total fuel consumed by the Generating Facilities as projected by PA Consulting. Shown as zero in years during which there are no fuel purchases.
13. Assumed to be $150 per ton in 2001 dollars and assumed to escalate thereafter at the rate of inflation.
14. Assumed to be $1,000 per ton through 2002, $2,300 per ton in 2004, $1,700 per ton in 2005 and assumed to escalate thereafter at the rate of inflation.
15. Assumes contract sales to third parties in 2002 and 2003 as reported by Southern Power for the Goat Rock Facility prior to commencement of the Goat Rock Power Purchase Agreement and market energy sales as estimated by PA Consulting for Harris 2 prior to the commencement of the Harris 2 Power Purchase Agreement.
16. Non-fuel operating expenses as estimated by the Southern Power assumed to escalate at the rate of inflation.
17. Interest payments are based on semi-annual payments due each July 15 and January 15 beginning January 15, 2003, as estimated by the Representatives of the Initial Purchasers. Assumes monthly accrual of interest payments six months prior to due date. Interest payments shown represent the payments due July 15 of the calendar year shown and January 15 of the following calendar year. Assumes the issuance of additional Debt of $650,000,000 on June 1, 2003, at an interest rate of 8.0 percent per year. The scheduled amortization of the Notes consists of a single payment due on July 15, 2012. Southern Power has assumed that the Debt will be refinanced upon maturity at the same principal amounts and interest rates. No additional costs of issuance have been included. No principal amortization of the Debt has been assumed.
18. Interest coverage is equal to the net operating revenue divided by the interest on the Debt.
19. Average interest coverage is equal to the total net operating revenues over the term of the Notes ending July 15, 2012 divided by the total interest on the Debt over the same period.
20. Capacity shown in 2005 for the Dahlberg Facility reflects the expiration of the Dynegy Power Purchase Agreement on May 31. Full capacity of the Dahlberg Facility is available for other sales after May 31.
EXHIBIT A-2
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY A - LOW FUEL MARKET PRICE SCENARIO
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
------------------------ -------- ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 2,489 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 55.8% 28.7% 33.6% 40.1% 47.1% 47.6%
Contract Energy Sales (GWh)(4) 6,654 10,033 13,171 16,887 19,780 19,978
Other Energy Sales (GWh)(4) 426 1,840 895 8 49 43
-------- ------- ------- ------- ------- -------
Total Energy Sales (GWh) 7,080 11,872 14,066 16,895 19,829 20,021
Fuel Consumption (BBtu) 48,949 85,160 102,071 121,015 141,325 142,452
Average Net Heat Rate (Btu/kWh)(5) 6,894 7,242 7,403 7,358 7,318 7,306
SO(2) Allowances Purchased (Tons)(6) 24 43 52 60 70 70
NO(x) Allowances Purchased (Tons)(7) 0 0 (43) 127 183 188
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 51.53 60.50 70.74 73.59 77.20 77.23
Contract Energy Price ($/MWh)(10) $ 3.10 4.01 4.79 4.77 4.46 4.43
Other Capacity Price ($/MWh)(11) $ 16.90 16.74 16.95 16.27 17.40 20.22
Other Energy Price ($/MWh)(11) $ 29.57 32.62 32.88 60.45 53.24 53.63
Fuel Price ($/MMBtu)(12) $ 3.22 3.67 3.57 2.85 2.81 2.91
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 30,117 46,845 45,517 2,668 0 0
Goat Rock(15) $ 38,984 80,463 107,393 116,227 118,022 118,085
Harris(15) $ 0 41,914 104,968 126,879 128,473 127,664
Stanton $ 0 10,029 43,343 43,310 43,956 43,859
Wansley $ 69,806 92,857 89,193 93,295 96,939 98,239
Other Electricity Revenues
Dahlberg $ 10 0 0 12,266 16,544 18,498
Goat Rock(15) $ 13,535 22,941 11,577 0 0 0
Harris $ 0 46,940 22,179 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
-------- ------- ------- ------- ------- -------
Total Operating Revenues $152,452 341,990 424,170 394,645 403,934 406,345
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 7 0 0 239 1,545 1,407
Goat Rock $ 9,640 16,587 8,390 0 0 0
Harris $ 0 33,446 15,522 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
Emissions Allowances $ 0 1 (86) (1) 11 10
Purchased Power $ 3,650 4,771 9,468 14,888 17,416 18,229
Operations & Maintenance $ 12,487 26,074 33,823 37,825 42,422 43,811
Major Maintenance $ 16,248 29,777 36,218 43,115 50,438 53,464
Administration $ 3,022 7,866 10,457 10,739 11,029 11,328
Insurance $ 756 1,995 2,676 2,748 2,821 2,899
Property Taxes $ 3,566 10,113 13,679 13,706 13,734 13,762
Other $ 90 216 270 270 270 270
-------- ------- ------- ------- ------- -------
Total Operating Expenses $ 49,466 130,846 130,417 123,529 139,687 145,180
NET OPERATING REVENUES ($000) $102,986 211,144 293,754 271,116 264,247 261,165
ANNUAL INTEREST($000)(17) $ 20,964 66,271 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 4.91 3.19 3.34 3.08 3.00 2.97
2002-12 AVG INTEREST COVERAGE(19) 3.42
Year Ending December 31, 2008 2009 2010 2011 2012
---------------------------------------- ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 45.7% 44.8% 45.2% 42.9% 41.7%
Contract Energy Sales (GWh)(4) 19,187 18,763 9,932 5,402 4,288
Other Energy Sales (GWh)(4) 55 103 8,823 12,316 12,925
------- ------- ------- ------- -------
Total Energy Sales (GWh) 19,242 18,866 18,755 17,717 17,213
Fuel Consumption (BBtu) 137,674 135,937 136,807 130,377 127,262
Average Net Heat Rate (Btu/kWh)(5) 7,346 7,396 7,385 7,417 7,451
SO(2) Allowances Purchased (Tons)(6) 69 69 68 66 64
NO(x) Allowances Purchased (Tons)(7) 176 163 164 150 144
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 77.26 77.28 40.00 60.62 84.98
Contract Energy Price ($/MWh)(10) 4.83 5.26 5.38 6.71 7.31
Other Capacity Price ($/MWh)(11) 48.96 54.17 61.15 66.19 71.22
Other Energy Price ($/MWh)(11) 53.81 56.29 37.62 38.91 39.68
Fuel Price ($/MMBtu)(12) 3.00 3.10 3.69 3.81 3.93
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock(15) 120,302 121,512 79,462 18,281 0
Harris(15) 129,416 131,518 83,530 68,776 69,676
Stanton 44,058 44,845 45,454 45,805 46,548
Wansley 98,388 100,335 0 0 0
Other Electricity Revenues
Dahlberg 42,196 49,216 55,928 62,132 66,648
Goat Rock(15) 0 0 95,330 245,977 297,375
Harris 0 0 99,269 149,395 151,073
Stanton 0 0 0 0 0
Wansley 0 0 247,563 252,733 259,759
------- ------- ------- ------- -------
Total Operating Revenues 434,360 447,426 706,536 843,099 891,079
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 1,843 3,593 4,405 5,661 5,970
Goat Rock 0 0 52,173 132,787 159,422
Harris 0 0 54,490 80,149 81,079
Stanton 0 0 0 0 0
Wansley 0 0 130,130 128,010 130,842
Emissions Allowances 13 26 277 294 307
Purchased Power 18,159 18,426 8,839 5,808 5,748
Operations & Maintenance 44,120 45,351 46,897 47,236 47,931
Major Maintenance 53,178 53,874 55,849 60,515 57,737
Administration 11,633 11,946 12,270 12,599 12,942
Insurance 2,978 3,057 3,140 3,224 3,311
Property Taxes 13,792 13,822 13,853 13,885 13,918
Other 270 270 270 270 270
------- ------- ------- ------- -------
Total Operating Expenses 145,986 150,365 382,592 490,439 519,478
NET OPERATING REVENUES ($000) 288,374 297,061 323,944 352,660 371,601
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 3.28 3.38 3.68 4.01 4.23
2002-12 AVG INTEREST COVERAGE(19)
|
EXHIBIT A-2
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY A - LOW FUEL MARKET PRICE SCENARIO
Year Ending December 31, 2013 2014 2015 2016 2017
------------------------ -------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 39.4% 36.4% 34.5% 32.3% 29.9%
Contract Energy Sales (GWh)(4) 3,820 2,497 2,287 2,139 1,971
Other Energy Sales (GWh)(4) 12,381 12,445 11,880 11,110 10,292
-------- ------- ------- ------- -------
Total Energy Sales (GWh) 16,201 14,941 14,167 13,249 12,264
Fuel Consumption (BBtu) 120,386 111,785 106,688 100,312 93,404
Average Net Heat Rate (Btu/kWh)(5) 7,461 7,513 7,561 7,602 7,647
SO(2) Allowances Purchased (Tons)(6) 61 57 54 49 47
NO(x) Allowances Purchased (Tons)(7) 134 112 100 76 48
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 79.61 88.55 88.55 88.55 88.55
Contract Energy Price ($/MWh)(10) $ 7.64 7.35 7.86 7.59 8.28
Other Capacity Price ($/MWh)(11) $ 73.75 75.88 79.35 80.66 82.65
Other Energy Price ($/MWh)(11) $ 40.84 43.33 44.78 47.24 49.29
Fuel Price ($/MMBtu)(12) $ 4.08 4.36 4.51 4.73 4.93
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 0 0 0 0 0
Goat Rock (15) $ 0 0 0 0 0
Harris (15) $ 68,550 71,068 70,694 68,960 69,047
Stanton $ 40,171 0 0 0 0
Wansley $ 0 0 0 0 0
Other Electricity Revenues
Dahlberg $ 67,003 67,061 71,771 70,073 68,767
Goat Rock (15) $296,116 289,841 295,172 289,954 283,502
Harris $152,045 149,899 150,794 149,199 151,884
Stanton $ 11,784 92,099 93,448 96,381 102,511
Wansley $252,915 249,408 243,961 247,711 237,332
-------- ------- ------- ------- -------
Total Operating Revenues $888,584 919,376 925,840 922,278 913,043
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 4,971 3,774 4,986 3,366 1,676
Goat Rock $157,945 150,345 153,014 149,266 143,924
Harris $ 81,410 78,949 78,834 77,318 79,739
Stanton $ 7,304 54,076 54,571 56,368 59,818
Wansley $124,385 120,645 113,673 113,882 103,523
Emissions Allowances $ 290 253 230 184 121
Purchased Power $ 2,666 2,633 2,518 2,467 2,371
Operations & Maintenance $ 47,642 46,930 47,279 46,865 46,124
Major Maintenance $ 58,784 54,544 53,821 52,920 51,170
Administration $ 13,290 13,650 14,016 14,395 14,786
Insurance $ 3,400 3,493 3,587 3,684 3,784
Property Taxes $ 13,952 13,986 14,022 14,058 14,096
Other $ 270 270 270 270 270
-------- ------- ------- ------- -------
Total Operating Expenses $516,308 543,550 540,822 535,043 521,403
NET OPERATING REVENUES ($000) $372,276 375,826 385,018 387,235 391,640
ANNUAL INTEREST($000) (17) $ 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 4.23 4.27 4.38 4.40 4.45
2002-12 AVG INTEREST COVERAGE (19) 3.42
Year Ending December 31, 2018 2019 2020 2021 2022
------------------------ ------- ------- ------- ------- ---------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,668 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 28.6% 27.0% 24.6% 22.7% 22.7%
Contract Energy Sales (GWh)(4) 1,955 573 0 0 0
Other Energy Sales (GWh)(4) 9,787 10,452 10,043 9,266 9,266
------- ------- ------- ------- ---------
Total Energy Sales (GWh) 11,743 11,025 10,043 9,266 9,266
Fuel Consumption (BBtu) 89,772 85,213 78,895 72,968 72,968
Average Net Heat Rate (Btu/kWh)(5) 7,677 7,729 7,856 7,874 7,874
SO(2) Allowances Purchased (Tons)(6) 45 42 39 37 37
NO(x) Allowances Purchased (Tons)(7) 41 31 (1) (9) (9)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 88.55 22.14 0.00 0.00 0.00
Contract Energy Price ($/MWh)(10) 9.90 7.38 0.00 0.00 0.00
Other Capacity Price ($/MWh)(11) 84.60 86.35 88.16 89.98 92.41
Other Energy Price ($/MWh)(11) 52.26 54.70 57.56 59.75 61.37
Fuel Price ($/MMBtu)(12) 5.09 5.28 5.58 5.75 5.88
SO(2) Allowances ($/Ton)(13) 236 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,413 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock (15) 0 0 0 0 0
Harris (15) 72,074 17,407 0 0 0
Stanton 0 0 0 0 0
Wansley 0 0 0 0 0
Other Electricity Revenues
Dahlberg 69,587 73,483 73,281 73,655 75,645
Goat Rock (15) 292,313 290,945 275,759 278,822 286,350
Harris 153,199 249,241 292,818 279,968 287,526
Stanton 103,909 108,549 112,123 112,206 115,235
Wansley 237,084 236,502 235,606 229,143 235,330
------- ------- ------- ------- ---------
Total Operating Revenues 928,166 976,127 989,587 973,794 1,000,086
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 1,490 3,067 2,286 1,575 1,617
Goat Rock 144,257 140,738 131,795 131,030 134,090
Harris 77,179 122,484 143,171 131,126 134,164
Stanton 59,396 61,697 64,446 63,226 64,517
Wansley 100,159 98,406 98,376 92,484 94,585
Emissions Allowances 109 83 8 (12) (13)
Purchased Power 2,498 0 0 0 0
Operations & Maintenance 46,487 47,028 46,572 46,374 47,627
Major Maintenance 50,370 49,348 50,593 45,433 46,750
Administration 15,186 15,595 16,015 16,447 16,893
Insurance 3,887 3,991 4,100 4,210 4,324
Property Taxes 14,134 14,174 14,214 14,256 14,299
Other 270 270 270 270 270
------- ------- ------- ------- ---------
Total Operating Expenses 515,422 556,880 571,845 546,418 559,123
NET OPERATING REVENUES ($000) 412,744 419,247 417,742 427,376 440,963
ANNUAL INTEREST($000) (17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 4.69 4.77 4.75 4.86 5.01
2002-12 AVG INTEREST COVERAGE (19)
|
FOOTNOTES TO EXHIBIT A-3
The footnotes to Exhibit A-2 are the same as the footnotes for Exhibit A-1, except:
3. Capacity factor as estimated by PA Consulting under its "Low Gas Price" scenario.
8. As estimated by PA Consulting in its "Low Gas Price" scenario. Weighted average market electricity price for the Generating Facilities calculated as the sum of the electricity revenues divided by the electricity generation, as estimated by PA Consulting.
9. As estimated by PA Consulting in its "Low Gas Price" scenario. Weighted average fuel price for the Generating Facilities calculated as sum of the fuel expenses divided by the total fuel consumed by the Generating Facilities.
EXHIBIT A-3
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY B - HIGH FUEL MARKET PRICE SCENARIO
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
------------------------ -------- ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 2,489 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 24.4% 11.3% 16.4% 21.0% 26.5% 28.6%
Contract Energy Sales (GWh)(4) 2,870 3,731 6,471 8,846 11,091 11,998
Other Energy Sales (GWh)(4) 137 906 415 1 51 42
-------- ------- ------- ------- ------- -------
Total Energy Sales (GWh) 3,007 4,637 6,886 8,847 11,142 12,041
Fuel Consumption (BBtu) 22,751 36,267 52,965 68,033 85,523 91,597
Average Net Heat Rate (Btu/kWh)(5) 7,339 7,834 7,865 7,905 7,884 7,812
SO(2) Allowances Purchased (Tons)(6) 11 17 27 34 43 45
NO(x) Allowances Purchased (Tons)(7) 0 0 (131) (38) 11 33
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 51.53 60.50 70.74 73.59 77.20 77.23
Contract Energy Price ($/MWh)(10) $ 5.76 7.36 7.36 8.62 8.53 8.22
Other Capacity Price ($/MWh)(11) $ 16.49 16.35 17.20 16.38 16.82 17.27
Other Energy Price ($/MWh)(11) $ 42.47 49.38 50.12 81.80 67.54 70.58
Fuel Price ($/MMBtu)(12) $ 4.90 5.66 5.54 3.88 3.85 3.99
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 29,303 46,858 45,510 2,666 0 0
Goat Rock(15) $ 38,781 78,210 101,442 114,784 119,572 120,862
Harris(15) $ 0 41,614 102,301 129,551 137,838 137,265
Stanton $ 0 9,981 44,335 44,902 45,374 45,832
Wansley $ 66,740 82,692 81,414 86,127 91,000 94,030
Other Electricity Revenues
Dahlberg $ 0 0 0 11,945 16,947 16,832
Goat Rock(15) $ 6,763 15,325 8,445 0 0 0
Harris $ 0 39,076 16,736 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
-------- ------- ------- ------- ------- -------
Total Operating Revenues $141,587 313,756 400,183 389,975 410,731 414,821
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 0 0 0 31 2,208 1,921
Goat Rock $ 5,107 11,557 6,379 0 0 0
Harris $ 0 29,136 12,217 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
Emissions Allowances $ 0 0 (263) (180) (120) (95)
Purchased Power $ 2,193 2,654 7,533 12,005 14,804 16,499
Operations & Maintenance $ 7,687 18,149 26,397 29,231 32,982 34,859
Major Maintenance $ 8,345 14,843 20,898 25,776 31,575 34,633
Administration $ 3,022 7,866 10,457 10,739 11,029 11,328
Insurance $ 756 1,995 2,676 2,748 2,821 2,899
Property Taxes $ 3,566 10,113 13,679 13,706 13,734 13,762
Other $ 90 216 270 270 270 270
-------- ------- ------- ------- ------- -------
Total Operating Expenses $ 30,766 96,529 100,243 94,327 109,302 116,076
NET OPERATING REVENUES ($000) $110,821 217,227 299,940 295,648 301,429 298,744
ANNUAL INTEREST($000)(17) $ 20,964 66,271 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 5.29 3.28 3.41 3.36 3.43 3.40
2002-12 AVG INTEREST COVERAGE(19) 3.65
Year Ending December 31, 2008 2009 2010 2011 2012
------------------------ ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 27.3% 28.3% 27.5% 26.9% 25.3%
Contract Energy Sales (GWh)(4) 11,437 11,789 6,293 3,654 2,806
Other Energy Sales (GWh)(4) 44 100 5,111 7,470 7,654
------- ------- ------- ------- -------
Total Energy Sales (GWh) 11,481 11,889 11,404 11,124 10,460
Fuel Consumption (BBtu) 87,417 90,671 88,917 86,835 82,313
Average Net Heat Rate (Btu/kWh)(5) 7,819 7,830 7,902 7,875 7,938
SO(2) Allowances Purchased (Tons)(6) 43 46 45 43 41
NO(x) Allowances Purchased (Tons)(7) 30 33 37 36 24
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 77.26 77.28 40.00 60.62 84.98
Contract Energy Price ($/MWh)(10) 8.50 8.58 9.68 13.04 12.28
Other Capacity Price ($/MWh)(11) 50.19 48.57 59.99 63.65 68.55
Other Energy Price ($/MWh)(11) 71.86 77.49 57.41 58.02 59.91
Fuel Price ($/MMBtu)(12) 4.11 4.25 5.49 5.62 5.83
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock(15) 119,516 121,373 80,160 25,717 0
Harris(15) 137,373 137,609 89,186 71,903 72,242
Stanton 46,106 46,072 46,615 46,661 47,104
Wansley 93,617 95,671 0 0 0
Other Electricity Revenues
Dahlberg 43,405 46,687 58,961 63,081 66,071
Goat Rock(15) 0 0 83,499 221,762 273,728
Harris 0 0 95,737 144,453 140,142
Stanton 0 0 0 0 0
Wansley 0 0 218,232 226,306 230,838
------- ------- ------- ------- -------
Total Operating Revenues 440,017 447,412 672,390 799,883 830,125
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 2,047 4,797 7,027 7,777 7,189
Goat Rock 0 0 45,611 123,007 151,666
Harris 0 0 55,012 82,082 77,566
Stanton 0 0 0 0 0
Wansley 0 0 114,738 117,193 116,504
Emissions Allowances (100) (101) 76 77 55
Purchased Power 15,961 17,253 8,577 5,845 5,686
Operations & Maintenance 35,126 37,109 38,011 38,868 38,946
Major Maintenance 34,457 36,120 36,395 41,201 36,412
Administration 11,633 11,946 12,270 12,599 12,942
Insurance 2,978 3,057 3,140 3,224 3,311
Property Taxes 13,792 13,822 13,853 13,885 13,918
Other 270 270 270 270 270
------- ------- ------- ------- -------
Total Operating Expenses 116,164 124,274 334,981 446,029 464,464
NET OPERATING REVENUES ($000) 323,854 323,138 337,409 353,854 365,661
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 3.68 3.67 3.84 4.02 4.16
2002-12 AVG INTEREST COVERAGE(19)
|
EXHIBIT A-3
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY B - HIGH FUEL MARKET PRICE SCENARIO
Year Ending December 31, 2013 2014 2015 2016 2017
------------------------ -------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 22.9% 20.5% 19.0% 18.2% 16.7%
Contract Energy Sales (GWh)(4) 2,380 1,408 1,240 1,245 1,045
Other Energy Sales (GWh)(4) 7,022 7,014 6,550 6,241 5,825
-------- ------- ------- ------- -------
Total Energy Sales (GWh) 9,402 8,422 7,790 7,486 6,870
Fuel Consumption (BBtu) 74,753 67,149 62,605 60,094 55,343
Average Net Heat Rate (Btu/kWh)(5) 7,983 8,007 8,069 8,061 8,087
SO(2) Allowances Purchased (Tons)(6) 37 33 32 31 28
NO(x) Allowances Purchased (Tons)(7) 5 (13) (26) (40) (56)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 79.61 88.55 88.55 88.55 88.55
Contract Energy Price ($/MWh)(10) $ 13.92 12.15 13.03 13.66 13.85
Other Capacity Price ($/MWh)(11) $ 73.15 74.76 76.72 72.49 77.95
Other Energy Price ($/MWh)(11) $ 61.89 65.29 67.83 71.47 73.53
Fuel Price ($/MMBtu)(12) $ 6.09 6.51 6.75 7.03 7.33
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 0 0 0 0 0
Goat Rock(15) $ 0 0 0 0 0
Harris(15) $ 72,379 69,827 68,879 69,734 67,206
Stanton $ 40,287 0 0 0 0
Wansley $ 0 0 0 0 0
Other Electricity Revenues
Dahlberg $ 69,838 66,897 70,314 64,431 65,951
Goat Rock(15) $268,996 259,187 254,965 249,836 244,669
Harris $141,074 136,126 130,497 129,639 129,495
Stanton $ 11,819 89,669 92,407 94,853 100,237
Wansley $217,400 210,602 208,634 202,522 205,443
-------- ------- ------- ------- -------
Total Operating Revenues $821,793 832,308 825,696 811,015 813,001
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 6,855 4,321 5,573 4,056 2,141
Goat Rock $145,714 135,321 130,889 131,374 124,866
Harris $ 77,481 72,455 67,983 68,818 67,748
Stanton $ 7,808 56,298 57,845 58,652 62,056
Wansley $102,349 97,439 94,340 91,126 88,104
Emissions Allowances $ 15 (23) (51) (89) (128)
Purchased Power $ 2,301 2,238 2,073 2,177 1,931
Operations & Maintenance $ 38,494 37,770 38,115 38,394 38,194
Major Maintenance $ 36,325 32,601 31,580 31,676 30,965
Administration $ 13,290 13,650 14,016 14,395 14,786
Insurance $ 3,400 3,493 3,587 3,684 3,784
Property Taxes $ 13,952 13,986 14,022 14,058 14,096
Other $ 270 270 270 270 270
-------- ------- ------- ------- -------
Total Operating Expenses $448,255 469,821 460,243 458,591 448,814
NET OPERATING REVENUES ($000) $373,538 362,487 365,453 352,424 364,187
ANNUAL INTEREST($000)(17) $ 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 4.25 4.12 4.16 4.01 4.14
2002-12 AVG INTEREST COVERAGE(19) 3.65
Year Ending December 31, 2018 2019 2020 2021 2022
------------------------ ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,668 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 16.1% 14.9% 13.9% 13.0% 13.0%
Contract Energy Sales (GWh)(4) 1,093 291 0 0 0
Other Energy Sales (GWh)(4) 5,531 5,809 5,667 5,316 5,316
------- ------- ------- ------- -------
Total Energy Sales (GWh) 6,624 6,100 5,667 5,316 5,316
Fuel Consumption (BBtu) 53,407 49,609 46,156 43,237 43,237
Average Net Heat Rate (Btu/kWh)(5) 8,097 8,132 8,144 8,133 8,133
SO(2) Allowances Purchased (Tons)(6) 27 24 22 21 21
NO(x) Allowances Purchased (Tons)(7) (66) (68) (82) (93) (93)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 88.55 22.14 0.00 0.00 0.00
Contract Energy Price ($/MWh)(10) 15.67 9.82 0.00 0.00 0.00
Other Capacity Price ($/MWh)(11) 82.10 84.39 87.46 89.36 91.78
Other Energy Price ($/MWh)(11) 75.96 80.90 83.20 84.60 86.89
Fuel Price ($/MMBtu)(12) 7.55 7.79 8.19 8.45 8.64
SO(2) Allowances ($/Ton)(13) 236 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,413 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock(15) 0 0 0 0 0
Harris(15) 69,845 16,040 0 0 0
Stanton 0 0 0 0 0
Wansley 0 0 0 0 0
Other Electricity Revenues
Dahlberg 68,187 73,341 75,847 76,781 78,855
Goat Rock(15) 254,813 255,835 241,120 248,156 254,856
Harris 133,284 212,500 254,583 250,887 257,660
Stanton 100,498 102,824 103,630 102,675 105,447
Wansley 197,755 203,499 204,632 188,454 193,542
------- ------- ------- ------- -------
Total Operating Revenues 824,382 864,039 879,812 866,953 890,360
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 1,622 3,791 3,950 3,764 3,865
Goat Rock 126,541 121,685 110,479 114,539 117,153
Harris 68,049 100,279 119,665 117,149 119,810
Stanton 61,857 62,154 63,224 61,498 62,742
Wansley 79,646 79,741 80,666 68,485 69,939
Emissions Allowances (153) (162) (201) (235) (242)
Purchased Power 2,046 0 0 0 0
Operations & Maintenance 38,678 39,322 39,736 40,103 41,187
Major Maintenance 31,008 30,345 29,989 33,333 30,681
Administration 15,186 15,595 16,015 16,447 16,893
Insurance 3,887 3,991 4,100 4,210 4,324
Property Taxes 14,134 14,174 14,214 14,256 14,299
Other 270 270 270 270 270
------- ------- ------- ------- -------
Total Operating Expenses 442,772 471,184 482,106 473,818 480,921
NET OPERATING REVENUES ($000) 381,610 392,855 397,706 393,135 409,439
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 4.34 4.47 4.52 4.47 4.66
2002-12 AVG INTEREST COVERAGE(19)
|
FOOTNOTES TO EXHIBIT A-3
The footnotes to Exhibit A-3 are the same as the footnotes for Exhibit A-1, except:
3. Capacity factor as estimated by PA Consulting under its "High Gas Price" scenario.
8. As estimated by PA Consulting in its "High Gas Price" scenario. Weighted average market electricity price for the Generating Facilities calculated as the sum of the electricity revenues divided by the electricity generation, as estimated by PA Consulting.
9. As estimated by PA Consulting in its "High Gas Price" scenario. Weighted average fuel price for the Generating Facilities calculated as sum of the fuel expenses divided by the total fuel consumed by the Generating Facilities.
EXHIBIT A-4
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY C - OVERBUILD PRICE SCENARIO
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
------------------------ -------- ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 2,489 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 37.2% 10.7% 14.0% 20.3% 27.4% 29.1%
Contract Energy Sales (GWh)(4) 4,404 3,609 5,518 8,544 11,525 12,241
Other Energy Sales (GWh)(4) 268 765 354 0 0 1
-------- ------- ------- ------- ------- -------
Total Energy Sales (GWh) 4,672 4,374 5,873 8,544 11,525 12,243
Fuel Consumption (BBtu) 33,408 33,803 45,095 64,359 85,758 90,833
Average Net Heat Rate (Btu/kWh)(5) 7,053 7,741 7,850 7,749 7,651 7,629
SO(2) Allowances Purchased (Tons)(6) 17 17 21 32 43 46
NO(x) Allowances Purchased (Tons)(7) 0 0 (135) (16) 26 45
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 51.53 60.50 70.74 73.59 77.20 77.23
Contract Energy Price ($/MWh)(10) $ 3.72 6.68 7.03 7.14 6.74 6.73
Other Capacity Price ($/MWh)(11) $ 16.49 17.07 17.40 15.79 16.16 16.63
Other Energy Price ($/MWh)(11) $ 34.62 40.85 43.18 0.00 0.00 57.54
Fuel Price ($/MMBtu)(12) $ 3.94 5.17 5.14 0.00 0.00 3.44
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 29,314 46,845 45,510 2,666 0 0
Goat Rock(15) $ 38,262 76,893 98,397 109,428 113,064 116,864
Harris(15) $ 0 39,755 98,147 122,297 130,133 128,364
Stanton $ 0 9,897 43,305 43,707 44,288 44,548
Wansley $ 67,098 82,624 80,831 84,692 89,429 91,970
Other Electricity Revenues
Dahlberg $ 0 0 0 11,462 12,961 13,417
Goat Rock(15) $ 10,188 12,023 6,346 0 0 0
Harris $ 0 29,303 13,387 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
-------- ------- ------- ------- ------- -------
Total Operating Revenues $144,862 297,341 385,923 374,252 389,875 395,163
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 0 0 0 0 0 55
Goat Rock $ 7,677 9,182 4,800 0 0 0
Harris $ 0 22,295 9,785 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
Emissions Allowances $ 0 0 (271) (153) (103) (82)
Purchased Power $ 2,712 2,042 5,450 9,995 13,006 14,342
Operations & Maintenance $ 9,572 17,943 25,476 28,841 32,841 34,548
Major Maintenance $ 11,605 14,427 18,686 25,088 32,516 35,024
Administration $ 3,022 7,866 10,457 10,739 11,029 11,328
Insurance $ 756 1,995 2,676 2,748 2,821 2,899
Property Taxes $ 3,566 10,113 13,679 13,706 13,734 13,762
Other $ 90 216 270 270 270 270
-------- ------- ------- ------- ------- -------
Total Operating Expenses $ 39,000 86,079 91,007 91,233 106,113 112,145
NET OPERATING REVENUES ($000) $105,862 211,262 294,916 283,018 283,761 283,018
ANNUAL INTEREST($000)(17) $ 20,964 66,271 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 5.05 3.19 3.35 3.22 3.23 3.22
2002-12 AVG INTEREST COVERAGE(19) 3.37
Year Ending December 31, 2008 2009 2010 2011 2012
------------------------ ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 31.6% 32.3% 32.8% 31.3% 29.9%
Contract Energy Sales (GWh)(4) 13,332 13,582 7,706 4,522 3,671
Other Energy Sales (GWh)(4) 0 28 5,910 8,445 8,710
------- ------- ------- ------- -------
Total Energy Sales (GWh) 13,332 13,610 13,616 12,967 12,381
Fuel Consumption (BBtu) 98,972 101,521 103,225 99,026 95,230
Average Net Heat Rate (Btu/kWh)(5) 7,631 7,666 7,691 7,713 7,769
SO(2) Allowances Purchased (Tons)(6) 50 51 51 49 47
NO(x) Allowances Purchased (Tons)(7) 64 61 58 47 43
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 77.26 77.28 40.00 60.62 84.98
Contract Energy Price ($/MWh)(10) 7.01 7.28 7.50 9.84 9.62
Other Capacity Price ($/MWh)(11) 17.08 18.02 44.95 54.08 57.01
Other Energy Price ($/MWh)(11) 0.00 61.47 48.77 50.12 52.04
Fuel Price ($/MMBtu)(12) 0.00 3.70 4.69 4.81 4.98
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock(15) 119,201 121,201 78,895 23,771 0
Harris(15) 134,721 135,902 87,975 70,924 72,786
Stanton 44,679 45,321 45,953 46,416 47,438
Wansley 94,238 96,036 0 0 0
Other Electricity Revenues
Dahlberg 13,694 16,157 37,714 46,433 49,505
Goat Rock(15) 0 0 78,425 213,163 260,910
Harris 0 0 87,030 131,994 131,850
Stanton 0 0 0 0 0
Wansley 0 0 207,178 220,489 220,773
------- ------- ------- ------- -------
Total Operating Revenues 406,533 414,617 623,170 753,190 783,262
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 0 1,137 1,039 2,035 2,308
Goat Rock 0 0 44,919 119,801 145,950
Harris 0 0 51,484 74,727 73,978
Stanton 0 0 0 0 0
Wansley 0 0 116,291 117,262 114,415
Emissions Allowances (65) (64) 116 102 94
Purchased Power 15,938 17,333 9,422 6,540 6,565
Operations & Maintenance 36,769 38,323 39,577 40,157 40,507
Major Maintenance 38,742 40,140 41,599 41,867 41,456
Administration 11,633 11,946 12,270 12,599 12,942
Insurance 2,978 3,057 3,140 3,224 3,311
Property Taxes 13,792 13,822 13,853 13,885 13,918
Other 270 270 270 270 270
------- ------- ------- ------- -------
Total Operating Expenses 120,058 125,963 333,980 432,470 455,715
NET OPERATING REVENUES ($000) 286,475 288,654 289,190 320,720 327,547
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 3.26 3.28 3.29 3.65 3.72
2002-12 AVG INTEREST COVERAGE(19)
|
EXHIBIT A-4
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY C - OVERBUILD PRICE SCENARIO
Year Ending December 31, 2013 2014 2015 2016 2017
------------------------ -------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 26.8% 24.3% 22.2% 21.9% 20.5%
Contract Energy Sales (GWh)(4) 2,980 1,576 1,396 1,391 1,218
Other Energy Sales (GWh)(4) 8,056 8,397 7,719 7,598 7,202
-------- ------- ------- ------- -------
Total Energy Sales (GWh) 11,036 9,973 9,115 8,989 8,419
Fuel Consumption (BBtu) 85,986 78,148 71,914 70,876 66,589
Average Net Heat Rate (Btu/kWh)(5) 7,821 7,867 7,920 7,916 7,938
SO(2) Allowances Purchased (Tons)(6) 43 38 35 35 32
NO(x) Allowances Purchased (Tons)(7) 28 9 (10) (17) (33)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 79.61 88.55 88.55 88.55 88.55
Contract Energy Price ($/MWh)(10) $ 11.04 11.29 12.52 11.97 11.95
Other Capacity Price ($/MWh)(11) $ 62.39 64.02 71.14 72.46 77.29
Other Energy Price ($/MWh)(11) $ 53.00 56.69 58.28 60.87 62.41
Fuel Price ($/MMBtu)(12) $ 5.18 5.55 5.76 5.99 6.20
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 0 0 0 0 0
Goat Rock(15) $ 0 0 0 0 0
Harris(15) $ 72,197 70,525 70,213 69,368 67,284
Stanton $ 40,250 0 0 0 0
Wansley $ 0 0 0 0 0
Other Electricity Revenues
Dahlberg $ 53,406 54,334 60,499 59,901 62,303
Goat Rock(15) $256,132 249,248 246,352 247,506 246,916
Harris $131,107 128,133 126,181 128,076 128,221
Stanton $ 13,547 99,962 104,056 107,827 118,024
Wansley $207,680 205,103 202,540 214,311 208,773
-------- ------- ------- ------- -------
Total Operating Revenues $774,319 807,305 809,841 826,989 831,521
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 1,732 1,290 1,839 1,089 270
Goat Rock $140,723 132,114 125,940 126,606 124,767
Harris $ 72,298 68,495 65,543 66,511 66,085
Stanton $ 9,204 65,194 66,607 67,218 73,115
Wansley $101,334 99,023 91,366 98,217 89,964
Emissions Allowances $ 65 24 (17) (34) (71)
Purchased Power $ 2,207 2,188 2,018 2,095 1,913
Operations & Maintenance $ 39,742 39,340 39,285 40,095 40,086
Major Maintenance $ 39,289 37,141 35,797 37,134 36,263
Administration $ 13,290 13,650 14,016 14,395 14,786
Insurance $ 3,400 3,493 3,587 3,684 3,784
Property Taxes $ 13,952 13,986 14,022 14,058 14,096
Other $ 270 270 270 270 270
-------- ------- ------- ------- -------
Total Operating Expenses $437,506 476,210 460,274 471,339 465,329
NET OPERATING REVENUES ($000) $336,813 331,095 349,567 355,650 366,192
ANNUAL INTEREST($000)(17) $ 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 3.83 3.77 3.98 4.04 4.16
2002-12 AVG INTEREST COVERAGE(19) 3.37
Year Ending December 31, 2018 2019 2020 2021 2022
------------------------ ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,668 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 19.9% 17.5% 17.1% 15.9% 15.9%
Contract Energy Sales (GWh)(4) 1,232 336 0 0 0
Other Energy Sales (GWh)(4) 6,929 6,815 6,985 6,500 6,500
------- ------- ------- ------- -------
Total Energy Sales (GWh) 8,161 7,151 6,985 6,500 6,500
Fuel Consumption (BBtu) 64,682 57,135 56,202 52,543 52,543
Average Net Heat Rate (Btu/kWh)(5) 7,956 7,990 8,047 8,083 8,083
SO(2) Allowances Purchased (Tons)(6) 32 29 27 25 25
NO(x) Allowances Purchased (Tons)(7) (29) (45) (54) (59) (59)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 88.55 22.14 0.00 0.00 0.00
Contract Energy Price ($/MWh)(10) 14.34 8.59 0.00 0.00 0.00
Other Capacity Price ($/MWh)(11) 80.40 85.35 87.07 88.88 91.28
Other Energy Price ($/MWh)(11) 65.33 69.00 71.66 73.29 75.27
Fuel Price ($/MMBtu)(12) 6.35 6.64 6.94 7.13 7.29
SO(2) Allowances ($/Ton)(13) 236 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,413 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock(15) 0 0 0 0 0
Harris(15) 70,390 16,068 0 0 0
Stanton 0 0 0 0 0
Wansley 0 0 0 0 0
Other Electricity Revenues
Dahlberg 65,466 71,047 72,074 73,701 75,692
Goat Rock(15) 254,615 252,494 244,643 248,673 255,387
Harris 133,499 209,561 262,680 254,525 261,396
Stanton 112,945 112,886 113,335 112,699 115,742
Wansley 213,598 206,530 214,283 201,728 207,174
------- ------- ------- ------- -------
Total Operating Revenues 850,513 868,586 907,015 891,326 915,391
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 614 1,587 1,335 1,576 1,619
Goat Rock 123,040 115,760 110,788 111,841 114,384
Harris 66,564 95,247 122,782 116,547 119,192
Stanton 69,504 69,187 69,664 68,531 69,965
Wansley 89,438 79,502 85,600 76,091 77,749
Emissions Allowances (62) (107) (131) (149) (153)
Purchased Power 2,015 0 0 0 0
Operations & Maintenance 40,874 40,586 41,424 41,723 42,851
Major Maintenance 36,821 34,866 35,151 34,161 35,084
Administration 15,186 15,595 16,015 16,447 16,893
Insurance 3,887 3,991 4,100 4,210 4,324
Property Taxes 14,134 14,174 14,214 14,256 14,299
Other 270 270 270 270 270
------- ------- ------- ------- -------
Total Operating Expenses 462,284 470,658 501,211 485,504 496,476
NET OPERATING REVENUES ($000) 388,229 397,928 405,804 405,822 418,915
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 4.41 4.53 4.61 4.61 4.76
2002-12 AVG INTEREST COVERAGE(19)
|
FOOTNOTES TO EXHIBIT A-4
The footnotes to Exhibit A-4 are the same as the footnotes for Exhibit A-1, except:
3. Capacity factor as estimated by PA Consulting under its "Capacity Overbuild" scenario.
8. As estimated by PA Consulting in its "Capacity Overbuild" scenario. Weighted average market electricity price for the Generating Facilities calculated as the sum of the electricity revenues divided by the electricity generation, as estimated by PA Consulting.
9. As estimated by PA Consulting in its "Capacity Overbuild" scenario. Weighted average fuel price for the Generating Facilities calculated as sum of the fuel expenses divided by the total fuel consumed by the Generating Facilities.
EXHIBIT A-5
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY D - REDUCED OUTPUT
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
------------------------ -------- ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 2,364 4,444 4,444 4,444 4,444 4,444
Average Capacity Factor (%)(3) 37.2% 14.7% 21.0% 25.9% 31.5% 33.5%
Contract Energy Sales (GWh)(4) 4,184 4,765 7,849 10,367 12,545 13,337
Other Energy Sales (GWh)(4) 247 998 514 0 45 42
-------- ------- ------- ------- ------- -------
Total Energy Sales (GWh) 4,431 5,764 8,364 10,367 12,590 13,380
Fuel Consumption (BBtu) 31,687 44,309 63,085 78,169 94,428 99,697
Average Net Heat Rate (Btu/kWh)(5) 7,042 7,723 7,706 7,749 7,703 7,652
SO(2) Allowances Purchased (Tons)(6) 15 23 31 40 47 50
NO(x) Allowances Purchased (Tons)(7) 0 0 (104) 5 50 66
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 51.53 60.52 70.61 73.41 77.20 77.23
Contract Energy Price ($/MWh)(10) $ 3.76 6.83 6.50 7.60 7.14 6.96
Other Capacity Price ($/MWh)(11) $ 16.49 16.35 16.84 16.38 16.82 17.27
Other Energy Price ($/MWh)(11) $ 34.62 42.40 41.94 0.00 61.94 60.75
Fuel Price ($/MMBtu)(12) $ 3.99 4.90 4.67 0.00 3.32 3.45
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 29,322 46,845 45,510 2,666 0 0
Goat Rock (15) $ 36,996 76,806 98,090 110,667 113,076 115,399
Harris (15) $ 0 39,867 99,180 125,194 128,051 127,977
Stanton $ 0 9,549 41,286 42,571 42,962 43,244
Wansley $ 63,850 82,279 80,217 84,554 89,731 90,599
Other Electricity Revenues
Dahlberg $ 0 0 0 11,291 15,573 15,741
Goat Rock (15) $ 9,430 15,122 8,820 0 0 0
Harris $ 0 36,356 16,826 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
-------- ------- ------- ------- ------- -------
Total Operating Revenues $139,598 306,825 389,929 376,943 389,393 392,960
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 0 0 0 0 1,658 1,685
Goat Rock $ 7,178 11,536 6,652 0 0 0
Harris $ 0 27,238 12,243 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
Emissions Allowances $ 0 0 (209) (126) (76) (57)
Purchased Power $ 2,589 2,855 7,511 11,919 14,167 15,490
Operations & Maintenance $ 9,303 19,417 27,920 30,797 34,508 36,346
Major Maintenance $ 11,605 17,836 25,034 30,385 36,548 39,529
Administration $ 3,022 7,866 10,457 10,739 11,029 11,328
Insurance $ 756 1,995 2,676 2,748 2,821 2,899
Property Taxes $ 3,566 10,113 13,679 13,706 13,734 13,762
Other $ 90 216 270 270 270 270
-------- ------- ------- ------- ------- -------
Total Operating Expenses $ 38,109 99,072 106,233 100,438 114,659 121,252
NET OPERATING REVENUES ($000) $101,489 207,753 283,695 276,505 274,734 271,708
ANNUAL INTEREST($000) (17) $ 20,964 66,271 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 4.84 3.13 3.23 3.14 3.12 3.09
2002-12 AVG INTEREST COVERAGE (19) 3.41
Year Ending December 31, 2008 2009 2010 2011 2012
------------------------ ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,444 4,444 4,444 4,444 4,444
Average Capacity Factor (%)(3) 31.5% 32.4% 32.2% 30.9% 29.6%
Contract Energy Sales (GWh)(4) 12,567 12,865 6,821 3,924 3,148
Other Energy Sales (GWh)(4) 42 93 5,886 8,192 8,495
------- ------- ------- ------- -------
Total Energy Sales (GWh) 12,609 12,958 12,706 12,116 11,643
Fuel Consumption (BBtu) 94,592 97,314 97,171 93,250 89,962
Average Net Heat Rate (Btu/kWh)(5) 7,704 7,710 7,745 7,762 7,794
SO(2) Allowances Purchased (Tons)(6) 46 48 50 47 44
NO(x) Allowances Purchased (Tons)(7) 57 55 65 59 55
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 77.26 77.28 40.00 60.62 84.98
Contract Energy Price ($/MWh)(10) 7.62 7.65 8.35 11.61 10.68
Other Capacity Price ($/MWh)(11) 51.65 51.68 60.96 66.92 71.14
Other Energy Price ($/MWh)(11) 61.12 65.13 48.21 49.51 50.91
Fuel Price ($/MMBtu)(12) 3.56 3.67 4.67 4.82 4.99
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock (15) 114,992 116,633 76,064 23,744 0
Harris (15) 130,690 129,238 83,679 69,001 69,319
Stanton 43,679 44,156 44,472 44,600 44,942
Wansley 90,911 92,986 0 0 0
Other Electricity Revenues
Dahlberg 41,917 45,418 54,454 60,929 64,131
Goat Rock (15) 0 0 83,271 213,105 262,193
Harris 0 0 89,584 134,001 135,221
Stanton 0 0 0 0 0
Wansley 0 0 213,778 219,480 219,609
------- ------- ------- ------- -------
Total Operating Revenues 422,189 428,431 645,302 764,860 795,415
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 1,690 3,852 5,140 6,491 6,202
Goat Rock 0 0 45,696 114,922 141,823
Harris 0 0 49,959 73,213 73,499
Stanton 0 0 0 0 0
Wansley 0 0 112,516 110,979 107,951
Emissions Allowances (67) (68) 128 125 121
Purchased Power 15,064 15,989 7,843 5,309 5,306
Operations & Maintenance 36,438 38,347 39,477 40,103 40,429
Major Maintenance 38,745 40,454 42,286 46,076 41,444
Administration 11,633 11,946 12,270 12,599 12,942
Insurance 2,978 3,057 3,140 3,224 3,311
Property Taxes 13,792 13,822 13,853 13,885 13,918
Other 270 270 270 270 270
------- ------- ------- ------- -------
Total Operating Expenses 120,543 127,669 332,579 427,196 447,216
NET OPERATING REVENUES ($000) 301,646 300,763 312,723 337,664 348,199
ANNUAL INTEREST($000) (17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 3.43 3.42 3.56 3.84 3.96
2002-12 AVG INTEREST COVERAGE (19)
|
EXHIBIT A-5
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY D - REDUCED OUTPUT
Year Ending December 31, 2013 2014 2015 2016 2017
------------------------ -------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,444 4,435 4,435 4,435 4,435
Average Capacity Factor (%)(3) 26.9% 24.5% 22.5% 21.8% 20.6%
Contract Energy Sales (GWh)(4) 2,662 1,596 1,419 1,360 1,231
Other Energy Sales (GWh)(4) 7,867 7,975 7,350 7,157 6,814
-------- ------- ------- ------- -------
Total Energy Sales (GWh) 10,530 9,571 8,770 8,517 8,045
Fuel Consumption (BBtu) 82,252 74,901 69,505 67,644 64,084
Average Net Heat Rate (Btu/kWh)(5) 7,844 7,859 7,958 7,975 7,996
SO(2) Allowances Purchased (Tons)(6) 41 37 35 34 31
NO(x) Allowances Purchased (Tons)(7) 34 15 (7) (19) (37)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 79.61 88.55 88.55 88.55 88.55
Contract Energy Price ($/MWh)(10) $ 12.40 11.40 12.92 13.45 13.67
Other Capacity Price ($/MWh)(11) $ 74.88 74.48 77.98 78.32 79.53
Other Energy Price ($/MWh)(11) $ 52.34 55.56 57.92 60.04 63.19
Fuel Price ($/MMBtu)(12) $ 5.21 5.58 5.79 6.03 6.26
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 0 0 0 0 0
Goat Rock(15) $ 0 0 0 0 0
Harris(15) $ 69,875 68,283 68,421 68,380 66,929
Stanton $ 38,698 0 0 0 0
Wansley $ 0 0 0 0 0
Other Electricity Revenues
Dahlberg $ 65,320 62,095 67,003 65,242 63,122
Goat Rock(15) $258,304 253,514 246,538 246,736 243,828
Harris $134,765 129,099 126,414 124,784 126,705
Stanton $ 11,070 84,967 87,187 90,255 97,475
Wansley $207,937 201,580 200,351 205,732 207,130
-------- ------- ------- ------- -------
Total Operating Revenues $785,969 799,538 795,914 801,129 805,189
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 5,132 3,382 4,782 3,687 1,784
Goat Rock $138,105 133,273 126,035 127,935 124,524
Harris $ 73,057 67,954 65,745 64,594 65,322
Stanton $ 7,175 52,216 52,959 54,975 58,922
Wansley $ 97,042 92,714 89,121 92,875 89,966
Emissions Allowances $ 75 41 (8) (36) (79)
Purchased Power $ 2,224 2,164 2,027 2,011 1,942
Operations & Maintenance $ 39,811 39,229 39,453 39,955 39,925
Major Maintenance $ 41,406 37,592 36,561 37,978 37,710
Administration $ 13,290 13,650 14,016 14,395 14,786
Insurance $ 3,400 3,493 3,587 3,684 3,784
Property Taxes $ 13,952 13,986 14,022 14,058 14,096
Other $ 270 270 270 270 270
-------- ------- ------- ------- -------
Total Operating Expenses $434,938 459,965 448,570 456,381 452,954
NET OPERATING REVENUES ($000) $351,030 339,573 347,344 344,748 352,235
ANNUAL INTEREST($000)(17) $ 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 3.99 3.86 3.95 3.92 4.01
2002-12 AVG INTEREST COVERAGE(19) 3.41
Year Ending December 31, 2018 2019 2020 2021 2022
------------------------ ------- ------- ------- ------- -------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,435 4,435 4,435 4,435 4,435
Average Capacity Factor (%)(3) 19.8% 18.8% 18.7% 17.2% 17.2%
Contract Energy Sales (GWh)(4) 1,226 374 0 0 0
Other Energy Sales (GWh)(4) 6,487 6,917 7,263 6,675 6,675
------- ------- ------- ------- -------
Total Energy Sales (GWh) 7,714 7,290 7,263 6,675 6,675
Fuel Consumption (BBtu) 61,280 58,299 58,472 53,871 53,871
Average Net Heat Rate (Btu/kWh)(5) 7,976 7,997 8,051 8,071 8,071
SO(2) Allowances Purchased (Tons)(6) 31 29 29 27 27
NO(x) Allowances Purchased (Tons)(7) (40) (44) (52) (59) (59)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 88.55 22.14 0.00 0.00 0.00
Contract Energy Price ($/MWh)(10) 15.04 9.32 0.00 0.00 0.00
Other Capacity Price ($/MWh)(11) 83.65 85.52 87.87 89.72 92.15
Other Energy Price ($/MWh)(11) 64.92 68.21 70.54 72.47 74.42
Fuel Price ($/MMBtu)(12) 6.44 6.63 6.89 7.12 7.28
SO(2) Allowances ($/Ton)(13) 236 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,413 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock(15) 0 0 0 0 0
Harris(15) 68,534 16,004 0 0 0
Stanton 0 0 0 0 0
Wansley 0 0 0 0 0
Other Electricity Revenues
Dahlberg 65,352 68,823 69,702 71,845 73,787
Goat Rock(15) 249,030 250,726 249,999 248,007 254,706
Harris 129,916 215,449 267,310 254,573 261,450
Stanton 96,644 102,049 105,224 103,189 105,976
Wansley 203,922 198,770 209,801 204,004 209,515
------- ------- ------- ------- -------
Total Operating Revenues 813,398 851,821 902,036 881,618 905,434
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 1,283 2,712 2,188 2,798 2,873
Goat Rock 122,411 119,726 119,947 116,909 119,588
Harris 65,526 104,871 131,239 121,331 124,105
Stanton 57,977 60,594 62,917 60,608 61,829
Wansley 85,153 78,809 86,529 81,830 83,644
Emissions Allowances (90) (105) (128) (149) (152)
Purchased Power 1,985 0 0 0 0
Operations & Maintenance 40,367 41,030 42,038 42,319 43,462
Major Maintenance 37,110 36,643 37,586 36,218 37,196
Administration 15,186 15,595 16,015 16,447 16,893
Insurance 3,887 3,991 4,100 4,210 4,324
Property Taxes 14,134 14,174 14,214 14,256 14,299
Other 270 270 270 270 270
------- ------- ------- ------- -------
Total Operating Expenses 445,198 478,309 516,914 497,047 508,330
NET OPERATING REVENUES ($000) 368,200 373,512 385,122 384,571 397,104
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 4.19 4.25 4.38 4.37 4.52
2002-12 AVG INTEREST COVERAGE(19)
|
FOOTNOTES TO EXHIBIT A-5
The footnotes to Exhibit A-5 are the same as the footnotes for Exhibit A-1, except:
1. The Output of the Generating Facilities is assumed to be 5 percent less than that assumed in the Base Case.
EXHIBIT A-6
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY E - REDUCED AVAILABILITY
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
------------------------ -------- ------- -------- -------- -------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 2,489 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 35.3% 14.0% 19.9% 24.6% 29.9% 31.7%
Contract Energy Sales (GWh)(4) 4,404 5,016 8,263 10,912 13,205 14,039
Other Energy Sales (GWh)(4) 179 908 406 0 45 42
-------- ------- -------- -------- -------- --------
Total Energy Sales (GWh) 4,584 5,924 8,669 10,912 13,250 14,082
Fuel Consumption (BBtu) 31,633 44,238 62,983 78,043 94,276 99,533
Average Net Heat Rate (Btu/kWh)(5) 7,041 7,723 7,706 7,749 7,704 7,652
SO(2) Allowances Purchased (Tons)(6) 15 23 31 39 47 50
NO(x) Allowances Purchased (Tons)(7) 0 0 (104) 4 49 65
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 51.53 60.50 70.74 73.59 77.20 77.23
Contract Energy Price ($/MWh)(10) $ 4.49 7.53 7.36 8.30 7.85 7.72
Other Capacity Price ($/MWh)(11) $ 16.49 16.35 16.84 16.38 16.82 17.27
Other Energy Price ($/MWh)(11) $ 34.62 42.72 42.12 0.00 61.97 60.77
Fuel Price ($/MMBtu)(12) $ 3.99 4.93 4.70 0.00 3.32 3.45
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 29,322 46,845 45,510 2,666 0 0
Goat Rock (15) $ 38,262 80,211 104,282 118,011 120,868 123,609
Harris (15) $ 0 43,036 105,817 133,356 136,751 137,046
Stanton $ 0 10,440 45,996 46,633 47,025 47,386
Wansley $ 70,491 89,145 86,584 91,721 98,215 99,632
Other Electricity Revenues
Dahlberg $ 0 0 0 11,886 16,246 16,432
Goat Rock (15) $ 7,134 11,787 6,185 0 0 0
Harris $ 0 36,639 15,206 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
-------- ------- -------- -------- -------- --------
Total Operating Revenues $145,209 318,103 409,580 404,273 419,105 424,105
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 0 0 0 0 1,658 1,681
Goat Rock $ 5,212 8,296 4,349 0 0 0
Harris $ 0 27,206 10,670 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
Emissions Allowances $ 0 0 (209) (127) (76) (58)
Purchased Power $ 8,127 9,479 21,121 35,828 43,060 47,245
Operations & Maintenance $ 9,294 19,408 27,907 30,779 34,485 36,324
Major Maintenance $ 11,127 17,365 24,408 29,609 35,568 38,447
Administration $ 3,022 7,866 10,457 10,739 11,029 11,328
Insurance $ 756 1,995 2,676 2,748 2,821 2,899
Property Taxes $ 3,566 10,113 13,679 13,706 13,734 13,762
Other $ 90 216 270 270 270 270
-------- ------- -------- -------- -------- --------
Total Operating Expenses $ 41,193 101,945 115,327 123,552 142,549 151,899
NET OPERATING REVENUES ($000) $104,016 216,158 294,253 280,721 276,556 272,206
ANNUAL INTEREST($000)(17) $ 20,964 66,271 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 4.96 3.26 3.35 3.19 3.14 3.10
2002-12 AVG INTEREST COVERAGE(19) 3.47
Year Ending December 31, 2008 2009 2010 2011 2012
------------------------ -------- -------- ------- ------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 29.9% 30.8% 30.6% 29.3% 28.1%
Contract Energy Sales (GWh)(4) 13,229 13,543 7,180 4,131 3,314
Other Energy Sales (GWh)(4) 42 93 5,805 8,141 8,481
-------- -------- ------- ------- --------
Total Energy Sales (GWh) 13,271 13,635 12,985 12,272 11,795
Fuel Consumption (BBtu) 94,438 97,158 97,012 93,099 89,816
Average Net Heat Rate (Btu/kWh)(5) 7,704 7,710 7,745 7,762 7,794
SO(2) Allowances Purchased (Tons)(6) 46 48 50 47 44
NO(x) Allowances Purchased (Tons)(7) 57 54 65 58 55
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 77.26 77.28 40.00 60.62 84.98
Contract Energy Price ($/MWh)(10) 8.39 8.44 8.40 11.74 10.98
Other Capacity Price ($/MWh)(11) 51.65 51.68 60.96 66.92 71.14
Other Energy Price ($/MWh)(11) 61.15 65.13 48.23 49.52 50.91
Fuel Price ($/MMBtu)(12) 3.56 3.67 4.67 4.82 4.99
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock(15) 123,117 124,941 79,486 24,459 0
Harris(15) 139,673 138,368 87,426 72,017 72,338
Stanton 47,827 48,107 48,446 48,653 48,946
Wansley 99,814 102,485 0 0 0
Other Electricity Revenues
Dahlberg 43,986 47,485 56,894 63,605 66,975
Goat Rock(15) 0 0 82,754 214,331 266,015
Harris 0 0 89,006 135,838 137,185
Stanton 0 0 0 0 0
Wansley 0 0 216,958 222,996 223,370
-------- -------- ------- ------- --------
Total Operating Revenues 454,417 461,386 660,970 781,899 814,829
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 1,690 3,852 5,136 6,487 6,194
Goat Rock 0 0 44,441 113,400 141,630
Harris 0 0 48,593 73,111 73,394
Stanton 0 0 0 0 0
Wansley 0 0 112,362 110,827 107,807
Emissions Allowances (68) (69) 127 124 119
Purchased Power 45,888 48,967 22,239 14,202 14,205
Operations & Maintenance 36,414 38,321 39,452 40,078 40,404
Major Maintenance 37,696 39,359 40,388 44,963 40,358
Administration 11,633 11,946 12,270 12,599 12,942
Insurance 2,978 3,057 3,140 3,224 3,311
Property Taxes 13,792 13,822 13,853 13,885 13,918
Other 270 270 270 270 270
-------- -------- ------- ------- --------
Total Operating Expenses 150,293 159,525 342,272 433,171 454,552
NET OPERATING REVENUES ($000) 304,124 301,861 318,698 348,729 360,277
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 3.46 3.43 3.62 3.97 4.10
2002-12 AVG INTEREST COVERAGE(19)
|
EXHIBIT A-6
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY E - REDUCED AVAILABILITY
Year Ending December 31, 2013 2014 2015 2016 2017 2018
------------------------ -------- ------- -------- -------- -------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,668 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 25.5% 23.3% 21.3% 20.7% 19.6% 18.8%
Contract Energy Sales (GWh)(4) 2,803 1,680 1,494 1,432 1,296 1,291
Other Energy Sales (GWh)(4) 7,804 7,962 7,338 7,145 6,803 6,477
-------- ------- -------- -------- -------- --------
Total Energy Sales (GWh) 10,606 9,642 8,832 8,577 8,099 7,768
Fuel Consumption (BBtu) 82,119 74,780 69,394 67,533 63,981 61,181
Average Net Heat Rate 7,844 7,859 7,958 7,974 7,997 7,976
(Btu/kWh)(5)
SO(2) Allowances Purchased 41 37 35 34 31 31
(Tons)(6)
NO(x) Allowances Purchased 32 15 (7) (19) (37) (40)
(Tons)(7)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price $ 79.61 88.55 88.55 88.55 88.55 88.55
($/kW-yr)(9)
Contract Energy Price ($/MWh)(10) $ 11.89 11.02 12.47 12.98 13.20 14.50
Other Capacity Price ($/MWh)(11) $ 74.88 74.48 77.98 78.32 79.53 83.65
Other Energy Price ($/MWh)(11) $ 52.31 55.56 57.92 60.04 63.19 64.92
Fuel Price ($/MMBtu)(12) $ 5.20 5.58 5.80 6.03 6.26 6.44
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230 236
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350 2,413
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 0 0 0 0 0 0
Goat Rock (15) $ 0 0 0 0 0 0
Harris (15) $ 72,851 71,243 71,353 71,308 69,836 71,447
Stanton $ 40,010 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
Other Electricity Revenues
Dahlberg $ 68,326 65,077 70,126 68,371 66,300 68,690
Goat Rock (15) $262,371 257,549 250,798 251,001 248,170 253,600
Harris $136,852 131,175 128,604 126,979 128,934 132,261
Stanton $ 8,288 86,342 88,611 91,735 98,970 98,253
Wansley $211,948 205,564 204,544 209,919 211,385 208,412
-------- ------- -------- -------- -------- --------
Total Operating Revenues $800,646 816,950 814,036 819,313 823,595 832,663
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 5,123 3,382 4,777 3,687 1,784 1,283
Goat Rock $137,915 133,087 125,870 127,761 124,358 122,242
Harris $ 72,957 67,860 65,658 64,507 65,236 65,436
Stanton $ 4,542 52,159 52,900 54,908 58,852 57,910
Wansley $ 96,916 92,598 89,007 92,750 89,846 85,039
Emissions Allowances $ 73 40 (9) (37) (80) (91)
Purchased Power $ 7,022 6,834 6,400 6,350 6,131 6,268
Operations & Maintenance $ 39,787 39,207 39,429 39,936 39,905 40,347
Major Maintenance $ 40,392 36,662 35,506 36,045 36,766 36,214
Administration $ 13,290 13,650 14,016 14,395 14,786 15,186
Insurance $ 3,400 3,493 3,587 3,684 3,784 3,887
Property Taxes $ 13,952 13,986 14,022 14,058 14,096 14,134
Other $ 270 270 270 270 270 270
-------- ------- -------- -------- -------- --------
Total Operating Expenses $435,640 463,229 451,434 458,314 455,736 448,125
NET OPERATING REVENUES ($000) $365,006 353,721 362,602 360,999 367,859 384,538
ANNUAL INTEREST($000) (17) $ 87,938 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 4.15 4.02 4.12 4.11 4.18 4.37
2002-12 AVG INTEREST COVERAGE (19) 3.47
Year Ending December 31, 2019 2020 2021 2022
------------------------ -------- -------- -------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 17.8% 17.7% 16.3% 16.3%
Contract Energy Sales (GWh)(4) 393 0 0 0
Other Energy Sales (GWh)(4) 6,885 7,251 6,664 6,664
-------- -------- -------- --------
Total Energy Sales (GWh) 7,279 7,251 6,664 6,664
Fuel Consumption (BBtu) 58,206 58,377 53,784 53,784
Average Net Heat Rate 7,997 8,051 8,071 8,071
(Btu/kWh)(5)
SO(2) Allowances Purchased 29 29 27 27
(Tons)(6)
NO(x) Allowances Purchased (44) (53) (59) (59)
(Tons)(7)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70
Contract Capacity Price 22.14 0.00 0.00 0.00
($/kW-yr)(9)
Contract Energy Price ($/MWh)(10) 9.07 0.00 0.00 0.00
Other Capacity Price ($/MWh)(11) 85.52 87.87 89.72 92.15
Other Energy Price ($/MWh)(11) 68.21 70.54 72.47 74.42
Fuel Price ($/MMBtu)(12) 6.63 6.89 7.12 7.28
SO(2) Allowances ($/Ton)(13) 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0
Goat Rock (15) 0 0 0 0
Harris (15) 16,750 0 0 0
Stanton 0 0 0 0
Wansley 0 0 0 0
Other Electricity Revenues
Dahlberg 72,231 73,206 75,416 77,454
Goat Rock (15) 255,400 254,815 252,927 259,758
Harris 218,141 272,242 259,630 266,643
Stanton 103,718 106,935 104,976 107,810
Wansley 203,371 214,520 208,830 214,472
-------- -------- -------- --------
Total Operating Revenues 869,611 921,718 901,779 926,137
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 2,712 2,188 2,792 2,867
Goat Rock 119,557 119,782 116,751 119,426
Harris 103,662 131,050 121,162 123,931
Stanton 60,524 62,845 60,540 61,758
Wansley 78,706 86,410 81,720 83,530
Emissions Allowances (106) (129) (150) (153)
Purchased Power 0 0 0 0
Operations & Maintenance 41,012 42,018 42,301 43,444
Major Maintenance 35,773 36,685 35,383 36,336
Administration 15,595 16,015 16,447 16,893
Insurance 3,991 4,100 4,210 4,324
Property Taxes 14,174 14,214 14,256 14,299
Other 270 270 270 270
-------- -------- -------- --------
Total Operating Expenses 475,870 515,447 495,682 506,925
NET OPERATING REVENUES ($000) 393,741 406,271 406,097 419,212
ANNUAL INTEREST($000) (17) 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 4.48 4.62 4.62 4.77
2002-12 AVG INTEREST COVERAGE (19)
|
FOOTNOTES TO EXHIBIT A-6
The footnotes to Exhibit A-6 are the same as the footnotes for Exhibit A-1, except:
2. Availability of the Generating Facilities is assumed to be 5 percentage
points less than that assumed in the Base Case based on a 5 percentage
point increase in the forced outage rate for each of the Generating
Facilities.
3. Capacity factor is assumed to decrease such that annual generation for
each of the Generating Facilities is reduced by 5 percent from that
assumed in the Base Case.
EXHIBIT A-7
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY F - INCREASED HEAT RATE
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
------------------------ -------- ------- -------- -------- -------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 2,489 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 37.2% 14.7% 21.0% 25.9% 31.5% 33.5%
Contract Energy Sales (GWh)(4) 4,404 5,016 8,263 10,912 13,205 14,039
Other Energy Sales (GWh)(4) 268 1,053 541 0 47 45
-------- ------- -------- -------- -------- --------
Total Energy Sales (GWh) 4,672 6,069 8,804 10,912 13,252 14,084
Fuel Consumption (BBtu) 35,079 48,996 69,726 86,398 104,369 110,190
Average Net Heat Rate (Btu/kWh)(5) 7,406 8,113 8,091 8,136 8,089 8,034
SO(2) Allowances Purchased (Tons)(6) 18 24 35 43 52 54
NO(x) Allowances Purchased (Tons)(7) 0 0 (86) 34 83 100
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 51.53 60.50 70.74 73.59 77.20 77.23
Contract Energy Price ($/MWh)(10) $ 3.74 6.67 6.35 7.41 6.97 6.81
Other Capacity Price ($/MWh)(11) $ 16.49 16.35 16.84 16.38 16.82 17.27
Other Energy Price ($/MWh)(11) $ 34.62 42.40 41.94 0.00 61.96 60.77
Fuel Price ($/MMBtu)(12) $ 6.22 5.53 7.07 0.00 34.44 38.28
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 29,314 46,845 45,510 2,666 0 0
Goat Rock(15) $ 38,262 80,211 102,843 115,863 118,401 120,799
Harris(15) $ 0 41,885 104,015 130,927 133,940 133,948
Stanton $ 0 9,979 43,224 44,444 44,835 45,119
Wansley $ 67,182 86,422 84,281 88,736 94,110 95,062
Other Electricity Revenues
Dahlberg $ 0 0 0 11,886 16,393 16,570
Goat Rock(15) $ 10,188 16,024 9,284 0 0 0
Harris $ 0 38,269 17,711 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
-------- ------- -------- -------- -------- --------
Total Operating Revenues $144,946 319,636 406,868 394,522 407,679 411,498
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 7 0 0 0 1,837 1,861
Goat Rock $ 9,442 14,807 10,420 4,719 5,412 5,909
Harris $ 0 30,450 16,067 4,630 5,492 6,056
Stanton $ 0 455 2,805 2,246 2,219 2,260
Wansley $ 3,292 2,709 2,290 2,972 4,083 4,548
Emissions Allowances $ 0 0 (173) (91) (34) (15)
Purchased Power $ 2,712 3,005 7,907 12,547 14,913 16,306
Operations & Maintenance $ 9,572 19,738 28,350 31,352 35,228 37,135
Major Maintenance $ 11,605 17,836 25,034 30,385 36,548 39,529
Administration $ 3,022 7,866 10,457 10,739 11,029 11,328
Insurance $ 756 1,995 2,676 2,748 2,821 2,899
Property Taxes $ 3,566 10,113 13,679 13,706 13,734 13,762
Other $ 90 216 270 270 270 270
-------- ------- -------- -------- -------- --------
Total Operating Expenses $ 44,065 109,189 119,784 116,223 133,552 141,848
NET OPERATING REVENUES ($000) $100,881 210,447 287,084 278,300 274,127 269,651
ANNUAL INTEREST($000)(17) $ 20,964 66,271 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 4.81 3.18 3.26 3.16 3.12 3.07
2002-12 AVG INTEREST COVERAGE(19) 3.42
Year Ending December 31, 2008 2009 2010 2011 2012
------------------------ -------- -------- ------- ------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 31.5% 32.4% 32.2% 30.9% 29.6%
Contract Energy Sales (GWh)(4) 13,229 13,543 7,180 4,131 3,314
Other Energy Sales (GWh)(4) 44 98 6,195 8,623 8,942
-------- -------- ------- ------- --------
Total Energy Sales (GWh) 13,273 13,640 13,375 12,754 12,256
Fuel Consumption (BBtu) 104,550 107,559 107,399 103,065 99,430
Average Net Heat Rate (Btu/kWh)(5) 8,089 8,095 8,132 8,150 8,183
SO(2) Allowances Purchased (Tons)(6) 53 54 53 51 51
NO(x) Allowances Purchased (Tons)(7) 91 90 101 94 90
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 77.26 77.28 40.00 60.62 84.98
Contract Energy Price ($/MWh)(10) 7.44 7.48 8.11 11.21 10.33
Other Capacity Price ($/MWh)(11) 51.65 51.68 60.96 66.92 71.14
Other Energy Price ($/MWh)(11) 61.12 65.13 48.21 49.51 50.91
Fuel Price ($/MMBtu)(12) 38.68 20.49 4.81 4.84 4.99
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock(15) 120,373 122,063 79,486 24,459 0
Harris(15) 136,630 135,212 87,426 72,017 72,338
Stanton 45,554 46,021 46,331 46,458 46,800
Wansley 95,352 97,508 0 0 0
Other Electricity Revenues
Dahlberg 44,122 47,808 57,322 64,136 67,506
Goat Rock(15) 0 0 87,654 224,321 275,993
Harris 0 0 94,299 141,055 142,338
Stanton 0 0 0 0 0
Wansley 0 0 225,029 231,031 231,168
-------- -------- ------- ------- --------
Total Operating Revenues 442,031 448,612 677,547 803,477 836,143
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 1,871 4,263 5,683 7,175 6,852
Goat Rock 5,830 6,230 54,323 126,376 154,567
Harris 5,938 6,209 58,707 83,068 83,419
Stanton 2,265 2,157 2,156 2,127 2,117
Wansley 4,439 4,951 122,300 120,604 117,258
Emissions Allowances (24) (21) 193 194 192
Purchased Power 15,856 16,830 8,255 5,588 5,585
Operations & Maintenance 37,200 39,177 40,334 40,963 41,271
Major Maintenance 38,745 40,454 42,286 46,076 41,444
Administration 11,633 11,946 12,270 12,599 12,942
Insurance 2,978 3,057 3,140 3,224 3,311
Property Taxes 13,792 13,822 13,853 13,885 13,918
Other 270 270 270 270 270
-------- -------- ------- ------- --------
Total Operating Expenses 140,793 149,343 363,770 462,150 483,145
NET OPERATING REVENUES ($000) 301,238 299,269 313,777 341,327 352,998
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 3.43 3.40 3.57 3.88 4.01
2002-12 AVG INTEREST COVERAGE(19)
|
EXHIBIT A-7
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY F - INCREASED HEAT RATE
Year Ending December 31, 2013 2014 2015 2016 2017 2018
------------------------ -------- ------- -------- -------- -------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,668 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 26.9% 24.5% 22.5% 21.8% 20.6% 19.8%
Contract Energy Sales (GWh)(4) 2,803 1,680 1,494 1,432 1,296 1,291
Other Energy Sales (GWh)(4) 8,281 8,395 7,737 7,533 7,172 6,829
-------- ------- -------- -------- -------- --------
Total Energy Sales (GWh) 11,084 10,075 9,231 8,965 8,469 8,120
Fuel Consumption (BBtu) 90,913 82,784 76,822 74,762 70,830 67,731
Average Net Heat Rate
(Btu/kWh)(5) 8,236 8,251 8,356 8,373 8,396 8,375
SO(2) Allowances Purchased
(Tons)(6) 46 41 39 37 34 34
NO(x) Allowances Purchased
(Tons)(7) 65 45 22 9 (11) (15)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price
($/kW-yr)(9) $ 79.61 88.55 88.55 88.55 88.55 88.55
Contract Energy Price ($/MWh)(10) $ 11.92 11.02 12.47 12.98 13.20 14.50
Other Capacity Price ($/MWh)(11) $ 74.88 74.48 77.98 78.32 79.53 83.65
Other Energy Price ($/MWh)(11) $ 52.34 55.56 57.92 60.04 63.19 64.92
Fuel Price ($/MMBtu)(12) $ 5.20 5.52 5.72 5.96 6.19 6.37
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230 236
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350 2,413
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 0 0 0 0 0 0
Goat Rock(15) $ 0 0 0 0 0 0
Harris(15) $ 72,851 71,243 71,353 71,308 69,836 71,447
Stanton $ 40,086 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
Other Electricity Revenues
Dahlberg $ 68,758 65,363 70,529 68,676 66,445 68,791
Goat Rock(15) $271,900 266,857 259,513 259,723 256,662 262,136
Harris $141,858 135,894 133,067 131,352 133,374 136,753
Stanton $ 11,653 89,439 91,775 95,005 102,605 101,731
Wansley $218,882 212,190 210,896 216,560 218,032 214,655
-------- ------- -------- -------- -------- --------
Total Operating Revenues $825,988 840,986 837,133 842,624 846,954 855,513
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 5,673 3,733 5,284 4,077 1,972 1,420
Goat Rock $150,415 145,022 136,984 139,025 135,384 133,317
Harris $ 82,593 76,811 74,123 72,839 73,464 73,993
Stanton $ 9,562 56,093 56,912 59,136 63,507 62,460
Wansley $105,203 100,417 96,487 100,851 97,764 92,572
Emissions Allowances $ 143 106 55 26 (20) (30)
Purchased Power $ 2,341 2,278 2,133 2,117 2,044 2,089
Operations & Maintenance $ 40,586 39,938 40,135 40,627 40,559 40,983
Major Maintenance $ 41,406 37,592 36,561 37,978 37,710 37,110
Administration $ 13,290 13,650 14,016 14,395 14,786 15,186
Insurance $ 3,400 3,493 3,587 3,684 3,784 3,887
Property Taxes $ 13,952 13,986 14,022 14,058 14,096 14,134
Other $ 270 270 270 270 270 270
-------- ------- -------- -------- -------- --------
Total Operating Expenses $468,834 493,391 480,569 489,084 485,321 477,391
NET OPERATING REVENUES ($000) $357,153 347,595 356,564 353,540 361,633 378,122
ANNUAL INTEREST($000)(17) $ 87,938 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 4.06 3.95 4.05 4.02 4.11 4.30
2002-12 AVG INTEREST COVERAGE(19) 3.42
Year Ending December 31, 2019 2020 2021 2022
------------------------ -------- -------- -------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 18.8% 18.7% 17.2% 17.2%
Contract Energy Sales (GWh)(4) 393 0 0 0
Other Energy Sales (GWh)(4) 7,281 7,645 7,026 7,026
-------- -------- -------- --------
Total Energy Sales (GWh) 7,674 7,645 7,026 7,026
Fuel Consumption (BBtu) 64,438 64,628 59,542 59,542
Average Net Heat Rate
(Btu/kWh)(5) 8,397 8,453 8,474 8,474
SO(2) Allowances Purchased
(Tons)(6) 32 32 29 29
NO(x) Allowances Purchased
(Tons)(7) (21) (31) (36) (36)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70
Contract Capacity Price
($/kW-yr)(9) 22.14 0.00 0.00 0.00
Contract Energy Price ($/MWh)(10) 9.07 0.00 0.00 0.00
Other Capacity Price ($/MWh)(11) 85.52 87.87 89.72 92.15
Other Energy Price ($/MWh)(11) 68.21 70.54 72.47 74.42
Fuel Price ($/MMBtu)(12) 6.54 6.78 7.00 7.16
SO(2) Allowances ($/Ton)(13) 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0
Goat Rock(15) 0 0 0 0
Harris(15) 16,750 0 0 0
Stanton 0 0 0 0
Wansley 0 0 0 0
Other Electricity Revenues
Dahlberg 72,445 73,371 75,626 77,671
Goat Rock(15) 263,922 263,158 261,061 268,112
Harris 226,790 281,380 267,973 275,211
Stanton 107,421 110,763 108,620 111,553
Wansley 209,232 220,843 214,741 220,541
-------- -------- -------- --------
Total Operating Revenues 896,560 949,515 928,021 953,088
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 3,001 2,419 3,092 3,176
Goat Rock 130,469 130,715 127,352 130,313
Harris 115,133 143,091 132,145 135,210
Stanton 65,355 67,923 65,369 66,718
Wansley 85,565 94,096 88,902 90,906
Emissions Allowances (45) (70) (89) (92)
Purchased Power 0 0 0 0
Operations & Maintenance 41,642 42,659 42,912 44,072
Major Maintenance 36,643 37,586 36,218 37,196
Administration 15,595 16,015 16,447 16,893
Insurance 3,991 4,100 4,210 4,324
Property Taxes 14,174 14,214 14,256 14,299
Other 270 270 270 270
-------- -------- -------- --------
Total Operating Expenses 511,793 553,018 531,083 543,285
NET OPERATING REVENUES ($000) 384,767 396,497 396,938 409,803
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 4.38 4.51 4.51 4.66
2002-12 AVG INTEREST COVERAGE(19)
|
FOOTNOTES TO EXHIBIT A-7
The footnotes to Exhibit A-7 are the same as the footnotes for Exhibit A-1, except:
4. Heat rate for each of the Generating Facilities is assumed to be 5 percent higher than that assumed in the Base Case.
EXHIBIT A-8
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY G - INCREASED OPERATING EXPENSES
Year Ending December 31, 2002(1) 2003 2004 2005 2006 2007
----------------------- -------- ------- -------- -------- -------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 2,489 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 37.2% 14.7% 21.0% 25.9% 31.5% 33.5%
Contract Energy Sales (GWh)(4) 4,404 5,016 8,263 10,912 13,205 14,039
Other Energy Sales (GWh)(4) 268 1,053 541 0 47 45
-------- ------- -------- -------- -------- --------
Total Energy Sales (GWh) 4,672 6,069 8,804 10,912 13,252 14,084
Fuel Consumption (BBtu) 33,408 46,663 66,407 82,283 99,399 104,941
Average Net Heat Rate (Btu/kWh)(5) 7,053 7,727 7,706 7,749 7,704 7,652
SO(2) Allowances Purchased (Tons)(6) 17 23 32 41 50 53
NO(x) Allowances Purchased (Tons)(7) 0 0 (95) 19 66 83
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) $ 51.53 60.50 70.74 73.59 77.20 77.23
Contract Energy Price ($/MWh)(10) $ 3.72 6.65 6.32 7.38 6.95 6.78
Other Capacity Price ($/MWh)(11) $ 16.49 16.35 16.84 16.38 16.82 17.27
Other Energy Price ($/MWh)(11) $ 34.62 42.40 41.94 0.00 61.96 60.77
Fuel Price ($/MMBtu)(12) $ 3.94 4.83 4.61 0.00 3.32 3.45
SO(2) Allowances ($/Ton)(13) $ 154 158 162 167 171 176
NO(x) Allowances ($/Ton)(14) $ 0 0 2,006 1,707 1,753 1,800
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 29,314 46,845 45,510 2,666 0 0
Goat Rock (15) $ 38,262 80,211 102,807 115,807 118,340 120,728
Harris (15) $ 0 41,860 103,979 130,878 133,881 133,884
Stanton $ 0 9,970 43,098 44,343 44,734 45,020
Wansley $ 67,098 86,353 84,225 88,659 94,005 94,945
Other Electricity Revenues
Dahlberg $ 0 0 0 11,886 16,393 16,570
Goat Rock (15) $ 10,188 16,024 9,284 0 0 0
Harris $ 0 38,269 17,711 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
-------- ------- -------- -------- -------- --------
Total Operating Revenues $144,862 319,533 406,614 394,239 407,353 411,147
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 0 0 0 0 1,747 1,771
Goat Rock $ 7,677 12,076 6,935 0 0 0
Harris $ 0 28,273 12,714 0 0 0
Stanton $ 0 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
Emissions Allowances $ 0 0 (191) (108) (55) (34)
Purchased Power $ 2,712 3,005 7,907 12,547 14,913 16,306
Operations & Maintenance $ 10,530 21,715 31,189 34,486 38,751 40,849
Major Maintenance $ 12,766 19,618 27,538 33,424 40,203 43,482
Administration $ 3,326 8,653 11,504 11,815 12,133 12,460
Insurance $ 831 2,194 2,944 3,022 3,105 3,189
Property Taxes $ 3,924 11,125 15,045 15,075 15,106 15,138
Other $ 99 238 296 296 296 296
-------- ------- -------- -------- -------- --------
Total Operating Expenses $ 41,865 106,897 115,881 110,556 126,200 133,457
NET OPERATING REVENUES ($000) $102,997 212,636 290,733 283,683 281,154 277,690
ANNUAL INTEREST($000) (17) $ 20,964 66,271 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 4.91 3.21 3.31 3.23 3.20 3.16
2002-12 AVG INTEREST COVERAGE (19) 3.50
Year Ending December 31, 2008 2009 2010 2011 2012
----------------------- -------- -------- ------- ------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,678 4,678 4,678 4,678
Average Capacity Factor (%)(3) 31.5% 32.4% 32.2% 30.9% 29.6%
Contract Energy Sales (GWh)(4) 13,229 13,543 7,180 4,131 3,314
Other Energy Sales (GWh)(4) 44 98 6,195 8,623 8,942
-------- -------- ------- ------- --------
Total Energy Sales (GWh) 13,273 13,640 13,375 12,754 12,256
Fuel Consumption (BBtu) 99,572 102,438 102,287 98,157 94,697
Average Net Heat Rate (Btu/kWh)(5) 7,704 7,710 7,745 7,762 7,794
SO(2) Allowances Purchased (Tons)(6) 50 51 51 49 48
NO(x) Allowances Purchased (Tons)(7) 74 72 83 77 73
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price ($/kW-yr)(9) 77.26 77.28 40.00 60.62 84.98
Contract Energy Price ($/MWh)(10) 7.42 7.45 8.10 11.19 10.30
Other Capacity Price ($/MWh)(11) 51.65 51.68 60.96 66.92 71.14
Other Energy Price ($/MWh)(11) 61.12 65.13 48.21 49.51 50.91
Fuel Price ($/MMBtu)(12) 3.56 3.67 4.63 4.78 4.95
SO(2) Allowances ($/Ton)(13) 181 186 191 196 201
NO(x) Allowances ($/Ton)(14) 1,849 1,899 1,950 2,002 2,057
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0 0
Goat Rock (15) 120,302 121,990 79,486 24,459 0
Harris (15) 136,567 135,147 87,426 72,017 72,338
Stanton 45,450 45,922 46,232 46,361 46,701
Wansley 95,237 97,381 0 0 0
Other Electricity Revenues
Dahlberg 44,122 47,808 57,322 64,136 67,506
Goat Rock (15) 0 0 87,654 224,321 275,993
Harris 0 0 94,299 141,055 142,338
Stanton 0 0 0 0 0
Wansley 0 0 225,029 231,031 231,168
-------- -------- ------- ------- --------
Total Operating Revenues 441,678 448,248 677,448 803,380 836,044
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 1,782 4,057 5,413 6,835 6,530
Goat Rock 0 0 47,765 120,080 148,195
Harris 0 0 52,219 76,505 76,796
Stanton 0 0 0 0 0
Wansley 0 0 117,408 115,791 112,603
Emissions Allowances (44) (45) 163 160 156
Purchased Power 15,856 16,830 8,255 5,588 5,585
Operations & Maintenance 40,924 43,094 44,366 45,060 45,397
Major Maintenance 42,619 44,496 46,514 50,682 45,587
Administration 12,797 13,141 13,498 13,862 14,235
Insurance 3,275 3,364 3,455 3,549 3,645
Property Taxes 15,170 15,203 15,237 15,273 15,309
Other 296 296 296 296 296
-------- -------- ------- ------- --------
Total Operating Expenses 132,675 140,436 354,589 453,681 474,335
NET OPERATING REVENUES ($000) 309,003 307,812 322,859 349,698 361,709
ANNUAL INTEREST($000) (17) 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 3.51 3.50 3.67 3.98 4.11
2002-12 AVG INTEREST COVERAGE (19)
|
EXHIBIT A-8
SOUTHERN POWER COMPANY, INC. FACILITIES
PROJECTED OPERATING RESULTS
SENSITIVITY G - INCREASED OPERATING EXPENSES
Year Ending December 31, 2013 2014 2015 2016 2017 2018
------------------------ -------- ------- -------- -------- -------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,678 4,668 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 26.9% 24.5% 22.5% 21.8% 20.6% 19.8%
Contract Energy Sales (GWh)(4) 2,803 1,680 1,494 1,432 1,296 1,291
Other Energy Sales (GWh)(4) 8,281 8,395 7,737 7,533 7,172 6,829
-------- ------- -------- -------- -------- --------
Total Energy Sales (GWh) 11,084 10,075 9,231 8,965 8,469 8,120
Fuel Consumption (BBtu) 86,581 78,843 73,165 71,203 67,456 64,506
Average Net Heat Rate
(Btu/kWh)(5) 7,844 7,859 7,958 7,974 7,996 7,976
SO(2) Allowances Purchased
(Tons)(6) 43 39 37 34 34 32
NO(x) Allowances Purchased
(Tons)(7) 48 31 7 (5) (23) (29)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70 2.70 2.70
Contract Capacity Price
($/kW-yr)(9) $ 79.61 88.55 88.55 88.55 88.55 88.55
Contract Energy Price ($/MWh)(10) $ 11.92 11.02 12.47 12.98 13.20 14.50
Other Capacity Price ($/MWh)(11) $ 74.88 74.48 77.98 78.32 79.53 83.65
Other Energy Price ($/MWh)(11) $ 52.34 55.56 57.92 60.04 63.19 64.92
Fuel Price ($/MMBtu)(12) $ 5.17 5.52 5.74 5.97 6.20 6.38
SO(2) Allowances ($/Ton)(13) $ 207 212 218 224 230 236
NO(x) Allowances ($/Ton)(14) $ 2,112 2,169 2,228 2,288 2,350 2,413
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg $ 0 0 0 0 0 0
Goat Rock(15) $ 0 0 0 0 0 0
Harris(15) $ 72,851 71,243 71,353 71,308 69,836 71,447
Stanton $ 40,086 0 0 0 0 0
Wansley $ 0 0 0 0 0 0
Other Electricity Revenues
Dahlberg $ 68,758 65,363 70,529 68,676 66,445 68,791
Goat Rock(15) $271,900 266,857 259,513 259,723 256,662 262,136
Harris $141,858 135,894 133,067 131,352 133,374 136,753
Stanton $ 11,653 89,439 91,775 95,005 102,605 101,731
Wansley $218,882 212,190 210,896 216,560 218,032 214,655
-------- ------- -------- -------- -------- --------
Total Operating Revenues $825,988 840,986 837,133 842,624 846,954 855,513
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg $ 5,398 3,557 5,036 3,886 1,875 1,352
Goat Rock $144,260 139,150 131,512 133,474 129,954 127,866
Harris $ 76,321 70,936 68,599 67,375 68,128 68,423
Stanton $ 7,449 54,155 54,935 57,058 61,212 60,221
Wansley $101,122 96,568 92,806 96,861 93,865 88,860
Emissions Allowances $ 109 73 24 (5) (50) (61)
Purchased Power $ 2,341 2,278 2,133 2,117 2,044 2,089
Operations & Maintenance $ 44,639 43,932 44,151 44,690 44,613 45,079
Major Maintenance $ 45,547 41,352 40,218 41,776 41,480 40,819
Administration $ 14,618 15,014 15,418 15,836 16,264 16,704
Insurance $ 3,742 3,842 3,946 4,053 4,162 4,274
Property Taxes $ 15,346 15,384 15,423 15,463 15,504 15,546
Other $ 296 296 296 296 296 296
-------- ------- -------- -------- -------- --------
Total Operating Expenses $461,189 486,538 474,498 482,880 479,349 471,468
NET OPERATING REVENUES ($000) $364,799 354,448 362,635 359,744 367,605 384,045
ANNUAL INTEREST($000) (17) $ 87,938 87,938 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE (18) 4.15 4.03 4.12 4.09 4.18 4.37
2002-12 AVG INTEREST COVERAGE (19) 3.50
Year Ending December 31, 2019 2020 2021 2022
------------------------ -------- -------- -------- --------
CONSOLIDATED
PERFORMANCE
Annual Average Capacity (MW)(2) 4,668 4,668 4,668 4,668
Average Capacity Factor (%)(3) 18.8% 18.7% 17.2% 17.2%
Contract Energy Sales (GWh)(4) 393 0 0 0
Other Energy Sales (GWh)(4) 7,281 7,645 7,026 7,026
-------- -------- -------- --------
Total Energy Sales (GWh) 7,674 7,645 7,026 7,026
Fuel Consumption (BBtu) 61,368 61,548 56,707 56,707
Average Net Heat Rate
(Btu/kWh)(5) 7,997 8,050 8,071 8,071
SO(2) Allowances Purchased
(Tons)(6) 30 30 28 28
NO(x) Allowances Purchased
(Tons)(7) (32) (41) (48) (48)
COMMODITY PRICES
General Inflation (%)(8) 2.70 2.70 2.70 2.70
Contract Capacity Price
($/kW-yr)(9) 22.14 0.00 0.00 0.00
Contract Energy Price ($/MWh)(10) 9.07 0.00 0.00 0.00
Other Capacity Price ($/MWh)(11) 85.52 87.87 89.72 92.15
Other Energy Price ($/MWh)(11) 68.21 70.54 72.47 74.42
Fuel Price ($/MMBtu)(12) 6.57 6.83 7.06 7.22
SO(2) Allowances ($/Ton)(13) 242 249 256 262
NO(x) Allowances ($/Ton)(14) 2,478 2,545 2,614 2,684
OPERATING REVENUES ($000)
Contract Electricity Revenues
Dahlberg 0 0 0 0
Goat Rock(15) 0 0 0 0
Harris(15) 16,750 0 0 0
Stanton 0 0 0 0
Wansley 0 0 0 0
Other Electricity Revenues
Dahlberg 72,445 73,371 75,626 77,671
Goat Rock(15) 263,922 263,158 261,061 268,112
Harris 226,790 281,380 267,973 275,211
Stanton 107,421 110,763 108,620 111,553
Wansley 209,232 220,843 214,741 220,541
-------- -------- -------- --------
Total Operating Revenues 896,560 949,515 928,021 953,088
OPERATING EXPENSES ($000)(16)
Fuel
Dahlberg 2,856 2,301 2,942 3,022
Goat Rock 125,097 125,325 122,136 124,957
Harris 109,565 137,165 126,738 129,657
Stanton 62,975 65,417 62,988 64,273
Wansley 82,184 90,313 85,366 87,275
Emissions Allowances (74) (99) (118) (122)
Purchased Power 0 0 0 0
Operations & Maintenance 45,803 46,924 47,205 48,481
Major Maintenance 40,307 41,345 39,840 40,916
Administration 17,153 17,617 18,092 18,582
Insurance 4,390 4,508 4,632 4,757
Property Taxes 15,590 15,634 15,680 15,727
Other 296 296 296 296
-------- -------- -------- --------
Total Operating Expenses 506,141 546,746 525,796 537,820
NET OPERATING REVENUES ($000) 390,419 402,769 402,225 415,268
ANNUAL INTEREST($000)(17) 87,938 87,938 87,938 87,938
ANNUAL INTEREST COVERAGE(18) 4.44 4.58 4.57 4.72
2002-12 AVG INTEREST COVERAGE(19)
|
FOOTNOTES TO EXHIBIT A-8
The footnotes to Exhibit A-8 are the same as the footnotes for Exhibit A-1, except:
13. Assumed to be 10 percent higher than that assumed in the Base Case.
14. Assumed to be 10 percent higher than that assumed in the Base Case.
16. Assumed to be 10 percent higher than that assumed in the Base Case.
ANNEX B
SOUTHERN POWER
Independent Market Expert's Report
for the SERC and FRCC Regions
June 5, 2002
SOUTHERN POWER
Independent Market Expert's Report
for the SERC and FRCC Regions
June 5, 2002
Company Confidential
(C) PA Knowledge Limited 2002
PA Consulting Group, Inc.
390 Interlocken Crescent
Prepared by: Todd Filsinger Suite 410
Broomfield
Colorado 80021
Tel: +1 720 566 9920
Fax: +1 720 566 9680
www.paconsulting.com
Southern Power - June 5, 2002
|
DISCLAIMER
This report presents the analysis of PA Consulting Group, Inc. (PA) for the following regions:
- SERC - Southeastern Electric Reliability Council
- FRCC - Florida Reliability Coordinating Council
(i) some information in the report is necessarily based on predictions and estimates of future events and behaviors,
(ii) such predictions or estimates may differ from that which other experts specializing in the electricity industry might present,
(iii) the provision of a report by PA does not obviate the need for potential investors to make further appropriate inquiries as to the accuracy of the information included therein, or to undertake an analysis of their own,
(iv) this report is not intended to be a complete and exhaustive analysis of the subject issues and therefore will not consider some factors that are important to a potential investor's decision making, and
(v) PA and its employees cannot accept liability for loss suffered in consequence of reliance on the report. Nothing in PA's report should be taken as a promise or guarantee as to the occurrence of any future events.
Southern Power - June 5, 2002 i
This page intentionally left blank.
ii Southern Power - June 5, 2002
TABLE OF CONTENTS [PA LOGO]
DISCLAIMER i
1. INTRODUCTION 1-1
1.1 Background 1-1
1.2 Asset Portfolio Description 1-1
1.3 Key Assumptions 1-1
1.4 Results 1-2
1.5 Report Structure 1-4
2. COMPETITION AND RESTRUCTURING IN THE U.S. ELECTRIC INDUSTRY 2-1
2.1 Introduction 2-1
2.2 Recent Federal Restructuring 2-1
2.2.1 FERC Order 2000 2-1
2.2.2 SAFE Act of 2001 2-1
2.2.3 Energy Policy Act of 2002 2-1
2.2.4 The Prospect for Legislation in 2002 2-2
2.3 State Restructuring 2-2
2.3.1 Alabama 2-2
2.3.2 Florida 2-4
2.3.3 Georgia 2-4
2.4 Reliability and Competitive Markets 2-5
2.4.1 Introduction 2-5
2.4.2 Overview of Regional Markets 2-5
2.4.3 Power Pools 2-6
2.4.4 ISOs -- Independent System Operators 2-6
2.4.5 RTOs -- Regional Transmission Organizations 2-6
2.4.6 Additional RTO-Related Actions by FERC 2-9
3. APPROACH TO MARKET PRICE FORECASTING 3-1
3.1 Introduction 3-1
3.2 Market Price Forecasting Principles 3-2
3.2.1 Economic Equilibrium 3-2
3.2.2 Capacity and Energy Markets 3-3
3.2.3 Price Bidding and Formulation 3-4
3.3 Step 1 - Review of Market Characteristics 3-5
3.4 Step 2 - Development of Assumptions 3-5
3.5 Step 3 - Fundamental Analysis 3-5
3.5.1 Energy Price and Dispatch Simulation 3-6
3.5.2 Capacity Compensation Simulation 3-6
3.5.3 Capacity Add/Retire Simulation 3-6
3.6 Step 4 - Plant-Level Dispatch Analysis 3-8
|
Southern Power - June 5, 2002 iii
Table of Contents
4. KEY ASSUMPTIONS 4-1
4.1 Introduction 4-1
4.2 Demand and Energy Forecasts 4-1
4.3 Fuel Prices 4-1
4.3.1 Natural Gas 4-2
4.3.2 Fuel Oil 4-4
4.3.3 Coal 4-5
4.3.4 Hydroelectric 4-7
4.3.5 Nuclear 4-7
4.4 SO(2)/NO(x) Emission Allowance Prices 4-7
4.4.1 Sulfur Dioxide Emission Allowance Prices 4-7
4.4.2 Development of NO(x) Emission Allowance Prices 4-8
4.5 Electricity Imports 4-9
4.5.1 Transfer Capabilities 4-9
4.5.2 Wheeling Rates 4-10
4.6 Capacity Additions and Retirements 4-10
4.7 Financial Assumptions 4-13
4.7.1 Generic Plant Characteristics 4-13
4.7.2 Other Expenses 4-13
4.7.3 Economic and Financial Assumptions 4-13
5. REGIONAL ANALYSIS 5-1
5.1 Introduction 5-1
5.2 Risk Issues and Sensitivity Cases 5-1
5.3 SERC 5-3
5.3.1 Background 5-3
5.3.2 Power Markets 5-3
5.3.3 Transmission System 5-3
5.3.4 Market Characteristics 5-4
5.3.5 Price Forecasts 5-5
5.3.6 Critical Market Factors 5-8
5.3.7 Dispatch Curves 5-9
5.4 FRCC 5-10
5.4.1 Background 5-10
5.4.2 Power Markets 5-10
5.4.3 Transmission System 5-10
5.4.4 Market Characteristics 5-11
5.4.5 Price Forecasts 5-12
5.4.6 Critical Market Factors 5-15
5.4.7 Dispatch Curves 5-16
|
iv Southern Power - June 5, 2002
1. INTRODUCTION
1.1 BACKGROUND
PA Consulting Group, Inc. (PA) was retained by Southern Power to assess future prices for electric energy and capacity in the markets in which Southern Power owns, has rights to, or is developing generating assets, as shown in Table 1-1. The markets analyzed in this report include:
- SERC - Southeastern Electric Reliability Council
- FRCC - Florida Reliability Coordinating Council.
This report assesses the price projections based on stated assumptions for electric prices in the markets mentioned above and presents the results of PA's analysis for the study period 2002-2021. The actual unit specific results were provided to the independent engineer (R.W. Beck) for inclusion in the financial projections for the years 2002-2022. The results for the final year, 2022, were held constant in real terms from the projections for 2021.
1.2 ASSET PORTFOLIO DESCRIPTION
Southern Power owns or has ownership interests in
FIGURE 1-1
SOUTHERN POWER ASSETS
IN GENERATION PORTFOLIO
[MAP]
companies with 4,777 MW of generation capacity, as summarized in Figure 1-1 and Table 1-1.
TABLE 1-1
REGIONAL MARKET LOCATION
OF SOUTHERN POWER GENERATING ASSETS
----------------------------------------------------------
REGIONAL ASSET TYPE TOTAL CAPACITY(1)
MARKET DISTRIBUTION (MW)
---------------------------------------------------------
SERC Gas/Oil - 100% 4,366
FRCC Gas/Oil - 100% 633(2)
|
(1) Capacity rating at 70 degrees Fahrenheit.
(2) Southern Power owns a 65% interest (or 411 MW) in the Stanton facility.
1.3 KEY ASSUMPTIONS
There are many important assumptions in the development of the price projections, including but not limited to demand growth, fuel prices, and capacity additions and retirements. Variations in these three factors, as well as other assumptions, can lead to significant variations in the end price results. PA has tested the forecasts presented herein for variations of these three assumptions, which represent the high fuel, low fuel, and overbuild sensitivity cases analyzed in Chapter 5.
Another key fundamental assumption on which this analysis is based is the concept of a competitive wholesale market. These results are based on the assumptions that rational markets for electricity exist, that markets are attempting to adjust to economic equilibrium, and that market players make decisions based on sound economic judgment.
DEMAND. Peak demand in the regions is forecasted to grow from 2002 through 2021 at annual compound growth rates of approximately(1):
SERC 2.0%
FRCC 2.3%
(1) Source: EIA Annual Energy Outlook 2002.
Southern Power - June 5, 2002 1-1
FUEL PRICES. Futures prices in the near term and a consensus fuel price forecast (derived from published fuel price forecasts) in the long term were utilized to develop fuel price forecasts for natural gas and oil. (See Chapter 4.) The marginal nuclear fuel costs were assumed to be $5.70/MWh, while the marginal coal prices were developed for each individual unit.
CAPACITY ADDITIONS AND RETIREMENTS. PA estimates capacity additions and retirements based on three main principles. First, near-term (2002 through 2004) capacity additions are based upon PA's investigation of new capacity addition announcements through a review of publicly available sources of new capacity addition information. These sources include newspapers, trade journals, developer and utility web sites and contacts, and industry news publications. PA has developed a proprietary database that tracks the status of new capacity additions and evaluates the probability of announced projects actually being constructed. Second, capacity additions post-2005 are based on economic analyses of generic new units. Third, units that are not competitive are retired in accordance with the methodology described in further detail in Chapter 3.
PA's base case results incorporate PA's best estimate of new capacity additions and retirements. The capacity and online dates for specific projects are identified in Chapter 4. These unit assumptions are based on PA's best estimate at the time the analyses are prepared. Due to deregulation of the electric industry, changes in economic conditions, the sometimes volatile nature of the industry, and the lead times associated with building new plants, these assumptions are likely to deviate from what actually transpires. Individual unit characteristics such as online dates and capacities may change. Projects may be cancelled or new ones may be added. The assumed capacity additions and retirements included in this analysis are summarized in Table 1-2.
------------------------------------------------------------------
TABLE 1-2
CAPACITY ADDITIONS AND RETIREMENTS(1)
------------------------------------------------------------------
REGION CAPACITY CAPACITY CAPACITY
ADDITIONS ADDITIONS RETIREMENTS
2002-2004 (MW) 2005-2021 (MW) 2002-2021 (MW)
------------------------------------------------------------------
SERC 33,061 61,310 8,413
FRCC 7,015 26,155 98
|
(1) Total capacity at the end of 2001 in each region was:
SERC 178,283 MW FRCC 41,548 MW |
A more complete discussion of the three key assumptions of demand growth, fuel prices, and capacity additions and retirements may be found in Chapter 4.
1.4 RESULTS
PA modeled the generation asset portfolio under alternative price and capacity scenarios. Before summarizing these scenarios, it is important to acknowledge that this portfolio valuation approach incorporates a conservative view on asset and portfolio management. In other words, PA simplifies real world asset and portfolio management decision-making by excluding the potential for incremental returns and corresponding risk enabled through dynamic portfolio optimization strategies and techniques.
PA has adopted this view for three reasons:
1. Dynamic portfolio optimization assumes a fairly high degree of decision-making sophistication that requires state-of-the-art tools, systems, and risk management acumen. Assessing this type of risk and portfolio decision-making capacity is not part of this report. Implementing an aggressive portfolio optimization strategy with a weak risk management framework can degrade rather than improve returns.
2. Portfolio optimization modeling is a complex analysis that attracts significant debate across the industry. This analytical complexity and the lack of an industry-accepted standard to quantify such value and risk would prevent a report, which attempts to include such value, from meeting objectives set forth by financial institutions for integrity and expert opinion.
3. Portfolio optimization modeling results are driven by market data (e.g., historic spot, volatility, and forwards) that often do not exist or that require a fair amount of extrapolation to create a useful data set. PA's approach of creating a forecast to better represent a given market over a given time horizon than a single snapshot of forward market data is not conducive to portfolio optimization analysis.
While PA has adopted this conservative position, we recognize that it is possible for asset owners to generate incremental portfolio returns above and beyond the compensation mechanisms contemplated in this analysis if supported by a best-practice risk and portfolio management framework.
1-2 Southern Power - June 5, 2002
Using the assumptions presented in Chapter 4, PA developed a base case for each region that reflects PA's assessment, given the stated set of assumptions in Chapter 4, of future market prices. It should be recognized that these cases will vary to the extent the input assumptions change, and such assumptions should be reviewed with the same rigor as the resulting forecast. The base case is described below:
- The BASE CASE incorporates the actual futures gas prices through December 2004 (2003 for oil). Prices then decrease linearly to the consensus forecast price in years 2006 (2005 for oil). The base case is constructed using generation and load growth data stated in the EIA Forms 411 combined with PA's merchant plant and in-house fuel forecast. This method is discussed in further detail in Chapter 4.
In addition to the base case, PA developed three sensitivity cases. These sensitivity cases are intended to provide an indication as to how changes in certain input parameters such as fuel prices and new capacity additions affect forecasted price results. These sensitivities are not intended to be bounding, or worst case scenarios. Their purpose is to determine the impact of an assumed change on the price forecast results. The magnitude of the changes in input parameters may be greater than or less than those assumed in the sensitivities. The three sensitivity cases evaluated are as follows:
- The LOW FUEL CASE evaluates the effects of lower gas and oil prices represented as a $0.50/MMBtu reduction in the 2002 consensus gas and oil prices with escalation remaining unchanged (coal prices are not changed).
- The HIGH FUEL CASE evaluates the effects of higher gas and oil prices represented as a $0.50/MMBtu increase in the 2002 gas and oil prices with escalation remaining unchanged.
- The OVERBUILD CASE evaluates an over-exuberance of merchant plant development in the regions reviewed. In addition to the base case merchant capacity, the overbuild case assumes that additional capacity is constructed:
------------- --------------- ---------------
2003 2004
------------- --------------- ---------------
SERC 8,135 MW 2,425 MW
FRCC 5,700 MW 1,560 MW
|
Gross revenue is total revenue minus variable costs (including fixed fuel). Figure 1-2 shows the proportion of projected gross revenues for each region while Figure 1-3 shows the percentage difference in terms of gross revenues for each sensitivity case as compared to the base case.
FIGURE 1-2
SUMMARY OF PROJECTED GROSS REVENUES
(BASE CASE)(1)
[CHART]
FIGURE 1-3
GROSS REVENUES
(% CHANGE FROM BASE CASE)(1)
[CHART]
Southern Power - June 5, 2002 1-3
FIGURE 1-4
AVERAGE REGIONAL ALL-IN PRICE FORECASTS(1) ($/MWH)
[CHART]
The all-in market price combines the energy price with the price received by generators for other relevant generation services and energy products in the market. The all-in price reflects PA's estimate of the total market price that generators will recover in the markets at a 100% capacity factor. The all-in price results of the study are summarized in Figure 1-4.
1.5 REPORT STRUCTURE
The remainder of this report is structured as follows:
- CHAPTER 2 provides an overview of competition and restructuring in the U.S. electricity markets.
- CHAPTER 3 reviews the methodology used to develop the forecasts presented in Chapter 5.
- CHAPTER 4 provides key assumptions that drive the forecast results in Chapter 5.
- CHAPTER 5 contains a discussion of each of the relevant generation markets organized by NERC transmission region. Each regional section includes an overview of the market with a discussion of the current generation mix and a summary of PA's fundamental load and generation requirements forecast for the period 2002-2021. Each section also provides forecasts of energy prices and capacity compensation for the base case as well as associated sensitivity cases. Dispatch curves are provided for 2006 and 2012. These curves illustrate the marginal cost of the last generator for the given load shown on the horizontal axis. The location of the assets in the generating portfolio are identified on the curves.
1-4 Southern Power - June 5, 2002 |
2. COMPETITION AND RESTRUCTURING IN THE U.S. ELECTRIC INDUSTRY 2.1 INTRODUCTION |
Over the past two decades, the structure of the electric power industry has been increasingly shaped by the emergence of a prevailing market trend in the networked industries, namely the introduction of competition in formerly regulated markets. This chapter examines the recent development of competitive power markets in the United States.
2.2 RECENT FEDERAL RESTRUCTURING
2.2.1 FERC ORDER 2000
In 1999, the Federal Energy Regulatory Commission (FERC) issued Order 2000 promoting the formation of Regional Transmission Organizations (RTOs), which represent a broadening of the ISO concept. Public utilities that own, operate, or control transmission are left to decide the type of RTO they wish to form or to join. The purpose of the order is to provide greater guarantees to wholesale market participants of open access to the transmission systems of FERC jurisdictional utilities. By pushing for additional levels of independence over the control and operation of the transmission system, it is FERC's hope that the formation of RTOs will further promote competition and greater investment efficiency in the wholesale and retail power sectors. Order 2000 is discussed in greater detail in Section 2.4.4.
2.2.2 SAFE ACT OF 2001
While the Securing America's Future Energy (SAFE) Act of 2001 currently does not have an electricity section, HR 3406 -- a bill that many lobbyists believe will be incorporated into the SAFE Act legislation -- contains many provisions of importance to electric power utilities and other wholesale market participants, including:
- repeal of the Public Utility Holding Company Act (PUHCA)
- repeal of the Public Utility Regulatory Policies Act (PURPA) mandate requiring utilities to purchase from and sell to qualified cogeneration facilities (QFs)
- replacement of NERC with an electric reliability organization that has mandatory standards.
- repeal of FERC's merger authority
- requirement that all transmission-owning utilities participate in an RTO within 12 months of the bill's enactment
- grant of transmission siting authority to FERC where states have delayed transmission projects involving interstate commerce
- tax deferral for the sale of transmission assets by utilities that join an RTO
- open access to the grid by transmission-owning utilities at fair rates.
HR 3406 further requires that FERC establish transmission pricing policies and standards to upgrade the system, and contains $33.5 billion in tax incentives -- primarily for research and development associated with the production of traditional energy sources. The SAFE Act was introduced to the House of Representatives on July 27, 2001, as HR 4. On August 2, 2001, the bill was passed by a vote of 240-189 and was then sent to the Senate.
2.2.3 ENERGY POLICY ACT OF 2002
Unlike the legislation passed in the House, the Senate's Energy Policy Act of 2002 does contain specific provisions for electricity. In several ways, the Senate bill compares directly to HR 3406, as both bills call for:
- Repeal of PUHCA. However, the Senate bill transfers PUHCA's merger authority from the Securities and Exchange Commission to FERC.
- Repeal of the PURPA mandate requiring utilities to purchase from and sell to QFs, but only if FERC determines that QFs have access to day-ahead and real-time power markets and competitive suppliers.
- Replacement of NERC with an electric reliability organization that has mandatory standards.
- Open access to the grid by transmission-owning utilities at fair rates.
Southern Power - June 5, 2002 2-1
However, the Senate legislation does contain several points in which it differs significantly from the House bill, such as:
- FERC's jurisdiction over merger and acquisition activity is expanded in the Senate bill rather than repealed. Under the language of the bill, FERC would be given authority to oversee mergers of holding companies that own utilities, mergers of generation-only utilities, and acquisitions of natural gas companies by electric companies.
- Unlike HR 3406, the Energy Policy Act contains no references to RTOs or siting policies.
- Also, under the Senate bill, utilities would be required to generate 10% of their electricity from renewable energy facilities by 2020 -- an increase from the 2% currently required.
Other important general aspects of the bill include $14 billion in tax credits and subsidies for new fossil fuel production (oil and gas production, coal mining, etc.), energy efficiency provisions, and energy produced from renewable resources. Included in this tax package is the recognition of capital gains on the sale of assets by electric utilities to independent transmission companies over an eight-year time frame. Almost $2 billion in incentives also are outlined to promote electricity generation from "clean coal" plants under the bill.
The Senate Energy Policy Act of 2002 was passed on April 25, 2002 by a vote of 88-11.
2.2.4 THE PROSPECT FOR LEGISLATION IN 2002
Selected House and Senate members must now agree on the final form of compromise legislation based on both House and Senate energy bills. Once this final bill is completed, it may then be put to a Congressional vote in the fall of 2002. However, while the White House is very interested in getting energy legislation passed in 2002, some believe that, given election year politics, there is a chance the energy legislation will not be put to a vote in the fall session.
2.3 STATE RESTRUCTURING
Restructuring in the United States has progressed in a piecemeal fashion because of the division of authority over various aspects of the electric power industry between state and federal legislative and regulatory bodies. While restructuring of the wholesale retail electricity markets has developed largely under federal jurisdiction, retail electricity markets have developed on a state-by-state basis. As illustrated in Figure 2-1, 24 states plus the District of Columbia have either enacted retail choice restructuring legislation or issued a comprehensive regulatory order on restructuring. The remaining states are either investigating the subject or have done nothing to address the topic.
A summary of the restructuring status of Alabama, Florida, and Georgia follows.
2.3.1 ALABAMA
As a low-cost electricity state, Alabama has been slowly and deliberately progressing toward reform of its current system. It has taken action to ensure stranded cost recovery when a competitive market is eventually adopted. Utilities will have the opportunity to recover stranded costs through exit fees assessed on customers who choose alternate suppliers. This May 1996 law was challenged in federal court, but the challenge was dismissed. Since there is no retail choice in Alabama at this time, the law has not yet been applied. No other restructuring legislation has been introduced.
After it opened a restructuring inquiry in June 1998, the Alabama PSC conducted restructuring studies and also received input from several market participants:
- Alabama Power and other public utilities urged the Alabama PSC to take no immediate action to restructure the state's electric industry, citing low power costs in the state and problems with restructuring in other states. The utilities recommended the PSC take two to five years to review the issue and learn from other states' mistakes. Alabama Power called for full recovery of stranded costs if restructuring was ordered and opposed a regional ISO and the forced divesture of the utility's generating assets, claiming a code of conduct and some restructuring of its business operations could handle any market power issues.
- Alabama Industrial Energy Consumers (AIEC) proposed retail choice beginning January 2001 and completed by the end of 2004. It argued that even with the current low energy prices, customers in the state would benefit from retail choice. AIEC claimed Alabama will lose its current rate advantage as high-priced states surrounding it restructure, noting also that some low-cost states had recognized the benefits of
2-2 Southern Power - June 5, 2002
FIGURE 2-1
STATUS OF STATE ELECTRIC INDUSTRY RESTRUCTURING ACTIVITY AS OF MARCH 2002
[MAP]
retail choice. The industrial users argued that Alabama could already draw key lessons from California, including the need to avoid high stranded-cost charges and a power exchange approach. On the issue of stranded costs, AIEC said that Alabama Power's existing plants have a low book values and the company should have no stranded costs to recover. If any costs were shown, AIEC said, the burden should be split between ratepayers and stockholders.
- While cooperatives and municipal power groups sided with Alabama Power in saying the state should go slow on restructuring, they sided with the industrial consumers on the issue of mitigating Alabama Power's market power once restructuring occurred by creating a regional ISO to run the transmission grid and requiring Alabama Power to unbundle or divest its generation assets.
In November 1999, the Alabama PSC opened a proceeding, which it closed in October 2000, deciding that deregulation was not in the public interest. It stated that research did not demonstrate all consumers in Alabama would continue to receive adequate, safe, reliable, and efficient energy services at fair and reasonable prices under a restructured retail market. The Alabama PSC also stated that it "cannot mandate or otherwise allow retail competition or electric industry restructuring without state enabling legislation" and that its own role during and after a transition would depend on the form restructuring takes in Alabama.
Southern Power - June 5, 2002 2-3
2.3.2 FLORIDA
Florida has yet to restructure its utility industry to introduce competition. In March 2000, a restructuring study bill was introduced that created a commission to examine state rules on generation, transmission, and delivery of electricity as well as study other states' restructuring policies. The bill was defeated because it contained an amendment requiring a moratorium on merchant plants while the study was conducted. However, the governor subsequently created the Florida Energy 2020 Study Commission by executive order. In September 2000, the 17-member study commission began studying Florida's electric energy needs over the next 20 years and determining how best to supply those needs while ensuring adequate electric reserves.
In its February 2001 interim report, the study commission unanimously recommended a plan to restructure Florida's wholesale power market, permitting construction of merchant plants and requiring IOUs to move all generating assets to affiliated exempt wholesale generators. The output from the transferred assets would be committed to the utilities under long-term contracts. The amount of power under contract would decline over time, which would increasingly open the market for merchant power plants. Legislation enacting the plan remained in committee during the 2001 session.
With the slow pace of regulatory change, current Florida law, and recent court rulings in the region, merchant power plant development has been severely hampered in Florida. An April 2000 ruling by the Florida Supreme Court upheld a plant siting law which discouraged the development of merchant plants and given incumbent firms the advantage in new plant construction. The U.S. Supreme Court declined to hear the case in March 2001. In its written November 2001 report, the study commission did not recommend repealing the plant siting law, but encouraged the removal of barriers to merchant plant development.
The study commission released its final report on December 11, 2001. The report presented the commission's "strategy for assuring that Florida will have an adequate, reliable and affordable supply of electricity." The commission recommended removing barriers to entry for merchant plants to facilitate the development of new generation capacity, providing nondiscriminatory access to the transmission system through the creation of an RTO, fully implementing wholesale competition within six years, and establishing a new study commission in 2004 "to assess the status of wholesale competition and make recommendations as to whether retail competition should be allowed."
2.3.3 GEORGIA
Georgia was a pioneer in retail competition. It was the first state to allow choice for electric customers with loads greater than 900 kW (1973) and also the first to legislate retail access for IOUs' natural gas customers (1997, modified in 1999).
In 1997, the Georgia PSC conducted a series of restructuring hearings on consumer impacts, the environment, energy efficiency, stranded costs, and changes in public policy. In January 1998, the PSC issued a report that set forth an action plan to continue investigations into asset recovery practices and cost-of-service versus unbundled rates and to initiate new dockets on planning, reliability, and stranded cost recovery.
However, Georgia's retail electric rates are currently at or below the national average, providing little momentum to any industry restructuring effort. Legislation to create a study committee on competitive electricity markets failed to pass in 1997, while no retail choice bills were introduced in either 1999 or 2000. In January 2001, the Georgia PSC chairman told a legislative committee that gas deregulation was a failure in that it did not protect residential and small commercial customers from price spikes. Georgia has been plagued by high gas prices, consumer complaints, loss of competing sellers, and a high rate of unpaid bills. Based on the sour gas deregulation experience, the chairman did not support electricity deregulation.
In March 2001, the governor signed SB 93, which provides net metering for solar, wind, and fuel cell systems.
The Georgia legislature and governor have pledged to take action in the 2002 session to fix the gas deregulation problem. Several options are being considered, including introduction of a large, regulated supplier into the market as a stabilizing force.
2-4 Southern Power - June 5, 2002 |
2.4 RELIABILITY AND COMPETITIVE MARKETS 2.4.1 INTRODUCTION |
Much of the development of competitive market structures and system operations in recent years has involved the balancing of system reliability concerns with the desire to allow the market to drive the development of the electricity industry. This balancing of market forces and reliability concerns is evident in shape of the transmission industry and evolving competitive electricity markets today.
2.4.2 OVERVIEW OF REGIONAL MARKETS
In the United States, competition in the wholesale markets is, in part, defined and shaped by North American Electric Reliability Council (NERC) regions, shown in Figure 2-2.
- ECAR - East Central Area Reliability Coordination Agreement
- ERCOT - Electric Reliability Council of Texas
- FRCC - Florida Reliability Coordinating Council
- MAIN - Mid-America Interconnected Network
- MAPP - Mid-Continent Area Power Pool
- NPCC - Northeast Power Coordinating Council
- NEPOOL - New England Power Pool
- NEW YORK - New York Power Pool
- PJM - Pennsylvania-New Jersey-Maryland Interconnection LLC (defined as Mid-Atlantic Area Council or MAAC by NERC)
- SERC - Southeastern Electric Reliability Council
- SPP - Southwest Power Pool
- WSCC - Western Systems Coordinating Council
- CALIFORNIA
- NORTHWEST
- AZ-NM-NV - Arizona-New Mexico-Northern Nevada
- CO-WY - Colorado-Wyoming.
The high-voltage transmission system and the corresponding bulk power markets in the United States were originally developed to ensure reliability of supply within franchised utility territories. They were not designed specifically to support commercial transactions and power trading.
FIGURE 2-2
NERC REGIONS IN THE UNITED STATES
[MAP]
Southern Power - June 5, 2002 2-5
Stemming from the Northeast blackout of 1965, the utility industry organized voluntary regional reliability councils to coordinate reliability practices in the United States and parts of Canada and Mexico. The continental United States is currently divided into ten voluntary regional reliability councils whose policies are, in turn, coordinated by NERC.
The reliability councils establish guidelines for all member utilities and suppliers. Two of the principal guidelines established by each council concern:
- MINIMUM OPERATING RESERVES. Operating reserves represent generating units that are maintained in a spinning or fast-start condition so that they can rapidly respond to an outage at another unit or some other emergency condition.
- MAXIMUM AREA CONTROL ERROR. Area control error is a measure of the difference between actual and scheduled power flows. It is controlled to maintain the standard operating frequency of the alternating current power supply system and to prevent damage to generators and other equipment connected to the grid.
The ten regional reliability councils are part of three, larger, interconnected and synchronized electric power systems:
- The Eastern Interconnection (ECAR, MAIN, MAPP, NPCC (excluding Quebec),
PJM, SERC, SPP, and FRCC)
- The Western Interconnection (WSCC)
- Electric Reliability Council of Texas Interconnection (ERCOT).
These three systems are interconnected through limited direct current (DC) transmission ties. However, the alternating current (AC) systems of these three systems are not synchronized and operate independently of one another.
2.4.3 POWER POOLS
While regional reliability councils provide standards and guidelines, they do not provide actual electricity dispatch, scheduling, or other transmission system operational services. To capture the economies of scale associated with load and resource pooling as well as joint-dispatch and transmission operations, utilities in several regions voluntarily established power pools, the first of which, the PJM Power Pool, was established in 1927. Power pools attempt to capture the benefits associated with being part of a larger generation and transmission system (including improved reliability) through coordinated maintenance planning and shared operating reserves, as well as the blending of load profiles and generating resources. Power pools vary widely throughout the United States in terms of the degree to which they provide coordination and services.
2.4.4 ISOS -- INDEPENDENT SYSTEM OPERATORS
FERC's landmark Order No. 888 actively encouraged the formation of ISOs to replace power pools in scheduling, dispatching, and operating regional transmission systems. The intent was, and continues to be, that the ISO provide independent grid management through a process in which all system users are treated equally. Many of the utilities in the most tightly coordinated power pools in the United States were among the first to file ISO applications with FERC, but the ISO trend is now progressing through the industry as an increasing number of states enact legislation implementing retail access. However, with the advent of Order 2000 the current movement in the industry is from ISOs to RTOs.
2.4.5 RTOS -- REGIONAL TRANSMISSION ORGANIZATIONS
While ISOs provided a starting point for the restructuring of electricity markets, FERC's drive to increase the open access to the transmission system and to expand dissemination of transmission system information led the Commission to call for the creation of RTOs. In Order 2000, FERC required that every FERC jurisdictional utility that owns, operates, or controls transmission facilities must join an independent RTO. FERC was flexible in the design process, stating that ISOs, transcos, combinations of the two, or other organizational forms would be accepted for consideration.
FERC established minimum characteristics and functions of RTOs, but left it to individual entities to determine how they are to meet such requirements.
The minimum characteristics that an RTO must satisfy include:
- independence from "market" participants"
- geographic scope and regional configuration
2-6 Southern Power - June 5, 2002 |
- operational authority (the RTO must serve as the security coordinator
for its region)
- short-term reliability (through scheduling and
re-dispatch.
|
The minimum functions that an RTO must satisfy include:
- tariff administration and design
- congestion management
- parallel path flow
- ancillary services
- open-access same-time information system (OASIS), including the calculation and posting of total transmission capability (TTC) available transfer capability (ATC)
- market monitoring
- planning and expansion
- interregional coordination.
While FERC allows for flexibility in structuring RTOs that satisfy the minimum characteristics and functions, there are three fundamental models that have been proposed in varying forms:
- ISO MODEL. A non-profit, independent entity operates and assumes control of transmission assets owned by multiple transmission owners. In addition to the functions that operational ISOs currently perform, an ISO also would have to assume planning and expansion functions to meet RTO requirements. This model is representative of the traditional ISO entities: ISO-NE, New York ISO, CA-ISO, and PJM (prior to the creation of PJM West).
- HYBRID MODEL. Under a hybrid model, a non-profit entity would serve as an umbrella organization over one or more for-profit, independent transmission-owning companies (ITCs) or gridcos. The non-profit entity and the ITCs/gridcos would share functions and collectively constitute an RTO. MISO and the current PJM structures are both examples of hybrid models.
- TRANSCO MODEL. A single for-profit, independent entity (ITC/gridco) operates and controls a collective pool of transmission assets. The transco would perform all RTO functions. The proposed Alliance RTO would have operated as a transco.
Initially, Order 2000 required all transmission owners (with the exception of those participating in an approved ISO) to file with FERC, by October 15, 2000, a proposal to form an RTO. All RTOs were to be operational by December 15, 2001. Alternatively, owners could describe efforts to participate in an RTO, any existing obstacles to RTO participation, and any plans to work toward RTO participation. However, this schedule has slipped considerably and FERC is no longer publicly establishing dates for RTO formation and operation goals.
Through Order 2000, FERC proposed a number of innovative transmission rate mechanisms to encourage the formation of compliant RTO entities by transmission owners. FERC has recently begun to follow through on some of its promised innovative rate mechanisms now that it has seen several proposals that meet its general RTO criteria. However, while FERC is offering financial incentives for RTO participants, it has also threatened financial punishments (such as the loss of market-based rate authority for a company's generating assets) for those utilities that refuse to join approved RTOs.
Figure 2-3 illustrates the current status of RTOs in the United States.
The status of proposed RTO groups is in flux and considerable activity in RTO development is likely in the near term as the approval status and membership of various RTO groups continues to change. While proposal specifics continue to evolve, the following is a brief summary of the some of the current RTO filings submitted to FERC:
CONDITIONALLY APPROVED RTOS
- ALLIANCE RTO. Several Midwest utilities filed to form a for-profit transco, in which they would hold some passive ownership, and FERC conditionally approved the filing on July 12, 2001. However, on December 19, 2001, FERC rejected the Alliance RTO proposal and recommended that the Alliance RTO pursue joining MISO. FERC expressed confidence that the Alliance RTO's desire to be a for-profit RTO could still be accommodated under the MISO umbrella. The commission justified its ruling not to approve the
Southern Power - June 5, 2002 2-7
FIGURE 2-3
RTOs IN THE UNITED STATES
[MAP]
Alliance RTO because it lacked sufficient scope and customers would be better served by a single Midwestern RTO. Recently American Electric Power (AEP), one of the founding members of the Alliance RTO, has announced its intention of now joining PJM.
- GRID FLORIDA, LLC. FP&L, PFC, and TEC filed to form a for-profit company to own and operate assets of FP&L and operate facilities retained by the other two utilities. The application was conditionally approved by FERC on March 28, 2001. However, in November 2001, the Florida Public Service Commission (PSC) ruled that Grid Florida must file as a not-for-profit RTO. Grid Florida filed a plan for service as a non-profit entity on March 20, 2002.
- GRID SOUTH LLC. CP&L, Duke Energy, and SCE&G filed to form a for-profit company (in which transmission owners would hold a passive interest) to operate their grid facilities. Grid South conditionally was approved by FERC on March 14, 2002. However, due to uncertainties surrounding RTO development, the Grid South companies withdrew their applications before the North Carolina and South Carolina Utilities Commissions and are awaiting further direction before re-filing.
OTHERS
- SETRANS GRID COMPANY, LLC. The five Southern Company subsidiaries filed to form an RTO to operate their transmission facilities. Subsequently, Entergy TRANSCO, CLECO Corp., and several southeastern cooperatives and municipalities have also joined the SeTrans RTO group.
ITCS/GRIDCOS
In addition to the RTO filings before FERC, there are also a number of ITCs/gridcos that have been formed or are being formed to operate under various RTOs, including:
- ENTERGY TRANSCO LLC. The five Entergy subsidiaries filed to transfer ownership of their assets to an independent, for-profit entity. Entergy TRANSCO is currently a member of the proposed SeTrans RTO along with Southern Company and several other southeastern utilities.
2-8 Southern Power - June 5, 2002
In general, the development of appropriate regional transmission institutions should improve open access and lead to more efficient transmission grid operation, improve grid reliability, remove the remaining opportunities for discriminatory transmission practices, improve wholesale market performance, and facilitate increased transmission investment.
While each of the proposed RTOs are developing individually and currently have different market products, the final resulting economies should be similar. Thus, PA approaches all regions with the same fundamental analysis.
2.4.6 ADDITIONAL RTO-RELATED ACTIONS BY FERC
In addition to the RTO efforts, several other recent FERC initiatives promise to have profound effects on the existing wholesale energy markets.
A. STANDARD MARKET DESIGN
One initiative that FERC is actively pursuing in conjunction with RTO formation is the creation of a standard market design (SMD) for all centralized wholesale energy markets. FERC believes that having standardized wholesale market structures across the country will greatly facilitate electricity trading. To this end, on March 13, 2002, FERC staff released a report on standard market design. In the report, the FERC staff stated their preference for locational marginal pricing (LMP), the separation of market monitoring units from RTO management, and RTO operation of day-ahead and real-time energy markets. FERC is expected to release a Notice of Public Ratemaking on SMD during the summer of 2002.
B. SUPPLY MARGIN ASSESSMENT
On November 20, 2001, FERC decided to abandon the hub-and-spoke analysis for determining market power in wholesale energy markets and instead embrace the Supply Margin Assessment (SMA) methodology. FERC stated that if utilities do not pass the SMA test, they would be stripped of their abilities to sell power at market-based rates in their control areas. However, utilities that belonged to FERC-approved RTOs would not be subject to such proceedings.
Southern Company, Entergy, and AEP were the first utilities listed by FERC as failing the SMA test. However, due to considerable industry criticism stemming from its SMA decree, FERC delayed SMA mitigation indefinitely on December 19, 2001. The three companies were still required to address the order and provide status reports to FERC by January 10, 2002.
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2-10 Southern Power - June 5, 2002 |
3. APPROACH TO MARKET PRICE FORECASTING 3.1 INTRODUCTION |
PA has developed a proprietary approach to market valuation and price forecasting. This market valuation process (MVP) applies best practice forecasting principles and leverages deep insight into energy market dynamics to deliver sound independent results. PA's proprietary Merchant Generation Database serves as the backbone of this process by ensuring that PA's expert opinion is supported by an accurate view of the ever-changing merchant energy market landscape.
At the highest level, MVP is a five-step process:
1. REVIEW MARKET CHARACTERISTICS. PA scans industry-leading market data sources, assesses internal data repositories and considers recent market developments and their impact on the merchant generation industry.
2. ESTABLISH ASSUMPTIONS. PA works with the stakeholders to review and validate critical plant-specific characteristics and reach consensus on the interpretation of market information.
3. COMPLETE BASELINE FUNDAMENTAL ANALYSIS. To examine the relationship between supply and demand for each region, PA assesses the impact of critical market drivers, including generation characteristics, fuel price forecasts, generation costs of new entrants, and costs of existing plants.
4a. CONDUCT PLANT-LEVEL DISPATCH ANALYSIS. Based on the outcome of the fundamental analysis, PA assesses from a cost vs. price forecast perspective how the generating plants in question are likely to respond to price signals in the market.
4b. REFINE PLANT DISPATCH WITH VOLATILITY ANALYSIS (OPTIONAL). Depending on
the type and location of plants in question, PA will refine the price
forecast to account for price volatility by projecting multiple price
paths calibrated to historical price patterns. This optional price
forecasting step provides for a more refined base from which to conduct
dispatch analysis for specific plants where volatility is relevant.
Based on the specific plants under review and the fact that the
Southern Power units are under contract for the near term for this
analysis, dispatch analysis utilizing volatility was not necessary.
FIGURE 3-1
OVERVIEW OF PA'S MARKET VALUATION PROCESS
[CHART]
This approach is designed to forecast generating unit and or portfolio revenue streams with the highest degree of accuracy that is possible based on market and plant information available at a specific point in time. Analytical results do not guarantee actual performance, however, PA is confident that the analysis most accurately reflects the present industry outlook. To support this claim, it is important to clarify how PA's approach stands apart from other market valuation methodologies:
- PA's proprietary merchant generation database is recognized by market participants as the most accurate, comprehensive and up to date view on industry activity.
- PA's approach uses traditional cost-based fundamental analysis to estimate the market value of generating units.
- PA assumptions on market entry and exit address the need for total cost recovery for new entrants and partial cost recovery for existing plants. Compared to other pure production-cost-based forecasts, this simple assumption provides for a much more realistic market view by addressing the likelihood of partial cost recovery when energy and capacity prices fall.
Southern Power - June 5, 2002 3-1
This chapter describes in detail PA's market valuation process. Section 3.2 outlines the forecasting principles that serve as the analytical foundation to the MVP approach, namely economic equilibrium, the distinction between capacity and energy markets and the evolution of market structures. Section 3.3 marks the beginning of the approach description with an overview of the market characteristics review step. Section 3.4 outlines the process for developing the assumptions (which are covered in detail in Chapter 4). Section 3.5 summarizes the methodology used for estimating market prices for electricity in the fundamental analysis. Section 3.6 follows with a description of the dispatch analysis.
3.2 MARKET PRICE FORECASTING PRINCIPLES
To fully understand PA's market price forecasts and generation portfolio revenue projections, it is important to consider the critical principles that drive the analytical approach. While PA has adopted numerous economic principles, three warrant specific explanation:
- The concept of economic equilibrium and how this impacts the market reaction to returns on equity (or lack thereof) as driven by market prices.
- The capacity component of generation revenue and how energy prices may or may not account for this cost of delivery.
- The cost of generation and the impact that this cost has on market price forecasts.
These principles are addressed below.
3.2.1 ECONOMIC EQUILIBRIUM
A fundamental tenet of PA's market price forecasting approach is that market participants will continuously adjust to support economic equilibrium conditions. PA defines economic equilibrium as the market's attempt to exploit or capture excess margins through entry (e.g., when the return on equity is above market) or exit (e.g., when expected returns fall below market). In other words, excess returns should not persist because participants will enter markets to capture a portion of the above market return until equilibrium is reached. In this explanation, above market return is defined as a return above the agreed upon market rate of return. The agreed upon market rate of return is specified in Chapter 4.
While the concept of economic equilibrium is sound in principle, actual markets may not follow economic equilibrium exactly. Many industries have shown a pendulum of cycling returns, where above market returns are followed by excess entry resulting in low returns which are followed by a disincentive to invest which results in high returns. While such cycling and overshooting is often a characteristic of commodity markets, market participants are, in general, attempting to adjust to a level commensurate with economic equilibrium - that is, they cycle around the price level suggested by economic equilibrium.
To explore the implication of "disequilibrium" conditions, PA generally constructs an overbuild scenario where excess entry is presumed to occur.
PA forces excess entry early in the study period, as the impacts on generation assets are likely to be most severe in this timeframe. Potential near term impacts include:
- decreased energy prices or less attractive spark spread
- diminished capacity revenue
- increased plant retirements.
Subsequent to this period of capacity abundance, PA then examines how the market might return to economic equilibrium. Key considerations in this analysis include:
- regional load growth
- unit retirements during periods of diminished returns
- capacity price recovery.
In summary, PA's market valuation process assumes that markets pursue economic equilibrium conditions. In this pursuit, participants will overreact to both below- and above-market returns. These reactions can cause pendulum-like price variations over the long term. PA captures the overreaction to above-market returns in an overbuild scenario where supply exceeds demand for a short timeframe that is followed by a return to equilibrium through exit and demand growth in subsequent years.
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3.2.2 CAPACITY AND ENERGY MARKETS
PA adopts the view that price forecasts must account for differences in market structure from a generator compensation perspective. There are two main types of generator compensation structures: (1) separate mechanisms for energy and capacity, and (2) energy-only compensation.
Examples of markets with separate compensation mechanisms for energy and capacity include New York, PJM, and England and Wales. In these markets, load-serving entities are required (by administrative rule) to own or contract for a minimum generating capacity reserve level. This capacity obligation creates a market between those that are short capacity and those that have surplus capacity. In a competitive market, potential suppliers compete to provide this capacity.
Competition has spawned capacity trading in the form of daily, monthly or annual capacity obligations. In capacity markets, generators receive compensation for generation availability, i.e., an obligation to produce an agreed upon amount if and when required. In capacity and energy markets, generators attempt to cover their total going-forward costs through a combination of potential revenue sources, including energy markets, capacity markets, ancillary services markets, and options and forwards on a bilateral basis.
This type of market provides generators with multiple opportunities to recover variable costs (e.g., fuel costs, variable maintenance expenses, emission costs) and going-forward costs(2) from the energy market and in the capacity market. One could claim that such a market structure offers a stronger incentive for investment in generating capacity as compared to the energy-only market compensation mechanism.
In market structures without an explicit capacity market (e.g., Australia, New Zealand, California) there is no separate payment to generators for their installed capacity.(3) In this type of market, generators must place greater weight on recovering their going-forward costs solely from the energy market. This heightened attention on a single energy-only compensation mechanism suggests that price volatility may be greater for energy-only markets.
To explain further, in an energy-only market, marginal plants (i.e., the last few generators needed to support reliability) would need to increase their bids above their costs to cover their going-forward costs and earn a sufficient margin when they are called upon to generate. In low load hours, however, there is an abundance of capacity present in the marketplace, and prices are more likely to be driven to marginal cost.
Volatility in the spot market affects pricing in the forward market and for options. Because of the volatility in spot prices, marginal generators, who might not be expected to run but for a few hours, may be able to sell call options for power with high strike prices. These options may or may not actually be "in the money," but market participants may be willing to buy these call options as a hedge against the possibility of even higher market prices.
These contracting mechanisms, fostered from volatile spot prices, provide the means for some of the marginal plants to recover their going-forward costs. They also provide the mechanism for the market to secure an economic level of reserves to meet peak demand. In addition to option contracts and energy prices being set above the marginal cost of the price setting plant, generators can also be compensated for capacity through ancillary services.
Even in markets with capacity obligations and a traded capacity market, energy prices have been quite volatile. This price volatility stems from an intrinsic characteristic of electricity: because there is no inventory, electricity must be produced in real time. This means that errors in forecasting demand or plant commitment, failures in equipment, and market perceptions amplify price movements. This has led to electricity having the most volatile spot prices of any commodity traded.
(2) Going-forward costs are those costs that a generator cannot avoid if it remains in the market, such as fixed operation and maintenance (O&M), property taxes, employee benefits, and incremental capital expenditures. These costs do not include a return on capital or debt service, as these costs are deferrable on capital that is already committed to the marketplace (e.g., sunk).
(3) Forms of energy-only pricing systems also may include payments for spinning and operating reserves. However, payments for ancillary services are differentiated from capacity reserve payments for purposes of this discussion.
Southern Power - June 5, 2002 3-3
Economic theory suggests that, an energy only market will over time lead to economically efficient capacity levels. As long as prices rise sufficiently to allow the generators in the market to recover their variable costs and going-forward costs, the average energy price should cover the costs of new capacity, even if there is no separate capacity payment delivered from either a traded capacity market or administered by the market operator.
As described above, regional market structure will determine the composition of generator revenue streams and will impact the mix and timing of new generating units. However, it is important to note that the financial return on new assets is likely to be similar in both types of markets as generators seek to cover their total going-forward costs.
PA recognizes the differences in these structures and accounts for these variations in the market valuation process as described in subsequent sections.
Further, PA anticipates that market structures will continue to evolve. Recent events suggest that all markets regardless of maturity level are susceptible to change. Events in California demonstrate how markets may change during a transition period. Likewise, recent activity in the UK and Wales suggest that mature markets can also undergo change.
3.2.3 PRICE BIDDING AND FORMULATION
PA generation service compensation forecasts address two primary revenue components:
- Energy based on a production-cost model with prices reflecting marginal cost in each hour.
- Compensation for capacity, which represents the additional margin necessary to keep an economic amount of capacity in the market. This compensation for capacity is not the same as a capacity price in a traded capacity market.
FIGURE 3-2
PRICE VS. LOAD -- PJM WEST, FEBRUARY 2000
[CHART]
Compensation for capacity may take many forms. Payments could be in the form of a capacity price arising from a capacity market, a regulated payment fee, bilateral option contracts, payments by the ISO for ancillary services, or in the form of energy prices above the marginal cost of the price-setting plant. Regardless of the form, the sum of the compensation for capacity and the market price for energy will ultimately reflect what customers are willing to pay for both energy services and reliability.
PA believes that the majority of the compensation for capacity actually arises through energy prices that are higher than marginal cost (and hence PA's energy price forecast) for some substantial portion of hours.
Actual market price results support this belief. Figure 3-2 presents a graph of market prices in the PJM market in February 2000. This month was selected for its low load characteristics. For this reason, prices should not reflect much in the way of a "scarcity premium" associated with insufficient generation to cover demand.
It is clear from the graph that generators do not simply bid their marginal cost of generation under all circumstances. Were it the case that such bidding strategies were employed, one would expect that the price results in Figure 3-2 would be closely clustered around the marginal cost line. Rather, there is considerable dispersion in the data, particularly in the higher load hours where marginal generation has a greater ability to support a price above marginal cost.
3-4 Southern Power - June 5, 2002
The terms "compensation for capacity" and "energy price" as used in this report reflect the prices needed by the marginal units to recover their variable and going-forward costs. These prices together form the all-in price that generators have determined as necessary to meet all of their going-forward costs.
3.3 STEP 1 - REVIEW OF MARKET CHARACTERISTICS
PA's first step in the market valuation process is to understand the nature and parameters of the relevant markets and the generation assets that participate in that market.
As illustrated in Figure 3-3, to characterize the market, PA uses a variety of data sources:
- PUBLISHED DATA. These data sources identify the generating units, consumer demand and load, and production capacities of existing plants. PA has built an extensive data scanning effort to maintain a current view of the marketplace.
- FUEL PRICE FORECASTS. PA continuously reviews published fuel price forecasts from a number of known industry groups, including the Energy Information Administration, The Gas Technology Institute, Standard and Poor's, and DRI/WEFA.
- PLANNED ADDITIONS. PA identifies new additions that are assumed to be online prior to 2005, based on a detailed review of the announced plans of developers (tracked in the PA Independent Power Producer Database) and utilities (contained in planning council reports). Capacity additions after 2004 are tested in the entry and exit logic.
The market characterization process centers on several critical drivers including the electric generating units currently in operation, their production efficiencies (including heat rate curves), a projection of plant additions (based in part on announcements and in part on an equilibrium evaluation of market price signals and new investments), consumer demand and load, and generation fuel prices.
FIGURE 3-3
PA MARKET CHARACTERISTICS REVIEW
[CHART]
3.4 STEP 2 - DEVELOPMENT OF ASSUMPTIONS
Once the raw data is gathered and assembled for the plants and regional markets in question, PA works with the developer and financial institutions to translate the market and plant data into assumptions for the MVP initiative.
As part of this process, PA takes the lead position in screening and validating all assumptions.
Assumptions for this analysis are described in detail in Chapter 4.
3.5 STEP 3 - FUNDAMENTAL ANALYSIS
To examine the relationship between supply and demand for each region, PA prepares a baseline fundamental analysis that assesses the impact of critical market drivers, including generation characteristics, fuel price forecasts, cost of new entry, and costs of existing plants. These impact assessments are completed in a series of simulation exercises.
Projecting electric market prices and generation product sales requires PA to consider not only price formation in the market, but also the issues of market entry and exit. Figure 3-4 provides a graphical view of PA's Fundamental Analysis process.
The outcome of the analysis is the baseline price forecast as driven by the assumptions developed in Step 2.
Southern Power - June 5, 2002 3-5
FIGURE 3-4
PA FUNDAMENTAL ANALYSIS SIMULATION EXERCISES
[CHART]
The price forecasts developed are based on a dynamic examination of market entry and exit (including retirement) decisions made by the supply-side players in the market.
The following sections will briefly discuss PA's approach to the three main simulation exercises that make up the Fundamental Analysis.
3.5.1 ENERGY PRICE AND DISPATCH SIMULATION
PA uses a detailed chronological production-cost model to simulate energy price formation in the market area of interest. Price formation is based on the sequential dispatch of generation units according to short-run marginal costs.
From the energy price analysis, PA determines the net energy margins (price minus variable cost) for each generating unit in the market. These margins, along with estimates of "going-forward costs," are used in the Capacity Compensation Simulation Model to predict the additional margins related to the provision of capacity.
3.5.2 CAPACITY COMPENSATION SIMULATION
Compensation for capacity is a mechanism for supporting an appropriate amount of generating capability in the system. There are two reasons for including a measure of the compensation for capacity or shortage payment in the projection of market prices. First, if generators bid their short-run marginal costs into an energy market, only inframarginal plants (those not on the margin) earn a contribution toward their going-forward costs. Plants at the top of the supply curve receive little, if any, contributions toward their going-forward costs. In addition, some of the baseload and cycling plants that are not at the top of the supply curve but have high going-forward costs may not earn a sufficient operating margin from the energy market alone to cover all of those costs.
PA predicts a value for compensation of capacity using its proprietary Capacity Compensation Simulation Model. This model presumes that the market will retain a sufficient amount of capacity to meet economic reliability targets. In other words, PA simulates a capacity market consisting of a supply curve and a demand curve for reliability (or capacity) services. PA assumes a competitive market, and that the market clearing compensation for capacity is determined by the intersection of the supply and demand curves. PA constructs supply and demand curves for each year in the simulation time horizon.
The supply curve is developed based on all of the generators in the market. For each generating unit, the net of going-forward costs and energy market margins, expressed on a per-kilowatt basis, are calculated. These net costs represent the minimum amount a generating unit needs to go forward. Ranking these net costs in ascending order produces a supply curve for capacity.
Next, the demand curve is estimated. The demand curve is estimated by representing the capacity associated with a target reliability level. The demand curve is a vertical line derived using a target reserve margin.
Finally, the intersection of the demand curve and the supply curve represents the capacity contribution that the market would support in that year. The capacity contribution forecast is the capacity payment derived for each year of the study period. This capacity payment is limited by the entrance cost of a combustion turbine. A sample supply and demand curve for a hypothetical year is shown in Figure 3-5.
3.5.3 CAPACITY ADD/RETIRE SIMULATION
It is necessary to assess the feasibility and timing of new capacity additions as well as the exit of uneconomic existing capacity. PA's proprietary modeling approach serves two purposes:
- First, it identifies generating units that are not able to recover their going-forward costs in the energy and capacity market and are therefore at risk of abandoning the market.
3-6 Southern Power - June 5, 2002
FIGURE 3-5
EXAMPLE SUPPLY AND DEMAND CURVE
[CHART]
- Second, it provides a rational method for ascertaining the amount, timing, and type of capacity additions.
Capacity additions through 2004 are based on PA's proprietary database and decision criteria for additions. Additions must meet PA's criteria for inclusion into the model, including, but not limited to, financing and/or ground-breaking. Thereafter, PA's approach uses a financial model to assess the decision to add new capacity and to retire existing capacity. The approach to plant additions is based on a set of generic plant characteristics, financing assumptions, and economic parameters. This "add/retire" analysis is an iterative process performed simultaneously with the development of the energy price forecast and the projected compensation for capacity.
The methodology assesses the feasibility of annual capacity additions based on a Discounted Cash Flow (DCF) model using net energy revenues determined in the production-cost simulations and compensation for capacity determined from the Capacity Compensation Simulation approach. For each increment of new capacity investment, a "Go" or "No Go" decision is made based on whether the entrant would experience sufficient returns (developed in the DCF model) to merit entry. In addition, economic retirement decisions are made at each step in the iterative process based on the specific financial and operating characteristics of the existing plant.
The iterative process begins with the addition of new capacity as needed. A production-cost run is executed to determine energy prices, dispatch, and operating costs. The Capacity Compensation Simulation is then performed. Results for energy and capacity compensation are combined in the DCF model to determine whether the new unit is a "Go" or "No Go." If the new unit is a "Go," another new unit is added in that year and the process repeated. This occurs until the next new unit returns a "No Go." Should the analysis show "No Go," the unit is removed (e.g., not added).
Annual retirements are determined after new units are added for that year. A financial analysis of each unit is performed beginning in 2002, combining the results of the energy and capacity compensation. If the operating profit (loss) for an existing unit is negative for any five-year consecutive period, it is retired at the end of the third year of consecutive operating loss. PA interprets this rather subjective retirement decision criteria conservatively to allow plants every chance to remain active in the market. Thus, if a unit loses money for two years, is profitable over the third year, and then loses money for two more years, the unit is maintained online.
This "Go" No-Go" approach reflects a game theoretic concept of market equilibrium. If units are retired, the iterative process begins again with the addition of new capacity. In this way, the introduction of new units influences the retirement of existing units, and the retirement of existing units enables the introduction of new units. Since the addition of new units is "lumpy," the iteration generally stops with new generators earning a small increment above their cost of debt and equity. The addition of one more new unit then pushes many of the previous additions into losses. This process is repeated chronologically through the end of the analysis for each year continuing to show a deficiency after the most recent new unit addition.
Southern Power - June 5, 2002 3-7
3.6 STEP 4 - PLANT-LEVEL DISPATCH ANALYSIS
The final step in PA's Market Valuation Process is the dispatch of the specific plants in question based on the price formation outcome of the fundamental analysis. PA assesses from a cost vs. price forecast perspective how the generating plants in question are likely to respond to price signals in the market.
First, the plants in question must have the ability to respond to price signals. The greater the flexibility, the greater the potential value the plants can extract by adjusting their operating strategies to take advantage of favorable prices while minimizing the losses from unfavorable prices.
Second, the plants must be subject to price volatility that actually causes them to alter their operating strategy. Because the Southern Power units are under contract for the near term for this analysis, dispatch analysis utilizing volatility was not necessary.
3-8 Southern Power - June 5, 2002 |
4. KEY ASSUMPTIONS 4.1 INTRODUCTION |
This chapter describes the key assumptions used in the development of the annual energy and capacity market price forecasts. Based on the assumptions below, PA Consulting Group, Inc. (PA) simulates the hourly market-clearing price of energy using MULTISYM(TM) (developed by Henwood Energy Services, Inc.), a production-costing framework that allows the characterization of multiple pricing areas within larger transmission regions. Each major generating unit within a transmission area is represented individually in the MULTISYM(TM) production-costing model using unit-specific cost and operating characteristics. The MULTISYM(TM) model is used to perform an hour-by-hour chronological simulation of the commitment and dispatch of generation resources. The output of this model is then used in PA's Capacity Compensation Simulation Model to develop the annual capacity contribution.
The key assumptions in this analysis are grouped into six categories:
- demand growth
- fuel prices
- NO(x) and SO(2) emissions costs
- electricity imports
- capacity additions and retirements
- and financial parameters.
These assumptions drive the fundamental model of energy prices and capacity compensation.
The following general assumptions were utilized in this study:
- The hourly market-clearing price of energy was developed using MULTISYM(TM), a production-cost model that allows the characterization of multiple transmission areas.
- The analysis has been prepared in 2001 real dollars. All results are in 2001 real dollars unless specified otherwise.
4.2 DEMAND AND ENERGY FORECASTS
The projected average annual demand and energy growth for the period 2002 through 2021 is summarized in Table 4-1.
TABLE 4-1
PROJECTED AVERAGE
ANNUAL LOAD GROWTH RATES(1)
(2002-2021)
REGION DEMAND ENERGY
------ ------ ------
SERC 2.0% 2.0%
FRCC 2.3% 2.3%
|
(1) Source: EIA Annual Energy Outlook, 2002.
The hourly data for the analysis is based on a synthetic hourly load shape based on five years of actual hourly data provided with the MULTISYM(TM) production-costing model to represent the native load requirements for each of the pricing areas. The annual demand and energy forecast values are applied to the native hourly load requirements to develop the forecasted hourly loads for each year of the analysis.
4.3 FUEL PRICES
All fuel types were analyzed on either a regional (natural gas and oil) or plant location (coal) basis in order to capture pricing variations among major delivery points. The forecast prices for each fuel include the cost of transportation to the power plant site. Two additional sections describe hydroelectric and nuclear units.
Southern Power - June 5, 2002 4-1
TABLE 4-2
HENRY HUB PROJECTIONS(1)
(REAL 2001 $/MMBTU)
AVERAGE
ANNUAL
GROWTH
2002 2005 2010 2015 2020 RATE
---- ---- ---- ---- ---- -------
EIA 2.23 2.99 3.21 3.45 3.67 2.81%
GTI 3.12 2.61 2.70 2.51 3.01 -0.20%
DRI/WEFA 2.87 3.16 3.19 3.31 3.38 0.91%
CONSENSUS 2.74 2.92 3.03 3.09 3.35 1.13%
|
(1) An inflation rate of 2.16% was used to inflate the forecasts from 2000 dollars to 2001 dollars and 4.49% was used from 1999 to 2001 dollars in the analysis.
Sources: EIA Annual Energy Outlook 2002, December 2001; GTI Baseline Projection and Databook 2001, March 2001; DRI/WEFA, November 2001.
TABLE 4-3
NYMEX FUTURES PRICES(1)
(REAL 2001 $/MMBTU)
YEAR NYMEX FUTURES ---- ------------- 2002 2.74 2003 3.16 2004 3.23 |
(1) Based on previous 90 calendar day closing prices ending 2/14/02.
FIGURE 4-2
HENRY HUB GAS PRICES 1991-2001
[CHART]
4.3.1 NATURAL GAS
The primary inputs into the analysis were forecasts from the Energy Information Administration (EIA),(4) The Gas Technology Institute (GTI), and DRI/WEFA. Table 4-2 outlines the Henry Hub projection from each of the three source forecasts as well as the consensus forecast of natural gas prices at the Henry Hub.
The projections represent industry standard market information on long-run equilibrium price. Because natural gas prices can exhibit significant volatility in the short-run, forecasts derived exclusively from long-run price projections may not accurately reflect near-term market conditions. In order to correct for this consideration, PA overrides the consensus through 2004 using a 90-day average of NYMEX futures prices. Natural gas prices are expected to trend back to the long-run consensus by 2006. Table 4-3 displays the near-term price projection.
Figure 4-1 shows historical gas prices for the Henry Hub from 1991 through December 2001. Although there has been unprecedented volatility over the past 18 months, recent pricing has exhibited less volatility and has trended back toward consensus forecasts.
Regional prices throughout the United States were projected based on this consensus Henry Hub forecast. For all regions modeled, the delivered price is the sum of the Henry Hub projection, the projected regional basis differential, and other natural gas supply costs including all taxes.
A. BASIS DIFFERENTIALS
The commodity component of the dispatch natural gas price is comprised of the Henry Hub price plus a regional basis differential. PA assembled historic price data from several reliable sources including Natural Gas Week, Gas Daily, and Bloomberg. Regional price differentials were calculated by comparing price history for that location to price history at the Henry Hub.
In some cases, the basis differentials are projected to change over time as a result of major pipeline construction and other factors that are expected to
(4) The EIA does not present a Henry Hub price forecast. The EIA figure is an estimate based on a lower-48 wellhead forecast.
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introduce discontinuity into the market. In other cases, market factors have already altered the regional pricing patterns. In these cases, PA has relied more heavily on recent price data.
Each generating unit was assigned to its nearest upstream trading hub based on its pipeline access. However, modeling limitations prevent the use of plant-specific natural gas prices. As a result, each unit was also assigned to a region. PA generated a regional average basis differential from the unit-specific data based on a weighed average of the unit-level data.
B. NATURAL GAS PRICE SEASONALITY
Natural gas prices exhibit significant and predictable seasonal variation. Consumption increases in the winter as space heating demand increases and falls in the summer. Prices follow this pattern as well; the seasonal pattern is most striking in cold weather locations. Dispatch prices in the model reflect the seasonal effects based on five-year historic price patterns exhibited at the regional market centers. The advent of significant additions of natural gas fired generation throughout North America may shift the historic seasonality patterns over the forecast period. Insufficient data is available at this point to model any potential changes and therefore a historical seasonality pattern has been applied to develop monthly price projections.
C. PIPELINE CHARGES
Natural gas fired generation facilities are subject to incremental costs associated with moving gas from liquid regional trading points to the plant gate. In a process similar to that used for calculating regional basis differentials, PA has derived a regional estimate of this cost by mapping generating units to pipelines and calculating a plant specific pipeline charge based on the published firm tariff rates. The variable component of this cost is reflected on a regional, weighted-average basis. The fixed portion of this cost is treated as a component of the fixed O&M cost.
D. LOCAL DISTRIBUTION COMPANY CHARGES
The final component of the natural gas dispatch price is local distribution costs. Regional Local Distribution Company (LDC) prices were derived from surveys of representatives of the tariff groups at major natural gas distribution companies. Because the information on specific contracts for individual generating stations is considered confidential, detailed unit-level information was not available. As a result, PA used the survey results to estimate LDC charges at the NERC region level.
Most of the charges collected reflect the tariff rates for electric generation customers or the largest volume industrial customer rate if an electric generation specific tariff was not available. While most of the LDCs have the ability to offer negotiated rates, negotiated rates will depend on the plant location, the LDC's cost to serve the facility and the facility's competitive options. Where it was possible, an estimated rate to serve an electric generation customer was used. In general, the tariff rates quoted should be viewed as the upper end of an expected range of pricing a facility would pay.
As it will become increasingly difficult for units that incur LDC costs to remain competitive, it is expected that market pressure will result in this cost declining over time. For each region, the LDC charge is expected to decline over the forecast period. In addition to this decline, it is expected that this cost will not apply to new units, as competitive forces and operating pressure constraints will result in new facilities locating with direct access to the interstate pipeline network. As a result, not only will the actual LDC charge decline over time, but also a smaller percentage of units will include the charge in their dispatch price, limiting the impact of this cost on market prices.
E. TOTAL DELIVERED NATURAL GAS PRICE
The total delivered price of natural gas in each market region is based on the projected Henry Hub price, basis differentials, pipeline charges, and LDC charges (see Table 4-4). (New generation is assumed not to incur LDC charges.)
TABLE 4-4
DELIVERED NATURAL GAS PRICE(1)
(2001 $/MMBTU)
2002 2005 2010 2015 2020
---- ---- ---- ---- ----
SERC-Southern 3.38 3.73 3.65 3.69 3.93
FRCC 3.44 3.78 3.70 3.75 3.98
|
(1) Gas prices include LDC charges and other delivery charges.
Southern Power - June 5, 2002 4-3
4.3.2 FUEL OIL
The fuel oil forecast methodology is described below for No. 2 Fuel Oil and No. 6 Fuel Oil. Prices are developed based on a consensus of crude oil by major forecasters as presented in Table 4-5. These widely used sources present a broad perspective on the potential changes in commodity fuel markets. Each forecast was equally weighted in an effort to arrive at an unbiased consensus projection of fuel prices.
As is the case with natural gas, PA has modeled near-term prices to reflect recent actual oil prices and futures prices through December 2003, rather than the long-run equilibrium price. In this case, prices are expected to trend back to the long-run consensus by 2005. The near-term price projection is shown in Table 4-6.
A. NO. 2 FUEL OIL
Prices for No. 2 Fuel Oil were derived from EIA data on historical delivered-to-utility prices for a five-year period, on a regional basis. Fuel costs are comprised of commodity costs and transportation costs. Each region in the analysis was assigned to a reference terminal. The commodity component is calculated by escalating the historic reference terminal prices at the escalation rate implicit in the crude oil forecast outlined in Tables 4-5 and 4-6.
Transportation costs are calculated as the five-year average premium for delivered fuel oil in each region above the market center price for the terminal assigned to that region. This transportation cost is held fixed over the forecast horizon. This methodology captures both the commodity and transportation components of delivered costs. Representative final delivered prices for No. 2 Fuel Oil are shown in Table 4-7.
B. NO. 6 FUEL OIL
Prices for No. 6 Fuel Oil were derived using an identical methodology as that employed for No. 2 Fuel Oil prices. Because residual oil is so thinly traded, it is difficult to identify significant regional price premiums. As a result, all eastern regions were assigned to the New York Harbor reference terminal. Commodity prices for all regions were based on 1% sulfur residual oil at New York Harbor and are therefore the same. Transportation costs and taxes for each region, however, do vary.
TABLE 4-5
CRUDE OIL PRICE PROJECTIONS
(REAL 2001 $/BBL)
AVERAGE
ANNUAL
GROWTH
2002 2005 2010 2015 2020 RATE
----- ----- ----- ----- ----- -------
EIA 21.57 23.22 23.86 24.52 25.21 0.87%
GTI 23.60 19.12 19.12 19.12 19.12 -1.16%
DRI/WEFA 21.03 24.21 24.54 25.93 27.42 1.48%
CONSENSUS 22.07 22.18 22.51 23.19 23.92 0.45%
|
(1) An inflation rate of 2.16% was used to inflate the forecasts from 2000 dollars to 2001 dollars and 4.49% was used from 1999 dollars to 2001 dollars in the analysis.
Sources: EIA Annual Energy Outlook 2002, December 2001; GTI Baseline Projection and Databook 2001, March 2001; DRI/WEFA, November 2001.
TABLE 4-6
NYMEX FUTURES CRUDE OIL PRICE PROJECTION(1)
(REAL 2001 $/BBL)
YEAR PRICE PROJECTION ---- ---------------- 2002 19.79 2003 20.16 |
(1) Based on previous 90 calendar day closing prices ending 2/14/02.
TABLE 4-7
DELIVERED NO. 2 FUEL OIL PRICE
(2001 $/MMBTU)
2002 2005 2010 2015 2020
---- ---- ---- ---- ----
SERC-Southern 4.64 5.16 5.24 5.39 5.55
FRCC 4.68 5.20 5.27 5.41 5.57
|
4-4 Southern Power - June 5, 2002
The transportation costs for each region were based on an analysis of historic New York Harbor prices and delivered residual oil at electric generating stations in the region. Transportation costs equal the five-year average premium for delivered No. 6 Fuel Oil above the New York Harbor price. This transportation cost is held fixed in constant dollars over the forecast horizon. Final delivered prices for 1% sulfur No. 6 Fuel Oil are shown in Table 4-8.
Price projections for lower sulfur oil products(5) were also calculated to generate model inputs for regions that have more stringent environmental regulations. The premium for lower sulfur products was derived from a comparison of historic price data.
4.3.3 COAL
PA developed a forecast of marginal delivered coal prices (in real 2001 dollars) for the period 2002 through 2021 on a unit-by-unit basis for electric generators in each region and the corresponding SO(2) and NO(x) emission allowance prices. The SO(2) and NO(x) allowance prices are presented in Section 4.4.
In cost-based electric dispatch modeling, the marginal cost of production is expected to determine dispatch order and the wholesale market price of electricity. For this reason, PA has provided marginal delivered coal prices. These prices reflect PA's projection of a particular unit's marginal coal selection and market pricing for that coal, as well as the rate for transportation for such marginal purchases. If a particular unit purchases some higher- or lower-priced coal under long-term contracts, the unit's average cost of coal acquisition will be different from its marginal coal acquisition cost. It is expected that the cost of contract coal will not be reflected in dispatch pricing or in market prices for electricity.
Delivered coal prices were projected in two components: (1) coal prices on an FOB mine or FOB barge basis(6) and (2) transportation rates. Because individual units within a plant sometimes burn different coals, coal selections and delivered prices were developed on a unit-by-unit basis.
TABLE 4-8
DELIVERED NO. 6 FUEL OIL PRICE
(2001 $/MMBTU)
2002 2005 2010 2015 2020
---- ---- ---- ---- ----
SERC-Southern 2.86 3.21 3.26 3.36 3.46
FRCC 2.95 3.29 3.34 3.44 3.54
|
The projected coal selection for individual units reflects differing requirements for compliance with emissions regulations over time, as well as economics. To determine the selected coal, PA considered the use of flue gas desulfurization equipment (scrubbers), requirements to comply with Phase I and/or Phase II of the Clean Air Act Amendments of 1990, and requirements for compliance with New Source Performance Standards and State Implementation Plan (SIP) limits, along with the variable costs of different methods of compliance. While a unit's historical coal selection was an important factor in the projections, substitutions of coal types were projected for some units over time as delivered price economics (including allowance prices) are expected to change.
Coal selections were projected using a proprietary PA linear programming model known as the Multi-Pollutant Optimization Model (MPOM) which simultaneously solves for the optimal combination of coal selections, unit dispatch, and SO(2) and NO(x) allowance prices over the forecast period. The operation of the MPOM model is explained in more detail in Section 4.4.
PA expects that the spike in coal prices which occurred in late 2000 and early 2001 will be temporary, and that coal prices will return to long-term levels over the next few years. In most cases, the long-term coal prices are close to the long-run marginal cost of mining (including a return on the incremental capital invested) for the marginal mine type in each coal mining region. (The major exceptions involve regions where substantially all of the coal production is sold under long-term contracts, which will cause prices higher than marginal mining costs to persist over a longer period of time.)
FOB mine prices were projected based on proprietary models of long-run marginal mining costs in each major coal mining region, supply and demand economics for different coal types, and other market
(5) Includes 0.3% residual oil, low sulfur No. 2 Fuel Oil, and jet fuel.
(6) "Free on Board," indicating that the price includes the costs of loading coal onto a train, truck, or barge.
Southern Power - June 5, 2002 4-5
knowledge available to PA, in an integrated market analysis. The forecast of long-run marginal mining costs includes an assessment of expected changes in mining productivity for each coal mining region. The forecast is conservative in that only about one-half of the historical rate of improvement in total factor productivity is reflected in the projected coal prices.
Prices for most types of coal are expected to decline fairly steeply from the extraordinary 2001 levels over the following three years.(7) The expected annual rates of price decline for major coal types during 2001-2004 range from about 4-5%/year for some types of Northern Appalachian coal to about 15-20%/year for some types of Wyoming Powder River Basin and Central Appalachian coals.
Real prices for most of the major coal types are expected to decrease further over the long term (2005-2021), although the expected rates of decline are much slower over the long term (ranging from 0.2%/year to 2.3%/year). The expected rate of change in prices for particular types of coal varies based on considerations specific to each coal type such as supply and expected depletion of reserves, market demand, and the sulfur content of the coals. The coal types which are expected to experience the steepest declines in long-term prices are Illinois Basin low- and mid-sulfur coals, and lignite. The Illinois Basin low- and mid-sulfur coals have historically enjoyed a price premium, but are expected to lose market share both to lower-sulfur Powder River Basin (PRB) coal and to higher-sulfur Illinois Basin coal burned at scrubbed plants. Many of the long-term contracts under which lignite production is typically sold have escalated to very high price levels, but PA expects that the competitive pressures of deregulated electricity markets (as well as more direct competition from PRB coal) will cause many of these contracts to be renegotiated over time to levels that more closely reflect marginal mining costs for lignite.
The only significant exception to the anticipated general trend of declining real coal prices involves PRB coals.(8) Due to the very low mining costs and the very low sulfur content (typically ranging from 0.6 to 0.8 lbs. SO(2) per million Btu) associated with these coals, PA projects that demand for these coals will continue to increase strongly throughout the forecast period. Prices for the 8,800 Btu/lb. Wyoming PRB coal are expected to fall to about $6.15/ton by 2004, and continue declining slowly through 2010, but then increase in real terms during the remainder of the forecast period as reserve depletion and higher stripping ratios more than offset expected productivity gains.(9)
Projected transportation rates are based on available delivery options at each plant for the coal types selected for each unit. Transportation modes included rail, barge, truck transportation, and conveyor transportation for minemouth plants. Rates for different transportation modes in different regions of the country are projected to vary at different rates over time. In cases where a multi-mode movement of coal is required (such as a combination rail and vessel movement), the rate for each mode of transportation is projected separately, and the total transportation rate is the sum of these separately escalated components.
In addition, potential future changes in transportation options were considered. In some cases, for example, PA projected the addition of rail or vessel receiving capability at a particular plant. Potential future regulatory relief was also projected for some plants with sufficiently high rail rates which do not have access to competitive transportation options.
Table 4-9 summarizes the expected annual rates of change in coal prices over the long term (2005-2020) for various coal types.
(7) Note that there are a number of coal types which are used in highly localized markets (such as Arizona/New Mexico coals, Central Pennsylvania high sulfur coal, and lignite) and therefore were not as greatly affected by the coal price spike. The expected short-term price trajectories for these coals are much flatter.
(8) Prices for Kansas, Missouri, and Oklahoma coals are expected to remain flat in real terms, but these are very small markets (totaling less than 1 million tons/year of utility coal consumption out of a national total of 971 million tons of coal used for electric generation in 2000.)
(9) The stripping ratio refers to the amount of soil and rock (overburden, usually measured in cubic yards) which must be removed to surface mine (or strip mine) a ton of coal.
4-6 Southern Power - June 5, 2002
TABLE 4-9
ESTIMATED ANNUAL CHANGE
IN COAL PRICES, 2005-2020
REAL ESCALATION RATE
COAL PER ANNUM
---- --------------------
Western 0.3% to -2.3%
Illinois Basin -0.2% to -1.1%
Eastern -0.2% to -0.7%
|
4.3.4 HYDROELECTRIC
The hydroelectric plants are consolidated by utility and categorized as peaking or baseload. Similar to the thermal units, the maximum capacity for each unit was taken from the sources cited above for summer and winter capabilities. Monthly energy patterns were developed from the six years of EIA Forms 759, which contain monthly generation and (for pumped storage units) net inflows.
4.3.5 NUCLEAR
PA evaluated the operation of nuclear plants in the regions covered by this study on the basis of going-forward costs to determine which plants would remain in service based on their economic performance.
PA estimated the annual going-forward costs (fixed O&M, property taxes, and annualized incremental capital costs) associated with each unit. The incremental capital costs do not include the original investment in the plant. The original investment is treated as a sunk cost and is not considered in the determination of the future competitiveness of a station. Incremental capital costs only include modifications made to the plant each year. These costs are very difficult to track due to the reporting methods. However, these costs are relatively low compared to O&M costs.
There are a number of other non-economic issues that might affect a shutdown date. Politics of the region plays an important part in the premature shutdown of the units. Equipment failures and poor overall performance can also cause a utility to shut down a unit before its license expires. As the units age, the amount of investment required to continue operating the unit becomes an important factor.
Historical performance as well as recent trends in forced outage rates at each unit were reviewed. Future forced outage rates were forecast for each year, and each unit's scheduled outages during the year were also considered. From this information, and noting that outages are becoming shorter as the industry improves outage planning, the duration of outages for each unit was forecast. For refueling outages, sources included refueling outage schedules, published every six months in Nuclear News for all U.S. units.
The decision whether to retire a unit prior to its license expiration date was made based on a thorough review of the unit's projected future economic performance. Nuclear unit retirements were made based on the same process applied to all other units. Currently it is the consensus that nuclear units will have their licenses extended past our current study period.
4.4 SO(2)/NO(x) EMISSION ALLOWANCE PRICES
4.4.1 SULFUR DIOXIDE EMISSION ALLOWANCE PRICES
PA's forecast of SO(2) allowance prices is shown in Table 4-10. The price of SO(2) allowances starts at $208 per ton in 2002, increases to $383 per ton by 2015, and then drops to $317 per ton by 2020. The drop between 2015 and 2020 results from new coal-fired units equipped with scrubbers projected to come into service during this period and displacing some existing coal-fired units which have higher SO(2) emissions.
TABLE 4-10
SO(2) EMISSION ALLOWANCE PRICES
(2001 $/TON SO(2))
YEAR SO(2) ---- ----- 2002 $208 2005 $243 2008 $286 2010 $322 2015 $383 2020 $317 |
Southern Power - June 5, 2002 4-7
PA's forecast of SO(2) allowance prices was developed using its proprietary Multi-Pollutant Optimization Model (MPOM). MPOM is a linear programming model which simultaneously solves for the optimal combination of coal selections, unit dispatch, and SO(2) and NO(x) allowance prices over the forecast period. For coal-fired units, the model includes a list of possible coal selections for each unit (i.e., coals with various sulfur contents), delivered fuel price data for each of the possible coal selections, and estimates of the cost of retrofitting Flue Gas Desulfurization equipment (FGD or scrubbers) on each unit that is not already scrubbed. Given these inputs, MPOM solves for the least-cost solution which will meet the national SO(2) emissions caps(10) while also satisfying the other constraints in the model. The SO(2) allowance price is the cost per ton of SO(2) removed for the last (or marginal) scrubber that must be installed (or the cost of a switch to lower-sulfur coal that must be made) to meet the emissions cap.
4.4.2 DEVELOPMENT OF NO(x) EMISSION ALLOWANCE PRICES
PA's forecast of NO(x) allowance prices is shown in Table 4-11. Unlike SO(2) allowances, which must be used year-round, NO(x) allowances are used only during the "ozone season" specified in EPA regulations, which extends from May 1 through September 30 of each year. Another important difference between SO(2) and NO(x) allowances is that NO(x) allowances cannot be "banked" or carried over from year to year without significant cost and limitations. Thus, NO(x) allowance prices are largely determined by the cost of the marginal NO(x) control technology (in dollars per ton of NO(x) removed) which is required to meet the NO(x) emissions cap.
The forecast shown in Table 4-11 reflects two separate sets of NO(x) emissions regulations: the Ozone Transport Region (OTR) and the SIP Call region in the eastern United States.
TABLE 4-11
NO(x) EMISSION ALLOWANCE PRICES
(REAL 2001 $/TON NO(x))
YEAR NO(x)
--------- ------
OTR
2002-2003 $1,023
SIP CALL
2004 $2,996
2008 $3,415
2010 $2,822
2015 $3,149
2020 $2,423
|
During 2002-2003, NO(x) emission allowances are required in the Ozone Transport Region (OTR), which includes 11 states in the Northeastern and Mid-Atlantic regions of the United States, plus the District of Columbia. Beginning with the 2004 ozone season, a larger region (including most of the states east of the Mississippi River) will be required to meet a stricter set of NO(x) emission regulations that were developed based on the EPA's call for NO(x) State Implementation Plans (SIP Call).(11)
The NO(x) allowance price forecast was developed using a methodology very similar to the methodology used for the SO(2) allowance price forecast. Estimated capital and operating costs for retrofitting various NO(x) control technologies on each coal-fired generating unit were input into the MPOM model, and the model solved for the least-cost solution which met the NO(x) emissions caps while also satisfying the other constraints in the model.
(10) The national caps on SO(2) emissions are 9.48 million tons of SO(2) per year for 2001-2009, and 8.95 million tons of SO(2) per year from 2010 forward.
(11) The original deadline for implementation of the regulations developed based on the NO(x) SIP Call process was the beginning of the 2003 ozone season (May 1, 2003). The EPA is currently attempting to impose a set of NO(x) regulations similar to the SIP Call regulations on the 2003 deadline using an alternate regulatory process known as the Section 126 process. PA has assumed for purposes of this forecast that the NO(x) SIP Call regulations (or any similar regulations) will not be effective until 2004.
4-8 Southern Power - June 5, 2002
The marginal NO(x) control technology that is required under the OTR regulations is Selective Non-Catalytic Reduction (SNCR). As shown on Table 4-11, the installation and operating costs associated with retrofitting this technology on existing coal fired generating units are approximately $1,000/ton of NO(x) removed. The marginal NO(x) control technology which will be required to meet the SIP Call regulations is Selective Catalytic Reduction (SCR). The NO(x) allowance price for each year is determined by the NO(x) control costs for the marginal unit (i.e., the last unit that must take action to bring the fleet into compliance with the program's emission cap) that operates each year. Between 2004 and 2015, the NO(x) allowance price is expected to remain within a relatively narrow range of $2,996/ton to $3,149/ton. By 2020, the NO(x) allowance price is expected to drop to $2,423/ton as newly built coal-fired generating units with low NO(x) emissions displace some existing coal-fired units with higher NO(x) emissions.
4.5 ELECTRICITY IMPORTS
Imports and exports between transmission areas are determined by the model using inputs for transfer capabilities, wheeling rates, and line losses. The transfer capabilities and wheeling rates between pricing areas are provided below. Line losses between all pricing areas are assumed to be 2%.
4.5.1 TRANSFER CAPABILITIES
The transmission system is the transportation mechanism that moves power from where it is generated to where it is to be used. There are a number of technical factors that limit the amount of power between utilities, control areas, or large regions. While facility ratings are one key element, voltage levels or instability are other considerations that need to be considered in establishing transfer capabilities. In addition, transfers that involve two utilities or control areas will have an impact on the transfer capabilities of neighboring utilities because a portion of that transfer will flow on neighboring utilities' lines. In order to quantify transmission capabilities between NERC regions and major
FIGURE 4-2
TRANSFER CAPABILITY(1)(MW)
[CHART]
Southern Power - June 5, 2002 4-9
subregions, seasonal analyses are performed that include current operating parameters, load patterns, and scheduled transfers to determine regional import and export capabilities.
The transfer capabilities that are shown are non-simultaneous, meaning that for any given transfer at an identified limit, the other transfer limitations shown are unlikely to be attainable at the same time. Concurrent exports or imports for any particular region may not be technically feasible at the total of the capabilities listed. These values represent the ability of the transmission networks to accommodate the transfer of electricity from one area to another area for a single load and generation pattern.
Therefore, the actual patterns of demands and generation can result in changes in transfer capabilities on both an hourly and daily basis. These transfer capabilities have been considered representative of the level of interchange that could occur between the various transmission areas. Figure 4-2 identifies the bulk transfer capabilities between regions and subregions included in this report.
4.5.2 WHEELING RATES
Wheeling rates were applied based on assumptions associated with proposed or existing RTO, ISO, and transco organizations.
In general, for transmission within transmission organizations, the wheeling rates are set at $0.00/MWh, which allows power to flow freely with transmission organizations. This assumes that the current pancaking issues will be eliminated or at least significantly reduced upon implementation of the new RTO organizations in accordance with FERC Order 2000. For transmission from one transmission organization to another, the wheeling rate is set at $3.00/MWh.
4.6 CAPACITY ADDITIONS AND RETIREMENTS
It is necessary to assess the feasibility and timing of new capacity additions as well as the exit of uneconomic existing capacity. PA's proprietary modeling approach serves two purposes:
- First, it identifies generating units that are not able to recover their going-forward costs in the energy and capacity markets and are, therefore, at risk of abandoning the markets.
- Second, it provides a rational method for ascertaining the amount, timing, and type of capacity additions.
Capacity additions through 2004 are based on publicly announced or planned additions. The additions assumed in this analysis are shown in Table 4-12. These capacity additions are a best estimate of what units will be developed during this period. Actual additions may differ from those indicated.
From 2005 through 2021, PA's approach uses a financial model to assess the decision to add new capacity and to retire existing capacity. The approach to plant additions is based on a set of generic plant characteristics, financing assumptions, and economic parameters. This "add/retire" analysis is an iterative process performed simultaneously with the development of the energy price forecast and the projected compensation for capacity.
The methodology assesses the feasibility of annual capacity additions based on a Discounted Cash Flow (DCF) model using net energy revenues determined in the production-cost simulations and compensation for capacity determined from the Capacity Compensation Simulation approach. For each increment of new capacity, a "Go" or "No Go" decision is made based on whether the entrant would experience sufficient returns (developed in the DCF model) to merit entry. In addition, economic retirement decisions are made at each step in the iterative process based on the specific financial and operating characteristics of the existing plant.
The market entry and exit logic determines the amount and timing of new generation capacity added to the system as well as the retirement of existing units. Starting in 2005, the market entry and exit logic, at a minimum, builds enough new capacity to meet the estimated reserve requirements. Table 4-13 describes the timing and amount of market entry and exit (retirements) for the base case (best estimate) for the modeled regions.
Nuclear unit retirement assumptions have changed dramatically since recent analysis. Currently it is the consensus that nuclear units will have their licenses extended past our current study period.
4-10 Southern Power - June 5, 2002
TABLE 4-12
CAPACITY ADDITIONS (MW), 2002-2004
ON-
SIZE UNIT LINE
DEVELOPER (PLANT) (MW)(1) TYPE YEAR
----------------- ------- ---- ----
SERC -- TOTAL = 33,061 MW
Aquila Inc. (Crossroads 1) 320 CT 2002
Associated Electric Cooperative
(Holden 1) 321 CT 2002
Calpine (Decatur 1) 794 CC 2002
Calpine (Morgan nrg 1) 790 CC 2002
Calpine (Parish 1) 577 CC 2002
Cleco/Calpine (Acadia b) 620 CC 2002
Cogentrix (Ouachita 1) 816 CC 2002
Cos-Mar (Carville 1) 440 CC 2002
Dow Chemical & American Power
(Plaquemine 1) 900 CC 2002
Duke (Enterprise 1) 640 CT 2002
Duke (Hot Springs 1) 620 CC 2002
Duke (Marshall 1) 640 CT 2002
Duke (Murray 1) 1,240 CC 2002
Duke/Southhaven (Southaven 2) 640 CT 2002
Entergy (Lake Charles 1) 425 CC 2002
Georgia Power (Wansley 6) 567 CC 2002
Georgia Power (Wansley 7) 567 CC 2002
Mirant & CLECO (Perryville 2) 550 CC 2002
Mirant/Kinder Morgan
(Wrightsville 1) 550 CC 2002
NRG (Bayou 1) 320 CT 2002
Oglethorpe Power Corp.
(Talbot County 1) 435 CT 2002
Panda (El Dorado 1) 1,100 CC 2002
Panda (El Dorado 2) 1,100 CC 2002
Progress (Richmond 5-6) 550 CC 2002
Progress (Richmond 7) 186 CT 2002
Santee Cooper (Savannah 1) 512 CC 2002
Santee Cooper (Savannah 2) 168 CT 2002
Santee Cooper (Savannah 3) 168 CT 2002
Southern Company (Goat Rock 1) 571 CC 2002
Southern Company (Smith 1) 575 CC 2002
TECO (Dell 1) 600 CC 2002
TECO (Mcadams 1) 599 CC 2002
Tenaska (Lindsayhill 1) 846 CC 2002
Calpine (Columbia 1) 550 cogen 2003
Calpine (Hillabee 1) 770 CC 2003
Cogentrix (Caledonia 2) 830 CC 2003
Cogentrix (Southaven 1) 866 CC 2003
FPL Group (Calhoun 1) 616 CT 2003
Intergen (Cottonwood 1) 1,200 CC 2003
Intergen (Magnolia 1) 900 CC 2003
NRG (Pike 1) 1,200 CC 2003
Occidental Chemical (Taft 1) 778 cogen 2003
Progress (Effingham 1)(2) 376 CT 2003
Progress (Tiger Creek 1) 686 CC 2003
Reliant (Frenchcamp 1) 400 CC 2003
Reliant (Frenchcamp 2) 400 CC 2003
Southern Company (Harris 1) 618 CC 2003
Southern Company (Harris 2) 618 CC 2003
Southern Company (Goat Rock 2) 615 CC 2003
Tenask Inc. (Coral 1) 900 CC 2003
Williams (Memphis 1) 265 CC 2003
Progress (Effingham 1-2) 561 CC 2004
Progress (Rowan 4-5) 541 CC 2004
FRCC -- TOTAL = 7,015 MW
City of Lakeland
(McIntosh 5 expansion) 120 CC 2002
Seminole (Payne Creek) 500 CC 2002
Jacksonville (Northside 1) 297 ST 2002
Jacksonville (Northside 2) 297 ST 2002
Mirant (Pasco County) 480 CT 2002
Calpine (Auburndale) 115 CT 2002
Constellation (Oleander) 680 CT 2002
Progress Energy (DeSoto) 360 CT 2002
FPL (Fort Myers Expansion) 1,000 CC 2002
FPL (Sanford) 1,000 CC 2003
Calpine (Osprey) 529 CC 2003
Southern Company (Stanton) 617 CC 2003
Florida Power (Hines 2) 530 CC 2003
Orion Power (CPV Atlantic) 250 CC 2004
City of Lakeland (McIntosh 4) 240 ST 2004
|
Southern Power - June 5, 2002 4-11
TABLE 4-13
CAPACITY ADDITIONS AND RETIREMENTS (MW)
2005-2021
CC CT CUMULATIVE
PLANTS PLANTS RETIRE- CAPACITY
YEAR(1) ADDED ADDED MENTS(2) ADDITIONS
------- ------ ------ ---------- ----------
SERC
2005 0 0 0 0
2006 0 0 -7,304 -7,304
2007 0 0 -9 -7,313
2008 3,640 0 0 -3,673
2009 4,160 0 0 487
2010 4,680 0 0 5,167
2011 4,680 0 -76 9,771
2012 3,640 1,035 -116 14,330
2013 3,120 1,380 -79 18,751
2014 3,640 1,035 -42 23,384
2015 4,160 345 0 27,889
2016 2,080 2,070 0 32,039
2017 3,120 690 0 35,849
2018 2,600 1,725 0 40,174
2019 3,640 1,035 -280 44,569
2020 3,120 1,035 -116 48,608
2021 4,680 0 -391 52,897
============================================================
TOTAL 50,960 10,350 -8,413 52,897
FRCC
2005 4,160 0 0 4,160
2006 1,560 0 0 5,720
2007 1,040 0 0 6,760
2008 1,040 0 0 7,800
2009 1,560 0 0 9,360
2010 1,040 0 0 10,400
2011 1,560 0 0 11,960
2012 1,040 0 0 13,000
2013 1,560 0 0 14,560
2014 1,560 0 0 16,120
2015 1,040 345 0 17,505
2016 520 690 0 18,715
2017 520 1,035 -1 20,269
2018 1,040 345 0 21,654
2019 520 1,035 -32 23,177
2020 1,040 345 0 24,562
2021 1,560 0 -65 26,058
============================================================
TOTAL 22,360 3,795 -98 26,058
|
(1) 2002 through 2004 additions are shown in Table 4-12.
(2) Retirements are assumed to occur on January 1 of year.
SERC has no retirements in 2002-2004.
4-12 Southern Power - June 5, 2002 |
4.7 FINANCIAL ASSUMPTIONS 4.7.1 GENERIC PLANT CHARACTERISTICS |
The starting points for the DCF calculation are the generic unit-specific operating parameters for new combined cycles and combustion turbines. The generic parameters and assumptions assumed in the model are shown in Table 4-14. The first year in which new generic capacity can be added to the model is 2005. Capital costs are assumed to decrease at 1% per annum (real 2001 $). Table 4-15 indicates the assumed schedule and effect of technology improvement on new unit heat rates.
TABLE 4-14
GENERATING CHARACTERISTICS OF NEW UNITS
(REAL 2001 $)
CAPITAL FIXED VARIABLE
COST O&M(1) O&M SIZE
($/KW) ($/KW-YEAR) ($/MWH) (MW)
------- ----------- -------- ----
NEW CCS
SERC-Southern 530 10.5 $2.00 520
FRCC 530 10.5 $2.00 520
NEW CTS
SERC-Southern 325 5.5 $5.00 345
FRCC 325 5.5 $5.00 345
|
(1) Fixed O&M does not include additional charges for pipeline reservation (where applicable).
TABLE 4-15
FULL LOAD HEAT RATE IMPROVEMENT(1)
(BTU/KWH)
2002-2003 2004-2008 2009-2013 2014-2018 2019+
--------- --------- --------- --------- ------
CC 6,834 6,697 6,564 6,432 6,304
CT 10,712 (W) 10,498 (W) 10,288 (W) 10,082 (W) 9,880 (W)
11,022 (S) 10,801 (S) 10,585 (S) 10,373 (S) 10,166 (S)
|
(1) Degradation of 2% for CC units and 3% for CT units was assumed.
(W) = winter, (S) = summer. 4.7.2 OTHER EXPENSES |
Information on fixed costs, depreciation, and taxes is also developed and incorporated within the DCF analysis to determine the economic viability of the new unit additions. Environmental costs and overhaul expenses are not included, due to expectations that such expenses would be minimal in early years of operation.
- Property taxes are assumed to be 1% to 2% of the initial capital costs.
- Depreciation of the initial all-in cost of the new additions is based
on a standard 20-year Modified Accelerated Cost Recovery System (150
DB) with mid-year convention.
4.7.3 ECONOMIC AND FINANCIAL ASSUMPTIONS
- Minimum internal rate of return is assumed to be 13.5%.
- Financing assumptions are assumed to be 60% debt and 40% equity for
combined cycle units, and 50% debt and 50% equity for combustion
turbine units.
- Debt interest rate is assumed to be 9.0%. Debt terms and project lives
are 15 years with mortgage-style amortization for combustion turbine
units and 20 years for combined cycle units.
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Southern Power - June 5, 2002 4-13
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5. REGIONAL ANALYSIS 5.1 INTRODUCTION |
Over the past two decades, the structure of the electric power industry has been dramatically changed by the emergence of a networked industry. A market trend that has paralleled the integration of the transmission network is the introduction of wholesale and retail competition in formerly regulated markets. These market developments have added new dimensions to the risk of owning and operating generation plants. This chapter examines the current and projected development of wholesale power markets in each target region before summarizing the market price projections for the pricing areas evaluated for Southern Power (see Table 5-1).
TABLE 5-1
SOUTHERN POWER ASSET PRICING AREAS
NERC REGION PRICING AREA
----------- ------------
SERC Southern Company (Southern)
FRCC FRCC
|
One mechanism for understanding risk is to examine how market prices and generation requirements could change under different scenarios, termed sensitivity cases. Sensitivity cases and their effect on the projected market power prices are described in this chapter.
5.2 RISK ISSUES AND SENSITIVITY CASES
Analysis of possible variances in fundamental variables is essential when forecasting market prices in the United States today. Initially a base case was developed for each region using the assumptions outlined in Chapter 4. The base case is defined as the best estimate given the stated assumptions but not as the most likely case. Three sensitivity cases were then developed to aid in understanding some of the downside risks of operating generation assets. It should be recognized that these cases will vary to the extent the input assumptions change, and such assumptions should be reviewed with the same rigor as the resulting forecasts. The four cases are outlined below:
- The BASE CASE incorporates the actual futures gas prices through December 2004 (2003 for oil). Prices then decrease linearly to the consensus forecast price in year 2006 (2005 for oil). This method is discussed in further detail in Chapter 4.
- The LOW FUEL CASE evaluates the effects of lower gas and oil prices represented as a $0.50/MMBtu reduction in the 2002 consensus gas and oil prices with escalation remaining unchanged (coal prices are not changed).
- The HIGH FUEL CASE evaluates the effects of higher gas and oil prices represented as a $0.50/MMBtu increase in the 2002 gas and oil prices with escalation remaining unchanged (coal prices are not changed).
- The OVERBUILD CASE evaluates an exuberance of merchant plant development. For purposes of this case, excess entry is presumed to occur early in the study period. PA assumed additional capacity in 2003-2004 in SERC and FRCC. (See Table 5-2.) Subsequent to this period of capacity abundance, as the regions experience load growth, we assume the markets eventually return to economic equilibrium.
TABLE 5-2
OVERBUILD CASE MERCHANT PLANT CAPACITY ADDITIONS(1)
(MW)
REGION 2002 2003 2004 2005 ------ ---- ----- ----- ---- SERC 0 8,135 2,425 0 FRCC 0 5,700 1,560 0 |
(1) Overbuild capacity in addition to base case merchant capacity.
These variances from the base case influence the resulting projections of market price forecasts and subsequent valuation of generation plants. It should be noted that the level of the sensitivities can vary and that there are other areas that can vary in the forecast, including but not limited to demand forecasts, new entrant technologies and construction costs, environmental costs, and regulatory structures.
Southern Power - June 5, 2002 5-1
The remaining sections of this chapter provide discussions of each of the relevant regions. Each regional section contains the following information:
- the region's background
- the power market structures currently in place
- current transmission system issues
- market characteristics
- price forecasts
- critical market factors
- dispatch curves.
The market characteristics section for each region contains a figure illustrating the energy and capacity by fuel type. The energy generated by fuel type is estimated based on results of the PA regional models. The capacity by fuel type is based on Energy Information Administration (EIA) Form EIA-411 data or its equivalent. The capacity includes additional new generating capacity additions assumed by PA to be online in 2002. The specific sources from which the information was obtained and the year the information is based upon are provided in the sources listed under the figures.
Information on state regulatory activities associated with deregulation of the electric industry can be found in Section 2.3.
Each regional section of this chapter includes the results of the various cases.
- The ENERGY PRICE forecast represents the average annual system marginal cost of generating energy in a particular market.
- The COMPENSATION FOR CAPACITY forecasts estimates the total compensation for capacity that generators need to receive over and above the system marginal cost energy price in order to keep a minimum amount of generation in the market. It should be noted that not all generators will receive the full capacity compensation outlined herein. The compensation for capacity was derived for the entire SERC and FRCC market regions.
- The ALL-IN PRICE forecast combines the energy price and the compensation for capacity (assuming 100% load). The all-in price reflects PA's estimate of the total market price that generators must receive to keep the market in equilibrium.
To show recent trends in electricity prices, Figure 5-1 provides recent electricity price information obtained from Power Markets Week. The values are the on-peak daily index values for April 1999 through March 2002 for the regions of interest.
FIGURE 5-1
HISTORICAL ELECTRICITY PRICES (DAILY ON-PEAK INDEX)(NOMINAL $)
[CHART]
5-2 Southern Power - June 5, 2002 |
5.3 SERC 5.3.1 BACKGROUND |
This section describes the current, proposed, and potential structure of the power market within the SERC region. SERC is the regional organization for the coordination of the operation and planning of the bulk power electric systems in the southeastern United States. The purpose of this coordination is to maximize the efficiency of the planning and operation of individual electric systems within the region in order to ensure system stability and reliability. The SERC region is subdivided into pricing areas: Entergy, Southern Company (Southern), Tennessee Valley Authority (TVA), and Virginia and Carolinas (VACAR). Figure 5-2 shows the SERC region.
From a national perspective, SERC lags behind the Northeast and California in terms of implementing RTOs and competitive market structures. The SERC energy market is characterized by largely informal market arrangements with the majority of power sold through bilateral agreements rather than through a power exchange or other formal marketplace.
5.3.2 POWER MARKETS
Southern Power's assets in SERC are located in the Southern pricing area. (See Figure 5-2.)
Unlike more tightly coordinated electrical markets in other regions, SERC lacks a generation or transmission market. The SERC wholesale market is informally organized with the majority of transactions completed through bilateral agreements. Within the region it is possible to conduct short-term financial trading of electricity futures contracts at the TVA and Entergy delivery points. These contracts are traded on the Chicago Board of Trade and New York Mercantile Exchange, respectively.
SERC currently functions primarily as a bilateral market whereby buyers and sellers enter into short- and long-term contracts for capacity and energy. Typically these contracts include both an energy and capacity payment.
The SERC Executive Committee is contemplating the creation of a market interface committee (MIC) to coordinate SERC's policies and activities with the national-level MIC organized by NERC. One reason for establishing such a committee is to allow greater participation by merchant power producers in SERC market policy and direction. The proposed MIC may
FIGURE 5-2
GENERATION ASSETS IN THE SERC REGION
[CHART]
be responsible for drafting new market procedures, should SERC establish a formalized regional power market at some point in the future.
5.3.3 TRANSMISSION SYSTEM
Several of the largest utilities in the United States (Southern Company, Entergy, and the TVA) dominate the region's generation and transmission facilities. Like all other transmission owning utilities, these utilities provide "open access" transmission service under FERC Order No. 888. Under Order No. 888, transmission owners are required to offer firm transmission capacity to the extent that they have any available, and to treat users of their transmission system on the same basis as they use the system for their own purposes. This is considered a "non-discriminatory" standard. While utilities in SERC offer "open access," transmission rate pancaking (when power crosses more than one transmission system and is subject to two or more tariffs) makes it challenging to move power more than a couple of transmission wheels.
Most of the region's utilities are just beginning to explore new market structures, such as the creation of a regional ISO. However, Entergy has proposed the creation of a transmission company subsidiary to operate and manage its transmission assets in Arkansas, Mississippi, Texas, and Louisiana, and has filed this proposal with the FERC for approval. The Louisiana PSC has moved to block the Entergy TRANSCO. In addition, Dominion Resources initially joined the Alliance RTO, which failed to get FERC approval, so Dominion then joined the SeTrans RTO.
Southern Power - June 5, 2002 5-3
5.3.4 MARKET CHARACTERISTICS
A. FUEL MIX
As illustrated in Figure 5-3, SERC is largely dependent on coal-fired and nuclear resources for baseload generation. Coal-fired generation is the predominant resource in terms of both the energy production and the installed capacity in SERC, accounting for 51% of the energy produced and 37% of the installed capacity in the region. Nuclear facilities produce 29% of the energy and account for 16% of the installed capacity. Gas- and oil-fired units produce 15% of the energy and account for 37% of the installed capacity. The remainder of SERC's installed capacity and baseload generation is composed of hydro units.
FIGURE 5-3
SERC FUEL MIX
ENERGY AND CAPACITY - 2002
[CHART]
B. MARKET DYNAMICS
Southern Power's assets evaluated in this report located in SERC include gas-fired plants representing 4,366 MW of capacity.
The load and resource balance for the SERC region is shown below in Figure 5-4. Peak demand in the SERC market is forecasted to grow at an annual compound rate of approximately 2.0% per year from 2002 through 2021. A required system-wide reserve margin of 15% is assumed through 2006, and it drops to 13% from 2007 through the remainder of the study period.
FIGURE 5-4
SERC LOAD AND RESOURCE BALANCE
[CHART}
5-4 Southern Power - June 5, 2002 |
5.3.5 PRICE FORECASTS A. BASE CASE MARKET RESULTS |
Near-term fuel prices are modeled based on recent actual spot prices and futures prices through December 2004, decreasing linearly to the long-term consensus view by 2006.
The all-in price represents a combined compensation for capacity and energy price (assuming a 100% load factor). The compensation for capacity contribution to the all-in price ranges between approximately $1.68/MWh and $6.23/MWh. The forecasts of energy prices, capacity compensation, and all-in prices are shown in Figure 5-5 for the SERC-Southern pricing area.
FIGURE 5-5
SERC-SOUTHERN COMPENSATION FOR CAPACITY, ENERGY, AND ALL-IN PRICE FORECASTS(1)
[CHART]
Southern Power - June 5, 2002 5-5
B. SENSITIVITY CASES ANALYSIS
The all-in prices for the sensitivity cases described in Section 5.2 are shown in Figure 5-6 for the SERC-Southern pricing area. The sensitivities evaluated were the low fuel, high fuel, and overbuild cases. These sensitivities are not meant to reflect bounding or worst case scenarios.
The high fuel case yields consistently higher all-in prices (in the range of $2.00 to $3.80/MWh) as compared the base case. Conversely, the low fuel case yields consistently lower all-in prices, of the same magnitude, as compared to the base case. The additional merchant surplus in the overbuild case depresses all-in prices up to $3.80/MWh in 2008. The overbuild prices return to the level of the base case by 2011 as the market absorbs the additional surplus.
FIGURE 5-6
SERC-SOUTHERN SENSITIVITY CASES ALL-IN PRICE FORECASTS(1) ($/MWH)
[CHART]
5-6 Southern Power - June 5, 2002
C. PROJECTED GROSS MARGINS
Figure 5-7 shows projected gross margins for Southern Power's SERC assets evaluated in this report for the base case and sensitivity cases for the period 2002-2022.
FIGURE 5-7
GROSS MARGINS FOR SOUTHERN POWER'S SERC ASSETS BY CASE(1) (REAL 2001 $)
[CHART]
Southern Power - June 5, 2002 5-7
5.3.6 CRITICAL MARKET FACTORS
A. SPARK SPREADS
Figure 5-8 shows the base case spark spread, which is the avoided cost or the net price of electricity after fuel costs for a combined cycle. It is calculated by subtracting fuel costs from the market clearing price. Variable O&M costs are not included in PA's calculation of spark spreads. PA used a heat rate of 6,834 Btu/kWh for the base case spark spread.
The spark spread for SERC in Figure 5-8 is depressed in early years because of the surplus of merchant capacity. As the market absorbs the excess capacity and moves to equilibrium, the spark spread for the base case stabilizes around $13/MWh.
B. GAS PRICES
Natural gas accounts for 34% and 15% of capacity and energy, respectively, in the SERC region in 2002. These resources significantly influence the marginal cost of energy. By 2021, natural gas is the marginal fuel over 85% of the time (see Figure 5-8). Consequently, regardless of the fuel burned by an individual unit, the revenue that is earned will be significantly influenced by the price of natural gas.
Figure 5-9 shows the fuel forecasts overlaid on the base case price results. The fuel forecasts represent the delivered natural gas prices for a new unit. Again, because the market is in an overbuild situation, the rise in gas prices in 2003-2004 does not trigger a significant jump in all-in prices.
C. NEW CAPACITY
For 2002-2004, over 33,000 MW of merchant capacity is expected to be added to the SERC region. This merchant surplus creates an overbuild situation that depresses capacity compensation in the near term. Capital investment in merchant generation is treated as a sunk cost; therefore, an overbuild situation created by merchants depresses capacity compensation in the near term. The market absorbs the surplus and returns to equilibrium by 2008. The forecasted supply and demand can be seen in the load and resource graph in Figure 5-10.
D. LOAD GROWTH
Due to the factors described above, load growth is a key driver in the SERC region. A higher load growth allows any merchant capacity to be absorbed in the
FIGURE 5-8
SERC - SPARK SPREADS & FUEL ON THE MARGIN
[CHART]
FIGURE 5-9
SERC - FUEL FORECASTS & MARKET RESULTS
[CHART]
FIGURE 5-10
SERC - LOAD & CAPACITY DEMAND
[CHART]
5-8 Southern Power - June 5, 2002
capacity market. The average annual rate of 2.0% was taken from the 2002 EIA Annual Energy Outlook forecast. The load and resource graph in Figure 5-10 illustrates the load growth and reserve margin assumptions for the overbuild period.
5.3.7 DISPATCH CURVES
Dispatch curves for the SERC region for 2006 and 2012 are shown in Figure 5-11. The dispatch curves show the annual average marginal dispatch cost of the target assets as compared to the other generators in the market.
FIGURE 5-11
SERC DISPATCH CURVES FOR 2006 AND 2012
[CHART]
Southern Power - June 5, 2002 5-9
5.4 FRCC
5.4.1 BACKGROUND
FRCC was established on September 16, 1996, to ensure and enhance the reliability and adequacy of bulk electricity supply in Florida. FRCC became the tenth reliability region of NERC. FRCC is limited to the State of Florida and coexists with a single state regulatory environment where there is emerging wholesale competition but little interest in establishment of retail competition.
There are currently 35 members in FRCC, including IOUs, cooperative systems, municipals, IPPs, and power marketers. However, the majority of the retail market is controlled by five utilities: Florida Power & Light Co. (FPL), Florida Power Corporation (FPC), Tampa Electric Company (TECO), Jacksonville Electric Authority (JEA), and Gulf Power Company (Gulf). Collectively, FPL, FPC, and TECO own or operate approximately 75% of the total generation capacity in the state. In addition, a number of small municipal utilities in the state purchase power from other utilities under wholesale power agreements. The state has twelve separate control areas.
The electricity market in Florida, like other states dominated by IOUs, is organized around utility service territories. FPL dominates the southern and eastern portions of the state while FPC's service territory covers the central and northern areas. TECO is centered in the middle of the state near Tampa and JEA provides power to Jacksonville residents in the northeast. Gulf, a Southern Company, is located in the far west in the Florida panhandle.
5.4.2 POWER MARKETS
Historically, the State of Florida has encouraged the development of non-utility generators through utility proposals for wholesale generation. Approximately 11% of Florida's electric capacity is served by non-utility generators.(12) The Florida Public Service Commission (FPSC) encouraged the use of wholesale market for inter-utility sales through the formation of the Florida Energy Broker. However, despite a profit incentive mechanism associated with its use, the mechanism is not widely used since most sales are made under long-term contracts.
In recent years, reserve margins forecast in Florida have decreased. The FPSC became concerned with the decrease in reserve margins and the potential impact on reliability and it investigated the adequacy of reserve margins for all of the utilities in peninsular Florida. The investigation concluded in November 1999 when the FPSC approved an agreement by FPL, FPC, and TECO to adopt a voluntary 20% reserve margin starting in the summer of 2004. The reserve margin agreement does not extend to municipal or cooperative utilities who are allowed to maintain their current level of reserves. Given the forecast supply shortfall and the recent decision by FPL, FPC, and TECO to maintain a 20% reserve margin, there has been considerable interest by merchant plant developers. Several companies have announced plans to construct merchant plants in Florida over the next five years.
Although there are a number of proposals for the construction of independent power plants to contractually serve both investor- and municipal-owned utilities, the IOUs mounted a successful legal challenge at the State Supreme Court level to deny FPSC's authority to license merchant plants that do not have contracts with utilities for their output (see discussion in the next section).
5.4.3 TRANSMISSION SYSTEM
Before 1980, Florida primarily existed as an island transmission system with limited ties to the north. Currently, there are two major 500 kV transmission lines connecting Florida with the transmission system in Southern Company's service territory. Florida's entire transmission system is regulated by FERC and the FPSC, which has jurisdiction over planning, developing, and maintaining the transmission system throughout Florida.
In December 2000, FPL, FPC, and TECO submitted their Order No. 2000 compliance filing providing for the creation of an RTO. The three applicants proposed the formation of a for-profit transmission company that will act as the RTO for the FRCC region. The proposed name for the TRANSCO was Grid Florida LLC. However, in November 2001, the Florida PSC stated that a for-profit entity would not benefit the state and ordered that the utilities devise a not-for-profit entity within 90 days. In March 2002, Grid Florida filed a compliance filing with the Florida PSC revising the form and function of Grid Florida to address the perceive problems. Specifically, Grid Florida filed to be a non-profit ISO structure.
(12) Based on DOE/EIA-0095(99)/1, "Inventory of Electric Utility Power Plants in the United States 1999," September 2000, and DOE/EIA-0095(99)/2, "Inventory of Nonutility Electric Power Plants in the United States 1999," November 2000.
5-10 Southern Power - June 5, 2002 |
5.4.4 MARKET CHARACTERISTICS A. FUEL MIX |
As illustrated in Figure 5-12, in year 2002, 61% of the generating capacity in FRCC consists of gas- and oil-fired units with coal accounting for 24%. Nuclear facilities account for 9% of the generating capacity, with the remaining 6% attributable to other sources. Although gas and oil units account for the majority of the generating capacity, they only account for 32% of the energy produced. The fuel producing the largest portion of energy in FRCC is coal at 41%.
The fuel mix of plants located in FRCC is unique due to the mix of baseload and peaking capacity. Additionally, facilities in FRCC are fueled by a unique but highly constrained gas distribution network. These constraints allow for opportunities and uncertainty around the delivery and potential redirection of fuel into load pockets to take advantage of valuation discrepancies. It is clear that as FRCC continues to develop, these gaps will be closed and financially firm contracts and distributed generation will absorb the uncertainty.
FIGURE 5-12
FRCC FUEL MIX
ENERGY AND CAPACITY - YEAR 2002
[CHART]
FRCC is unique in that it needs a significant amount of gas pipeline capacity. Combined cycle units are purchasing pipeline capacity at significant rates (~$40/kW/yr). While gas is expected to be on the margin within the next 15 years, FRCC will need to loosen regulatory restrictions and allow combined cycles to be built to avoid a significant capacity shortage (e.g., California).
B. MARKET DYNAMICS
Southern Power's assets evaluated in this report located in FRCC include 411 MW (65% interest in 633 MW) of gas-fired capacity. Figure 5-13 illustrates the load and resource balance for FRCC through the end of the study period. Peak demand in the FRCC market is forecasted to grow at an annual compound rate of approximately 2.3% per year from 2002 through 2021. A required system-wide reserve margin of 17% is assumed through the study period.
The load shape for FRCC has peaks in both the winter and summer. The summer peak occurs because of the expected hot weather in the summer; however, peak demand occurs in the winter because of Florida's winter tourism season. FRCC is forecasting this winter peak to occur over the next
FIGURE 5-13
FRCC LOAD AND RESOURCE BALANCE
[CHART]
Southern Power - June 5, 2002 5-11 |
10 years. With this characteristic in load shape, peaking plants are able to take advantage of two periods of high-priced occurrences. |
5.4.5 PRICE FORECASTS
A. BASE CASE MARKET RESULTS
Near-term fuel prices are modeled based on recent actual spot prices and futures prices through December 2004, decreasing linearly to the long-term consensus view by 2006.
The all-in price represents a combined compensation for capacity and energy price (assuming a 100% load factor). The compensation for capacity contribution to the all-in price ranges between approximately $4.93/MWh and $7.80/MWh. The forecasts of energy prices, capacity compensation, and all-in prices are shown in Figure 5-14 for the FRCC region.
FIGURE 5-14
FRCC COMPENSATION FOR CAPACITY, ENERGY, AND ALL-IN PRICE FORECASTS(1)
[CHART]
5-12 Southern Power - June 5, 2002
B. SENSITIVITY CASES ANALYSIS
The all-in prices for high fuel, low fuel, and overbuild sensitivity cases described in Section 5.2 are shown in Figure 5-15 for the FRCC region. These sensitivities are not meant to reflect bounding or worst case scenarios.
The high fuel case yields consistently higher all-in prices (in the range of $2.80 to $3.80/MWh) as compared the base case. Conversely, the low fuel case yields consistently lower all-in prices, of the same magnitude, as compared to the base case. The additional merchant surplus in the overbuild case depresses all-in prices up to $7.10/MWh in 2004. The overbuild prices return to the level of the base case by 2010 as the market absorbs the additional surplus.
FIGURE 5-15
FRCC SENSITIVITY CASES ALL-IN PRICE FORECASTS(1) ($/MWH)
[CHART]
Southern Power - June 5, 2002 5-13
C. PROJECTED GROSS MARGINS
Figure 5-16 shows projected gross margins for Southern Power's FRCC assets evaluated in this report for the base case and sensitivity cases for the period 2002-2022.
FIGURE 5-16
GROSS MARGINS FOR SOUTHERN POWER'S FRCC ASSETS BY CASE(1) (REAL 2001 $)
[CHART]
5-14 Southern Power - June 5, 2002 |
5.4.6 CRITICAL MARKET FACTORS A. SPARK SPREADS |
Figure 5-17 shows the base case spark spread, which is the avoided cost or the net price of electricity after fuel costs for a combined cycle. It is calculated by subtracting fuel costs from the market clearing price. Variable O&M costs are not included in PA's calculation of spark spreads. PA used a heat rate of 6,834 Btu/kWh for the base case spark spread.
The spark spread for FRCC in Figure 5-17 declines in early years because of the increase in natural gas as the marginal fuel. Once the market reaches equilibrium in 2005, the spark spread remains consistent at $14/MWh for the base case.
B. GAS PRICES
Natural gas accounts for 34% and 19% of capacity and energy, respectively, in the FRCC region in 2002. These resources significantly influence the marginal cost of energy. By 2021, natural gas is the marginal fuel over 85% of the time (see Figure 5-17). Consequently, regardless of the fuel burned by an individual unit, the revenue that is earned will be significantly influenced by the price of natural gas.
Figure 5-18 shows the fuel forecasts overlaid on the base case price results. The fuel forecasts represent the delivered natural gas prices for a new unit.
C. NEW CAPACITY
For 2002-2004, over 7,000 MW of merchant capacity is expected to be added to the FRCC region. The market is expected to be in equilibrium starting in 2005. The forecasted supply and demand can be seen in the load and resource graph in Figure 5-19.
D. LOAD GROWTH
Due to the factors described above, load growth is a key driver in the FRCC region. A higher load growth allows merchant capacity to be absorbed more quickly in the capacity market. The average annual rate of 2.3% was taken from the 2002 EIA Annual Energy Outlook forecast. This load growth, coupled with a reserve margin of 17%, allows FRCC to avoid an overbuild situation in the base case. The load and resource graph in Figure 5-19 illustrates the load growth and reserve margin assumptions for the first ten years of the base case.
FIGURE 5-17
FRCC - SPARK SPREADS & FUEL ON THE MARGIN
[CHART]
FIGURE 5-18
FRCC - FUEL FORECASTS & MARKET RESULTS
[CHART]
FIGURE 5-19
FRCC - LOAD & CAPACITY DEMAND
[CHART]
Southern Power - June 5, 2002 5-15
5.4.7 DISPATCH CURVES
Dispatch curves for the FRCC region for 2006 and 2012 are shown in Figure 5-20. The dispatch curves show the annual average marginal dispatch cost of the target assets as compared to the other generators in the market.
FIGURE 5-20
FRCC DISPATCH CURVES FOR 2006 AND 2012
[CHART]
5-16 Southern Power - June 5, 2002
$575,000,000
SOUTHERN POWER COMPANY
A SUBSIDIARY OF
(SOUTHERN COMPANY LOGO)
OFFER TO EXCHANGE
ALL OUTSTANDING
6.25% SENIOR NOTES, SERIES A DUE JULY 15, 2012
FOR
6.25% SENIOR NOTES, SERIES B DUE JULY 15, 2012
(REGISTERED UNDER THE SECURITIES ACT OF 1933)
UNTIL [ ], ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of Title 8 of the Delaware Code gives a corporation power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The same section also gives a corporation power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Also, the section states that, to the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any such action, suit or proceeding, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
The By-Laws of Southern Power Company provide in substance that no present or future director or officer of the corporation, or his heirs, executors or administrators, shall be liable for any act, omission, step or conduct taken or had in good faith, which is required, authorized or approved by any order or orders issued pursuant to the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, as amended, or any federal or state statute or municipal ordinance regulating the corporation or its parent by reason of their being holding or investment companies, public utility companies, public utility holding companies or subsidiaries of public utility holding companies. In any action, suit or proceeding based on any act, omission, step or conduct, as in this paragraph described, the provisions hereof shall be brought to the attention of the court. In the event that the foregoing provisions of this paragraph are found by the court not to constitute a valid defense on the grounds of not being applicable to the particular class of plaintiff, each such director and officer, and his heirs, executors and administrators, shall be reimbursed for, or indemnified against, all expenses and liabilities incurred by him or imposed on him, in connection with, or arising out of, any such action, suit or proceeding based on any act, omission, step, or conduct taken or had in good faith as in this paragraph described. Such expenses and liabilities shall include judgments, court costs and attorneys' fees.
The By-Laws of Southern Power Company further provide as follows:
"Each person who is or was a director of the corporation or officer or employee of the corporation holding one or more positions of management through and inclusive of managers (but not positions below the level of such managers) (such positions being hereinafter referred to as "Management Positions") and who was or is a party or was or is threatened to be made a party to any threatened, pending or completed claim,
II-1
action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director of the corporation or officer or employee of the corporation holding one or more Management Positions, or is or was serving at the request of the corporation as a director (or the equivalent), alternate director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall be indemnified by the corporation as a matter of right against any and all expenses (including attorneys' fees) actually and reasonably incurred by him and against any and all claims, judgments, fines, penalties, liabilities and amounts paid in settlement actually incurred by him in defense of such claim, action, suit or proceeding, including appeals, to the full extent permitted by applicable law. The indemnification provided by this section shall inure to the benefit of the heirs, executors and administrators of such person.
Expenses (including attorneys' fees) incurred by a director of the corporation or officer or employee of the corporation holding one or more Management Positions with respect to the defense of any such claim, action, suit or proceeding may be advanced by the corporation prior to the final disposition of such claim, action, suit or proceeding, as authorized by the board of directors in the specific case, upon receipt of an undertaking by or on behalf of such person to repay such amount unless it shall ultimately be determined that such person is entitled to be indemnified by the corporation under these bylaws or otherwise; provided, however, that the advancement of such expenses shall not be deemed to be indemnification unless and until it shall ultimately be determined that such person is entitled to be indemnified by the corporation."
Southern Power Company has an insurance policy covering its liabilities and expenses which might arise in connection with its lawful indemnification of its directors and officers for certain of their liabilities and expenses and also covering its officers and directors against certain other liabilities and expenses.
II-2
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1 -- Purchase Agreement dated as of June 18, 2002 among Southern
Power Company and Lehman Brothers Inc. and Salomon Smith
Barney Inc. (as representative of the Purchasers named
therein).
3.1 -- Certificate of Incorporation of Southern Power Company dated
January 8, 2001.
3.2 -- Bylaws of Southern Power Company effective January 8, 2001.
4.1 -- Indenture dated as of June 1, 2002, between Southern Power
Company and The Bank of New York, as Trustee.
4.2 -- First Supplemental Indenture dated as of June 18, 2002
between Southern Power Company and The Bank of New York, as
Trustee.
4.3 -- Registration Rights Agreement dated as of June 18, 2002
among Southern Power Company and the Initial Purchasers
named therein.
4.4 -- Form of Exchange Senior Note (included in Exhibit 4.2).
5.1 -- Opinion of Balch & Bingham LLP as to the legality of the
Exchange Senior Notes.
10.1 -- Credit Facility among Southern Power Company, Citibank N.A.,
as the administrative agent, and the lenders listed therein
dated as of November 15, 2001.
10.2(a) -- Completion Guarantee among The Southern Company, Southern
Power Company and Citibank, N.A., in its capacity as agent
for the Lenders under the Credit Facility dated as of
November 15, 2001.
10.2(b) -- Completion Guarantee Supplement by The Southern Company and
Southern Power Company dated as of April 22, 2002.
10.3(a) -- Equity Contribution Agreement among The Southern Company and
Citibank, N.A. in its capacity as agent for the Lenders
under the Credit Facility dated as of November 15, 2001.
10.3(b) -- Equity Contribution Agreement Supplement by The Southern
Company and Southern Power Company dated as of April 22,
2002.
10.4 -- Service Contract dated as of January 1, 2001, between
Southern Company Services and Southern Power Company.
10.5 -- Intercompany Interchange Agreement dated as of February 17,
2000 among Southern Power Company, Alabama Power Company,
Georgia Power Company, Gulf Power Company, Mississippi Power
Company, Savannah Electric and Power Company and Southern
Company Services.
10.6 -- Operating Agreement between Southern Power Company and
Alabama Power Company dated as of June 26, 2001.
10.7 -- Operating Agreement between Southern Power Company and
Georgia Power Company dated as of July 31, 2001.
10.8 -- Interconnection Agreement by and between Southern Power
Company and Georgia Power Company for Plant Dahlberg dated
as of July 31, 2001.
10.9 -- Interconnection Agreement by and between Southern Power
Company and Georgia Power Company for Wansley CC Units 6 and
7 dated as of May 10, 2001.
10.10 -- Interconnection Agreement by and between Southern Power
Company and Georgia Power Company for Goat Rock CC Unit 1
dated as of May 10, 2001.
10.11 -- Revised and Restated Interconnection Agreement by and
between Southern Power Company and Georgia Power Company for
Goat Rock CC Unit 2 dated as of October 18, 2001.
10.12 -- Interconnection Agreement by and between Southern Power
Company and Alabama Power Company for Autaugaville Combined
Cycle Unit 1 dated as of June 25, 2001.
10.13 -- Interconnection Agreement by and between Southern Power
Company and Alabama Power Company for Autaugaville Combined
Cycle Unit 2 dated as of June 25, 2001.
10.14 -- Purchased Power Agreement between Georgia Power Company and
Dynegy Power Marketing, Inc. dated as of March 2, 2000.
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II-3
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.15 -- Purchased Power Agreement between Georgia Power Company and
LG&E Energy Marketing Inc. dated as of November 24, 1998.
10.16 -- 1999 Purchased Power Agreement between Georgia Power Company
and LG&E Energy Marketing Inc. dated as of October 6, 1999.
10.17 -- Assignment and Assumption Agreement by and between Georgia
Power Company and Southern Power Company dated as of July
31, 2001.
10.18 -- Power Purchase Agreement between Southern Power Company and
Alabama Power Company dated as of June 1, 2001.
10.19 -- Amended and Restated Power Purchase Agreement between
Southern Power Company and Georgia Power Company at Plant
Autaugaville dated as of August 6, 2001.
10.20 -- Contract for the Purchase of Firm Capacity and Energy
between Southern Power Company and Savannah Electric and
Power Company dated as of July 26, 2001.
10.21 -- Contract for the Purchase of Firm Capacity and Energy
between Southern Power Company and Georgia Power Company
dated as of July 26, 2001.
10.22 -- Power Purchase Agreement between Southern Power Company and
Georgia Power Company at Plant Goat Rock dated as of March
30, 2001.
10.23 -- Power Purchase Agreement between Southern Company - Florida
LLC and Kissimmee Utility Authority dated as of March 19,
2001.
10.24 -- Power Purchase Agreement between Southern Company - Florida
LLC and Florida Municipal Power Agency dated as of March 19,
2001.
10.25 -- Power Purchase Agreement between Southern Company - Florida
LLC and Orlando Utilities Commission dated as of March 19,
2001.
10.26 -- Power and Gas Supply Agreement among Southern Power Company,
Dynegy Power Marketing, Inc. and Dynegy Marketing and Trade
dated as of March 28, 2002.
10.27 -- Energy Contract between Southern Power Company and Dynegy
Power Marketing, Inc. dated as of March 28, 2002.
10.28 -- The Southern Company Employee Savings Plan, Amended and
Restated effective January 1, 2002.
10.29 -- Amendment Number One to The Southern Company Employee
Savings Plan dated June 21, 2002.
10.30 -- The Southern Company Employee Stock Ownership Plan, Amended
and Restated effective January 1, 2002.
10.31 -- Southern Company Omnibus Incentive Compensation Plan,
Amended and Restated effective May 23, 2001.
10.32 -- The Southern Company Pension Plan, effective as of January
1, 1997 and all amendments thereto through Amendment Number
Seven.
10.33 -- The Southern Company Supplemental Executive Retirement Plan,
Amended and Restated effective May 1, 2000.
10.34 -- The Southern Company Supplemental Benefit Plan, Amended and
Restated effective May 1, 2000.
10.36 -- Southern Company Executive Change in Control Severance Plan,
Amended and Restated effective July 10, 2000.
10.37 -- Amended and Restated Change in Control Agreement between The
Southern Company, Southern Company Services and H. Allen
Franklin.
10.38 -- Amended and Restated Change in Control Agreement between The
Southern Company, Southern Company Services and Charles D.
McCrary.
10.39 -- Amended and Restated Change in Control Agreement between The
Southern Company, Georgia Power Company and David M.
Ratcliffe.
10.40 -- Amended and Restated Change in Control Agreement between The
Southern Company, Southern Company Services and Gale E.
Klappa.
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II-4
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.41 -- Southern Company Deferred Compensation Trust Agreement dated
as of January 1, 2001 between Wachovia Bank, N.A., The
Southern Company, Southern Company Services, Alabama Power
Company, Georgia Power Company, Savannah Electric and Power
Company, Gulf Power Company, Mississippi Power Company,
Southern Communications, Energy Solutions, Mirant and
Southern Nuclear.
10.42 -- Change in Control Agreement between The Southern Company,
Southern Company Services and W. Paul Bowers, dated as of
May 15, 2002.
10.43 -- The Southern Company Deferred Compensation Plan, Amended and
Restated effective February 23, 2001.
12.1 -- Calculation of Ratio of Earnings to Fixed Charges.
21.1 -- Subsidiaries of Registrant.
23.1 -- Consent of Deloitte & Touche LLP, Independent Auditor.
23.2 -- Consent of Balch & Bingham LLP (included in Exhibit 5.1).
23.3 -- Consent of R. W. Beck.
23.4 -- Consent of PA Consulting Services, Inc.
24.1 -- Powers of Attorney and Resolution.
25.1 -- Statement of Eligibility of The Bank of New York, as Trustee
on Form T-1.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Clients.
99.4 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
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(b) Financial Statement Schedules
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Securities and Exchange Commission filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities and Exchange Act of 1934 that are incorporated by reference in the registration statement.
II-5
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first-class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
(d) The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia on August 22, 2002.
SOUTHERN POWER COMPANY
By: W. PAUL BOWERS
President, Chief Executive Officer
and Director
By: /s/ WAYNE BOSTON
------------------------------------
(Wayne Boston, Attorney-in-fact)
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Pursuant to the requirements of the Securities Act of 1933, the registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* President, Chief Executive Officer
------------------------------------------------ and Director (Principal Executive
(W. Paul Bowers) Officer)
* Vice President, Comptroller and
------------------------------------------------ Chief Financial Officer (Principal
(Cliff S. Thrasher) Financial Officer and Principal
Accounting Officer)
* Director
------------------------------------------------
(H. Allen Franklin)
* Director
------------------------------------------------
(Gale E. Klappa)
* Director
------------------------------------------------
(Charles D. McCrary)
* Director
------------------------------------------------
(David M. Ratcliffe)
*By: /s/ WAYNE BOSTON August 22, 2002
------------------------------------------
(Wayne Boston, Attorney-in-fact)
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II-7
Exhibit 1.1
$575,000,000 6.250% Senior Notes, Series A due July 15, 2012
SOUTHERN POWER COMPANY
PURCHASE AGREEMENT
June 13, 2002
Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019
Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
As Representatives of the Several Initial Purchasers named on Schedule I hereto
Ladies and Gentlemen:
Southern Power Company, a Delaware corporation (the "Company"), confirms its agreement (the "Agreement") with you and each of the other Initial Purchasers named in Schedule I hereto (collectively, the "Initial Purchasers", which term shall also include any initial purchaser substituted as hereinafter provided in Section 10 hereof) for whom you are acting as representatives (in such capacity you shall hereinafter be referred to as the "Representatives"), with respect to the sale by the Company and the purchase by the Initial Purchasers, acting severally and not jointly, of $575,000,000 aggregate principal amount of the 6.250% Senior Notes, Series A due July 15, 2012 (the "Senior Notes") as set forth in Schedule I hereto.
The Senior Notes will be offered without being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance on certain exemptions therefrom and in transactions not subject thereto. The Company has prepared a preliminary offering memorandum, dated June 11, 2002, including any and all annexes attached thereto, (the "Preliminary Offering Memorandum") and an offering memorandum, dated the date hereof, including any and all annexes attached thereto, (the "Offering Memorandum") setting forth information regarding the Company and the transactions described herein.
The Senior Notes will be issued pursuant to an indenture, dated as of June 1, 2002 (the "Base Indenture"), between the Company and The Bank of New York, as trustee (the "Trustee"), as supplemented by a first supplemental indenture to the Base Indenture relating to the Senior Notes (the "Supplemental Indenture," and together with the Base Indenture and any other amendments or supplements thereto, the "Indenture"), between the Company and the Trustee.
The Initial Purchasers and their direct and indirect transferees will be entitled to the benefits of a Registration Rights Agreement, dated the date hereof (the "Registration Rights Agreement") pursuant to which the Company will file with the Securities and Exchange Commission (the "Commission") (i) a registration statement under the Securities Act (the "Exchange Offer Registration Statement") registering an issue of notes of the Company ("Exchange Notes") which are identical in all material respects to the Senior Notes (except the Exchange Notes will not contain terms with respect to transfer restrictions and additional interest) and (ii) under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement").
Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Offering Memorandum.
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the Initial Purchasers as follows:
(a) The Offering Memorandum does not on the date of this Agreement and, as it may be then amended and supplemented, will not on the Closing Date, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; except that this representation and warranty does not apply to (i) statements or omissions made in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Initial Purchaser specifically for use in the Offering Memorandum and (ii) the Independent Engineer's Report or the Independent Market Expert's Report attached as Annex A and Annex B, respectively, to the Offering Memorandum. The factual information provided by the Company to R.W. Beck, Inc. ("Beck") for inclusion in its Independent Engineer's Report contained in Annex A to the Offering Memorandum was to the Company's knowledge, accurate in all material respects as of the time it was furnished.
(b) The Preliminary Offering Memorandum, as of its date, did not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the Company makes no warranty or representation to the Initial Purchasers with respect to: (i) statements or omissions made in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Initial Purchaser specifically for use in the Preliminary Offering Memorandum and (ii) the Independent Engineer's Report or the Independent Market Expert's Report attached as Annex A and Annex B, respectively, to the Preliminary Offering Memorandum.
(c) The historical financial statements of the Company and its predecessor (such predecessor entity hereinafter referred to as "Plant Dahlberg") contained in the Offering Memorandum have been prepared in conformity with generally accepted accounting principles in the United States and fairly present the financial position of the Company and Plant Dahlberg as of the dates set forth therein. The pro forma financial statements of Plant Dahlberg included in the Offering Memorandum present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein.
(d) Since the date as of which information is given in the Offering Memorandum, except as otherwise stated therein, there has been no material adverse change in the business, properties or financial condition of the Company.
(e) The Company is a corporation duly organized and existing under the laws of the State of Delaware and has due corporate authority to conduct its business and to own and operate the properties used by it in such business, as described in the Offering Memorandum, to enter into and perform its obligations under this Agreement, the Registration Rights Agreement and the Indenture and to issue and sell the Senior Notes to the Initial Purchasers.
(f) This Agreement has been duly authorized, executed and delivered by the Company.
(g) The Indenture has been duly authorized by the Company and, on the Closing Date, will have been duly executed and delivered by the Company, and, assuming due authorization, execution and delivery of the Indenture by the Trustee, the Indenture will, on the Closing Date, constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except to the extent that enforcement thereof may be limited by (1) bankruptcy, insolvency, reorganization, receivership, liquidation, fraudulent conveyance, moratorium or other similar laws affecting creditors' rights generally or (2) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity) (the "Enforceability Exceptions"); the Indenture will conform in all material respects to all statements relating thereto contained in the Offering Memorandum.
(h) The issuance and delivery of the Senior Notes have been duly authorized by the Company and, on the Closing Date, the Senior Notes will have been duly executed by the Company and, when authenticated in the manner provided for in the Indenture and delivered against payment therefor
as described in the Offering Memorandum, will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by the Enforceability Exceptions; the Notes will be in the form contemplated by, and entitled to the benefits of, the Indenture and will conform in all material respects to all statements relating thereto in the Offering Memorandum.
(i) The Registration Rights Agreement has been duly authorized by the Company and, on the Closing Date, will have been duly executed and delivered by the Company and, assuming due authorization, execution and delivery of the Registration Rights Agreement by the other parties thereto, the Registration Rights Agreement will, on the Closing Date, constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except to the extent the enforcement thereof may be limited by the Enforceability Exceptions and except as indemnification or contribution obligations thereunder may be limited under applicable laws; the Registration Rights Agreement will conform in all material respects to all statements relating thereto in the Offering Memorandum.
(j) Neither the Company nor any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act, an "Affiliate") has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of any security (as defined in the Securities Act) which is or will be integrated with the sale of the Senior Notes in a manner that would require the registration under the Securities Act of the Senior Notes or (ii) engaged in any form of general solicitation or general advertising in connection with the offering of the Senior Notes (as those terms are used in Regulation D under the Securities Act), or acted in any manner involving a public offering of the Senior Notes within the meaning of Section 4(2) of the Securities Act.
(k) The Senior Notes are eligible for resale pursuant to Rule 144A under the Securities Act ("Rule 144A") and will not be, at the Closing Date, of the same class (within the meaning of Rule 144A) as securities listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or quoted in a U.S. automated inter-dealer quotation system.
(l) With respect to those Senior Notes sold in reliance on Regulation S under the Securities Act, (i) none of the Company, its Affiliates or any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representation) has engaged or will engage in any directed selling efforts within the meaning of Regulation S and (ii) each of the Company and its Affiliates and any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representation) has complied and will comply with the offering restrictions requirement of Regulation S.
(m) The execution, delivery and performance by the Company of this Agreement, the Registration Rights Agreement, the Indenture and the Senior Notes and the consummation by the Company of the transactions contemplated herein and therein and compliance by the Company with its obligations hereunder and thereunder shall have been duly authorized by all necessary corporate action on the part of the Company and do not and will not result in any violation of the charter or bylaws of the Company, and do not and will not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company under (A) any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which the Company is a party or by which it may be bound or to which any of its properties may be subject (except for conflicts, breaches or defaults which would not, individually or in the aggregate, be materially adverse to the Company or materially adverse to the transactions contemplated by this Agreement), or (B) any existing applicable law, rule, regulation, judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, or any regulatory body or administrative agency or other governmental body having jurisdiction over the Company, or any of its properties.
(n) No authorization, approval, consent or order of any court or governmental authority or agency is necessary in connection with the issuance and sale by the Company of the Senior Notes or the transactions by the Company contemplated in this Agreement and the Offering Memorandum, except (A) such as may be required under the Public Utility Holding Company Act of 1935, as amended (the "Holding Company Act"); (B) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws and (C) such consents, approvals, authorizations, registrations and qualifications as may be required under the Securities Act and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") in connection with the transactions contemplated in the Registration Rights Agreement.
(o) The projected financial information contained in the Offering Memorandum (excluding the Independent Market Expert's Report, attached as Annex B to the Offering Memorandum) (i) are, in the judgment of the Company as to the matters covered thereby, reasonable as of their date and (ii) are based on easonable assumptions as to all factual and legal matters material to the estimates therein, all of which assumptions, to the extent material, are fairly disclosed in the Offering Memorandum. To the knowledge of the Company, none of the information forming the basis of such projections and assumptions has changed since they were originally prepared so as to materially affect such projections and assumptions.
(p) Assuming the accuracy of the Initial Purchasers' representations contained herein, and the Initial Purchasers' compliance with its agreements hereunder, the Company is not required by applicable law or regulation, in connection with the offer, sale and delivery of the Senior Notes to the Initial Purchasers, and the initial resales by the Initial
Purchasers, each in the manner contemplated by this Agreement and the Offering Memorandum, to register the Senior Notes under the Securities Act or to qualify the Indenture under the Trust Indenture Act.
SECTION 2. SALE AND DELIVERY TO THE INITIAL PURCHASERS; CLOSING; SALE AND RESALE BY THE INITIAL PURCHASERS.
(a) On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Initial Purchaser, and each Initial Purchaser, severally and not jointly, agrees to purchase from the Company, the principal amount of Senior Notes set forth in Schedule I to this Agreement opposite the name of such Initial Purchaser (plus any additional amount of Senior Notes that such Initial Purchaser may become obligated to purchase pursuant to the provisions of Section 10 hereof), at the prices set forth in Schedule I to this Agreement.
(b) Payment for and delivery of certificates for the Senior Notes shall be made at the offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019 at 10:00 A.M., New York time, on June 18, 2002 (unless postponed in accordance with the provisions of Section 10) or such other time, place or date as shall be agreed upon by the Representatives and the Company (such time and date of payment and delivery being herein called the "Closing Date"). Payment shall be made to the Company by wire transfer in federal funds at the Closing Date gainst delivery of the Senior Notes to Salomon Smith Barney Inc. ("SSB"). It is understood that each Initial Purchaser has authorized SSB, for its account, to accept delivery of, receipt for, and make payment of the principal amount of the Senior Notes which it has agreed to purchase. SSB, individually and not as Representatives of the Initial Purchaser, may (but shall not be obligated to) make payment of the principal amount of the Senior Notes to be purchased by any Initial Purchaser whose payment has not been received by the Closing Date, but such payment shall not relieve such Initial Purchaser from its obligations hereunder.
(c) The Senior Notes in which interests are sold to Qualified Institutional Buyers (as defined in Rule 144A) in reliance on Rule 144A will be issued in the form of one or more Global Notes (the "Rule 144A Global Notes"). The Senior Notes in which interests are sold to persons other than U.S. persons (as defined in Regulation S under the Securities Act ("Regulation S")) in offshore transactions in reliance on Regulation S will each be issued in the form of one or more Global Notes (the "Regulation S Global Notes"). Upon issuance by the Company, the Trustee will authenticate and deliver the Rule 144A Global Notes and the Regulation S Global Notes and will record Cede & Co., as the nominee of DTC, on its books as the registered owner of the Senior Notes. The Senior Notes in which interests are sold to a limited number of institutional investors who are "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) will be issued in certificated form without coupons and registered in such names as each Initial Purchaser may request upon at least forty-eight hours' prior notice to the Company.
For the purpose of expediting the checking of the Senior Notes by the Initial Purchasers, the Company agrees to make the Senior Notes available to the Initial Purchasers for such purpose at the offices of the Trustee in New York, New York not later than 2:00 PM, New York City time, on the business day preceding the Closing Date, or at such other time and place as may be agreed upon by the Company and the Initial Purchasers.
(d) Resale of the Securities: Each Initial Purchaser represents and warrants to, and agrees with the Company that:
(1) It is a Qualified Institutional Buyer and an "accredited investor" within the meaning of Rule 501(a) under the Securities Act;
(2) It has not offered or sold, and will not offer or sell, Senior
Notes except (i) to persons whom it reasonably believes to be Qualified
Institutional Buyers or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or
agent, only when such person has represented to such Initial Purchaser that
each such account is a Qualified Institutional Buyer to whom such notice
has been given that such sale or delivery is being made in reliance on Rule
144A, in each case in transactions meeting the requirements of Rule 144A,
(ii) to a limited number of other institutional investors whom the Company
believes to be "accredited investors" (as defined in Rule 501(a) (1), (2),
(3) or (7) of Regulation D) that, prior to their purchase of the Senior
Notes, deliver to it a letter substantially in the form of Annex C to the
Offering Memorandum or (iii) in the case of offers outside the United
States to persons other than U.S. Persons (within the meaning of Regulation
S) to whom it reasonably believes offers and sales of the Senior Notes may
be made in reliance upon Regulation S under the Securities Act; and
(3) Neither it nor any of its Affiliates or any person acting on its or their behalf has made or will make offers or sales of Senior Notes in the United States by means of any form of general solicitation or general advertising (within the meaning of Regulation D) or in any mannerinvolving a public offering (within the meaning of Section 4(2) under the Securities Act) in the United States.
(e) Each Initial Purchaser represents, warrants, and agrees with respect to offers and sales outside the United States that:
(1) such Initial Purchaser understands that no action has been or will be taken in any jurisdiction by the Company that would permit a public offering of the Senior Notes, or possession or distribution of the Offering Memorandum or Preliminary Offering Memorandum or any other offering or publicity materialrelating to the Senior Notes, in any country or jurisdiction where action for that purpose is required;
(2) such Initial Purchaser will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Senior Notes or has in its possession or distributes the Offering Memorandum or Preliminary Offering Memorandum or any such other material, in all cases at its own expense;
(3) the Senior Notes have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Rule 144A or Regulation S or pursuant to another exemption from, or in transactions not subject to, the registration requirements of the Securities Act;
(4) such Initial Purchaser has offered the Senior Notes and will offer and sell the Senior Notes (A) as part of its distribution at any time and (B) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 of Regulation S or as otherwise permitted in Section 2(d) of this Agreement; accordingly, neither such Initial Purchaser, its Affiliates nor any persons acting on its or their behalf have engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Senior Notes, and the Initial Purchaser, its Affiliates and any such persons have complied and will comply with the offering restrictions requirement of Regulation S;
(5) such Initial Purchaser has (A) not offered or sold and will not offer or sell any Senior Notes to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (B) only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the "FSMA")) received by it in connection with the issue or sale of any Senior Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Company and (C) complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Senior Notes in, from or otherwise involving the United Kingdom; and
(6) such Initial Purchaser agrees that, at or prior to confirmation of sales of the Senior Notes, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Senior Notes from it during the restricted period a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A or any other exemption from the registration requirements of the Securities Act if available) under the Securities Act. Terms used above have the meaning given to them by Regulation S."
Terms used in this Section 2(e) have the meanings given to them by Regulation S.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with the Initial Purchasers as follows:
(a) To prepare the Offering Memorandum in a form approved by the Initial Purchasers and to furnish to the Initial Purchasers, without charge, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum and any supplements and amendments thereto as the Initial Purchasers may reasonably request.
(b) If, at any time prior to completion of the initial resales of the Senior Notes by the Initial Purchasers to purchasers, any event shall occur or condition exist as a result of which it is necessary, in the opinion of Dewey Ballantine LLP, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in ight of the circumstances existing at the time it is delivered to a purchaser or a potential purchaser, or if it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, to promptly prepare such amendment or supplement as may be necessary to correct such untrue statement or omission or so that the Offering Memorandum, as so amended or supplemented, will comply with applicable law and to furnish the Initial Purchasers such number of copies as they may reasonably request.
(c) So long as the Senior Notes are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, to furnish to holders of Senior Notes and prospective purchasers of Senior Notes designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless such information is contained, at the time of such request, in documents filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
(d) The Company will endeavor, in ooperation with the Initial Purchasers, to qualify the Senior Notes for offering and sale under the applicable securities laws of such states and the other jurisdictions of the United States as the Initial Purchasers may designate and to pay filing fees, reasonable attorneys' fees and disbursements in connection therewith in an amount not exceeding $15,000 in the aggregate (including filing fees and disbursements paid or incurred prior to the date this Agreement becomes effective); provided, however, that the Company shall not be obligated to
qualify as a foreign corporation in any jurisdiction in which it is not so qualified or to file a consent to service of process or to file annual reports or to comply with any other equirements in connection with such qualification deemed by the Company to be unduly burdensome.
(e) The Company covenants (i) not to solicit any offer to buy or offer to sell the Senior Notes by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act and (ii) not to engage, or permit its Affiliates or any person acting on their behalf to engage, in any directed selling efforts (as defined in Regulation S) with respect to the Senior Notes sold pursuant to Regulation S and to comply and cause its Affiliates and each person acting on their behalf to comply with the offering restrictions of Regulation S with respect to those Senior Notes sold pursuant thereto (it being understood that the Company and its Affiliates shall not have responsibility for the actions of the Initial Purchasers or any of their respective affiliates).
(f) The Company covenants not to offer, sell, contract to sell or otherwise dispose of any additional securities of the Company or to issue any securities convertible into or exchangeable for the Senior Notes or with respect to any debt securities substantially similar to the Senior Notes (except for the securities issued pursuant to this Agreement), without the consent (which consent shall not be unreasonably withheld) of the Initial Purchasers during the period beginning from the date of this Agreement and continuing to and including the earlier of (i) the termination of trading restrictions on the Senior Notes, as communicated to the Company by the Initial Purchasers and (ii) 15 days following the Closing Date.
(g) The Company agrees not to, and will cause its Affiliates not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) in a transaction that could be integrated with the sale of the Senior Notes in a manner that would require the registration under the Securities Act of the Senior Notes.
(h) During the period of two years after the Closing Date, the Company will not, and will not permit any of its Affiliates to, purchase, agree to purchase or otherwise acquire any of the Senior Notes which constitute "restricted securities" under Rule 144 under the Securities Act.
SECTION 4. PAYMENT OF EXPENSES.
(a) The Company agrees to pay all expenses incidental to the performance of its obligations under this Agreement, including, but not limited to, the expenses of (i) the preparation and printing of the Preliminary Offering Memorandum and the Offering Memorandum and any amendments and supplements thereto, (ii) distributing the Preliminary Offering Memorandum and the Offering Memorandum and any amendments or supplements thereto, (iii) the preparation, issuance and delivery of the
certificate(s) for the Senior Notes to the Initial Purchasers, (iv) the
fees and disbursements of the Company's counsel and accountants, (v) the
qualification of the Senior Notes under securities laws in accordance with
the provisions of Section 3(d) hereof including filing fees and the
reasonable fees and disbursements of Dewey Ballantine LLP, counsel for the
Initial Purchasers, in connection therewith and in connection with the
preparation of any blue sky survey, (vi) the printing and delivery to the
Initial Purchasers of copies of any blue sky survey, (vii) the fee of the
National Association of Securities Dealers, Inc. in connection with its
review of the offering contemplated by this Agreement, if applicable,
(viii) the fees and expenses of the Trustee, including the fees and
disbursements of counsel for the Trustee in connection with the Indenture
and the Notes, (ix) any fees payable in connection with the rating of the
Senior Notes, (x) the cost and charges of any transfer agent or registrar,
(xi) the cost of qualifying the Senior Notes with DTC; and (xii) all
reasonable fees, disbursements and expenses of independent engineers,
independent market experts and any other third party consultants who have
prepared reports, attached as annexes to the Preliminary Offering
Memorandum and Offering Memorandum, or otherwise.
(b) In addition, the Company agrees to pay the reasonable and documented third party outof pocket expenses incurred by the Representatives in connection with the offer and sale of the Senior Notes to the Initial Purchasers (including (i) all out of pocket expenses incurred by the Initial Purchasers with respect to the "road show" including expenses relating to slide production, Bloomberg taping and travel and (ii) reasonable and documented fees and expenses of counsel to the Initial Purchasers).
SECTION 5. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations of the Initial Purchasers to purchase and pay for the Senior Notes are subject to the following conditions:
(a) Any required order or orders of the Commission under the Holding Company Act permitting the transactions contemplated hereby substantially in accordance with the terms and conditions hereof shall be in full force and effect and shall contain no provision unacceptable to the Initial Purchasers or the Company (but all provisions of such order or orders heretofore entered, copies of which have heretofore been delivered to the Representatives, are deemed acceptable to the Initial Purchasers and the Company and all provisions of such order or orders hereafter entered shall be deemed acceptable to the Initial Purchasers and the Company unless within 24 hours after receiving a copy of any such order any party to this Agreement shall give notice to the other parties to the effect that such order contains an unacceptable provision).
(b) On the Closing Date the Representatives shall have received:
(1) The opinion, dated the Closing Date, of Balch & Bingham LLP, counsel for the Company, substantially in the form attached hereto as Schedule II.
(2) The opinion, dated the Closing Date, of Pillsbury Winthrop LLP, counsel to the Trustee, substantially in the form attached hereto as Schedule III.
(3) The opinion, dated as of the Closing Date, of Dewey Ballantine LLP, counsel for the Initial Purchasers, substantially in the form attached hereto as Schedule IV.
(4) At the Closing Date, there shall not have been, since the
date hereof or since the respective dates as of which information is
given in the Offering Memorandum, any material adverse change in the
business, properties or financial condition of the Company, whether or
not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President or
any Vice President of the Company, dated as of the Closing Date, to
the effect that (i) there has been no such material adverse change,
(ii) the representations and warranties in Section 1 hereof are true
and correct with the same force and effect as though expressly made at
and as of the Closing Date and (iii) the Company has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied on or prior to the Closing Date.
(5) On the Closing Date, the Representatives shall have received from Deloitte & Touche LLP a letter dated as of the Closing Date to the effect that: (A) they are independent public accountants with respect to the Company within the meaning of the Securities Act and the rules and regulations under the Securities Act; (B) in their opinion, the financial statements audited by them and included in the Offering Memorandum comply as to form in all material respects with the applicable accounting requirements of the Exchange Act and the rules and regulations under the Exchange Act; and (C) on the basis of certain limited procedures performed through a specified date not more than five business days prior to the date of such letter, namely (i) reading the minute books of the Company; (ii) performing the procedures specified by the American Institute of Certified Public Accountants ("AICPA") for a review of interim financial information as described in Statement on Auditing Standards No. 71, "Interim Financial Information", on the unaudited financial statements, if any, of the Company included in the Offering Memorandum and of the latest available unaudited financial statements of the Company, if any, for any calendar quarter subsequent to the date of those included in the Offering Memorandum; and (iii) making inquiries of certain officials of the Company who have responsibility for financial and accounting matters regarding such unaudited financial statements or any specified unaudited amounts derived therefrom (it being understood that the foregoing rocedures do not constitute an audit performed in accordance with generally accepted auditing standards and they would not necessarily reveal matters of significance with respect to the comments made in such letter, and accordingly that Deloitte & Touche LLP make no representations as to the sufficiency of such procedures for the Initial Purchasers' purposes), nothing came to their attention that caused them to believe that: (1) any material modifications should be made to the unaudited condensed financial statements included in the Offering Memorandum for them to be in conformity with
generally accepted accounting principles; (2) such unaudited condensed financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act as it applies to Form 10-Q and the related published rules and regulations thereunder; (3) the unaudited amounts for Operating Revenues, Earnings Before Interest and Income Taxes and Net Income and the unaudited Ratio of Earnings to Fixed Charges set forth in the Offering Memorandum do not agree with the amounts set forth in or derived from the unaudited financial statements for the same period or were not determined on a basis substantially consistent with that of the corresponding audited amounts or ratios included in the Offering Memorandum; (4) as of a specified date not more than five business days prior to the date of delivery of such letter, there has been any change in the capital stock or long-term debt of the Company or any decrease in net assets as compared with amounts shown in the latest audited balance sheet, except in each case for changes or decreases which (i) the Offering Memorandum discloses have occurred or may occur, (ii) are occasioned by the declaration of dividends, (iii) are occasioned by draw-downs under existing pollution control financing arrangements, (iv) are occasioned by draw-downs and regularly scheduled payments of capitalized lease obligations, (v) are occasioned by the purchase or redemption of bonds or stock to satisfy mandatory or optional redemption provisions relating thereto, or (vi) are disclosed in such letter; and (5) the unaudited amounts for Operating Revenues, Earnings Before Interest and Income Taxes and Net Income and the unaudited Ratio of Earnings to Fixed Charges for any calendar quarter subsequent to those set forth in (3) above, which, if available, shall be set forth in such letter, do not agree with the amounts set forth in or derived from he unaudited financial statements for the same period or were not determined on a basis substantially consistent with that of the corresponding audited amounts or ratios included in the Offering Memorandum. Deloitte & Touche LLP shall also have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Offering Memorandum, (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Issuer's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter.
(6) On the Closing Date, Dewey Ballantine LLP, counsel for the Initial Purchasers shall have been furnished with such documents and opinions as they may reasonably equire for the purpose of enabling them to pass upon the issuance and sale of the Senior Notes as herein contemplated and related proceedings, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Senior Notes as herein contemplated shall be satisfactory in form and substance to the Representatives and Dewey Ballantine LLP, counsel for the Initial Purchasers.
(7) That no amendment or supplement to the Preliminary Offering Memorandum or the Offering Memorandum shall be unsatisfactory in form to Dewey Ballantine LLP or shall contain information (other than with respect to an amendment or supplement relating solely to the activity of the Initial Purchasers) which, in the reasonable judgment of the Representatives, shall materially impair the marketability of the Senior Notes.
(8) Beck shall have consented to the references to it in the Offering Memorandum and the use of the Independent Engineer's Report prepared by Beck and contained in Annex A to the Offering Memorandum; and confirmed that nothing has come to their attention in connection with the preparation of the Independent Engineer's Report which would cause it to believe that the Independent Engineer's Report, as of its date, or any statements in the Offering Memorandum specifically attributed to it, as of the date of the Offering Memorandum, were inaccurate or misleading in any material respect, as evidenced by a certificate satisfactory to the Initial Purchasers of an authorized officer of Beck, delivered and dated as of the Closing Date.
(9) PA Consulting Services, Inc. ("PA") shall have consented to the references to it in the Offering Memorandum and the use of the Independent Market Expert's Report prepared by PA and contained in Annex B to the Offering Memorandum; and since the date of the Independent Market Expert's Report, no event affecting the Report or the matters referred to therein shall have occurred (i) which shall make untrue or incorrect in any material respect, as of the date of this Agreement, any information or statement contained in the Independent Market Expert's Report or in the Offering Memorandum relating to matters referred to in the Independent Market Expert's Report or (ii) which is not reflected in the Offering Memorandum but should be reflected therein in order to make the statements and information contained in the Offering Memorandum relating to matters referred to in the Independent Market Expert's Report, in light of the circumstances under which they were made, not misleading, as evidenced by a certificate satisfactory to the Initial Purchasers of an authorized officer of PA, delivered and dated as of the Closing Date.
(10) The Initial Purchasers shall have received on the Closing Date the Registration Rights Agreement executed by theCompany and the Representatives.
(11) The Company shall have performed its obligations when and as provided under this Agreement.
If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Representatives by notice to the Company at any time prior to the Closing Date, and such termination shall be without liability of any party to any other party except as provided in Sections 4, 7 and 9(b) hereof.
SECTION 6. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company shall be subject to the conditions set forth in Section 5(a). In case such conditions shall not have been fulfilled, this Agreement may be terminated by the Company by mailing or delivering written notice thereof to the Representatives. Any such termination shall be without liability of any party to any other party except as otherwise provided in Sections 4, 7 and 9(b) hereof.
SECTION 7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each of the Initial Purchasers and each person, if any, who controls any such Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, Exchange Act or otherwise, and to reimburse such Initial Purchaser and such controlling person or persons, if any, for any legal or other expenses incurred by them in connection with defending any actions, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or Offering Memorandum or, if the Company shall furnish to the Initial Purchasers any amendments or any supplements thereto, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any such untrue statement or alleged untrue statement or omission or alleged omission which was made in such Preliminary Offering Memorandum or Offering Memorandum or any such amendment or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by, or through the Representatives on behalf of, the Initial Purchasers for use therein and except that this indemnity with respect to the Preliminary Offering Memorandum or with respect to the Offering Memorandum, if the Company shall have furnished any amendment or supplement thereto, shall not inure to the benefit of any Initial Purchaser (or of any person controlling such Initial Purchaser) on account of any losses, claims, damages, liabilities or actions arising from the sale of the Senior Notes to any person if a copy of the Offering Memorandum, as the same may then be amended or supplemented, shall not have been sent or given by or on behalf of such Initial Purchaser to such person with or prior to the written confirmation of the sale involved and the untrue statement or alleged untrue statement or omission or alleged omission was corrected in the Offering Memorandum as supplemented or amended at the time of such confirmation. Each Initial Purchaser agrees, within ten days after the receipt by it of notice of the commencement of any action in respect of which indemnity may be sought by it, or by any person controlling it, from the Company on ccount of its agreement contained in this Section 7, to notify the Company in writing of the commencement thereof but the omission of such Initial Purchaser so to notify the
Company of any such action shall not release the Company from any liability
which it may have to such Initial Purchaser or to such controlling person
otherwise than on account of the indemnity agreement contained in this Section
7. In case any such action shall be brought against an Initial Purchaser or any
such person controlling such Initial Purchaser and such Initial Purchaser shall
notify the Company of the commencement thereof as above provided, the Company
shall be entitled to participate in (and, to the extent that it shall wish,
including the selection of counsel, to direct) the defense thereof, at its own
expense. In case the Company elects to direct such defense and select such
counsel, any Initial Purchaser or controlling person shall have the right to
employ its own counsel, but, in any such case, the fees and expenses of such
counsel shall be at the expense of such Initial Purchaser or such controlling
person unless the employment of such counsel has been authorized in writing by
the Company in connection with defending such action. No indemnifying party
shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification may be sought hereunder (whether or not the indemnified party is
an actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include any statement as to, or an admission of, fault, culpability or a failure
to act, by or on behalf of any indemnified party. In no event shall any
indemnifying party have any liability or responsibility in respect of the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim effected without its prior
written consent.
(b) Each Initial Purchaser agrees severally and not jointly, to indemnify and hold harmless the Company and each of its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act to the same extent and upon the same terms as the indemnity agreement of the Company set forth in Section 7(a) hereof, but only with respect to alleged untrue statements or omissions made in the Preliminary Offering Memorandum or the Offering Memorandum, or such documents as amended or supplemented, in reliance upon and in conformity with information furnished in writing to the Company by, or through the Representatives on behalf of, such Initial Purchaser for use therein.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this Agreement, or contained in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Initial Purchaser or controlling person, or by, or on behalf of the Company and shall survive delivery of the Senior Notes to the Initial Purchasers.
SECTION 9. TERMINATION OF AGREEMENT.
(a) The Representatives may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Date if (i) trading in securities on the New York Stock Exchange shall have been generally suspended or there shall have been a material disruption in settlement in securities generally, (ii) minimum or maximum ranges for prices shall have been generally established on the New York Stock Exchange by the Commission or by the New York Stock Exchange, (iii) a general banking moratorium shall have been declared by federal or New York State authorities, or (iv) there shall have occurred any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by the United States Congress or any other substantial national or international calamity or emergency (including, without limitation, acts of terrorism) affecting the United States, in any such case provided for in clauses (i) through (iv) with the result that, in the reasonable judgement of the Representatives, th marketability of the Senior Notes shall have been materially impaired.
(b) If this Agreement shall be terminated by the Representatives pursuant to subsection (a) above or because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, then in any such case, the Company will reimburse the Initial Purchasers for the reasonable and documented third party out of pocket expenses described in Section 4(b) of this Agreement. Upon such reimbursement, the Company shall be absolved from any further liability hereunder, except as provided in Sections 4(a) and 7.
SECTION 10. DEFAULT BY AN INITIAL PURCHASER
If an Initial Purchaser shall fail on the Closing Date to purchase the Senior Notes that it is obligated to purchase under this Agreement (the "Defaulted Securities"), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for the non-defaulting Initial Purchasers, or any other initial purchasers, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth. If, however, the Representatives shall not have completed such arrangements within such 24-hour period, then:
(a) if the principal amount of Defaulted Securities does not exceed 10% of the Senior Notes, the non-defaulting Initial Purchasers shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Initial Purchasers, or
(b) if the principal amount of Defaulted Securities exceeds 10% of the Senior Notes, this Agreement shall terminate without liability on the part of any non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination of this Agreement, either the Representatives or the Company shall have the right to postpone the Closing Date for a period not exceeding seven days in order to effect any required changes in the Offering Memorandum or in any other documents or arrangements.
SECTION 11. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchasers shall be directed to the Representatives at Lehman Brothers Inc., 745 7th Avenue, New York, New York 10019, Attention: Debt Capital Markets, Power Group, Fax: 212-526-0943 and Salomon Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention: Dean Keller, Fax: 212-816-0901; notices to the Company shall be mailed to 270 Peachtree Street, N.W., Atlanta, Georgia 30303, Attention: Treasurer, with a copy to Southern Company Services, Inc., 270 Peachtree Street, N.W., Atlanta, Georgia 30303, Attention: Christopher J. Kysar.
SECTION 12. PARTIES. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchasers and the Company and their respective successors and the controlling persons and officers and directors referred to in Section 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchasers and the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Senior Notes from any of the Initial Purchasers shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said State. Except as otherwise set forth herein, specified times of day refer to New York City time.
SECTION 14. COUNTERPARTS. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
SOUTHERN POWER COMPANY
CONFIRMED AND ACCEPTED,
as of the date first above written
LEHMAN BROTHERS INC.
SALOMON SMITH BARNEY INC.
As Representatives of the Several Initial Purchasers named in Schedule I hereto
SCHEDULE I
I. Purchase Price
The purchase prices to be paid by the Initial Purchasers for the Senior Notes shall be as follows:
Initial Purchasers' Initial Purchasers'
Price to Public Discount Purchase Price
-------------------- ----------------- -----------------
99.859% 0.650% 99.209%
------------------------------------------------------------------------------
II. Principal Amount to be Purchased
---------------------------------------------------- Principal Amount of
Initial Purchasers Senior Notes
Lehman Brothers Inc............................... 201,250,000
Salomon Smith Barney Inc.......................... 201,250,000
Barclays Capital Inc.............................. 28,750,000
Commerzbank Capital Markets Corp.................. 28,750,000
Mizuho International plc.......................... 28,750,000
Morgan Stanley & Co. Incorporated................. 28,750,000
Scotia Capital (USA) Inc.......................... 28,750,000
Tokyo-Mitsubishi International plc................ 28,750,000
-------------
Aggregate Principal Amount $575,000,000
|
Schedule II
[Letterhead of BALCH & BINGHAM LLP]
________, 2002
Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019
Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
As Representatives of the Several Initial Purchasers
SOUTHERN POWER COMPANY
___ % Senior Notes, Series A due _________ 2012
Ladies and Gentlemen:
We have acted as general counsel to Southern Power Company (the "Company") in connection with (i) the Company's issuance of $__________ aggregate principal amount of its ___% Senior Notes, Series A due _______ 2012 (the "Notes") pursuant to a Senior Note Indenture dated as of June 1, 2002, by and between the Company and The Bank of New York, as trustee (the "Trustee"), as heretofore supplemented and as further supplemented by the First Supplemental Indenture dated as of __________, 2002 (collectively, the "Indenture"); and (ii) the purchase by the Representatives of the Notes pursuant to the terms of a Purchase Agreement dated June __, 2002, among the Company and the initial purchasers named in Schedule I thereto (the "Initial Purchasers") for whom you are acting as the Representatives (the "Purchase Agreement"). The Notes are subject to the Registration Rights Agreement dated the date hereof by and among the Company and you (the "Registration Rights Agreement"). This opinion is being delivered to you as Representatives pursuant to Section 5(b)(1) thereof.
All capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement.
In rendering the opinions expressed below, we have examined the offering memorandum dated __________, 2002 (the "Offering Memorandum"), the Indenture, the Notes, the Registration Rights Agreement and the Purchase Agreement.
In addition, we have examined, and have relied as to matters of fact upon, the documents delivered to you at the closing (except the Notes, of which we have examined specimens), and we have made such other and further investigations as we deemed necessary to express the opinions hereinafter set forth. In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such latter documents.
The Indenture, the Registration Rights Agreement, the Notes and the Purchase Agreement are herein referred to as the "Agreements".
Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion, relying as to matters of New York law upon the opinion dated the date hereof rendered to you by Dewey Ballantine LLP, that:
1. The Company has been duly organized and is validly existing and in good standing as a corporation under the laws of the State of Delaware and has due corporate authority to conduct it business and to own and operate the properties used by it in such business as described in the Offering Memorandum and to enter into and perform its obligations under the Agreements and the Notes.
2. The execution, delivery and performance by the Company of the Purchase Agreement have been duly authorized by all necessary corporate action, and the Purchase Agreement has been duly executed and delivered by the Company.
3. All orders, consents, or other authorizations or approvals of the Commission legally required under the Public Utility Holding Company Act of 1935, as amended, for the issuance and delivery of the Notes have been obtained; such orders are sufficient for the issuance and the delivery of the Notes; the issuance and the delivery of the Notes conform in all material respects with the terms of such orders; and no other order, consent or other authorization or approval of the States of Delaware, Georgia, Florida, Alabama or United States governmental body (other than in connection or in compliance with the provisions of the securities or "blue sky" laws of any jurisdiction, as to which we express no opinion) is legally required for the issuance and delivery of the Notes in accordance with the terms of the Purchase Agreement.
4. The Indenture has been duly authorized, executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by the Trustee constitutes a valid and legally binding instrument of the Company, enforceable against the Company in accordance with its terms, subject to the qualifications that the enforceability of the Company's obligations under the Indenture may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting ceditors' rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and the Indenture conforms as to legal matters in all material respects to the description thereof in the Offering Memorandum.
5. The Notes have been duly authorized and executed by the Company and, when authenticated by the Trustee in the manner provided in the Indenture and delivered to and paid for by the Initial Purchasers pursuant to Agreement, will constitute valid and binding obligations of the Company, the Purchase enforceable against the Company in accordance with their terms, subject to the qualifications that the enforceability of the Company's obligations under the Notes may be limited by bankruptcy, insolvency, reorganization, moratorium andother similar laws relating to or affecting creditors' rights generally and by general principles of equity; nd the Notes conform as to legal matters in allmaterial respects to the description thereof in the Offering Memorandum.
6. The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by the other parties thereto, constitutes a valid and legally binding instrument of the Company, enforceable against the Company in accordance with its terms, except to the extent that the enforceability of the Company's obligations under the Registration Rights Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except to the extent indemnification or contribution provisions thereunder may be limited under applicable law; the Registration Rights Agreement conforms in all material respects to all statements relating thereto in the Offering Memorandum.
7. The statements as to matters of law and legal conclusions contained in the Offering Memorandum under the caption "Certain U.S. Federal Income Tax Considerations" are correct in all material respects.
8. Assuming (a) the accuracy of the representations and
warranties of the Company set forth in Section 1 of the Purchase Agreement and
of the Initial Purchasers set forth in Section 2 of the Purchase Agreement, (b)
the due performance by the Company of the covenants and agreements set forth in
Section 3 of the Purchase Agreement and the due performance by the Initial
Purchasers of the covenants and agreements set forth in Section 2 of the
Purchase Agreement, (c) compliance by the Initial Purchasers with the offering
and transfer procedures and restrictions described in the Offering Memorandum
and (d) the accuracy of the representations and warranties made in accordance
with the Offering Memorandum by purchasers to whom the Initial Purchasers
initially resells the Notes, the offer, sale and delivery of the Notes to the
Initial Purchasers in the manner contemplated by the Purchase Agreement and the
Offering Memorandum and the initial resale of the Notes by the Initial
Purchasers in the manner contemplated in the Offering Memorandum and the
Purchase Agreement do not require registration of the Notes under the
Securities Act (it being understood that we express no opinion as to any
subsequent resale of any Notes) and the Indenture is not required to be
qualified under the Trust Indenture Act.
9. The execution, delivery and performance by the Company of the Agreement does not and will not result in any violation of the Certificate of Incorporation or the By-Laws of the Company, and do not and will not conflict
with, or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company under (A) any material contract, indenture, mortgage, loan agreement, note, lease or any other agreement or instrument known to us to which the Company is a party or by which it may be bound or to which any of its properties may be subject (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not have a material adverse effect on the condition (financial or otherwise) of the Company), (B) any existing applicable law, rule or regulation applicable to the Company (other than the securities or blue sky laws of any jurisdiction, as to which we express no opinion) or (C) any judgment, order or decree known to us of any government, governmental instrumentality, or court, domestic or foreign, or any regulatory body or administrative agency or other governmental body having jurisdiction over the Company.
10. The Company is not, nor after giving effect to the sale of the Notes will be, an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended.
We have not independently verified the accuracy, completeness or fairness of the statements made or included in the Offering Memorandum and take no responsibility therefor, except as and to the extent set forth in paragraphs 4, 5, 6 and 7 above. In the course of the preparation by the Company of the Offering Memorandum, we participated in conferences with certain officers and employees of the Company, with representatives of Deloitte & Touche LLP and with your counsel. Based upon our examination of the Offering Memorandum, our investigations made in connection with the preparation of the Offering Memorandum and our participation in the conferences referred to above, nothing came to our attention which gives us reason to believe that the Offering Memorandum, as of its date, contained, or on the date hereof contains, any untrue statement of a material fact or omitted as of its date or omits as of the date hereof to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, except that in each case we express no opinion or belief with respect to (i) the financial statements or other financial or statistical data contained in the Offering Memorandum or (ii) the Independent Engineer's Report or the Independent Market Expert's Report attached as Annex A and B, respectively, to the Offering Memorandum.
We are members of the State Bar of Alabama and we do not express any opinion herein concerning any law other than the laws of such State and, to the extent set forth herein, the law of the States of New York, Georgia, Florida, Delaware General Corporation Law and the federal law of the United States.
This opinion is rendered to you in connection with the above-described transaction. This opinion may not be relied upon by you for any other purpose, or relied upon by or furnished to any other person without our prior written consent.
Yours very truly,
BALCH & BINGHAM LLP
[Note: With respect to matters involving the laws of the States of Florida and Georgia, Balch & Bingham LLP shall be permitted to rely on opinions addressed to it from Florida counsel and Georgia counsel.]
Schedule III
[Letterhead of PILLSBURY WINTHROP LLP]
__________, 2002
Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019
Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
As Representatives of the Several Initial Purchasers
Southern Power Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Southern Power Company ___% Senior Notes, Series A due 20__
Ladies and Gentlemen:
We have acted as counsel to The Bank of New York (the "Bank") in connection with (a) the Senior Note Indenture, dated as of June 1, 2002 (the "Original Indenture"), between Southern Power Company (the "Company") and the Bank, as Trustee and (b) the First Supplemental Indenture dated as of June __, 2000 (together with the Original Indenture, herein called the "Indenture"), between the Company and the Bank, as Trustee.
In that connection, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, records and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, including copies of the Indenture and certain resolutions adopted by the Board of Directors of the Bank.
Based upon the foregoing, we are of the opinion that:
i) the Bank has been duly incorporated and is validly existing as a banking corporation in good standing under the laws of the State of New York; and
ii) the Bank has the corporate trust power and authority to execute, deliver and perform its duties under the Indenture, has duly executed and delivered the Indenture, and, insofar as the laws governing the trust powers of the Bank are concerned and assuming due authorization, execution and delivery thereof by the Company, the Indenture constitutes a legal, valid and binding agreement of the Bank, enforceable against the Bank in accordance with its terms subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.
We are admitted to practice only in the State of New York, and we express no opinion as to matters governed by any laws other than the laws of the State of New York and the Federal law of the United States of America. We are furnishing this opinion to you solely for your benefit. This opinion is not to be relied upon by any other person or used, circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
Schedule IV
[Letterhead of DEWEY BALLANTINE LLP]
_____, 2002
Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019
Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
As Representatives of the Several Initial Purchasers
SOUTHERN POWER COMPANY
___% Senior Notes, Series A due 20__
Ladies and Gentlemen:
We have represented you in connection with (i) the issuance by Southern Power Company (the "Company") of $__________ of its ___% Senior Notes, Series A due 20__ (the "Notes") pursuant to a Senior Note Indenture dated as of June 1, 2002, by and between the Company and The Bank of New York, as trustee (the "Trustee"), as heretofore supplemented and as further supplemented by the First Supplemental Indenture dated as of June __, 2002 (collectively, the "Indenture"); and (ii) the purchase by you of the Notes pursuant to the terms of a Purchase Agreement dated June ___, 2002, among the Company and the initial purchasers named in Schedule I thereto (the "Initial Purchasers") for whom you are acting as Representatives (the "Purchase Agreement"). The Notes are subject to the Registration Rights Agreement dated the date hereof by and among the Company and you (the "Registration Rights Agreement"). This opinion is being delivered to you as Representatives pursuant to Section 5(c)(4) thereof.
All capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement.
In rendering the opinions expressed below, we have examined the Offering Memorandum dated _________, 2002 (the "Offering Memorandum"), the Indenture, the Notes, the Registration Rights Agreement and the Purchase Agreement.
In addition, we have examined, and have relied as to matters of fact upon, the documents delivered to you at the closing (except the Notes, of which we have examined specimens), and we have made such other and further investigations as we deemed necessary to express the opinions hereinafter set forth. In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such latter documents.
The Indenture, the Registration Rights Agreement, the Notes and the Purchase Agreement are herein referred to as the "Agreements".
Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion:
1. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware and has due corporate authority to conduct its business and to own and operate the properties used by it in such business as described in the Offering Memorandum and to enter into and perform its obligations under the Agreements and the Notes.
2. The execution, delivery and performance by the Company of the Purchase Agreement have been duly authorized by all necessary corporate action, and the Purchase Agreement has been duly executed and delivered by the Company.
3. All orders, consents, or other authorizations or approvals of the Commission legally required under the Public Utility Holding Company Act of 1935, as amended, for the issuance and delivery of the Notes have been obtained; such orders are sufficient for the issuance and delivery of the Notes; the issuance and delivery of the Notes conform in all material respects with the terms of such orders; and no other order, consent or other authorization or approval of the State of New York or United States governmental body (other than in connection or in compliance with the provisions of the securities or "blue sky" laws of any jurisdiction, as to which we express no opinion) is legally required for the issuance and delivery of the Notes in accordance with the terms of the Purchase Agreement.
4. The Indenture has been duly authorized, executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by the Trustee constitutes a valid and legally binding instrument of the Company, enforceable against the Company in accordance with its terms, subject to the qualifications that the enforceability of the Company's obligations under the Indenture may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and the Indenture conforms as to legal matters in all material respects to the description thereof in the Offering Memorandum.
5. The Notes have been duly authorized and executed by the Company and, when authenticated by the Trustee in the manner provided in the Indenture and delivered to and paid for by the Initial Purchasers pursuant to the Purchase Agreement, will constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, subject to the qualifications that the enforceability of the Company's obligations under the Notes may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and the Notes conform as to legal matters in all material respects to the description thereof in the Offering Memorandum.
6. The Registration Rights Agreement has been duly authorized, executed and delivered by theCompany and, assuming the due authorization, execution and delivery thereof by the other parties thereto, constitutes a valid and legally binding instrument of the Company, enforceable against the Company in accordance with its terms, except to the extent that the enforceability of the Company's obligations under the Registration Rights Agreement may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except to the extent indemnification or contribution provisions thereunder may be limited under applicable law; the Registration Rights Agreement conforms in all material respects to all statements relating thereto in the Offering Memorandum.
7. Assuming (a) the accuracy of the representations and
warranties of the Company set forth in Section 1 of the Purchase Agreement and
of the Initial Purchasers set forth in Section 2 of the Purchase Agreement, (b)
the due performance by the Company of the covenants and agreements set forth in
Section 3 of the Purchase Agreement and the due performance by the Initial
Purchasers of the covenants and agreements set forth in Section 2 of the
Purchase Agreement, (c) compliance by the Initial Purchasers with the offering
and transfer procedures and restrictions described in the Offering Memorandum
and (d) the accuracy of the representations and warranties made in accordance
with the Offering Memorandum by purchasers to whom the Initial Purchasers
initially resells the Notes, the offer, sale and delivery of the Notes to the
Initial Purchasers in the manner contemplated by the Purchase Agreement and the
Offering Memorandum and the initial resale of the Notes by the Initial
Purchasers in the manner contemplated in the Offering Memorandum and the
Purchase Agreement do not require registration of the Notes under the
Securities Act (it being understood that we express no opinion as to any
subsequent resale of any Notes) and the Indenture is not required to be
qualified under the Trust Indenture Act.
We have not independently verified the accuracy, completeness or fairness of the statements made or included in the Offering Memorandum and take no responsibility therefor, except as and to the extent set forth in paragraphs 4, 5 and 6 above. In the course of the preparation by the Company of the Offering Memorandum, we participated in conferences with certain officers and employees of the Company, with representatives of Deloitte & Touche LLP and with your counsel. Based upon our examination of the Offering Memorandum, our investigations made in connection with the preparation of the Offering Memorandum and our participation in the conferences referred to above, nothing came to our attention which gives us reason to believe that the Offering Memorandum, as of its date, contained, or on the date hereof contains, any untrue statement of a material fact or omitted as of its date or omits as of the date hereof to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, except that in each case we express no opinion or belief with respect to (i) the financial statements or other financial or statistical data contained in the Offering Memorandum or (ii) the Independent Engineer's Report or the Independent Market Expert's Report attached as Annex A and Annex B, respectively, to the Offering Memorandum.
We are members of the State Bar of New York and we do not express any opinion herein concerning any law other than the law of the State of New York and the federal law of the United States and the general corporation law of the State of Delaware.
This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent except that Balch & Bingham LLP may rely on this opinion in giving their opinions (i) pursuant to Section 5 of the Purchase Agreement, insofar as such opinions relate to matters of New York law, and (ii) pursuant to Sections 102, 302 and 904 of the Indenture, insofar as such opinion relates to matters of New York law.
Very truly yours,
DEWEY BALLANTINE LLP
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
SOUTHERN POWER COMPANY
I.
The name of the corporation is Southern Power Company (the "Corporation").
II.
The initial registered office of the Corporation in the State of Delaware shall be located at 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808. The initial registered agent of the Corporation at such address shall be Corporation Service Company.
III.
The purpose or purposes for which the Corporation is organized shall be to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
IV.
The Corporation shall be authorized to issue One Million (1,000,000) shares of $0.01 par value capital stock, all of which shall be designated "Common Stock." The shares of Common Stock shall have unlimited voting rights and shall be entitled to receive all of the net assets of the Corporation upon dissolution or liquidation.
V.
The affairs of the Corporation shall be managed by a Board of Directors and as otherwise provided in the Bylaws of the Corporation. The initial Board of Directors of the corporation shall consist of five members, whose names are as follows:
A. W. Dahlberg H. Allen Franklin Elmer B. Harris Charles D. McCrary David M. Ratcliffe W. L. Westbrook
The mailing address of the directors is c/o The Southern Company, 270 Peachtree Street, Atlanta, Georgia 30303.
VI.
The Corporation shall have perpetual duration.
VII.
The Board of Directors of the Corporation shall have the power to adopt, amend and repeal the Bylaws of the Corporation.
VIII.
To the fullest extent that the General Corporation Law of Delaware, as it exists on the date hereof or as it may hereafter be amended, permits the limitation or elimination of the liability of directors, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of duty of care or other duty as a director. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.
IX.
The name and address of the Incorporator of the Corporation is Melissa K. Caen, Troutman Sanders LLP, 600 Peachtree Street, N.E., Suite 5200, Atlanta, Georgia 30308.
I, the undersigned, being the Incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 8th day of January, 2001.
/s/Melissa K. Caen Melissa K. Caen, Authorized Person |
Exhibit 3.2
BYLAWS
OF
SOUTHERN POWER COMPANY
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors shall be held at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at such date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted that might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of incorporation or in an agreement among stockholders as permitted under the General Corporation Law of the State of Delaware (the "Delaware Corporation Law"), each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having
voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board shall be not less than one (1) nor more than twenty (20). The initial board shall consist of six (6) directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or under the direction of its board of directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board.
Section 7. Special meetings of the board may be called by the president on notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director.
Section 8. At all meetings of the board, a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in the Delaware Corporation Law, Section 151(a), fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of stock of the corporation), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors.
Section 12. Unless otherwise specifically permitted by the board of directors, the provisions of these bylaws that govern meetings, actions without meetings, notice and waiver of notice and quorum and voting requirements of the board of directors, shall apply to meetings of committees and their members as well.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of incorporation or by law, any director of the entire board of directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram, facsimile or email.
Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of directors and shall be at a minimum a president, secretary and treasurer. The board of directors may also choose one or more vice-presidents, assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provides.
Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, one or more vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their successors are chosen and qualified. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
Section 6. Each officer of the corporation shall have the authority to execute and deliver any and all applications and filings as are necessary to be filed with federal, state and local regulatory agencies on behalf of the corporation.
THE PRESIDENT
Section 7. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect.
Section 8. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 9. In the absence of the president or in the event of his inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of, and be subject to, all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 10. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature.
Section 11. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 12. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors.
Section 13. The treasurer shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation.
Section 14. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
Section 15. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a certificate or shall be uncertificated. Certificates shall be signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or a vice-president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation.
Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to the Delaware Corporate Law, Sections 151, 156, 202(a) or 218(a) or a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on a certificate may be by facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or certificates or uncertificated shares to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates or uncertificated shares, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
INDEMNIFICATION
Section 1. Each person who is or was a director of the corporation or officer or employee of the corporation holding one or more positions of management through and inclusive of managers (but not positions below the level of such managers) (such positions being hereinafter referred to as "Management Positions") and who was or is a party or was or is threatened to be made a party to any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director of the corporation or officer or employee of the corporation holding one or more Management Positions, or is or was serving at the request of the corporation as a director (or the equivalent), alternate director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall be indemnified by the corporation as a matter of right against any and all expenses (including attorneys' fees) actually and reasonably incurred by him and against any and all claims, judgments, fines, penalties, liabilities and amounts
paid in settlement actually incurred by him in defense of such claim, action, suit or proceeding, including appeals, to the full extent permitted by applicable law. The indemnification provided by this section shall inure to the benefit of the heirs, executors and administrators of such person.
Section 2. Expenses (including attorneys' fees) incurred by a director of the corporation or officer or employee of the corporation holding one or more Management Positions with respect to the defense of any such claim, action, suit or proceeding may be advanced by the corporation prior to the final disposition of such claim, action, suit or proceeding, as authorized by the board of directors in the specific case, upon receipt of an undertaking by or on behalf of such person to repay such amount unless it shall ultimately be determined that such person is entitled to be indemnified by the corporation under these bylaws or otherwise; provided, however, that the advancement of such expenses shall not be deemed to be indemnification unless and until it shall ultimately be determined that such person is entitled to be indemnified by the corporation.
Section 3. The corporation may purchase and maintain insurance at the expense of the corporation on behalf of any person who is or was a director, officer, employee or agent of the corporation, or any person who is or was serving at the request of the corporation as a director (or the equivalent), alternate director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability or expense (including attorneys' fees) asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability or expense under these bylaws or otherwise.
Section 4. Without limiting the generality of the foregoing provisions, no present or future director or officer of the corporation, or his heirs, executors or administrators, shall be liable for any act, omission, step or conduct taken or had in good faith, which is required, authorized or approved by any order or orders issued pursuant to the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, as amended, or any federal or state statute or municipal ordinance regulating the corporation or its parent by reason of their being holding or investment companies, public utility companies, public utility holding companies or subsidiaries of public utility holding companies. In any action, suit or proceeding based on any act, omission, step or conduct, as in this paragraph described, the provisions hereof shall be brought to the attention of the court. In the event that the foregoing provisions of this paragraph are found by the court not to constitute a valid defense on the grounds of not being applicable to the particular class of plaintiff, each such director and officer, and his heirs, executors and administrators, shall be reimbursed for, or indemnified against, all expenses and liabilities incurred by him or imposed on him, in connection with, or arising out of, any such action, suit or proceeding based on any act, omission, step, or conduct taken or had in good faith as in this paragraph described. Such expenses and liabilities shall include judgments, court costs and attorneys' fees.
Section 5. The foregoing rights shall not be exclusive of any other rights to which any such director or officer or employee may otherwise be entitled and shall be available whether or not the director or officer or employee continues to be a director or officer or employee at the time of incurring any such expenses and liabilities.
Section 6. If any word, clause or provision of the bylaws or any indemnification made under this Article VII hereof shall for any reason be determined to be invalid, the provisions of the bylaws shall not otherwise be affected thereby but shall remain in full force and effect. The masculine pronoun, as used in the bylaws, means the masculine and feminine wherever applicable.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation, at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal bylaws is conferred upon the board of directors by the certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws.
I hereby certify that the foregoing Bylaws were duly adopted by the Board of Directors of the Corporation on January 8, 2001.
Secretary
[SEAL]
Exhibit 4.1
SOUTHERN POWER COMPANY
TO
THE BANK OF NEW YORK,
TRUSTEE.
SENIOR NOTE INDENTURE
DATED AS OF JUNE 1, 2002
SOUTHERN POWER COMPANY
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND
SENIOR NOTE INDENTURE, DATED AS OF JUNE 1, 2002
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
(S) 310(a)(1)..........................................................609
(a)(2)..........................................................609
(a)(3)...............................................Not Applicable
(a)(4)...............................................Not Applicable
(b).............................................................608
610
(S) 311(a).................................................................613
311(b)(4).......................................................613(a)
(b)(6).......................................................613(b)
(S) 312(a).............................................................701
702(a)
(c)..........................................................702(b)
(S) 313(a)..........................................................703(a)
313(b)..........................................................703(b)
313(c)..........................................................703(c)
704
(d)..........................................................703(c)
(S) 314(a).......................................................704, 1005
(b)..................................................Not Applicable
(c)(1)..........................................................102
(c)(2)..........................................................102
(c)(3)...............................................Not Applicable
(d)..................................................Not Applicable
(e).............................................................102
(S) 315(a)..........................................................601(a)
(b).............................................................602
(c)..........................................................601(b)
(d)..........................................................601(c)
(d)(1)....................................................601(a)(1)
(d)(2)....................................................601(c)(2)
(d)(3)....................................................601(c)(3)
(e).............................................................514
(S) 316(a).............................................................101
(a)(1)(A).......................................................502
512
(a)(1)(B).......................................................513
(a)(2)...............................................Not Applicable
(b).............................................................508
(S) 317(a)(1)..........................................................503
(a)(2)..........................................................504
(b)............................................................1003
(S) 318(a).............................................................107
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PAGE
Parties........................................................................................................1
Recitals of the
Company........................................................................................................1
ARTICLE ONE....................................................................................................1
SECTION 101. DEFINITIONS................................................................1
-----------
Act ....................................................................................2
Affiliate....................................................................................2
Authenticating Agent.........................................................................2
Board of Directors...........................................................................2
Board Resolution.............................................................................2
Business Day.................................................................................2
Certificate of a Firm of Independent Public Accountants......................................2
Commission...................................................................................2
Company 3
Company Request or Company Order.............................................................3
Corporate Trust Office.......................................................................3
Corporation..................................................................................3
Defaulted Interest...........................................................................3
Depositary...................................................................................3
Event of Default.............................................................................3
Global Security..............................................................................3
Holder ....................................................................................3
Indenture....................................................................................3
Interest Payment Date........................................................................3
Maturity 4
Officers' Certificate........................................................................4
Opinion of Counsel...........................................................................4
Outstanding..................................................................................4
Paying Agent.................................................................................5
Person ....................................................................................5
Predecessor Security.........................................................................5
Redemption Date..............................................................................5
Redemption Price.............................................................................5
Regular Record Date..........................................................................5
Responsible Officer..........................................................................5
Security Register and Security Registrar.....................................................5
Senior Note..................................................................................5
Special Record Date..........................................................................5
Stated Maturity..............................................................................5
Subsidiary...................................................................................6
Trust Indenture Act..........................................................................6
Trustee ....................................................................................6
Vice President...............................................................................6
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.......................................6
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.....................................7
SECTION 104. ACTS OF HOLDERS............................................................7
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY......................................8
SECTION 106. NOTICE TO HOLDERS OF SENIOR NOTES; WAIVER..................................9
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT..........................................9
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS...................................9
SECTION 109. SUCCESSORS AND ASSIGNS.....................................................9
SECTION 110. SEPARABILITY CLAUSE.......................................................10
SECTION 111. BENEFITS OF INDENTURE.....................................................10
SECTION 112. GOVERNING LAW.............................................................10
SECTION 113. LEGAL HOLIDAYS............................................................10
SECTION 114. APPOINTMENT OF AGENT FOR SERVICE..........................................10
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ARTICLE TWO...................................................................................................11
SECTION 201. FORMS GENERALLY...........................................................11
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION...........................11
-
SECTION 203. SENIOR NOTES ISSUABLE IN THE FORM OF A GLOBAL SECURITY....................11
ARTICLE THREE.................................................................................................13
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES......................................13
SECTION 302. EXECUTION, AUTHENTICATION, DELIVERY AND DATING............................15
SECTION 303. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.......................16
SECTION 304. MUTILATED, DESTROYED, LOST AND STOLEN SENIOR NOTES........................18
SECTION 305. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED............................18
SECTION 306. PERSONS DEEMED OWNERS.....................................................19
SECTION 307. CANCELLATION..............................................................20
SECTION 308. COMPUTATION OF INTEREST...................................................20
SECTION 309 CUSIP NUMBERS............................................................20
ARTICLE FOUR..................................................................................................21
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE...................................21
SECTION 402. APPLICATION OF TRUST......................................................22
ARTICLE FIVE..................................................................................................22
SECTION 501. EVENTS OF DEFAULT.........................................................22
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT........................23
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE...........24
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM..........................................25
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SENIOR NOTES.............26
SECTION 506. APPLICATION OF MONEY COLLECTED............................................26
SECTION 507. LIMITATION ON SUITS.......................................................26
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SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST..................................................................27
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES........................................27
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE............................................27
SECTION 511. DELAY OR OMISSION NOT WAIVER..............................................28
SECTION 512. CONTROL BY HOLDERS OF SENIOR NOTES........................................28
SECTION 513. WAIVER OF PAST DEFAULTS...................................................28
SECTION 514. UNDERTAKING FOR COSTS.....................................................29
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS..........................................29
ARTICLE SIX...................................................................................................29
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.......................................29
SECTION 602. NOTICE OF DEFAULTS........................................................30
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.................................................31
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SENIOR NOTES..................32
SECTION 605. MAY HOLD SENIOR NOTES.....................................................32
SECTION 606. MONEY HELD IN TRUST.......................................................32
SECTION 607. COMPENSATION AND REIMBURSEMENT............................................32
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS...................................33
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY...................................33
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.........................34
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR....................................35
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS...............36
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.........................36
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.......................................37
ARTICLE SEVEN.................................................................................................39
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.................39
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS....................39
SECTION 703. REPORTS BY TRUSTEE........................................................39
SECTION 704. REPORTS BY COMPANY........................................................40
ARTICLE EIGHT.................................................................................................41
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS......................41
SECTION 802. SUCCESSOR CORPORATION SUBSTITUTED.........................................41
ARTICLE NINE..................................................................................................42
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS........................42
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS...........................43
SECTION 903. GENERAL PROVISIONS REGARDING SUPPLEMENTAL INDENTURE.......................43
SECTION 904. EXECUTION OF SUPPLEMENTAL INDENTURES......................................44
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SECTION 905. EFFECT OF SUPPLEMENTAL INDENTURES.........................................44
SECTION 906. CONFORMITY WITH TRUST INDENTURE ACT.......................................44
SECTION 907. REFERENCE IN SENIOR NOTES TO SUPPLEMENTAL INDENTURES......................44
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ARTICLE TEN...................................................................................................45
SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST.........................................45
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY...........................................45
SECTION 1003. MONEY FOR SENIOR NOTES PAYMENTS TO BE HELD IN TRUST.......................45
SECTION 1004. CORPORATE EXISTENCE.......................................................46
SECTION 1005. STATEMENT AS TO COMPLIANCE................................................47
SECTION 1006. WAIVER OF CERTAIN COVENANTS...............................................47
ARTICLE ELEVEN................................................................................................47
SECTION 1101. APPLICABILITY OF ARTICLE..................................................47
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.....................................47
SECTION 1103. SELECTION BY TRUSTEE OF SENIOR NOTES TO BE REDEEMED.......................48
SECTION 1104. NOTICE OF REDEMPTION......................................................48
SECTION 1105. DEPOSIT OF REDEMPTION PRICE...............................................49
SECTION 1106. SENIOR NOTES PAYABLE ON REDEMPTION DATE...................................49
SECTION 1107. SENIOR NOTES REDEEMED IN PART.............................................50
ARTICLE TWELVE................................................................................................50
SECTION 1201. APPLICABILITY OF ARTICLE..................................................50
SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SENIOR NOTES....
SECTION 1203. REDEMPTION OF SENIOR NOTES FOR SINKING FUND...............................51
ARTICLE THIRTEEN..............................................................................................51
SECTION 1301. NO RECOURSE AGAINST OTHERS................................................51
SECTION 1302. ASSIGNMENT; BINDING EFFECT................................................51
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SENIOR NOTE INDENTURE
THIS SENIOR NOTE INDENTURE is made as of June 1, 2002, between SOUTHERN POWER COMPANY, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at 270 Peachtree Street, N.W., Atlanta, Georgia 30303, and THE BANK OF NEW YORK, a banking corporation duly organized and existing under the laws of the State of New York, having its principal corporate trust office at 101 Barclay Street, 21 West, New York, New York 10286, as Trustee (herein called the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company has duly authorized the execution and delivery of this Senior Note Indenture to provide for the issuance from time to time of its unsecured senior debentures, notes or other evidences of indebtedness (herein called the "Senior Notes"), to be issued in one or more series as in this Senior Note Indenture provided; and
WHEREAS, all things necessary to make this Senior Note Indenture a valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, for and in consideration of the premises and the purchase of the Senior Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Senior Notes or of series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
For all purposes of this Senior Note Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States of America, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Senior Note Indenture as a whole and not to any particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that Article.
"Act," when used with respect to any Holder of a Senior Note, has the meaning specified in Section 104.
"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Authenticating Agent" means any Person or Persons authorized by the Trustee to authenticate one or more series of Senior Notes.
"Board of Directors" means either the board of directors of the Company or any duly authorized committee of the officers and/or directors of the Company appointed by that board.
"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.
"Business Day" means a day other than (i) a Saturday or a Sunday, (ii) a day on which banks in New York, New York are authorized or obligated by law or executive order to remain closed, or (iii) a day on which the Trustee's Corporate Trust Office is closed for business.
"Certificate of a Firm of Independent Public Accountants" means a certificate signed by an independent public accountant or a firm of independent public accountants who may be the independent public accountants regularly retained by the Company or who may be other independent public accountants. Such accountant or firm shall be entitled to rely upon an Opinion of Counsel as to the interpretation of any legal matters relating to such certificate.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Senior Note Indenture, and thereafter "Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee in the Borough of Manhattan, New York City, at which at any particular time its corporate trust business shall be principally administered, located at 101 Barclay Street, 21 West, New York, New York 10286.
"Corporation" includes corporations, partnerships, limited liability companies, associations, companies and business trusts.
"Defaulted Interest" has the meaning specified in Section 305.
"Depositary" means, unless otherwise specified by the Company pursuant to either Section 203 or 301, with respect to Senior Notes of any series issuable or issued as a Global Security, The Depository Trust Company, New York, New York, or any successor thereto registered as a clearing agency under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation.
"Event of Default" has the meaning specified in Section 501.
"Global Security" means, with respect to any series of Senior Notes issued hereunder, a Senior Note that is executed by the Company and authenticated and delivered by the Trustee to the Depositary or pursuant to the Depositary's instruction, all in accordance with Section 203 of this Indenture and any indenture supplemental hereto.
"Holder," when used with respect to any Senior Note, means the Person in whose name the Senior Note is registered in the Security Register.
"Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of the particular series of Senior Notes established as contemplated by Section 301.
"Interest Payment Date," when used with respect to any series of Senior Notes, means the dates established for the payment of interest thereon, as provided in the supplemental indenture for such series.
"Maturity," when used with respect to any Senior Note, means the date on which the principal of such Senior Note or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding," when used with respect to Senior Notes, means, as of the date of determination, all Senior Notes theretofore authenticated and delivered under this Indenture, except:
(i) Senior Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(ii) Senior Notes for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Senior Notes; provided that if such Senior Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;
(iii) Senior Notes that have been paid or in exchange for or in lieu of which other Senior Notes have been authenticated and delivered pursuant to this Indenture, other than any such Senior Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Senior Notes are held by a bona fide purchaser in whose hands such Senior Notes are valid obligations of the Company; and
(iv) Senior Notes, or portions thereof, converted into or exchanged for another security if the terms of such Senior Notes provide for such conversion or exchange;
provided, however, that in determining, during any period in which any Senior Notes of a series are owned by any Person other than the Company or any Affiliate thereof, whether the Holders of the requisite principal amount of Outstanding Senior Notes of such series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Senior Notes of such series owned by the Company or any Affiliate thereof shall be disregarded and deemed not to be Outstanding. In determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Senior Notes that the Trustee knows to be so owned by the Company or an Affiliate of the Company in the above circumstances shall be so disregarded. Senior Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Senior Notes and that the pledgee is not the Company or any Affiliate of the Company.
"Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Senior Notes on behalf of the Company.
"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Senior Note means every previous Senior Note evidencing all or a portion of the same debt as that evidenced by such particular Senior Note; and, for the purposes of this definition, any Senior Note authenticated and delivered under Section 304 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Senior Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Senior Note.
"Redemption Date," when used with respect to any Senior Note to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price," when used with respect to any Senior Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date on the Senior Notes of any series means the date specified for that purpose as contemplated by Section 301, whether or not a Business Day.
"Responsible Officer," when used with respect to the Trustee, means any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any senior trust officer, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.
"Security Register" and "Security Registrar" have the respective meanings specified in Section 303.
"Senior Note" has the meaning stated in the first recital of this Indenture and more particularly means any Senior Notes authenticated and delivered under this Indenture.
"Special Record Date" for the payment of any Defaulted Interest on the Senior Notes of any series means a date fixed by the Trustee pursuant to Section 305.
"Stated Maturity," when used with respect to any Senior Note or any installment of principal thereof or interest thereon, means the date specified in such Senior Note as the fixed date on which the principal of such Senior Note or such installment of principal or interest is due and payable.
"Subsidiary" means any corporation or other entity of which sufficient voting stock or other ownership or economic interests having ordinary voting power to elect a majority of the board of directors (or equivalent body) are at the time directly or indirectly held by the Company.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, and any reference herein to the Trust Indenture Act or a particular provision thereof shall mean such Trust Indenture Act or provision, as the case may be, as amended or replaced from time to time.
"Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such with respect to one or more series of Senior Notes pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Senior Notes of any series shall mean the Trustee with respect to Senior Notes of that series.
"Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president."
SECTION 102 COMPLIANCE CERTIFICATES AND OPINIONS
Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include
(i) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. An Opinion of Counsel may be rendered insofar as it relates to matters of New York law in reliance on an opinion of New York counsel which may be an opinion contemporaneously delivered to a third party or parties and shall expressly permit such reliance.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent, shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.
(c) The principal amount and serial numbers of Senior Notes held by any Person, and the date of holding the same, shall be proved by the Security Register.
(d) Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of the Holder of any Senior Note shall bind every future Holder of the same Senior Note and the Holder of every Senior Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Senior Note.
(e) The fact and date of execution of any such instrument or writing and the authority of the Person executing the same may also be proved in any other manner which the Trustee deems sufficient; and the Trustee may in any instance require further proof with respect to any of the matters referred to in this Section.
(f) If the Company shall solicit from the Holders of Senior Notes of any series any Act, the Company may, at its option, by Board Resolution, fix in advance a record date for the determination of Holders of Senior Notes entitled to take such Act, but the Company shall have no obligation to do so. Any such record date shall be fixed at the Company's discretion. If such a record date is fixed, such Act may be sought or given before or after the record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders of Senior Notes for the purpose of determining whether Holders of the requisite proportion of Senior Notes of such series Outstanding have authorized or agreed or consented to such Act, and for that purpose the Senior Notes of such series Outstanding shall be computed as of such record date.
Any request, demand, authorization, direction, notice, consent, election, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder of a Senior Note or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee, 100 Ashford Center North, Suite 520, Atlanta, Georgia 30338, Attention: Corporate Trustee Administration Department, or
(2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to the attention of its Secretary, at 270 Peachtree Street, N.W., Atlanta, Georgia 30303, or at any other address previously furnished in writing to the Trustee by the Company.
Except as otherwise expressly provided herein, where this Indenture provides for notice to Holders of Senior Notes of any event, such notice shall be sufficiently given if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such Notice.
In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.
Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders of Senior Notes shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required to be a part of and govern this Indenture, such required provision shall control.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.
In case any provision in this Indenture or the Senior Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Nothing in this Indenture or the Senior Notes, express or implied, shall give to any Person, other than the parties hereto, their successors hereunder and the Holders of Senior Notes any benefit or any legal or equitable right, remedy or claim under this Indenture.
This Indenture and the Senior Notes shall be governed by, and construed in accordance with, the internal laws of the State of New York.
In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Senior Note shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Senior Notes) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
By the execution and delivery of this Indenture, the Company hereby appoints the Trustee as its agent upon which process may be served in any legal action or proceeding which may be instituted in any Federal or State court in the Borough of Manhattan, New York City, arising out of or relating to the Senior Notes or this Indenture. Service of process upon such agent at the office of such agent at 101 Barclay Street, 21 West, New York, New York 10286, Attention: Corporate Trustee Administration Department (or such other address in the Borough of Manhattan, New York City, as may be the Corporate Trust Office of the Trustee), and written notice of such service to the Company by the Person serving the same addressed as provided in Section 105, shall be deemed in every respect effective service of process upon the Company in any such legal action or proceeding, and the Company hereby submits to the jurisdiction of any such court in which any such legal action or proceeding is so instituted. Such appointment shall be irrevocable so long as the Holders of Senior Notes shall have any rights pursuant to the terms thereof or of this Indenture until the appointment of a successor by the Company with the consent of the Trustee and such successor's acceptance of such appointment. The Company further agrees to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment of such agent or successor.
By the execution and delivery of this Indenture, the Trustee hereby agrees to act as such agent and undertakes promptly to notify the Company of receipt by it of service of process in accordance with this Section.
ARTICLE TWO
The Senior Notes of each series shall be in substantially the form appended to the supplemental indenture authorizing such series, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Senior Notes, as evidenced by their execution of the Senior Notes.
The Senior Notes of each series shall be issuable in registered form without coupons.
The definitive Senior Notes may be printed, typewritten, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Senior Notes, as evidenced by their execution of such Senior Notes.
The form of the Trustee's Certificate of Authentication for a series of Senior Notes shall be in substantially the form appended to the Supplemental Indenture authorizing such series.
(a) If the Company shall establish pursuant to Section 301 that
the Senior Notes of a particular series are to be issued in whole or in part in
the form of one or more Global Securities, then the Company shall execute and
the Trustee shall, in accordance with Section 302 and the Company Order
delivered to the Trustee thereunder, authenticate and deliver such Global
Security or Securities, which (i) shall represent, and shall be denominated in
an amount equal to the aggregate principal amount of the Outstanding Senior
Notes of such series to be represented by such Global Security or Securities,
(ii) may provide that the aggregate amount of Outstanding Senior Notes
represented thereby may from time to time be increased or reduced to reflect
exchanges, (iii) shall be registered in the name of the Depositary for such
Global Security or Securities or its nominee, (iv) shall be delivered by the
Trustee to the Depositary or pursuant to the Depositary's instruction and (v)
shall bear a legend in accordance with the requirements of the Depositary.
(b) Notwithstanding any other provision of this Section 203 or of
Section 303, subject to the provisions of paragraph (c) below, unless the terms
of a Global Security expressly permit such Global Security to be exchanged in
whole or in part for individual Senior Notes, a Global Security may be
transferred, in whole but not in part and in the manner provided in Section 303,
only to a nominee of the Depositary for such Global Security, or to the
Depositary, or to a successor Depositary for such Global Security selected or
approved by the Company, or to a nominee of such successor Depositary.
(c) (1) If at any time the Depositary for a Global Security notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or if at any time the Depositary for the Senior Notes for such series shall no longer be eligible or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, the Company shall appoint a successor Depositary with respect to such Global Security. If a successor Depositary for such Global Security is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of individual Senior Notes of such series in exchange for such Global Security, will authenticate and deliver individual Senior Notes of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of the Global Security in exchange for such Global Security.
(2) The Company may at any time and in its sole discretion determine that the Senior Notes of any series issued or issuable in the form of one or more Global Securities shall no longer be represented by such Global Security or Securities. In such event the Company will execute, and the Trustee, upon receipt of a Company Request for the authentication and delivery of individual Senior Notes of such series in exchange in whole or in part for such Global Security, will authenticate and deliver individual Senior Notes of such series of like tenor and terms in definitive form in an aggregate principal amount equal to the principal amount of such Global Security or Securities representing such series in exchange for such Global Security or Securities.
(3) If specified by the Company pursuant to Section 301 with respect to Senior Notes issued or issuable in the form of a Global Security, the Depositary for such Global Security may surrender such Global Security in exchange in whole or in part for individual Senior Notes of such series of like tenor and terms in definitive form on such terms as are acceptable to the Company and such Depositary. Thereupon the Company shall execute, and the Trustee shall authenticate and deliver, without service charge, (A) to each Person specified by such Depositary a new Senior Note or Notes of the same series of like tenor and terms and of any authorized denomination as requested by such Person in aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Security; and (B) to such Depositary a new Global Security of like tenor and terms and in an authorized denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Senior Notes delivered to Holders thereof.
(4) In any exchange provided for in any of the preceding three paragraphs, the Company will execute and the Trustee will authenticate and deliver individual Senior Notes in definitive form in authorized denominations. Upon the exchange of the entire principal amount of a Global Security for individual Senior Notes, such Global Security shall be cancelled by the Trustee. Except as provided in the preceding paragraph, Senior Notes issued in exchange for a Global Security pursuant to this Section shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. Provided that the Company and the Trustee have so agreed, the Trustee shall deliver such Senior Notes to the Persons in whose names the Senior Notes are registered.
(5) Any endorsement of a Global Security to reflect the amount, or any increase or decrease in the amount, or changes in the rights of Holders, of Outstanding Senior Notes represented thereby shall be made in such manner and by such Person or Persons as shall be specified therein or in the Company Order to be delivered pursuant to Section 302 with respect thereto. Subject to the provisions of Section 302, the Trustee shall deliver and redeliver any such Global Security in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Company Order. If a Company Order pursuant to Section 302 has been, or simultaneously is, delivered, any instructions by the Company with respect to such Global Security shall be in writing but need not be accompanied by or contained in an Officers' Certificate and need not be accompanied by an Opinion of Counsel.
ARTICLE THREE
THE SENIOR NOTES
The aggregate principal amount of Senior Notes which may be authenticated and delivered under this Indenture is unlimited.
The Senior Notes may be issued in one or more series. There may be established, pursuant to one or more indentures supplemental hereto, prior to the issuance of Senior Notes of any series,
(1) the title of the Senior Notes of the series (which shall distinguish the Senior Notes of the series from Senior Notes of all other series);
(2) any limit upon the aggregate principal amount of the Senior Notes of the series which may be authenticated and delivered under this Indenture (except for Senior Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Senior Notes of the series pursuant to Sections 203, 303, 304, 907 or 1107);
(3) the Person to whom interest on a Senior Note of the series shall be payable if other than the Person in whose name that Senior Note (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest;
(4) the date or dates on which the principal of the Senior Notes of the series is payable;
(5) the rate or rates at which the Senior Notes of the series shall bear interest, if any, or any method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable, the Regular Record Date for the interest payable on Senior Notes on any Interest Payment Date and the basis upon which interest shall be calculated if other than that of a 360-day year consisting of twelve 30-day months;
(6) the place or places where the principal of (and premium, if any) and interest, if any, on Senior Notes of the series shall be payable;
(7) the period or periods within which, the price or prices at which and the terms and conditions upon which Senior Notes of the series may be redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase Senior Notes of the series pursuant to any sinking fund or analogous provision or at the option of a Holder thereof and the period or periods within which, the price or prices at which, and the terms and conditions upon which, Senior Notes of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;
(9) the denominations in which Senior Notes of the series shall be issuable;
(10) if the amount of payments of principal of (and premium, if any) or interest on the Senior Notes of the series may be determined with reference to an index or formula, the manner in which such amounts shall be determined;
(11) if other than the principal amount thereof, the portion of the principal amount of Senior Notes of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502;
(12) any deletions from, modifications of or additions to the Events of Default or covenants of the Company as provided herein pertaining to the Senior Notes of the series, and any change in the rights of the Trustee or Holders of such series pursuant to Section 901 or 902;
(13) any additions to the definitions currently set forth in this Indenture with respect to such series;
(14) whether the Senior Notes of the series shall be
issued in whole or in part in the form of a Global Security or Securities; the
terms and conditions, if any, upon which such Global Security or Securities may
be exchanged in whole or in part for certificated Senior Notes of such series
and of like tenor of any authorized denomination and the circumstances under
which such exchange may occur, if other than in the manner provided for in
Section 203; the Depositary for such Global Security or Securities; and the form
of any legend or legends to be borne by any such Global Security in addition to
or in lieu of the legend referred to in Section 203;
(15) any restriction or condition on the transferability of such Senior Notes;
(16) the terms of any right to convert or exchange such Senior Notes into or for other securities or property of the Company;
(17) CUSIP numbers; and
(18) any other terms of the series.
All Senior Notes of any one series shall be substantially identical except as to the date or dates from which interest, if any, shall accrue and denomination and except as may otherwise be provided in the terms of such Senior Notes determined or established as provided above. All Senior Notes of any one series need not be issued at the same time and, unless otherwise provided, a series may be reopened for issuances of additional Senior Notes of such series.
The Senior Notes shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Senior Notes may be manual or facsimile.
Senior Notes bearing the manual or facsimile signatures of individuals who were at the time relevant to the authorization thereof the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Senior Notes or did not hold such offices at the date of such Senior Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Senior Notes of any series executed by
the Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Senior Notes, and the Trustee, in
accordance with the Company Order, shall authenticate and deliver such Senior
Notes. If all of the Senior Notes of any series are not to be issued at one time
and if the supplemental indenture establishing such series shall so permit, such
Company Order may set forth procedures acceptable to the Trustee for the
issuance of such Senior Notes and determining the terms of particular Senior
Notes of such series, such as interest rate, maturity date, date of issuance and
date from which interest shall accrue. In authenticating Senior Notes hereunder,
and accepting the additional responsibilities under this Indenture in relation
to such Senior Notes, the Trustee shall be entitled to receive, and (subject to
Section 601) shall be fully protected in relying upon:
(1) an Opinion of Counsel, to the effect that:
(a) the form and terms of such Senior Notes or the manner of determining such terms have been established in conformity with the provisions of this Indenture; and
(b) such Senior Notes, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles; and
(2) an Officers' Certificate stating, to the best knowledge of each signer of such certificate, that no event which is, or after notice or lapse of time would become, an Event of Default with respect to any of the Senior Notes shall have occurred and be continuing.
The Trustee shall not be required to authenticate such Senior Notes if the issue of such Senior Notes pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Senior Notes and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.
If all the Senior Notes of any series are not to be issued at one time, it shall not be necessary to deliver an Opinion of Counsel and Officers' Certificate at the time of issuance of each such Senior Note, but such opinion and certificate shall be delivered at or before the time of issuance of the first Senior Note of such series to be issued.
Each Senior Note shall be dated the date of its authentication.
No Senior Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Senior Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Senior Note shall be conclusive evidence, and the only evidence, that such Senior Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture.
The Company shall cause to be kept at the office of the Security Registrar designated pursuant to this Section 303 or Section 1002 a register (referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Senior Notes and of transfers of Senior Notes. The Trustee is hereby initially appointed as Security Registrar for the purpose of registering Senior Notes and transfers of Senior Notes as herein provided.
Subject to Section 203, upon surrender for registration of transfer of any Senior Note of any series at the office or agency maintained for such purpose for such series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Senior Notes of the same series, Stated Maturity and original issue date, of any authorized denominations and of like tenor and aggregate principal amount.
Subject to Section 203, Senior Notes of any series may be exchanged, at the option of the Holder, for Senior Notes of the same series, Stated Maturity and original issue date, of any authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Senior Notes to be exchanged at any such office or agency.
Whenever any Senior Notes are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Senior Notes that the Holder making the exchange is entitled to receive.
All Senior Notes issued upon any registration of transfer or exchange of Senior Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Senior Notes surrendered upon such registration of transfer or exchange.
Every Senior Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Senior Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Senior Notes, other than exchanges pursuant to Section 304, 907 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, to register the transfer of or to exchange Senior Notes of any series during a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Senior Notes of that series called for redemption, or (ii) to issue, to register the transfer of or to exchange any Senior Notes so selected for redemption in whole or in part, except the unredeemed portion of any Senior Note being redeemed in part.
None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
If any mutilated Senior Note is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Senior Note of the same series, Stated Maturity and original issue date, and of like tenor and principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Senior Note and
(ii) such security or indemnity as may be required by them to save each of them
and any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Senior Note has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Senior
Note, a new Senior Note of the same series, Stated Maturity and original issue
date, and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Senior Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Senior Note, pay such Senior Note.
Upon the issuance of any new Senior Note under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Senior Note of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Senior Note shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Senior Note shall be at any time enforceable by anyone, and any such new Senior Note shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Senior Notes of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Senior Notes.
Unless otherwise provided as contemplated by Section 301 with respect to any series of Senior Notes, interest on any Senior Note that is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Senior Note (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.
Any interest on any Senior Note of any series that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Senior Notes of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Senior Note of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Senior Notes of such series at the address of such Holder as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Senior Notes of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the Senior Notes of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Senior Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Senior Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Senior Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Senior Note.
Prior to due presentment of a Senior Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Senior Note is registered as the absolute owner of such Senior Note for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Section 305) interest on such Senior Note and for all other purposes whatsoever, whether or not such Senior Note be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.
All Senior Notes surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by the Trustee. The Company may at any time deliver to the Trustee for cancellation any Senior Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Senior Notes so delivered shall be canceled by the Trustee. No Senior Notes shall be authenticated in lieu of or in exchange for any Senior Notes canceled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Senior Notes held by the Trustee shall be disposed of in accordance with a Company Order and the Trustee shall promptly deliver a certificate of disposition to the Company or, in the absence of such a Company Order, shall be returned to the Company.
Except as otherwise specified as contemplated by Section 301 for Senior Notes of any series, interest on the Senior Notes of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months.
The Company in issuing the Senior Notes may use "CUSIP" numbers, and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Senior Notes or as contained in any notice of redemption and that reliance may be placed only on the identification numbers printed on the Senior Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
This Indenture shall, upon Company Request, cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Senior Notes herein expressly provided for) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Senior Notes theretofore authenticated and delivered (other than (i) Senior Notes that have been destroyed, lost or stolen and that have been replaced as provided for in Section 304 and (ii) Senior Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Senior Notes not theretofore delivered to the Trustee for cancellation have become due and payable, or have been called for redemption,
and the Company, in the case of (B) above, has deposited or caused to be deposited with the Trustee as funds in trust for the purpose described above an amount sufficient to pay and discharge the entire indebtedness on such Senior Notes not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of the Stated Maturity or Redemption Date, as the case may be, or if later, the date of payment;
(2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.
In the event there are Senior Notes of two or more series hereunder, the Trustee shall be required to execute an instrument acknowledging satisfaction and discharge of this Indenture only if requested to do so with respect to Senior Notes of all series as to which it is Trustee and if the other conditions thereto are met. In the event there are two or more Trustees hereunder, then the effectiveness of any such instrument shall be conditioned upon receipt of such instruments from all Trustees hereunder.
Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive.
Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Senior Notes, and this Indenture, to the payment, either directly or through any Paying Agent (including the Company or an Affiliate acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
REMEDIES
"Event of Default", wherever used herein with respect to Senior Notes of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Senior Note of that series when it becomes due and payable on an Interest Payment Date other than at Maturity and continuance of such default for a period of thirty (30) days; or
(2) default in the payment of the principal of, (or premium, if any) or interest on any Senior Note of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as due by the terms of a Senior Note of that series and continuance of such default for a period of three Business Days; or
(4) default in the performance or breach of any covenant
or agreement of the Company in this Indenture (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere in this
Section specifically dealt with other than that), and continuance of such
default or breach for a period of 30 days after there has been given, by
registered or certified mail, to the Company by the Trustee, or to the Company
and the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Senior Notes of that series, a written notice specifying such
default or breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(5) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company or a Subsidiary in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company or a Subsidiary a bankrupt or insolvent, or approving as properly filed a petition by one or more Persons other than the Company or a Subsidiary seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or a Subsidiary under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or a Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or
(6) the commencement by the Company or a Subsidiary of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company or a Subsidiary in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company or a Subsidiary, or the filing by the Company or a Subsidiary of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by the Company or a Subsidiary to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or a Subsidiary or of any substantial part of their respective property, or the making by the Company or a Subsidiary of an assignment for the benefit of creditors, or the admission by the Company or a Subsidiary in writing of their respective inability to pay the Company's or a Subsidiary's debts generally as they become due, or the taking of corporate action by the Company or a Subsidiary in furtherance of any such action; or
(7) any other Event of Default provided with respect to Senior Notes of that series in the supplemental indenture authorizing such series.
The occurrence of an event described in (5) and (6) of this Section 501 with respect to a Subsidiary shall not constitute an Event of Default if (x) the creditors of such Subsidiary have no recourse to the Company or (y) such Subsidiary is not a "significant subsidiary" as defined in Regulation S-X under the Securities Act.
If an Event of Default (other than an Event of Default specified in
Section 501(7) or 501(8) with respect to Senior Notes of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Senior Notes
of that series may declare the principal amount of and accrued interest on all
of the Senior Notes of that series to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders), and
upon any such declaration such principal amount (or specified amount) shall
become immediately due and payable. If an Event of Default specified in Section
501(7) or (8) occurs, the principal of and interest on all the Senior Notes
shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders.
At any time after such a declaration of acceleration with respect to Senior Notes of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of not less than a majority in principal amount of the Outstanding Senior Notes of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient to pay
(A) all overdue interest on all Senior Notes of that series,
(B) the principal of (and premium, if any)
any Senior Notes of that series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates
prescribed therefor in such Senior Notes,
(C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Senior Notes, and
(D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee under Section 607; and
(2) all Events of Default with respect to Senior Notes of that series, other than the non-payment of the principal of Senior Notes of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right consequent thereon.
The Company covenants that if an Event of Default occurs under Section 501(1), (2) or (3) with respect to any Senior Notes the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Senior Notes, the whole amount then due and payable on such Senior Notes for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate or rates prescribed therefor in such Senior Notes, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee under Section 607.
If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Senior Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Senior Notes, wherever situated.
If an Event of Default with respect to Senior Notes of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Senior Notes of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Senior Notes or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Senior Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,
(1) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in respect of the
Senior Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due to the Trustee under
Section 607) and of the Holders of Senior Notes allowed in such judicial
proceeding, and
(2) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder of Senior Notes to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Senior Notes, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Senior Note any plan of reorganization, arrangement, adjustment or composition affecting the Senior Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder of a Senior Note in any such proceeding.
All rights of action and claims under this Indenture or the Senior Notes may be prosecuted and enforced by the Trustee without the possession of any of the Senior Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Senior Notes in respect of which such judgment has been recovered.
First: To the payment of all amounts due the Trustee under
Section 607; and
Second: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Senior Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Senior Notes for principal (and premium, if any) and interest, respectively; and
Third: The balance, if any, to the Person or Persons entitled thereto.
No Holder of any Senior Note of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Senior Notes of that series;
(2) the Holders of not less than 25% in principal amount of the Outstanding Senior Notes of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Senior Notes of that series;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatsoever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders.
Notwithstanding any other provision in this Indenture, the Holder of
any Senior Notes shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 305) interest on such Senior Note on the due dates expressed in such
Senior Note (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
If the Trustee or any Holder of a Senior Note has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders of Senior Notes shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Senior Notes in the last paragraph of
Section 304, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders of Senior Notes is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder of any Senior Note to exercise any right or remedy upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders of Senior Notes may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders of Senior Notes.
The Holders of not less than a majority in principal amount of the Outstanding Senior Notes of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Senior Notes of such series, provided that
(1) such direction shall not be in conflict with any rule of law or with this Indenture, and could not involve the Trustee in personal liability in circumstances where reasonable indemnity would not be adequate, and
(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.
The Holders of not less than a majority in principal amount of the Outstanding Senior Notes of any series may, on behalf of the Holders of all the Senior Notes of such series, waive any past default hereunder with respect to such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or interest on any Senior Note of such series, or
(2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Senior Note of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
All parties to this Indenture agree, and each Holder of any Senior Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Senior Notes of any series, or to any suit instituted by any Holder of any Senior Note for the enforcement of the payment of the principal of (or premium, if any) or interest on any Senior Note on or after the Stated Maturity or Maturities expressed in such Senior Note (or, in the case of redemption, on or after the Redemption Date).
The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
(a) Except during the continuance of an Event of Default with respect to Senior Notes of any series,
(1) the Trustee undertakes to perform, with respect to Senior Notes of such series, such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may, with respect to Senior Notes of such series, conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).
(b) In case an Event of Default with respect to Senior Notes of any series has occurred and is continuing, the Trustee shall exercise, with respect to Senior Notes of such series, such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of
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judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Senior Notes of any series relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Senior Notes of such series; and
(4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.
Within 90 days after the occurrence of any default hereunder with respect to the Senior Notes of any series, the Trustee shall transmit by mail to all Holders of Senior Notes of such series entitled to receive reports pursuant to Section 313(c) of the Trust Indenture Act, notice of all defaults hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the
principal of (or premium, if any) or interest on any Senior Note of such series or in the payment of any sinking fund installment with respect to Senior Notes of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Senior Notes of such series; and provided, further, that in the case of any default of the character specified in Section 501(4) with respect to Senior Notes of such series, no such notice to Holders shall be given until at least 45 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Senior Notes of such series.
Subject to the provisions of Section 601:
(a) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and a resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Senior Notes of any series pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and
(h) the Trustee shall not be charged with knowledge of any Event of Default with respect to the Senior Notes of any series for which it is acting as Trustee unless either (1) a Responsible Officer of the Trustee assigned to the Corporate Trustee Administration Department and agency group of the Trustee (or any successor division or department of the Trustee) shall have actual knowledge of the Event of Default or (2) written notice of such Event of Default shall have been given to a Responsible Officer of the Trustee by the Company, any other obligor on such Senior Notes or by any Holder of such Senior Notes.
The recitals contained herein and in the Senior Notes (except the Trustee's certificates of authentication) shall be taken as the statements of the Company, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Senior Notes. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Senior Notes or the proceeds thereof.
The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Senior Notes and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent.
Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company.
SECTION 607 COMPENSATION AND REIMBURSEMENT
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith; and
(3) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any loss, claim, damage, liability or expense (including taxes other than taxes on the income of the Trustee) incurred without negligence, willful misconduct or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company under this Section the Trustee shall have a lien prior to the Senior Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of, premium, if any, or interest, if any, on particular Senior Notes.
If the Trustee has or shall acquire any conflicting interest, within the meaning of the Trust Indenture Act, it shall, within 90 days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.
There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by federal or state authority and qualified and eligible under this Article and otherwise permitted by the Trust Indenture Act to act as Trustee under an Indenture qualified under the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Senior Notes of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee at the expense of the Company may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Senior Notes of such series.
(c) The Trustee may be removed at any time with respect to the Senior Notes of any series by Act of the Holders of a majority in principal amount of the Outstanding Senior Notes of such series delivered to the Trustee and to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the resigning Trustee at the expense of the Company may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Senior Notes of such series.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder of a Senior Note who has been a Holder of a Senior Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the Trustee with respect to all Senior Notes, or (ii) subject to Section 514, any Holder of a Senior Note who has been a bona fide Holder of a Senior Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Senior Notes and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Senior Notes of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Senior Notes of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Senior Notes of one or
more or all of such series and that at any time there shall be only one Trustee
with respect to the Senior Notes of any particular series) and shall comply with
the applicable requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Senior Notes of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Senior Notes of such series delivered to the Company and the
retiring Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable requirements of
Section 611, become the successor Trustee with respect to the Senior Notes of
such series and to that extent supersede the successor Trustee appointed by the
Company. If no successor Trustee with respect to the Senior Notes of any series
shall have been so appointed by the Company or the Holders of Senior Notes and
accepted appointment in the manner required by Section 611, any Holder of a
Senior Note who has been a bona fide Holder of a Senior Note of such series for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Senior Notes of such series.
(f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Senior Notes of any series and each appointment of a successor Trustee with respect to the Senior Notes of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of such series of Senior Notes as their names and addresses appear in the Security Register.
(a) In case of the appointment hereunder of a successor Trustee with respect to all Senior Notes, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with respect to the Senior Notes of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Senior Notes of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Senior Notes of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all
Senior Notes, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Senior Notes of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Senior Notes of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Senior Notes of that or those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Senior Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Senior Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Senior Notes.
If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Senior Notes), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). For purposes of Section 311(b)(4) and (6) of the Trust Indenture Act:
(a) "cash transaction" means any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; and
(b) "self-liquidating paper" means any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company (or any such obligor) for the purpose of financing the purchase, processing, manufacturing, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company (or any such obligor) arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation.
At any time when any of the Senior Notes remain Outstanding the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Senior Notes that shall be authorized to act on behalf of the Trustee to authenticate Senior Notes of such series issued upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 304, and Senior Notes so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Senior Notes by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Senior Notes, if any, of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607.
The provisions of Sections 306, 604 and 605 shall be applicable to each Authenticating Agent.
If an appointment with respect to one or more series is made pursuant to this Section, the Senior Notes of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form:
This is one of the Senior Notes of the series designated
therein referred to in the within-mentioned Indenture.
As Trustee
By:
-----------------------------------------------------
As Authenticating Agent
By:
-----------------------------------------------------
Authorized Signatory
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not later than June 1 and December 1, in each year, a list, in such form as the Trustee may reasonably require, containing all the information in the possession or control of the Company, or any of its Paying Agents other than the Trustee, as to the names and addresses of the Holders of Senior Notes as of the preceding May 15 or November 15, as the case may be, and
(b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of the most recent Regular Record Date;
excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar.
(a) The Trustee shall comply with the obligations imposed on it pursuant to Section 312 of the Trust Indenture Act.
(b) Every Holder of Senior Notes, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Senior Notes in accordance with Section 312(b) of the Trust Indenture Act, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act.
(a) Within 60 days after May 15 of each year commencing with the first May 15 after the first issuance of Senior Notes pursuant to this Indenture, if required by Section 313(a) of the Trust Indenture Act, the Trustee shall transmit a brief report dated as of such May 15 with respect to any of the events specified in such Section 313(a) that may have occurred since the later of the immediately preceding May 15 and the date of this Indenture.
(b) The Trustee shall transmit the reports required by Section 313(b) of the Trust Indenture Act at the times specified therein.
(c) Reports pursuant to this Section shall be transmitted in the manner and to the Persons required by Sections 313(c) and (d) of the Trust Indenture Act.
The Company, pursuant to Section 314(a) of the Trust Indenture Act, shall:
(1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) that the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations (delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer's Certificates));
(2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations (delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer's Certificates));
(3) transmit, within 30 days after the filing thereof with the Trustee, to the Holders of Senior Notes, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section 704 as may be required by rules and regulations prescribed from time to time by the Commission; and
(4) notify the Trustee when and as the Senior Notes of any series become admitted to trading on any national securities exchange.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless
(1) in case the Company shall consolidate with or merge into another corporation or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Senior Notes and the performance of every covenant of this Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transactions, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.
Upon any consolidation by the Company with or merger by the Company into any corporation or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Senior Notes.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Without the consent of any Holders of Senior Notes, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Senior Notes; or
(2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Senior Notes (and if such covenants are to be for the benefit of less than all series of Senior Notes, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this Indenture, to change or eliminate any restrictions on the payment of principal (or premium, if any) on Senior Notes or to permit the issuance of Senior Notes in uncertificated form, provided any such action shall not adversely affect the interests of the Holders of Senior Notes of any series in any material respect; or
(5) to change or eliminate any of the provisions of this Indenture with respect to any series of Senior Notes theretofore unissued; or
(6) to secure the Senior Notes; or
(7) to establish the form or terms of Senior Notes of any series as permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Senior Notes of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); or
(9) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make provisions with respect to matters or questions arising under this Indenture, provided such action shall not adversely affect the interests of the Holders of Senior Notes of any series in any material respect; or
(10) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the Trust Indenture Act or under any similar federal statute hereafter enacted, and to add to this Indenture such other provisions as may be expressly required by the Trust Indenture Act.
With the consent of the Holders of not less than a majority in principal amount of the Outstanding Senior Notes of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Senior Notes of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Senior Note affected thereby,
(1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Senior Note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the method of calculating the rate of interest thereon, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding Senior Notes of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section 902,
Section 513 or Section 1006, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Senior Note
affected thereby, provided, however, that this clause shall not be deemed to
require the consent of any Holder of a Senior Note with respect to changes in
the references to "the Trustee" and concomitant changes in this Section and
Section 1006, or the deletion of this proviso, in accordance with the
requirements of Sections 611(b) and 901(8).
(a) A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Senior Notes, or which modifies the rights of the Holders of Senior Notes of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Senior Notes of any other series.
(b) It shall not be necessary for any Act of Holders of Senior Notes under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act or action shall approve the substance thereof.
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties, immunities or liabilities under this Indenture or otherwise.
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Senior Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act.
Senior Notes of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Senior Notes of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Senior Notes of such series.
ARTICLE TEN
COVENANTS
The Company covenants and agrees for the benefit of each series of Senior Notes that it will duly and punctually pay the principal of (and premium, if any) and interest on the Senior Notes of that series in accordance with the terms of the Senior Notes and this Indenture.
The Company or its Affiliate will maintain an office or agency where Senior Notes of each series may be presented or surrendered for payment, where Senior Notes of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Senior Notes of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency in respect of any series of Senior Notes or shall fail to furnish the Trustee with the address thereof, such presentations and surrenders of Senior Notes of that series may be made and notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive such respective presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices or agencies where the Senior Notes of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
The Company may appoint an Affiliate as an agency for any of the foregoing purposes.
If the Company or one of its Affiliates shall at any time act as its own Paying Agent with respect to any series of Senior Notes, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Senior Notes of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of Senior Notes, it will, prior to each due date of the principal of (and premium, if any) or interest on any Senior Notes of that series, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Senior Notes other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Senior Notes of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other obligor upon the Senior Notes of that series) in the making of any payment of principal of (and premium, if any) or interest on the Senior Notes of that series; and
(3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Senior Note of any series and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Senior Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper of general circulation in New York City notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.
Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the rights (charter and statutory) and franchises of the Company; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company, and that the loss thereof is not disadvantageous in any material respect to the Holders.
(a) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, a written statement, which need not comply with Section 102, signed by the principal executive officer, the principal financial officer or the principal accounting officer of the Company, as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 1005, such compliance shall be determined without regard to any period of grace or requirement of notice under this Indenture.
(b) The Company shall deliver to the Trustee, within five days after the occurrence thereof, written notice of any event which after notice or lapse of time or both would become an Event of Default pursuant to Section 501.
The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 1004 with respect to the Senior Notes of any series if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Senior Notes of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SENIOR NOTES
Senior Notes of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Senior Notes of any series) in accordance with this Article.
The election of the Company to redeem any Senior Notes shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of all of the Senior Notes of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date. In case of any redemption at the election of
the Company of less than all the Senior Notes of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of Senior Notes of such series to be redeemed. In the case of any redemption of Senior Notes (i) prior to the expiration of any restriction on such redemption provided in the terms of such Senior Notes or elsewhere in this Indenture, or (ii) pursuant to an election of the Company which is subject to a condition specified in the terms of such Senior Notes, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction or condition.
If the Senior Notes are registered in the name of only one Holder, any partial redemptions shall be pro rata. If the Senior Notes are held in definitive form by more than one Holder and if less than all the Senior Notes of any series are to be redeemed, the particular Senior Notes to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Senior Notes of such series not previously called for redemption, by lot or other such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Senior Notes of that series or any integral multiple thereof) of the principal amount of Senior Notes of such series of a denomination larger than the minimum authorized denomination for Senior Notes of that series.
The Trustee shall promptly notify the Company in writing of the Senior Notes selected for redemption and, in the case of any Senior Notes selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Senior Notes shall relate, in the case of any Senior Notes redeemed or to be redeemed only in part, to the portion of the principal amount of such Senior Notes which has been or is to be redeemed.
Unless otherwise indicated in the supplemental indenture relating to any series of Senior Notes, notice of redemption shall be given in the manner provided in Section 106 to the Holders of Senior Notes to be redeemed not less than 30 nor more than 60 days prior to the Redemption Date.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, or if not then ascertainable, the manner of calculation thereof,
(3) if less than all the Outstanding Senior Notes of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Senior Notes to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due and payable upon each such Senior Note to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date,
(5) the place or places where such Senior Notes are to be surrendered for payment of the Redemption Price,
(6) the CUSIP numbers; and
(7) that the redemption is for a sinking fund, if such s the case.
Notice of redemption of Senior Notes to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company.
The Company shall give the Trustee prompt notice of the amount of any Redemption Price that is subject to calculation, promptly after the calculation thereof.
Except as otherwise provided in a supplemental indenture pursuant to
Section 301, prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company or its Affiliate is acting as
its own Paying Agent, segregate and hold in trust as provided in Section 1003)
an amount of money sufficient to pay the Redemption Price of and accrued
interest, if any, on all the Senior Notes which are to be redeemed on that date.
Notice of redemption having been given as aforesaid, the Senior Notes
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified together with any accrued interest thereon,
and from and after such date (unless the Company shall default in the payment of
the Redemption Price and accrued interest) such Senior Notes shall cease to bear
interest. Upon surrender of any such Senior Note for redemption in accordance
with such notice, such Senior Note shall be paid by the Company at the
Redemption Price, together with accrued interest, if any; provided, however,
that, except as otherwise provided in a supplemental indenture pursuant to
Section 301, installments of interest on Senior Notes whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Senior Notes, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 305.
If any Senior Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Senior Note.
Any Senior Note that is to be redeemed only in part shall be surrendered at an office or agency of the Company therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Senior Note without service charge, a new Senior Note of the same series, Stated Maturity and original issue date of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Senior Note so surrendered.
ARTICLE TWELVE
SINKING FUNDS
The provisions of this Article shall be applicable to any sinking fund for the retirement of Senior Notes of a series except as otherwise specified as contemplated by Section 301 for Senior Notes of such series.
The minimum amount of any sinking fund payment provided for by the terms of Senior Notes of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Senior Notes of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Senior Notes of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Senior Notes of any series as provided for by the terms of Senior Notes of such series.
The Company (1) may deliver Outstanding Senior Notes of a series (other than any previously called for redemption), and (2) may apply as a credit Senior Notes of a series which have been redeemed either at the election of the Company pursuant to the terms of such Senior Notes or through the application of permitted optional sinking fund payments pursuant to the terms of such Senior Notes, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Senior Notes of such series required to be made pursuant to the terms of such Senior Notes as provided for by the terms of such series; provided that such Senior Notes have not been previously so credited. Such Senior Notes shall be received and credited for such purpose by the Trustee
at the Redemption Price specified in such Senior Notes for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly.
Not less than 60 days prior to each sinking fund payment date for any series of Senior Notes, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Senior Notes of that series pursuant to Section 1202 and stating the basis for such credit and that such Senior Notes have not previously been so credited and will also deliver to the Trustee any Senior Notes to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Senior Notes to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Senior Notes shall be made upon the terms and in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
MISCELLANEOUS PROVISIONS
An incorporator or any past, present or future director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Senior Notes or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Senior Note, each Holder shall waive and release all such liability. Such waiver and release shall be part of the consideration for the issue of the Senior Notes.
The Company shall have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly-owned subsidiary of the Company, provided that, in the event of any such assignment, the Company shall remain primarily liable for the performance of all such obligations. This Indenture may also be assigned by the Company in connection with a transaction described in Article Eight. This Indenture shall be binding upon and inure to the benefit of the Company, the Trustee, the Holders, any Security Registrar, Paying Agent, and Authenticating Agent and their respective successors and assigns.
This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.
SOUTHERN POWER COMPANY
By:
Its:
Attest:
THE BANK OF NEW YORK
Trustee
Attest:
Exhibit 4.2
SOUTHERN POWER COMPANY
TO
THE BANK OF NEW YORK,
AS TRUSTEE.
FIRST SUPPLEMENTAL INDENTURE
DATED AS OF JUNE 18, 2002
$575,000,000
6.25% SENIOR NOTES, SERIES A DUE JULY 15, 2012
6.25% SENIOR NOTES, SERIES B DUE JULY 15, 2012
TABLE OF CONTENTS*
Article I Additional Definitions..................................................................................2
Section 101. Definitions........................................................................2
Article II 2012 Notes.............................................................................................7
Section 201. Establishment......................................................................7
Section 202. Aggregate Principal Amount.........................................................7
Section 203. Payment of Principal and Interest..................................................7
Section 204. Denominations......................................................................8
Section 205. Global Securities and Certificated Securities......................................8
Section 206. Form of Securities................................................................10
Section 207. Transfer and Exchange.............................................................10
Article III......................................................................................................15
Section 301. Optional Redemption...............................................................15
Article IV Covenants.............................................................................................15
Section 401. Reporting Obligations.............................................................15
Section 402. Limitation on Asset Sales.........................................................17
Section 403. Limitation on Liens...............................................................17
Section 404. Restrictions on Subsidiary Indebtedness...........................................19
Section 405. Minimum Contract Maintenance Covenant.............................................19
Article V Additional Events of Default...........................................................................19
Section 501. Additional Events of Default......................................................19
Article VI Covenant Defeasance...................................................................................19
Section 601. Defeasance of Certain Obligations.................................................19
Article VII Miscellaneous Provisions.............................................................................21
Section 701. Recitals by Company...............................................................21
Section 702. Ratification and Incorporation of Original Indenture..............................21
Section 703. Executed in Counterparts..........................................................21
Section 704. Legends...........................................................................21
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1 This Table of Contents does not constitute part of the Indenture or have any bearing upon the interpretation of any of its terms and provisions.
THIS FIRST SUPPLEMENTAL INDENTURE is made as of the 18th day of June, 2002, between SOUTHERN POWER COMPANY, a corporation duly organized and existing under the laws of the state of Delaware (herein called the "Company"), having its principal office at 270 Peachtree Street, N.W., Atlanta, Georgia 30303 and THE BANK OF NEW YORK, a banking corporation, duly organized and existing under the laws of the state of New York, having its principal corporate trust office at 101 Barclay Street, 21 West, New York, New York 10286, as Trustee (herein called the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company has heretofore entered into a Senior Note Indenture, dated as of June 1, 2002 (the "Original Indenture"), with The Bank of New York;
WHEREAS, the Original Indenture is incorporated herein by this reference and the Original Indenture, as supplemented by this First Supplemental Indenture, is herein called the "Indenture";
WHEREAS, under the Original Indenture, a new series of unsecured senior debentures, notes or other evidences of indebtedness (the "Senior Notes") may at any time be established by the Board of Directors of the Company in accordance with the provisions of the Original Indenture and the terms of such series may be described by a supplemental indenture executed by the Company and the Trustee;
WHEREAS, the Company proposes to create under the Indenture a series of Senior Notes to be designated the "6.25% Senior Notes, Series A due July 15, 2012" (the "Series A Notes") and a series of Senior Notes to be designated the "6.25% Senior Notes, Series B due July 15, 2012" (the "Series B Notes"; and together with the Series A Notes the "2012 Notes"), the form and substance of the 2012 Notes and the terms, provisions and conditions thereof to be set forth as provided in the Original Indenture and this First Supplemental Indenture;
WHEREAS, additional Senior Notes of other series hereafter established, except as may be limited in the Original Indenture as at the time supplemented and modified, may be issued from time to time pursuant to the Indenture as at the time supplemented and modified; and
WHEREAS, all conditions necessary to authorize the execution and delivery of this First Supplemental Indenture and to make it a valid and binding obligation of the Company have been done or performed.
NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
Article I
Additional Definitions
Section 101. Definitions. The following defined terms used herein shall, unless the context otherwise requires, have the meanings specified below. Capitalized terms used herein for which no definition is provided herein shall have the meanings set forth in the Original Indenture.
"Additional Interest" shall have the meaning assigned to it in the Registration Rights Agreement.
"Additional Interest Event" shall have the meaning assigned to it in the Registration Rights Agreement.
"Affiliate Subordinated Indebtedness" means the Southern Subordinated Note and any other borrowings by the Company from Southern, or an affiliate of Southern, provided that such borrowings are subordinated on terms substantially similar to the terms of subordination set forth in the Southern Subordinated Note.
"Asset Sale" means any sale, lease, sale and leaseback transfer,
conveyance or other disposition of any assets including by way of the issue by
the Company or any of its Subsidiaries of equity interests in such Subsidiaries
which own any assets, except (a) in the ordinary course of business to the
extent that such property is worn out or is no longer useful or necessary in
connection with the operation of the Company's business or sale of inventory,
(b) if, prior to such conveyance or disposition, each Rating Agency provides a
Ratings Reaffirmation of the 2012 Notes after giving effect to such transaction,
or (c) sale and leaseback or similar transfers of assets (other than Existing
Assets).
"Clearstream" means Clearstream Banking, Societe Anonyme, or any successor securities clearing agency.
"Consolidated Tangible Assets" means, at any date of determination, the total assets of the Company and its Subsidiaries determined in accordance with GAAP, excluding, however, from the determination of total assets (a) goodwill, organizational expenses, research and product development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles, (b) all deferred charges or unamortized debt discount and expenses, (c) all reserves carried and not deducted from assets, (d) securities which are not readily marketable, (e) cash held in sinking or other analogous funds established for the purpose of redemption, retirement or prepayment of capital stock or other equity interests or debt, (f) any write-up in the book value of any assets resulting from a revaluation thereof subsequent to March 31, 2002, and (g) any items not included in clauses (a) through (f) above which are treated as intangibles in conformity with GAAP, plus the aggregate net book value of all asset sales or dispositions made by the Company and any of its Subsidiaries since the Original Issue Date of the 2012 Notes to the extent that the proceeds thereof or other consideration received therefor are not invested or reinvested in a Permitted Business, or are not retained by the Company or its Subsidiaries.
"Contracted Operating Cash Flow" means the projection done at the end of each fiscal quarter of the next four fiscal quarters of the Company's and its Subsidiaries' (other than Unrestricted Subsidiaries) total cash flow available for debt service from fixed-price capacity power contracts, each contract having a term from initial commencement to expiry of at least five years; provided, however, that up to 12.5% of the Contracted Operating Cash Flows may be derived from fixed-price capacity power contracts that have contract terms of at least two years but less than five years from initial commencement to expiry. The projection shall be consistent with financial reporting procedures of the Company. The term fixed-price capacity power contracts includes any power contract that states the base capacity price on a per unit basis (for example, in dollars per megawatt) and which may allow for adjustments to that base price that are generally encompassed within the Company's or the electric generation industry's commercial expectations for a power contract of a similar duration (including but not limited to adjustments to accommodate changed capacity purchase levels, variations in expected or actual construction costs or demonstrated capability levels, changes in equipment or law and force majeure); provided, however, that a power contract will not be considered to be a fixed-price capacity power contract if a material portion of the capacity price varies based upon a market index for electric capacity or energy, fuel, weather or other factor that is external to the facility and the transaction between the Company and its customer. The method of calculating the energy price shall not be considered in assessing whether a power contract is a fixed-price capacity power contract.
"Distribution Compliance Period," with respect to the 2012 Notes, means the period of 40 consecutive days beginning on and including the later of (i) the day on which such 2012 Notes are first offered to Persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the Original Issue Date.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Euroclear" means Euroclear Bank S.A., as operator of the Euroclear System or any successor securities clearing agency.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer Registration Statement" shall have the meaning assigned to it in the Registration Rights Agreement.
"Existing Assets" means the following generating facilities of the
Company and its Subsidiaries: (i) Dahlberg Units 1-10; (ii) Wansley 6 and
Wansley 7; (iii) Goat Rock 1 and Goat Rock 2; (iv) Harris 1 and Harris 2; and
(v) Stanton A.
"GAAP" means U.S. generally accepted accounting principles.
"Global Securities" means global certificates representing the 2012 Notes as described in Section 205.
"Holder" means a registered holder of a 2012 Note.
"Indebtedness" of any person means (i) all indebtedness of such person
for borrowed money, (ii) all obligations of such person evidenced by bonds,
debentures, notes, or other similar instruments, (iii) all obligations of such
person to pay the deferred purchase price of property or services (other than
trade accounts obtained on normal commercial terms in the ordinary course of
business or practice), (iv) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (v) all capital lease obligations of such person that
are required to be accounted for as a capital lease in accordance with GAAP,
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other persons which such person is responsible for as guarantor, and (vii) all
Indebtedness of the type referred to in clauses (i) through (vi) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any lien or security interest on
property.
"Institutional Accredited Investor" has the meaning set forth in
Section 205(a) hereof.
"Interest Payment Dates" mean July 15 and January 15 of each year.
"Make-Whole Premium" means, with respect to the 2012 Notes, a computation as of a date not more than five days prior to the redemption date of the following:
(i) the average life of the remaining scheduled payments of principal in respect of outstanding 2012 Notes (the "Remaining Average Life") as of the redemption date;
(ii) the yield to maturity for the United States treasury security having an average life equal to the Remaining Average Life and trading in the secondary market at the price closest to the principal amount thereof (the "Primary Issue") (subject to extrapolation if no United States treasury security has an average life equal to the Remaining Average Life); and
(iii) the discounted present value of the then-remaining scheduled payments of principal and interest (but excluding that portion of any scheduled payment of interest that is actually due and paid on the redemption date) in respect of outstanding 2012 Notes as of the redemption date using a discount factor equal to the sum of (x) the yield to maturity for the Primary Issue, plus (y) 25 basis points.
The amount of Make-Whole Premium in respect of 2012 Notes to be redeemed shall be an amount equal to (x) the discounted present value of such 2012 Notes to be redeemed determined in accordance with clause (iii) above, minus (y) the unpaid principal amount of such 2012 Notes; provided, however, that the Make-Whole Premium shall not be less than zero.
"Original Issue Date" means June 18, 2002.
"Owner" means each Person who is the beneficial owner of a Global Security as reflected in the records of the Depository or, if a Depository participant is not the Owner, then as reflected in the records of a Person maintaining an account with such Depository (directly or indirectly, in accordance with the rules of such Depository).
"Permanent Regulation S Global Security" has the meaning set forth in
Section 205(b).
"Permitted Business" means a business that is the same as or similar to our business as of the date that the 2012 Notes are issued under the Indenture, or any business reasonably related thereto.
"QIBs" means qualified institutional buyers as defined in Rule 144A.
"Rating Agencies" mean Moody's Investors Service, Inc. and Standard & Poor's Ratings Services.
"Ratings Reaffirmation" means a reaffirmation by a rating agency of the higher of its minimum investment grade rating or the then current credit ratings (as applicable) of any of the 2012 Notes outstanding, giving effect to the transaction giving rise to such request for such reaffirmation.
"Recourse Indebtedness" means all Indebtedness (other than Affiliate Subordinated Indebtedness) of the Company and its Subsidiaries (other than Unrestricted Subsidiaries).
"Registered Exchange Offer" shall have the meaning assigned to it in the Registration Rights Agreement
"Registration Rights Agreement" means the Registration Rights Agreement, dated June 18, 2002 among the Company, Lehman Brothers Inc. and Salomon Smith Barney Inc. relating to the registration of the 2012 Notes under the Securities Act.
"Regular Record Date" means, with respect to each Interest Payment Date, the close of business on the 15th calendar day preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act and any successor regulation thereto.
"Rule 144" means Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission.
"Rule 144A Global Security" means any Series A Note that is to be traded pursuant to Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation.
"Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depository), or any successor Person thereto and shall initially be the Trustee.
"Shelf Registration Statement" shall have the meaning assigned to it in the Registration Rights Agreement.
"Southern" means The Southern Company.
"Southern Subordinated Note" means the subordinated promissory note, dated June 20, 2001, issued by the Company to Southern.
"Stated Maturity" means July 15, 2012.
"Subsidiary" means any corporation or other entity of which sufficient voting stock or other ownership or economic interests having ordinary voting power to elect a majority of the board of directors (or equivalent body) are at the time directly or indirectly held by the Company.
"Temporary Regulation S Global Security" has the meaning set forth in
Section 205(b).
"Total Capitalization" means the sum of (a) the aggregate of the capital stock and other equity accounts (including retained earnings and paid-in-capital) of the Company and its Subsidiaries (other than Unrestricted Subsidiaries; provided, however, that retained earnings of Unrestricted Subsidiaries shall be included); (b) all Recourse Indebtedness; and (c) Affiliate Subordinated Indebtedness.
"Total Operating Cash Flow" means the projection done at the end of each fiscal quarter of the next four fiscal quarters of the Company and its Subsidiaries' (other than Unrestricted Subsidiaries) total cash flow available for debt service, as projected consistent with the Company's financial reporting procedures.
"Transfer Restricted Security" shall have the meaning assigned to it in the Registration Rights Agreement.
"Unrestricted Subsidiary" means any Subsidiary of the Company all the Indebtedness of which (a) is nonrecourse to the Company or any of its Subsidiaries (other than any other Unrestricted Subsidiary), other than with respect to stock or other ownership interest of the Company or any of its Subsidiaries in such Subsidiary, and (b) is not secured by any property of the Company or any of its Subsidiaries (other than the property of, or stock or other ownership interest in, an Unrestricted Subsidiary).
"U.S. Government Obligations" means securities that are (i) direct and unconditional obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by, and acting as an agency or instrumentality of, the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company subject to federal or state supervision or examination with a combined capital and surplus of at least $100,000,000 as custodian with respect to any such U.S. Government Obligations or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt.
Article II
2012 Notes
Section 201. Establishment. The Series A Notes shall be designated as the Company's "6.25% Senior Notes, Series A due July 15, 2012" and the Series B Notes shall be designated as the Company's "6.25% Senior Notes, Series B due July 15, 2012". The Series A Notes and the Series B Notes shall be treated for all purposes under the Indenture as a single class or series of Senior Notes.
Section 202. Aggregate Principal Amount. The Trustee shall authenticate and deliver (i) Series A Notes for original issue on the Original Issue Date in the aggregate principal amount of $575,000,000 and (ii) Series B Notes from time to time thereafter for issue only in exchange for Series A Notes pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement or pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement, in each case upon a Company Order for authentication and delivery thereof and satisfaction of Sections 301 and 302 of the Original Indenture. The aggregate principal amount of the 2012 Notes shall be initially limited to $575,000,000. All 2012 Notes need not be issued at the same time and such series may be reopened at any time, without the consent of any Holder, for issuances of additional 2012 Notes. Any such additional 2012 Notes will have the same interest rate, maturity and other terms as those initially issued. No further Series A Notes shall be authenticated and delivered except as provided by Sections 203, 302, 303, 907 or 1107 of the Original Indenture. The Series A Notes shall be issued in definitive fully registered form.
The form of the Trustee's Certificate of Authentication for the 2012 Notes shall be in substantially the form set forth in Exhibit B hereto.
Each 2012 Note shall be dated the date of authentication thereof and shall bear interest from the date of original issuance thereof or from the most recent Interest Payment Date to which interest has been paid or duly provided for.
Section 203. Payment of Principal and Interest. The principal of the 2012 Notes shall be due at Stated Maturity (unless earlier redeemed). The unpaid principal amount of the 2012 Notes shall bear interest at the rate of 6.25% per annum until paid or duly provided for. Interest shall be paid semi-annually in arrears on each Interest Payment Date to the Person in whose name the 2012 Notes are registered on the Regular Record Date for such Interest Payment Date, provided that interest payable at the Stated Maturity of principal or on a Redemption Date as provided herein will be paid to the Person to whom principal is payable.
The initial Interest Payment Date shall be January 15, 2003. Any such interest that is not so punctually paid or duly provided for will forthwith cease to be payable to the Holders on such Regular Record Date and may either be paid to the Person or Persons in whose name the 2012 Notes are registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee ("Special Record Date"), notice whereof shall be given to Holders of the 2012 Notes not less than ten (10) days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange, if any, on which the 2012 Notes shall be listed, and upon such notice as may be required by any such exchange, all as more fully provided in the Original Indenture.
Payments of interest on the 2012 Notes will include interest accrued to, but excluding, the respective Interest Payment Dates. Interest payments for the 2012 Notes shall be computed and paid on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the 2012 Notes is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day, with the same force and effect as if made on the date the payment was originally payable.
Payment of the principal and interest due at the Stated Maturity or earlier redemption of the 2012 Notes shall be made upon surrender of the 2012 Notes at the Corporate Trust Office of the Trustee, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payments of interest (including interest on any Interest Payment Date) will be made, subject to such surrender where applicable, at the option of the Company, (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least sixteen (16) days prior to the date for payment by the Person entitled thereto.
Additional Interest shall accrue on the Transfer Restricted Securities over and above the interest rate set forth herein at a rate of 0.50% per annum from and including the date on which any Additional Interest Event shall occur to, but excluding, the date on which all such Additional Interest Events have been cured or, if earlier, the date on which the Transfer Restricted Securities may first be resold in reliance on Rule 144(k). All Additional Interest shall be paid to the Holders of Transfer Restricted Securities in the same manner and at the same time as regular payments of interest on the 2012 Notes. In the event that more than one Additional Interest Events occurs at the same time, the maximum increase in the interest rate shall be 0.50% per annum.
Section 204. Denominations. The 2012 Notes may be issued in denominations of $100,000 and integral multiples of $1,000 in excess thereof.
Section 205. Global Securities and Certificated Securities.
(a) General. The Series A Notes will be resold initially only to
(i) QIBs in reliance on Rule 144A under the Securities Act ("Rule
144A"), (ii) institutional "accredited investors" as such term is
defined in rule 501(a)(1), (2),(3) and (7) of Regulation D under the
Securities Act (each, an "Institutional Accredited Investor") and
(iii) Persons other than U.S. Persons (as defined in Regulation S) in
reliance on Regulation S under the Securities Act ("Regulation S"). Series A Notes may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S, and Institutional Accredited Investors in each case, subject to the restrictions on transfer set forth herein.
(b) Global Securities.
(i) Form. Series A Notes initially resold pursuant to Rule
144A shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form
(collectively, the "Rule 144A Global Security") and Series A
Notes initially resold pursuant to Regulation S and shall be
issued initially in the form of one or more temporary global
securities in definitive, fully registered form (collectively,
the "Temporary Regulation S Global Security"), in each case
without interest coupons and with the global securities legend
and restricted securities legend set forth in Exhibit A hereto,
which shall be deposited on behalf of the purchasers of the
Series A Notes represented thereby with the Securities Custodian,
and registered in the name of the Depository or a nominee of the
Depository, duly executed by the Company and authenticated by the
Trustee as provided in the Indenture. Except as set forth in this
Section 205, beneficial ownership interests in the Temporary
Regulation S Global Security (x) will not be exchangeable for
interests in the Rule 144A Global Security, the permanent global
security (the "Permanent Regulation S Global Security"), or any
other security without a legend containing restrictions on
transfer of such security prior to the expiration of the
Distribution Compliance Period and (y) then may be exchanged for
interests in a Rule 144A Global Security or the Permanent
Regulation S Global Security only upon certification that
beneficial ownership interests in such Temporary Regulation S
Global Security are owned either by non-U.S. persons or U.S.
persons who purchased such interests in a transaction that did
not require registration under the Securities Act.
The Rule 144A Global Security, the Temporary Regulation S Global Security and the Permanent Regulation S Global Security are collectively referred to herein as "Global Securities". The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided.
(ii) Book-Entry Provisions. This Section shall apply only to a Global Security deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.05(b)(ii), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depository for such Global Security or Global Securities or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as custodian for the Depository.
Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Security, and the Company, the Trustee and any agent of the Company or the Trustee shall be entitled to treat the Depository as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security.
To the extent a notice or other communication to the beneficial owners of the 2012 Notes is required under the Indenture, unless and until Certificated Securities shall have been issued to such owners, the Trustee shall give all such notices and communications specified herein to be given to such owners to the Depository, and shall have no obligations to such Owners.
(c) Certificated Securities. Series A Notes sold to Institutional Accredited Investors shall be issued initially in the form of a fully registered, certificated Series A Note ("Certificated Securities"). Except as provided in this Section 205, owners of beneficial interests in Global Securities shall not be entitled to receive physical delivery of Certificated Securities.
Global Securities shall be exchangeable for Certificated Securities if
(i) the Depository (x) notifies the Company that it is unwilling or unable to
continue as Depository for the Global Securities and the Company thereupon fails
to appoint a successor Depository within 90 days after receipt of such notice or
(y) has ceased to be a clearing agency registered under the Exchange Act and the
Company thereupon fails to appoint a successor Depository within 90 days after
it becomes aware of such cessation or (ii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default under the Indenture and payment of
principal and interest has been accelerated. The Trustee shall notify the
Depository (in the case of (ii)) and the Holders of any such event. Upon
surrender to the Trustee of the typewritten certificate or certificates
representing the Global Securities by the Depository, accompanied by
registration instructions, the Trustee shall execute and authenticate the
certificates in accordance with the instructions of the Depository. Neither the
Security Registrar nor the Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Certificated Securities, the
Trustee shall recognize the Holders of the Certificated Securities as Holders.
The Certificated Securities shall be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Company, as
evidenced by the execution thereof by the Company, and shall bear the legend set
forth on Exhibit A hereto unless the Company informs the Trustee that such
legend is no longer required.
Section 206. Form of Securities. The Global Securities and Certificated Securities shall be substantially in the form attached as Exhibit A thereto.
(a) General. The 2012 Notes may not be transferred except in compliance with the legend contained in Exhibit A unless otherwise determined by the Company in accordance with applicable law. No service charge will be made for any transfer or exchange of 2012 Notes, but payment will be required of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith.
(b) Transfer and Exchange of Global Securities. (i) If a holder of a beneficial interest in the Rule 144A Global Security wishes at any time to exchange its interest in the Rule 144A Global Security for an interest in the Permanent Regulation S Global Security, or to transfer its interest in the Rule 144A Global Security to a person who wishes to take delivery thereof in the form of an interest in the Permanent Regulation S Global Security, such holder may, subject to the rules and procedures of the Depository and to the requirements set forth in the following sentence, exchange or cause the exchange or transfer or cause the transfer of such interest for an equivalent beneficial interest in the Permanent Regulation S Global Security. Upon receipt by the Trustee, as transfer agent, of (1) instructions given in accordance with the Depository procedures from or on behalf of a holder of a beneficial interest in the Rule 144A Global Security, directing the Trustee, as transfer agent, to credit or cause to be credited a beneficial interest in the Permanent Regulation S Global Security in an amount equal to the beneficial interest in the Rule 144A Global Security to be exchanged or transferred, (2) a written order given in accordance with the Depository's procedures containing information regarding the Euroclear or Clearstream account to be credited with such increase and the name of such account, and (3) a certificate in the form of Exhibit C hereto given by the holder of such beneficial interest stating that the exchange or transfer of such interest has been made pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act, the Trustee, as transfer agent, shall promptly deliver appropriate instructions to the Depository, its nominee, or the custodian for the Depository, as the case may be, to reduce or reflect on its records a reduction of the Rule 144A Global Security by the aggregate principal amount of the beneficial interest in such Rule 144A Global Security to be so exchanged or transferred from the relevant participant, and the Trustee, as transfer agent, shall promptly deliver appropriate instructions to the Depository, its nominee, or the custodian for the Depository, as the case may be, concurrently with such reduction, to increase or reflect on its records an increase of the principal amount of such Permanent Regulation S Global Security by the aggregate principal amount of the beneficial interest in such Rule 144A Global Security to be so exchanged or transferred, and to credit or cause to be credited to the account of the person specified in such instructions (who may be Euroclear or Clearstream or another agent member of Euroclear or Clearstream or both, as the case may be, acting for and on behalf of them) a beneficial interest in such Permanent Regulation S Global Security equal to the reduction in the principal amount of such Rule 144A Global Security.
(ii) If a holder of a beneficial interest in the Permanent Regulation S Global Security wishes at any time to exchange its interest in the Permanent Regulation S Global Security for an interest in the Rule 144A Global Security, or to transfer its interest in the Permanent Regulation S Global Security to a person who wishes to take delivery thereof in the form of an interest in the Rule 144A Global Security, such holder may, subject to the rules and procedures of Euroclear or Clearstream and the Depository, as the case may be, and to the requirements set forth in the following sentence, exchange or cause the exchange or transfer or cause the transfer of such interest for an equivalent beneficial interest in such Rule 144A Global Security. Upon receipt by the Trustee, as transfer agent, of (1) instructions given in accordance with the procedures of Euroclear or Clearstream and the Depository, as the case may be, from or on behalf of a beneficial owner of an interest in the Permanent Regulation S Global Security directing the Trustee, as transfer agent, to credit or cause to be credited a beneficial interest in the Rule 144A Global Security in an amount equal to the beneficial interest in the Permanent Regulation S Global Security to be exchanged or transferred, (2) a written order given in accordance with the procedures of Euroclear or Clearstream and the Depository, as the case may be, containing information regarding the account with the Depository to be credited with such increase and the name of such account, and (3) prior to the expiration of the Distribution Compliance Period, a certificate in the form of Exhibit C hereto given by the holder of such beneficial interest and stating that the person transferring such interest in such Permanent Regulation S Global Security reasonably believes that the person acquiring such interest in the Rule 144A Global Security is a QIB and is obtaining such beneficial interest for its own account or the account of a QIB in a transaction meeting the requirements of Rule 144A and any applicable securities laws of any state of the United States or any other jurisdiction, the Trustee, as transfer agent, shall promptly deliver appropriate instructions to the Depository, its nominee, or the custodian for the Depository, as the case may be, to reduce or reflect on its records a reduction of the Permanent Regulation S Global Security by the aggregate principal amount of the beneficial interest in such Permanent Regulation S Global Security to be exchanged or transferred, and the Trustee, as transfer agent, shall promptly deliver appropriate instructions to the Depository, its nominee, or the custodian for the Depository, as the case may be, concurrently with such reduction, to increase or reflect on its records an increase of the principal amount of the Rule 144A Global Security by the aggregate principal amount of the beneficial interest in the Permanent Regulation S Global Security to be so exchanged or transferred, and to credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the Rule 144A Global Security equal to the reduction in the principal amount of the Permanent Regulation S Global Security. After the expiration of the Distribution Compliance Period, the certification requirement set forth in clause (3) of the second sentence of this Section 207(b)(ii) will no longer apply to such exchanges and transfers.
(iii) Any beneficial interest in one of the Global Securities that is transferred to a person who takes delivery in the form of an interest in the other Global Securities will, upon transfer, cease to be an interest in such Global Security and become an interest in the other Global Securities and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such other Global Security Note for as long as it remains such an interest.
(iv) Beneficial interests in Temporary Regulation S Global Securities may be exchanged for interests in Rule 144A Global Securities or Permanent Regulation S Global Securities if (1) such exchange occurs in connection with a transfer of securities in compliance with Rule 144A, and (2) the transferor of the beneficial interest in the Temporary Regulation S Global Security first delivers to the Trustee a written certificate (in a form satisfactory to the Trustee) to the effect that the beneficial interest in the Temporary Regulation S Global Security is being transferred to a Person (a) who the transferor reasonably believes to be a QIB (b) purchasing for its own account or the account of a QIB in a transaction meeting the requirements of Rule 144A, and (c) in accordance with all applicable securities laws of the states of the United States and other jurisdictions.
(v) During the Distribution Compliance Period, beneficial ownership interests in Temporary Regulation S Global Securities may only be sold, pledged or transferred through Euroclear or Clearstream in accordance with the applicable procedures relating to such institutions and only (i) to the Company, (ii) so long as such security is eligible for resale pursuant to Rule 144A, to a Person whom the selling holder reasonably believes is a QIB that purchases for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, (iii) in an offshore transaction in accordance with Regulation S (other than a transaction resulting in an exchange for interest in a Permanent Regulation S Global Security), (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if applicable) under the Securities Act or (v) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States.
(c) Transfer and Exchange of Global Securities and Certificated Securities.
(i) In the event that a Global Security is exchanged for a Certificated Security as provided in Section 205(c), such Certificated Security may be exchanged or transferred for one another, subject to Section 303 of the Original Indenture, only in accordance with such procedures as are substantially consistent with the provisions of clauses (b)(i) and (ii) above (including the certification requirements intended to ensure that such exchanges or transfers comply with Rule 144, Rule 144A or Regulation S, as the case may be) and as may be from time to time reasonably adopted by the Company.
(ii) Upon receipt by the Trustee of a Certificated Security, duly endorsed or accompanied by appropriate instruments of transfer, the Trustee shall cancel such Certificated Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing of the
Depository and the Securities Custodian, the aggregate principal amount of 2012 Notes represented by the Rule 144A Global Security or Permanent Regulation S Global Security, as applicable, to be increased by the aggregate principal amount of the Certificated Security to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Security or Permanent Regulation S Global Security, as applicable, equal to the principal amount of the Certificated Security so canceled. If no Rule 144A Global Securities or Permanent Regulation S Global Securities, as applicable, are then outstanding, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Rule 144A Global Security or Permanent Regulation S Global Security, as applicable, in the appropriate principal amount.
(d) Certificates. In connection with any transfer described in paragraphs (b) and (c) of this Section 207, the Trustee shall receive a certificate of transfer in the form attached as Exhibit C hereto. Additionally, upon any transfer or exchange to an Institutional Accredited Investor, the Company and the Trustee shall receive a certificate in the form attached as Exhibit D hereto.
(e) Transfer Restricted Security. Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act or an effective registration statement under the Securities Act, which shall be certified to the Trustee and Security Registrar upon which each may conclusively rely:
(i) in the case of any Transfer Restricted Security represented by a Certificated Security, the Security Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Certificated Security that does not bear the legend set forth in Exhibit A hereto and rescind any restriction on the transfer of such Transfer Restricted Security; and
(ii) in the case of any Transfer Restricted Security represented by a Global Security, such Transfer Restricted Security shall not be required to bear the legend set forth in Exhibit A hereto if all other interests in such Global Note have been or are concurrently being sold or transferred pursuant to Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act.
(f) Registered Exchange Offer. Notwithstanding the foregoing, upon consummation of the Registered Exchange Offer, the Company shall issue and, upon receipt of a Company Order in accordance with Section 303 of the Original Indenture, the Trustee shall authenticate Series B Notes in exchange for Series A Notes accepted for exchange in the Registered Exchange Offer, which Series B Notes shall not bear the transfer restriction legend set forth in Exhibit A hereto and shall not provide for Additional Interest, and the Security Registrar shall rescind any restriction on the transfer of such Series B Notes, in each case unless the Holder of such Series A Notes (A) is a broker-dealer tendering Series A Notes acquired directly from the
Company or an "affiliate" (as defined in Rule 144 under the Securities Act) of the Company for its own account, (B) is a Person who has an arrangement or understanding with any Person to participate in the "distribution" (within the meaning of the Securities Act) of the Series B Notes, (C) is a Person who is an "affiliate" (as defined in Rule 144 under the Securities Act) of the Company or (D) will not be acquiring the Series B Notes in the ordinary course of such Holder's business. The Company shall identify to the Trustee such Holders in a written certification signed by an Officer of the Company and, absent certification from the Company to such effect, the Trustee shall assume that there are no such Holders.
Article III
Redemption
Section 301. Optional Redemption. The 2012 Notes will be redeemable by the Company in whole or in part at any time upon not less than 30 nor more than 60 days' notice, at a redemption price of 100% of the principal amount of the 2012 Notes being redeemed plus accrued interest thereto, if any, to the redemption date, plus the Make-Whole Premium.
In the event of redemption of the 2012 Notes in part only, a new 2012 Note or Notes for the unredeemed portion will be issued in the name or names of the Holders thereof upon the surrender thereof.
The 2012 Notes will not have a sinking fund.
Notice of redemption shall be given as provided in Section 1104 of the Original Indenture except that any Notice of Redemption shall not specify the Redemption Price but only the manner of calculation thereof.
Any redemption of less than all of the 2012 Notes shall, with respect to the principal thereof, be divisible by $1,000.
Article IV
Covenants
Section 401. Reporting Obligations.
(a) General. The Company will furnish to the Trustee: -------
(i) unless the Company is then filing comparable reports pursuant to the reporting requirements of the Exchange Act, as soon as practicable and in any event within 45 days after the end of the first, second and third quarterly accounting periods of each fiscal year (commencing with the quarter ending June 30, 2002), its unaudited consolidated balance sheet as of the last day of such quarterly period and the related consolidated statements of income and cash flows during such quarterly period prepared in accordance with GAAP and (in
the case of second and third quarterly periods) for the portion of the fiscal year ending with the last day of such quarterly period, setting forth in each case in comparative form corresponding unaudited figures from the preceding fiscal year (except in the case where the preceding fiscal year includes periods prior to the Company's formation) and accompanied by (A) a written statement of an authorized representative of the Company to the effect that such financial statements fairly represent in all material respects the financial condition and results of operations of the Company at and as of their respective dates and (B) a section substantially similar to the "Management's Discussion and Analysis" ("MD&A") section of an SEC Form 10-Q (without any comparison to periods prior to the Company's formation);
(ii) unless the Company is then filing comparable reports pursuant to the reporting requirements of the Exchange Act, as soon as practicable and in any event within 90 days after the end of each fiscal year (commencing with the fiscal year ending December 31, 2002), its consolidated balance sheet as of the end of such year and the related consolidated statements of income, cash flows, and retained earnings during such year setting forth in each case in comparative form corresponding figures from the preceding fiscal year (except in the case where the preceding fiscal year includes periods prior to the Company's formation), accompanied by (A) an audit report thereon of a firm of independent public accountants of recognized national standing and (B) a section substantially similar to the MD&A section of an SEC Form 10-K (without any comparison to periods prior to the Company's formation).
(iii) at the time of the delivery of the report provided for in clause (ii) above (or at the time of the filing of the comparable report pursuant to the Exchange Act), an officer's certificate to the effect that, to the best of such officer's knowledge, no default or event of default under the 2012 Notes or the Indenture has occurred and is continuing or, if any default or event of default thereunder has occurred and is continuing, specifying the nature and extent thereof and what action is being taken or is proposed to be taken in response thereto; and
(iv) promptly after the Company obtains actual knowledge of the occurrence thereof, written notice of the occurrence of any event or condition which constitutes an event of default, and an Officer's Certificate of the Company specifically stating that such event of default has occurred and setting forth the details thereof and the action which is being taken or is proposed to be taken with respect thereto.
All such information provided to the Trustee as indicated above also will be provided by the Trustee upon written request to the Trustee (which may be a single continuing request), to (x) Holders, (y) holders of beneficial interests in the 2012 Notes or (z) prospective purchasers of the 2012 Notes or beneficial interests in the 2012 Notes. The Company will furnish to the Trustee, upon its request, sufficient copies of all such information to accommodate the requests of such Holders and prospective holders of beneficial interests in the 2012 Notes.
Upon the request of any Holder, any holder of a beneficial interest in the 2012 Notes, or the Trustee (on behalf of a Holder or a holder of a beneficial interest in the 2012 Notes), we will furnish such information as is specified in paragraph (d)(4) of Rule 144A to Holders (and to holders of beneficial interests in the 2012 Notes), prospective purchasers of the 2012 Notes (and of beneficial interests in the Senior Notes) who are QIBs or "Institutional Accredited Investors" or to the Trustee for delivery to such Holder or prospective purchasers of the 2012 Notes or beneficial interests therein, as the case may be, unless, at the time of such request, the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.
Section 402. Limitation on Asset Sales. Exceptfor the sale of the Company's properties and assets substantially as an entirety as described in Article VIII of the Original Indenture, and other than assets required to be sold to conform with governmental regulations, the Company will not, and will not permit any of its Subsidiaries to, consummate any Asset Sale, if the aggregate net book value of all such Asset Sales consummated during the most recent twelve month period would exceed 10% of Consolidated Tangible Assets as of the beginning of the Company's most recently ended full fiscal quarter preceding such Asset Sale; provided, however, that any such Asset Sale will be disregarded for purposes of the 10% limitation specified above if the proceeds thereof (i) are, within 18 months of such Asset Sale, invested or reinvested by the Company or any Subsidiary in a Permitted Business, (ii) are used by the Company or a Subsidiary to repay Indebtedness of the Company or such Subsidiary or (iii) are retained by the Company or a Subsidiary.
Section 403. Limitation on Liens. The Company shall not, and shall permit any of its Subsidiaries to, issue, assume, guarantee or permit to exist any Indebtedness for borrowed money secured by any lien on any property of the Company or its Subsidiaries, whether owned on the date that the 2012 Notes are issued or thereafter acquired, without in any such case effectively securing the outstanding 2012 Notes (together with, if the Company shall so determine, any other Indebtedness of or guaranteed by the Company ranking equally with the 2012 Notes) equally and ratably with such Indebtedness (but only so long as such Indebtedness is so secured); provided, however, that the foregoing restriction shall not apply to the following liens:
(i) liens, if any, in existence on the date the 2012 Notes are issued;
(ii) pledges or deposits in the ordinary course of business in connection with bids, tenders, contracts or statutory obligations or to secure surety or performance bonds;
(iii) liens imposed by law, such as carriers', warehousemen's and mechanics' liens, arising in the ordinary course of business;
(iv) liens for taxes being contested in good faith;
(v) minor encumbrances, easements or reservations which do not in the aggregate materially adversely affect the value of the properties or impair their use;
(vi) liens on any property existing at the time of acquisition thereof by the Company or any of its Subsidiaries;
(vii) liens on property (other than Existing Assets) securing (a) all or any portion of the cost of acquiring, constructing, altering, improving or repairing any real or personal property or improvements used or to be used in connection with such property or (b) Indebtedness incurred by the Company or any of its Subsidiaries prior to, at the time of, or within one year after the later of the acquisition, the completion of construction (including any improvements on an existing property), alteration, improvement, repair or the commencement of commercial operation of the property, which Indebtedness is incurred for the purpose of financing or refinancing all or any part of the purchase price, construction, improvements, alterations or repairs;
(viii) liens to secure purchase money Indebtedness not in excess of the cost or value of the property acquired;
(ix) mortgages securing obligations issued by a state, territory or possession of the United States, or any political subdivision of any of the foregoing or the District of Columbia, to finance the acquisition or construction of property, and on which the interest is not, in the opinion of tax counsel of recognized standing or in accordance with a ruling issued by the Internal Revenue Service, includible in gross income of the holder by reason of Section 103(a)(1) of the Internal Revenue Code (or any successor to such provision) as in effect at the time of the issuance of such obligations;
(x) other liens to secure Indebtedness for borrowed money or in connection with a project financing (including a sale-leaseback transaction) in an aggregate principal amount which does not at the time such Indebtedness is incurred exceed 20% of Consolidated Tangible Assets; or
(xi) liens granted in connection with extending, renewing, replacing or refinancing (or successive extensions, renewals, replacements or refinancings) any of the Indebtedness (so long as there is no increase in the principal amount of the Indebtedness) described in clauses (i) through (x) above.
In the event that the Company or any of its Subsidiaries shall propose
to pledge, mortgage or hypothecate any property, other than as permitted by
clauses (i) through (xi) of the previous paragraph, the Company shall (prior
thereto) give written notice thereof to the Trustee, who shall give notice to
the Holders, and the Company shall, prior to or simultaneously with such pledge,
mortgage or hypothecation, effectively secure all the 2012 Notes equally and
ratable with such Indebtedness. This covenant does not restrict the Company's
ability or the ability of any of its Subsidiaries to pledge, mortgage,
hypothecate or permit to exist any mortgage, pledge or lien upon any assets
(other than an Existing Asset, except to the extent permitted by clauses (i)
through (xi) above) in connection with project financings or otherwise.
Section 404. Restrictions on Subsidiary Indebtedness. Except to the extent permitted under Section 403 hereof, the Company shall not permit any Subsidiary which owns any Existing Asset to create or incur or suffer to exist any Indebtedness for borrowed money.
Section 405. Minimum Contract Maintenance Covenant. The Company will not declare or pay any dividends or make any other distributions (except dividends payable or distributions made in shares of its common stock and dividends payable in cash in cases where, concurrently with the payment of the dividend, an amount in cash equal to the dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its common stock) on its common stock, or purchase or permit any of its Subsidiaries to purchase any shares of its common stock or make any payment on Affiliate Subordinated Indebtedness, unless (i) the percentage derived from dividing Contracted Operating Cash Flows by Total Operating Cash Flows is at least 0%, or (ii) the ratio of Recourse Indebtedness to Total Capitalization is 60% or less.
Article V
Additional Events of Default
Section 501. Additional Events of Default. In accordance with Section
501 (7) of the Original Indenture, each of the following events, in
addition to those provided in Section 501 of the Original Indenture, shall
be an Event of Default with respect to the 2012 Notes:
(a) an event of default, as defined in any of the Company's instruments under which there may be issued, or by which there may be secured or evidenced, of any Indebtedness of the Company that has resulted in the acceleration of such Indebtedness, or any default occurring in payment of any such Indebtedness at final maturity (and after the expiration of any applicable grace periods), other than such Indebtedness the principal of which does not individually, or in the aggregate, exceed $50,000,000; or
(b) one or more final judgments, decrees or orders of any court, tribunal, arbitrator, administrative or other governmental body or similar entity for the payment of money is rendered against the Company or any of its properties in an aggregate amount in excess of $50,000,000 (excluding the amount covered by insurance) and such judgment, decree or order remains unvacated, undischarged, unsatisfied and unstayed for more than 60 consecutive days, except while being contested in good faith by appropriate proceedings.
Article VI
Covenant Defeasance
Section 601. Defeasance of Certain Obligations. The Company may omit to comply with any term, provision or condition set forth in Sections 402 through 405 of this First Supplemental Indenture and Section 501(4)(with respect to Sections 403 through 405) of the Original Indenture and Sections
501(a) and 501(b) of this First Supplemental Indenture shall be deemed not to be Events of Default on the 123rd day after the deposit referred to in subparagraph (a) hereof if:
(a) with reference to this Section 601, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 611 of the Original Indenture) as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the 2012 Notes, (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms (without reinvestment) will provide not later than one day before the due date of any payment referred to in clause (x) of this Section 601 money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, (x) the principal of, premium, if any, and each installment of principal and interest on the Outstanding 2012 Notes at the Stated Maturity of such principal or installment of principal or interest;
(b) the Company has delivered to the Trustee (i) an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for federal income tax purposes as a result of the Company's exercise of its option under this Section 601 and will be subject to federal income tax on the same amount and in the same manner at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, and (ii) an Opinion of Counsel to the effect that the defeasance trust does not constitute an "investment company" under the Investment Company Act of 1940, as amended, and after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the U.S. Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law;
(c) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after the date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which the Company is bound; and
(d) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions), each stating that all conditions precedent with respect to such covenant defeasance have been complied with.
Article VII
Miscellaneous Provisions
Section 701. Recitals by Company. The recitals in this First Supplemental Indentur are made by the Company only and not by the Trustee, and all of the provisions contained in the Original Indenture in respect of the rights, privileges, immunities, powers and duties of the Trustee shall be applicable in respect of 2012 Notes and of this First Supplemental Indenture as fully and with like effect as if set forth herein in full.
Section 702. Ratification and Incorporation of Original Indenture. As supplemented hereby, the Original Indenture is in all respects ratified and confirmed, and the Original Indenture and this First Supplemental Indenture shall be read, taken and construed as one and the same instrument.
Section 703. Executed in Counterparts. This First Supplemental Indenture may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument.
Section 704. Legends. Except as determined by the Company in accordance with applicable law, each 2012 Note shall bear the applicable legends relating to restrictions on transfer pursuant to the securities laws in substantially the form set forth on Exhibit A hereto.
IN WITNESS WHEREOF, each party hereto has caused this instrument to be signed in its name and behalf by its duly authorized signatories, all as of the day and year first above written.
SOUTHERN POWER COMPANY
By:
Name:
Title:
Attest:
THE BANK OF NEW YORK
By:
Name:
Title:
Attest:
EXHIBIT A
FORM OF SERIES [A/B] NOTE
[Rule 144A Global Security]
[Regulation S Global Security]
[Certificated Security]
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OR PORTIONS OF THIS GLOBABL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[FOR REGULATION S GLOBAL NOTE ONLY] UNTIL 40 DAYS AFTER THE
COMMENCEMENT OF THE OFFERING, AN OFFER OR SALE OF NOTES WITHIN THE UNITED STATES BY A DEALER (AS DEFINED IN THE U.S. SECURITIES ACT) MAY VIOLATE THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT IF SUCH OFFER OR SALE IS MADE OTHERWISE THAN IN ACCORDANCE WITH THE RULE 144A THEREUNDER.]
[Restricted Securities Legend]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
EX.A-1
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM AND IN ANY EVENT MAY BE SOLD OR OTHERWISE TRANSFERRED ONLY IN ACORDANCE WITH THE INDENTURE, COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AT THE CORPORATE TRUST OFFICE OF THE TRUSTEE IN ATLANTA, GEORGIA.
EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIFED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. EACH HOLDER OF THIS NOTE
REPRESENTS TO SOUTHERN POWER COMPANY THAT (a) SUCH HOLDER WILL NOT SELL, PLEDGE
OR OTHERWISE TRANSFER THIS NOTE (WITHOUT THE CONSENT OF SOUTHERN POWER COMPANY)
OTHER THAN (I) TO SOUTHERN POWER COMPANY, (II) IN THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION COMPLYING WITH THE REQUIREMENTS OF RULE 144A UNDER THE
SECURITIES ACT, (III) IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT, (IV)
OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF
REGULATION S UNDER THE SECURITIES ACT, (V) TO AN INSTITUTIONAL ACCREDITED
INVESTOR (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE AND
SOUTHERN POWER COMPANY A LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE
OBTAINED FROM THE TRUSTEE), (VI) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT SUBJECT IN THE CASE OF CLAUSES (ii),
(iii), OR (iv) TO THE RECEIPT BY SOUTHERN POWER COMPANY OF AN OPINION OF COUNSEL
OF SUCH OTHER EVIDENCE ACCEPTABLE TO SOUTHERN POWER COMPANY THAT SUCH RESALE,
PLEDGE OR TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR (VII) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, AND
THAT (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS NOTE OF THE RESALE RESTRICTIONS REFERRED TO HEREIN AND DELIVER
TO THE TRANSFEREE (OTHER THAN A QUALIFIED INSTITUTIONAL BUYER) PRIOR TO THE SALE
A COPY OF THE TRANSFER RESTRICTIONS APPLICABLE HERETO (COPIES OF WHICH MAY BE
OBTAINED FROM THE TRUSTEE).
[Temporary Regulation S Global Security Legend]
EXCEPT AS SET FORTH BELOW, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL SECURITY WILL NOT BE EXCHANGEABLE FOR INTERESTS IN THE PREMANENT REGULATION S GLOBAL SECURITY OR ANY OTHER SECURITY REPRESENTING AN INTEREST IN THE SECURITIES REPRESENTED HEREBY WHICH DO NOT CONTAIN A LEGEND CONTAINING RESTRICTIONS ON TRANSFER, UNTIL THE EXPIRATION OF
Ex. A-2
THE "40-DAY DISTRIBUTION COMPLIANCE PERIOD (WITHIN THE MEANING OF RULE 903(c)(3)
OF REGULATION S UNDER THE SECURITIES ACT) AND THEN ONLY UPON CERTIFICATION IN
FORM REASONABLY SATISFACTORY TO THE TRUSTEE THAT SUCH BENEFICIAL INTERESTS ARE
OWNED EITHER BY NON-U.S. PERSONS OR U.S. PERSONS WHO PURCHASED SUCH INTERESTS IN
A TRANSACTION THAT DID NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. DURING
SUCH 40-DAY DISTRIBUTION COMPLIANCE PERIOD, BENEFICIAL OWNERSHIP INTEREST IN
THIS TEMPORARY REGULATION S GLOBABL SECURITY MAY ONLY BE SOLD, PLEDGED OR
TRANSFERRED THROUGH EUROCLEAR BANK S.A./N.A., AS OPERATOR OF THE EUROCLEAR
SYSTEM OR CLEARSTREAM BANKING, SOCIETE ANONYME AND ONLY (I) TO THE COMPANY, (II)
IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED
STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, OR
(IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH OF CASE (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. HOLDERS OF INTERESTS IN THIS TEMPORARY
REGULATION S GLOBABL SECURITY WILL NOTIFY ANY PURCHASER OF THIS SECURITY OF THE
RESALE RESTRICTIONS REFERRED TO ABOVE, IF THEN APPLICABLE.
BENEFICIAL INTERESTS IN THIS TEMPORARY REGULATIONS S GLOBAL SECURITY MAY BE EXCHANGED FOR INTERESTS IN A RULE 144A GLOBAL SECURITY ONLY IF (1) SUCH EXCHANGE OCCURS IN CONNECTION WITH A TRANSFER OF THE NOTES IN COMPLIANCE WITH RULE 144A, AND (2) THE TRANSFEROR OF THE REGULATION S GLOBAL SECURITY FIRST DELIVERS TO THE TRUSTEE A WRITTEN CERTIFICATE (IN THE FORM ATTACHED TO THIS CERTIFICATE) TO THE EFFECT THAT THE REGULATION S GLOBAL SECURITY BEING TRANSFERRED TO A PERSON (A) WHO THE TRANSFEROR REASONABLY BELIEVES TO BE A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (B) PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, AND (C) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.
BENEFICIAL INTEREST IN A RULE 144A GLOBAL SECURITY MAY BE TRANSFERRED TO A PERSON WHO TAKES DELIVERY IN THE FORM OF AN INTEREST IN THE REGULATION S GLOBAL SECURITY, WHETHER BEFORE OR AFTER THE EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD, ONLY IF THE TRANSFEROR FIRST DELIVERS TO THE TRUSTEE A WRITTEN CERTIFICATE (IN THE FORM ATTACHED TO THIS CERTIFICATE) TO THE EFFECT THAT IF SUCH TRANSFER IS BEING MADE IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S OR RULE 144 (IF AVAILABLE) AND THAT, IF SUCH TRANSFER OCCURS PRIOR
Ex.. A-3
TO THE EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD, THE INTEREST TRANSFERRED WILL BE HELD IMMEDIATELY THEREAFTER THROUGH EUROCLEAR BANK S.A./N.A. OR CLEARSTREAM BANKING SOCIETE ANONYME.
[Certificated Securities Legend]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
NO. ____ CUSIP NO. _________
SOUTHERN POWER COMPANY
6.25% SENIOR NOTE SERIES [A/B]
DUE JULY 15, 2012
Principal Amount: $575,000,000 Regular Record Date: 15th calendar day prior to Interest Payment Date Original Issue Date: June 18, 2002 Stated Maturity: July 15, 2012 Interest Payment Dates: July 15 and January 15 Interest Rate: 6.25% per annum Authorized Denomination: $100,000 and integrals of $1,000 in excess thereof |
Southern Power Company, a Delaware corporation (the "Company", which term includes any successor corporation under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to _____________________________________, or registered assigns, the principal sum of _________ DOLLARS ($__________) [or such other amount as is indicated on
Ex.A-4
Schedule A hereto]2 on the Stated Maturity shown above (or upon earlier redemption), and to pay interest thereon from the Original Issue Date shown above, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on each Interest Payment Date as specified above, commencing on January 15, 2003 and on the Stated Maturity (or upon earlier redemption) at the rate per annum shown above until the principal hereof is paid or made available for payment and on any overdue principal and on any overdue installment of interest. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date (other than an Interest Payment Date that is the Stated Maturity or on a Redemption Date) will, as provided in such Indenture, be paid to the Person in whose name this Note (the "Note") is registered at the close of business on the Regular Record Date as specified above next preceding such Interest Payment Date, provided that any interest payable at Stated Maturity or on any Redemption Date will be paid to the Person to whom principal is payable. Except as otherwise provided in the Indenture, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Note is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice whereof shall be given to Holders of Notes of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange, if any, on which the Notes of this series shall be listed, and upon such notice as may be required by any such exchange, all as more fully provided in the Indenture.
Payments of interest on this Note will include interest accrued to but excluding the respective Interest Payment Dates. Interest payments for this Note shall be computed and paid on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Note is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day, with the same force and effect as if made on the date the payment was originally payable. A "Business Day" shall mean any day other than a Saturday or a Sunday or a day on which banking institutions in New York City are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the Trustee is closed for business.
Payment of the principal of and interest due at the Stated Maturity or earlier redemption of this Note shall be made upon surrender of this Note at the Corporate Trust Office of the Trustee, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payment of interest (including interest on an Interest Payment Date) will be made, subject to such surrender where applicable, at the option of the Company, (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer at such place and to such account at a banking institution in the United States as may be designated in writing to the Trustee at least 16 days prior to the date for payment by the Person entitled thereto.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
*Insert in the Rule 144A Global Security and the Regulation S Global Security only.
Ex.A-5
Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
EX.A-6
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
Dated: June __, 2002.
SOUTHERN POWER COMPANY
By:
Name:
Title:
Attest:
EX.A-7
CERTIFICATE OF AUTHENTICATION
This is one of the Senior Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:
Authorized Signatory
EX.A-8
(Reverse Side of Note)
This Note is one of a duly authorized issue of Senior Notes of the Company (the "Notes"), issued and issuable in one or more series under a Senior Note Indenture, dated as of June 1, 2002, as supplemented (the "Indenture"), among the Company and The Bank of New York, Trustee (the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitation of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Notes issued thereunder and of the terms upon which said Notes are, and are to be, authenticated and delivered. This Note is one of the series designated on the face hereof as 6.25% Senior Notes Series [A/B] due July 15, 2012 initially issued in the aggregate principal amount of $575,000,000. Capitalized terms used herein for which no definition is provided herein shall have the meanings set forth in the Indenture.
This Note will be redeemable by the Company in whole or in part at any time upon not less than 30 nor more than 60 days' notice, at a redemption price equal to 100% of the principal amount of the this Note being redeemed plus accrued interest on the principal amount of this Note, if any, to the redemption date, plus the Make-Whole Premium.
In the event of redemption of this Note in part only, a new Note or Notes for the unredeemed portion will be issued in the name or names of the Holders thereof upon the surrender thereof.
This Note will not have a sinking fund.
If an Event of Default with respect to the Notes of this series shall occur and be continuing, the principal of the Notes of this series may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in principal amount of the Notes at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Notes of each series at the time Outstanding, on behalf of the Holders of all Notes of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed.
Ex.A-9
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Security Register, upon surrender of this Note for registration of transfer at the office or agency of the Company for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar and duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of this series, of authorized denominations and of like tenor and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
The Notes of this series are issuable only in registered form without coupons in denominations of $100,000 and integral multiples of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series of a different authorized denomination, as requested by the Holder surrendering the same upon surrender of the Note or Notes to be exchanged at the office or agency of the Company.
This Note shall be governed by, and construed in accordance with, the internal laws of the State of New York.
Ex.A-10
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM- as tenants in UNIF GIFT MIN ACT- _______ Custodian ________
common (Cust) (Minor)
TEN ENT- as tenants by the
entireties under Uniform Gifts to
JT TEN- as joint tenants Minors Act
with right of
survivorship and ________________________
not as tenants (State)
in common
|
Additional abbreviations may also be used though not on the above list.
FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto ___________________ (please insert Social Security or other identifying number of assignee)
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE
the within Note and all rights thereunder, hereby irrevocably constituting and appointing
agent to transfer said Note on the books of the Company, with full power of substitution in the premises.
Dated:
-------------------- ----------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the within instrument in every
particular without alteration or
enlargement, or any change whatever.
|
Ex. A-11
In connection with any transfer of any of the Series A Notes evidenced by this certificate, the undersigned confirms that such Series A Notes are being:
CHECK ONE BOX BELOW
(1) ___ exchanged for the undersigned's own account without
transfer; or
(2) ___ transferred to a person whom the undersigned
reasonably believes to be a "qualified institutional
buyer" as defined in Rule 144A under the Securities
Act of 1933 who is purchasing such Series A Notes for
such buyer's own account or the account of a
"qualified institutional buyer" in a transaction
meeting the requirements of Rule 144A under the
Securities Act of 1933 and any applicable securities
laws of any state of the United States or any other
jurisdiction; or
(3) ___ exchanged or transferred pursuant to and in
compliance with Rule 903 or 904 of
Regulation S under the Securities Act of 1933; or
(4) ___ exchanged or transferred to an institutional
"accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act pursuant to Rule 144A (and based upon
an opinion of counsel if the Company or the Trustee
so requests) and, to the knowledge of the transferor
of the Series A Notes, such institutional accredited
investor to whom such Note is to be transferred is
not an "affiliate" (as defined in Rule 144 under the
Securities Act) of the Company; or
(5) _____ transferred pursuant to another available
exemption from the registration requirements of the
Securities Act of 1933.
|
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Series A Notes evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if box
(3), (4) or (5) is checked, the Company may require, prior to registering any
such transfer of the Series A Notes, such legal opinions, certifications and
other information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act; provided, further, that if
box (2) is checked, the transferee must also certify that it is a qualified
institutional buyer as defined in Rule 144A.
Signature
EX. A-12
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Series A Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A.
NOTICE: To be executed by an executive officer.
EX. A-13
SCHEDULE A
The initial aggregate principal amount of Series A Notes evidenced by the Certificate to which this Schedule is attached is $___________. The notations on the following table evidence decreases and increases in the aggregate principal amount of Series A Notes evidenced by such Certificate.
Principal Amount of
Series A Notes
Decrease in Principal Increase in Principal Remaining After Such Notation by
Amount of Series A Notes Amount of Series A Notes Decrease or Increase Registrar
------------------------ ------------------------ ------------------- -----------
|
Ex. A-14
EXHIBIT B
CERTIFICATE OF AUTHENTICATION
This is one of the Senior Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:-------------------------------------
Authorized Signatory
EX. B-1
EXHIBIT C
FORM OF TRANSFER CERTIFICATE
In connection with any transfer of any of the Series A Notes evidenced by this certificate, the undersigned confirms that such Series A Notes are being:
CHECK ONE BOX BELOW
(1) ____ exchanged for the undersigned's own account without
transfer; or
(2) _____ transferred to a person whom the undersigned
reasonably believes to be a "qualified institutional
buyer" as defined in Rule 144A under the Securities
Act of 1933 who is purchasing such Series A Notes for
such buyer's own account or the account of a
"qualified institutional buyer" in a transaction
meeting the requirements of Rule 144A under the
Securities Act of 1933 and any applicable securities
laws of any state of the United States or any other
jurisdiction; or
(3) ____ exchanged or transferred pursuant to and in
compliance with Rule 903 or 904 of
Regulation S under the Securities Act of 1933; or
(4) ____ exchanged or transferred to an institutional
"accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act pursuant to Rule 144A (and based upon
an opinion of counsel if the Company or the Trustee
so requests) and, to the knowledge of the transferor
of the Series A Notes, such institutional accredited
investor to whom such Note is to be transferred is
not an "affiliate" (as defined in Rule 144 under the
Securities Act) of the Company; or
(5) ____ transferred pursuant to another available
exemption from the registration requirements of the
Securities Act of 1933.
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Unless one of the boxes is checked, the Trustee will refuse to register
any of the Series A Notes evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if box
(3) or (4) is checked, the Company may require, prior to registering any such
transfer of the Series A Notes, such legal opinions, certifications and other
information as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act; provided, further, that if
box (2) is checked, the transferee must also certify that it is a qualified
institutional buyer as defined in Rule 144A.
Signature
EX. C-1
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Series A Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A.
NOTICE: To be executed by an executive officer.
EX. C-2
EXHIBIT D
FORM OF LETTER TO BE DELIVERED BY
INSTITUTIONAL ACCREDITED INVESTORS
Southern Power Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Ladies and Gentlemen:
We are delivering this letter in connection with an offering of 6.25% Senior Notes, Series A due July 15, 2012 (the "Notes") issued by Southern Power Company (the "Company"). We confirm that we understand that the Notes have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or any other applicable securities law and may not be offered, sold or otherwise transferred unless registered pursuant to, or exempt from registration under, the Securities Act or any other applicable securities law. We also represent and agree as follows:
(i) We are an "institutional accredited investor" within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act (an "Institutional Accredited Investor");
(ii) (A) any purchase of the Notes by us will be for our own account or
for the account of one or more other Institutional Accredited
Investors or as fiduciary for the account of one or more trusts,
each which is an "accredited investor" within the meaning of Rule
501(a)(7) under the Securities Act and for each of which we
exercise sole investment discretion or (B) we are a "bank", within
the meaning of Section 3(a)(2) of the Securities Act, or a
"savings and loan association" or other institution described in
Section 3(a)(5)(A) of the Securities Act that is acquiring the
Notes as fiduciary for the account of one or more institutions for
which we exercise sole investment discretion;
(iii) in the event that we purchase any of the Notes, we will acquire Notes having a minimum purchase price of not less than $100,000 for our own account or for any separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of purchasing the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment in the Notes;
EX. D1
(v) we are not acquiring the Notes with a view to distribution thereof or with any present intention of offering or selling any of the Notes, except inside the United States in accordance with Rule 144A under the Securities Act or outside the United States in accordance with Regulation S under the Securities Act, as provided below; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary shall remain at all times within our control; and
(vi) we acknowledge that (A) we have beenafforded an opportunity to request form the Company and to review, and we have received, all additional information considered by us to be necessary to verify the accuracy of the information contained in the offering memorandum relating to the Notes dated June 13, 2002 (the "Offering Memorandum"); (B) we have not relied on any Initial Purchaser or any person affiliated with any Initial Purchaser in connection with our investigation of the accuracy of the information contained in the Offering Memorandum or our investment decision; and (C) no person has been authorized to give any information or to make any representation concerning the Notes other than those contained in the Offering Memorandum and, if given or made, such other information or representation should not be relied upon as having been authorized by any Initial Purchaser.
We understand that the Notes are being offered in a transaction not
involving any public offering within the United States within the meaning of the
Securities Act and that the Notes have not been and will not be registered under
the Securities Act, and we agree, on our own behalf and on behalf of each
account for which we acquire any Notes, that if in the future we decide to
resell, pledge or otherwise transfer such Notes, such Notes may be offered,
resold, pledged or otherwise transferred only (i) in the United States to a
person who we reasonably believe is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in a transaction meeting the
requirements of Rule 144A, (ii) outside the United States in a transaction in
accordance with Rule 904 under the Securities Act, (iii) pursuant to an
exemption from registration under the Securities Act provided by Rule 144
thereunder (if available), (iv) to an Institutional Accredited Investor that,
prior to such transfer, furnishes to you and the Company, a signed letter
substantially in the form of this letter or (v) pursuant to an effective
registration statement under the Securities Act, in each of cases described in
(i) through (v), in accordance with any applicable securities laws of any State
of the United States or any other applicable jurisdiction. We understand that
the registrar and transfer agent for the Notes will not be required to accept
for registration of transfer any Notes acquired by us, except upon presentation
of evidence satisfactory to the Company and the transfer agent that the
foregoing restrictions on transfer have been complied with. We further
understand that any Notes acquired by us will be in definitive, certificated
form and that such certificated Notes will bear a legend reflecting the
substance of this paragraph.
We acknowledge that you, the Company and others will rely upon our confirmations, acknowledgements and agreements set forth herein, and we agree to notify you promptly in writing if any of our representations or warranties herein ceases to be accurate and complete.
Ex. D-2
You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Date:____________________________ __________________________________
(Name of Purchaser)
By:________________________________
Name:
Title:
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Address:
EX. D-3
Exhibit 4.3
SOUTHERN POWER COMPANY
6.250% Senior Notes, Series A due July 15, 2012
REGISTRATION RIGHTS AGREEMENT
New York, New York
June 18, 2002
Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019
Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
As Representatives of the Initial Purchasers
Ladies and Gentlemen:
Southern Power Company, a corporation organized under the laws of the State of Delaware (the "Company"), proposes to issue and sell, severally and not jointly, to Lehman Brothers Inc., Salomon Smith Barney Inc., Barclays Capital Inc., Commerzbank Capital Markets Corp., Mizuho International plc, Morgan Stanley & Co. Incorporated, Scotia Capital (USA) Inc. and Tokyo-Mitsubishi International plc (the "Initial Purchasers"), upon the terms set forth in a purchase agreement, dated June 13, 2002 (the "Purchase Agreement"), $575,000,000 aggregate principal amount of its 6.250% Senior Notes, Series A due July 15, 2012 (the "Securities"), relating to the initial placement of the Securities (the "Initial Placement"). To induce the Initial Purchasers to enter into the Purchase Agreement and to satisfy a condition of your obligations thereunder, the Company agrees with you for your benefit and the benefit of the holders from time to time of the Securities (including the Initial Purchasers) (each a "Holder" and, together, the "Holders"), as follows:
1. Definitions. Each of the capitalized terms used herein without definition shall have the meaning set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings:
"Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified Person shall mean any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified Person. For purposes of this
definition, control of a Person shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.
"Broker-Dealer" shall mean any broker or dealer registered as such under the Exchange Act.
"Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City.
"Commission" shall mean the Securities and Exchange Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" shall mean the 270-day period following the consummation of the Registered Exchange Offer, exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" shall mean a registration statement of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer, all amendments and supplements to such registration statement, including post-effective amendments thereto, in each case including the Prospectus contained therein, all exhibits thereto and any material incorporated by reference therein.
"Exchanging Dealer" shall mean any Holder (which may include any Initial Purchaser) that is a Broker-Dealer and elects to exchange for New Securities any Securities that it acquired for its own account as a result of market-making activities or other trading activities (but not directly from the Company or any Affiliate of the Company) for New Securities.
"Holder" shall have the meaning set forth in the preamble hereto.
"Indenture" shall mean the Indenture dated as of June 1, 2002, between the Company and The Bank of New York, as trustee, as the same may be amended or supplemented from time to time in accordance with the terms thereof.
"Initial Placement" shall have the meaning set forth in the preamble hereto.
"Initial Purchaser" shall have the meaning set forth in the preamble hereto.
"Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of Securities registered under a Registration Statement.
"Managing Underwriters" shall mean the investment banker or investment bankers and manager or managers that shall administer an underwritten offering of the Securities offered pursuant to a Shelf Registration Statement.
"New Securities" shall mean debt securities of the Company issued under the Indenture that are registered under the Act and are identical in all material respects to the Securities (except that the interest rate step-up provisions and the transfer restrictions shall be modified or eliminated, as appropriate).
"Offering Memorandum" shall have the meaning set forth in the Purchase Agreement.
"Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or the New Securities covered by such Registration Statement, and all amendments and supplements thereto and any material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the preamble hereto.
"Registered Exchange Offer" shall mean the proposed offer of the Company to issue and deliver to the Holders of the Securities that are not prohibited by any law or policy of the Commission from participating in such offer, in exchange for the Securities, a like aggregate principal amount of the New Securities.
"Registration Statement" shall mean any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the New Securities pursuant to the provisions of this Agreement, any amendments and supplements to such registration statement, including post-effective amendments (in each case including the Prospectus contained therein), all exhibits thereto and any material incorporated by reference therein.
"Securities" shall have the meaning set forth in the preamble hereto.
"Shelf Registration" shall mean a registration effected pursuant to Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in
Section 3(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 3 hereof which covers some or all of the Securities or New Securities, as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and any material incorporated by reference therein.
"Transfer Restricted Security" means each Security until: (i) the date on which that Security has been exchanged by a person other than a broker-dealer for a freely transferable New Security in the Registered Exchange Offer; (ii) following the exchange by a Broker-Dealer in the Registered Exchange Offer of a Security for a New Security, the date on which that New Security is
sold to a purchaser who receives from that Broker-Dealer on or prior to the date of that sale a copy of the Prospectus constituting part of the Exchange Offer Registration Statement; (iii) the date on which that Security has been effectively registered under the Act and disposed of in accordance with the Shelf Registration Statement; or (iv) the date on which that Security is distributed to the public pursuant to Rule 144 under the Act or becomes freely tradeable pursuant to Rule 144(k) under the Act.
"Trustee" shall mean the trustee with respect to the Securities under the Indenture.
(a) To the extent not prohibited by any applicable law or applicable interpretation of the Commission, the Company shall use its best efforts to consummate the Registered Exchange Offer within 270 days of the date of the original issuance of the Securities (or if such 270th day is not a Business Day, the next succeeding Business Day).
(b) Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Securities electing to exchange those Transfer Restricted Securities for New Securities (assuming that such Holder is not an Affiliate of the Company, acquires the New Securities in the ordinary course of such Holder's business, has no arrangements with any Person to participate in the distribution of the New Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer ) to trade such New Securities from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States.
(c) In connection with the Registered Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less than 20 Business Days and not more than 30 Business Days after the date notice thereof is mailed to the Holders (or, in each case, longer if required by applicable law);
(iii) use its best efforts to keep the Exchange Offer Registration Statement continuously effective under the Act, supplemented and amended as required, under the Act to ensure that it is available for sales of New Securities by Exchanging Dealers during the Exchange Offer Registration Period;
(iv) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan in New York City, which may be the Trustee or an Affiliate of the Trustee;
(v) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last Business Day on which the Registered Exchange Offer is open;
(vi) prior to effectiveness of the Exchange Offer Registration Statement, provide a supplemental letter to the Commission (A) stating that the Company is conducting the Registered Exchange Offer in reliance on the position of the Commission in Exxon Capital Holdings Corporation (pub. avail. May 13, 1988) and Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991); and (B) including a representation that the Company has not entered into any arrangement or understanding with any Person to distribute the New Securities to be received in the Registered Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Registered Exchange Offer is acquiring the New Securities in the ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the New Securities; and
(vii) comply in all material respects with all applicable laws.
(d) As soon as practicable after the close of the Registered Exchange Offer, the Company shall:
(i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation in accordance with Section 4(q) herein all Securities so accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to each Holder of Securities a principal amount of New Securities equal to the principal amount of the Securities of such Holder so accepted for exchange.
(e) Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Registered Exchange Offer to participate in a distribution of the New Securities (x) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission in Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991) and Exxon Capital Holdings Corporation (pub. avail. May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993 and similar no-action letters; and (y) must comply with the registration and prospectus delivery requirements of the Act in connection with any secondary resale transaction and must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K under the Act if the resales are of New Securities obtained by such Holder in exchange for Securities acquired by such Holder directly from the Company or one of its Affiliates. Accordingly, each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that, at the time of the consummation of the Registered Exchange Offer:
(i) any New Securities received by such Holder will be acquired in the ordinary course of business;
(ii) such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Securities or the New Securities within the meaning of the Act;
(iii) such Holder is not an Affiliate of the Company;
(iv) if that Holder is not a Broker-Dealer, that it is not engaged in, and does not intend to engage in, any distribution of the New Securities; and
(v) if that Holder is a Broker-Dealer, that it will receive New Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities and that it will deliver a Prospectus in connection with any resale of those New Securities.
(f) Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any Prospectus forming a part thereof and any supplement thereto complies in all material respects with the Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(g) If following the date hereof there has been announced a change in Commission policy with respect to exchange offers that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Registered Exchange Offer is permitted by applicable federal law, the Company will seek a no-action letter or other favorable decision from the Commission allowing the Company to consummate the Registered Exchange Offer. The Company will pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Company will take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (i) participating in telephonic conferences with the Commission, (ii) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that the Registered Exchange Offer should be permitted and (iii) diligently pursuing a resolution (which need not be favorable) by the Commission staff.
(a) If (i) due to any change in law or applicable interpretations thereof by the Commission's staff, the Company determines upon the advice of its outside counsel that it is not permitted to effect the Registered Exchange Offer as contemplated by Section 2 hereof;
(ii) for any other reason the Registered Exchange Offer is not consummated within 270 days of the date hereof;
(iii) any Initial Purchaser so requests with respect to Securities that are not eligible to be exchanged for New Securities in the Registered Exchange Offer and that are held by it following consummation of the Registered Exchange Offer;
(iv) any Holder (other than an Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer under applicable law or applicable policies of the Commission; or
(v) any Holder (other than an Exchanging Dealer) that participates in the Registered Exchange Offer does not receive freely tradeable New Securities on the date of the exchange for validly tendered (and not withdrawn) Transfer Restricted Securities,
the Company shall effect a Shelf Registration Statement in
accordance with subsection (b) below (the date on which any of
the conditions described in the foregoing clauses (i) through
(v) occur, including in the case of clauses (iii), (iv) and
(v) the receipt of the required notice, being a "Trigger
Date"):
(b) (i) To the extent not prohibited by any applicable law or applicable interpretation of the staff of the Commission, the Company shall as promptly as practicable (but in no event more than 50 days after the Trigger Date), prepare and file with the Commission and thereafter shall use its best efforts to cause to be declared effective under the Act a Shelf Registration Statement relating to the offer and sale of the Transfer Restricted Securities or the New Securities, as applicable, by the Holders thereof from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement; provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Transfer Restricted Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder; and provided further, that with respect to New Securities received by an Initial Purchaser in exchange for Securities constituting any portion of an unsold allotment, the Company may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Item 507 or 508 of Regulation S-K, as applicable, in satisfaction of its obligations under this subsection with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement.
(ii) The Company shall use its best efforts to keep
the Shelf Registration Statement continuously effective,
supplemented and amended as required by the Act, in order to
permit the Prospectus forming a part thereof to be usable by
Holders for a period of two years from the date the Shelf
Registration Statement is declared effective by the Commission
(or for such longer period if extended pursuant to Section
4(j)) or such shorter period that will terminate when all the
Securities or New Securities, as applicable, covered by the
Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period"). The Company
shall be deemed not to have used its best efforts to keep the
Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in
Holders of Securities covered thereby not being able to offer
and sell such Securities during that period, unless such
action is required by applicable law.
(iii) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
4. Additional Registration Procedures. In connection with any Shelf Registration Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply.
(a) The Company shall:
(i) furnish to you, not less than five Business Days prior to the filing thereof with the Commission, a copy of any
Exchange Offer Registration Statement and any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein and shall not file any such Registration Statement or amendment thereto or any Prospectus or any supplement thereto (including any documents incorporated by reference therein after the initial filing) to which the Initial Purchasers shall reasonably object in writing, except for any Registration Statement or amendment thereto or Prospectus or supplement thereto (a copy of which has been previously furnished to the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel)) which counsel to the Company has advised the Company in writing is required to be filed, notwithstanding any such objection, in order to comply with applicable law;
(ii) include the information set forth in Annex A hereto on the facing page of the Exchange Offer Registration Statement, in Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Exchange Offer, in Annex C hereto in the underwriting or plan of distribution section of the Prospectus contained in the Exchange Offer Registration Statement, and in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer;
(iii) if requested by an Initial Purchaser, include the information required by Item 507 or 508 of Regulation S-K, as applicable, in the Prospectus contained in the Exchange Offer Registration Statement; and
(iv) in the case of a Shelf Registration Statement, include the names of the Holders that propose to sell Securities pursuant to the Shelf Registration Statement as selling security holders.
(b) The Company shall advise you, the Holders of Securities covered by any Shelf Registration Statement and any Exchanging Dealer under any Exchange Offer Registration Statement that has provided in writing to the Company a telephone or facsimile number and address for notices, and, if requested by you or any such Holder or Exchanging Dealer, shall confirm such advice in writing (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the Company shall have remedied the basis for such suspension):
(i) when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus or for additional information;
(iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation of any proceeding for such purpose; and
(v) of the happening of any event that requires any change in the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading.
(c) The Company shall use its best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement or the qualification of the securities therein for sale in any jurisdiction at the earliest possible time.
(d) The Company shall furnish to each Holder of Securities covered by any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including any material incorporated therein by reference, and, if the Holder so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein).
(e) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities covered by any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of securities in connection with the offering and sale of the securities covered by the Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.
(f) The Company shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including any material incorporated by reference therein, and, if the Exchanging Dealer so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein).
(g) The Company shall promptly deliver to each Initial Purchaser, each Exchanging Dealer and each other Person required to deliver a Prospectus during the Exchange Offer Registration Period, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as any such Person may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by any Initial Purchaser, any Exchanging Dealer and any such other Person that may be required to deliver a Prospectus following the Registered Exchange Offer in connection with the offering and sale of the New Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Exchange Offer Registration Statement.
(h) Prior to the Registered Exchange Offer or any other offering of Securities pursuant to any Registration Statement, the Company shall arrange, if necessary, for the qualification of the Securities or the New Securities for sale under the laws of such jurisdictions as any Holder shall reasonably request and will maintain such qualification in effect so long as required; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the Initial Placement, the Registered Exchange Offer or any offering pursuant to a Shelf Registration Statement, in any such jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing New Securities or Securities to be issued or sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request.
(j) Upon the occurrence of any event contemplated by paragraphs
(ii) through (v) of Section 4(b) above during the period in which the
Company is required to maintain an effective Registration Statement,
the Company shall promptly prepare and file a post-effective amendment
to the applicable Registration Statement or an amendment or supplement
to the related Prospectus or any other required document so that, as
thereafter delivered to the Holders or purchasers of the Securities,
the Prospectus will not include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. In such circumstances, the period of effectiveness of
the Exchange Offer Registration Statement provided for in Section 2
and the Shelf Registration Statement provided for in Section 3(b)
shall each be extended by the number of days from and including the
date of the giving of a notice of suspension pursuant to Section 4(b)
to and including the date when the Initial Purchasers, the Holders of
the Securities and any known Exchanging Dealer shall have received
such amended or supplemented Prospectus pursuant to this Section.
(k) Not later than the effective date of any Registration Statement, the Company shall provide a CUSIP number for the Securities or the New Securities, as the case may be, registered under such Registration Statement and provide the Trustee with printed certificates for such Securities or New Securities, in a form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Act) an earnings statement satisfying the provisions of Section 11(a) of the Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner.
(n) The Company may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of such Securities as the Company may from time to time reasonably require for inclusion in such Registration Statement. The Company may exclude from such Shelf Registration Statement the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request and the Company shall be under no further obligations to such Holder to include such Holder in a Shelf Registraion Statement. A Holder will not be permitted to sell Securities pursuant to the Shelf Registration Statement unless the Holder has eturned to the Company a completed and signed notice electing to be included and furnishing the older's name and other information required to be included in the related Prospectus. The Company will send the form of notice and questionnaire to Holders at least 30 calendar days before the effectiveness of the Shelf Registration Statement and Holders will have 28 calendar days to return it.
(o) In the case of any Shelf Registration Statement, the Company
shall enter into such and take all other appropriate actions
(including if requested an underwriting agreement in customary form)
in order to expedite or facilitate the registration or the disposition
of the Securities, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification
provisions and procedures no less favorable than those set forth in
Section 6 (or such other provisions and procedures acceptable to the
Majority Holders and the Managing Underwriters, if any, with respect
to all parties to be indemnified pursuant to Section 6).
(p) In the case of any Shelf Registration Statement, the Company shall:
(i) make reasonably available for inspection by the Holders of Securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries; provided, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law (including, without limitation, pursuant to the Act), or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality;
(ii) cause the Company's officers, directors and employees to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law (including, without limitation, pursuant to the Act), or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to the Holders of Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters;
(v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and
(vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 4(k) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company.
The actions set forth in clauses (i) through (vi) of this paragraph (p) shall be performed at each closing under any underwriting or similar agreement as and to the extent required thereunder.
(q) If a Registered Exchange Offer is to be consummated: (i) upon delivery of the Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the New Securities, the Company shall mark, or caused to be marked, on the Securities so exchanged that such Securities are being canceled in exchange for the New Securities (in no event shall the Securities be marked as paid or otherwise satisfied); and (ii) if requested by any Initial Purchaser or any known Exchanging Dealer, the Company shall cause (A) its counsel to deliver to such Initial Purchaser or such Exchanging Dealer a signed opinion in the form set forth in Section 5 of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants to deliver to such Initial Purchaser or such Exchanging Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Section 5 of the Purchase Agreement, with appropriate date changes.
(r) The Company will use its best efforts (i) if the Securities have been rated prior to the initial sale of such Securities pursuant to the Purchase Agreement, to confirm such ratings will apply to the Securities or the New Securities, as the case may be, covered by a Registration Statement; or (ii) if the Securities were not previously rated, to cause the Securities covered by a Registration Statement to be rated with at least one nationally recognized statistical rating agency, if so requested by Majority Holders with respect to the
related Registration Statement or by any Managing Underwriters.
(s) In the event that any Broker-Dealer shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc.) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such Broker-Dealer in complying with the requirements of such Rules and By-Laws, including, without limitation, by:
(i) if such Rules or By-Laws shall so require, engaging a "qualified independent underwriter" (as defined in such Rules) to participate in the preparation of the Registration Statement, to exercise usual standards of due diligence with respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities;
(ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof; and
(iii) providing such information to such Broker-Dealer as may be required in order for such Broker-Dealer to comply with the requirements of such Rules.
(t) The Company shall use its best efforts to take all other steps necessary to effect the registration of the Securities or the New Securities, as the case may be, covered by a Registration Statement.
5. Registration Expenses. The Company shall bear all expenses incurred in connection with the performance of its obligations under Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, will reimburse the Initial Purchasers for the reasonable fees and disbursements of their counsel incurred in connection with their review of the Exchange Offer Registration Statement.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Holder, any Exchanging Dealer and each person, if any, who controls any such Holder or Exchanging Dealer within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, Exchange Act or otherwise, and to reimburse such Holder, such Exchanging Dealer and such controlling person or persons, if any, for any legal or other expenses incurred by them in connection with defending any actions, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (as amended or supplemented if the Company shall have
furnished any amendment or supplement thereto), or arise out of
or are based upon any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any such untrue statement or
alleged untrue statement or omission or alleged omission which
was made in any Registration Statement or Prospectus in reliance
upon and in conformity with information furnished in writing to
the Company by the Holders or Exchanging Dealers for use therein
and except that this ndemnity with respect to any Prospectus,
shall not inure to the benefit of any Holder or Exchanging Dealer
(or of any person controlling such Holder or Exchanging Dealer)
on account of any losses, claims, damages, liabilities or actions
arising from the sale of the Securities or the New Securities to
any person if a copy of the Prospectus, as the same may then be
amended or supplemented, shall not have been sent or given by or
on behalf of such Holder or Exchanging Dealer to such person with
or prior to the written confirmation of the sale involved and the
untrue statement or alleged untrue statement or omission or
alleged omission was corrected in the Prospectus as supplemented
or amended at the time of such confirmation. Each Holder and
Exchanging Dealer agrees, within ten days after the receipt by it
of notice of the commencement of any action in respect of which
indemnity may be sought by it, or by any person controlling it,
from the Company on account of its agreement contained in this
Section 6, to notify the Company in writing of the commencement
thereof but the omission of such Holder or Exchanging Dealer so
to notify the Company of any such action shall not release the
Company from any liability which it may have to such Holder or
Exchanging Dealer or to such controlling person otherwise than on
account of the indemnity agreement contained in this Section 6.
In case any such action shall be brought against a Holder or
Exchanging Dealer or any such person controlling such Holder or
Exchanging Dealer and such Holder or Exchanging Dealer shall
notify the Company of the commencement thereof as above provided,
the Company shall be entitled to participate in (and, to the
extent that it shall wish, including the selection of counsel, to
direct) the defense thereof, at its own expense. In case the
Company elects to direct such defense and select such counsel,
any Holder or Exchanging Dealer or controlling person shall have
the right to employ its own counsel, but, in any such case, the
fees and expenses of such counsel shall be at the expense of such
Holder or Exchanging Dealer or such controlling person unless the
employment of such counsel has been authorized in writing by the
Company in connection with defending such action. No indemnifying
party shall, without the written consent of the indemnified
party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification may be sought
hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of
the indemnified party from all liability arising out of such
action or claim and (ii) does not include any statement as to, or
an admission of, fault, culpability or a failure to act, by or on
behalf of any indemnified party. In no event shall any
indemnifying party have any liability or responsibility in
respect of the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened
action or claim effected without its prior written consent.
(b) Each Holder and Exchanging Dealer agrees severally and not jointly, to indemnify and hold harmless the Company and each of the Company's directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act to the same extent and upon the same terms as the indemnity agreement of the Company set forth in Section 6(a) hereof, but only with respect to alleged untrue statements or omissions made in any Registration Statement or Prospectus in reliance upon and in conformity with information furnished in writing to the Company by such Holder or Exchanging Dealer for use therein.
(c) The agreements contained in this Section 6 shall survive the sale of the Securities or New Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.
7. Additional Interest Under Certain Circumstances.
(a) Additional interest (the "Additional Interest") with respect to the Securities will be assessed as follows if any of the following events occurs (each event identified in clauses (i) through (v) below, an "Additional Interest Event"):
(i) If all Transfer Restricted Securities properly tendered to the Company have not been exchanged for New Securities on or prior to the 270th day following the date of the original issuance of the Securities; or
(ii) If the Shelf Registration Statement has not been declared effective on or prior to the 270th day following the date of the original issuance of the Securities; or
(iii) If, after the Exchange Offer Registration Statement is declared effective, such Exchange Offer Registration Statement thereafter ceases to be effective or usable at any time during the required period specified within this Agreement; or
(iv) Whether or not the Registered Exchange Offer is consummated, any required Shelf Registration Statement is not filed as promptly as practicable, and in any event within 50 days, following the Trigger Event giving rise to the requirement to file a Shelf Registration Statement in accordance with this Agreement; or
(v) If, after any Shelf Registration Statement is
declared effective, (A) such Shelf Registration Statement thereafter
ceases to be effective during the Shelf Registration Period; or (B)
such Shelf Registration Statement or the related Prospectus ceases to
be usable in connection with resales of Transfer Restricted Securities
during the Shelf Registration Period (except as permitted in paragraph
(b) of this Section 7) because either (1) any event occurs as a result
of which the related Prospectus forming part of such Shelf Registration
Statement would include any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made not
misleading, or (2) it shall be necessary to amend such Shelf
Registration Statement, or supplement the related Prospectus, to comply
with the Act or the Exchange Act or the respective rules thereunder.
Additional Interest shall accrue on the Transfer Restricted Securities over and above the interest set forth in the title of the Securities at a rate of 0.50% per annum from and including the date on which any such Additional Interest Event shall occur to, but excluding, the date on which all such Additional Interest Events have been cured or, if earlier, the date on which the Securities may first be resold in reliance on Rule 144(k). Such Additional Interest shall be payable in accordance with Section 7(c). In the event that more than one of the aforementioned Additional Interest Event occurs at the same time, the maximum increase in the interest rate applicable to the Securities shall be 0.50% per annum.
(b) An Additional Interest Event referred to in Section 7(a)(v) is deemed not to be continuing in relation to a Shelf Registration Statement or the related Prospectus if (i) that Additional Interest Event has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company, when such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus or (y) the occurrence of other material events or developments with respect to the Company or its Affiliates that would need to be described in such Shelf Registration Statement or the related Prospectus, and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related Prospectus to describe those events or, in the case of material developments that the Company determines in good faith must remain confidential for business reasons, the Company is proceeding promptly and in good faith to take such steps as are necessary so that those developments need no longer remain confidential, but in any case, if any Additional Interest Event (including any referred to in clause (x) or (y), above) continues for a period in excess of 45 days, Additional Interest will be payable in accordance with the above paragraph from the day following the last day of that 45-day period until the date on which that Additional Interest Event is cured or, if earlier, the date on which the Securities may first be resold in reliance on Rule 144(k).
(c) Any Additional Interest payable will be payable on the regular interest payment dates with respect to the Securities, in the same manner as the manner in which regular interest is payable. The amount of Additional Interest for any period will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Securities, multiplied by a fraction, the numerator of which is the number of days that Additional Interest rate was applicable during that period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360.
8. Rules 144 and 144A. The Company shall use its best efforts to file the reports required to be filed by it under the Act and the Exchange Act in a timely manner. If at any time the Company is not required to file those reports, it will, upon the request of any Holder of Transfer Restricted Securities, make publicly available other information so long as is necessary to permit sales of Securities pursuant to Rules 144 and 144A and otherwise as required by
the Indenture. The Company covenants that it will take such further action as any Holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable that Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). Upon request by an Initial Purchaser, the Company will provide a copy of this Agreement to prospective purchasers of Securities identified in writing to the Company by that Initial Purchaser. Upon the request of any Holder of Transfer Restricted Securities, the Company shall deliver to that Holder a written statement as to whether it has complied with these requirements. Notwithstanding the foregoing, nothing in this Section 8 requires the Company to register any of its securities under the Exchange Act.
9. Underwritten Registrations.
(a) If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the Managing Underwriters shall be selected by the Majority Holders.
(b) No Person may participate in any underwritten offering pursuant to any Shelf Registration Statement, unless such Person (i) agrees to sell such Person's Transfer Restricted Securities, as the case may be, on the basis reasonably provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements; and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.
10. No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof.
11. Amendments and Waivers. The provisions of this Agreement, including the provisions of this Section 9, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Majority Holders (or, after the consummation of any Registered Exchange Offer in accordance with Section 2 hereof, of New Securities); provided that, with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities or New Securities, as the case may be, are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of Securities or New Securities, as the case may be, being sold rather than registered under such Registration Statement.
12. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier or air courier guaranteeing overnight delivery:
(a) if to a Holder, at the most current address given by such
holder to the Company in accordance with the provisions of this
Section, which address initially is, with respect to each Holder, the
address of such Holder maintained by the Registrar under the
Indenture, with a copy in like manner to: (i) Lehman Brothers Inc.,
745 Seventh Avenue, New York, New York 10019, Attention: John Veech;
(ii) Salomon Smith Barney Inc., 388 Greenwich Street, New York, New
York 10013, Attention: Barry P. Gold and (iii) Dewey Ballantine LLP,
1301 Avenue of the Americas, New York, New York 10019, Attention:
Peter K. O'Brien;
(b) if to you, initially at the respective addresses set forth in the Purchase Agreement; and
(c) if to the Company, initially at its address set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly given when received.
The Initial Purchasers or the Company by notice to the other parties may designate additional or different addresses for subsequent notices or communications.
13. Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Securities and the New Securities. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Securities and the New Securities, and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto.
14. Counterparts. This agreement may be in signed counterparts, each of which shall an original and all of which together shall constitute one and the same agreement.
15. Headings. The headings used herein are for
convenience only and shall not affect the construction hereof.
16. Applicable Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York.
17. Severability. In the event that any one of more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law.
18. Securities Held by the Company, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities or New Securities is required hereunder, Securities or New Securities, as applicable, held by the Company or its Affiliates (other than subsequent Holders of Securities or New Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities or New Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.
19. Specific Performance. Without limiting the remedies available to the Holders, the Company acknowledges that any failure by it to comply with its obligations under Sections 2 or 3 hereof may result in material irreparable injury to the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such failure precisely and that, in the event of any such failure, any Holder may obtain such relief as is necessary to enforce specifically the obligations of the Company.
[signature page follows]
If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a building agreement among the Company and the several Initial Purchasers.
Very truly yours,
SOUTHERN POWER COMPANY
By: __________________________
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first above written.
LEHMAN BROTHERS INC.
By: __________________________
Name:
Title:
SALOMON SMITH BARNEY INC.
By: __________________________
Name:
Title:
For themselves and the other several Initial Purchasers named in Schedule I to the Purchase Agreement.
ANNEX A
Each Broker-Dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, during the Exchange Offer Registration Period, it will make this Prospectus available to any Broker-Dealer for use in connection with any such resale. See "Plan of Distribution".
ANNEX B
Each Broker-Dealer that receives New Securities for its own account in exchange for Securities, where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. See "Plan of Distribution".
ANNEX C
PLAN OF DISTRIBUTION
Each Broker-Dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Broker-Dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, during the Exchange Offer Registration Period, it will make this Prospectus, as amended or supplemented, available to any Broker-Dealer for use in connection with any such resale. In addition, until __________, 20___, all dealers effecting transactions in the New Securities may be required to deliver a prospectus.1
The Company will not receive any proceeds from any sale of New Securities by Broker-Dealers. New Securities received by Broker-Dealers for their own accounts pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Broker-Dealer and/or the purchasers of any such New Securities. Any Broker-Dealer that resells New Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Securities may be deemed to be an "underwriter" within the meaning of the Act and any profit on any such resale of New Securities and any commissions or concessions received by any such Person may be deemed to be underwriting compensation under the Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Act.
During the Exchange Offer Registration Period, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Broker-Dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holder of the Securities) other than commissions or concessions of any broker or dealer and will indemnify the holders of the Securities (including any Broker-Dealers) against certain liabilities, including liabilities under the Act.
ANNEX D
Rider A
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Rider B
If the undersigned is not a Broker-Dealer, the undersigned represents that it acquired the New Securities in the ordinary course of its business, it is not engaged in, and does not intend to engage in, a distribution of New Securities and it has no arrangements or understandings with any Person to participate in a distribution of the New Securities. If the undersigned is a Broker-Dealer that will receive New Securities for its own account in exchange for Securities, it represents that the Securities to be exchange for New Securities were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a Prospectus in connection with any resale of such New Securities; however, by so acknowledging and by delivering a Prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Act.
Exhibit 5.1
August 22, 2002
Southern Power Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Re: Southern Power Company
Registration Statement on Form S-4
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Ladies and Gentlemen:
We have acted as counsel to Southern Power Company, a Delaware corporation (the "Company") in connection with the preparation of the above-referenced Registration Statement on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act") relating to the proposed exchange of up to $575,000,000 in aggregate principal amount of the Company's 6.25% Senior Notes, Series B due July 15, 2012 (collectively, the "Exchange Senior Notes") for a like principal amount of the Company's issued and outstanding 6.25% Senior Notes, Series A due July 15, 2012 (collectively, the "Original Senior Notes") pursuant to the Indenture, dated as of June 1, 2002 (the "Indenture") and supplemented by the First Supplemental Indenture dated as of June 18, 2002 (the "Supplemental Indenture"), among the Company and The Bank of New York, as trustee, and as contemplated by the Registration Rights Agreement, dated as of June 18, 2002, by and among the Company and the signatories thereto.
We have been requested to furnish our opinion about certain matters regarding the securities being registered by the Registration Statement. In connection therewith, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the Registration Statement, the Indenture, the Supplemental Indenture and the form of the Exchange Senior Notes included as Exhibit A to the Supplemental Indenture (collectively, the "Documents"). We also have reviewed such matters of law and examined such corporate records and other certificates, agreements and documents as we have deemed relevant and necessary as a basis for the opinions expressed below.
In our examination of the documents listed above, we have assumed, without independent investigation, the genuineness of all signatures, the enforceability of the Documents against all parties thereto (other than the Company in the case of the Indenture, the Supplemental Indenture and the Exchange Senior Notes), the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as certified, photostatic, reproduced or conformed copies of valid existing agreements and other documents, the authenticity of all such latter documents and the legal capacity of all individuals who have executed any of the documents.
In expressing the opinions set forth below, we have relied upon the factual matters contained in the representations and warranties of the Company made in any of the Documents and upon certificates of public officials and officers of the Company. We also have assumed that the Exchange Senior Notes will be in the form of Exhibit A to the Supplemental Indenture.
Based upon the foregoing, and subject to the assumptions, exceptions and qualifications set forth in this letter, we are of the opinion that the Exchange Senior Notes to be issued under the Indenture and the Supplemental Indenture have been duly authorized by the Company and, when issued, authenticated and delivered as provided in the Indenture and the Supplemental Indenture and as contemplated by the Registration Statement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforceability of such obligations may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or other similar laws now or hereafter in effect affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).
In rendering the foregoing opinions, with respect to matters of New York law, we have relied on the opinion of Dewey Ballantine LLP attached hereto as Annex I.
This opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the caption "Legal Matters" in the prospectus that is included in the Registration Statement. In giving this consent, we do not admit that we come within the category of persons whose consent is required by the Securities Act or the rules and regulations thereunder.
Very truly yours,
/s/BALCH & BINGHAM LLP BALCH & BINGHAM LLP |
Annex I
August 22, 2002
Balch & Bingham LLP
1901 Sixth Avenue North
Birmingham, Alabama 35203
Ladies and Gentlemen:
We have acted as counsel to the initial purchasers in the
private offering by Southern Power Company (the "Company") of $575,000,000
aggregate principal amount of its 6.25% Senior Notes, Series A due July 15, 2012
(the "Series A Notes"). In connection with the Company's Registration Statement
on Form S-4 (the "Registration Statement") relating to an offer to exchange (the
"Exchange Offer") up to $575,000,000 aggregate principal amount of the Company's
6.25% Senior Notes, Series B due July 15, 2012 (the "Series B Notes"), which are
being registered under the Securities Act of 1933, as amended, for an equivalent
aggregate principal amount of Series A Notes, we have examined (i) the
Registration Statement, (ii) the Series A Notes, (iii) the Series B Notes and
(iv) the Indenture (the "Indenture"), dated as of June 1, 2002, between the
Company and The Bank of New York, as trustee (the "Trustee"), as supplemented by
the First Supplemental Indenture (the "Supplemental Indenture"), dated as of
June 18, 2002, between the Company and the Trustee, pursuant to which the Series
A Notes have been and the Series B Notes will be issued. The terms of the Series
B Notes to be issued will be substantially identical to the Series A Notes,
except for certain transfer restrictions and registration rights relating to the
Series A Notes.
We have also examined the originals, or duplicates or certified or conformed copies, of such records, agreements, instruments and other documents and have made such other and further investigations as we have deemed relevant and necessary in connection with the opinions expressed herein. As to questions of fact material to this opinion, we have relied upon certificates of public officials and of officers and representatives of the Company and its subsidiaries.
In rendering the opinions set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents. We also have assumed that the documents we have examined have been
duly authorized, executed and delivered by each party thereto, that each party to such documents is validly existing and in good standing under the laws of all jurisdictions where it is conducting business or otherwise is required to be so qualified, and has full power and authority and all necessary consents and approvals to execute, deliver and perform its obligations under such documents. We further have assumed that the Indenture and the Supplemental Indenture are the valid and binding obligations of the Trustee.
Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that, when the Series B Notes are issued, executed, authenticated and delivered in accordance with the terms of the Exchange Offer, the Indenture and the Supplemental Indenture, the Series B Notes will be valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws relating to or affecting the enforcement of creditors' rights generally and to general equity principles (regardless of whether enforcement is sought in law or equity).
We are members of the State Bar of New York and we do not express any opinion concerning any law other than the law of the State of New York.
This opinion is furnished for your benefit in connection with your rendering an opinion to the Company to be filed as Exhibit 5.1 to the Registration Statement and we hereby consent to your attaching this opinion as an annex to such opinion.
Very truly yours,
/s/DEWEY BALLANTINE LLP DEWEY BALLANTINE LLP |
Exhibit 10.1
EXECUTION VERSION
CREDIT AGREEMENT
Dated as of November 15, 2001
Among
SOUTHERN POWER COMPANY
as Borrower
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
and
CITIBANK, N.A.
as Agent
SALOMON SMITH BARNEY INC.
as Lead Arranger and Syndication Agent
THE BANK OF TOKYO-MITSUBISHI, LTD.
as Co-Arranger
BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH
as Co-Arranger
COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
as Co-Arranger
THE INDUSTRIAL BANK OF JAPAN, LIMITED
as Co-Arranger
TABLE OF CONTENTS
Page
Article I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.......................................................................1
SECTION 1.02. Computation of Time Periods................................................................30
SECTION 1.03. Accounting Terms...........................................................................30
SECTION 1.04. Interpretation.............................................................................30
Article II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances...............................................................................31
SECTION 2.02. Making the Advances........................................................................32
SECTION 2.03. Fees.......................................................................................34
SECTION 2.04. Termination or Reduction of the Commitments................................................34
SECTION 2.05. Repayment of the Advances..................................................................34
SECTION 2.06. Interest on the Advances...................................................................34
SECTION 2.07. Interest Rate Determination................................................................35
SECTION 2.08. Optional Conversion of the Advances........................................................37
SECTION 2.09. Prepayments................................................................................37
SECTION 2.10. Increased Costs............................................................................39
SECTION 2.11. Illegality.................................................................................39
SECTION 2.12. Payments and Computations..................................................................40
SECTION 2.13. Taxes......................................................................................41
SECTION 2.14. Sharing of Payments, Etc...................................................................43
SECTION 2.15. Reservation of CP Commitments..............................................................44
SECTION 2.16. Use of Proceeds............................................................................45
Article III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.15............................45
SECTION 3.02. Conditions Precedent to the Initial Advances for Each Initial Project......................47
SECTION 3.03. Conditions Precedent to Subsequent Advances for an Initial Project.........................48
SECTION 3.04. Conditions Precedent to the Initial Advances for Each Subsequent Project...................49
SECTION 3.05. Conditions Precedent to Subsequent Advances for a Subsequent Project.......................54
SECTION 3.06. Conditions Precedent to CP Commitment Reservations.........................................55
SECTION 3.07. Conditions Precedent to the Working Capital and CP Advances................................56
SECTION 3.08. Determinations Under Sections 3.01 Through 3.07, Inclusive.................................56
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Article IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.............................................57
Article V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants......................................................................60
SECTION 5.02. Negative Covenants.........................................................................66
Article VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default..........................................................................70
Article VII
THE AGENT
SECTION 7.01. Authorization and Action...................................................................72
SECTION 7.02. Agent's Reliance, Etc......................................................................72
SECTION 7.03. Citibank and Affiliates....................................................................73
SECTION 7.04. Lender Credit Decision.....................................................................73
SECTION 7.05. Indemnification............................................................................73
SECTION 7.06. Successor Agent............................................................................73
Article VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc............................................................................74
SECTION 8.02. Notices, Etc...............................................................................75
SECTION 8.03. No Waiver; Remedies........................................................................76
SECTION 8.04. Costs and Expenses, Etc....................................................................76
SECTION 8.05. Right of Set-off...........................................................................79
SECTION 8.06. Binding Effect.............................................................................79
SECTION 8.07. Assignments and Participations.............................................................79
SECTION 8.08. Confidentiality............................................................................83
SECTION 8.09. Governing Law..............................................................................85
SECTION 8.10. Execution in Counterparts..................................................................85
SECTION 8.11. Jurisdiction, Etc..........................................................................85
SECTION 8.12. No Bankruptcy Proceedings..................................................................86
SECTION 8.13. Waiver of Jury Trial.......................................................................86
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Schedules
---------
Schedule I - List of Commitments and Applicable Lending Offices
Schedule II - Terms of Subordination
Schedule III - Project Limits for Initial Projects
Schedule IV - Scheduled Completion Date, Guaranteed Heat Rate and Guaranteed Output for Each Initial Project
Schedule V - Testing Procedures and Reliability Test
Exhibits
Exhibit A - Form of Note
Exhibit B - Form of Notice of Utilization
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Confidentiality Agreement
Exhibit E - Form of Opinions of Counsel for the Loan Parties
Exhibit F - Form of Designation Agreement
Exhibit G - Form of Southern Equity Agreement
Exhibit H - Form of Southern Completion Guarantee
Exhibit I-1 - Form of Independent Engineer and Environmental Consultant Certificate (for Funds Availability Date)
Exhibit I-2 - Form of Independent Engineer and Environmental Consultant Certificate (other than for Funds Availability
Date)
Exhibit I-3 - Form of Independent Engineer and Environmental Consultant Bring-Down Certificate
Exhibit J-1 - Form of Independent Insurance Consultant Certificate (for Funds Availability Date)
Exhibit J-2 - Form of Independent Insurance Consultant Certificate (other than for Funds Availability Date)
Exhibit J-3 - Form of Independent Insurance Consultant Bring-Down Certificate
Exhibit K-1 - Form of Independent Market Consultant Certificate (for Funds Availability Date)
Exhibit K-2 - Form of Independent Market Consultant Certificate (other than for Funds Availability Date)
Exhibit K-3 - Form of Independent Market Consultant Bring-Down Certificate
Exhibit L-1 - Form of Substantial Completion Certificate
Exhibit L-2 - Form of Final Completion Certificate
Exhibit M - Form of Development Authority Sale/Leaseback Letter
|
CREDIT AGREEMENT
Dated as of November 15, 2001
SOUTHERN POWER COMPANY, a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages of this agreement (the "Initial Lenders") and CITIBANK, N.A. ("Citibank"), as administrative agent (the "Agent") for the Lenders (as hereinafter defined), agree as follows:
Article I
DEFINITIONS AND ACCOUNTING TERMS
As used in this Agreement, the following terms shall have the following meanings:
"Acceptable Credit Party" means any Person whose corporate credit rating is, or whose unsecured, non-credit enhanced long-term debt securities are, rated not less than "BBB" and "Baa2" by S&P and Moody's, respectively.
"Acceptable Credit Support" means, with respect to any Power Purchase Agreement, any of the following in form and substance reasonably satisfactory to the Majority Lenders: (a) a guaranty from an Acceptable Credit Party; (b) an irrevocable standby letter of credit, with a tenor not less than the term of such Power Purchase Agreement (or, if shorter than such term, which may be drawn if not automatically renewed prior to the stated maturity of such Power Purchase Agreement) and issued by a financial institution organized under the laws of the United States, or any state thereof, or the New York City branch of a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, in each case, whose unsecured, non-credit enhanced long-term debt securities are rated at least "A" by S&P and "A2" by Moody's and which has a combined capital and surplus of at least $1,000 million; or (c) any other instrument reasonably acceptable to the Majority Lenders.
"Acceptable PPA Counterparty" means, with respect to any Power Purchase Agreement, any Person which is (a) an Acceptable Credit Party, or whose obligations under such Power Purchase Agreement are secured by Acceptable Credit Support until the stated maturity of such Power Purchase Agreement; or (b) with respect to Power Purchase Agreements for not more than twenty percent (20%) of the total output of all Plants only, any Person (i) whose corporate credit rating is, or whose unsecured, non-credit enhanced long-term debt securities are, rated not less than "BBB-" and "Baa3" by S&P and Moody's, respectively; or (ii) whose obligations under such Power Purchase Agreement are secured by a Person whose corporate credit rating is, or whose unsecured, non-credit enhanced long-term debt securities are, rated not less than "BBB-" and "Baa3" by S&P and Moody's, respectively, until the stated maturity of such Power Purchase Agreement.
"Adjusted Project Budget" means, for each Project, the project budget for such Project setting forth the adjusted Project Costs for such Project (as compared to its Initial Project Budget), prepared in the same format as its Initial Project Budget and certified by the Borrower to be complete and correct, and delivered to the Agent by the Borrower at (a) the time of any change in the Project Limit for such Project pursuant to Section 2.01(b); and (b) the earlier of the Non-Recourse Date for such Project and the Refinancing Date with respect to such Project.
"Advance" means an advance by a Lender to the Borrower pursuant to Article II and refers, as the context may require, (a) to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "Type" of Advance); or (b) to a Project Advance, a Working Capital Advance or a CP Advance (each of which shall be a "Category" of Advance).
"Affiliate" means, as to any Person (other than an individual), any other Person (other than an individual) that, directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with such Person.
"Affiliate Subordinated Debt" means Debt of the Borrower which is subordinated to the Borrower's obligations under the Facility on terms and conditions specified in Schedule II and which is owed to or held by an Affiliate of the Borrower other than a Subsidiary of the Borrower.
"Agent" has the meaning set forth in the introductory paragraph to this Agreement.
"Agent's Account" means the account of the Agent maintained by the Agent at Citibank with its office at 2 Penns Way, Suite 200, New Castle, DE 19720, Account No. 36852248, Attention: Dave Graber re Southern Power Company.
"Agreement" means this agreement.
"Applicable Commitment Fee Percentage" means, as of any date, a percentage per annum determined by reference to the Rating Level in effect on such date and whether such date is a Low Use Date or a High Use Date, as set forth below:
Applicable Commitment Applicable Commitment
Rating Level Fee Percentage on Fee Percentage on
Low Use Date High Use Date
---------------------------------------------------------------
Level 1 0.300% 0.200%
---------------------------------------------------------------
Level 2 0.350% 0.250%
---------------------------------------------------------------
Level 3 0.400% 0.300%
---------------------------------------------------------------
Level 4 0.475% 0.375%
---------------------------------------------------------------
Level 5 0.550% 0.450%
---------------------------------------------------------------
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"Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance.
"Applicable Margin" means, as of any date:
(a) with respect to Base Rate Advances, 0% per annum; and
(b) with respect to Eurodollar Rate Advances, a percentage per
annum determined by reference to the Rating Level in effect on
such date and whether such date is a Low Use Date or a High
Use Date, as set forth below:
--------------------------------------------------------------
Rating Level Applicable Margin Applicable Margin on High
on Low Use Date Use Date
---------------------------------------------------------------
Level 1 1.125% 1.250%
---------------------------------------------------------------
Level 2 1.250% 1.375%
---------------------------------------------------------------
Level 3 1.500% 1.625%
---------------------------------------------------------------
Level 4 2.500% 2.625%
---------------------------------------------------------------
Level 5 2.750% 2.875%
---------------------------------------------------------------
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"Arrangers" means, collectively, the Lead Arranger and the Co-Arrangers; each individually, an "Arranger".
"Assets" means, with respect to any Person, all or any part of its business, property and assets, both tangible and intangible, wherever situated.
"Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and one or more Eligible Assignees (or other Persons approved by the Borrower and the Agent), and, if required under this Agreement, accepted by the Agent and the Borrower, in substantially the form of Exhibit C.
"Autaugaville 1 Project" means the approximately 618MW gas-fired electric generation plant constructed or to be constructed by the Borrower or an Affiliate of the Borrower in Autauga County, Alabama with an expected completion date in June 2003, and which is not the Autaugaville 2 Project.
"Autaugaville 2 Project" means the approximately 618MW gas-fired electric generation plant constructed or to be constructed by the Borrower or an Affiliate of the Borrower in Autauga County, Alabama with an expected completion date in June 2003, and which is not the Autaugaville 1 Project.
"Availability Period" means the period from the Funds Availability Date until the Final Maturity Date.
"Base Case Projections" means the Initial Base Case Projections or, if the Agent has received any Project Base Case Projections pursuant to Section 3.04, the then most recent Updated Base Case Projections.
"Base Rate" means for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of
(a) the Federal Funds Effective Rate as in effect at such time plus
0.5%; and (b) the per annum rate of interest from time to time publicly
announced by the Agent at its principal office in the United States as
its base lending rate for domestic (United States) commercial loans
(which rate may not be the lowest rate of interest charged by the Agent
in connection with extensions of credit to its other customers);
provided that (i) if for any reason the Agent shall have determined
(which determination shall be conclusive absent manifest error) that it
is unable to ascertain the Federal Funds Effective Rate for any reason,
the Base Rate shall be determined without regard to clause (a) of this
definition until the circumstances giving rise to such inability no
longer exist; and (ii) any change in the Base Rate due to a change in
the rate referred to in clause (b) of this definition or in the Federal
Funds Effective Rate shall be effective as of the opening of business
on the date of such change in the rate referred to in such clause (b)
or the Federal Funds Effective Rate, respectively.
"Base Rate Advance" means an Advance that bears interest as provided in Section 2.06(a)(i).
"Baseload" means, on any date, an electric generation plant which is projected (in the then most recent Independent Market Consultant report delivered pursuant to Article III or Section 5.01(r)) to have an average Capacity Factor of 65% or more during the Remaining Base Case Period.
"Borrower" has the meaning set forth in the introductory paragraph to this Agreement.
"Borrower Group Members" means, collectively, the Borrower and all Relevant Subsidiaries; each individually, a "Borrower Group Member".
"Borrowing" means a borrowing consisting of simultaneous Advances of the same Type and Category made by each of the Lenders pursuant to Section 2.01.
"Borrowing Limit" means, with respect to (a) all Utilizations for any Project, the Project Limit applicable to such Project; and (b) Working Capital Advances, $25,000,000.
"Business Day" means any day other than a Saturday, Sunday or any day on which any Lender specifically or banking institutions generally are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings in Dollars are carried on in the London interbank market.
"Buydown Amount" means, with respect to any Substantially Completed Project, the aggregate principal amount of all Project Debt with respect to such Substantially Completed Project required to be prepaid upon the occurrence of a Southern Event of Default or the Buydown Date for such Substantially Completed Project pursuant to Sections 2.09(b)(i)(B) and 2.09(b)(ii)(B), respectively, in each case, so as to result in the minimum and average Portfolio Adjusted Base Case Projections, calculated on the assumptions that (a) all Recourse Debt of the Borrower Group Members (other than Recourse Debt incurred with respect to Uncompleted Plants) outstanding immediately after such prepayment is repaid in full on or prior to the end of the Remaining Base Case Period; and (b) all liquidated damages for completion of such Substantially Completed Project at a reduced capacity from that contracted for under each Power Purchase Agreement for such Substantially Completed Project which are then payable or which, after the date of determination, would become payable as a result thereof (in each case, calculated by reference to the performance of such Substantially Completed Plant, as certified by Southern to the Agent for purposes of its Substantial Completion), are paid in full when due. If on any date the Buydown Amount for more than one Substantially Completed Project is to be calculated, for purposes of calculating the Buydown Amount for each such Substantially Completed Project, all other Substantially Completed Projects shall be deemed to be Uncompleted Projects.
"Buydown Date" means, with respect to any Project, the date which is twenty-four (24) months after the Scheduled Completion Date for such Project, or such earlier date as may be notified in writing to the Agent by Southern.
"Buydown Event" means, with respect to any Project which achieves Substantial Completion, the occurrence of the Buydown Date for such Project before such Project achieves Final Completion.
"Capacity Factor" means, with respect to an electric
generation plant in connection with determining the Required Project
DSCR applicable to such plant at any time, the ratio, expressed as a
percentage, of (a) the total electrical energy expected to be generated
by such electric generation plant during the relevant period, as
projected in the then most recent Independent Market Consultant report
delivered pursuant to Article III or Section 5.01(r), to (b) the
maximum possible electrical energy such electric generation plant could
have generated during such period if operated at its maximum capacity
rating, (i) as determined for purposes of the Power Purchase Agreement
in effect with respect to such electric generation plant at such time,
if any (or, if there is more than one such Power Purchase Agreement,
the lowest such output under all such Power Purchase Agreements); or
(ii) if there is no such Power Purchase Agreement then in effect, as
determined as of the Non-Recourse Date for such Project.
"Cash Available for Corporate Debt Service" for any period means, without duplication, (a) cash earnings from operations prior to interest, principal and tax payments based on income with reference to the Borrower's consolidated financial statements (but excluding any such cash earnings attributable to Unrestricted Subsidiaries); plus (b) cash received (net of transaction costs and expenses) during such period by the Borrower and its consolidated Subsidiaries (other than Unrestricted Subsidiaries) from Sales or other dispositions of Assets not required to prepay Debt; plus (c) cash received by the Borrower from Southern in the form of equity contributions (other than Equity Contributions) or Affiliate Subordinated Debt, which cash is received during such period; plus (d) cash dividends or cash distributions received by the Borrower from Unrestricted Subsidiaries.
"Category" has the meaning specified in the definition of "Advance".
"Citibank" has the meaning set forth in the introductory paragraph to this Agreement.
"Co-Arrangers" means The Bank of Tokyo-Mitsubishi, Ltd., Bayerische Landesbank Girozentrale, Cayman Islands Branch, Commerzbank AG, New York and Grand Cayman Branches and The Industrial Bank of Japan, Limited.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Commercial Paper" means commercial paper issued by the
Borrower (a) rated at least "A-2" or better by S&P and at least "P-2"
or better by Moody's; (b) having a maturity not exceeding 180 days from
its issuance and occurring on or before the Final Maturity Date; and
(c) the obligations with respect to which are not secured by any Liens
or subject to any form of credit enhancement other than liquidity
support provided pursuant to this Facility.
"Commitment" has the meaning specified in Section 2.01.
"Commitment Termination Date" means the date on which the Commitments of all Lenders have been terminated or cancelled in accordance with this Agreement.
"Completed Plants" means, as at any relevant time, (a) all Projects which (i) have then achieved Final Completion; or (ii) have then achieved Substantial Completion, the relevant Buydown Dates for which have occurred and for which the relevant Buydown Amounts, if required, have been paid; and (b) all other Plants which have then commenced commercial operation and achieved Substantial Completion.
"Completed Project Advances" means, at any time, all Advances then outstanding with respect to Completed Projects; each individually, a "Completed Project Advance".
"Completed Projects" means all Projects the Non-Recourse Date for which has occurred; each individually, a "Completed Project".
"Confidential Information" means information concerning the Borrower or its Affiliates which is non-public, confidential or proprietary in nature, or any information that is marked or designated confidential by or on behalf of the Borrower, which is furnished to any Lender by the Borrower or any of its Affiliates directly or through the Agent or any Arranger in connection with this Agreement or the transactions contemplated hereby (at any time on, before or after the date of this Agreement), together with all analyses, compilations or other materials prepared by such Lender or its respective directors, officers, employees, agents, auditors, attorneys, consultants or advisors (collectively, "Representatives") which contain or otherwise reflect such information.
"Control" has the meaning set forth in rule 12b-2 promulgated under the Securities Exchange Act of 1934.
"Controlled Group" means (a) the controlled group of corporations as defined in Section 414(b) of the Code and the applicable regulations thereunder; or (b) the group of trades or businesses under common control as defined in Section 414(c) of the Code and the applicable regulations thereunder, of which the Borrower is a part or may become a part.
"Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.07 or 2.08.
"Corporate Interest" means, for any period, the sum of (a) the aggregate of interest expense accrued during such period by the Borrower and the Relevant Subsidiaries on Recourse Debt less the amount of interest, if any, included in such interest expense which was capitalized in accordance with GAAP, plus (b) to the extent not included in clause (a), rent or similar payments on Recourse Debt consisting of Finance Leases, capital leases, sale-leasebacks that are capitalized in accordance with GAAP, Synthetic Leases, all amortizations of the discount on Debt issued at discount, or other similar arrangements.
"CP Advance" has the meaning specified in Section 2.16.
"CP Commitment" has the meaning specified in Section 2.15.
"CP Commitment Reservation" means the simultaneous creation of CP Commitments by each of the Lenders pursuant to Section 2.15, and refers, as the context may require, to a CP Commitment (Original CP) Reservation or a CP Commitment (Refinancing CP) Reservation (each of which shall be a "Kind" of CP Commitment Reservation).
"CP Commitment (Original CP) Reservation" means a CP Commitment Reservation which is made with respect to Original Commercial Paper.
"CP Commitment (Refinancing CP) Reservation" means a CP Commitment Reservation which is made with respect to Refinancing Commercial Paper.
"Dahlberg Project" means the ten unit, approximately 810MW gas-fired electric generation plant constructed by Georgia Power Company and located in Jackson County, Georgia.
"Debt" means for any Person any obligations of such Person for
or in respect of (a) moneys borrowed or raised (whether or not for
cash) by whatever means (including acceptances, deposits, discounting,
letters of credit, factoring (other than on a non-recourse basis),
Finance Leases, Lease Obligations and any other form of financing which
is recognized in accordance with GAAP in such Person's financial
statements as being in the nature of a borrowing (excluding for the
avoidance of doubt, share capital, share premium account and any
capital prepayment reserve) or is treated as "off-balance" sheet
financing (including all amounts financed under any Synthetic Lease or
other synthetic financing transaction (excluding, in the case of any
Person other than Southern, such portion of such amounts for which
Southern is also directly liable and such portion of such amounts equal
to any committed equity amounts from Southern in respect thereof) and
all minority equity investments)); (b) the deferred purchase price of
Assets or services (other than goods and services obtained on normal
commercial terms in the ordinary course of business or operations); and
(c) guarantees by such Person of obligations which constitute Debt of
another Person under clause (a) or (b) above; provided that (i) for any
Subsidiary of the Borrower, "Debt" shall not include any such
obligation owed to the Borrower or to any Relevant Subsidiary; (ii)
except for purposes of Section 6.01(d), "Debt" shall not include any
obligations in connection with Trust Preferred Securities; and (iii)
with respect to the Borrower, "Debt" for purposes of Section 5.01(a)
shall not include up to $10,000,000 of obligations, in the aggregate
amount at any time outstanding, which are secured by Liens referred to
in any of paragraphs (iv), (vii), (viii), (ix), (xv) and (xvi) of
Section 5.02(c).
"Debt/Equity Ratio" means with respect to any (a) Initial Project, 60:40; and (b) Subsequent Project, the ratio of (i) the Project Limit for such Project to (ii) the amount by which the Project Costs for such Project (as set forth in its Project Budget) exceeds such Project Limit.
"Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
"Designated Lender" means a special purpose corporation that is identified as such on the signature pages of this Agreement, as well as each special purpose corporation that (a) shall have become a party to this Agreement pursuant to Section 8.07(i); and (b) is not otherwise a Lender.
"Designated Lender Note" means a Note evidencing the obligation of the Borrower to repay Advances made by a Designated Lender.
"Designating Lender" means each Lender that is identified as
such on the signature pages of this Agreement, as well as each Lender
that shall designate a Designated Lender pursuant to Section 8.07(i).
"Designation Agreement" means a designation agreement in
substantially the form of Exhibit F, entered into by a Lender and a
Designated Lender and accepted by the Agent.
"Development Authority Sale/Leaseback" means (a) the Wansley
Sale/Leaseback; and (b) any sale of a Project (other than the Wansley
Project) to a development authority created and existing under the laws
of the State of Georgia (or any political sub-division thereof), where
(i) such development authority is a political sub-division or agency of
a local government of the State of Georgia; (ii) the purchase price for
such Project is paid for with proceeds from the issuance of Project
Bonds which are purchased by the Borrower or a wholly owned Subsidiary
of the Borrower; (iii) such Project is leased by a Borrower Group
Member which has the right to purchase such Project at any time at a
nominal purchase price so long as all Project Bonds relating thereto
have been repaid in full, (iv) Southern has issued a support letter in
the form of Exhibit M; and (v) all such Project Bonds are issued at par
with a repayment or maturity date which is subsequent to the Final
Maturity Date and with no amortization of the Debt thereunder occurring
prior thereto.
"Dollars" means the lawful currency of the United States.
"Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule I or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent.
"Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c) a commercial bank organized under the laws of the United States, or any State thereof; (d) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof; (e) a commercial bank organized under the laws of any other country that is a member of the Organization for Economic Cooperation and Development or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, so long as such bank is acting through a branch or agency located in the country in which it is organized or another country that is described in this clause (e); (f) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business; and (g) the central bank of any country that is a member of the Organization for Economic Cooperation and Development; provided that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee; provided further that the entities listed in clauses (c)-(g) above shall have a short-term credit rating of at least "Prime-2" (or the then equivalent grade) by Moody's or "A-2" (or the then equivalent grade) by S&P or "F-2" (or the then equivalent grade) by Fitch, or, if no short-term credit rating is available, a long-term credit rating of at least "Baa2" (or the then equivalent grade) by Moody's or "BBB" (or the then equivalent grade) by S&P or Fitch; provided further that if any entity listed in clause (g) above shall have no short-term or long-term credit rating, the relevant credit rating shall be the short-term or long-term credit rating of the country of which such entity is the central bank.
"Equity Contributions" means, with respect to any Project, (a) all equity contributed to the Borrower by Southern with respect to such Project, if any, which, if contributed after the date of this Agreement, is contributed pursuant to the Southern Equity Agreement; and (b) all retained earnings of the Borrower available for the making of a Restricted Payment in accordance with Section 5.02(b), if any, which are applied to pay outstanding Project Costs with respect to such Project.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder.
"ERISA Affiliate" means each person (as defined in Section 3(9) of ERISA) which together with the Borrower or any Subsidiary of the Borrower would be deemed to be a member of the same "controlled group" within the meaning of Sections 414(b), (c), (m) and (o) of the Code.
"Eurocurrency Reserve Requirements" means for any day as applied to a Eurodollar Rate Advance, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities") in Regulation D of such Board maintained by a member bank of such System.
"Eurodollar Base Rate" means, with respect to each day during each Interest Period pertaining to a Eurodollar Rate Advance, the rate per annum equal to the average (rounded upward, if necessary, to the nearest 1/16 of 1%) of the respective rates notified to the Agent by each of the Reference Banks as the rate at which such Reference Bank is offered Dollar deposits at or about 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period in the London interbank eurodollar market for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Rate Advance to be outstanding during such Interest Period.
"Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule I or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent.
"Eurodollar Rate" means with respect to each day during each Interest Period pertaining to a Eurodollar Rate Advance, a rate per annum determined for such day in accordance with the following formula (rounded upward, if necessary, to the nearest 1/100 of 1%):
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Rate Advance" means an Advance that bears interest as provided in Section 2.06(a)(ii).
"Events of Default" has the meaning specified in Section 6.01.
"Exempt Asset Sale Proceeds" means the proceeds from any sale of Assets (a) in the ordinary course, which sale would not reasonably be expected to result in a material adverse effect to the operation and maintenance of the Projects; (b) other than Assets relating to any Project, to conform with governmental regulations; (c) consisting of short-term readily marketable investments purchased for cash management purposes; or (d) owned by an Unrestricted Subsidiary.
"Facility" means the senior unsecured revolving credit facility made or to be made available by the Lenders to the Borrower under this Agreement.
"Facility Rating" means, as of any date, the credit rating then in effect by S&P, Moody's or Fitch as the case may be, for the Debt under the Facility, as demonstrated by written evidence delivered to the Agent which is in form and substance reasonably satisfactory to the Agent.
"Federal and State Energy Law and Regulation" includes the Federal Power Act, as amended, the Public Utility Regulatory Policies Act of 1978, as amended, the Powerplant and Industrial Fuel Use Act of 1978, as amended, the Public Utility Holding Company Act of 1935, as amended, the Energy Policy Act of 1992, as amended, any State law regulating public utility companies, electric utilities, public service companies, or any similar entity, as well as any regulation implementing any of the foregoing.
"Federal Funds Effective Rate" means, with respect to each day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Effective Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day; and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Effective Rate for such day shall be the average rate quoted to the Agent on such day on such transactions as the Agent may reasonably determine.
"Filing Condition" means, with respect to any order, approval, permit or authorization issued by FERC, (a) a ministerial subsequent filing, reporting or notification condition customarily imposed on sellers with market-based rate approval from FERC; or (b) with respect to a Power Purchase Agreement only, a condition that an unredacted version of such contract be filed on a non-confidential basis but with the requirement to make such filing held in abeyance pending resolution of a proceeding as to whether a redacted or unredacted version of such Power Purchase Agreement is to be filed on a non-confidential basis.
"Final Completion" means the date on which Southern certifies in the form of Exhibit L-2 to the Agent that, in the case of (a) any Project, (i) such Project has achieved Substantial Completion; and (ii) the tested output in megawatts for such Project has achieved 100% of its Guaranteed Output and such Project has achieved a tested heat rate not greater than 100% of its Guaranteed Heat Rate, in each case, as set forth in the Project Schedule for such Project and as tested in accordance with the testing procedures applicable to such Project set forth in, or determined in accordance with, Schedule V; and (b) any other electric generation plant owned or leased by the Borrower or any Relevant Subsidiary, the equivalent thereof has occurred.
"Finance Lease" means, for any Person, any lease, or any hire purchase, conditional sale or other form of title retention agreement which is recognized, in accordance with GAAP, in such Person's financial statements as being in the nature of a borrowing.
"Fitch" means Fitch IBCA, Duff & Phelps, a division of Fitch, Inc.
"Funds Availability Date" has the meaning specified in Section 3.01.
"Generally Accepted Accounting Principles" or "GAAP" means those accounting principles, standards and practices generally accepted in the United States consistent with those applied by the Borrower, as in effect at the relevant time.
"Goat Rock 1 Project" means the approximately 571MW gas-fired electric generation plant constructed or to be constructed by the Borrower or an Affiliate of the Borrower in Lee County, Alabama with an expected completion date in April 2002.
"Goat Rock 2 Project" means the approximately 615MW gas-fired electric generation plant constructed or to be constructed by the Borrower or an Affiliate of the Borrower in Lee County, Alabama with an expected completion date in June 2003.
"Governmental Authority" means any nation or government, any state, province or other political subdivision thereof, and any governmental, executive, legislative, judicial, administrative or regulatory agency, department, authority, instrumentality, commission, board or similar body, whether federal, state, provincial, territorial, local or foreign.
"Granting Lender" has the meaning specified in Section 8.07(j).
"Guaranteed Heat Rate" means, with respect to (a) any Initial Project, the average heat rate associated with such Project while operating in base mode (namely, at 100% combustion turbine load) at the average ambient rated conditions for such Project, as set forth in Schedule IV; and (b) any Subsequent Project, the average heat rate associated with such Project, as set forth in the Project Schedule delivered pursuant to Section 3.04 for such Project, while operating in the mode of operation and at the rated conditions set forth therein.
"Guaranteed Output" means, with respect to (a) any Initial Project, the capability of such Project with all possible modes of operation in use at rated summer conditions for such Project, including the following: operation in base load (namely, 100% combustion turbine load), full pressure operation, evaporative cooling, and power augmentation modes, as set forth in Schedule IV; and (b) any Subsequent Project, the capability of such Project, as set forth in the Project Schedule delivered pursuant to Section 3.04 for such Project, while operating in the mode of operation and at the rated conditions set forth therein.
"High Use Date" means each day on which the aggregate amount of all outstanding Advances exceeds 33% of the aggregate of the Commitments of all Lenders.
"Indemnified Costs" has the meaning specified in Section 7.05.
"Indemnified Party" has the meaning specified in Section 8.04(b)(i).
"Independent Engineer and Environmental Consultant" means R.W. Beck, Inc. or any successor consultant appointed by the Agent and reasonably acceptable to the Borrower.
"Independent Insurance Consultant" means Marsh USA Inc. or any successor consultant appointed by the Agent and reasonably acceptable to the Borrower.
"Independent Market Consultant" means PA Consulting, Inc. or any successor consultant appointed by the Agent and reasonably acceptable to the Borrower.
"Information Memorandum" means the information memorandum dated October 8, 2001 and used by the Arrangers in connection with the syndication of the Commitments by the Arrangers (excluding, however, the report of the Independent Market Consultant, the Independent Engineer and Environmental Consultant and the Independent Insurance Consultant, and the information in such information memorandum the source of which is identified as the report of the Independent Market Consultant, the Independent Engineer and Environmental Consultant or the Independent Insurance Consultant).
"Initial Base Case Projections" means a projection prepared by the Borrower of the operating results for the Initial Projects for a period from the date of this Agreement up to and including December 31, 2023.
"Initial Lenders" has the meaning set forth in the introductory paragraph to this Agreement.
"Initial Project Budget" means, for each Project, the project budget setting forth the Projects Costs incurred or to be incurred for such Project delivered to the Agent by the Borrower prior to the first Utilization related to such Project pursuant to Section 3.01, 3.02 or 3.06, as applicable (in the case of an Initial Project) or Section 3.04 or 3.06, as applicable (in the case of a Subsequent Project).
"Initial Project Limit" means, with respect to each Project, the aggregate amount of all Utilizations related to such Project that is permitted under this Agreement, which amount with respect to (a) each Initial Project, is set forth in Schedule III; and (b) each Subsequent Project, shall be calculated by the Borrower (and agreed to by the Agent) based upon the Initial Project Budget and the Project Base Case Projections for such Project as the maximum principal amount of Utilizations permitted with respect to such Project, such determination to be consistent with the Required Project DSCR for such Project (but which shall not, in any event, exceed 60% of the Project Costs, as set forth in the Initial Project Budget for such Project).
"Initial Projects" means, collectively, the Autaugaville 1 Project, the Autaugaville 2 Project, the Dahlberg Project, the Goat Rock 1 Project, the Goat Rock 2 Project and the Wansley Project, in each case, owned or leased (pursuant to a Development Authority Sale/Leaseback) by the Borrower, and including all buildings, structures and improvements, and easements with respect thereto, all alterations thereto or replacements thereof, all fixtures, attachments, appliances, equipment, machinery and other articles attached thereto or used in connection therewith and all parts which may from time to time be incorporated or installed in or attached thereto, all contracts and agreements for the purchase or sale of commodities or other personal property related thereto, all leases of personal property related thereto, and all other real and tangible and intangible personal property related thereto; each individually, an "Initial Project".
"Insurance Account" means an account of the Borrower established with the Agent pursuant to Section 5.01(l)(ii) and maintained with the Agent for purposes of holding Loss proceeds (other than business interruption insurance proceeds) in excess of $1,000,000, which are, or may become, payable with respect to Completed Projects.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below and, thereafter with respect to each Eurodollar Rate
Advance, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one (1), two (2), three
(3) or six (6) months, or such other period agreed between the Borrower
and the Agent (acting on the instructions of all Lenders), as the
Borrower may, upon notice received by the Agent not later than 11:00
A.M. (New York City time) on the third Business Day prior to the first
day of such Interest Period, select; provided that:
(a) the Borrower may not select any Interest Period that ends after the Final Maturity Date;
(b) Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration;
(c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, such Interest Period shall be extended to end on the next succeeding Business Day; provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day;
(d) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month; and
(e) no more than three (3) different Interest Periods may exist concurrently with respect to all outstanding Advances of each Category.
"Intermediate (High)" means, on any date, any electric generation plant which is projected, in the then most recent Independent Market Consultant report delivered pursuant to Article III or Section 5.01(r), to have an average Capacity Factor of 45% or more, but less than 65%, in each case, during the Remaining Base Case Period.
"Intermediate (Low)" means, on any date, any electric generation plant which is projected, in the then most recent Independent Market Consultant report delivered pursuant to Article III or Section 5.01(r), to have an average Capacity Factor of 20% or more, but less than 45%, in each case, during the Remaining Base Case Period.
"Investment Grade Rating" means (a) with respect to any Person other than the Borrower, a rating of any class of its non-credit-enhanced long-term senior unsecured Debt of at least "Baa3" by Moody's and "BBB-" by S&P; and (b) with respect to the Borrower, a rating of the Debt under the Facility (giving effect to the Southern Completion Guarantee) of at least "Baa3" by Moody's and "BBB-" by each of S&P and Fitch.
"Kind" has the meaning specified in the definition of "CP Commitment Reservation".
"Law" means any constitution, decree, judgment, legislation, order, ordinance, regulation, statute, treaty or other legislative measure having the force of law (and "lawful" and "unlawful" shall be construed accordingly).
"Lease Obligations" means, with respect to any Person who is a lessee under any lease which is not a Synthetic Lease or a Finance Lease, the present value of all payment obligations (without double-counting) that are in the nature of a rental payment obligation or are otherwise not avoidable at the option of the lessee without incurring other costs or risks (including for this purpose purchase rights for which the failure to exercise results in other payment obligations and guarantees of value) such Person may have under such lease and related documents, provided that (i) payments which such Person may be entitled unilaterally to determine not to pay without incurring other payment obligations, (ii) termination value obligations which may be due if events not expected to happen occur (but not excluding any which are expected to be payable), and (iii) indemnity obligations, shall not be included in the meaning of "Lease Obligations". For this purpose, the present value of such "Lease Obligations" with respect to any such lease shall equal the amount obtained by discounting all relevant obligations from their respective due dates to the date of determination in accordance with accepted financial practice and at a discount factor of 10% per annum.
"Lenders" means the Initial Lenders, each Person that shall become a party to this Agreement pursuant to Section 8.07(a) and the Designated Lenders, if any; provided that the term "Lender" shall exclude each Designated Lender when used in reference to an Advance (except to the extent a Designated Lender is the obligee of an Advance actually funded by it pursuant to Section 2.01(c)), terms relating to the Advances (except as noted above) and the Commitments.
"Lien" means any mortgage, pledge, lien, hypothecation, security interest or other charge, encumbrance or other arrangement in the nature of a security interest in property; provided that the term "Lien" shall not mean any easements, rights-of-way, zoning restrictions, leases, subleases, licenses, sublicenses, other restrictions on the use of property, defects in title to property or other similar encumbrances, in each case, that do not interfere materially with the use of such property for its intended purpose.
"Liquidity Lender" means, with respect to any Designated Lender, any Person (other than its Designating Lender) which may be liable for the Debt of such Designated Lender.
"Loan Documents" means, collectively, this Agreement, the Notes, the Southern Completion Guarantee and the Southern Equity Agreement; each individually, a "Loan Document".
"Loan Parties" means, collectively, the Borrower and Southern; each individually, a "Loan Party".
"Loss" means, with respect to any Completed Project (a) any
total or partial loss, as a result of a casualty of such Project; or
(b) if such Project (or a substantial portion thereof) is condemned,
seized, compulsorily acquired or otherwise expropriated by any
Governmental Authority under power of eminent domain.
"Low Use Date" means each day which is not a High Use Date.
"Majority Lenders" means at any time Lenders owed at least a majority of the then aggregate unpaid principal amount of the Advances owing to the Lenders, or, if no such principal amount is then outstanding, Lenders having at least a majority of the aggregate amount of the Commitments.
"Material Adverse Effect" means a material adverse change in, or material adverse effect on, (a) the financial condition, operations, business or properties of the Borrower or Southern, as the case may be, which would have a material adverse effect on the ability of the Borrower or Southern to pay amounts owed by, or to perform obligations of, the Borrower from time to time under any Loan Document, or Southern under the Southern Completion Guarantee or the Southern Equity Agreement, as the case may be; or (b) the rights or remedies of the Lenders under, or the validity, enforceability or legality of, any Loan Document.
"Material Documents" means the Loan Documents and the PPA Documents.
"Mechanical Completion" means, with respect to any electric generation plant owned or to be owned, or leased or to be leased, by a Borrower Group Member (including the Projects), the time at which the construction manager for such plant certifies to the Borrower (a) that all construction work for such plant is complete according to the proper scope of work and such plant is ready for performance testing with the exception of Punch List Items; (b) of the satisfactory completion of the materials and equipment associated with individual turnover packages (all items within the turnover package shall be completed to the satisfaction of the Borrower's start-up or testing manager, all equipment shall be capable of operation in a safe and proper manner without voiding warranties, all equipment systems installed associated with the turnover package, including remote control systems, shall be ready to commence start-up and testing) and the satisfactory completion and documentation of the construction completion testing; and (c) of the removal of all construction, temporary facilities that may interfere with or disrupt the Borrower's start-up and plant testing activities, waste material and rubbish from the work area.
"Moody's" means Moody's Investors Service, Inc.
"Nature" means, with respect to any Advance, a Completed Project Advance or an Uncompleted Project Advance, as the context may require.
"Non-Recourse Date" means, with respect to any Project, the earlier to occur of Final Completion of, and the Buydown Date (but, if a Buydown Amount is payable with respect to such Project, only if the Buydown Amount has been paid) for, such Project.
"Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A, evidencing the aggregate maximum indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender.
"Notice of Utilization" has the meaning specified in Section 2.02(a).
"Original Commercial Paper" means Commercial Paper other than
(a) Refinancing Commercial Paper; or (b) Rollover Commercial Paper.
"Other Taxes" has the meaning specified in Section 2.13(a).
"Participant" means any Person to whom a participation has been granted by a Lender of its rights and obligations under this Agreement pursuant to Section 8.07(f).
"Peaker" means (a) a quickstart gas-fired simple cycle electric generation plant; or (b) on any date, any electric generation plant which is projected, in the then most recent Independent Market Consultant report delivered pursuant to Article III or Section 5.01(r), to have an average Capacity Factor of less than 20% during the Remaining Base Case Period.
"Permitted Encumbrances" shall mean liens for taxes not yet due and payable or being contested in good faith, mechanics' and similar liens arising or incurred in the ordinary course of business and representing obligations not yet due, and such other liens, imperfections in or failure of title, charges, easements, restrictions and encumbrances which do not materially detract from the value of the Projects for their contemplated use or materially interfere with the contemplated use thereof.
"Person" means any individual, company, corporation, firm, partnership, joint venture, undertaking, association, organization, trust, state or agency of a state (in each case, whether or not having separate legal personality).
"Plan" means any single-employer plan as defined in Section 4001 of ERISA and to which ERISA applies, which is maintained, or at any time during the five (5) calendar years preceding the date of this Agreement was maintained, for employees of the Borrower, any Subsidiary of the Borrower or an ERISA Affiliate.
"Plants" means the Projects and other electric generation plants owned or leased by the Borrower or any Relevant Subsidiary.
"Portfolio Adjusted Base Case Projections" means, with respect to any Relevant Event, the weighted average of each of the minimum Required Project DSCRs (for each year, or part thereof, during the Remaining Base Case Period) and the average Required Project DSCRs (for the Remaining Base Case Period) applicable, in each case, to all Relevant Completed Plants immediately after such Relevant Event, with such weighted average determined, in each case, based upon the cash earnings from operations (after all operating expenses but prior to interest and principal payments and income taxes) for each such Relevant Completed Plant during the Remaining Base Case Period, determined (a) with respect to each Plant which has achieved (i) Substantial Completion but not Final Completion, by reference to the performance of such Plant, as certified by Southern to the Agent for purposes of its Substantial Completion; and (ii) Final Completion, by reference to the performance of such Plant, as certified by Southern to the Agent for purposes of its Final Completion; and (b) using the figures in an updated Independent Market Consultant report provided in connection with such Relevant Event pursuant to Section 5.01(r).
"Power Purchase Agreement" means any contract for the sale of electric capacity and energy by a Borrower Group Member with a term in excess of one year.
"PPA Documents" means all Power Purchase Agreements and, if any such Power Purchase Agreement is not with an Acceptable PPA Counterparty, all Acceptable Credit Support relating thereto.
"PPA Parameters" means, with respect to any electric generation plant, any Power Purchase Agreement not previously provided in the form necessary to satisfy Section 3.01(c)(ix)(D):
(a) with a purchaser or off-taker which is an Acceptable PPA Counterparty;
(b) which provides for capacity or fixed or other payments to the Seller which are payable regardless of availability (except to the extent caused by the Seller or by force majeure) or actual dispatch of such plant, and which are sufficient to achieve the Required Project DSCR applicable to such plant (in each case, prorated if such Power Purchase Agreement is not for the entire capacity of such plant);
(c) pursuant to which (i) if such plant has not yet achieved Substantial Completion, upon Substantial Completion, all conditions precedent for commencement of the obligations of the purchaser or off-taker with respect to payment for capacity, energy or ancillary services provided under such Power Purchase Agreement (other than the passage of time) will have been satisfied; (ii) if such plant has achieved Substantial Completion, all conditions precedent for commencement of the obligations of the purchaser or off-taker with respect to payment for capacity, energy or ancillary services provided under such Power Purchase Agreement (other than the passage of time) have been satisfied; and (iii) penalties or liquidated damages for delay in completion of construction or completion of such plant at a reduced capacity from that contracted for under such Power Purchase Agreement (or equivalent sums), if any, are payable by the Seller at or are only accrued as of or prior to Substantial Completion;
(d) pursuant to which the obligations of the Seller
(i) with respect to the date when, and the extent to which,
such plant is available for dispatch, is consistent with the
Scheduled Completion Date for such Project (or the equivalent
thereof, as applicable), as confirmed by the Independent
Engineer and Environmental Consultant, or may otherwise be met
with other resources available to the Seller; and (ii) which
relate to performance of such plant (with respect to output,
heat rate and availability) are consistent with the design of,
and technical and performance parameters applicable to, such
plant, as confirmed by the Independent Engineer and
Environmental Consultant, or may otherwise be met with other
resources available to the Seller;
(e) pursuant to which substantially all costs and expenses payable by the Seller with respect to fuel (including any transportation thereof) for the generation of capacity, energy and/or ancillary services provided to the purchaser or off-taker thereunder are (i) subject to a full "pass-through" to, or may otherwise be recovered in full from, the purchaser or off-taker; or (ii) recoverable from the purchaser or off-taker, based on a fuel price index that matches with reasonable closeness the projected fuel type and fuel costs of such Project, to the extent that the heat rate of such plant satisfies applicable heat rates agreed between the parties in such Power Purchase Agreement;
(f) pursuant to which fixed and variable operations and maintenance costs and expenses will be provided for either in the capacity payment under such Power Purchase Agreement or in a separate $/kW-year or $/MWh payment;
(g) which would not subject the Seller to market damages to cover replacement costs incurred by the purchaser or off-taker for any failure by the Seller to perform its obligations under such Power Purchase Agreement, to the extent such failure is due to planned or scheduled outages of such plant or events of force majeure (whether expressly provided or after taking into account the availability factor utilized in such Power Purchase Agreement);
(h) which does not require the granting of any Lien in connection therewith; and
(i) which is not assignable, except to another Acceptable PPA Counterparty or unless such assignment does not release the original Acceptable Counterparty from its obligations.
"Project Advance" has the meaning specified in Section 2.16.
"Project Base Case Projections" means, with respect to any Subsequent Project, projections prepared by the Independent Engineer and Environmental Consultant (and approved by the Borrower) for such Project in the same format as the Initial Base Case Projections and reflecting the prices, costs and other relevant amounts set forth in the certificates from the Independent Market Consultant and the Independent Engineer and Environmental Consultant delivered in connection with such Project pursuant to Section 3.04.
"Project Bonds" means industrial development revenue bonds issued by any development authority created and existing under the laws of the State of Georgia in connection with a Development Authority Sale/Leaseback.
"Project Budget" means, for each Project, its Initial Project Budget or, if an Adjusted Project Budget has been received by the Agent for such Project pursuant to Section 2.01(b) or 5.01(r), the then most recent Adjusted Project Budget.
"Project Costs" means, with respect to any Project, the cost of the development, design, engineering, acquisition, installation, equipping, construction, assembly, inspection, testing, completion, and start-up of such Project, including (without duplication): (a) all amounts payable under any construction contracts, any contractor bonuses, site acquisition and preparation costs, any interconnection and transmission upgrade costs payable by any Borrower Group Member, all steam and water interconnection costs, all costs related to water clarification facilities and/or water treatment facilities, all costs of acquisition and construction of natural gas fuel handling and processing equipment (if any) and interconnection expenses payable by any Borrower Group Member and all other costs payable by any Borrower Group Member under all Power Purchase Agreements and other contracts relating to such Project; (b) all other costs, including fuel-related costs and prepaid fuel costs, management services fees and expenses and expenses to complete the development, acquisition, construction and financing of such Project; and (c) interest on Advances made with respect to, and commitment fees on the unused portion of the Commitments available to, such Project; provided that in the case of Projects that are not wholly owned or leased (pursuant to a Development Authority Sale/Leaseback) by the Borrower or a wholly owned Subsidiary (other than an Unrestricted Subsidiary) of the Borrower, Project Costs shall consist of a pro rata portion (based on the Borrower's ownership or leasehold interest percentage in such Project or direct or indirect ownership percentage in the Person owning such Project, as the case may be) of the amounts of costs described above.
"Project Debt" means, at any time with respect to any Project, all Advances then outstanding and all Commercial Paper then outstanding (and as to which a CP Commitment Reservation is then in effect), in each case, with respect to such Project.
"Project DSCR" means, at any time with respect to any electric generation plant, a pro forma ratio, for each of the twenty (20) years (or part thereof) after the Scheduled Completion Date for such electric generation plant (or equivalent thereof if such plant is not a Project), of (a) all cash earnings from operations of such electric generation plant, prior to interest, principal and any income tax payments during such year (or part thereof, as the case may be), to (b) all Debt service during such year (or part thereof, as the case may be) with respect to Debt incurred with respect to such electric generation plant (assuming such Debt is fully amortized during such twenty (20) year period and a fixed interest rate of 8.25% per annum).
"Project Finance Debt" means Debt incurred or existing in connection with the financing or refinancing of any Asset (other than a Project or the Assets comprising a Project, or any portion thereof), the repayment of which Debt is to be made from the revenues arising out of, or other proceeds of realization from, the acquired or created Asset or project, with recourse to those revenues and proceeds and Assets forming the subject matter of such Asset or project (including insurance, contracts and shares or other rights of ownership in the entity(ies) which own the relevant Assets or project) and other Assets ancillary thereto but without substantial recourse to any other Asset (other than Assets of any Unrestricted Subsidiary) or otherwise to the Borrower or any Relevant Subsidiary; provided that substantial recourse shall not be deemed to exist by reason of normal and customary sponsor support arrangements if (a) the Borrower's obligations under such arrangements, together with all other such arrangements then in existence, does not exceed the net cash available for Restricted Payments by the Borrower pursuant to Section 5.02(b) in its two (2) fiscal quarters immediately preceding the incurrence thereof; and (b) the Borrower has an Investment Grade Rating which is reaffirmed by S&P and Moody's immediately after the incurrence of such obligations.
"Project Limit" means, with respect to each Project, the aggregate amount of all Utilizations related to such Project that is permitted under this Agreement, which amount with respect to (a) each Initial Project, is set forth in Schedule III; and (b) each Subsequent Project, shall be calculated by the Borrower (and agreed to by the Agent) based upon the Initial Project Budget and the Project Base Case Projections for such Subsequent Project as the maximum principal amount of Utilizations permitted with respect to such Project, such determination to be consistent with the Required Project DSCR for such Project (but which shall not, in any event, exceed the amount equal to 60% of the Project Costs, as set forth in the Initial Project Budget for such Project), in each case, as amended pursuant to Section 2.01(b); provided that the "Project Limit" for (i) each Project which is an Uncompleted Project on the date of the first Utilization with respect to such Project shall, from and after the Non-Recourse Date for such Project, be the aggregate principal amount of all Utilizations outstanding as of the date of determination (including the Utilizations, if any, made on the Non-Recourse Date or repaid or reduced (in the case of a repayment of Commercial Paper and the corresponding reduction in the outstanding CP Commitments, if any, made with respect to such Commercial Paper) on or after the Non-Recourse Date); and (ii) each Project which is a Completed Project on the date of the first Utilization with respect to such Project shall, as of each date after the date of such first Utilization, be the aggregate principal amount of all Utilizations outstanding on the date of determination (including the Utilizations, if any, made on such date or repaid or reduced (in the case of a repayment of Commercial Paper and the corresponding reduction in the outstanding CP Commitments, if any, made with respect to such Commercial Paper) on such date).
"Project Schedule" means, with respect to each Project, a schedule for such Project which, with respect to each (a) Initial Project, is set forth in Schedule IV; and (b) Subsequent Project, is delivered by the Borrower to the Agent prior to the first Utilization related to such Project pursuant to Section 3.04 or 3.06 (as the case may be), setting forth such Project's Scheduled Completion Date (if such Project has not yet achieved Final Completion) and the Guaranteed Output and Guaranteed Heat Rate for such Project.
"Projects" means, collectively, the Initial Projects and the Subsequent Projects; each individually, a "Project".
"PUHCA" means the Public Utility Holding Company Act of 1935, as amended.
"Punch List Items" means, with respect to the construction of any electric generation plant, those incomplete work items that do not have a material effect on the operations and maintenance of such plant, including painting, platforms, and damaged instrument glass.
"Rating Level" means, with respect to any date, any of the following levels (with Level 1 being the "highest" of such Rating Levels and Level 5 being the "lowest"), as determined by reference to the Facility Ratings, if any, on such date issued by S&P, Fitch and Moody's:
----------------------------------------------------
Facility Rating:
Rating Level S&P/Moody's/Fitch
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Level 1 BBB+/Baa1/BBB+ or higher
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Level 2 BBB/Baa2/BBB
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Level 3 BBB-/Baa3/BBB-
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Level 4 BB+/Ba1/BB+ or lower
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Level 5 Unrated/Partially Rated
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provided that (i) if on any day the Facility Ratings established by S&P, Fitch and Moody's fall within different Rating Levels, the Rating Level for such day shall be determined by reference to the lowest such Facility Rating; (ii) if any Facility Rating established by S&P, Fitch or Moody's shall be changed, such change shall be effective as of the date on which such change is notified in writing to the Borrower, or is announced publicly, by the rating agency making such change; and (iii) if S&P, Fitch or Moody's shall change the basis on which ratings are established, each reference to a Facility Rating announced by S&P, Fitch or Moody's, as the case may be, shall refer to the then equivalent rating by S&P, Fitch or Moody's, as the case may be.
"Recourse Debt" means all Debt of the Borrower and each Relevant Subsidiary (including subordinated debt) other than Affiliate Subordinated Debt.
"Reference Banks" means Citibank, The Bank of Tokyo- Mitsubishi, Ltd. and Commerzbank AG.
"Refinancing" means the incurrence of Debt by the Borrower or any Subsidiary (other than pursuant to the issuance of Original Commercial Paper or Rollover Commercial Paper) for purposes of refinancing Project Costs for, or outstanding Utilizations made with respect to, one or more Projects.
"Refinancing Commercial Paper" means Commercial Paper the proceeds of which are used to refinance outstanding Project Advances made with respect to the same Project.
"Refinancing Date" means, with respect to any Project, the date on which there are no outstanding Advances made with respect to such Project and no Commitments available with respect to such Project.
"Register" has the meaning specified in Section 8.07(d).
"Relevant Completed Plants" means, when used to determine (a) the Buydown Amount to be paid in connection with the occurrence of the Buydown Date for any Substantially Completed Project, all Completed Plants as of such Buydown Date (other than any other Substantially Completed Project for which a Buydown Amount is also paid or to be paid on such Buydown Date) and such Substantially Completed Project; (b) the Buydown Amount to be paid with respect to any Substantially Completed Project upon the occurrence of a Southern Event of Default, all Completed Plants as of such Buydown Date (other than any other Substantially Completed Project for which a Buydown Amount is also paid or to be paid as a result of such Southern Event of Default) and such Substantially Completed Project; and (c) the amount, if any, to be prepaid pursuant to Section 2.09(b)(iii) on the Sale Prepayment Date relating to any Sale, all Completed Plants as of such Sale Prepayment Date.
"Relevant Event" means, as the context may require, a Buydown Event, a Southern Event of Default or a Sale Event.
"Relevant Subsidiaries" means, collectively, all Subsidiaries (other than Unrestricted Subsidiaries) of the Borrower; each individually, a "Relevant Subsidiary".
"Remaining Base Case Period" means, as of any date, the period from the first day of the fiscal quarter in which such day occurs up to and including December 31, 2023.
"Reportable Event" means a "reportable event" as defined in
Section 403 of ERISA with respect to which the notice requirements to
the Pension Benefit Guaranty Corporation established under ERISA (or
any successor thereto) have not been waived.
"Representatives" has the meaning specified in the definition of "Confidential Information".
"Required Lenders" means at any time Lenders owed at least 75% of the then aggregate unpaid principal amount of the outstanding Advances, or, if no such principal amount is then outstanding, Lenders having at least 75% of the aggregate amount of the Commitments.
"Required Project DSCR" means, at any date with respect to any electric generation plant, the following minimum Project DSCR for each of the years (or part thereof) thereafter during the 20 years after the Scheduled Completion Date of such plant (if it is a Project), or the equivalent thereof (if such plant is not a Project), and the following average Project DSCR for such period: (a) if such electric generation plant is a Baseload, an average Project DSCR of 3.30:1.00 and a minimum Project DSCR of 2.50:1.00; (b) if such electric generation plant is an Intermediate (High), an average Project DSCR of 3.60:1.00 and a minimum Project DSCR of 2.80:1.00; (c) if such electric generation plant is an Intermediate (Low), an average Project DSCR of 4.30:1.00 and a minimum Project DSCR of 3.70:1:00; and (d) if such electric generation plant is a Peaker, an average Project DSCR of 5.00:1.00 and a minimum Project DSCR of 4.50:1.00; provided that (i) an average and a minimum Project DSCR of 1.60:1.00 shall be applicable during the term of any Power Purchase Agreement entered into with respect to the entire capacity of such electric generation plant which is owned by the Borrower or any Relevant Subsidiary, if the Agent has received a Required Project DSCR Certificate, dated as of such date, with respect to such electric generation plant; and (ii) if the entire capacity of such electric generation plant which is owned by the Borrower or any Relevant Subsidiary is not contracted for under all such Power Purchase Agreements, the average and minimum Project DSCRs applicable to such electric generation plant shall be determined by reference to the weighted average of 1.60:1.00 and the minimum and average Project DSCR (as the case may be) applicable to such electric generation plant if there were no such Power Purchase Agreement, with such weighted average determined based upon the portion of the capacity of such electric generation plant which is the subject of such Power Purchase Agreement(s) at any relevant time.
"Required Project DSCR Certificate" means a certificate of the
Borrower certifying, with respect to each Power Purchase Agreement and
related Acceptable Credit Support, if any, entered into with respect to
(a) any Project, and which PPA Documents were previously delivered to
the Agent in satisfaction of Section 3.01(c)(ix)(D), 3.02(c)(ii),
3.04(c) or 3.06(a) or (d), that each such PPA Document remains in full
force and effect, all necessary approvals under all Federal and State
Energy Laws and Regulations required to be obtained with respect
thereto under Section 3.02, 3.04 or 3.06 (as applicable) remain in full
force and effect, and there is no litigation, arbitration or
administrative proceeding currently pending against any Borrower Group
Member concerning (i) the pricing terms under such Power Purchase
Agreement; or (ii) any such PPA Document which has had or would
reasonably be expected to have a Material Adverse Effect; and (b) any
other Plant which is not a Project, and which PPA Documents are
delivered to the Agent together with such certificate, that (i) such
Power Purchase Agreement complies with all of the PPA Parameters and
does not contain any additional terms not set forth in the PPA
Parameters which impose additional material obligations outside the
ordinary course of business of the industry generally on, or otherwise
materially reduce the benefit to, any Borrower Group Member thereunder;
(ii) such PPA Documents are in full force and effect; and (iii) all
necessary approvals required to be obtained with respect to such PPA
Documents under all Federal and State Energy Laws and Regulations have
been obtained, are in full force and effect and are final and
non-appealable but for any Filing Conditions, and do not contain any
restrictions, conditions or requirements which are then required to be
satisfied and have not been satisfied, other than any Filing
Conditions.
"Restricted Payments" means, with respect to any Person, any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any class of capital stock of such Person.
"Rollover Commercial Paper" means any Commercial Paper which is issued in the amount of, and for the repayment of, existing Commercial Paper on the maturity thereof and for which CP Commitments are then outstanding under the Facility.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
"Sale" means the sale (including by way of sale/leaseback other than a Development Authority Sale/Leaseback), in whole or in part, of any Asset of the Borrower or any of its Relevant Subsidiaries or the ownership interest in any direct or indirect Relevant Subsidiary to a Person which is not a Borrower Group Member.
"Sale Event" means, with respect to any Sale, the earlier to occur of (a) the date which is six (6) months after receipt of all or any part of the Sale Proceeds arising from such Sale; and (b) issuance of a prepayment notice from the Borrower with respect to the Sale Proceeds from such Sale.
"Sale Prepayment Date" has the meaning specified in Section 2.09(b)(iii).
"Sale Proceeds" means, with respect to any Sale, the proceeds arising from such Sale, net of customary transaction costs and expenses, other than (a) Exempt Asset Sale Proceeds; and (b) proceeds which are applied to repay all Recourse Debt of the Borrower and its Relevant Subsidiaries, other than Debt under the Facility, incurred in connection with the acquisition, improvement, development, ownership or operation of such Asset.
"Scheduled Completion Date" means, with respect to each Project, the date on which its Final Completion is expected to occur, as set forth in the Project Schedule for such Project.
"Seller" means, with respect to any electric generation plant, the Borrower or any Relevant Subsidiary which owns or leases such plant, as the case may be.
"Similar Asset" means any gas-fired electric generation plant (other than an Initial Project or a Subsequent Project) in, or to be constructed in, the United States, which is, or is to be, owned wholly or partially (as tenants-in-common) or leased (pursuant to a Development Authority Sale/Leaseback) by the Borrower or by any Relevant Subsidiary which is wholly or majority owned by, and is controlled by, the Borrower, including all buildings, structures and improvements, and easements with respect thereto, all alterations thereto or replacements thereof, all fixtures, attachments, appliances, equipment, machinery and other articles attached thereto or used in connection therewith and all parts which may from time to time be incorporated or installed in or attached thereto, all contracts and agreements for the purchase or sale of commodities or other personal property related thereto, all leases of personal property related thereto, and all other real and tangible and intangible personal property related thereto.
"Southern" means The Southern Company, a Delaware corporation.
"Southern Completion Guarantee" means the agreement executed or to be executed among the Borrower, the Agent and Southern in the form or substantially in the form of Exhibit H.
"Southern Equity Agreement" means the agreement executed or to be executed among the Borrower, the Agent and Southern in the form or substantially in the form of Exhibit G.
"Southern Event" means any Southern Event of Default or any event, occurrence or circumstance which with the passage of time and/or giving of any notice would become a Southern Event of Default.
"Southern Event of Default" has the meaning specified for the
terms "Guarantor Event of Default" and "Southern Event of Default" in
Section 5 of the Southern Completion Guarantee and Section 2(i) of the
Southern Equity Agreement, respectively.
"SPV" has the meaning specified in Section 8.07(j).
"Stub Period" means, with respect to any Project and any Power Purchase Agreement relating to such Project, the period from the Scheduled Completion Date for such Project up to and including the date when all obligations of the purchaser or off-taker under such Power Purchase Agreement commences.
"Subsequent Projects" means, collectively, (a) gas-fired electric generation plants (other than the Initial Projects) in, or to be constructed in, the United States, which are or are to be wholly or partially financed by the Facility, owned wholly or partially (as tenants-in-common) or leased (pursuant to a Development Authority Sale/Leaseback) by the Borrower or by any Relevant Subsidiary which is wholly or majority owned by, and is controlled by, the Borrower, including all buildings, structures and improvements, and easements with respect thereto, all alterations thereto or replacements thereof, all fixtures, attachments, appliances, equipment, machinery and other articles attached thereto or used in connection therewith and all parts which may from time to time be incorporated or installed in or attached thereto, all contracts and agreements for the purchase or sale of commodities or other personal property related thereto, all leases of personal property related thereto, and all other real and tangible and intangible personal property related thereto; and (b) each Similar Asset acquired in accordance with Section 5.01(l)(iii) or pursuant to a reinvestment of Sale Proceeds made in accordance with Section 5.01(m); each individually, a "Subsequent Project".
"Subsidiary" means, as to any Person, a corporation, partnership, limited liability company or other entity of which (or in which) shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by such Person.
"Substantial Completion" means the date on which Southern
certifies in the form of Exhibit L-1 to the Agent that, in the case of
(a) any Project, (i) such Project has achieved Mechanical Completion;
(ii) such Project has passed an emissions test demonstrating that it
can operate in accordance with its permits; (iii) such Project has
achieved at least 95% of its Guaranteed Output and has achieved a heat
rate not greater than 105% of its Guaranteed Heat Rate, in each case,
as set forth in the Project Schedule for such Project and as tested in
accordance with the testing procedures applicable to such Project set
forth in, or determined pursuant to, Schedule V; (iv) such Project has
successfully completed the reliability run applicable thereto, as set
forth in, or determined pursuant to, Schedule V; (v) such Project has
obtained final, non-appealable permits required to operate as designed
as of such date; and (vi) all necessary facilities for the
transportation of natural gas to, the necessary electric interconnect
facilities for, and all necessary facilities for the procurement,
transportation and discharge of water to and from, such Project have
been completed; and (b) any other electric generation plant owned or
leased by the Borrower or any Relevant Subsidiary, the equivalent
thereof has occurred.
"Substantially Completed Projects" means, as at any date, all Projects which have achieved Substantial Completion but not Final Completion as of such date; each individually, a "Substantially Completed Project".
"Synthetic Lease" means a financing for any Asset which is characterized as an operating lease under GAAP, but which is treated as a financing under the Code.
"Taxes" has the meaning specified in Section 2.13(a).
"Total Capitalization" means the sum of (a) the aggregate of the capital stock and other equity accounts (including retained earnings and paid-in capital) of the Borrower; (b) to the extent not included under clause (a) or (d), the aggregate amount of any funded Equity Contributions; (c) Recourse Debt; and (d) Affiliate Subordinated Debt; provided that "Total Capitalization" shall not include (i) the obligations of any Borrower Group Member with respect to any Trust Preferred Securities; and (ii) any capital stock or other equity (including paid-in capital and retained earnings, other than retained earnings which are permitted to be distributed by an Unrestricted Subsidiary to a Borrower Group Member) attributable, directly or indirectly, to an Unrestricted Subsidiary.
"Total Project Costs" means, with respect to each Completed Project, the Project Costs incurred with respect to such Project as of the Non-Recourse Date for such Project (including all Project Costs incurred on such date).
"Trust Preferred Securities" means deferrable interest debt securities, and any related securities issued by a trust or other special purpose entity in connection therewith, as long as (a) the maturity date of all such Debt is subsequent to the Final Maturity Date and there is no amortization of such Debt prior to the Final Maturity Date; (b) the obligations with respect thereto are not secured by any Liens (other than Liens on such debt securities and any proceeds thereof); and (c) the Borrower's obligations under the Facility are senior in right of payment in full in cash to such Debt, and such Debt is expressly made fully subordinated in right of payment in full in cash to all obligations of the Borrower with respect to the Facility.
"Type" has the meaning specified in the definition of "Advance".
"Uncompleted Plants" means all Plants which are not Completed Plants; each individually, an "Uncompleted Plant".
"Uncompleted Project Advances" means, at any time, all Advances then outstanding with respect to Uncompleted Projects; each individually, an "Uncompleted Project Advance".
"Uncompleted Projects" means all Projects which are not Completed Projects; each individually, an "Uncompleted Project".
"United States" means the United States of America.
"Unrated/Partially Rated" means the Debt under the Facility is not rated by each of S&P, Fitch and Moody's.
"Unrestricted Subsidiary" means any Subsidiary of the Borrower (other than any Subsidiary of the Borrower which directly or indirectly owns a Project or any portion thereof) all the Debt of which (a) is nonrecourse to the Borrower or any of the Borrower's other Subsidiaries (other than any other Unrestricted Subsidiary), other than with respect to stock or other ownership interest of the Borrower or any of its other Subsidiaries in such Subsidiary or to the extent permitted with respect to Project Finance Debt; and (b) is not secured by any Assets of the Borrower or any of its Subsidiaries (other than the Assets of, or stock or other ownership interests in, an Unrestricted Subsidiary).
"Unused" means, with respect to each Lender's Commitment, the amount which is equal to such Lender's Commitment minus all outstanding Advances made by such Lender.
"Updated Base Case Projections" means, as of any date, the Initial Base Case Projections, as supplemented by all Project Base Case Projections previously delivered pursuant to Section 3.04, in each case, for a period from such date up to and including December 31, 2023.
"U.S. Tax Law Change" has the meaning specified in Section 2.13(a).
"Utilizations" means a Borrowing or a CP Commitment Reservation, as the context may require; each individually, a "Utilization".
"Wansley Project" means the approximately 1,134MW gas-fired electric generation plant constructed or to be constructed by the Borrower or an Affiliate of the Borrower in Heard County, Georgia with an expected completion date in June 2002.
"Wansley Sale/Leaseback" means the sale/leaseback of the Wansley Project, pursuant to the Lease Agreement dated as of December 1, 2000 between the Development Authority of Heard County (a public body corporate and politic created and existing under the laws of the State of Georgia), as lessor, and the Borrower (as assignee of Georgia Power Company), as lessee (as amended, modified and supplemented from time to time to extend such lease to additional real or personal property comprising the Wansley Project), and all documents relating thereto.
"Working Capital Advance" has the meaning specified in Section 2.16.
SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP.
SECTION 1.04. Interpretation. In this Agreement:
(a) the singular includes the plural and the plural includes the singular;
(b) the word "or" is not exclusive;
(c) the words "include", "includes" and "including" are not limiting;
(d) a reference to an Article, Section, Schedule or Exhibit is to the Article, Section, Schedule or Exhibit of this Agreement unless otherwise indicated, and Schedules and Exhibits to this Agreement shall be deemed incorporated by reference in this Agreement;
(e) references to any document, instrument or agreement shall include (i) all schedules, exhibits and other attachments thereto; and (ii) all documents, instruments or agreements issued or executed in replacement thereof;
(f) references to any document or agreement, including this Agreement, shall be deemed to include references to such document or agreement as amended, supplemented, modified or restated and in effect from time to time in accordance with its terms and subject to the conditions set forth herein and therein;
(g) references to "days" shall mean calendar days, unless the term "Business Days" shall be used; and
(h) the Loan Documents are the result of negotiations among the Loan Parties, the Agent, each Initial Lender and their respective counsel. Accordingly, the Loan Documents shall be deemed the product of all parties thereto, and no ambiguity shall be construed in favor of or against the Loan Parties, the Agent or any Lender.
Article II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. (a) The Advances. Each Lender severally agrees, on
the terms and conditions set forth in this Agreement, to make Advances to the
Borrower from time to time on any Business Day during the period from the Funds
Availability Date to the Final Maturity Date in an aggregate amount not to
exceed at any time outstanding the amount set forth opposite such Lender's name
on Schedule I or, if such Lender has entered into any Assignment and Acceptance,
set forth for such Lender in the Register maintained by the Agent pursuant to
Section 8.07(d), as such amount may be reduced pursuant to Section 2.04 (such
Lender's "Commitment"); provided that (i) only one Borrowing of Project Advances
shall be permitted with respect to each of the Dahlberg Project and any
Subsequent Project which, as of the date of acquisition thereof by a Borrower
Group Member, is a Completed Project; (ii) Project Advances for any Project
shall be made in an aggregate amount not to exceed the Project Limit for such
Project (as reduced, in accordance with Section 2.15, to reflect the aggregate
amount of all outstanding CP Commitment Reservations, if any, relating to such
Project); (iii) CP Advances for any Project shall be made in an aggregate amount
not to exceed the aggregate of all CP Commitment Reservations for such Project;
(iv) Working Capital Advances shall be made in an aggregate amount not to exceed
the lesser of (A) the Borrowing Limit for Working Capital Advances; and (B) the
aggregate of all Unused Commitments minus all CP Commitment Reservations; and
(v) the aggregate principal amount of all outstanding Advances and CP Commitment
Reservations shall not exceed $850,000,000. Each Borrowing shall be in an
aggregate amount of $5,000,000 and an integral multiple of $1,000,000 in excess
thereof, except for any Borrowing of the remaining Unused portion of the
Commitments available for the making of Advances within the applicable Borrowing
Limit. Each Borrowing shall consist of Advances of the same Type and Category
made on the same day by the Lenders ratably according to their respective
Commitments. The Borrower may make more than one Borrowing on the same day;
provided that (x) such Borrowings are of different Categories; and (y) no more
than two Borrowings of each Category may be made during any one calendar month.
Within each Lender's Commitment, the applicable Borrowing Limit and the
Availability Period, and subject to the conditions set forth in Article III, the
Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.09 and
reborrow under this Section 2.01.
(b) Project Limit Modification. The Borrower shall have the right, upon at least thirty (30) days' notice to the Agent,to modify the Project Limit applicable to any Uncompleted Project; provided that:
(i) the aggregate principal amount of all outstanding Advances and CP Commitment Reservations shall not exceed $850,000,000;
(ii) the aggregate of all increases in the Project Limit for any Project may not exceed 10% of the Initial Project Limit for such Project;
(iii) other than with respect to any modification reducing such Project Limit to zero, the Agent shall have received an Adjusted Project Budget for such Project; and
(iv) the aggregate principal amount of all outstanding Advances and CP Commitment Reservations with respect to such Project shall not exceed the Project Limit, upon such modification, for such Project.
(c) Designated Lenders. For any Lender which is a Designating Lender, any Advance to be made by such Lender may from time to time be made by its Designated Lender in such Designated Lender's sole discretion, and nothing herein shall constitute a commitment to make Advances by such Designated Lender; provided that if any Designated Lender elects not to, or fails to, make any such Advance, its Designating Lender hereby agrees that it shall make such Advance pursuant to the terms of this Agreement. Any Advance actually funded by a Designated Lender shall constitute a utilization of the Commitment and, in the case of a CP Advance, the CP Commitment of the Designating Lender for all purposes under this Agreement.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made on
notice, given not later than 11:00 A.M. (New York City time) on the third
Business Day prior to the date of the proposed Borrowing in the case of a
Borrowing consisting of Eurodollar Rate Advances, or not later than 11:00
A.M. (New York City time) on the date of the proposed Borrowing in the case
of a Borrowing consisting of Base Rate Advances, by the Borrower to the
Agent, which shall give to each Lender prompt notice thereof by telecopier.
Each such notice of a Borrowing (a "Notice of Utilization") shall be by
telephone, confirmed immediately by telecopier in substantially the form of
Exhibit B, (i) specifying therein the requested (A) date of such Borrowing;
(B) Type and Category of Advances comprising such Borrowing; (C) aggregate
amount of such Borrowing; (D) in the case of a Borrowing comprising Project
Advances or CP Advances, aggregate principal amount of the Advances to be
made with respect to each Project; and (E) in the case of a Borrowing
consisting of Eurodollar Rate Advances, initial Interest Period for each
such Advance; (ii) in the case of a Borrowing comprising of Project
Advances, specifying therein the relevant Project(s) and containing a
representation that proceeds of the requested Borrowing will be used to
finance Project Costs for such Project(s) (including, in the case of any
Project, repayment of any Affiliate Subordinated Debt incurred by the
Borrower to fund the costs of acquiring such Project and Project Costs paid
in respect of such Project prior to the initial Advances hereunder in
respect of such Project); (iii) in the case of a Borrowing comprising CP
Advances, specifying the relevant Project(s) and CP Commitment
Reservation(s) pursuant to which such CP Advances are requested; (iv)
containing a representation that such Borrowing will not result in the
applicable Borrowing Limit to be exceeded or the aggregate principal amount
of all outstanding Advances and CP Commitment Reservations to exceed
$850,000,000; and (v) specifying the aggregate principal amount of all
outstanding Advances and the unused Commitments and CP Commitments, in each
case, after giving effect to the proposed Borrowing. Each Lender shall,
before 11:00 A.M. (New York City time) on the date of such Borrowing, make
available for the account of its Applicable Lending Office to the Agent at
the Agent's Account, in same day funds, such Lender's ratable portion of
such Borrowing; provided that if a Notice of Utilization in respect of a
proposed Borrowing consisting of Base Rate Advances is given on the date of
such Borrowing, the Lenders shall so make available their ratable portions
of such Borrowing before 3:00 P.M. (New York City time) on such date. After
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Agent will make such funds
available to the Borrower at the Agent's address referred to in Section
8.02.
(b) Anything in subsection (a) above to the contrary notwithstanding, the Borrower may not select Eurodollar Rate Advances for any Borrowing if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.07(e) or 2.11.
(c) The Borrower shall indemnify each Lender against any actual and documented loss (excluding any loss of profit and/or margin), cost or expense reasonably incurred by such Lender as a result of (i) the revocation by the Borrower of (A) any Notice of Utilization for a Borrowing that such Notice of Utilization specifies is to be comprised of Eurodollar Rate Advances; or (B) any notice given by the Borrower pursuant to Section 2.08 of the Conversion of Base Rate Advances to Eurodollar Rate Advances; and (ii) any failure to fulfill on or before the date specified in a Notice of Utilization for a Borrowing the applicable conditions set forth in Article III, including, in each such case, any loss (excluding loss of profit and/or margin), cost or expense reasonably incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing or as a result of such Conversion when such Advance, as a result of such revocation or failure, is not made on the date specified therefor in the relevant Notice of Utilization or when such Base Rate Advances, as a result of such revocation, are not converted to Eurodollar Rate Advances, but excluding, however, any such losses, costs and expenses resulting from any such revocation or failure which has occurred more than ninety (90) days prior to demand being made to the Borrower by such Lender for indemnification. The payment of such indemnity to a Lender shall be made within thirty (30) days of a demand by such Lender complying with Section 8.04(d).
(d) With respect to any Borrowing, unless the Agent shall have
received notice from a Lender prior to the date of such Borrowing (in the
case of a proposed Borrowing consisting of Eurodollar Rate Advances) or on
or before 1:00 P.M. (New York City time) on the date of such Borrowing (in
the case of a Borrowing consisting of Base Rate Advances) that such Lender
will not make available to the Agent such Lender's ratable portion of such
Borrowing, the Agent may assume that such Lender has made such portion
available to the Agent on the date of such Borrowing in accordance with
Section 2.02(a) and the Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to
the extent that such Lender shall not have so made such ratable portion
available to the Agent, such Lender and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable at
the time to Advances comprising such Borrowing; and (ii) in the case of
such Lender, the Federal Funds Effective Rate. If such Lender shall repay
to the Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Advance as part of such Borrowing for purposes of
this Agreement.
(e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, under this Agreement to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Fees. (a) Commitment Fee. The Borrower shall pay to the Agent for the account of each Lender a commitment fee on the daily Unused portion of such Lender's Commitment, (i) in the case of each Initial Lender, from the date of this Agreement; and (ii) in the case of each other Lender (other than a Designated Lender), from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender, in each case, until the Commitment Termination Date at a rate per annum equal to the Applicable Commitment Fee Percentage in effect from time to time, payable in arrears on the fifteenth day of each March, June, September and December, and on the Commitment Termination Date.
(b) Agent's Fees. The Borrower shall pay to the Agent for its own account such fees as may from time to time be agreed between the Borrower and the Agent.
SECTION 2.04. Termination or Reduction of the Commitments. The
Borrower shall have the right, upon at least three (3) Business Days'
notice to the Agent, to terminate in whole or reduce ratably in part the
unused portions of the respective Commitments of the Lenders; provided that
(a) each partial reduction shall be in the aggregate amount of $10,000,000
or an integral multiple of $1,000,000 in excess thereof; and (b) the
aggregate of all Commitments, upon such reduction, shall not be less than
the aggregate principal amount of all Utilizations then outstanding.
SECTION 2.05. Repayment of the Advances. The Borrower shall repay to the Agent for the ratable account of the Lenders on the Final Maturity Date the aggregate principal amount of the Advances then outstanding.
SECTION 2.06. Interest on the Advances. (a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time plus (B) the Applicable Margin in effect from time to time, payable in arrears on the fifteenth day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurodollar Rate for such Interest Period for such Advance plus (B) the Applicable Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three (3) months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the continuance of an Event of Default under Section 6.01(a) or any failure to prepay or repay any Project Debt in accordance with Section 2.09(b), the Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing to each Lender (in the case of such an Event of Default or any failure to prepay or repay Project Debt in accordance with any of Section 2.09(b)(ii), (iii), (iv) or (v)) or each Advance so required to be prepaid pursuant to Section 2.09(b)(i), as the case may be, in each case, payable in arrears on the dates referred to in Section 2.06(a)(i) or (a)(ii) above and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to Section 2.06(a)(i) or (a)(ii) above; and (ii) to the fullest extent permitted by Law, the amount of any interest, fee or other amount payable under this Agreement or under any Note that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to Section 2.06(a)(i) above.
SECTION 2.07. Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the Agent, at its request, timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Agent for the purpose of determining any such interest rate, the Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.06(a)(i) or (ii), and the rate, if any, furnished by each Reference Bank for the purpose of determining the interest rate under Section 2.06(a)(ii).
(b) If (i) the Agent is unable for any reason to determine the Eurodollar Rate for any Interest Period; (ii) if applicable, fewer than two Reference Banks furnish timely information to the Agent for determining the Eurodollar Rate for any Interest Period pursuant to Section 2.07(a); or (iii) the Majority Lenders notify the Agent by 12:00 noon (London time) two Business Days prior to the first day of any Interest Period that the Majority Lenders were unable to obtain, at approximately 11:00 A.M. (London time) on such Business Day and at the applicable Eurodollar Rate, Dollar deposits for a period equal to such Interest Period and in amounts substantially equal to such Majority Lenders' respective Eurodollar Rate Advances comprising part of the Borrowing to be outstanding during such Interest Period, the Agent shall promptly notify the Borrower and the Lenders of such event, whereupon:
(A) within five (5) Business Days of receipt of such notification, the Agent and the Borrower shall enter into good faith negotiations for a period of fifteen (15) days (or such shorter period as is required to agree to the alternative basis referred to in this clause (A)) with a view to agreeing on an alternative basis for determining the rate of interest applicable to such Eurodollar Rate Advances;
(B) any alternative basis agreed under clause (A) above with the approval of the Majority Lenders and any interest rate determined pursuant thereto will be binding on all the parties to this Agreement and will be retroactive to, and take effect from, the first day of the applicable Interest Period;
(C) if no alternative basis is agreed under clause (A) above within the 15-day period there specified, the Agent, upon instructions of the Majority Lenders, shall, on behalf of each of the Lenders, set forth an alternative basis for determining the rate of interest applicable to such Eurodollar Rate Advances on or before the last day of the Interest Period to which the notification relates or, if earlier, within ten (10) days after the expiration of the 15-day period set forth in clause (A) above. Each Lender shall certify to the Agent and to the Borrower such Lender's actual cost of funds for funding its applicable Eurodollar Rate Advances, and the Majority Lenders shall certify to the Agent and the Borrower in reasonable detail the alternative basis for determining the rate of interest to be applicable to such Eurodollar Rate Advances and such interest rate as so determined;
(D) any interest rate determined pursuant to clause (C) above shall not, in any event, exceed (1) the Majority Lenders' reasonable determination of the cost to the Lenders, as certified by them pursuant to clause (C) above, of funding their applicable Eurodollar Rate Advances plus (2) the Applicable Margin;
(E) each alternative basis so certified by the Majority Lenders pursuant to clause (C) above and each interest rate determined pursuant thereto shall be binding on the Borrower and the Lenders and shall be retroactive to, and take effect from, the first day of the applicable Interest Period; and
(F) so long as any alternative basis referred to above is in force, the Agent, in consultation with the Borrower and the Majority Lenders, shall from time to time, but not less frequently than monthly, review whether or not the circumstances referred to in this Section 2.07(b) still prevail with a view to returning to the normal provisions of this Agreement in relation to the method of determining interest as soon as practicably possible.
(c) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, then on the last day of the then existing Interest Period therefor, if the Borrower could have selected an Interest Period for such Eurodollar Rate Advances in accordance with such provisions, an Interest Period with a duration of three (3) months shall be applicable to such Eurodollar Rate Advances or, if the Borrower could not have selected any Interest Period for such Eurodollar Rate Advances in accordance with such provisions, such Eurodollar Rate Advances will automatically, on such last day, Convert into Base Rate Advances, and the Agent shall promptly notify the Borrower and the Lenders thereof.
(d) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such Advances shall automatically Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of (i) any Event of Default, (A) each Eurodollar Rate Advance then outstanding will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance; and (B) the obligation of the Lenders to make, or to Convert Base Rate Advances into, Eurodollar Rate Advances shall be suspended until all Events of Default have been cured or waived; and (ii) any failure to prepay any Eurodollar Rate Advance in accordance with Section 2.09(b)(i), (A) each Eurodollar Rate Advance required to be so prepaid will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance; and (B) the Lenders shall have no obligation to Convert any Base Rate Advances required to be prepaid pursuant to Section 2.09(b)(i) into Eurodollar Rate Advances.
SECTION 2.08. Optional Conversion of the Advances. The Borrower may on any Business Day, upon notice given to the Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.07 and 2.11, Convert all Advances of one Type comprising the same Borrowing into Advances of the other Type; provided that any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances and any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.01(a). Each such notice of a Conversion shall, within the restrictions specified above, specify (a) the date of such Conversion; (b) the Advances to be Converted; and (c) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for each such Advance.
SECTION 2.09. Prepayments. (a) Optional Prepayments. The Borrower may, upon at least three (3) Business Days' notice (in the case of Eurodollar Rate Advances) or upon at least one Business Day's notice (in the case of Base Rate Advances) to the Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amount of the Advances comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided that (i) each partial prepayment shall be in an aggregate principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof; and (ii) in the event of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(c).
(b) Mandatory Prepayments. (i) Upon the occurrence of a Southern Event of Default, the Borrower shall prepay, (A) with respect to all Projects which have not yet achieved Substantial Completion, all Project Debt then outstanding with respect to such Projects; and (B) with respect to each Substantially Completed Project the Buydown Date for which has not then occurred, such portion of Project Debt then outstanding with respect to such Substantially Completed Project as is equal to the Buydown Amount for such Substantially Completed Project, in each case, in accordance with clause (c) below.
(ii) Upon the occurrence of the Buydown Date for any Project, the Borrower shall prepay (A) if Substantial Completion of such Project has not then been achieved, all Project Debt then outstanding with respect to such Project; or (B) if Substantial Completion of such Project has then been achieved, such portion of such Project Debt as is equal to the Buydown Amount for such Project, in each case, in accordance with clause (c) below.
(iii) On the date (the "Sale Prepayment Date") which is either (1) the earlier of (A) the date falling six (6) months after any Sale; and (B) the prepayment date specified in a prepayment notice from the Borrower with respect to the Sale Proceeds from such Sale, or (2) the date specified in sub-clauses (B), (D) or (F) below, if applicable, to the extent any Sale Proceeds from such Sale have not been reinvested in a Similar Asset in accordance with Section 5.01(m), the Borrower shall use such Sale Proceeds to prepay the then outstanding Project Debt (but in no event more than in an amount equal to such Sale Proceeds) to the extent necessary to result in the minimum and average Portfolio Adjusted Base Case Projections, calculated on the assumption that all Recourse Debt of the Borrower and the Relevant Subsidiaries outstanding immediately following such prepayment is repaid in full on or prior to the end of the Remaining Base Case Period, with such Debt being prepaid or repaid (as the case may be) in the following order of priority: (A) Completed Project Advances, if any, on a pro rata basis, together with interest thereon; (B) to the extent of any such Sale Proceeds remaining thereafter, Commercial Paper, if any, then outstanding with respect to Completed Projects, on the maturity date thereof and on a pro rata basis, together with interest thereon (if any); (C) to the extent of any such Sale Proceeds remaining thereafter, Advances, if any, then outstanding with respect to the Asset the sale of which resulted in such Sale Proceeds, on a pro rata basis, together with interest thereon; (D) to the extent of any such Sale Proceeds remaining thereafter, Commercial Paper, if any, then outstanding with respect to such Asset, on the maturity date thereof and on a pro rata basis, together with interest thereon; (E) to the extent of any such Sale Proceeds remaining thereafter, all other Advances, if any, then outstanding, on a pro rata basis, together with interest thereon; and (F) to the extent of any such Sale Proceeds remaining thereafter, all other Commercial Paper, if any, then outstanding, on the maturity date thereof and on a pro rata basis, together with interest thereon.
Contemporaneously with (AA) such prepayment of Advances, the Project Limit for the relevant Project shall automatically be reduced by the amount of such prepayment; and (BB) such repayment of Commercial Paper, each of the Project Limit for the relevant Project and the CP Commitments of the Lenders with respect to such Commercial Paper, if any, shall automatically be reduced (on a pro rata basis) by the amount of such repayment.
(iv) Upon any Loss with respect to a Completed Project, the Borrower shall repay, if required, the relevant Project Debt then outstanding in accordance with Section 5.01(l).
(v) Within five (5) Business Days after receipt of the proceeds of any Refinancing relating to any Project, and upon at least three (3) Business Days' notice (in the case of Eurodollar Rate Advances) or upon at least one Business Day's notice (in the case of Base Rate Advances) to the Agent stating the proposed date and aggregate principal amount of the payment, apply such proceeds to repay Project Debt then outstanding with respect to such Project, and interest thereon, in accordance with clause (c) below.
(c) All prepayments or repayments (as the case may be) of Project Debt with respect to any particular Project pursuant to clause (b)(i), (ii), (iv) and (v) above and Section 5.01(l) shall be made using funds other than the proceeds of any Borrowing or any Commercial Paper as to which CP Commitments are outstanding or requested, in the following order of priority:
(i) firstly, to all Project Advances and all CP Advances, if any, made with respect to such Project, on a pro rata basis, together with interest thereon; and
(ii) secondly, upon the maturity thereof, to all Commercial Paper, if any, then outstanding with respect to such Project and as to which CP Commitments are then in effect, on a pro rata basis, together with interest thereon (if any).
Contemporaneously with (A) such prepayment of Advances, the Project Limit for the relevant Project shall automatically be reduced by the amount of such prepayment; and (B) such repayment of Commercial Paper, each of the Project Limit for the relevant Project and the CP Commitments of the Lenders with respect to such Commercial Paper, if any, shall automatically be reduced (on a pro rata basis) by the amount of such repayment.
SECTION 2.10. Increased Costs. The Borrower agrees to indemnify each Lender for its actual and documented losses (whether due to decreased revenues or increased costs) that are the result of a change of Law or in the official interpretation thereof or compliance with any guideline or request from any central bank or other Governmental Authority having jurisdiction over such Lender (whether or not having the force of law) adopted or made (a) in the case of the Initial Lenders, after the date of this Agreement; and (b) in the case of any other Lender, after the date such Lender shall have become a party to this Agreement by executing and delivering an Assignment and Acceptance or a Designation Agreement (as the case may be), which costs are reasonably incurred by such Lender and are the result of (i) such Lender agreeing to make or making, funding or maintaining Eurodollar Rate Advances; or (ii) any increase in the amount of capital required to be maintained by such Lender or any corporation controlling such Lender, based upon the existence of such Lender's commitment to lend under this Agreement and other commitments of this type, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend under this Agreement. The foregoing indemnity shall not apply to (A) any such change of Law or interpretation or any adoption or making of any such guideline or request that is anticipated on the date of this Agreement, (B) any period or periods ending more than one hundred and twenty (120) days prior to demand for indemnification being made or (C) any such losses resulting from (1) Taxes or Other Taxes (as to which Section 2.13 shall govern); or (2) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender is organized or has its Applicable Lending Office or any political subdivision thereof. The Borrower shall from time to time, within thirty (30) days following demand by such Lender complying with Section 8.04(d) (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such losses.
SECTION 2.11. Illegality. If as a result of a change in Law or in the official interpretation thereof (a) in the case of the Initial Lenders, after the date of this Agreement; and (b) in the case of any other Lender, after the date such Lender shall have become a party to this Agreement by executing and delivering an Assignment and Acceptance or a Designation Agreement (as the case may be), it shall have become unlawful, or if after the applicable date set forth above any central bank or other Governmental Authority having jurisdiction over such Lender asserts that it is unlawful, for such Lender to (i) allow all or part of its commitment to make Eurodollar Rate Advances to remain outstanding; or (ii) make, fund or allow to remain outstanding all or part of its Eurodollar Rate Advances, such Lender may notify the Borrower and the Agent thereof in reasonable detail (together with supporting documentation) of such event, whereupon:
(A) such Lender's obligations to make Eurodollar Rate Advances shall be suspended and, forty-five (45) days following such notification, shall be canceled if such unlawfulness shall then be continuing; and
(B) the Borrower will prepay such Lender's Eurodollar Rate Advances or convert them to Base Rate Advances at the time or times and to the extent necessary to avoid such unlawfulness, together with unpaid accrued interest thereon, unpaid accrued fees and any other amounts due and payable to such Lender,
unless, in either case, prior thereto, the Borrower shall have given notice to such Lender that the Borrower will require such Lender to assign and transfer all of its interests in this Agreement pursuant to Section 8.07(b) and shall have caused such Lender to have so assigned and transferred such interests.
SECTION 2.12. Payments and Computations. (a) The Borrower shall make each payment under this Agreement and under the Notes not later than 11:00 A.M. (New York City time) on the day when due in Dollars to the Agent at the Agent's Account in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or commitment fees to the Lenders ratably in accordance with such amounts owing to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement; provided that unless otherwise expressly provided in this Agreement, funds so paid by the Borrower on account of any principal or interest due under this Agreement shall be applied first to satisfy such amounts due with respect to Completed Project Advances and, after all such amounts are paid, to the corresponding amounts due with respect to Uncompleted Project Advances. Upon its acceptance of an Assignment and Acceptance or a Designation Agreement and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance or Designation Agreement (as the case may be), the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance or Designation Agreement (as the case may be) shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(b) All computations of interest based on the Base Rate shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or the Federal Funds Effective Rate and of commitment fees shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or commitment fees are payable. Each determination by the Agent of an interest rate under this Agreement shall be conclusive and binding for all purposes, absent manifest error.
(c) Whenever any payment under this Agreement or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day; provided that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. Any such extension or reduction of time shall be included in the computation of payment of interest or commitment fee, as the case may be.
(d) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders under this Agreement that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Effective Rate.
SECTION 2.13. Taxes. (a) Any and all payments by the Borrower under this Agreement or under the Notes shall be made, in accordance with Section 2.12, without deduction for any Taxes or Other Taxes (each as defined below).
"Taxes" means any and all present or future taxes, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or any Note, and all liabilities with respect thereto, excluding (i) in the case of each Lender and the Agent, taxes imposed on its income, net worth or gross receipts and franchise or similar taxes imposed on it by a jurisdiction under the laws of which such Lender or the Agent (as the case may be) is organized or in which its principal executive office is located or any political subdivision thereof or, in the case of each Lender, in which its Applicable Lending Office is located or any political subdivision thereof; and (ii) in the case of each Lender, any United States withholding tax imposed on such payments except to the extent that such Lender is subject to United States withholding tax by reason of a U.S. Tax Law Change.
"Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note.
"U.S. Tax Law Change" means with respect to any Lender the occurrence (i) in the case of the Initial Lenders, after the date of this Agreement; and (ii) in the case of any other Lender, after the date such Lender shall have become a party to this Agreement by executing and delivering an Assignment and Acceptance or a Designation Agreement (as the case may be), of the adoption of any applicable United States federal law or regulation relating to taxation, or any change therein or in the official interpretation thereof, or the entry into force, modification or revocation of any income tax convention or treaty to which the United States is a party.
If the Borrower shall be required by Law to deduct any Taxes or Other Taxes from or in respect of any sum payable under this Agreement or under any Note to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.13) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made; (ii) the Borrower shall make such deductions; (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Law; and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 8.02, the original or a certified copy of a receipt evidencing payment thereof.
(b) The Borrower agrees to indemnify each Lender and the Agent for the full
amount of actual and documented Taxes or Other Taxes (including taxes of any
kind imposed by any jurisdiction on amounts payable under this Section 2.13)
paid by such Lender or the Agent (as the case may be) as a result of any U.S.
Tax Law Change and any actual and documented liability (including penalties,
interest and expenses) arising therefrom or with respect thereto paid by such
Lender or the Agent (as the case may be), but excluding, however, any Taxes or
Other Taxes so paid by such Lender or the Agent more than one hundred and twenty
(120) days prior to demand being made to the Borrower by such Lender or the
Agent for indemnification. The payment of such indemnity shall be made within
thirty (30) days from the date such Lender or the Agent (as the case may be)
makes written demand therefor complying with Section 8.04(d).
(c) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of the Initial Lenders and on the date of the Assignment and Acceptance or Designation Agreement (as the case may be) pursuant to which it becomes a Lender in the case of any other Lender, and from time to time thereafter as requested in writing by the Borrower or the Agent (but only so long as such Lender remains lawfully able to do so), shall provide each of the Agent and the Borrower with two completed and duly executed original Internal Revenue Service forms W-8 W-8ECI or W-8BEN, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, or other documentation reasonably requested by the Borrower or the Agent, certifying that such Lender is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or the Notes. If the form provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such form. If any form or document referred to in this subsection (c) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date of this Agreement by Internal Revenue Service form W-8, W-8ECI or W-8BEN, that the Lender reasonably considers to be confidential, the Lender shall give notice thereof to the Borrower and shall not be obligated to include in such form or document such confidential information.
(d) For any period with respect to which a Lender has failed to provide the Borrower with the appropriate form or document (or information required by such form or document) described in Section 2.13(c) (other than if such failure is due to a U.S. Tax Law Change), such Lender shall not be entitled to payments without deduction and indemnification under Section 2.13(a) or (b) with respect to any Taxes or Other Taxes which would not have been payable had such form or document (or information required thereby) been so provided; provided that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form or document (or information required thereby), required under Section 2.13(c), the Borrower shall take such reasonable steps as the Lender shall request to assist the Lender to recover such Taxes (it being understood, however, that the Borrower shall have no liability to such Lender in respect of such Taxes).
(e) If the Borrower is required to indemnify or pay additional amounts to or for the account of any Lender pursuant to this Section 2.13, then such Lender will take such action (including changing the jurisdiction of its Applicable Lending Office) as in the reasonable judgment of such Lender (i) will eliminate or reduce any such additional payment which may thereafter accrue; and (ii) is not otherwise commercially unreasonable.
(f) Each Lender and the Agent shall use its reasonable efforts to obtain in
a timely fashion any refund, deduction or credit of any Taxes and Other Taxes
paid or reimbursed by the Borrower pursuant to this Section 2.13. If any Lender
or the Agent receives a benefit in the nature of a refund, deduction or credit
(including a refund in the form of a deduction from or credit against taxes that
are otherwise payable by the Lender or the Agent) of any Taxes or Other Taxes
with respect to which the Borrower has made a payment under Section 2.13(a) or
(b), such Lender or the Agent (as the case may be) agrees to reimburse the
Borrower to the extent of the benefit of such refund, deduction or credit
promptly after the Agent or such Lender reasonably determines that such refund,
deduction or credit has become final; provided that nothing contained in this
subsection (f) shall require any Lender or the Agent (as the case may be) to
make available its tax returns (or any other information relating to its taxes
which it deems to be confidential) or to attempt to obtain any such refund,
deduction or credit, which attempt would be inconsistent with any reporting
position otherwise taken by the Agent or such Lender on its applicable tax
returns.
SECTION 2.14. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances of any Nature owing to it (other than pursuant to Section 2.02(c), 2.03, 2.10, 2.11, 2.13 or 8.04) in excess of its ratable share of payments on account of Advances of the same Nature obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances of such Nature owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and each Lender shall repay to the purchasing Lender such purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.14 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.
SECTION 2.15. Reservation of CP Commitments. On the terms and conditions set forth in this Agreement, each Lender shall allocate from time to time all or any portion of its Commitment (such Lender's "CP Commitment") to provide liquidity support for Commercial Paper issued or to be issued by the Borrower with respect to any Project; provided that such CP Commitment shall be automatically reduced if and to the extent of all CP Advances made with respect to such CP Commitment and if and to the extent the Commercial Paper with respect to which such CP Commitment was established is not refinanced on its maturity by the issuance of Rollover Commercial Paper. The Borrower may make more than one CP Commitment Reservation on the same day; provided that (a) no more than two CP Commitment Reservations of each Kind may be made during any one calendar month; and (b) only one CP Commitment (Original CP) Reservation shall be permitted with respect to any Project which is a Completed Project as of the Funds Availability Date or, if later, the date of acquisition of such Project by a Borrower Group Member. Each CP Commitment Reservation shall be made during the Availability Period, in an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and shall be made pro rata among all Lenders (according to their respective Commitments) following notice by the Borrower, given not later than the third Business Day prior to the date of a proposed CP Commitment Reservation, to the Agent (which shall give to each Lender prompt notice thereof), and upon a Utilization by way of CP Commitment Reservation with respect to any Project, and to the extent it is still outstanding, (A) the unused portion of the Commitments available to the Borrower for Project Advances, Working Capital Advances and other CP Commitment Reservations shall be reduced by the outstanding amount of such Utilization; and (B) the Project Limit for such Project shall be reduced by the outstanding amount of such Utilization. Each such notice of a CP Commitment Reservation shall be by telephone, confirmed immediately by telecopier in substantially the form of Exhibit B, (a) specifying therein (i) the requested date of such CP Commitment Reservation and aggregate amount of such CP Commitment Reservation; (ii) in the case of Original Commercial Paper, the aggregate principal amount of the Commercial Paper issued, or to be issued, for which such CP Commitment Reservation is requested (the amount of which Commercial Paper shall equal the CP Commitment Reservation requested) and specifying the relevant Project with respect to which such Commercial Paper is, or is to be, issued; and (iii) in the case of Refinancing Commercial Paper, the Project Advances to be repaid with proceeds from such Commercial Paper; (b) containing a representation that proceeds of such Commercial Paper will be used to finance Project Costs (including, in the case of any Project, repayment of any Affiliate Subordinated Debt incurred by the Borrower to fund the costs of acquiring such Project and Project Costs paid in respect of such Project prior to the initial Advances hereunder in respect of such Project) incurred for such Project (in the case of a CP Commitment (Original CP) Reservation) and/or to repay outstanding Project Advances made with respect to such Project (in the case of a CP Commitment (Refinancing CP) Reservation); and (c) specifying the aggregate principal amount of all outstanding Advances, the unused Commitments and all outstanding CP Commitments, in each case, after giving effect to the proposed CP Commitment Reservation, issuance of such Commercial Paper and application of proceeds therefrom.
SECTION 2.16. Use of Proceeds. The proceeds of Advances shall be used (a) to finance Project Costs or to repay any Affiliate Subordinated Debt incurred by the Borrower to fund the acquisition and construction of any Project prior to the date of the initial Advances hereunder with respect to such Project (such Advances, "Project Advances"); (b) for the Borrower's general corporate purposes or to provide working capital for the Borrower (such Advances, "Working Capital Advances"); or (c) to pay amounts due under Commercial Paper issued by the Borrower to finance or refinance Project Costs with respect to any Project up to the CP Commitment Reservation previously established for such Project (such Advances, "CP Advances").
Article III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and
2.15. Sections 2.01 and 2.15 shall become effective on and as of the first date
(the "Funds Availability Date") on which the following conditions precedent have
been satisfied:
(a) The Borrower shall have paid all accrued fees and expenses of the Agent and the Lenders (including the accrued fees and expenses of each of special New York counsel and regulatory counsel to the Agent) that are then due and payable.
(b) On the Funds Availability Date, the representations and warranties contained in Section 4.01 and in Sections 4 and 2 of the Southern Completion Guarantee and the Southern Equity Agreement, respectively, shall be true and correct as though made on and as of the Funds Availability Date, and the Agent shall have received for the account of each Lender a certificate to such effect signed by a duly authorized officer of each of the Borrower (with respect to Section 4.01) and Southern (with respect to Sections 4 and 2 of the Southern Completion Guarantee and the Southern Equity Agreement, respectively).
(c) The Agent shall have received on or before the Funds Availability Date the following, each dated such day and (except for the Notes) in sufficient copies for each Lender: (i) Each of the Southern Completion Guarantee and the Southern Equity Agreement, duly executed by the Loan Parties.
(ii) A Note payable to the order of each Lender, duly executed by the Borrower.
(iii) Certified copies of the certificate of incorporation and
the bylaws of each Loan Party.
(iv) Certified copies of the resolutions of the board of
directors of each Loan Party authorizing each Loan Document to which
it is or is to be a party, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with
respect to each Loan Document to which it is or is to be a party.
(v) A certificate of the secretary or an assistant secretary of each Loan Party certifying the names and true signatures of the officers of each Loan Party authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered under each such Loan Document.
(vi) Certificate of the Independent Engineer and Environmental Consultant substantially in the form of Exhibit I-1.
(vii) Certificate of the Independent Insurance Consultant substantially in the form of Exhibit J-1.
(viii) Certificate of the Independent Market Consultant substantially in the form of Exhibit K-1.
(ix) Certificate of the Borrower attaching:
(A) the Initial Project Budget for each Initial Project (other than the Dahlberg Project), in form and substance satisfactory to the Lenders (after consultation with the Independent Engineer and Environmental Consultant), together with a calculation showing a determination of the Initial Project Limit for each Initial Project;
(B) Base Case Projections reflecting the Initial Projects through December 31, 2023, together with a statement of the assumptions underlying such projections;
(C) a list of all Assets of the Borrower and its Subsidiaries which, as of the Funds Availability Date, are subject to any Lien, together with reasonable details concerning all such Liens, if any;
(D) if available at the Funds Availability Date, a certified copy of each executed or draft PPA Document (or a detailed term sheet with respect to each PPA Document to be entered into) with respect to each Initial Project;
(E) an unaudited consolidated balance sheet of the Borrower as of September 30, 2001; and
(F) if any Initial Project or the entire legal and beneficial ownership of any Initial Project is not acquired on or before the Funds Availability Date, evidence that the Borrower has, subject to required regulatory approvals, the right to acquire and develop each such Initial Project.
(x) A Notice of Utilization, duly executed by the Borrower, dated the Funds Availability Date.
(xi) Opinions of counsel for the Loan Parties, substantially in the respective forms of Exhibit E.
(xii) An opinion of Shearman & Sterling, counsel for the Agent.
SECTION 3.02. Conditions Precedent to the Initial Advances for Each Initial Project. The obligation of each Lender to make a Project Advance on the occasion of the first Borrowing with respect to any Initial Project shall be subject to the following conditions precedent:
(a) The Funds Availability Date shall have occurred.
(b) On the date of such Borrowing the representations and warranties contained in Section 4.01 and Sections 4 and 2 of the Southern Completion Guarantee and the Southern Equity Agreement, respectively, are true and correct in all material respects on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date (and each of the giving of the applicable Notice of Utilization and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty made herein, with respect to Section 4.01, by the Borrower to such effect).
(c) The Agent shall have received, together with or prior to delivery of the Notice of Utilization with respect to such Borrowing, a certificate of the Borrower:
(i) certifying the Project Costs and/or net book value acquisition costs incurred by the Borrower or an Affiliate of the Borrower prior to such Borrowing in connection with such Project;
(ii) attaching certified copies of the executed PPA Documents for
such Project (if not previously provided to the Lenders pursuant to
Section 3.01(c)(ix)(D)), and certifying that such PPA Documents (A)
either (1) conform to the relevant form provided to the Lenders
pursuant to Section 3.01(c)(ix)(D); or (2) substantially and
accurately reflect the term sheet provided to the Lenders pursuant to
Section 3.01(c)(ix)(D) or comply with all of the PPA Parameters, and
do not contain any additional terms not set forth in such term sheet
or the PPA Parameters (as applicable) which impose additional material
obligations outside the ordinary course of business of the industry
generally on, or otherwise materially reduce the benefit to, any
Borrower Group Member under such PPA Documents; and (B) are in full
force and effect, and that all necessary regulatory approvals required
to be obtained with respect to such PPA Documents under all Federal
and State Energy Laws and Regulations by the Borrower and each of its
Affiliates (if any) party thereto, have been obtained, are in full
force and effect and are final and non-appealable but for any Filing
Conditions, and do not contain any restrictions, conditions or
requirements which are then required to be satisfied and have not been
satisfied, other than any Filing Conditions;
(iii) certifying that proceeds of the Borrowing shall be used to fund, pro rata with Equity Contributions, Project Costs for such Project so that the ratio of outstanding Debt to Equity Contributions, in each case, with respect to such Project does not exceed the Debt/Equity Ratio applicable to such Project, as at the date of such Borrowing and after giving effect to such Borrowing and such Equity Contributions, and the application of proceeds therefrom; and
(iv) in the case of the first Borrowing only, certifying that the PPA Documents for the Dahlberg Project have been assigned to the Borrower.
(d) If the first Borrowing with respect to any Initial Project is not made within six (6) months after the Funds Availability Date, the Agent shall have received each of the following documents at least thirty (30) days before such Borrowing:
(i) A certificate of the Independent Engineer and Environmental Consultant, substantially in the form of I-3.
(ii) A certificate of the Independent Insurance Consultant, substantially in the form of J-3.
(iii) A certificate of the Independent Market Consultant, substantially in the form of K-3.
(iv) A certificate of the Borrower:
(A) Confirming that the Initial Project Budget for such Project has not changed since it was delivered pursuant to Section 3.01 or, if it has changed, a revised and updated Initial Project Budget for such Project in form and substance satisfactory to the Required Lenders; and
(B) Base Case Projections for the Initial Projects through
December 31, 2023, together with a statement of the assumptions
underlying such projections, updated, if necessary, to reflect the
contents of the certificates referred to in clauses (i), (ii) and
(iii) above and of the Initial Project Budget referred to in clause
(A) above, in each case, in form and substance satisfactory to the
Required Lenders.
(e) in the case of the first Borrowing with respect to the Wansley Project only, a support letter from Southern regarding the Development Authority Sale/Leaseback for the Wansley Project in the form of Exhibit M.
SECTION 3.03. Conditions Precedent to Subsequent Advances for an Initial Project. The obligation of each Lender to make a Project Advance on the occasion of each Borrowing after the first Borrowing, in each case, with respect to any Initial Project shall be subject to the following conditions precedent:
(a) All representations and warranties contained in Section 4.01 (other than those listed in Sections 4.01(h) and (j)) and all representations and warranties contained in Sections 4 and 2 of the Southern Completion Guarantee and the Southern Equity Agreement (other than Sections 4(f) and (h) and 2(f) and (h), respectively), are true and correct in all material respects on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date (and each of the giving of the applicable Notice of Utilization and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty made herein, with respect to Section 4.01 and to Sections 4 and 2 of the Southern Completion Guarantee and the Southern Equity Agreement, respectively, by the Borrower to such effect).
(b) The Agent shall have received, together with or prior to delivery of the Notice of Utilization with respect to such Borrowing, a certificate of the Borrower:
(i) certifying the Project Costs, including construction and related costs, interest and commitment fees, that have been incurred in connection with such Project since the immediately preceding Borrowing related to it;
(ii) confirming that (A) except as otherwise provided in clause (B) below, all Borrowings previously made to the Borrower for such Project were applied to pay Project Costs for, or to repay Affiliate Subordinated Debt incurred with respect to, such Project in accordance with this Agreement; and (B) the proceeds of such Borrowing, and of the immediately preceding Borrowing (but only to the extent not previously applied in accordance with clause (A) above), will be applied to Project Costs for such Project which have been paid, are then due or will become due within three (3) months from the date of such Borrowing (or, in the case of the last Borrowing with respect to such Project only, then due or to become due after the date of such Borrowing), in each case, in accordance with this Agreement; and
(iii) certifying that proceeds of the Borrowing shall be used to fund, pro rata with Equity Contributions, Project Costs for such Project so that the ratio of outstanding Debt to Equity Contributions, in each case, with respect to such Project does not exceed the Debt/Equity Ratio applicable to such Project, as at the date of such Borrowing and after giving effect to such Borrowing and such Equity Contributions, and the application of proceeds therefrom.
SECTION 3.04. Conditions Precedent to the Initial Advances for Each Subsequent Project. The obligation of each Lender to make a Project Advance on the occasion of the first Borrowing with respect to any Subsequent Project shall be subject to the following conditions precedent:
(a) If, at the time of such Borrowing, the Borrower does not have an Investment Grade Rating:
(i) All representations and warranties of the Borrower contained
in Section 4.01 and all representations and warranties of Southern
contained in Sections 4 and 2 of the Southern Completion Guarantee and
the Southern Equity Agreement, respectively, are true and correct in
all material respects on and as of the date of such Borrowing, before
and after giving effect to such Borrowing and to the application of
the proceeds therefrom, as though made on and as of such date (and
each of the giving of the applicable Notice of Utilization and the
acceptance by the Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty made herein, with respect to
Section 4.01, by the Borrower to such effect).
(ii) The Agent shall have received no later than thirty (30) days before such Borrowing a certificate of the Borrower:
(A) certifying that such Project will not cause the number of Subsequent Projects (including such Project) to be greater than two (2) or cause the projected aggregate amount of Utilizations made or to be made under the Facility related to Subsequent Projects, including such Project (in each case, as set forth in their respective Project Budgets), to exceed $500,000,000;
(B) attaching an Initial Project Budget (together with a calculation by the Borrower, and agreed to by the Agent, showing a determination of the Initial Project Limit for such Project) and a Project Schedule for such Project;
(C) attaching Project Base Case Projections for such Project, together with a statement of the assumptions underlying such projections demonstrating the Required Project DSCR applicable to such Project;
(D) certifying that, including such Project, Peakers represent no more than 25% of the total megawatt capacity owned by the Borrower and all Relevant Subsidiaries; and
(E) certifying the Project Costs, including construction and related costs, acquisition cost, construction interest and commitment fees, as the case may be, incurred in connection with such Project prior to such Borrowing.
(iii) The Agent shall have received, together with or prior to delivery of the Notice of Utilization with respect to such Borrowing, a certificate of the Borrower:
(A) certifying that proceeds of the Borrowing shall be used to fund, pro rata with Equity Contributions, Project Costs for such Project so that the ratio of outstanding Debt to Equity Contributions, in each case, with respect to such Project does not exceed the Debt/Equity Ratio applicable to such Project, as at the date of such Borrowing and after giving effect to such Borrowing and such Equity Contributions, and the application of proceeds therefrom;
(B) attaching resolutions of the Borrower authorizing such Project; and
(C) if such Project is a Peaker only, attaching details (as agreed with the Independent Engineer and Environmental Consultant) of testing procedures applicable to, and a seven day reliability run to be successfully completed as a condition for, Substantial Completion of such Project.
(iv) The Agent shall have received no later than thirty (30) days before such Borrowing:
(A) If such Project is an Uncompleted Project, a certificate of Southern certifying that each of the Southern Completion Guarantee and the Southern Equity Agreement is still in full force and effect and has not been amended since the Funds Availability Date except to apply to Subsequent Projects.
(B) If such Project is an Uncompleted Project, the Southern Completion Guarantee and the Southern Equity Agreement, in each case, amended in accordance with the terms thereof to extend its terms to apply to such Project.
(C) A certificate of the Independent Engineer and Environmental Consultant with respect to such Project, substantially in the form of Exhibit I-2.
(D) A certificate of the Independent Insurance Consultant with respect to such Project, substantially in the form of Exhibit J-2.
(E) A certificate of the Independent Market Consultant with respect to such Project, substantially in the form of Exhibit K-2.
(v) If such Project is not wholly owned by a Borrower Group Member, each other owner shall, on or before the date of such Borrowing, have contributed its pro rata share of Project Costs or in the event that any such third party owner fails to contribute its pro rata share of Project Costs, the Borrower shall have funded such Project Costs through Equity Contributions.
(b) If, at the time of such Borrowing, the Borrower has an Investment Grade Rating:
(i) All representations and warranties contained in Section 4.01 and all representations and warranties contained in Sections 4 and 2 of the Southern Completion Guarantee and the Southern Equity Agreement, respectively, are true and correct in all material respects on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date (and each of the giving of the applicable Notice of Utilization and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty made herein, with respect to Section 4.01, by the Borrower to such effect).
(ii) The Agent shall have received, together with or prior to delivery of the Notice of Utilization with respect to such Borrowing, an affirmation by Moody's, Fitch and S&P of the Investment Grade Rating for the Borrower, taking into account such Project and the Debt to be incurred with respect thereto.
(iii) The Agent shall have received no later than thirty
(30) days before such Borrowing a certificate of the Borrower:
(A) attaching an Initial Project Budget (together with a calculation by the Borrower, and agreed to by the Agent, showing a determination of the Initial Project Limit for such Project) and a Project Schedule for such Project;
(B) attaching Project Base Case Projections for such Project, together with
a statement of the assumptions underlying such projections demonstrating the
Required Project DSCR applicable to such Project; provided that the Required
Project DSCR need not be satisfied during any Stub Period for such Project if
(1) such Stub Period does not exceed one year in duration; (2) the relevant PPA
Documents for such Project are executed on or before such Borrowing; and (3)
Stub Periods shall apply to no more than two Subsequent Projects (including such
Project, and no more than one of which may be a Peaker), at any time, the
aggregate Project Costs of which does not exceed $400,000,000;
(C) certifying that, including such Project, Peakers represent no more than 25% of the total megawatt capacity owned by the Borrower and all Relevant Subsidiaries; and
(D) certifying the Project Costs, including construction and related costs, acquisition cost, construction interest and commitment fees, as the case may be, incurred in connection with such Project prior to such Borrowing.
(iv) The Agent shall have received, together with or prior to delivery of the Notice of Utilization with respect to such Borrowing, a certificate of the Borrower:
(A) certifying that proceeds of such Borrowing are used to fund, pro rata with Equity Contributions, Project Costs for such Project so that the ratio of outstanding Debt to Equity Contributions, in each case, with respect to such Project does not exceed the Debt/Equity Ratio applicable to such Project, as at the date of such Borrowing and after giving effect to such Borrowing and such Equity Contributions, and the application of proceeds therefrom;
(B) attaching resolutions of the Borrower authorizing such Project; and
(C) if such Project is a Peaker only, attaching details (as agreed with the Independent Engineer and Environmental Consultant) of testing procedures applicable to, and a seven day reliability run to be successfully completed as a condition for, Substantial Completion of such Project.
(v) The Agent shall have received no later than thirty (30) days before such Borrowing:
(A) If such Project is an Uncompleted Project, a certificate of Southern certifying that each of the Southern Completion Guarantee and the Southern Equity Agreement are still in full force and effect and has not been amended since the Funds Availability Date except to apply to Subsequent Projects.
(B) If such Project is an Uncompleted Project, the Southern Completion Guarantee and the Southern Equity Agreement, in each case, amended in accordance with the terms thereof to extend its terms to apply to such Project.
(C) A certificate of the Independent Engineer and Environmental Consultant with respect to such Project, substantially in the form of Exhibit I-2.
(D) A certificate of the Independent Insurance Consultant with respect to such Project, substantially in the form of Exhibit J-2.
(E) A certificate of the Independent Market Consultant with respect to such Project, substantially in the form of Exhibit K-2.
(vi) If such Project is not wholly owned by any Borrower Group Member, each other owner shall, on or before the date of such Borrowing, have contributed its pro rata share of Project Costs or in the event that any such third party owner so fails to contribute its pro rata share of Project Costs, the Borrower shall have funded such Project Costs through Equity Contributions.
(c) The Agent shall have received no later than thirty (30) days
before such Borrowing, a certificate of the Borrower attaching
certified copies of the executed PPA Documents for such Project (if
any, and if not previously provided to the Lenders in satisfaction of
Section 3.01(c)(ix)(D), and certifying that such PPA Documents (i)
either (A) conform to the relevant form provided to the Lenders in
satisfaction of Section 3.01(c)(ix)(D); or (B) substantially and
accurately reflect the term sheet provided to the Lenders in
satisfaction of Section 3.01(c)(ix)(D) or comply with all of the PPA
Parameters, and do not contain any additional terms not set forth in
such term sheet or the PPA Parameters (as applicable) which impose
additional material obligations outside the ordinary course of
business of the industry generally on, or otherwise materially reduce
the benefit to, any Borrower Group Member under such PPA Documents;
and (ii) are in full force and effect, and that all necessary
regulatory approvals required to be obtained with respect to such PPA
Documents under all Federal and State Energy Laws and Regulations have
been obtained, are in full force and effect and are final and
non-appealable but for any Filing Conditions, and do not contain any
restrictions, conditions or requirements which are then required to be
satisfied and have not been satisfied, other than any Filing
Conditions.
SECTION 3.05. Conditions Precedent to Subsequent Advances for a Subsequent Project. The obligation of each Lender to make a Project Advance on the occasion of each Borrowing after the first Borrowing, in each case, with respect to any Subsequent Project shall be subject to the following conditions precedent:
(a) All representations and warranties contained in Section 4.01 (other than those listed in Sections 4.01(h) and (j)) and all representations and warranties contained in Sections 4 and 2 of the Southern Completion Guarantee and the Southern Equity Agreement (other than Sections 4(f) and (h) and 2(f) and (h), respectively), are true and correct in all material respects on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date (and each of the giving of the applicable Notice of Utilization and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty made herein, with respect to Section 4.01 and to Sections 4 and 2 of the Southern Completion Guarantee and the Southern Equity Agreement, respectively, by the Borrower to such effect).
(b) The Agent shall have received, together with or prior to delivery of the Notice of Utilization with respect to such Borrowing, a certificate of the Borrower:
(i) certifying the Project Costs, including construction and related costs, construction interest and commitment fees, that have been incurred in connection with such Project since the immediately preceding Borrowing related to it;
(ii) confirming that (A) except as otherwise provided in clause (B) below, all Borrowings previously made to the Borrower for such Project were applied to pay Project Costs for such Project in accordance with this Agreement; and (B) the proceeds of such Borrowing, and of the immediately preceding Borrowing (but only to the extent not previously applied in accordance with clause (A) above), will be applied to Project Costs for such Project which have been paid, are then due or will become due within three (3) months from the date of such Borrowing (or, in the case of the last Borrowing with respect to such Project only, then due or to become due after the date of such Borrowing), in each case, in accordance with this Agreement; and
(iii) certifying that proceeds of the Borrowing shall be used to fund, pro rata with Equity Contributions, Project Costs for such Project so that the ratio of outstanding Debt to Equity Contributions, in each case, with respect to such Project does not exceed the Debt/Equity Ratio applicable to such Project, as at the date of such Borrowing and after giving effect to such Borrowing and such Equity Contributions, and the application of proceeds therefrom.
SECTION 3.06. Conditions Precedent to CP Commitment Reservations. The obligation of each Lender to establish a CP Commitment on the occasion of each CP Commitment Reservation shall be subject to the following conditions precedent:
(a) In the case of the first CP Commitment (Original CP) Reservation for any Initial Project requested prior to the first Borrowing with respect to such Initial Project, the satisfaction of all conditions referred to in Sections 3.02(a) through (e) inclusive, with all references therein to "Borrowing" and proceeds of any Borrowing thereunder being read and construed as references to "CP Commitment (Original CP) Reservation" and the proceeds of the Commercial Paper with respect to which such CP Commitment (Original CP) Reservation is being requested, where appropriate.
(b) In the case of any CP Commitment (Original CP) Reservation requested after the first Borrowing or the first CP Commitment Reservation, in each case with respect to an Initial Project, the satisfaction of all conditions referred to in Section 3.03(a) and (b), with all references therein to "Borrowing" and proceeds of any Borrowing thereunder being read and construed as references to "CP Commitment (Original CP) Reservation" and the proceeds of the Commercial Paper for which such CP Commitment (Original CP) Reservation is being requested, where appropriate.
(c) In the case of any CP Commitment (Refinancing CP) Reservation requested with respect to any Initial Project, the satisfaction of the condition referred to in Section 3.03(a), with all references therein to "Borrowing" and proceeds of any Borrowing thereunder being read and construed as references to "CP Commitment (Refinancing CP) Reservation" and the proceeds of the Project Advances being refinanced by the Refinancing Commercial Paper for which such CP Commitment (Refinancing CP) Reservation is being requested, where appropriate.
(d) In the case of the first CP Commitment (Original CP) Reservation for any Subsequent Project requested prior to the first Borrowing with respect to such Subsequent Project, the satisfaction of all conditions referred to in Sections 3.04(a) through (c) inclusive, with all references therein to "Borrowing" and proceeds of any Borrowing thereunder being read and construed as references to "CP Commitment (Original CP) Reservation" and the proceeds of the Commercial Paper with respect to which such CP Commitment (Original CP) Reservation is being requested, where appropriate.
(e) In the case of any CP Commitment (Original CP) Reservation requested after the first Borrowing or the first CP Commitment Reservation, in each case, with respect to a Subsequent Project, the satisfaction of all conditions referred to in Section 3.05(a) and (b), with all references therein to "Borrowing" and proceeds of any Borrowing thereunder being read and construed as references to "CP Commitment (Original CP) Reservation" and the proceeds of the Commercial Paper for which such CP Commitment (Original CP) Reservation is being requested, where appropriate.
(f) In the case of any CP Commitment (Refinancing CP) Reservation requested with respect to any Subsequent Project, the satisfaction of the condition referred to in Section 3.05(a), with all references therein to "Borrowing" and proceeds of any Borrowing thereunder being read and construed as references to "CP Commitment (Refinancing CP) Reservation" and the proceeds of the Project Advances being refinanced by the Refinancing Commercial Paper for which such CP Commitment (Refinancing CP) Reservation is being requested, where appropriate.
SECTION 3.07. Conditions Precedent to the Working Capital and CP Advances. The obligation of each Lender to make a Working Capital Advance or a CP Advance with respect to an existing CP Commitment Reservation relating to the same Project, on the occasion of the related Borrowing thereto, shall be subject to the following conditions precedent:
(a) All representations and warranties contained in Section 4.01 (other
than those listed in Sections 4.01(h) and (j)) and all representations and
warranties contained in Sections 4 and 2 of the Southern Completion Guarantee
and the Southern Equity Agreement (other than Sections 4(f) and (h) and 2(f) and
(h), respectively), are true and correct in all material respects on and as of
the date of such Borrowing, before and after giving effect to such Borrowing and
to the application of the proceeds therefrom, as though made on and as of such
date (and each of the giving of the applicable Notice of Utilization and the
acceptance by the Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty made herein, with respect to Section 4.01 and to
Sections 4 and 2 of the Southern Completion Guarantee and the Southern Equity
Agreement, respectively, by the Borrower to such effect).
(b) The Agent shall have received a certificate of the Borrower certifying that the proceeds of such Borrowings shall be used (i) in the case of a Borrowing comprising of Working Capital Advances, for the Borrower's working capital or general corporate purposes; and (ii) in the case of a Borrowing comprising of CP Advances, for payment of obligations owing with respect to Commercial Paper for which such CP Commitment Reservation was established.
(c) In the case of a Borrowing comprising of Working Capital Advances, the Agent shall have received a certificate of the Borrower certifying that the aggregate outstanding amount of all Working Capital Advances, before and after giving effect to such Advance and to the application of the proceeds therefrom, does not exceed $25,000,000.
SECTION 3.08. Determinations Under Sections 3.01 Through 3.07, Inclusive. For purposes of determining compliance with the conditions specified in Sections 3.01 through 3.07, inclusive, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the Funds Availability Date (in the case of Section 3.01) or the date of the relevant Borrowing or CP Commitment Reservation, as applicable (in all other cases), specifying its objection thereto. The Agent shall promptly notify the Lenders of the occurrence of the Funds Availability Date.
Article IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:
(a) Organization. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Relevant Subsidiary is a limited liability company or a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each Borrower Group Member is duly qualified or licensed and in good standing in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed.
(b) Power and Authority. Each Borrower Group Member has the power to execute, deliver and perform its obligations under each Material Document to which it is or is to be a party and to take all action necessary to consummate the transactions contemplated by each such Material Document.
(c) Due Authorization. The execution, delivery and performance by each
Borrower Group Member of each Material Document to which it is or is to be a
party (including, with respect to any applicable PPA Document, the assignment of
rights to, and the assumption of liabilities by, such Borrower Group Member
thereunder) and the transactions contemplated thereby have been duly authorized
by all necessary action and do not (i) contravene its certificate of
incorporation or bylaws (or similar constitutive or governing documents); or
(ii) conflict with or contravene any Law to which it or any of its Assets are
subject which has had or would reasonably be expected to have a Material Adverse
Effect as to the Borrower.
(d) Governmental Approval. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required for the due execution, delivery and performance by the Borrower of the Loan Documents, or the transactions contemplated thereby, except for those which have been duly obtained or made and are in full force and effect. With respect to each Project for which a Utilization is then outstanding or a Notice of Utilization has been issued by the Borrower, no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is then required for the due execution, delivery and performance by each Borrower Group Member of the PPA Documents relating to such Project and to which it is or is to be a party, or the transactions contemplated thereby, except for those which have been duly obtained or made and are in full force and effect.
(e) Binding and Enforceable. The Material Documents constitute the legal, valid and binding obligation of each Borrower Group Member party thereto, enforceable against the Borrower Group Member party thereto in accordance with their respective terms, subject to Laws affecting the enforcement of creditors' rights generally and to general principles of equity.
(f) No Violation. The execution, delivery and performance by each Borrower Group Member of each Material Document to which it is a party do not violate, in a manner which has had or would reasonably be expected to have a Material Adverse Effect as to the Borrower, any agreement binding on it.
(g) No Default. No Default or Event of Default has occurred and is continuing, other than any Default or Event of Default which has been waived.
(h) Litigation. No litigation, arbitration or administrative proceeding is currently pending or, to the Borrower's knowledge, threatened against any Borrower Group Member (i) to restrain the entry by such Borrower Group Member into, the enforcement of, or exercise of any rights by the Lenders or the Agent under, or the performance or compliance by such Borrower Group Member with any obligations under, any Material Document to which it is a party; (ii) which has had or would reasonably be expected to have a Material Adverse Effect; or (iii) which purports to affect the legality, validity or enforceability of any such Material Document or the transactions contemplated thereby.
(i) Financial Condition. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 30, 2001, heretofore furnished to the Lenders, fairly presents in all material respects the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date in accordance with GAAP.
(j) Material Adverse Change. There has been no change in the business, condition (financial or otherwise) or results of operations of the Borrower or its consolidated Subsidiaries since September 30, 2001 which has had or would reasonably be expected to have a Material Adverse Effect as to the Borrower.
(k) Taxes. There has been no matter with respect to payment of taxes or filing of tax returns which has had or would reasonably be expected to have a Material Adverse Effect as to the Borrower.
(l) Investment Company Act. Neither the Borrower nor any of its Subsidiaries is an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or is a company "controlled" by an "investment company", in each case, as such terms are defined in such Act.
(m) Environmental Matters. To the knowledge of the Borrower, there has been no matter with respect to environmental compliance which has had or would reasonably be expected to have a Material Adverse Effect as to the Borrower.
(n) Accuracy of Information. To the knowledge of the Borrower (i) the
Information Memorandum (other than the projections included therein) was
complete and correct in all material respects on and as of the date thereof; and
(ii) all financial projections contained in the Information Memorandum were
prepared in good faith and based upon assumptions which management of the
Borrower believed to be not unreasonable at the time the projections were
prepared (it being understood that (A) such projections are subject to
significant uncertainties and contingencies, many of which are beyond the
Borrower's control; (B) no assurance can be given that the projections will be
realized; and (C) no representation or warranty can be made as to the accuracy
of such projections).
(o) Affiliate Transactions. All transactions between a Borrower Group Member and an Affiliate thereof are on arm's-length terms or are "at cost", in each case, in accordance with PUHCA or applicable rules and regulations issued pursuant thereto.
(p) ERISA. (i) No Reportable Event has occurred and is continuing with
respect to any Plan; (ii) no Plan has an accumulated funding deficiency
determined under Section 412 of the Code; (iii) no proceedings have been
instituted or, to the knowledge of the Borrower, planned to terminate any Plan;
(iv) neither the Borrower, nor any member of a Controlled Group, nor any duly
appointed administrator of a Plan has instituted or intends to institute
proceedings to withdraw from any Multiemployer Pension Plan (as defined in
Section 3(37) of ERISA); and (v) each Plan has been maintained and funded in all
material respects in accordance with its terms and with the provisions of ERISA
applicable thereto.
(q) PUHCA and FPA. The Borrower is an "electric utility company" (as defined in PUHCA). No authorization or approval by, or notice to or filing with, any Governmental Authority is required for (i) the acquisition of each Project by a Borrower Group Member, other than those which, on or prior to the first Utilization with respect to such Project, have been duly obtained or made and are in full force and effect; or (ii) the issuance of the Notes, the incurrence of the Debt contemplated under this Agreement and the borrowing, repayment and reborrowing of the Advances, other than those which have been duly obtained or made and are in full force and effect. All necessary rate schedules are on file and effective with the Federal Energy Regulatory Commission for the Borrower Group Members to sell power at wholesale. The Borrower reasonably believes that timely interconnection agreements for the Projects will be available in the ordinary course.
(r) No Subsidiary. The Borrower has not had any Subsidiaries on or prior to the Funds Availability Date other than Southern Company-Florida LLC.
(s) Title to Property. Except for the Permitted Encumbrances, with respect to all real property necessary for, or material to, the development, ownership, operation and maintenance of the Projects and which is not leased by it, each Borrower Group Member has such title as a reputable title company doing business in the state in which such real property is located would insure, subject to such exceptions as would not materially affect the contemplated use of such property by such Borrower Group Member, and with respect to all such real property which is leased by a Borrower Group Member, such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms.
Article V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment under this Agreement, the Borrower will:
(a) Ratio of Recourse Debt to Recourse Capital. At the end of each fiscal quarter (including the fourth fiscal quarter) of the Borrower for which financial statements have most recently been delivered to the Agent by the Borrower pursuant to Section 5.01(d) or (e), cause the ratio of Recourse Debt to Total Capitalization to be not more than 0.60:1:00 (60%), calculated as of the date of such financial statements; provided that at the Borrower's election, (i) capital contributions or Affiliate Subordinated Debt made to the Borrower within forty-five (45) days after the end of such fiscal quarter, net of Restricted Payments made by the Borrower during such 45-day period, shall be taken into account in calculating Total Capitalization as at the end of such fiscal quarter; and (ii) if any such capital contribution or Affiliate Subordinated Debt is made to the Borrower and included for such calculation, the incurrence or repayment, if any, of Debt during such 45-day period, shall also be taken into account in calculating Recourse Debt as at the end of such fiscal quarter.
(b) Compliance with Law. Comply, and cause each Relevant Subsidiary to comply, with the requirements of all Laws applicable to it in the conduct of its business, where failure to do so would reasonably be expected to have a Material Adverse Effect.
(c) Maintenance of Existence. Preserve and maintain, and cause each Relevant Subsidiary to preserve and maintain, its legal existence as a corporation or limited liability company and the rights, licenses, permits, privileges, properties and franchises material to its business, except that (i) the Borrower may be merged or consolidated with or into another Person if the continuing or surviving Person is the Borrower or is organized under the laws of any State of the United States; and (ii) the Borrower may be converted into a limited liability company upon giving notice to the Agent at least ten (10) Business Days prior to such conversion if such limited liability company expressly assumes all of the obligations of the Borrower under each Material Document to which it is a party; provided that in each case (A) immediately before the consummation of such transaction there is no Default or Event of Default; (B) such consummation shall not result in a Default or Event of Default; and (C) the resulting Person shall have delivered evidence of its due organization, incumbency of officers or managers, and unless all of the Borrower's obligations under the Material Documents to which the Borrower is a party have been assumed by operation of law by such resulting Person, a certified copy of the agreement pursuant to which such resulting Person assumes all such obligations, and an opinion of counsel, in each case, in form reasonably satisfactory to the Agent, and certified copies of such Person's constitutive and other governing documents.
(d) Annual Financial Statements, Etc. Within one hundred and twenty (120) days after the end of each fiscal year of the Borrower (beginning with the fiscal year 2001), deliver to the Agent copies for the Lenders of its consolidated financial statements as of the end of and for such fiscal year duly certified by the independent accountants of the Borrower. Such financial statements shall be prepared in accordance with GAAP and shall be accompanied by a certificate of the chief financial officer or the treasurer of the Borrower as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 5.01(a).
(e) Interim Financial Statements, Etc. Within sixty (60) days after the end
of each of the first three fiscal quarters of each fiscal year of the Borrower
(beginning with the first such fiscal quarter to end after September 30, 2001),
deliver to the Agent copies for the Lenders of its unaudited consolidated
financial statements as of the end of and for such fiscal quarter duly certified
(subject to year-end adjustments) by the chief financial officer or the
treasurer of the Borrower as having been prepared in accordance with GAAP
(except as to the omission of footnotes). Such financial statements shall be
accompanied by a certificate of the chief financial officer or the treasurer of
the Borrower as to compliance with the terms of this Agreement and setting forth
in reasonable detail the calculations necessary to demonstrate compliance with
Section 5.01(a).
(f) Other Information. Deliver to the Agent as soon as reasonably practicable such other information relating to the then existing financial condition of the Borrower and its consolidated Subsidiaries as the Agent may from time to time reasonably request, except such information the disclosure of which is prohibited by Law or by regulatory requirement applicable to the Borrower.
(g) Notice of Default. Promptly, and in any event within ten (10) Business Days, notify the Agent of the occurrence of any Default or Event of Default of which the chief financial officer or treasurer of the Borrower has actual knowledge.
(h) Notice Concerning PPA Documents. Promptly notify the Agent of (i) the entry by any Borrower Group Member into a PPA Document and any issuance of Acceptable Credit Support in favor of a Borrower Group Member; and (ii) the termination of any PPA Document prior to its stated expiration.
(i) Project Information. Promptly, and in any event within ten (10) Business Days, after delivery of a cash basis financial statement to the Agent pursuant to Section 5.01(d) or (e), notify the Agent if the ratio of Cash Available for Corporate Debt Service to Corporate Interest is 2.00:1.00 or less or, if the Borrower does not have at least an Investment Grade Rating, 2.25:1.00 or less, in each case, as calculated on a rolling four (4) fiscal quarter basis commencing from the first fiscal quarter to commence after ubstantial Completion is achieved for any Project which, as of the date of this Agreement or the date of the first Utilization with respect thereto, is an Uncompleted Project and ending on the date of such financial statement (or, if at such time less than four (4), but at least two (2), such fiscal quarters have ended, as calculated for the fiscal quarters ending on the date of such financial statement), and deliver to the Agent as soon as reasonably practicable such information relating to the completion testing, operations and maintenance of any Completed Project for review by the Independent Engineer and Environmental Consultant as the Agent (acting upon the instructions of the Majority Lenders) may from time to time thereafter reasonably request, except such information the disclosure of which is prohibited by Law or by regulatory requirement applicable to the Borrower.
(j) Inspection Rights, Etc. Permit the Agent or any Lender or any agents or representatives thereof to examine and make copies of and abstracts from records and books of, and visit the properties of, any Borrower Group Member to discuss the affairs, finances and accounts of, any Borrower Group Member with any of its officers or directors and with its independent certified public accountants from time to time during normal business hours upon reasonable notice. The Lenders and the Agent agree that the Agent shall coordinate and consolidate visits by Lenders and their agents and representatives (including the examination of records and books and the making of copies and abstracts of records and books) at mutually convenient times and in such a manner so as to minimize the disruption to the operations of the Borrower Group Members and the costs associated with such visits.
(k) PPA Documents. Obtain the consent of the Majority Lenders prior to any material amendment to, or termination prior to its stated expiration by any Borrower Group Member of, any PPA Document, which in the case of any such termination, is not replaced by another PPA Document satisfying the PPA Parameters.
(l) Insurance. (i) Insurance. (A) At all times maintain in full force and effect insurance (including worker's compensation insurance, liability insurance, casualty insurance and business interruption insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice; provided that such coverages (and limits and deductibles) may be modified due to, but only to the extent of, the unavailability of such coverages at commercially reasonable rates or on commercially reasonable terms.
(B) Review its insurance program at least annually, on each anniversary of the Funds Availability Date.
(ii) Insurance Account. Upon the occurrence of any Loss which may reasonably be expected to result in payment of Loss proceeds exceeding, in the aggregate, $1,000,000, and in any event prior to receipt by any Borrower Group Member of such proceeds, establish an account with the Agent to hold and disburse such proceeds in accordance with this Section 5.01(l).
(iii) Total Loss. Except as otherwise provided in the last sentence of this sub-clause (iii), in the event of a total Loss of any Completed Project (with respect to which there are Utilizations then outstanding or Commitments then available under the Facility), promptly apply all proceeds of insurance (other than business interruption insurance), condemnation awards or other recoveries to prepay all outstanding Project Debt associated with such Project in accordance with Section 2.09(c), unless the Borrower certifies to the Agent, within sixty (60) days after receipt of such proceeds in an aggregate amount equal to at least 30% of the Total Project Costs for such Completed Project that: (1) all such insurance proceeds have been, or upon receipt shall be immediately, deposited by a Borrower Group Member into the Insurance Account; (2) it will reinstate such Project or replace it with a Similar Asset; (3) all conditions precedent specified in Sections 3.04(a) through (c) inclusive (but with (x) all references to "Borrowing" therein being read and construed as references to the first disbursement from the Insurance Account and all references therein to "Project" being read and construed as references to such Project (in the case of a reinstatement) or such Similar Asset (in the case of a replacement); and (y) the certification referred to in Section 3.04(a)(iii)(A) certifying instead that the ratio of outstanding Debt to Equity Contributions for such Project or Similar Asset (as the case may be) does not exceed the Debt/Equity Ratio applicable thereto, as at the date of the first disbursement from the Insurance Account, and after giving effect to such disbursement and any Equity Contributions as of the date thereof, and the application of proceeds therefrom) are then satisfied with respect to the reinstatement or replacement of such Project; (4) there are sufficient funds to do so (taking into account all undisputed proceeds to be paid and all committed equity contributions into the Borrower); and (5) such reinstatement or replacement is technically feasible, then, such proceeds may be held in the Insurance Account and disbursed from time to time to pay Project Costs for reinstating such Project or for such replacement Similar Asset (x) if all conditions precedent specified in Section 3.05(a) and (b) (but with (AA) all references to "Borrowing" therein being read and construed as references to a disbursement from the Insurance Account and all references therein to "Project" being read and construed as references to such Project (in the case of a reinstatement) or such Similar Asset (in the case of a replacement); and (BB) the certification referred to in Section 3.05(b)(iii) certifying instead that the ratio of outstanding Debt to Equity Contributions for such Project or Similar Asset (as the case may be) does not exceed the Debt/Equity Ratio applicable thereto, as at the date of the relevant disbursement from the Insurance Account, and after giving effect to such disbursement and any Equity Contributions as of the date thereof, and the application of proceeds therefrom) are then satisfied; and (y) where the aggregate of all such proceeds is less than the Project Costs for such reinstatement or replacement (as the case may be), if Project Costs are funded pro rata between disbursements from the Insurance Account and Equity Contributions to be paid with respect to such reinstatement or replacement. To the extent any such proceeds in excess of $1,000,000 are not used for such reinstatement or replacement, they shall, upon completion of such reinstatement or replacement (as applicable) be applied to prepay the outstanding Project Debt made with respect to such Project in accordance with Section 2.09(c).
(iv) Partial Loss. In the event of a partial Loss of any
Completed Project (with respect to which there are Utilizations then
outstanding or Commitments then available under the Facility), deal
with such proceeds of insurance (other than business interruption),
condemnation awards or other recoveries in the following manner: if
such proceeds (A) do not exceed $1,000,000 in the aggregate with
respect to such Loss, apply them at the Borrower's sole discretion;
(B) exceed $1,000,000 but not $5,000,000 in the aggregate with respect
to such Loss, use such proceeds to prepay the outstanding Project Debt
made with respect to such Project in accordance with Section 2.09(c)
to the extent such proceeds (in excess of $1,000,000 in the aggregate
with respect to such Loss) are not used to repair or reinstate such
Project, upon completion of such repair or reinstatement; (C) exceed
$5,000,000 but not 10% of the Total Project Costs for such Project
with respect to such Loss, apply such proceeds to repair or reinstate
the affected Project if the Borrower certifies to the Agent, within
sixty (60) days after receipt of proceeds equal to at least $5,000,000
(but with all such proceeds to be reserved by the Borrower until such
certification is made or until prepayment is required pursuant to this
Section 5.01(l)(iv)) that (1) it will repair or reinstate such
Project; (2) there are sufficient funds to do so (taking into account
all undisputed proceeds to be paid and committed equity contributions
into the Borrower); and (3) such repairs or reinstatements are
technically feasible; otherwise, all such proceeds in excess of
$1,000,000 not used for such repair or reinstatement shall, upon
completion of such repair or reinstatement, be promptly applied to
prepay the outstanding Project Debt made with respect to such Project
in accordance with Section 2.09(c); and (D) exceed 10% of the Total
Project Costs for such Completed Project, apply such proceeds to
repair or reinstate the affected Project if consent from the Majority
Lenders shall have been obtained; otherwise, all such proceeds shall
be used promptly to prepay the outstanding Project Debt made with
respect to such Project in accordance with Section 2.09(c).
(m) Asset Sales. To the extent the Borrower has not reinvested
Sale Proceeds arising from any Sale in a Similar Asset, by way of the
purchase or lease (pursuant to a Development Authority Sale/Leaseback)
of such Similar Asset, within six (6) months after such Sale (any such
reinvestment being subject to satisfaction of all conditions precedent
specified in Sections 3.04(a) through (c) inclusive as of the date of
the Borrower's initial investment in such Similar Asset (but (i) with
all references to "Borrowing" therein being read and construed as
references to such investment and all references therein to "Project"
being read and construed as references to such Similar Asset; and (ii)
the certification referred to in Section 3.04(a)(iii)(A) certifying
instead that the ratio of outstanding Debt to Equity Contributions for
such Similar Asset does not exceed the Debt/Equity Ratio applicable
thereto, as at the date of such investment, and after giving effect to
such investment and any Equity Contributions as of the date thereof,
and the application of proceeds therefrom)), the Borrower shall prepay
the outstanding Debt under the Facility to the extent required under
Section 2.09(b)(iii); provided that the Borrower shall be permitted to
apply all Sale Proceeds remaining thereafter, if any, to make a
Restricted Payment in accordance with Section 5.02(b).
(n) Regulatory Approvals. Obtain and maintain, and cause each Relevant Subsidiary to obtain and maintain, in full force and effect all necessary authorizations and approvals by, and deliver all necessary notices to and undertake all necessary filings with, each Governmental Authority which are required, in each case, for the Borrower and such Subsidiary to sell, at wholesale, the entire output of each electric generation plant (including the Projects) owned by the Borrower or such Subsidiary, as the case may be.
(o) Initial Projects. As long as an Initial Project is owned, directly or indirectly, by the Borrower, own, or procure that a wholly owned Subsidiary of the Borrower (other than an Unrestricted Subsidiary) will own, such Project.
(p) Granting of Benefits under Certain Circumstances. If in connection with obtaining a waiver or a curative amendment of a "default" or an "event of default" under a document under which any Debt of the Borrower in a principal or notional amount equal to or in excess of $50,000,000 is outstanding or which evidences any such Debt, any creditor in respect of such Debt will obtain any benefit (including collateral security, a guarantee or other third-party support and improved financial terms), offer to the Lenders the same benefit (including ratable collateral security and guarantees and third-party support and comparably improved terms) and, upon the acceptance by the Majority Lenders of such offer, cause such benefit to be made available to the Lenders concurrently with making such benefit available, and on substantially the same terms as it is made available, to such other creditor.
(q) Notice of Change of Investment Grade Rating. Promptly, and in any event within ten (10) days, after the Borrower is notified thereof in writing by S&P, Fitch or Moody's (as applicable), or the chief financial officer or the treasurer of the Borrower becomes aware of the public announcement thereof by S&P, Fitch or Moody's (as applicable), notify the Agent of either (i) any downgrade in the Borrower's Investment Grade Rating by S&P, Fitch or Moody's, as the case may be; or (ii) mention of the Borrower with negative implication in "Credit Watch", or the equivalent thereof by any of S&P, Moody's or Fitch.
(r) Updated Documents. Upon (i) the earlier of the Non-Recourse Date and the Refinancing Date for any Project, deliver to the Agent an Adjusted Project Budget setting forth Project Costs incurred, as of such date, with respect to such Project; and (ii) each Relevant Event, deliver to the Agent an updated Independent Market Consultant report with respect to all Relevant Completed Plants as at such Relevant Event (including where such Relevant Event is a Southern Event of Default or a Buydown Event, all Substantially Completed Projects for which a Buydown Amount is to be paid as a result of such Relevant Event) based, in the case of each Plant which has then achieved (A) Final Completion, on the performance of such Plant, as certified by Southern to the Agent for purposes of its Final Completion; and (B) Substantial Completion but not Final Completion, on the performance of such Plant, as certified by Southern to the Agent for purposes of its Substantial Completion, and, in each case, which is verified by the Independent Engineer and Environmental Consultant as being consistent with the performance (output, heat rate, environmental and permit compliance and availability) of such Plant.
(s) Project Bonds. As long as any Project is owned by a development authority created and existing under the laws of the State of Georgia and is leased by a Borrower Group Member, hold, or procure that a wholly owned Subsidiary of the Borrower shall hold, free and clear of any Liens, all legal and beneficial title to all Project Bonds issued with respect to a Development Authority Sale/Leaseback of such Project.
SECTION 5.02. Negative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment under this Agreement, the Borrower will not:
(a) Debt. Incur, and will not permit any Subsidiary of the Borrower to
incur, any Debt other than (i) Recourse Debt under the Facility; (ii) Recourse
Debt the proceeds of which (after customary transaction fees and costs) are
applied to the concurrent repayment of Debt; (iii) if the Borrower has at least
an Investment Grade Rating and such rating of the Borrower is reaffirmed after
incurrence of such other Debt, Recourse Debt or, in the case of Lease
Obligations, Debt of the related lessor, that has been rated at least "Baa3" by
Moody's and "BBB-" by S&P; (iv) Recourse Debt the repayment in full of which is
guaranteed by Southern or another Affiliate which has at least an Investment
Grade Rating; (v) Debt that is incurred by an Unrestricted Subsidiary on a basis
that is without recourse to the Borrower other than with respect to the
Borrower's ownership interest in such Unrestricted Subsidiary; or (vi) Debt
which is secured by Liens referred to in Section 5.02(c)(iv), (vi), (vii),
(viii), (ix), (x), (xvi) or (xvii). Notwithstanding the above, the Borrower will
ensure that no Relevant Subsidiary which owns or leases a Project with respect
to which Advances are then outstanding, or for which Commitments are then
available, shall incur any Debt, other than Debt referred to in clause (vi)
above.
(b) Restricted Payments. (i) Declare or make any Restricted Payment; (ii)
make any payments with respect to Affiliate Subordinated Debt (other than any
Affiliate Subordinated Debt loaned, prior to the initial Utilization hereunder
in respect of any Project, to the Borrower to fund its acquisitions of such
Project) or make any redemption or repurchase of any Affiliate Subordinated Debt
(except for any payment, redemption or repurchase of Affiliate Subordinated Debt
from insurance proceeds for casualties which have been restored with the
proceeds of such Affiliate Subordinated Debt); or (iii) purchase, redeem or
otherwise acquire for value any shares of any class of capital stock of the
Borrower or any warrants, rights or options to acquire any such shares, now or
hereafter outstanding, or reduce the Borrower's capital (except for any
purchase, redemption or acquisition of such shares held by Southern or any
reduction of capital paid to an Affiliate of the Borrower from insurance
proceeds for casualties which have been restored with the proceeds of such
shares or such capital, as the case may be); provided that the Borrower may (A)
declare and make any Restricted Payment payable in common stock of the Borrower;
(B) purchase, redeem or otherwise acquire shares of its common stock or
warrants, rights or options to acquire any such shares with the proceeds
received from the substantially concurrent contribution to the Borrower's
capital or the issue of new shares of the Borrower's common stock; and (C) make
any payments with respect to Affiliate Subordinated Debt, make any redemption or
repurchase of Affiliate Subordinated Debt and take any other action specified in
clauses (i), (ii) and (iii) above if, in any such case, (x) no Default or Event
of Default shall have occurred and is continuing; and (y) at the end of the
fiscal quarter (including the fourth fiscal quarter) of the Borrower for which a
cash basis financial statement has been delivered to the Agent pursuant to
Section 5.01(d) or (e) most recently preceding the date on which the Borrower
takes such action, the ratio of Cash Available for Corporate Debt Service to
Corporate Interest was at least 2.00:1.00 or, if the Borrower does not have at
least an Investment Grade Rating, 2.25:1.00, in each case, calculated on a
rolling four (4) fiscal quarter basis ending on the date of such financial
statement (or, if at such time less than four (4) fiscal quarters have ended,
such lesser number of fiscal quarters and with effect from the date of such
delivery of such financial statement). Any such cash basis financial statement
shall be certified by the chief financial officer or the treasurer of the
Borrower as having been prepared in accordance with the books and records of the
Borrower.
(c) Liens. Without the consent of the Majority Lenders, create or have outstanding, or permit the creation of, any Lien on or over any Assets of the Borrower or any of its Subsidiaries except for:
(i) Liens arising solely by operation of law or by order of a court or tribunal or other Governmental Authority (or by an agreement of similar effect);
(ii) Liens arising in the ordinary course of business or operations, in respect of overdue amounts which either (A) have not been overdue for more than thirty (30) days; or (B) are being contested in good faith and for which adequate reserves have been set aside in accordance with GAAP;
(iii) Liens created for the sole purpose of refinancing all outstanding Advances; provided that the Advances are simultaneously prepaid in full, all Commitments cancelled and no amounts are then owing under this Agreement;
(iv) Liens arising out of title retention or like provisions in relation to the acquisition of goods or equipment acquired in the ordinary course of business or operations;
(v) Liens created or arising on ownership interests and documents evidencing ownership interests in (A) an Unrestricted Subsidiary which is the primary obligor in respect of Project Finance Debt; or (B) a Subsidiary all the Assets of which consist of ownership interests in (x) an Unrestricted Subsidiary which is the primary obligor in respect of Project Finance Debt; or (y) another Person described in this clause (B), which Liens secure such Project Finance Debt only;
(vi) Liens on deposits to secure, or any Lien otherwise securing, the performance of bids, trade contracts (other than for borrowed money), operating leases other than Synthetic Leases, statutory obligations, surety bonds, appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(vii) Liens, other than Liens on a Project or the Assets comprising a Project or the ownership interests in all Persons directly or indirectly owning such Project, securing reimbursement obligations under letters of credit, guarantees and other forms of credit enhancement given in the ordinary course of business;
(viii) Liens created or arising over any Asset which is acquired, constructed or created by the Borrower (excluding any Assets acquired or constructed with the use of a Synthetic Lease), but only if (A) such Lien secures only principal amounts (not exceeding the cost of such acquisition, construction or creation) raised for the purposes of such acquisition, construction or creation, together with any costs, expenses, interest and fees incurred in relation thereto or a guarantee given in respect thereof; (B) such Lien is created or arises on or before ninety (90) days after the completion of such acquisition, construction or creation; (C) such Lien is confined solely to the propertyso acquired, constructed or created; and (D) the aggregate principal amount secured by all such Liens and by Liens (if any) under subparagraphs (ix) and (xvii) below, does not exceed $75,000,000;
(ix) Liens (A) outstanding on or over any Asset acquired after the
date of this Agreement; (B) in existence at the date of such acquisition;
(C) where the Borrower does not take any step to increase the principal
amount secured thereby from that so secured and outstanding at the time of
such acquisition (other than in the case of Liens for a fluctuating balance
facility, by way of utilization of that facility within the limits
applicable thereto at the time of acquisition); and (D) the aggregate
principal amount secured under such Liens, and by Liens (if any) under
subparagraphs (viii) above and (xvii) below, does not exceed $75,000,000;
(x) Liens created or arising over any Asset which is acquired or
constructed by the Borrower with the use of a synthetic financing or
Synthetic Lease, but only if (A) such Lien secures only principal amounts
(not exceeding the cost of such acquisition or construction (including any
contingency amount relating to such acquisition or construction)) raised
for the purposes of such acquisition or construction through such synthetic
financing or Synthetic Lease, together with any costs, expenses, interest
and fees and indemnities incurred in relation thereto or a guarantee given
in respect thereof; (B) such Lien is created or arises on or before ninety
(90) days after the completion of such acquisition or construction; and (C)
such Lien is confined solely to the property so acquired or constructed;
(xi) Liens constituted by a right of set-off (including a bank's right of set-off with respect to deposit accounts) or rights over a margin call account or any form of cash collateral or any similar arrangement for obligations incurred in respect of any currency, commodity or interest rate swap, option, forward rate, or futures contracts or any other arrangement for the hedging or management of risks entered into on commercial terms;
(xii) Liens in favor of a plaintiff or defendant in any action before a court or tribunal as security for costs or expenses where such action is being prosecuted or defended in the bona fide interest of the Borrower;
(xiii) Liens described in any of subparagraphs (iv) through (xi) above or (xiv) through (xvii) below and renewed or extended upon the renewal or extension or refinancing or replacement of the indebtedness secured thereby; provided that there is no increase in the principal amount of the indebtedness secured thereby over the principal, capital or nominal amount thereof outstanding immediately prior to such refinancing;
(xiv) Liens existing on the date of this Agreement;
(xv) Liens on the property of a Person existing at the time such Person is merged into or consolidated with the Borrower or any of its Subsidiaries and not incurred in contemplation with such merger or consolidation;
(xvi) Liens created or arising over any land which is acquired by the Borrower or any of its Subsidiaries, but only if (A) such Lien secures only principal amounts (not exceeding the cost of such acquisition) raised for the purpose of such acquisition or which are secured by such land at the time of its acquisition, together with any costs, expenses, interest and fees incurred in relation thereto or a guarantee given in respect thereof; (B) such Lien is created or arises on or before ninety (90) days after the completion of such acquisition; (C) such Lien is confined solely to the land so acquired; and (D) the aggregate principal amount secured by all such Liens does not exceed $25,000,000; and
(xvii) Liens created or outstanding on or over Assets of the Borrower or any Relevant Subsidiary; provided that the aggregate outstanding principal, capital or nominal amount secured by all Liens created or outstanding under this subparagraph (xvii) on or over Assets of the Borrower and all Relevant Subsidiaries shall not at any time exceed $25,000,000.
Notwithstanding anything else contained herein, an Unrestricted Subsidiary may create or have outstanding any Lien on or over its Assets to secure the payment of such Unrestricted Subsidiary's Debt.
(d) Activities. Engage in, and will not permit any of its Subsidiaries to engage in, any business activities other than activities which the Borrower and its Subsidiaries may undertake under PUHCA (whether or not such law is repealed); provided that in the event PUHCA is repealed, any Unrestricted Subsidiary shall not be so restricted.
(e) Acquisitions. Acquire, and will ensure that no Relevant Subsidiary will acquire, from a non-Affiliate of the Borrower any Project that has achieved Final Completion without first obtaining the consent of the Majority Lenders.
(f) Affiliate Transactions. Except as otherwise required by Law, enter into, or permit any Relevant Subsidiary to enter into, any transaction or series of transactions, whether or not in the ordinary course of business, with any of its Affiliates other than on terms and conditions substantially as favorable as would be obtainable in a comparable arm's-length transaction with a Person other than an Affiliate.
Article VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing:
(a) Payments. The Borrower shall fail to pay (i) any principal of any
Advance when the same becomes due and payable; or (ii) any interest on any
Advance or any fees or other amounts payable under this Agreement within five
(5) Business Days after the same becomes due and payable; provided that failure
to pay any principal, interest or other amounts required under Section
2.09(b)(i) shall not constitute a default by the Borrower or an Event of Default
unless such failure is still continuing as of the Final Maturity Date, whereupon
it shall, on such date, become an Event of Default; or
(b) Representations and Warranties. Any representation or warranty made by the Borrower in this Agreement shall prove to have been materially incorrect when made and, if the underlying facts or circumstances making such representation or warranty incorrect are susceptible of cure, it shall not have been cured within thirty (30) days after written notice thereof has been given by the Agent to the Borrower (or such longer period as the Majority Lenders may permit); or
(c) Covenants. The Borrower shall fail to perform or comply with (i)
Section 5.01(g); or (ii) any other material term, covenant or agreement
contained in this Agreement on its part to be performed or observed and such
failure under clause (ii) shall remain unremedied for thirty (30) days after
written notice thereof has been given by the Agent to the Borrower (or such
longer period as the Majority Lenders may permit); or
(d) Cross-default. The Borrower or any Relevant Subsidiary shall fail to pay any principal of, or premium or interest on, any of its Debt that is outstanding in a principal or notional amount equal to or in excess of $50,000,000, in the aggregate, for all such unpaid Debt (but excluding Debt outstanding under the Facility) when such Debt becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under the agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Debt by reason of default; or any such Debt shall be declared due and payable, or be required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case, prior to the scheduled maturity thereof by reason of default; or
(e) Judgment. Any judgment or order for the payment of money in excess of $50,000,000, in the aggregate, shall be rendered against the Borrower and the Relevant Subsidiaries and there shall be any period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(f) Bankruptcy, Etc. The Borrower or any Relevant Subsidiary shall (i)
apply for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property; (ii) make a general assignment for the benefit of its
creditors; (iii) commence a voluntary case under the U.S. Bankruptcy Code (as
now or hereafter in effect) or any similar law of any applicable jurisdiction;
(iv) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts; or (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the U.S. Bankruptcy Code or any similar law of any
applicable jurisdiction; or a proceeding or case shall be comenced, without the
application or consent of the Borrower or any of its Relevant Subsidiaries, in
any court of competent jurisdiction, seeking (A) its liquidation,
reorganization, dissolution or winding-up, or the composition or readjustment of
its debts; (B) the appointment of a trustee, receiver, custodian, liquidator or
the like of the Borrower or such Relevant Subsidiary (as applicable) or of all
or any substantial part of its assets; or (C) similar relief in respect of the
Borrower or such Relevant Subsidiary (as applicable) under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment
of debts, and such proceeding or case shall continue unstayed and in effect for
a period of ninety (90) or more days; or
(g) Change of Control. Southern shall at any time cease to beneficially own, directly or indirectly, (i) at least a majority of each of the non-voting common stock (if any) and the voting common stock of the Borrower; or (ii) sufficient shares of the capital stock of the Borrower to elect a majority of the board of directors of the Borrower; or
(h) Credit Agreement. Any material provision of this Agreement shall fail to be in full force and effect, or the Borrower so asserts in writing;
then, and in any such event, the Agent (i) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the obligation of each Lender to make Advances or establish CP Commitments to be terminated, whereupon the same shall forthwith terminate; and/or (ii) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the Advances and the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances and the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances or establish CP Commitments shall automatically be terminated; and (B) the Advances and the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.
Any Default or Event of Default which has been waived in the manner required by the applicable provisions of this Agreement shall not be considered to be continuing from and after the time as of which such waiver has become effective.
Article VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Agent by their respective terms, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement or any other Loan Document (including enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to this Agreement, the other Loan Documents or applicable Law. The Agent agrees to give to each Lender prompt notice of each notice given to it by any Loan Party pursuant to the terms of the relevant Loan Document.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement or
any other Loan Document, except for its or their own gross negligence or willful
misconduct. Without limitation to the generality of the foregoing, the Agent:
(a) may treat the payee of any Note as the holder thereof until the Agent
receives and accepts an Assignment and Acceptance entered into by the Lender
that is the payee of such Note, as assignor, and an Eligible Assignee, as
assignee, as provided in Section 8.07; (b) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement, any other Loan Document or any PPA Document; (d) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement or any other Material
Document on the part of the Borrower or Southern or any other party thereto, or
to inspect the property (including the books and records) of the Borrower or
Southern; (e) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other Material Document or any other instrument or document
furnished pursuant hereto or thereto; and (f) shall incur no liability under or
in respect of this Agreement or any other Loan Document by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopier, telegram or telex) believed by it to be genuine and signed or sent
by the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect to its Commitment, the Advances made by it and the Note issued to it, Citibank shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Citibank in its individual capacity. Citibank and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from, and generally engage in any kind of business with, the Borrower, Southern, any of their respective Subsidiaries and any Person who may do business with, or own securities of, the Borrower, Southern or any such Subsidiary, all as if Citibank were not the Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent, any Arranger or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, any Arranger or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement or any other Loan Document.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Notes then held by each of them (or if no Notes are at the time outstanding or if any Notes are held by Persons that are not Lenders, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by the Agent under this Agreement or any other Loan Document (collectively, the "Indemnified Costs"); provided that no Lender shall be liable for any portion of the Indemnified Costs resulting from the Agent's gross negligence or willful misconduct; provided further that no Designated Lender shall be liable for any payment under this Section 7.05 so long as, and to the extent that, its Designating Lender makes such payment. Without limitation to the generality of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Material Document or any other instrument or agreement furnished pursuant hereto or thereto, to the extent that the Agent is not reimbursed for such expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by the Agent, any Lender or a third party.
SECTION 7.06. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Borrower shall have the right to appoint a successor Agent, subject to the approval of the Majority Lenders, such approval not to be unreasonably withheld or delayed. If no successor Agent shall have been so appointed by the Borrower and approved by the Majority Lenders, and shall have accepted such appointment, within thirty (30) days after the retiring Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent subject to the approval of the Borrower and the Majority Lenders, such approval not to be unreasonably withheld or delayed, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent under this Section 7.06 by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Agent's resignation or removal under this Section 7.06 as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents.
Article VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement, the Notes or any other Loan Document, nor consent to any departure by the Borrower or Southern therefrom, shall in any event be effective unless the same shall be in writing and signed by or on behalf of the Borrower (and, in the case only of the Southern Completion Guarantee and the Southern Equity Agreement, Southern) and the Majority Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that:
(a) no amendment, waiver or consent shall, unless in writing and
signed by or on behalf of the Borrower (and, in the case only of the
Southern Completion Guarantee and the Southern Equity Agreement, Southern)
and all the Lenders, do any of the following: (i) increase the Commitments
of the Lenders or subject the Lenders to any additional obligations; (ii)
reduce the principal of, or interest on, the Notes or any fees payable
under this Agreement or the other Loan Documents; (iii) postpone any date
fixed for, or change the place or currency of, any payment of principal of,
or interest on, the Notes or any fees payable under this Agreement or the
other Loan Documents; (iv) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Notes, or the number of
Lenders, that shall be required for the Lenders or any of them to take any
action under this Agreement or any other Loan Document; (v) amend the
definition of "Majority Lenders" or "Required Lenders"; or (vi) amend this
Section 8.01;
(b) no amendment or waiver of any of the conditions specified in
Section 3.02, 3.04, 3.06(a) or 3.06(d) shall be effective unless in writing
and signed by or on behalf of the Borrower and the Required Lenders;
(c) no amendment (other than an amendment to extend its provisions, in accordance with the terms thereof, to a Subsequent Project), waiver or consent shall, unless in writing and signed by or on behalf of the Borrower, Southern and the Required Lenders (or, all of the Lenders with respect to any matters relating to those matters expressly referred to in subsection (a) above), be made to or given under the Southern Completion Guarantee or the Southern Equity Agreement; and
(d) no amendment, waiver or consent shall, unless in writing and signed by or on behalf of the Agent in addition to the Persons required pursuant to subsection (a), (b) or (c) above, as the case may be, to take such action, affect the rights or duties of the Agent under this Agreement, any Note or any other Loan Document.
Each Designating Lender may act on behalf of its Designated Lender with respect to any rights of its Designated Lender to grant or withhold any amendment, waiver or consent under this Agreement and the other Loan Documents or with respect to the Notes.
SECTION 8.02. Notices, Etc. All notices and other communications provided for under this Agreement shall be in writing (including telecopier) and mailed, telecopied, or delivered,
(a) if to the Borrower, at its address at 270 Peachtree Street NW,
Suite 2000, Atlanta, GA 30303, Attention: Allen Leverett, Treasurer,
facsimile: (404) 506-0708; with a copy to Chris J. Kysar, Southern Power
Company, 270 Peachtree Street NW, Suite 2000, Atlanta, GA 30303, facsimile:
(404) 506-0708, and Richard H. Brody, Troutman Sanders LLP, Bank of America
Plaza, Suite 5200, 600 Peachtree Street NE, Atlanta, GA 30308, facsimile:
(404) 962-6514;
(b) if to an Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule I;
(c) if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender;
(d) if to any Designated Lender, to its Designating Lender in accordance with subsection (c) above; and
(e) if to the Agent, at its address at 2 Penns Way, Suite 200, New
Castle, DE 19720, Attention: Dave Graber, telephone: (302) 894-6034,
facsimile: (302) 894-6120; with a copy to Citibank, N.A., 388 Greenwich
Street, 20th Floor, New York, NY 10013, Attention: John Maguire, telephone:
(212) 816-1081, facsimile: (212) 816-0584;
or, as to the Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. All such notices and communications shall, when mailed or telecopied, be effective when deposited in the mails or telecopied, respectively, except that notices and communications to the Agent pursuant to Article II, III or VII shall not be effective until received by the Agent. Delivery by telecopier of an executed counterpart of this Agreement or of any amendment or waiver of any provision of this Agreement or the Notes or any other Loan Document or of any Exhibit to be executed and delivered under this Agreement shall be effective as delivery of a manually executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right under this Agreement or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies provided under this Agreement are cumulative and not exclusive of any remedies provided by Law.
SECTION 8.04. Costs and Expenses, Etc. (a) The Borrower agrees to pay, upon demand and presentation to the Borrower of a statement of account, all reasonable and documented third-party out-of-pocket costs and expenses of the Agent in connection with the preparation, execution, delivery, syndication, administration, modification and amendment of this Agreement, the Notes, the other Loan Documents and the other documents to be delivered hereunder or thereunder (including (i) all costs and expenses in connection with due diligence and syndication (including printing, travel, communication, document preparation, printing and distribution and bank meetings); (ii) the reasonable fees and expenses of each of New York special counsel and regulatory counsel for the Agent (but excluding the Agent's in-house counsel) with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this Agreement and the other Loan Documents; and (iii) the fees and expenses of each of the Independent Engineer and Environmental Consultant, the Independent Insurance Consultant and the Independent Market Consultant). The Borrower further agrees to pay, upon demand and presentation to the Borrower of a statement of account, all reasonable and documented third-party out-of-pocket costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable fees and expenses of counsel), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes, the other Loan Documents and the other documents to be delivered hereunder and thereunder, including reasonable fees and expenses of counsel for the Agent and the Lenders in connection with the enforcement of rights under this Section 8.04(a); provided that the Borrower shall be required to pay the reasonable fees and expenses of only one special counsel and, if applicable, one regulatory counsel selected by the Indemnified Parties under the circumstances contemplated by the proviso to Section 8.04(b)(iii).
(b) (i) The Borrower agrees to indemnify each of the Arrangers, the Agent, the Lenders and their respective Affiliates, officers, directors, employees and agents (each, an "Indemnified Party") from, and hold each of them harmless against, any and all losses, liabilities, claims, damages and expenses incurred by any of them relating to, or arising out of or in connection with, this Agreement, the Notes, the other Loan Documents and the actual or proposed use of the proceeds of the Advances or the consummation of any matter contemplated by this Agreement or the other Loan Documents, including any investigation, litigation or other proceeding (whether or not any of the Indemnified Parties is a party thereto) related to the entering into of any Loan Document and, to the extent provided in this subsection (b), the reasonable fees and disbursements of counsel incurred in connection with any such claim, investigation, litigation or other proceeding; provided that the Borrower shall not be responsible for any such losses, liabilities, claims, damages or expenses of any Indemnified Party to the extent incurred by reason of gross negligence or willful misconduct on the part of such Indemnified Party.
(ii) The Borrower shall be entitled to participate in any action or proceeding of which it has been notified by any Indemnified Party except any action or proceeding brought by or for the benefit of the Borrower, Southern or any Subsidiary of the Borrower or Southern against an Indemnified Party.
(iii) Promptly after receipt by an Indemnified Party of written notice of any investigation, litigation or proceeding in respect of which indemnity is sought by it under this Agreement, such Indemnified Party will, if a claim is to be made against the Borrower, notify the Borrower thereof in writing, but the omission so to notify the Borrower will not relieve the Borrower from (A) any liability under this Section which it may have to such Indemnified Party except to the extent the Borrower was prejudiced by such omission; or (B) any liability other than under this Section. Thereafter, the Indemnified Party and the Borrower shall consult, to the extent appropriate, with a view to minimizing the cost to the Borrower of its obligations under this Agreement. In case any Indemnified Party receives written notice of any investigation, litigation or proceeding in respect of which indemnity may be sought by it under this Agreement and it notifies the Borrower thereof, the Borrower will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the Indemnified Party promptly after receiving the aforesaid notice from the Indemnified Party, to assume the defense thereof with counsel reasonably satisfactory to the Indemnified Parties (and, if the Agent or one or more Lenders are the Indemnified Parties, the Agent and such Lenders shall be entitled jointly to direct the conduct of their defense); provided that if the parties against which any loss, claim, damage, expense or liability may arise under any such investigation, litigation or proceeding include both an Indemnified Party and the Borrower, Southern or any Subsidiary of the Borrower or Southern, and such Indemnified Party shall have reasonably concluded that (1) there may be legal defenses available to it or other Indemnified Parties which are different from or additional to those available to the Borrower, Southern or any Subsidiary of the Borrower or Southern, and may conflict therewith; or (2) if any liability, loss, claim, damage or expense arises out of actions brought by or for the benefit of the Borrower, Southern or any Subsidiary of the Borrower or Southern, the Indemnified Parties collectively shall have the right to select one separate counsel to assume such legal defenses and otherwise to participate in the defense of such investigation, litigation or proceeding on behalf of the Indemnified Parties. Upon receipt by the Indemnified Party of notice from the Borrower of its election to assume the defense of such investigation, litigation or proceeding and approval by the Indemnified Party of counsel, the Borrower shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof unless (x) the Indemnified Party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the preceding sentence; (y) the Borrower shall not have employed and continued to employ counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action; or (z) the Borrower shall have authorized in writing the employment of separate counsel for the Indemnified Party at the expense of the Borrower. At the Borrower's request, an Indemnified Party will settle, compromise or consent to the entry of any order adjudicating or otherwise disposing of any loss, claim, damage or liability resulting from such investigation, litigation or proceeding for which the Borrower is liable under this Agreement if such settlement, compromise or consent to entry of any order (AA) includes a provision unconditionally releasing each Indemnified Party from and holding each Indemnified Party harmless against all liability in respect of claims by any releasing party relating to or arising out of this Agreement, the Notes and the matters contemplated herein; (BB) does not require any admission or acknowledgment of culpability or wrongdoing by such Indemnified Party; and (CC) does not involve performance by, or the payment of money damages by, such Indemnified Party. The Borrower shall not be liable for any settlement, compromise or consent to the entry of any order adjudicating or otherwise disposing of any investigation, litigation or proceeding effected without its consent.
(c) The Borrower agrees to indemnify each Lender for its actual and documented losses (excluding any loss of profit and/or margin), costs and expenses reasonably incurred by it resulting from any payment or prepayment of principal of, or Conversion of, any Eurodollar Rate Advance which is made on a day other than the last day of the relevant Interest Period or in an amount other than given in the Borrower's notice of such payment or prepayment, excluding, however, any such losses, costs and expenses resulting from a payment or prepayment made more than ninety (90) days prior to demand being made to the Borrower by such Lender for indemnification. The payment of such indemnity to a Lender shall be made within thirty (30) days of a demand by such Lender complying with Section 8.04(d).
(d) Any demand by a Lender for payment under Section 2.02(c), 2.10, 2.13, 8.04(b) or 8.04(c) or under any other indemnity made by the Borrower under this Agreement shall be made in writing to the Borrower (with a copy to the Agent) and shall be accompanied by a certificate of an officer of the Agent or the relevant Lender, as may be appropriate, setting forth in reasonable detail the calculation of the amount demanded.
(e) To the extent permitted by Law, if any Lender notifies the Borrower that additional amounts will be due under Section 2.10 or that any of the events outlined in Section 2.11 have occurred, such Lender will, if it determines that such change is not commercially unreasonable, change its Applicable Lending Office if as a result of such change such increased costs would not be required to be so paid or it would not be illegal for such Lender to make, fund or maintain its Eurodollar Rate Advances. The Borrower will reimburse such Lender for all reasonable expenses it may incur as a result of complying with this Section 8.04(e).
(f) If any circumstances arise which result, or such Lender becomes aware of any circumstances which might result, in the Borrower having to make such compensation or indemnification or in it becoming illegal for such Lender to make, fund or maintain such Lender's Eurodollar Rate Advances, such Lender will promptly notify the Borrower thereof and, in consultation with the Borrower, such Lender shall take all such steps, if any, as it determines are reasonable and the Borrower determines are acceptable to mitigate the effect of those circumstances.
(g) Without prejudice to the survival of any other agreement of the Borrower or of the Lenders under this Agreement, the agreements and obligations of the Borrower contained in Sections 2.10, 2.13 and 8.04 and the obligations of the Lenders contained in Sections 2.13, 8.04, 8.07(g) and 8.08 shall survive the payment in full of principal, interest and all other amounts payable under this Agreement and under the Notes.
SECTION 8.05. Right of Set-off. Upon declaration by the Agent that the
Advances and the Notes are due and payable pursuant to the provisions of Section
6.01, each Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by Law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by
such Lender to, or for the credit or the account of, the Borrower against any
and all of the obligations of the Borrower now or hereafter existing under this
Agreement, the Notes held by such Lender and the other Loan Documents, whether
or not such Lender shall have made any demand under this Agreement, such Notes
or any other Loan Document and although such obligations may be unmatured. Each
Lender agrees promptly to notify the Borrower after any such set-off and
application; provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
set-off) that such Lender may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective (other than Section 2.01 and 2.15, each of which shall only become effective upon satisfaction of the conditions precedent set forth in Section 3.01) when it shall have been executed by the Borrower and the Agent and when the Agent shall have been notified by the Initial Lenders that such Initial Lenders have executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may assign to
(i) one or more Eligible Assignees without the approval of the Borrower or the
Agent in the case of any Eligible Assignee that is already a Lender or an
Affiliate of a Lender, and with the approval of the Borrower (unless an Event of
Default or Default has occurred and is then continuing) and the Agent, in the
case of any other Eligible Assignee (such approval not to be unreasonably
withheld or delayed); and (ii) one or more other entities with the approval of
the Agent and the Borrower, all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment, the Advances owing
to it and the Note or Notes held by it); provided that (A) each such assignment
shall be of a pro rata share of each outstanding Advance made by such Lender and
the Commitment and CP Commitment of such Lender; (B) each such assignment shall
be of a constant, and not a varying, percentage of all rights and obligations
under this Agreement; (C) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall be $10,000,000 or a larger integral multiple
of $1,000,000; and (D) the parties to each such assignment shall execute and
deliver to the Agent, for recording in the Register, and, if the relevant
assignee is not a Lender or an Affiliate of a Lender, to each of the Agent and
the Borrower for its acceptance (provided that no such acceptance is required
(1) from the Borrower or the Agent with respect to an assignee that is a Lender
or an Affiliate of a Lender; or (2) from the Borrower with respect to any other
Eligible Assignee while an Event of Default or Default has occurred and is
continuing), an appropriate Assignment and Acceptance, together with any Note
subject to such assignment and a processing and recordation fee of $3,000 (which
shall not be payable by the Borrower). Upon such execution, delivery, acceptance
(if applicable) and recording, from and after the effective date specified in
each Assignment and Acceptance, (x) the assignee thereunder shall be a party to
this Agreement and, to the extent that rights and obligations under this
Agreement have been assigned to it pursuant to such Assignment and Acceptance,
have the rights and obligations of a Lender under this Agreement; and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
under this Agreement have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (other than under Sections 2.13(f), 8.07(g) and 8.08) (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party to this Agreement).
(b) If any Lender shall make a demand under Section 8.04(d) for payment in respect of a claim under Section 2.10 or shall give a notice under Section 2.11 of any unlawfulness or assertion of unlawfulness contemplated by such Section or any demand shall be made or any amount shall be payable with respect to any Lender under Section 2.13, the Borrower may, by written notice given to such Lender within forty-five (45) days of the making by such Lender of such demand or the giving by such Lender of such notice, require by written notice to such Lender that such Lender assign, by executing and delivering an Acceptance and Assignment, within fifteen (15) days of the giving by the Borrower of such notice but on at least three (3) Business Days' notice to one or more Persons in accordance with Section 8.07(a) such Lender's Commitment and its Advances against payment to such Lender in immediately available funds of the principal amount of such Advances, all interest accrued thereon to the date of payment, all fees accrued by such Lender to the date of payment, any amounts payable to such Lender under Section 8.04(c) and all other amounts payable hereunder to such Lender.
(c) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties to this Agreement as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Material Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Material Document or any other instrument or document furnished pursuant hereto or thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, Southern or any Subsidiary of the Borrower or Southern, or the performance or observance by the Borrower or Southern or any other party of any of its obligations under any Material Document to which it is a party or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents; (v) such assignee confirms that it is an Eligible Assignee or that it is an entity that has been approved by the Borrower and the Agent to the extent any such approval is required under Section 8.07(a); (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement and the other Loan Documents are required to be performed by it as a Lender.
(d) The Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance and each Designation Agreement delivered to and (if applicable) accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender under this Agreement for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an existing Lender or Affiliate of a Lender or that it is an entity that has been approved by the Borrower and the Agent under Section 8.07(a), together with any Note or Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C, (i) accept such Assignment and Acceptance; (ii) record the information contained therein in the Register; and (iii) promptly give notice and a copy thereof to the Borrower. Within five (5) Business Days after its receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Agent in exchange for the surrendered Note a new Note to such Eligible Assignee or other entity in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment under this Agreement, a new Note to the assigning Lender in an amount equal to the Commitment retained by it under this Agreement. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A.
(f) Each Lender may sell participations to one or more banks or other entities
(other than the Borrower or any of its Affiliates) in or to all or a portion of
its rights and/or obligations under this Agreement (including all or a portion
of its Commitment, the Advances owing to it and/or the Note or Notes held by
it); provided that (i) such Lender's obligations under this Agreement and the
other Loan Documents (including its Commitment) shall remain unchanged; (ii)
such Lender shall remain solely responsible to the other parties to this
Agreement and the other Loan Documents for the performance of such obligations;
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement and the other Loan Documents; (iv) the Borrower, the Agent and
the other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents; and (v) no participant under any such participation
shall have any right to approve any amendment or waiver of any provision of this
Agreement, any Note or any other Loan Document, or any consent to any departure
by the Borrower or Southern therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Notes or
any fees or other amounts payable under this Agreement, the Notes or any other
Loan Document, or postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable under this
Agreement, the Notes or any other Loan Document, in each case to the extent
subject to such participation, or any other matter for which unanimous consent
of the Lenders is required pursuant to this Agreement or any other Loan
Document.
(g) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 8.07, disclose to the assignee or participant or proposed assignee or participant, any Confidential Information; provided that prior to any such disclosure, the assignee or participant or proposed assignee or participant shall (if it is not an existing Lender or Participant) have executed and delivered to such Lender and to the Borrower a duly authorized confidentiality agreement substantially in the form of Exhibit D.
(h) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including the Advances owing to it and the Note held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.
(i) Any Lender may at any time, without the consent of the Borrower, designate
not more than one Designated Lender to fund Advances on behalf of such
Designating Lender subject to the terms of this Section 8.07(i), and the
provisions of Sections 8.07(a) through (h) shall not apply to such designation.
No Lender may have more than one Designated Lender at any time. Such designation
may occur either by the execution before the Funds Availability Date of the
signature pages of an Assignment and Acceptance by such Lender and Designated
Lender next to the appropriate "Designating Lender" and "Designated Lender"
captions, or by execution by such parties of a Designation Agreement on or after
the Funds Availability Date; provided that any Lender and its Designated Lender
executing the signature pages of any Assignment and Acceptance as "Designating
Lender" and "Designated Lender", respectively, before the Funds Availability
Date shall be deemed to have executed a Designation Agreement, and shall be
bound by the respective representations, warranties and covenants contained
therein. The parties to each such designation occurring on or after the Funds
Availability Date shall execute and deliver to the Agent and the Borrower a
Designation Agreement. Upon receipt of an appropriately completed Designation
Agreement executed by a Designating Lender and a designee representing that it
is a Designated Lender, the Agent will accept such Designation Agreement and
will give prompt notice thereof to the Borrower and the other Lenders, whereupon
(i) the Borrower shall execute and deliver to the Designating Lender a
Designated Lender Note payable to the order of the Designated Lender; (ii) from
and after the effective date specified in the Designation Agreement, the
Designated Lender shall become a party to this Agreement with a right to make
Advances on behalf of its Designating Lender pursuant to Section 2.01(c); and
(iii) the Designated Lender shall not be required to make payments with respect
to any obligations in this Agreement except to the extent of excess cash flow of
such Designated Lender which is not otherwise required to repay obligations of
such Designated Lender which are then due and payable; provided that regardless
of such designation and assumption by the Designated Lender, the Designating
Lender shall be and remain obligated to the Borrower, the Agent and the Lenders
for each and every of the obligations of the Designating Lender and its related
Designated Lender with respect to this Agreement and the other Loan Documents,
including any indemnification obligations under Section 7.05, and any sums
otherwise payable to the Borrower by the Designated Lender. Each Designating
Lender, or specified branch or affiliate thereof, shall serve as the
administrative agent of its Designated Lender and shall on behalf of its
Designated Lender: (A) receive any and all payments made for the benefit of such
Designated Lender; and (B) give and receive all communications and notices and
take all actions under this Agreement and the other Loan Documents, including
votes, approvals, waivers, consents and amendments under or relating to this
Agreement and the other Loan Documents. Any such notice, communication, vote,
approval, waiver, consent or amendment shall be signed by a Designating Lender,
or specified branch or affiliate thereof, as administrative agent for its
Designated Lender and need not be signed by such Designated Lender on its own
behalf. The Borrower, the Agent and the Lenders may rely thereon without any
requirement that the Designated Lender sign or acknowledge the same. No
Designated Lender may assign or transfer all or any portion of its interest
under this Agreement, other than via an assignment to its Designating Lender or
Liquidity Lender, if any, or otherwise in accordance with the provisions of
Sections 8.07(a) through (h).
(j) Notwithstanding anything in this Agreement to the contrary (including any
other provision regarding assignments, participations, transfers or novations),
any Lender (a "Granting Lender") may, without the consent of any other party
hereto, grant to a special purpose vehicle (whether a corporation, partnership,
limited liability company, trust or otherwise, an "SPV") sponsored or managed by
the Granting Lender or any Affiliate thereof, a participation in all or any part
of any existing or future Advances hereunder (including Commitments therefor)
that such Granting Lender has made or will make pursuant to this Agreement;
provided that (i) such Granting Lender's obligations under this Agreement
(including its Commitments) shall remain unchanged; (ii) such Granting Lender
shall remain the holder of the Notes for all purposes under this Agreement; and
(iii) the Borrower, Agent and other Lenders shall continue to deal solely and
directly with such Granting Lender in connection with such Granting Lender's
rights and obligations under this Agreement. Each party hereto hereby agrees
that (A) no SPV will be entitled to any rights or benefits that a Participant
would not otherwise be entitled to under this Agreement; and (B) an SPV may
assign its interest in any existing or future Advances under this Agreement to
any Person that would constitute a Participant. Notwithstanding anything in this
Agreement to the contrary, the Granting Lender and any SPV may, without the
consent of any other party to this Agreement, and without limiting any other
rights of disclosure of the Granting Lender under this Agreement, disclose on a
confidential basis any non-public information relating to its funding of
Advances to (1) (in the case of the Granting Lender) any actual or prospective
SPV, (2) (in the case of an SPV) its lenders, sureties, reinsurers, guarantors
or credit liquidity enhancers, (3) their respective directors, officers, and
advisors, and (4) any rating agency.
SECTION 8.08. Confidentiality. (a) Neither the Agent, any Arranger nor any
Lender shall, without the prior written consent of the Borrower, (i) disclose
Confidential Information to any Person except as permitted by Section 8.07(g) or
(j) or this Section 8.08; or (ii) use, either directly or indirectly, any of the
Confidential Information except in concert with the Borrower and in connection
with this Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby.
(b) The Agent, each Arranger and each Lender may disclose the Confidential Information (i) to their respective Representatives who need to know the Confidential Information for the purpose of administering or enforcing its rights under this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby or for the discharge of their duties, who are informed by the Agent, such Arranger or such Lender of the confidential nature of the Confidential Information, and who agree to be bound by the terms and conditions of this Agreement to the same extent as the Agent, such Arranger or such Lender; and (ii) to any party to this Agreement.
(c) Each of the Agent, each Arranger and each Lender agrees that, without the Borrower's prior written consent, it shall not disclose to any Person (except as otherwise expressly permitted in this Agreement) the fact that the Confidential Information has been made available or any of the terms, conditions or other facts with respect to the Confidential Information.
(d) The provisions contained in this Section 8.08 shall be inoperative as to any portion of the Confidential Information that (i) is or becomes generally available to the public on a nonconfidential basis through no fault or action by the Agent, any Arranger, any Lender or their respective Representatives; or (ii) is or becomes available to the Agent, any Arranger or any Lender on a nonconfidential basis from a source other than the Borrower, its Affiliates or Representatives or the Agent or any Arranger or their Representatives, which source, to the best knowledge of the Agent, any Arranger or any Lender, as may be appropriate, is not prohibited from disclosing such Confidential Information to the Agent, any Arranger or such Lender by a contractual, legal or fiduciary obligation to the Borrower, the Agent, any Arranger or any Lender.
(e) The Agent, each Arranger and each Lender may disclose the Confidential Information at the request of any regulatory or supervisory authority having jurisdiction over it or to the extent necessary for purposes of enforcing this Agreement or any other Loan Document.
(f) In the event that the Agent, any Arranger or any Lender becomes legally compelled to disclose any of the Confidential Information otherwise than as contemplated by Section 8.08(e), the Agent, such Arranger or such Lender shall provide the Borrower with notice of such event promptly upon its obtaining knowledge thereof (provided that it is not otherwise prohibited by Law from giving such notice) so that the Borrower may seek a protective order or other appropriate remedy. In the event that such protective order or other remedy is not obtained, the Agent, such Arranger or such Lender shall furnish only that portion of the Confidential Information that it is legally required to furnish and shall cooperate with the Borrower's counsel to enable the Borrower to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information.
(g) In the event of any breach of this Section 8.08, the Borrower shall be entitled to equitable relief (including injunction and specific performance) in addition to all other remedies available to it at Law or in equity.
(h) Neither the Agent, any Arranger nor any Lender shall make any public announcement, advertisement, statement or communication regarding the Borrower, its Affiliates (insofar as such announcement, advertisement, statement or communication relates to the Borrower or the transactions contemplated hereby) or this Agreement or the transactions contemplated hereby without the prior written consent of the Borrower (such consent not to be unreasonably withheld or delayed).
(i) Any Designated Lender may disclose any Confidential Information to any rating agency, commercial paper dealer, Liquidity Lender, sureties, reinsurers, guarantors or credit liquidity enhancers for or to such Designated Lender, and their respective directors, officers and advisors; provided that each of such Persons is informed by the Designated Lender of the confidential nature of the Confidential Information and each such commercial paper dealer, Liquidity Lender, surety, reinsurer, guarantor or credit liquidity enhancer agrees to be bound by the terms and conditions of this Section 8.08 to the same extent as the Designated Lender.
(j) The obligations of the Agent, each Arranger and each Lender under this
Section 8.08 shall survive the termination or expiration of this Agreement.
SECTION 8.09. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the Laws of the State of New York.
SECTION 8.10. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties to this Agreement in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties to this Agreement hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court, New York County, United States District Court for the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the Notes, or for recognition or enforcement of any judgment, and each of the parties to this Agreement hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by Law, in such federal court. Each of the parties to this Agreement agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or the Notes in the courts of any jurisdiction. (b) Each of the parties to this Agreement irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York State or federal court. Each of the parties to this Agreement hereby irrevocably waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
SECTION 8.12. No Bankruptcy Proceedings. Each of the Borrower, the Lenders and the Agent agrees that it will not institute against any Designated Lender or join any other Person in instituting against any Designated Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any federal or state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Designated Lender.
SECTION 8.13. Waiver of Jury Trial. Each of the Borrower, the Agent and the Lenders hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement, the Notes or any other Loan Document or the actions of the Agent or any Lender in the negotiation, administration, performance or enforcement of any such document.
IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to be executed by their respective officers duly authorized for such purpose, as of the date first above written.
The Borrower
SOUTHERN POWER COMPANY
By: _________________________________________
Name:
Title:
The Agent
CITIBANK, N.A.,
as Agent
By: __________________________________________
Name:
Title:
The Initial Lenders
CITIBANK, N.A.
By: ______________________________________________
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD., NY BRANCH
By: ------------------------------------------------
Name:
Title:
By: ------------------------------------------------
Name:
Title:
BAYERISCHE LANDESBANK
GIROZENTRALE, CAYMAN ISLANDS
BRANCH
By: ______________________________________________
Name:
Title:
By: _____________________________________________
Name:
Title:
COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
By:_______________________________________________
Name:
Title:
By:_______________________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: _____________________________________________
Name:
Title:
By: _____________________________________________
Name:
Title:
SCHEDULE I
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
COMMITMENTS AND APPLICABLE LENDING OFFICES
------------------------------------------------------------------------------------------------------------------------------
Initial Lenders Commitments Domestic Lending Offices Eurodollar Lending Offices
------------------------------------------------------------------------------------------------------------------------------
Citibank, N.A. $75,000,000 Citibank, N.A. Citibank, N.A.
2 Penns Way, Suite 200 2 Penns Way, Suite 200
New Castle, DE 19720 New Castle, DE 19720
Attention: Tony Neville Attention: Tony Neville
Tel: (302) 894-6057 Tel: (302) 894-6057
Fax: (302) 894-6120 Fax: (302) 894-6120
Copy to: Copy to:
Citibank, N.A. Citibank, N.A.
388 Greenwich Street, 20th Floor, 388 Greenwich Street, 20th Floor
New York, NY 10013 New York, NY 10013
Attention: John Maguire Attention: John Maguire
Tel: (212) 816-1081 Tel: (212) 816-1081
Fax: (212) 816-0584 Fax: (212) 816-0584
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The Bank of Tokyo-Mitsubishi, $65,000,000 The Bank of Tokyo-Mitsubishi The Bank of Tokyo-Mitsubishi Ltd.,
Ltd., NY Branch Ltd., NY Branch NY Branch
1251 Avenue of the Americas 1251 Avenue of the Americas
New York, NY 10020-1104 New York, NY 10020-1104
Attention: Mr. Rolando Uy, AVP, Attention: Mr. Rolando Uy, AVP,
Loan Operations Dept. Loan Operations Dept.
BTM Information Services, Inc. BTM Information Services, Inc.
Tel: (201) 413-8570 Tel: (201) 413-8570
Fax: (201) 521-2304/2305 Fax: (201) 521-2304/2305
------------------------------------------------------------------------------------------------------------------------------
Bayerische Landesbank $65,000,000 Bayerische Landesbank Girozentrale Bayerische Landesbank Girozentrale
Girozentrale, Cayman Islands 560 Lexington Avenue 560 Lexington Avenue
Branch New York, NY 10022 New York, NY 10022
Attention: Sean Attention: Sean
O'Sullivan/Patricia Sanchez O'Sullivan/Patricia Sanchez
Tel: (212) 310-9913/9810 Tel: (212) 310-9913/9810
Fax: (212) 310-9868/9930 Fax: (212) 310-9868/9930
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Commerzbank AG, New York and $65,000,000 Commerzbank AG, Atlanta Agency Commerzbank AG, Atlanta Agency
Grand Cayman Branches 1230 Peachtree St., N.E. 1230 Peachtree St., N.E.
Suite 3500 Suite 3500
Atlanta, GA 30309 Atlanta, GA 30309
Attention: Brian Campbell, Senior Attention: Brian Campbell, Senior
Vice President Vice President
Tel: (404) 888-6518 Tel: (404) 888-6518
Fax: (404) 888-6539 Fax: (404) 888-6539
Copy to: Commerzbank AG, Copy to: Commerzbank AG,
555 Theodore Fremd Ave - Suite 555 Theodore Fremd Ave - Suite
B-200, B-200,
Rye, NY 10580 Rye, NY 10580
Attention: Monica Aguirre Attention: Monica Aguirre
Tel: (914) 925-2097 Tel: (914) 925-2097
Fax: (914) 925-2001 Fax: (914) 925-2001
------------------------------------------------------------------------------------------------------------------------------
The Industrial Bank of Japan, $65,000,000 The Industrial Bank of Japan, The Industrial Bank of Japan,
Limited Limited Limited
1251 Avenue of the Americas 1251 Avenue of the Americas
New York, NY 10020-1104 New York, NY 10020-1104
Attention: Juan A. Almodoval Attention: Juan A. Almodoval
Tel: (212) 282-4072 Tel: (212) 282-4072
Fax: (212) 282-4480 Fax: (212) 282-4480
------------------------------------------------------------------------------------------------------------------------------
Bank of America, N.A. $45,000,000 Bank of America, N.A. Bank of America, N.A.
901 Main St. 14th FL 901 Main St. 14th FL
Dallas, TX 75202 Dallas, TX 75202
Attention: Nora Taylor Attention: Nora Taylor
Tel: (214) 209-0175 Tel: (214) 209-0175
Fax: (214) 290-9440 Fax: (214) 290-9440
------------------------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia $45,000,000 The Bank of Nova Scotia The Bank of Nova Scotia
Suite 2700, 600 Peachtree St. N.E. Suite 2700, 600 Peachtree St. N.E.
Atlanta, GA 30308 Atlanta, GA 30308
Attention: Anthony Attention: Anthony
Millington/Twala Johnson Millington/Twala Johnson
Tel: (404) 877-1579/1565 Tel: (404) 877-1579/1565
Fax: (404) 888-8998 Fax: (404) 888-8998
------------------------------------------------------------------------------------------------------------------------------
Barclays Bank PLC $45,000,000 Barclays Bank PLC Barclays Bank PLC
222 Broadway - 11th Floor 222 Broadway - 11th Floor
New York, NY 10038 New York, NY 10038
Attention: Jesse Adams/Jeff Attention: Jesse Adams/Jeff
Pannullo Pannullo
Tel: (212) 412-4081/3724 Tel: (212) 412-4081/3724
Fax: (212) 412-5306 Fax: (212) 412-5306
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|
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KBC Bank N.V., New York Branch $45,000,000 KBC Bank N.V., KBC Bank N.V.,
New York Branch New York Branch
125 West 55th Street 125 West 55th Street
New York, NY 10019 New York, NY 10019
Attention: Rose Pagan, Loan Attention: Rose Pagan, Loan
Administration Administration
Tel: (212) 541-0657 Tel: (212) 541-0657
Fax: (212) 956-5581 Fax: (212) 956-5581
------------------------------------------------------------------------------------------------------------------------------
Australia and New Zealand $32,500,000 Australia and New Zealand Banking Australia and New Zealand Banking
Banking Group Limited Group Limited Group Limited
1177 Avenue of the Americas 1177 Avenue of the Americas
New York, NY 10036 New York, NY 10036
Attention: Arlene Esin/Ben Attention: Arlene Esin/Ben
Velazquez Velazquez
Tel: (212) 801-9827/9100 Tel: (212) 801-9827/9100
Fax: (212) 536-9278/556-4829 Fax: (212) 536-9278/556-4829
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Bayerische Hypo- und $32,500,000 Bayerische Hypo- und Vereinsbank Bayerische Hypo- und Vereinsbank
Vereinsbank AG, New York AG, New York Branch AG, Grand Cayman Branch
Branch 150 East 42nd Street c/o Bayerische Hypo- und
New York, NY 10017 Vereinsbank AG
Attention: Tina Chung 150 East 42nd Street
Tel: (212) 672-5688 New York, NY 10017
Fax: (212) 672-5691 Attention: Tina Chung
Tel: (212) 672-5688
Fax: (212) 672-5691
------------------------------------------------------------------------------------------------------------------------------
Credit Lyonnais New York $32,500,000 Credit Lyonnais New York Branch Credit Lyonnais New York Branch
Branch 1301 Avenue of the Americas 1301 Avenue of the Americas
New York, NY 10019 New York, NY 10019
Attention: Bindu Menon Attention: Bindu Menon
Tel: (212) 261-7633 Tel: (212) 261-7633
Fax: (917) 849-5440 Fax: (917) 849-5440
------------------------------------------------------------------------------------------------------------------------------
First Union National Bank $32,500,000 First Union National Bank First Union National Bank
201 South College Street NC1183 201 South College Street NC1183
Charlotte, NC 28288-1183 Charlotte, NC 28288-1183
Attention: Chanue Michael Attention: Chanue Michael
Tel: (704) 715-1195 Tel: (704) 715-1195
Fax: (704) 383-7201 Fax: (704) 383-7201
------------------------------------------------------------------------------------------------------------------------------
Fleet National Bank $32,500,000 Fleet National Bank Fleet National Bank
Global Energy MA DE 10008A Global Energy MA DE 10008A
100 Federal Street 100 Federal Street
Boston, MA 02110 Boston, MA 02110
Attention: Cassandra Roberson Attention: Cassandra Roberson
Tel: (617) 434-3936 Tel: (617) 434-3936
Fax: (617) 434-0201 Fax: (617) 434-0201
------------------------------------------------------------------------------------------------------------------------------
ING (U.S.) Capital LLC $32,500,000 ING (U.S.) Capital LLC ING (U.S.) Capital LLC
c/o ING Barings c/o ING Barings
135 East 57th Street 135 East 57th Street
New York, NY 10022 New York, NY 10022
Attention: Charmen Smith, Attention: Charmen Smith, Associate
Associate Tel: (212) 409-1516
Tel: (212) 409-1516 Fax: (212) 409-1091
Fax: (212) 409-1091
------------------------------------------------------------------------------------------------------------------------------
JP Morgan Chase Bank $20,000,000 JP Morgan Chase Bank JP Morgan Chase Bank
ICMP - 8th Floor ICMP - 8th Floor
New York, NY 10081 New York, NY 10081
Attention: Lynette Lang Attention: Lynette Lang
Tel: (212) 552-7692 Tel: (212) 552-7692
Fax: (212) 552-5777 Fax: (212) 552-5777
------------------------------------------------------------------------------------------------------------------------------
Lehman Commercial Paper Inc. $20,000,000 Lehman Commercial Paper Inc. Lehman Commercial Paper Inc.
101 Hudson Street 101 Hudson Street
Jersey City, NJ 07302 Jersey City, NJ 07302
Attention: Nancy Wong Attention: Nancy Wong
Tel: (201) 524-4204 Tel: (201) 524-4204
Fax: (201) 524-4298 Fax: (201) 524-4298
------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Senior $20,000,000 Morgan Stanley Senior Funding, Morgan Stanley Senior Funding, Inc.
Funding, Inc. Inc. 1585 Broadway
1585 Broadway New York NY 10036
New York NY 10036 Attention: Larry Benison/Will
Attention: Larry Benison/Will Pope/Theresa Amato
Pope/Theresa Amato Tel: (212) 537-1439/1366/1384
Tel: (212) 537-1439/1366/1384 Fax: (212) 537-1867/1866
Fax: (212) 537-1867/1866
------------------------------------------------------------------------------------------------------------------------------
Norddeutsche Landesbank $20,000,000 NORD/LB New York Branch NORD/LB New York Branch
Girozentrale 1114 Avenue of the Americas, 37th 1114 Avenue of the Americas, 37th
Floor Floor
New York, NY 10036 New York, NY 10036
Attention: Andrea Johann, Loan Attention: Andrea Johann, Loan
Administration Group Administration Group
Tel: (212) 812-6830 Tel: (212) 812-6830
Fax: (212) 812-6930 Fax: (212) 812-6930
------------------------------------------------------------------------------------------------------------------------------
Sanpaolo IMI S.p.A. $20,000,000 Sanpaolo IMI S.p.A. Sanpaolo IMI S.p.A.
245 Park Avenue, 35th Floor 245 Park Avenue, 35th Floor
New York, NY 10167 New York, NY 10167
Attention: Glen Binder Attention: Glen Binder
Tel: (212) 692-3016 Tel: (212) 692-3016
Fax: (212) 692-3178 Fax: (212) 692-3178
------------------------------------------------------------------------------------------------------------------------------
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Toronto Dominion (Texas), Inc. $20,000,000 Toronto Dominion (Texas), Inc. Toronto Dominion (Texas), Inc.
909 Fannin Street, 17th Floor 909 Fannin Street, 17th Floor
Houston, TX 77010 Houston, TX 77010
Attention: Jean Pettit Attention: Jean Pettit
Tel: (713) 653-8234 Tel: (713) 653-8234
Fax: (713) 951-9921 Fax: (713) 951-9921
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Westdeutsche Landesbank $20,000,000 Westdeutsche Landesbank Westdeutsche Landesbank
Girozentrale, New York Branch Girozentrale, New York Branch Girozentrale, New York Branch
1211 Avenue of the Americas 1211 Avenue of the Americas
New York, NY 10036 New York, NY 10036
Attention: Felicia La Forgia Attention: Felicia La Forgia
Tel: (212) 852-6096 Tel: (212) 852-6096
Fax: (212) 852-6307 Fax: (212) 852-6307
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2/570773
SCHEDULE II
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
TERMS OF SUBORDINATION
Terms defined in the Credit Agreement referred to below are used in these Terms of Subordination with their defined meanings except as otherwise defined herein.
SECTION 1. "Affiliate Subordinated Debt" Defined. "Affiliate Subordinated Debt" means, for purposes of these Terms of Subordination (the "Agreement"), [describe the specific Affiliate Subordinated Debt that is being subordinated hereby -- to include all amounts payable in connection therewith], which constitutes debt of the Borrower originally issued to a Person that is an Affiliate of the Borrower and which is subordinated on the terms set forth below. Debt of the Borrower payable to any entity that is formed by the Borrower or an Affiliate of the Borrower for the purpose of issuing securities in the public or capital markets, or in a private placement, shall not constitute "Affiliate Subordinated Debt" for all purposes hereof.
SECTION 2. Agreement to Subordinate. The holder hereof (the "Subordinated Creditor") and the Borrower each agree that the Affiliate Subordinated Debt is and shall be subordinate and subject in right of payment, to the extent and in the manner hereinafter set forth, to the prior payment in full of all obligations of the Borrower now or hereafter existing under (a) the Credit Agreement, dated as of November 15, 2001, as from time to time in effect (the "Credit Agreement"), among the Borrower, the financial institution(s) party thereto and Citibank, N.A., as Agent for such financial institution(s), and any promissory notes (the "Notes") issued pursuant thereto and (b) such documents as may be listed on Schedule I hereto on the date of execution hereof or from time to time added to said Schedule I (other than any such document which the Senior Creditors (as hereinafter defined) thereunder have agreed may be deleted from said Schedule I from time to time) by a writing signed by the Borrower and the Subordinated Creditor (such documents being referred to herein collectively as the "Senior Debt Documents"), whether for principal, interest (including, without limitation, interest, as provided in the Notes and in the debt instruments included in the Senior Debt Documents (such debt instruments included in the Senior Debt Documents being referred to herein collectively as the "Senior Debt Instruments"), accruing after the filing of a petition initiating any proceeding referred to in Section 3(a), whether or not such interest accrues after the filing of such petition for purposes of the Federal Bankruptcy Code or is an allowed claim in such proceeding), fees, expenses, indemnity or other amounts due thereunder (such obligations of the Borrower under the Credit Agreement and the Senior Debt Documents being the "Obligations"). For the purposes of this Agreement, the Obligations shall not be deemed to have been paid in full until (i) with respect to the Lenders, the earlier of (A) the Final Maturity Date, and (B) the date of termination in whole of each Lender's commitment (the "Termination Date") under the Credit Agreement shall have occurred and (ii) with respect to each Senior Creditor, the obligation under each of its respective Senior Debt Documents to extend credit, disburse funds or acquire a debt instrument shall have terminated and unless the Lenders, the creditors under the Senior Debt Documents and the holders (other than the Lenders) of the Senior Debt Instruments (such creditors and holders being referred to collectively herein as the "Senior Creditors") shall have received payment of their respective Obligations in full in cash. The Borrower and the Subordinated Creditor shall endorse on any instrument evidencing Affiliate Subordinated Debt a statement to the effect that it is subject to these terms of subordination.
SECTION 3. Events of Subordination. (a) In the event of any dissolution, winding up, liquidation, arrangement, reorganization, adjustment, protection, relief or composition of the Borrower or its debts, whether voluntary or involuntary, in any bankruptcy, insolvency, arrangement, reorganization, receivership, relief or other similar case or proceeding under any federal or state bankruptcy or similar law or upon an assignment for the benefit of creditors or any other marshaling of the assets and liabilities of the Borrower or otherwise, the Lenders and the Senior Creditors shall be entitled to receive payment in full of their respective Obligations before the Subordinated Creditor is entitled to receive any payment of all or any of the Affiliate Subordinated Debt, and any payment or distribution of any kind (whether in cash, property or securities) that otherwise would be payable or deliverable upon or with respect to the Affiliate Subordinated Debt in any such case, proceeding, assignment or marshaling (including any payment that may be payable by reason of any other Debt of the Borrower being subordinated to payment of the Affiliate Subordinated Debt) shall be paid or delivered directly to Citibank, as Agent under the Credit Agreement, for the account of the Lenders, and to the Senior Creditors or to a trustee or other agent for the Senior Creditors or for any group of the Senior Creditors (any such trustee or agent being referred to herein as a "Representative") which may be listed on Schedule I hereto, pro rata according to the principal amount of the Obligations then owed by the Borrower to each of the Lenders and the Senior Creditors, for application (in the case of cash) to, or as collateral (in the case of non-cash property or securities) for, the payment or prepayment of the Obligations until the Obligations shall have been paid in full.
(b) In the event that (i) any Default or Event of Default
described in Section 6.01 of the Credit Agreement or any payment default by the
Borrower under a Senior Debt Document shall have occurred and be continuing,
(ii) any Event of Default or any "event of default" under a Senior Debt Document
that would entitle the creditors under such Senior Debt Document to accelerate
the maturity of indebtedness evidenced by such Senior Debt Document (a "Senior
Event of Default") (other than as referred to in the preceding clause (i)) shall
have occurred and be continuing or (iii) any judicial proceeding shall be
pending with respect to any Event of Default or Senior Event of Default, then no
payment (including any payment that may be payable by reason of any other Debt
of the Borrower being subordinated to payment of the Affiliate Subordinated
Debt) or distribution of any kind, whether in cash, property or securities,
shall be made by or on behalf of the Borrower for or on account of any Affiliate
Subordinated Debt, and the Subordinated Creditor shall not take or receive from
the Borrower, directly or indirectly, in cash or other property or by set-off in
any other manner, including, without limitation, from or by way of collateral,
payment of all or any of the Affiliate Subordinated Debt until the Obligations
shall have been paid in full.
(c) Notwithstanding anything to the contrary in Section 3(b) and regardless of whether any Default or Event of Default shall have occurred and be continuing, until the Termination Date under the Credit Agreement shall have occurred and the Obligations thereunder then owned by the Borrower to the Lenders shall have been paid in full in cash, no payment (including any payment that may be payable by reason of any other Debt of the Borrower being subordinated to the payment of the Affiliate Subordinated Debt) or distribution of any kind, whether in cash, property or securities, shall be made by or on behalf of the Borrower for or on account of any Affiliate Subordinated Debt, and the Subordinated Creditor shall not take or receive from the Borrower, directly or indirectly, in cash, property or securities or by set-off or in any other manner, including, without limitation, from or by way of collateral, payment of all or any of the Affiliate Subordinated Debt at any time unless at the end of the fiscal quarter (including the fourth fiscal quarter) of the Borrower for which financial statements have most recently been delivered to the Agent by the Borrower pursuant to Section 5.01(d) or (e) of the Credit Agreement on or preceding the date on which the Borrower takes such action, the ratio of Cash Available for Corporate Debt Service to Corporate Interest was at least 2.00:1.00 or, if the Borrower does not have at least an Investment Grade Rating, 2.25:1.00, in each case, for the period comprised of the four fiscal quarters ending on the date of such financial statements and with effect from the date of delivery of such financial statements.
SECTION 4. In Furtherance of Subordination. The Subordinated Creditor agrees as follows:
(a) If any proceeding referred to in Section 3(a) above is commenced by or against the Borrower,
(i) Citibank, as Agent for the Lenders, and the Senior Creditors, acting directly or through one or more Representatives, are hereby irrevocably authorized and empowered (in their own names or in the name of the Subordinated Creditor or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution referred to in Section 3(a) to which they are entitled thereunder and give acquittance therefor and to file claims and proofs of claim and take such other action (including, without limitation, voting the Affiliate Subordinated Debt pro rata according to the principal amount of the Obligations then owed by the Borrower to each of the Lenders and the Senior Creditors or enforcing any security interest or other lien securing payment of the Affiliate Subordinated Debt) as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the Agent, the Lenders, the Representatives and the Senior Creditors hereunder; and
(ii) the Subordinated Creditor shall duly and promptly take such reasonable actions as Citibank, as Agent for the Lenders and the Senior Creditors or the Representatives may request (A) to permit Citibank, as Agent of the Lenders, and the Senior Creditors or the Representatives to collect the Subordinated Debt for the account of the Lenders and the Senior Creditors and to file appropriate claims or proofs of claim in respect of the Subordinated Debt, (B) to execute and deliver to Citibank, as Agent for the Lenders, and to the Senior Creditors or their Representatives such documents as Citibank, as Agents for the Lenders and the Senior Creditors or the Representatives may reasonably request in order to enable Citibank, as Agent for the Lenders, and the Senior Creditors or the Representatives to enforce any and all claims with respect to, and any security interest and other liens securing payment of, the Subordinated Debt, and (C) to collect and receive any and all payments or distributions which may be payable or deliverable upon or with respect to the Subordinated Debt, which payments and distributions shall be distributed pro rata according to the principal amount of the Obligations then owed by the Borrower to each of the Lenders and the Senior Creditors.
(b) All payments or distributions upon or with respect to the Affiliate Subordinated Debt which are received by the Subordinated Creditor contrary to the provisions of this Agreement shall be received in trust for the benefit of the Lenders and the Senior Creditors pro rata according to the principal amount of the Obligations then owed by the Borrower to each of the Lenders and the Senior Creditors, shall be segregated from other funds and property held by the Subordinated Creditor and shall be forthwith paid over to Citibank, as Agent for the Lenders, for the account of the Lenders, and to the Senior Creditors or their Representatives pro rata according to the principal amount of the Obligations then owed by the Borrower to each of the Lenders and the Senior Creditors, in the same form as so received (with any necessary indorsement) to be applied (in the case of cash) to, or held as collateral (in the case of non-cash property or securities) for, the payment or prepayment of the Obligations in accordance with the terms of the Credit Agreement and the Senior Debt Documents. Any portion of a payment or distribution received by a Lender or Senior Creditor (or by the Agent or a Representative) which is in excess of its pro rata portion of such payment or distribution shall be held in trust by such Lender or Senior Creditor (or Agent or Representative) for the benefit of the other Lenders and Senior Creditors to be paid promptly to the other Lenders and Senior Creditors (or to the Agent and the Representatives on behalf of such Lenders and Senior Creditors) pro rata according to the principal amount of the Obligations then owed by the Borrower to each of such Lenders and Senior Creditors.
(c) Citibank, as Agent for the Lenders, and the Senior Creditors or their Representatives are hereby authorized to seek specific performance of this Agreement, whether or not the Borrower shall have complied with any of the provisions hereof applicable to it, at any time when the Subordinated Creditor shall have failed to comply with any of the provisions of this Agreement applicable to it.
SECTION 5. No Commencement of Any Proceeding. The Subordinated Creditor agrees that, so long as the Obligations shall not have been paid in full in cash, the Subordinated Creditor will not sue for payment of all or any of the Affiliate Subordinated Debt, or commence, or join with any creditor other than the Lenders, Citibank, as Agent for the Lenders, the Senior Creditors and the Representatives, in commencing any proceeding referred to in Section 3(a); provided, however, that the foregoing provisions shall not prevent the Subordinated Creditor from commencing and prosecuting to judgment any action necessary to enforce such Affiliate Subordinated Debt during the period commencing one year prior to the expiration of the limitation period governing such Affiliate Subordinated Debt under any applicable statute of limitations.
SECTION 6. Rights of Subrogation. The Subordinated Creditor agrees that no payment or distribution to Citibank, as Agent for the Lenders, the Lenders, the Senior Creditors or the Representatives pursuant to the provisions of this Agreement shall entitle the Subordinated Creditor to exercise any right of subrogation in respect thereof until the Obligations shall have been paid in full. From and after the payment in full of the Obligations, the Subordinated Creditor shall be subrogated to all rights of the Agent, the Lenders, the Senior Creditors and the Representatives to receive any further payments or distributions applicable to the Obligations until the Affiliate Subordinated Debt shall have been paid in full, in addition to all other rights of subrogation that the Subordinated Creditor may have. For purposes of any such subrogation, no payments or distributions on the Obligations pursuant to this Agreement shall, as between the Borrower, its creditors other than the Lenders and the Senior Creditors, and the Subordinated Creditor, be deemed to be a payment by the Borrower to or on account of the Obligations, and no payments or distributions to the Subordinated Creditor of assets by virtue of the subrogation herein provided for shall, as between the Borrower, its creditors other than the Lenders and the Senior Creditors, and the Subordinated Creditor, be deemed to be a payment by the Borrower to or on account of the Obligations, and no payments or distributions to the Subordinated Creditor of assets by virtue of the subrogation herein provided for shall, as between the Borrower, its creditors other than the Lenders and the Senior Creditors, and the Subordinated Creditor, be deemed to be a payment to or on account of the Affiliate Subordinated Debt. The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the Subordinated Creditor, on the one hand, and the Lenders, the Agent for the benefit of the Lenders, the Senior Creditors and the Representatives, on the other hand, and nothing contained in this Agreement is intended to or shall impair the obligation of the Borrower, which is unconditional and absolute, to pay the principal of (and premium, if any) and interest on the Affiliate Subordinated Debt as and when the same shall become due and payable in accordance with its terms, or, except as provided in Section 10 below, to affect the relative rights of the Subordinated Creditor and the creditors of the Borrower other than the Lenders and the Senior Creditors, nor shall anything herein prevent the Subordinated Creditor from exercising all remedies otherwise permitted by applicable law upon default under the Affiliate Subordinated Debt, subject to the rights, if any, under this Agreement, of the Lenders, the Agent for the benefit of the Lenders, the Senior Creditor and the Representatives in respect of cash, property or securities of the Borrower otherwise payable or delivered to the Subordinated Creditor upon the exercise of any such remedy.
SECTION 7. Agreements in Respect of Affiliate Subordinated Debt. The Subordinated Creditor will not sell, assign, pledge, encumber or otherwise dispose of any of the Affiliate Subordinated Debt unless such sale, assignment, pledge, encumbrance or disposition (i) is to a person or entity other than the Borrower and (ii) is made expressly subject to this Agreement.
SECTION 8. Obligations Hereunder Not Affected. All rights and interest of Citibank, as Agent for the Lenders, the Lenders, the Senior Creditors and the Representatives hereunder, and all agreements and obligations of the Subordinated Creditor and the Borrower under this Agreement, shall remain in full force and effect irrespective of:
(i) any lack of validity or enforceability of the Credit Agreement, a Note, a Senior Debt Document or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, a Note or a Senior Debt Document, including, without limitation, any increase in the Obligations resulting from the extension of additional credit to the Borrower or otherwise;
(iii) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations;
(iv) any manner of application of collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any collateral for all or any of the Obligations or any other assets of the Borrower or any of its subsidiaries;
(v) any change, restructuring or termination of the corporate structure or existence of the Borrower; or
(vi) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Borrower or a subordinated creditor.
This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by Citibank, as Agent for the Lenders, any Lender, any Senior Creditor or any Representative upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made.
SECTION 9. Waiver. The Subordinated Creditor and the Borrower each hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations and this Agreement and any requirement that Citibank, as Agent for the Lenders, any Lender, any Senior Creditor or any Representative protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against the Borrower or any other person or entity or any collateral.
SECTION 10. Extension of Subordination. The Borrower and the Subordinated Creditor shall not subordinate the Affiliate Subordinated Debt for the benefit of any one or more other creditors of the Borrower, now or hereafter existing, upon any terms other than those set forth in this Agreement. The Borrower and the Subordinated Creditor shall have the right to subordinate the Affiliate Subordinated Debt for the benefit of any one or more other creditors of the Borrower, now or hereafter existing, upon the same terms as are set forth in this Agreement.
SCHEDULE I
Senior Debt Documents
Title and Date Party(ies) Representative
SCHEDULE III
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
PROJECT LIMITS FOR INITIAL PROJECTS
Initial Project Total Project Costs (Estimated if an Project Limit
--------------- ------------------------------------- -------------
Uncompleted Project, and actual, if a
Completed Project)
Autaugaville 1 Project $270,512,613 $162,307,568
Autaugaville 2 Project $242,292,211 $145,375,327
Dahlberg $265,341,836 $159,205,102
Goat Rock 1 Project $229,183,570 $137,510,142
Goat Rock 2 Project $246,205,077 $147,723,046
Wansley $451,387,132 $270,832,279
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SCHEDULE IV
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
SCHEDULED COMPLETION DATE, GUARANTEED HEAT RATE
AND GUARANTEED OUTPUT FOR EACH INITIAL PROJECT
1. Scheduled Completion Dates
----------------------------------------------------------
Initial Project Scheduled Completion Date
----------------------------------------------------------
Autaugaville 1 Project June 1, 2003
----------------------------------------------------------
Autaugaville 2 Project June 1, 2003
----------------------------------------------------------
Dahlberg June 1, 2001 (Completed)
----------------------------------------------------------
Goat Rock 1 Project April 1, 2002
----------------------------------------------------------
Goat Rock 2 Project June 1, 2003
----------------------------------------------------------
Wansley Project June 1, 2002
----------------------------------------------------------
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2. Guaranteed Heat Rates
Guaranteed Heat Rate with respect to the following Initial Projects, at the relevant average ambient rated conditions for such Project, are set forth below:
---------------------------------------------------------------------------------------------------------------------
Power Power HP IP Condenser Condenser
Average Base Mode Dry Bulb Relative Fuel Factor Factor Blowdown Blowdown Makeup Makeup
Annual Heat Rate * Temperature Humidity Elevation Temperature** (GT) (ST) Flow Flow Flow Temp.
Ambient -------------------------------------------------------------------------------------------------------------
Btu/kWh F % Ft. F - - % % Lb/Hr F
---------------------------------------------------------------------------------------------------------------------
Goat Rock 1 6,711 64.0 74.5 560 25.0 0.85 0.85 0.5 1.0 1169 65
Goat Rock 2 6,728 64.0 74.5 560 25.0 0.85 0.90 0.5 1.0 1049 65
Autaugaville 1 6,730 64.8 73.8 200 25.0 0.85 0.90 0.5 1.0 1068 65
Autaugaville 2 6,730 64.8 73.8 200 25.0 0.85 0.90 0.5 1.0 1068 65
Wansley 6,706 61.0 69.0 740 25.0 0.85 0.85 0.5 1.0 1172 63
-------------------------------------------------------------------------------------------------------------------
* All to the high side of the generator step-up transformer
** 25F is as of the gas is delivered to each combustion turbine. The gas is then heated by the Project's process before
entry to the combustion turbine burner
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3. Guaranteed Output
Guaranteed Output with respect to the following Initial Project, at the relevant rated summer conditions for such Project, are set forth below:
------------------------------------------------------------------------------------------------------------------
Summer Summer Dry Power Power HP IP Condenser Condenser
Peak Bulb Relative Fuel Factor Factor Blowdown Blowdown Makeup Makeup
Capacity * Temperature Humidity Elevation Temperature** (GT) (ST) Flow Flow Flow Temp.
------------------------------------------------------------------------------------------------------------------
MW F % Ft. F - - % % Lb/Hr F
------------------------------------------------------------------------------------------------------------------
Goat Rock 1 571 95.0 40.0 560 25.0 0.82 0.98 0.5 1.0 224,005 83
Goat Rock 2 615 95.0 39.8 560 25.0 0.82 0.95 0.5 1.0 226,689 83
Autaugaville 1 618 95.0 44.3 200 25.0 0.82 0.95 0.5 1.0 229,045 83
Autaugaville 2 618 95.0 44.3 200 25.0 0.82 0.95 0.5 1.0 229,045 83
Wansley 1134 95.0 42.5 740 25.0 0.83 0.98 0.5 1.0 221,913 80
------------------------------------------------------------------------------------------------------------------
* All to the high side of the generator step-up transformer
** 25F is as of the gas is delivered to each combustion turbine. The gas is then heated by the Project's process before entry
to the combustion turbine burner
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SCHEDULE V
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
TESTING PROCEDURES
A. COMBINED-CYCLE PROJECTS
The procedures and required tests which must be completed prior to Southern's certification of Substantial Completion and Final Completion with respect to an Uncompleted Project which is a combined-cycle electric generation plant are set forth below. The capacity and heat rate tests for such Project may be conducted independently; provided that if the Guaranteed Heat Rate and Guaranteed Output for such Project are based upon the same ambient conditions and operating mode (e.g., base mode, full pressure and power augmentation), the capacity and heat rate tests for such Project shall be conducted simultaneously.
The tests will be conducted by the owner according to a test procedure (incorporating the relevant matters set forth herein) provided by the owner and approved by Southern Company Services, Inc. ("SCS") and the purchaser of energy from such Project under each Power Purchase Agreement, if any, applicable thereto. The test procedure will be based on ASME PTC 46-1996 ("PTC 46"). This code determines the net electrical output and heat rate of the Project, corrected to design operating conditions.
The Uncompleted Project shall demonstrate compliance with the air permit limits during the tests (using certified plant continuous emissions monitoring system ("CEMS"), calibrated portable CEMS, or by certified emissions testing contractor) and all applicable laws and other permits, with no waivers or variances for construction, start-up, testing or otherwise.
The tests will encompass a control volume including the cooling tower as shown in Figure 5.1 of PTC 46. The only essential data required are those parameters which cross the test boundary. Correction curves will be utilized to correct net unit performance from test conditions to design conditions.
The tests will be conducted after all required systems are fully commissioned and at actual ambient and operating conditions as close as practical to design conditions. Heat recovery steam generator ("HRSG") blowdown will be isolated during the tests since these flows are unmetered; however, corrections to account for design flows will be applied. All auxiliary components must be operated in a normal manner consistent with Prudent Utility Practices. "Prudent Utility Practices" shall mean at a particular time, any of the practices, methods and acts engaged in or approved by a significant portion of the United States electric utility industry as at such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired results at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practices 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and the requirements of governmental authorities of competent jurisdiction.
Capacity test results will be corrected to the rated conditions (the "Output Rated Conditions") applicable to the Guaranteed Output for such Project, as set forth, (a) in the case of an Initial Project, in Schedule IV to the Credit Agreement; or (b) in the case of a Subsequent Project, in the Project Schedule delivered pursuant to Section 3.04 of the Credit Agreement for such Project. The demonstrated net output of the Project will be as measured by the test metering system and corrected to such Project's Output Rated Conditions. PTC 46 correction curves will be produced by SCS using a GateCycle computer model, created from design input provided by the equipment vendors. Combustion turbine evaporative coolers, HRSG ductburners and power augmentation steam injection will be in service.
Net unit capacity will be corrected from test to design conditions for the following parameters as required by PTC 46:
Ambient Dry Bulb Temperature Ambient Humidity (or wet bulb temperature) Barometric Pressure (or elevation) HRSG Blowdown Flow Condenser Makeup Flow and Temperature Fuel Temperature (upstream of fuel heaters) Power Factor (each generator) Abnormal Auxiliary Power Loads Abnormal Fuel Properties Abnormal Unit Operating Conditions
Heat rate test results will be corrected to the rated operating conditions (the "Heat Rate Rated Conditions") applicable to the Guaranteed Heat Rate for such Project, as set forth, (a) in the case of an Initial Project, in Schedule IV to the Credit Agreement; or (b) in the case of a Subsequent Project, in the Project Schedule delivered pursuant to Section 3.04 of the Credit Agreement for such Project. The demonstrated net heat rate of the Project will be as measured by the test metering system and corrected to such Project's Heat Rate Rated Conditions. PTC 46 heat rate correction curves will be produced by SCS using a GateCycle computer model, created from design input provided by the equipment vendors. Combustion turbine evaporative coolers will be in service or appropriate corrections will be applied. HRSG ductburners and power augmentation will be out of service.
Net unit heat rate will be corrected from test to design conditions for the following parameters, as required by PTC 46:
Test data will be obtained using test instruments which meet the requirements of PTC 46. Specific methods which will be employed for significant data points are as follows:
1. Net power will be determined from the sum of gross combustion turbine output and steam turbine output, less station service and main transformer losses.
2. Combustion turbine gross output will be measured using temporary test watt meters installed in parallel with station watt meters.
3. Steam turbine gross output will be measured using temporary test watt meters installed in parallel with station watt meters.
4. Station service will be measured using installed station watt hour meters.
5. Main transformer losses will be calculated from transformer shop test data.
6. Net fuel consumption will be the sum of fuel flow to each combustion turbine and the ductburners.
7. Natural gas flows to each combustion turbine and ductburner will be determined using test differential pressure transmitters installed in parallel with station instruments across the existing plant orifice meter tubes. Test instruments also will be used to measure gas pressure and temperatures.
8. Natural gas flowrates will be calculated using the formulas provided in ASME MFC-3M.
9. Fuel properties will be determined from gas samples taken during each test and analyzed by an independent analysis laboratory.
10. Ambient pressure will be measured using an electronic test barometer meeting ASME PTC 22 requirements.
11. Combustion turbine inlet dry bulb temperatures will be determined by a test temperature grid installed in the inlet of each combustion turbine unit.
12. Combustion turbine inlet wet bulb temperature and relative humidity will be determined using a test psychrometer in the inlet of each combustion turbine unit.
13. Substitute or temporary plant equipment shall not be used during testing, and the Uncompleted Project shall be tested while in an "automatic mode" to an extent consistent with normal operating practice.
14. Cooling tower inlet dry and wet bulb temperatures will be determined based on dedicated temperature readings near the cooling tower(s).
At least two test runs of one hour each will be conducted and compared for repeatability. The tests will be conducted after all required systems are fully commissioned and at actual ambient and operating conditions as close as practical to Output Rated Conditions (in the case of capacity tests) or Heat Rate Rated Conditions (in the case of heat rate tests). HRSG blowdown will be isolated during the tests since these flows are unmetered; however, corrections back to design flows will be applied. If the corrected results of the two test runs do not agree within 0.25%, then the cause of the discrepancy will be investigated, eliminated if possible, and a third test performed. If the results of all tests vary by more than 0.25% from the mean of all tests, then the results of all three tests will be averaged. If one test varies by more than 0.25% from the mean of the other two tests, then its results will be discarded and the results of the other two will be averaged.
To be agreed between the Borrower and the Independent Engineer and Environmental Consultant (acting on the instructions of the Majority Lenders) with respect to each Subsequent Project which is a Peaker on or prior to the first Utilization relating thereto.
RELIABILITY TEST
A. COMBINED-CYCLE PROJECTS
The Borrower will conduct a 7-day reliability test which is intended to demonstrate that each of the Autaugaville 1 Project, the Autaugaville 2 Project, the Goat Rock 1 Project, the Goat Rock 2 Project and the Wansley Project (and any other Subsequent Project which is a combined-cycle electric generation plant) are capable of continuous, reliable operation at various load points. The reliability test shall be conducted during a continuous 168-hour period during which the relevant Project shall demonstrate the following requirements:
o Achieve an Equivalent Availability Factor (as calculated by the North American Electric Reliability Council) of at least 97 percent;
o During such test, the Project shall operate for 124 or more hours at the mode of operation applicable to either the Guaranteed Output or the Guaranteed Heat Rate for such Project, provided that the Project shall operate (a) for at least 24 hours in the mode of operation applicable to the Guaranteed Output for such Project, if ambient conditions allow; and (b) for at least 6 continuous hours in the mode of operation applicable to the Guaranteed Output for such Project;
o During the reliability test, data will be recorded from plant instrumentation at one-hour intervals (ambient conditions recorded manually if necessary);
o All plant emissions shall be recorded by the plant CEMS during the reliability test;
o During the reliability test, the Project shall be operated in accordance with prudent utility practice and all laws, permits and regulations applicable to such Project (including, without limitation, all emissions requirements imposed by the Project's air permit); and
o The facility controls shall be placed in an "automatic mode" to an extent consistent with normal operating practice, and manual control of facility equipment and systems shall be minimized. Operating personnel shall be staffed consistent with normal operating plans.
To be agreed between the Borrower and the Independent Engineer and Environmental Consultant (acting on the instructions of the Majority Lenders) with respect to each Subsequent Project which is a Peaker on or prior to the first Utilization relating thereto.
EXHIBIT A
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
FORM OF NOTE
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, _____
FOR VALUE RECEIVED, the undersigned, SOUTHERN POWER COMPANY, a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to _________________________ (the "Lender") for the account of its Applicable Lending Office on the Final Maturity Date (each as defined in the Credit Agreement referred to below) the principal sum of U.S.$[amount of the Lender's Commitment in figures] or, if less, the aggregate outstanding principal amount of the Advances made by the Lender to the Borrower pursuant to the Credit Agreement dated as of [ ], 2001 among the Borrower, the Lender and certain other financial institutions parties thereto and Citibank, N.A., as Agent for the Lender and such other financial institutions (as amended or modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined) outstanding on the Final Maturity Date.
The Borrower promises to pay interest on the unpaid principal amount of each Advance from the date of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United States of America to Citibank, N.A., as Agent, at 2 Penns Way, Suite 200, New Castle, DE 19720, Attention: Dave Graber, in same day funds. Each Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Advances by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the Dollar amount first above mentioned, the debt of the Borrower resulting from each such Advance being evidenced by this Promissory
Note; and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified.
SOUTHERN POWER COMPANY
By: _____________________________________
Title:
NYDOCS02/570773
ADVANCES AND PAYMENTS OF PRINCIPAL
------------------------------------------------------------------------------
Amount of
Amount Category Project Principal Unpaid
Date of of (if Paid Principal Notation
Advance Advance applicable)1 or Prepaid Balance Made By
|
1 Insert name of Project, unless Working Capital Advance.
EXHIBIT B
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
FORM OF NOTICE OF UTILIZATION
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
2 Penns Way
Suite 200
New Castle, DE 19720
Attention: Dave Graber
[Date]
Attention: ____________________
Ladies and Gentlemen:
The undersigned, SOUTHERN POWER COMPANY, refers to the Credit Agreement, dated as of [ ], 2001 (as amended or modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain financial institutions parties thereto and CITIBANK, N.A., as Agent for said financial institutions, and hereby gives you notice, irrevocably, pursuant to Article II of the Credit Agreement that the undersigned hereby requests a Utilization under the Credit Agreement, and in that connection sets forth below the information relating to such Utilization (the "Proposed Utilization") as required by Section 2.02(a) (if the Proposed Utilization is to be a Borrowing) or 2.15 (if the Proposed Utilization is to be a CP Commitment Reservation) of the Credit Agreement, as the case may be:
(a) The Proposed Utilization shall consist of a [Borrowing in the aggregate amount of $_______________] / [CP Commitment Reservation in the aggregate amount of $_______________, and is being made with respect to Commercial Paper in an aggregate principal amount equal to such amount which will be issued on the date of the Proposed Utilization]*.
(b) The Business Day of the Proposed Utilization is _______________, ____.
[(c) [The Type of Advances comprising the Proposed Utilization is [Base Rate Advances] / [Eurodollar Rate Advances].] The initial Interest Period for each Eurodollar Rate Advance made as part of the Proposed Utilization is __________ month[s].]**
(d) The aggregate principal amount of all outstanding Advances and the unused Commitments and CP Commitments, in each case, with respect to the Project(s) relating to the Proposed Utilization, before and after giving effect to the Proposed Utilization, are as follows:
------------------------------------------------------------------------------------------------------
Outstanding Utilizations Outstanding Utilizations After
Before Proposed Utilization Proposed Utilization
Estimated
Aggregate Project Aggregate Aggregate Aggregate Aggregate
Project Project Limit Borrowings CP Borrowings CP
Costs Commitments Commitments
-----------------------------------------------------------------------------------------------------
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[(e) The Advances comprising the Proposed Utilization are Project Advances, the proceeds of which are to finance Project Costs in the following amounts with respect to the following Project(s):
----------------------------------------------------------------------
Project(s) Aggregate
Project Project Costs to be Project Costs to be
Costs Funded by Proposed Funded with Equity
Utilization Contributions
----------------------------------------------------------------------
|
]; OR
[(e) The Advances comprising the Proposed Utilization are CP Advances in the following amounts, the proceeds of which are to repay Commercial Paper issued with respect to the following Project(s) in connection with the CP Commitment Reservation(s) established on the following dates for such Project(s):
-------------------------------------------------------------------------------
Project(s) Aggregate Aggregate
Project Amount Amount(s) and Project Costs Funded
Costs of CP Date(s) of CP with Equity
Advances Commitment Contributions
Reservation
-------------------------------------------------------------------------------
|
]; OR
[(e) The Advances comprising the Proposed Utilization are Working Capital Advances.
]; OR
[(e) The Proposed Utilization is a CP Commitment (Refinancing CP) Reservation which is to be made with respect to Refinancing Commercial Paper the proceeds of which are to be used to repay Project Advances in the following amounts with respect to the following Project(s):
-------------------------------------------------------------------------------
Project(s) Aggregate Amount(s) and Date(s) of
Project Advances
-------------------------------------------------------------------------------
|
]; OR
[(e) The Proposed Utilization is a CP Commitment (Original CP) Reservation which is to be made with respect to Original Commercial Paper, the proceeds of which are to finance Project Costs in the following amounts with respect to the following Project(s):
-------------------------------------------------------------------------------
Project(s) Aggregate Project Project Costs Project Costs
Costs to be Funded to be Funded
by Commercial Paper with Equity
Contributions
|
(f) The Proposed Utilization will not result in the applicable Borrowing Limit(s) to be exceeded or in the aggregate principal amount of all outstanding Advances and CP Commitment Reservations (including the Proposed Utilization) to exceed $850,000,000.
The undersigned hereby certifies that on the date hereof and on the date of the Proposed Utilization the representations and warranties contained in Section 4.01 of the Credit Agreement [(except those contained in Sections 4.01(h) and (j)) and all representations and warranties contained in Sections 4 and 2 of the Southern Completion Guarantee and the Southern Equity Agreement (other than Sections 4(f) and (h) and 2(f) and (h), respectively)]* are or will be, as the case may be, correct [in all material respects]**, before and after giving effect to the Proposed Utilization and to the application of the proceeds therefrom (or, if the Proposed Utilization is a CP Commitment Reservation, after giving effect to the application of the proceeds of the Commercial Paper for which such CP Commitment Reservation is being requested), as though made on and as of such date.
Very truly yours,
SOUTHERN POWER COMPANY
By: ___________________________
Title:
EXHIBIT C
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of [ ], 2001 (as amended or modified from time to time, the "Credit Agreement") among SOUTHERN POWER COMPANY, a Delaware corporation (the "Borrower"), certain financial institutions parties thereto and CITIBANK, N.A., as agent for said financial institutions (the "Agent"). Terms defined in the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof equal to the percentage interest specified on Schedule 1 hereto. After giving effect to such sale and assignment, the Assignee's Commitment, CP Commitment and the amount of the Advances (and Categories thereof) owing to the Assignee will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, Southern or any Subsidiary of the Borrower or Southern, or the performance or observance by any of the Borrower, Southern or any Subsidiary of the Borrower or Southern, or any other party, of any of its obligations under the Credit Agreement and the other Material Documents to which it is a party, or any other instrument or document furnished pursuant thereto; and (iv) attaches the Note held by the Assignor and requests that the Agent exchange such Note for a new Note payable to the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto or new Notes payable to the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an amount equal to the Commitment retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.01 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement and the other Loan Documents; (iii) confirms that it is an Eligible
Assignee or that it is an entity that has been approved by the Borrower and the
Agent to the extent any such approval is required under Section 8.07(a) of the
Credit Agreement; (iv) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers and discretion under the Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms thereof, together with such powers and discretion as are reasonably
incidental thereto; (v) agrees that it will perform in accordance with their
terms all of the obligations that by the terms of the Credit Agreement and the
other Loan Documents are required to be performed by it as a Lender; and (vi)
attaches any U.S. Internal Revenue Service forms required under Section 2.13 of
the Credit Agreement.
4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date of acceptance hereof by the Agent, unless otherwise specified on Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations (other than under Sections 2.13(f), 8.07(g) and 8.08) under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the Laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers duly authorized for such purpose, as of the date specified thereon.
Schedule 1 to Assignment and Acceptance
1. Percentage interest assigned: _____%
2. Commitments
(a) Assignee's Commitment: $_______________
(b) Assignee's CP Commitment $_______________
3. Outstanding Advances
(a) Aggregate outstanding principal amount of
Project
Advances assigned: $_______________
(b) Aggregate outstanding principal amount of CP
Advances assigned: $_______________
(c) Aggregate outstanding principal amount of
Working Capital Advances assigned: $_______________
|
4. Principal amount of Note payable to Assignee: $_______________
5. Principal amount of Note payable to Assignor: $_______________
6. Effective Date*: _______________, _____
[NAME OF ASSIGNOR],
as Assignor
By: -------------------------------------------- Title:
Dated: _______________, ____
[NAME OF ASSIGNEE], as Assignee
By: -------------------------------------------- Title:
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
Accepted this __________ day of _______________, ____
CITIBANK, N.A., as Agent
By: _____________________
Title:
By: _____________________
Title:
**Agreed this ___ day of ________, ____
SOUTHERN POWER COMPANY
By: _____________________
Title:
EXHIBIT D
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
CONFIDENTIALITY AGREEMENT
Memorandum To: Proposed Assignee or Participant
From: Lender
Date: [___________]
Subject: Credit Agreement for Southern Power Company
In connection with your possible interest in becoming a Lender
|
or participant under the Credit Agreement dated as of [ ], 2001 (as from time to time in effect, the "Credit Agreement") among Southern Power Company (the "Company"), certain financial institution(s) party thereto and Citibank, N.A., as Agent for such financial institution(s) (the "Agent"), you will receive certain information which is non-public, confidential or proprietary in nature. That information and any other information concerning the Company and its affiliates or the Credit Agreement furnished to you at any time on, before or after the date of this Confidentiality Agreement (this "Agreement") by the Company and its affiliates, the Agent, Salomon Smith Barney Inc. (the "Lead Arranger") or any Co-Arranger or Lender in connection with the Credit Agreement, together with analyses, compilations or other materials prepared by you or your directors, officers, employees, agents, auditors, attorneys, consultants or advisors (collectively, "Representatives") which contain or otherwise reflect such information or your review of or interest in the Credit Agreement is hereinafter referred to as the "Information". In consideration of your receipt of the Information, you agree that:
1. You will not, without the prior written consent of the Company, use, either directly or indirectly, any of the Information except in concert with the Company or in connection with the Credit Agreement.
2. You agree to reveal the Information only to your Representatives who need to know the Information for the purpose of evaluating the Credit Agreement, who are informed by you of the confidential nature of the Information, and who agree to be bound by the terms and conditions of this Agreement. You agree to be responsible for any breach of this Agreement by any of your Representatives.
3. Without the Company's prior written consent, you shall not disclose to any person (except as otherwise expressly permitted herein) the fact that the Information has been made available, or any of the terms, conditions or other facts with respect to the Credit Agreement.
4. This Agreement shall be inoperative as to any portion of the Information that (i) is or becomes generally available to the public on a nonconfidential basis through no fault or action by you or your Representatives, or (ii) is or becomes available to you on a nonconfidential basis from a source other than the Company or its affiliates, the Lead Arranger, any Co-Arranger, the Agent or any Lender or their Representatives, which source, to the best of your knowledge, is not prohibited from disclosing such Information to you by a contractual, legal or fiduciary obligation to the Company, the Lead Arranger, any Co-Arranger, the Agent or any Lender.
5. You may disclose the Information at the request of any regulatory or supervisory authority having jurisdiction over you.
6. In the event that you become legally compelled to disclose any of the Information or the existence of the Credit Agreement, you shall provide the Company with notice of such event promptly upon your obtaining knowledge thereof (provided that you are not otherwise prohibited by law from giving such notice) so that the Company may seek a protective order or other appropriate remedy. In the event that such protective order or other remedy is not obtained, you shall furnish only that portion of the Information that is legally required and shall cooperate with the Company's counsel to enable either the Company to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Information.
7. In the event that discussions with you concerning the Credit Agreement are discontinued, you shall redeliver to the Company the copies of the Information that were furnished to you by or on behalf of the Company and represent to the Company that you have destroyed all other copies thereof. All of your obligations hereunder and all of the Company's rights and remedies hereunder shall survive any return or destruction of the Information.
8. You acknowledge that disclosure of the Information in violation of the terms of this Agreement could have serious consequences, and agree that, in the event of any breach by you or your Representatives of this Agreement, the Company may be entitled to equitable relief (including injunction and specific performance) in addition to all other remedies available to it at law or in equity.
9. You will not make any public announcement, advertisement, statement or communication regarding the Company, its affiliates or the Credit Agreement without the prior written consent of the Company.
10. This Agreement shall be governed in all respects, whether as to validity, construction, capacity, performance or otherwise, by and under the laws of the State of New York.
11. All provisions of this Agreement are severable, and the unenforceability or invalidity of any of the provisions of this Agreement shall not affect the validity or enforceability of the remaining provisions of this Agreement.
12. No waiver of any provision of this Agreement, or of a breach hereof, shall be effective unless it is in writing, signed by the party waiving the provision, or the breach hereof. No waiver of a breach of this Agreement (whether express or implied) shall constitute a waiver of a subsequent breach hereof.
13. The Company is a party to and an intended beneficiary of this Agreement.
If you are prepared to accept the Information on this basis,
please sign and return this Confidentiality Agreement to us at [ ] and to the
Company at [ ], Attention:
[ ].
EXHIBIT E
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
FORM OF OPINIONS OF COUNSEL FOR THE LOAN PARTIES
EXHIBIT F
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
DESIGNATION AGREEMENT
Reference is made to that certain Credit Agreement dated as of
[ ], 2001 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") by and among SOUTHERN POWER COMPANY, the Lenders parties
thereto and CITIBANK, N.A., as Agent. Terms defined in the Credit Agreement are
used herein with the same meaning.
[NAME OF DESIGNATING LENDER] (the "Designating Lender"),
[NAME OF DESIGNEE] (the "Designee") and the Agent agree as follows:
1. Pursuant to Section 8.07(i) of the Credit Agreement, the Designating Lender hereby designates the Designee, and the Designee hereby accepts such designation, to have a right to make Advances pursuant to Article II of the Credit Agreement. Any delegation by Designating Lender to Designee of its rights to make an Advance pursuant to such Article II shall be effective at the time of the funding of such Advance and not before such time.
2. Except as set forth in Section 7 below, the Designating
Lender makes no representation or warranty and assumes no
responsibility pursuant to this Designation Agreement with respect to
(a) any statements, warranties or representations made in or in
connection with the Credit Agreement or any document related thereto
(each, a "Loan Document") or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document
or any other instrument and document furnished pursuant thereto; and
(b) the financial condition of the Borrower or Southern or any other
party or the performance or observance by the Borrower or Southern or
any other party of any of its obligations under any Loan Document or
other Material Document to which it is a party or any other instrument
or document furnished pursuant thereto.
3. The Designee (a) confirms that it has received a copy of
each Loan Document, together with copies of the financial statements
referred to in Article IV of the Credit Agreement and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Designation Agreement;
(b) agrees that it will independently and without reliance upon the
Agent, any Arranger, the Designating Lender or any other Lender and,
based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not
taking action under any Loan Document; (c) confirms that it is a
Designated Lender; (d) appoints and authorizes the Agent to take such
action as Agent on its behalf and to exercise such powers and
discretion under any Loan Document as are delegated to the Agent by the
terms thereof, together with such powers and discretion as are
reasonably incidental thereto; and (e) agrees that it will perform in
accordance with their terms all of the obligations which by the terms
of any Loan Document are required to be performed by it as a Lender.
4. The Designee hereby appoints Designating Lender or a specified branch or affiliate of Designating Lender as Designee's agent and attorney in fact and grants to Designating Lender or a specified branch or affiliate of Designating Lender an irrevocable power of attorney to receive payments made for the benefit of Designee under the Loan Documents, to deliver and receive all communications and notices under the Credit Agreement and other Loan Documents and to exercise on Designee's behalf all rights to vote and to grant and make approvals, waivers, consents and amendments to or under the Credit Agreement or other Loan Documents. Designee shall not have any right to approve any waiver or amendment of the Credit Agreement, any Note or any other Loan Document, or any consent to any departure by the Borrower or Southern therefrom, except to the extent that such waiver, amendment or consent would reduce the principal of, or interest on, the Notes or any fees or any other amounts payable under any Loan Document or postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or any other amounts payable under any Loan Document. Any document executed by such agent on the Designee's behalf in connection with the Credit Agreement or other Loan Documents shall be binding on the Designee. The Borrower, the Agent and each of the Lenders may rely on and are beneficiaries of the preceding provisions.
5. Following the execution of this Designation Agreement by the Designating Lender and its Designee, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Designation Agreement (the "Effective Date") shall be the date of acceptance hereof by the Agent, unless otherwise specified on the signature page of this Designation Agreement.
6. Each of the Designating Lender and the Agent hereby (a) acknowledges that the Designee is relying on the non-petition provisions of Section 8.12 of the Credit Agreement as agreed to by all signatories thereto; and (b) reaffirms that it will not institute against the Designee or join any other Person in instituting against the Designee any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any federal or state bankruptcy or similar law for one year and one day after the payment in full of the latest maturing commercial paper note issued by the Designee.
7. The Designating Lender unconditionally agrees to pay or reimburse the Designee and save the Designee harmless against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed or asserted by any of the parties to the Loan Documents against the Designee, in its capacity as such, in any way relating to or arising out of this Designation Agreement or any Loan Documents or any action taken or omitted by the Designee hereunder or thereunder; provided that the Designating Lender shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements if the same results from the Designee's gross negligence or willful misconduct.
8. Upon such acceptance and recording by the Agent, as of the Effective Date, the Designee shall be a party to the Credit Agreement with a right to make Advances as a Designated Lender pursuant to Article II of the Credit Agreement and the rights and obligations of a Designated Lender related thereto; provided that the Designee shall not be required to make payments with respect to such obligations except to the extent of excess cash flow of the Designee which is not otherwise required to repay obligations of the Designee Lender which are then due and payable. Notwithstanding the foregoing, the Designating Lender or a specified branch or affiliate of Designating Lender, as administrative agent for the Designee, shall be and remain obligated to the Borrower, the Agent and the Lenders for each and every of the obligations of the Designee and the Designating Lender with respect to the Credit Agreement, including any indemnification obligations under Section 7.05 of the Credit Agreement and any sums otherwise payable to any Loan Party by the Designee.
9. This Designation Agreement shall be governed by and construed in accordance with the Laws of the State of New York.
10. This Designation Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Designation Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Designation Agreement.
IN WITNESS WHEREOF, the Designating Lender and the Designee intending to be legally bound, have caused this Designation Agreement to be executed by their officers duly authorized for such purpose, as of the date first above written.
[NAME OF DESIGNATING LENDER],
as Designating Lender
Title:
[NAME OF DESIGNEE], as Designee
Title:
Lending Office
(and address for notices):
Accepted this __ day of ________, ____ Effective Date:
CITIBANK, N.A.
as Agent
EXHIBIT I-1
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
[Letterhead of R.W. Beck, Inc.]
[Funds Availability Date]
Citibank, N.A.
388 Greenwich Street, 20th Floor
New York, New York 10013
(as Agent for the Lenders)
Subject: Independent Engineer's Report
Southern Power Company Initial Projects
Ladies and Gentlemen:
This letter is furnished pursuant to Section 3.01(c)(vi) of the Credit Agreement dated as of ____________ ___, 2001 (the "Credit Agreement") by and among Southern Power Company (the "Borrower"), Citibank, N.A. (the "Agent"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and the financial institutions named therein (the "Lenders"). Capitalized terms used in this letter and not otherwise defined herein shall have the respective meanings specified in the Credit Agreement.
R. W. Beck, Inc. (the "Independent Engineer") has been retained by the
Agent, on behalf of the Lenders, as the Independent Engineer and it has
prepared an Independent Engineer's Report dated October 16, 2001 (the
"Report") relating to the combustion turbine power generation facilities
located in Autauga County, Alabama (the "Autaugaville Facility"); Lee
County, Alabama (the "Goat Rock Facility"); Athens, Georgia (the "Dahlberg
Facility"); and near Atlanta, Georgia (the "Wansley Facility" and,
collectively, the "Initial Projects"), a copy of which is attached as Annex
A.
The Report was prepared pursuant to the scope of services under our Professional Services Agreement with the Agent on behalf of the Lenders and those services were provided in accordance with generally accepted engineering practices.
In connection with the preparation of the Report, personnel of the Independent Engineer have participated in meetings or telephone discussions with representatives of the Borrower, counsel to the Borrower, the Agent, and counsel to the Agent in regard to the Initial Projects.
Based on our review of the information made available to us by the Borrower on the Initial Projects as of the date of the Report, we have noted, among other things as set forth in the Report, certain observations and have arrived at certain conclusions regarding the design, technical provisions of the agreements and other aspects of the Initial Projects as set forth below. The Agent and the Lenders are encouraged to read the Report in its entirety for the purpose of understanding the following observations and conclusions:
1. Each of the Initial Projects, from a technical and engineering perspective, appears to have been, or is expected to be, designed by Southern Company Services, Inc. ("SCS") in accordance with prudent industry standards and practices for similar plants.
2. SCS has demonstrated experience in the design, engineering, procurement, and construction of power plants similar to each of the Initial Projects. Alabama Power Company and Georgia Power Company have demonstrated experience in the operation of power plants similar to each of the Initial Projects.
3. Based on GE's previously demonstrated capability to address issues
similar to those related to the Frame 7F/FA described in the Report, each of the
Initial Projects utilizes sound technology and proven methods of electric
generation in accordance with generally accepted industry practice. If operated
and maintained consistent with generally accepted industry practices, each of
the Initial Projects should be capable of meeting: (1) the heat rate, output,
and availabilities assumed in the Initial Base Case Projections as set forth in
Section 8 of the Report; (2) the requirements set forth in each Power Purchase
Agreement (if any) entered into with respect to such Initial Project and
referred to in Section 5 of the Report (collectively, the "Relevant Power
Purchase Agreements"); and (3) the requirements of the major permits and
approvals required for the construction and operation of each of the Initial
Projects (the "Project Permits").
4. The performance tests used, or to be used, to determine whether each of Substantial Completion and Final Completion with respect to each of the Initial Projects has been achieved are (a) consistent with the testing procedures set forth in, or determined pursuant to, Schedule V of the Credit Agreement; (b) similar to performance test programs conducted for electric generating plants of the type and size of such Initial Project with which we are familiar; (c) adequate for demonstrating the capability of the Initial Projects to meet the Guaranteed Heat Rate, Guaranteed Output, and the air emissions requirements under the Project Permits, in each case, applicable thereto; and (d) consistent with the testing procedures set forth in the Relevant Power Purchase Agreements.
5. The construction schedule applicable to each of the Initial Projects, other than the Dahlberg Project, as determined pursuant to the major equipment supply contracts and major construction contracts, is consistent with (a) the Scheduled Completion Date, as set forth in the Project Schedule for that Initial Project; and (b) the requirements under all Relevant Power Purchase Agreements entered into with respect to such Initial Project. The performance guarantees applicable to each of the Initial Projects, as contained in the major equipment supply contracts and major construction contracts are consistent with (i) the Guaranteed Output and Guaranteed Heat Rate applicable thereto, each as set forth in the Project Schedule for that Initial Project; and (ii) all corresponding performance guarantees in all Relevant Power Purchase Agreements entered into with respect to such Initial Project.
6. The Dahlberg Project has and, upon achievement of Substantial Completion, the proposed design of each of the other Initial Projects will be consistent with the obligations relating to performance of such Initial Project under the Relevant Power Purchase Agreements applicable thereto.
For purposes of this letter, the Independent Engineer has, at the request of the Agent, carried out certain limited procedures for the period commencing October 17, 2001 and ending on____________ ___, ___ [Insert the date of this certificate], consisting solely of the making of inquiries of the Borrower as to whether there has been any material change in the information provided by them, and upon which the Independent Engineer relied, for purposes of the Report. These procedures would not be sufficient under generally accepted engineering practices to enable the Independent Engineer to express an opinion as to the matters covered by the Report and would not necessarily reveal matters of significance with respect to the statement in the last sentence of this paragraph. The Independent Engineer, therefore, expresses no opinion as to the matters covered by the Report as of any date subsequent to the date of the Report and makes no representations as to the sufficiency of the foregoing procedures for the Agent's purposes. Nothing has come to the attention of the Independent Engineer as a result of the foregoing procedures, however, that caused the Independent Engineer to believe that, as of the date to which the procedures were carried out, the opinions of the Independent Engineer set forth in the Report were not correct. The Borrower did inform us of a matter which it believed did not represent a material change in the information provided by them which is described in Attachment A to this letter.
This letter is solely for the information of, and assistance to, the Agent and the Lenders in conducting and documenting their investigation of the matters covered by the Report in connection with the Initial Projects and is not to be used, circulated, quoted, or otherwise referred to within or without the lending group for any purpose, nor is it to be referred to in whole or in part in any other document, except that reference may be made to it in the above-mentioned Credit Agreement or in any list of closing documents pertaining to the Initial Projects.
The Independent Engineer disclaims any obligation to update this letter. This letter is not intended to, and may not, be relied upon by any party other than the Agent and the Lenders.
Very truly yours,
R. W. BECK, INC.
[Name]
Principal and Senior Director
EXHIBIT I-2
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
[Letterhead of R.W. Beck, Inc.]
[Date of Initial Borrowing
for relevant Subsequent Project]
Citibank, N.A.
388 Greenwich Street, 20th Floor
New York, New York 10013
(as Agent for the Lenders)
Subject: Independent Engineer's Report
Southern Power Company Subsequent Project(s)
Ladies and Gentlemen:
This letter is furnished pursuant to Section [3.04(a)(iv)(C)] / [3.04(b)(v)(C)] / [3.06(d)] of the Credit Agreement dated as of ____________ ___, 2001 (the "Credit Agreement") by and among Southern Power Company (the "Borrower"), Citibank, N.A. (the "Agent"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and the financial institutions named therein (the "Lenders"). Capitalized terms used in this letter and not otherwise defined herein shall have the respective meanings specified in the Credit Agreement.
R. W. Beck, Inc. (the "Independent Engineer") has been retained by the Agent, on behalf of the Lenders, as the Independent Engineer and it has prepared an Independent Engineer's Report dated _______ __, ____ the "Report") relating to the [insert name(s) of Subsequent Project(s)](the "Subsequent Project(s)"), a copy of which is attached as Annex A.
The Report was prepared pursuant to the scope of services under our Professional Services Agreement with the Agent on behalf of the Lenders and those services were provided in accordance with generally accepted engineering practices.
In connection with the preparation of the Report, personnel of the Independent Engineer have participated in meetings or telephone discussions with representatives of the Borrower[, counsel to the Borrower, the Agent, and counsel to the Agent] in regard to the Subsequent Project(s).
Based on our review of the information made available to us by the Borrower on the Subsequent Project(s) as of the date of the Report, we have noted, among other things as set forth in the Report, certain observations and have arrived at certain conclusions regarding the design, technical provisions of the agreements and other aspects of the Subsequent Project(s) as set forth below. The Agent and the Lenders are encouraged to read the Report in its entirety for the purpose of understanding the following observations and conclusions:
1. Each of the Subsequent Projects, from a technical and engineering perspective, appears to have been, or is expected to be, designed by Southern Company Services, Inc. ("SCS") in accordance with prudent industry standards and practices for similar plants.
2. SCS has demonstrated experience in the design, engineering, procurement, and construction of power plants similar to each of the Subsequent Projects. [An affiliate of Southern Company] has demonstrated experience in the operation of power plants similar to each of the Subsequent Projects.
3. The major components of each of the Subsequent Projects (including, without limitation, the turbines, generators, and heat recovery steam generators) are identical to the components incorporated in one or more of the Initial Projects.
4. Each of the Subsequent Projects utilizes sound technology and proven methods of electric generation in accordance with generally accepted industry practice. If operated and maintained consistent with generally accepted industry practices, each of the Subsequent Projects should be capable of meeting: (1) the heat rate, output, and availabilities assumed in its Project Base Case Projections as set forth in Section [ ] of the Report; (2) the requirements set forth in each Power Purchase Agreement (if any) entered into with respect to such Subsequent Project and referred to in Section [ ] of the Report (collectively, the "Relevant Power Purchase Agreements"); and (3) the requirements of the major permits and approvals required for the construction and operation of each of the Subsequent Projects (the "Project Permits").
5. The performance tests used, or to be used, to determine whether each of Substantial Completion and Final Completion with respect to each of the Subsequent Projects has been achieved are (a) consistent with the testing procedures set forth in, or determined pursuant to, Schedule V of the Credit Agreement; (b) similar to performance test programs conducted for electric generating plants of the type and size of such Subsequent Project with which we are familiar; (c) adequate for demonstrating the capability of the Subsequent Project(s) to meet the Guaranteed Heat Rate, Guaranteed Output, and the air emissions requirements under the Project Permits, in each case, applicable thereto; and (d) consistent with the testing procedures set forth in the Relevant Power Purchase Agreements.
6. The construction schedule applicable to each of the Subsequent Projects, as determined pursuant to the major equipment supply contracts and major construction contracts, is consistent with (a) the Scheduled Completion Date, as set forth in the Project Schedule for that Subsequent Project; and (b) the requirements under all Relevant Power Purchase Agreements entered into with respect to such Subsequent Project. The performance guarantees applicable to each of the Subsequent Projects, as contained in the major equipment supply contracts and major construction contracts are consistent with (i) the Guaranteed Output and Guaranteed Heat Rate applicable thereto, each as set forth in the Project Schedule for hat Subsequent Project; and (ii) all corresponding performance guarantees in all Relevant Power Purchase Agreements entered into with respect to such Subsequent Project.
7. Upon achievement of Substantial Completion, the [proposed] design of each of the Subsequent Projects was, or will be, consistent with the obligations relating to performance of such Subsequent Project under the Relevant Power Purchase Agreements applicable thereto.
8. Set out in Sections [ ] and [ ] of the Report is a description of each material project contract for the construction (if applicable), operation and maintenance of each of the Subsequent Projects, including, without limitation, all equipment supply contracts with respect to major components and construction contracts (if such Subsequent Project is not a Completed Project), interconnection contracts, contracts for the supply and transportation of fuel (unless one or more of the Relevant Power Purchase Agreements have been entered into with respect to the entire output of such Subsequent Project, and the purchaser(s) thereunder are solely responsible for fuel supply and transportation), the supply and discharge of water and the operation and maintenance of such Subsequent Project, and long term service contract(s) with respect to turbines and generators, in each case, in existence as of the date hereof (with respect to each of the Subsequent Projects, the "Project Contracts"). The term and technical and pricing provisions of the Project Contracts with respect to each of the Subsequent Projects have been taken into consideration in the preparation of the Project Base Case Projections.
9. Set out in Section [ ] of the Report is a list and brief description of the Project Permits. Although all Project Permits have not been obtained to date, some of which cannot be obtained until a respective project is ready to operate, we are not aware of any technical or engineering circumstances that would prevent the issuance of the remaining Project Permits. The technical provisions of the Project Permits with respect to each of the Subsequent Projects have been taken into consideration in the preparation of the Project Base Case Projections.
10. The Initial Project Budget for each of the Subsequent Projects includes all Project Costs anticipated to be incurred up to Final Completion of such Subsequent Project (including contingency). The construction cost included in the Initial Project Budget has been developed in accordance with generally accepted estimating practices and is comparable to the like costs of other projects similar in size and technology with which we are familiar.
11. The Project Base Case Projections for each of the Subsequent Projects
(a) incorporate the forecasted prices for electricity and fuel provided to us by
the Independent Market Consultant applicable to such Subsequent Project; (b)
incorporate assumptions regarding heat rates, outputs and availabilities that we
believe to be achievable; and (c) include the assumption (as agreed between the
Borrower and the Lenders) that the debt referred to in such Project Base Case
Projections has a term of 20 years and that such debt will bear interest at the
rate of 8.25% per annum throughout its term.
12. Environmental site assessments for each of the Subsequent Projects performed by [Insert name of environmental consultant that performed assessment] were conducted in a manner consistent with industry standards, using comparable industry protocols for similar studies with which we are familiar. The results of the environmental site assessments with respect to each of the Subsequent Projects have been taken into consideration in the preparation of the Project Base Case Projections.
For purposes of this letter, the Independent Engineer has, at the request of the Agent, carried out certain limited procedures for the period commencing ____________ ___, ___ [Insert the date one day after the date of the Report] and ending on____________ ___, ___ [Insert the date of this certificate], consisting solely of the making of inquiries of the Borrower as to whether there has been any material change in the information provided by them, and upon which the Independent Engineer relied, for purposes of the Report. These procedures would not be sufficient under generally accepted engineering practices to enable the Independent Engineer to express an opinion as to the matters covered by the Report and would not necessarily reveal matters of significance with respect to the statement in the last sentence of this paragraph. The Independent Engineer, therefore, expresses no opinion as to the matters covered by the Report as of any date subsequent to the date of the Report and makes no representations as to the sufficiency of the foregoing procedures for the Agent's purposes. Nothing has come to the attention of the Independent Engineer as a result of the foregoing procedures, however, that caused the Independent Engineer to believe that, as of the date to which the procedures were carried out, the opinions of the Independent Engineer set forth in the Report were not correct.
This letter is solely for the information of, and assistance to, the Agent and the Lenders in conducting and documenting their investigation of the matters covered by the Report in connection with the Subsequent Project(s) and is not to be used, circulated, quoted, or otherwise referred to within or without the lending group for any purpose, nor is it to be referred to in whole or in part in any other document, except that reference may be made to it in the above-mentioned Credit Agreement or in any list of closing documents pertaining to the Subsequent Project(s).
The Independent Engineer disclaims any obligation to update this letter. This letter is not intended to, and may not, be relied upon by any party other than the Agent and the Lenders.
Very truly yours,
R. W. BECK, INC.
[Name]
Principal and Senior Director
EXHIBIT I-3
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
[Letterhead of R.W. Beck, Inc.]
[Date of Initial Borrowing
for relevant Initial Project]
[Date of Initial Borrowing
for relevant Initial Project]
Citibank, N.A.
388 Greenwich Street, 20th Floor
New York, New York 10013
(as Agent for the Lenders)
Subject: Independent Engineer's Report
Southern Power Company Initial Project(s)
Ladies and Gentlemen:
This letter is furnished pursuant to Section 3.02(d)(i) of the Credit Agreement dated as of ___________ ___, 2001 (the "Credit Agreement") by and among Southern Power Company (the "Borrower"), Citibank, N.A. (the "Agent"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and the financial institutions named therein (the "Lenders"). Capitalized terms used in this letter and not otherwise defined herein shall have the respective meanings specified in the Credit Agreement.
R. W. Beck, Inc. (the "Independent Engineer") was retained by the Agent, on behalf of the Lenders, as the Independent Engineer and it prepared an Independent Engineer's Report dated October 16, 2001 (the "Report") relating to the [insert name(s) of Initial Project(s)](the "Initial Project(s)"), a copy of which is attached as Annex A.
The Report was prepared pursuant to the scope of services under our Professional Services Agreement with the Agent on behalf of the Lenders and those services were provided in accordance with generally accepted engineering practices.
In connection with the preparation of the Report, personnel of the Independent Engineer have participated in meetings or telephone discussions with representatives of the Borrower, counsel to the Borrower, the Agent, and counsel to the Agent in regard to the Initial Project(s).
For purposes of this letter, the Independent Engineer has, at the request of the Agent, carried out certain limited procedures for the period commencing October 17, 2001 and ending on____________ ___, ___ [Insert the date of this certificate], consisting solely of the making of inquiries of the Borrower as to whether there has been any material change in the information provided by them, and upon which the Independent Engineer relied, for purposes of the Report. These procedures would not be sufficient under generally accepted engineering practices to enable the Independent Engineer to express an opinion as to the matters covered by the Report and would not necessarily reveal matters of significance with respect to the statement in the last sentence of this paragraph. The Independent Engineer, therefore, expresses no opinion as to the matters covered by the Report as of any date subsequent to the date of the Report and makes no representations as to the sufficiency of the foregoing procedures for the Agent's purposes. Nothing has come to the attention of the Independent Engineer as a result of the foregoing procedures, however, that caused the Independent Engineer to believe that, as of the date to which the procedures were carried out, the opinions of the Independent Engineer set forth in the Report were not correct.
This letter is solely for the information of, and assistance to, the Agent and the Lenders in conducting and documenting their investigation of the matters covered by the Report in connection with the Initial Project(s) and is not to be used, circulated, quoted, or otherwise referred to within or without the lending group for any purpose, nor is it to be referred to in whole or in part in any other document, except that reference may be made to it in the above-mentioned Credit Agreement or in any list of closing documents pertaining to the Initial Project(s).
The Independent Engineer disclaims any obligation to update this letter. This letter is not intended to, and may not, be relied upon by any party other than the Agent and the Lenders.
Very truly yours,
R. W. BECK, INC.
[Name]
Principal and Senior Director
EXHIBIT J-1
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
[Letterhead of Marsh USA Inc.]
[Funds Availability Date]
The Lenders referred to below and
Citibank, N.A. (as Agent for such Lenders)
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of [_____], 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Southern Power Company (the "Borrower"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and Lenders party thereto and Citibank, N.A., as administrative agent (the "Agent") for the Lenders. Defined terms used in this certificate and not otherwise defined herein shall have the respective meanings specified in the Credit Agreement.
The undersigned, a duly authorized representative of Marsh USA Inc. (the "Insurance Consultant"), hereby certifies that:
1. This certificate is delivered pursuant to Section 3.01(c)(vii) of the Credit Agreement.
2. In connection with the Credit Agreement, the Insurance Consultant has been retained to prepare the Independent Insurance Consultant's Report dated [________], 2001 (the "Report") relating to the Initial Projects, a true and correct copy of which is attached hereto as Annex A. The Report represents the Insurance Consultant's professional opinion as of the date thereof and was prepared in accordance with generally accepted practices for independent insurance consulting and with the standards of care practiced by leading independent insurance consultants in performing similar tasks on like projects and financings.
3. The Insurance Consultant acknowledges that pursuant to the Credit Agreement, the Lenders will be providing financing to the Borrower for the acquisition, development, construction, operation and/or maintenance of the Initial Projects.
4. After due inquiry, we hereby confirm that since the date of the Report, no event or circumstance has occurred which:
(a) makes, as of the date hereof, any material information or material statement contained in the Report, read as a whole, untrue or incorrect; or
(b) should be reflected in the Report in order to make the statements and information contained therein, read as a whole and in light of the circumstances under which they were made, not misleading; or
(c) results, as of the date hereof, in the Report, read as a whole, omitting to state any material matter relevant to the insurance program for, or insurable events, losses or casualties relating to, the Initial Projects.
5. This certificate is solely for the information of, and assistance to, Citibank, N.A. as Agent and the Lenders from time to time under the Credit Agreement, and is not to be otherwise used, circulated, quoted or referred to within any document, unless specifically consented to in writing by the Insurance Consultant.
Marsh USA Inc.
EXHIBIT J-2
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
[Letterhead of Marsh USA Inc.]
[Date of initial Borrowing
for relevant Subsequent Project]
The Lenders referred to below and
Citibank, N.A. (as Agent for such Lenders)
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of [_____], 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Southern Power Company (the "Borrower"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and Lenders party thereto and Citibank, N.A., as administrative agent (the "Agent") for the Lenders. Defined terms used in this certificate and not otherwise defined herein shall have the respective meanings specified in the Credit Agreement.
The undersigned, a duly authorized representative of Marsh USA Inc. (the "Insurance Consultant"), hereby certifies that:
1. This certificate is delivered pursuant to Section [3.04(a)(iv)(D)] / [3.04(b)(v)(D)] / [3.06(d)] of the Credit Agreement.
2. In connection with the Credit Agreement, the Insurance Consultant has been retained to prepare the Independent Insurance Consultant's Report dated [________] (the "Report") relating to [insert name(s) of Subsequent Project(s)] (each a "Subsequent Project"), a true and correct copy of which is attached hereto as Annex A. The Report represents the Insurance Consultant's professional opinion as of the date thereof and was prepared in accordance with generally accepted practices for independent insurance consulting and with the standards of care practiced by leading independent insurance consultants in performing similar tasks on like projects and financings.
3. The Insurance Consultant acknowledges that pursuant to the Credit Agreement, the Lenders will be providing financing to the Borrower for the acquisition, development, construction, operation and/or maintenance of each Subsequent Project.
4. After due inquiry, we hereby confirm that since the date of the Report, no event or circumstance has occurred which:
(a) makes, as of the date hereof, any material information or material statement contained in the Report, read as a whole, untrue or incorrect; or
(b) should be reflected in the Report in order to make the statements and information contained therein, read as a whole and in light of the circumstances under which they were made, not misleading; or
(c) results, as of the date hereof, in the Report, read as a whole, omitting to state any material matter relevant to the insurance program for, or insurable events, losses or casualties relating to, the Subsequent Projects.
5. We have reviewed the insurance program put in place by the Borrower to insure the Subsequent Projects and conclude that (a) the insurance coverages (including, without limitation, the types and amounts of insurances, the risks insured against, and the limits, deductibles, exclusions and excesses applicable to such insurances) are consistent with the customs and practices of the utility power industry in the United States, and (b) such insurance program is maintained with insurance companies and underwriters which are customarily used by the utility power industry in the United States to insure against the relevant risks, and the use of all such insurance companies and underwriters in accordance with such insurance program is appropriate (taking into account all applicable coverages under the relevant policies).
6. This certificate is solely for the information of, and assistance to, Citibank, N.A. as Agent and the Lenders from time to time under the Credit Agreement, and is not to be otherwise used, circulated, quoted or referred to within any document, unless specifically consented to in writing by the Insurance Consultant.
Marsh USA Inc.
EXHIBIT J-3
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
[Letterhead of Marsh USA Inc.]
[Date of initial Borrowing
for relevant Initial Project]
The Lenders referred to below and
Citibank, N.A. (as Agent for such Lenders)
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of [_____], 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Southern Power Company (the "Borrower"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and Lenders party thereto and Citibank, N.A., as administrative agent (the "Agent") for the Lenders, and to our certificate dated [Funds Availability Date] provided pursuant to Section 3.01(c)(vii) of the Credit Agreement (the "Closing Certificate") and to the report attached to the Closing Certificate (the "Report"). Defined terms used in this certificate and not otherwise defined herein shall have the respective meanings specified in the Credit Agreement.
The undersigned, a duly authorized representative of Marsh USA Inc. (the "Insurance Consultant"), hereby certifies that:
1. This certificate is delivered pursuant to Section [3.02(d)(ii)] / [3.06(a)] of the Credit Agreement.
2. The Insurance Consultant acknowledges that pursuant to the Credit Agreement, the Lenders will be providing financing to the Borrower for the acquisition, development, construction, operation and/or maintenance of the Initial Projects.
3. After due inquiry, we hereby confirm that since the date of the Report, no event or circumstance has occurred which:
(a) makes, as of the date hereof, any material information or material statement contained in the Report, read as a whole, untrue or incorrect; or
(b) should be reflected in the Report in order to make the statements and information contained therein, read as a whole and in light of the circumstances under which they were made, not misleading; or
(c) results, as of the date hereof, in the Report, read as a whole, omitting to state any material matter relevant to the insurance program for, or insurable events, losses or casualties relating to, the Relevant Initial Projects.
4. This certificate is solely for the information of, and assistance to, Citibank, N.A. as Agent and the Lenders from time to time under the Credit Agreement, and is not to be otherwise used, circulated, quoted or referred to within any document, unless specifically consented to in writing by the Insurance Consultant.
Marsh USA Inc.
EXHIBIT K-1
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
[Letterhead of PA Consulting, Inc.]
[Funds Availability Date]
The Lenders referred to below and
Citibank, N.A. (as Agent for such Lenders)
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of [_____], 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Southern Power Company (the "Borrower"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and Lenders party thereto and Citibank, N.A., as administrative agent (the "Agent") for the Lenders. Defined terms used in this certificate and not otherwise defined herein shall have the respective meanings specified in the Credit Agreement.
The undersigned, a duly authorized representative of PA Consulting, Inc. (the "Independent Market Consultant"), hereby certifies that:
1. This certificate is delivered pursuant to Section 3.01(c)(viii) of the Credit Agreement.
2. In connection with the Credit Agreement, the Independent Market Consultant has been retained to prepare the Independent Market Consultant's Report dated [________], 2001 (the "Report") relating to the Initial Projects, a true and correct copy of which is attached hereto as Annex A. The Report represents the Independent Market Consultant's professional opinion as of the date thereof and was prepared in accordance with generally accepted practices for independent market consulting and with the standards of care practiced by leading independent market consultants in performing similar tasks on like projects and financings.
3. The Independent Market Consultant acknowledges that pursuant to the Credit Agreement, the Lenders will be providing financing to the Borrower for the acquisition, development, construction, operation and/or maintenance of the Initial Projects.
4. After due inquiry, we hereby confirm that since the date of the Report, no event or circumstance has occurred which:
(a) makes, as of the date hereof, any material information or material statement contained in the Report, read as a whole, untrue or incorrect; or
(b) should be reflected in the Report in order to make the statements and information contained therein, read as a whole and in light of the circumstances under which they were made, not misleading; or
(c) results, as of the date hereof, in the Report, read as a whole, omitting to state any material matter relevant to each electric power market relevant to the Initial Projects.
5. This certificate is solely for the information of, and assistance to, Citibank, N.A. as Agent and the Lenders from time to time under the Credit Agreement, and is not to be otherwise used, circulated, quoted or referred to within any document, unless specifically consented to in writing by the Independent Market Consultant.
PA Consulting, Inc.
EXHIBIT K-2
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
[Letterhead of PA Consulting, Inc.]
[Date of initial Borrowing
for relevant Subsequent Project]
The Lenders referred to below and
Citibank, N.A. (as Agent for such Lenders)
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of [_____], 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Southern Power Company (the "Borrower"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and Lenders party thereto and Citibank, N.A., as administrative agent (the "Agent") for the Lenders. Defined terms used in this certificate and not otherwise defined herein shall have the respective meanings specified in the Credit Agreement.
The undersigned, a duly authorized representative of PA Consulting, Inc. (the "Independent Market Consultant"), hereby certifies that:
1. This certificate is delivered pursuant to section [3.04(a)(iv)(E)] / [3.04(b)(v)(E)] / [3.06(d)] of the Credit Agreement.
2. In connection with the Credit Agreement, the Independent Market Consultant has been retained to prepare the Independent Market Consultant's Report dated [________] (the "Report") relating to [insert name(s) of Subsequent Project(s)] (each a "Subsequent Project"), a true and correct copy of which is attached hereto as Exhibit A. The Report represents the Independent Market Consultant's professional opinion as of the date thereof and was prepared in accordance with generally accepted practices for independent market consulting and with the standards of care practiced by leading independent market consultants in performing similar tasks on like projects and financings.
3. The Independent Market Consultant acknowledges that pursuant to the Credit Agreement, the Lenders will be providing financing to the Borrower for the acquisition, development, construction, operation and/or maintenance of each Subsequent Project.
4. After due inquiry, we hereby confirm that since the date of the Report, no event or circumstance has occurred which:
(a) makes, as of the date hereof, any material information or material statement contained in the Report, read as a whole, untrue or incorrect; or
(b) should be reflected in the Report in order to make the statements and information contained therein, read as a whole and in light of the circumstances under which they were made, not misleading; or
(c) results, as of the date hereof, in the Report, read as a whole, omitting to state any material matter relevant to each electric power market relevant to the Subsequent Projects.
5. This certificate is solely for the information of, and assistance to, Citibank, N.A. as Agent and the Lenders from time to time under the Credit Agreement, and is not to be otherwise used, circulated, quoted or referred to within any document, unless specifically consented to in writing by the Independent Market Consultant.
PA Consulting, Inc.
EXHIBIT K-3
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
[Letterhead of PA Consulting, Inc.]
[Date of initial Borrowing
for relevant Initial Project]
The Lenders referred to below and
Citibank, N.A. (as Agent for such Lenders)
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of [_____], 2001 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Southern Power Company (the "Borrower"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and Lenders party thereto and Citibank, N.A., as administrative agent (the "Agent") for the Lenders, and to our certificate dated [Funds Availability Date] provided pursuant to Section 3.01(c)(viii) of the Credit Agreement (the "Closing Certificate") and to the report attached to the Closing Certificate (the "Report"). Defined terms used in this certificate and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
The undersigned, a duly authorized representative of PA Consulting, Inc. (the "Independent Market Consultant"), hereby certifies that:
1. This certificate is delivered pursuant to Section [3.02(d)(iii)] /
[3.06(a)] of the Credit Agreement.
2. The Independent Market Consultant acknowledges that pursuant to the Credit Agreement, the Lenders will be providing financing to the Borrower for the acquisition, development, construction, operation and/or maintenance of the Initial Projects.
3. After due inquiry, we hereby confirm that since the date of the Report, no event or circumstance has occurred which:
(a) makes, as of the date hereof, any material information or material statement contained in the Report, read as a whole, untrue or incorrect; or
(b) should be reflected in the Report in order to make the statements and information contained therein, read as a whole and in light of the circumstances under which they were made, not misleading; or
(c) results, as of the date hereof, in the Report, read as a whole, omitting to state any material matter relevant to each electric power market relevant to the Initial Projects.
4. This certificate is solely for the information of, and assistance to, Citibank, N.A. as Agent and the Lenders from time to time under the Credit Agreement, and is not to be otherwise used, circulated, quoted or referred to within any document, unless specifically consented to in writing by the Independent Market Consultant.
PA Consulting, Inc.
EXHIBIT L-1
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
CERTIFICATE OF SUBSTANTIAL COMPLETION
Pursuant to that certain Credit Agreement, dated as of _________, 2001 (as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, the "Credit Agreement"), by and among Southern Power Company (the "Borrower"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and Lenders party thereto, and Citibank, N.A., as administrative agent for the Lenders (the "Agent"), The Southern Company ("Southern") hereby delivers this Certificate to the Agent. Except as otherwise defined herein, capitalized terms used herein but not defined shall have the respective meanings given to them in Exhibit A attached hereto.
Southern hereby certifies as follows:
(i) the [relevant] Project has achieved Mechanical Completion;
(ii) the [relevant] Project has passed an emissions test demonstrating that it can operate in accordance with its permits;
(iii) the [relevant] Project has achieved at least 95% of its Guaranteed Output as set forth in Schedule I hereto, has achieved a heat rate not greater than 105% of its Guaranteed Heat Rate as set forth in Schedule I hereto, in each case, pursuant to tests conducted in accordance with Schedule V to the Credit Agreement;
(iv) the [relevant] Project has successfully completed the reliability run required pursuant to Schedule V to the Credit Agreement;
(v) the [relevant] Project has obtained final, non-appealable permits required to operate as designed as of the date hereof;
(vi) all necessary facilities for the transportation of natural gas to, the necessary electric interconnect facilities for, and all necessary facilities for the procurement, transportation and discharge of water to and from, the [relevant] Project have been completed; and
(vii) based upon the foregoing, the [relevant] Project has achieved Substantial Completion as of the date hereof.
Southern has caused this Certificate to be executed and delivered by its duly authorized officer as of the _____ day of ___________, 200__.
THE SOUTHERN COMPANY
EXHIBIT A
Definitions
"[Relevant] Project" means the [Project description].
"Guaranteed Heat Rate" means the average heat rate associated with the
[relevant] Project while operating in [base mode (namely, at 100% combustion
turbine load)] / [ specify mode of operation applicable to Guaranteed Heat Rate
] at the rated conditions for the [relevant] Project, as set forth in Schedule I
hereto.
"Guaranteed Output" means the capability of the [relevant] Project with [all possible modes of operation in use] / [ specify mode of operation applicable to Guaranteed Output ] at the rated conditions for the [relevant] Project, as set forth in Schedule I hereto.
"Mechanical Completion" means (a) all construction work for the [relevant]
Project has been completed according to the proper scope of work and the
[relevant] Project is ready for performance testing with the exception of Punch
List Items; (b) satisfactory completion of the materials and equipment
associated with individual turnover packages (with all items within the turnover
package completed to the satisfaction of the Borrower's start-up or testing
manager, all equipment capable of operation in a safe and proper manner without
voiding warranties, all equipment systems installed associated with the turnover
package, including remote control systems, ready to commence start-up and
testing) and the satisfactory completion and documentation of the construction
completion testing; and (c) all construction, temporary facilities that may
interfere with or disrupt the Borrower's start-up and plant testing activities,
waste material and rubbish have been removed from the work area.
"Punch List Items" means those incomplete work items that do not have a material effect on the operations and maintenance of the [relevant] Project, including painting, platforms, and damaged instrument glass.
"Substantial Completion" means (a) achievement of Mechanical Completion; (b) the
[relevant] Project has passed an emissions test demonstrating that it can
operate in accordance with its permits; (c) the [relevant] Project has achieved
at least 95% of its Guaranteed Output, has achieved a heat rate not greater than
105% of its Guaranteed Heat Rate, in each case, as set forth in Schedule I
hereto and as tested in accordance with the testing procedures applicable to the
[relevant] Project set forth in, or determined in accordance with, Schedule V to
the Credit Agreement; (d) the [relevant] Project has successfully completed the
reliability run applicable thereto, as set forth in, or determined in accordance
with, Schedule V to the Credit Agreement; (e) the [relevant] Project has
obtained final, non-appealable permits required to operate as designed as of the
date hereof; and (f) all necessary facilities for the transportation of natural
gas to, the necessary electric interconnect facilities for, and all necessary
facilities for the procurement, transportation and discharge of water to and
from, the [relevant] Project have been completed.
Schedule I
Rated Conditions
EXHIBIT L-2
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
CERTIFICATE OF FINAL COMPLETION
Pursuant to that certain Credit Agreement, dated as of _________, 2001 (as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, the "Credit Agreement"), by and among Southern Power Company (the "Borrower"), Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, the Co-Arrangers and Lenders party thereto, and Citibank, N.A., as administrative agent for the Lenders (the "Agent"), The Southern Company ("Southern") hereby delivers this Certificate to the Agent. Except as otherwise defined herein, capitalized terms used herein but not defined shall have the respective meanings given to them in Exhibit A attached hereto.
Southern hereby certifies as follows:
(i) the [relevant] Project has achieved Substantial Completion;
(ii) the tested output in megawatts for the [relevant] Project has achieved 100% of its Guaranteed Output and the [relevant] Project has achieved an average tested heat rate not greater than 100% of its Guaranteed Heat Rate, in each case, as set forth in Schedule I hereto and pursuant to tests conducted in accordance with Schedule V to the Credit Agreement; and
(iii) based upon the foregoing, the [relevant] Project has achieved Final Completion as of the date hereof.
Southern has caused this Certificate to be executed and delivered by its duly authorized officer as of the _____ day of ___________, 200__.
THE SOUTHERN COMPANY
EXHIBIT A
Definitions
"[Relevant] Project" means the [Project description].
"Final Completion" means (a) the [relevant] Project has achieved Substantial Completion; (b) the tested output in megawatts for the [relevant] Project has achieved 100% of its Guaranteed Output pursuant to tests conducted in accordance with Schedule V to the Credit Agreement; and (c) the [relevant] Project has achieved a tested heat rate not greater than 100% of its Guaranteed Heat Rate pursuant to tests conducted in accordance with Schedule V to the Credit Agreement.
"Guaranteed Heat Rate" means the average heat rate associated with the
[relevant] Project while operating in [base mode (namely, at 100% combustion
turbine load)] / [ specify mode of operation applicable to Guaranteed Heat Rate
] at the rated conditions for the [relevant] Project, as set forth in Schedule I
hereto.
"Guaranteed Output" means the capability of the [relevant] Project with [all possible modes of operation in use] / [ specify mode of operation applicable to Guaranteed Output ] at the rated conditions for the [relevant] Project, as set forth in Schedule I hereto.
"Mechanical Completion" means (a) all construction work for the [relevant]
Project has been completed according to the proper scope of work and the
[relevant] Project is ready for performance testing with the exception of Punch
List Items; (b) satisfactory completion of the materials and equipment
associated with individual turnover packages (with all items within the turnover
package completed to the satisfaction of the Borrower's start-up or testing
manager, all equipment capable of operation in a safe and proper manner without
voiding warranties, all equipment systems installed associated with the turnover
package, including remote control systems, ready to commence start-up and
testing) and the satisfactory completion and documentation of the construction
completion testing; and (c) all construction, temporary facilities that may
interfere with or disrupt the Borrower's start-up and plant testing activities,
waste material and rubbish have been removed from the work area.
"Punch List Items" means those incomplete work items that do not have a material effect on the operations and maintenance of the [relevant] Project, including painting, platforms, and damaged instrument glass.
"Substantial Completion" means (a) achievement of Mechanical Completion; (b) the
[relevant] Project has passed an emissions test demonstrating that it can
operate in accordance with its permits; (c) the [relevant] Project has achieved
at least 95% of its Guaranteed Output, has achieved a heat rate not greater than
105% of its Guaranteed Heat Rate, in each case, as set forth in Schedule I
hereto and as tested in accordance with the testing procedures applicable to the
[relevant] Project set forth in, or determined in accordance with, Schedule V to
the Credit Agreement; (d) the [relevant] Project has successfully completed the
reliability run applicable thereto, as set forth in, or determined in accordance
with, Schedule V to the Credit Agreement; (e) the [relevant] Project has
obtained final, non-appealable permits required to operate as designed as of the
date hereof; and (f) all necessary facilities for the transportation of natural
gas to, the necessary electric interconnect facilities for, and all necessary
facilities for the procurement, transportation and discharge of water to and
from, the [relevant] Project have been completed.
Schedule I
Rated Conditions
EXHIBIT M
SOUTHERN POWER COMPANY
CREDIT AGREEMENT
[SOUTHERN COMPANY LETTERHEAD]
____________, 2001
Citibank, N.A., as Agent for
the Lenders under, and as defined in,
the Credit Agreement referred to below
Ladies and Gentlemen:
The Southern Company ("Southern") hereby refers to that certain Credit Agreement, dated as of the date hereof (the "Credit Agreement"), among Southern Power Company (the "Borrower"), the Initial Lenders named therein, Citibank, N.A., as Agent, Salomon Smith Barney Inc., as Lead Arranger and Syndication Agent, and the Co-Arrangers. Except as otherwise defined in this letter agreement (the "Agreement"), capitalized terms used herein but not defined shall have the respective meanings given to them in the Credit Agreement. Southern owns all of the outstanding stock of the Borrower and acknowledges that it will benefit from the Credit Agreement.
Southern, therefore, hereby agrees as follows:
(a) if (1) the [name of development authority] (including its
successors and permitted assigns, the "Development Authority") shall: (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or substantially
all of its property; (ii) make a general assignment for the benefit of its
creditors; (iii) commence a voluntary case under the U.S. Bankruptcy Code (as
now or hereafter in effect) or any similar law of any applicable jurisdiction;
(iv) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts; or (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the U.S. Bankruptcy Code or any similar law of any
applicable jurisdiction; or (2) a proceeding or case shall be commenced, without
the application or consent of the Development Authority, in any court of
competent jurisdiction, seeking (A) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts; (B) the
appointment of a trustee, receiver, custodian, liquidator or the like of the
Development Authority or of all or substantially all of its assets; or (C)
similar relief in respect of the Development Authority under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment
of debts, and such proceeding or case shall continue unstayed and in effect for
a period of ninety (90) or more days (each a "Bankruptcy Event");
(b) if, as a result of such Bankruptcy Event, the Borrower's leasehold interest with the Development Authority in respect of the [name of leased project], or any of the Borrower's rights, powers and remedies under or in connection with the lease of the [name of leased project] with the Development Authority, or any documents related thereto, is materially and adversely affected; and
(c) if revenues of the Borrower (after payment of (i) all operating expenses; and (ii) all Recourse Debt of the Borrower (other than the Project Debt relating to the [name of leased project]) then due and payable, and accrued interest thereon) are insufficient to repay any or all of the principal amount of the Project Debt outstanding with respect to the [name of leased project], and accrued interest thereon, in each case, as and when due;
then, Southern shall (A) on the Final Maturity Date (or, if required to be prepaid prior to the Final Maturity Date pursuant to the Credit Agreement, on such earlier date), pay to the Agent, for the account of the Lenders and on behalf of the Borrower, such amount as may be required to pay in full the outstanding principal of all Advances then outstanding with respect to the [name of leased project] and all accrued and unpaid interest related thereto; (B) pay all interest due and payable, from time to time, on the outstanding Advances made with respect to the [name of leased project]; and (C) upon the maturity thereof, pay to the holders of all Commercial Paper then outstanding with respect to the [name of leased project] and for which there are one or more CP Commitment Reservations then outstanding (or a trustee on behalf of such holders), for the account of the Borrower, such amount as may be required to pay in full the outstanding principal of all such Commercial Paper and all accrued and unpaid interest related thereto.
This Agreement has been duly executed and delivered by Southern and constitutes the legal, valid and binding obligation of Southern enforceable against Southern in accordance with its terms, subject to laws affecting the enforcement of creditors' rights generally and to general principles of equity.
This Agreement is intended to be solely for the benefit of the Borrower, the Agent and the Lenders and is not intended to and shall not confer any rights or benefits on any other party.
Very truly yours,
The Southern Company
Agreed and accepted by
Citibank, N.A.,
As Agent for and on behalf of
the Lenders
* Include only if Utilization is CP Commitment Reservation.
** Include only if Utilization is Borrowing.
* Include only if Utilization is under Section 3.03, 3.05, 3.06(b), (c), (e) or
(f) or 3.07.
** Include unless Utilization is on Funds Availability Date.
* This date should be no earlier than five (5) Business Days after the delivery of this Assignment and Acceptance to the Agent.
** Include if Borrower's consent is required.
Exhibit 10.2(b)
COMPLETION GUARANTEE
THIS COMPLETION GUARANTEE, dated as of November __, 2001 (this "Guarantee"), is made and entered into by and among THE SOUTHERN COMPANY, a Delaware corporation ("Guarantor"), in favor of SOUTHERN POWER COMPANY, a Delaware corporation (the "Borrower"), and CITIBANK, N.A., in its capacity as agent for the benefit of the Lenders under, and as defined in, the Credit Agreement (the "Credit Agreement") referred to below (in such capacity, the "Agent"). Except as otherwise defined herein, capitalized terms used herein but not defined shall have the respective meanings given to them in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, Guarantor owns all the outstanding stock of the Borrower;
WHEREAS, the Agent and the Lenders have agreed to enter into the Credit Agreement of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") with the Borrower, Salomon Smith Barney Inc. as Lead Arranger and Syndication Agent, the Co-Arrangers and Lenders party thereto, and Citibank, N.A., as agent for the Lenders, on the condition that Guarantor provide this Guarantee;
WHEREAS, Guarantor acknowledges that it will benefit, directly and indirectly, from the Credit Agreement.
NOW, THEREFORE, in consideration of the provisions set forth above and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and as an inducement to the Agent and the Lenders to enter into the Credit Agreement, Guarantor hereby consents and agrees as follows:
1. Guarantee. Guarantor hereby irrevocably guarantees and covenants in favor of each of the Borrower and the Lenders, with respect to each of the Projects listed in Schedule 1 hereto, as such Schedule 1 may be amended, modified, supplemented, replaced and/or superceded from time to time by a Completion Guarantee Supplement in the form of Exhibit A hereto (each, a "Project"), as follows:
(a) if the aggregate principal amount of all Advances and CP Commitment Reservations outstanding with respect to such Project equals or exceeds the Project Limit for such Project and if the Borrower's cash flow from operations is insufficient, the Guarantor will, from time to time, (A) pay to the Agent, for the account of the Lenders and on behalf of the Borrower, such amount as may be required to pay in full the current interest due and payable under the Credit Agreement attributable to such Project; and (B) make equity contributions or loans, in the form of Affiliate Subordinated Debt, in cash or by wire transfer of immediately available funds to the Borrower to enable the Borrower to pay all remaining Project Costs related to such Project, in the case of sub-clauses (A) and (B) above, until the earlier of the date on which Final Completion has been achieved with respect to such Project and the Refinancing Date with respect to such Project; and
(b) subject to clause (c) below, if Final Completion for such Project has not been achieved by the earliest to occur of (i) the Buydown Date for such Project as set forth on Schedule 1 hereto, (ii) the Final Maturity Date, and (iii) the occurrence of a "Guarantor Event of Default" (as defined herein), the Guarantor shall, (A) on the earliest of such dates, pay to the Agent, for the account of the Lenders and on behalf of the Borrower, such amount as may be required to pay in full the outstanding principal of all Advances then outstanding with respect to such Project and all accrued and unpaid interest related thereto; and (B) upon the maturity thereof, pay to the holder of all Commercial Paper then outstanding with respect to such Project and for which one or more CP Commitment Reservations are then outstanding (or a trustee on behalf of such holders), for the account of the Borrower, such amount as may be required to pay in full the outstanding principal of all such Commercial Paper and all accrued and unpaid interest related thereto;
(c) if Substantial Completion has then been achieved for such Project, Guarantor shall not be obligated to pay any of the amounts specified in clause (b) above, but shall instead be required to (i) on the applicable date determined under clause (b) above, pay to the Agent, for the account of the Lenders and on behalf of the Borrower, such amount of the Advances then outstanding related to such Project, if any, and (ii) pay, upon the maturity thereof, to the holder of all Commercial Paper then outstanding with respect to such Project and for which one or more CP Commitment Reservations are then outstanding (or a trustee on behalf of such holders), for the account of the Borrower, such amount as may be required to pay in full the outstanding principal of all such Commercial Paper and all accrued and unpaid interest related thereto, as is required, in the aggregate, to achieve the minimum and average Portfolio Adjusted Base Case Projections, calculated on the assumption that all Recourse Debt of the Borrower Group Members, other than Recourse Debt related to Uncompleted Plants, outstanding immediately following such repayment of Project Debt is repaid in full on or before the end of the then Remaining Base Case Period (each, a "Buydown Amount").
The Borrower hereby consents to and acknowledges any such payments by the Guarantor on its behalf, and irrevocably and unconditionally instructs the Guarantor to make, and the Guarantor hereby agrees that it will make, all payments (whether on account of a loan (in the form of Affiliate Subordinated Debt), cash equity contribution or otherwise) which are to be paid to the Agent pursuant to Section 1(a), (b) and (c) above directly into the Agent's Account.
2. Guarantee Absolute. The liability of Guarantor under this Guarantee shall be irrevocable and absolute irrespective of:
(a) any lack of validity or enforceability of or defect or deficiency in the Credit Agreement or any other documents executed in connection with the Credit Agreement;
(b) any modification, extension or waiver of any of the terms of the Credit Agreement;
(c) any change in the time, manner, terms of payment of or in any other term of, all or any of Guarantor's obligations under Section 1 hereof (the "Guaranteed Obligations"), or any other amendment or waiver of or any consent to departure from any agreement or instrument executed in connection therewith;
(d) failure, omission, delay, waiver or refusal by the Lenders to exercise, in whole or in part, any right or remedy held by the Lenders with respect to the Credit Agreement or any transaction under the Credit Agreement;
(e) any change in the existence, structure or ownership of Guarantor or the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets (including, without limitation, any unenforceability, invalidity or disallowance of any of the Borrower's obligations under the Credit Agreement as a result thereof); or
(f) any other circumstance or any existence of or reliance on any representation by the Borrower or any other Person that might otherwise constitute a defense available to, or a discharge of, a guarantor or surety (other than the defense of payment).
The obligations of Guarantor hereunder are several from the Borrower or any other Person, and are primary obligations concerning which Guarantor is the principal obligor. There are no conditions precedent to the enforcement of this Guarantee, except as expressly contained herein.
This Guarantee is a continuing guarantee and shall remain in full force and effect with respect to any Project until the earliest to occur of (i) the payment in full in cash or by wire transfer of immediately available funds of the Guaranteed Obligations with respect to such Project; (ii) the occurrence of the Non-Recourse Date with respect to such Project; and (iii) the termination of the Commitments and the payment in full in cash or by wire transfer of immediately available funds of all Project Debt attributable to Uncompleted Projects and accrued and unpaid interest thereon.
This Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations are annulled, set aside, invalidated, declared to be fraudulent or preferential, rescinded or must otherwise be returned, refunded or repaid by the Lenders upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower, the Guarantor, or any other guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower, the Guarantor, or any other guarantor or any substantial part of its property or otherwise, or upon the entry of an order by a bankruptcy court avoiding the payment of any such amounts, all as though such payment or payments had not been made.
3. Waiver. This is a Guarantee of payment and not of collection. Guarantor hereby irrevocably and unconditionally waives:
(a) notice of acceptance of this Guarantee, of the creation or existence of any of the Guaranteed Obligations and of any action by the Lenders in reliance hereon or in connection herewith;
(b) except as expressly set forth herein, presentment, demand for payment, notice of dishonor or nonpayment, protest and notice of protest with respect to the Guaranteed Obligations; and
(c) any requirement that suit be brought against the Borrower or any other person as a condition to Guarantor's liability for the Guaranteed Obligations under this Guarantee or as a condition to the enforcement of this Guarantee against Guarantor.
4. Representations and Warranties. Guarantor hereby represents and warrants that:
(a) Organization and Good Standing. Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware.
(b) Power, Authority and Due Authorization. Guarantor (i) has the requisite corporate power and authority to execute, deliver and perform this Guarantee and to take all action necessary to consummate the transactions contemplated hereunder, and (ii) is duly authorized, and has been authorized by all necessary corporate action, to execute, deliver and perform this Guarantee.
(c) No Conflicts. Neither the execution and delivery of this Guarantee, nor the consummation of the transactions contemplated herein, nor performance of and compliance with the terms and provisions hereof by Guarantor will (i) violate or conflict with any provision of its certificate or articles of incorporation or bylaws, (ii) conflict with or contravene any Law to which it or its properties are subject which has had or would reasonably be expected to have a Material Adverse Effect as to Guarantor, or (iii) violate any agreement to which it is a party or by which it may be bound, the violation of which has had or would reasonably be expected to have a Material Adverse Effect as to Guarantor.
(d) Consents. No approval or authorization or other action by, or filing, registration or qualification with, any governmental authority is required for the due execution, delivery or performance by Guarantor of this Guarantee and the transactions contemplated hereby, except for those which have been duly obtained or made and are in full force and effect.
(e) Enforceable Obligations. This Guarantee has been duly executed and delivered by Guarantor and constitutes the legal, valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms, subject to laws affecting the enforcement of creditors' rights generally and to general principles of equity.
(f) Litigation. No litigation, arbitration, or administrative proceeding is currently pending or, to Guarantor's knowledge, threatened against Guarantor (i) to restrain the entry by Guarantor into, the enforcement of or exercise of any rights by the Lenders or the Agent under, or the performance or compliance by Guarantor with any obligations under, this Guarantee, or (ii) which has had or would reasonably be expected to have a Material Adverse Effect.
(g) Financial Condition. The consolidated balance sheet of Guarantor as at December 31, 2000 and the related consolidated statements of income, retained earnings and cash flow for the fiscal year then ended, heretofore furnished to the Lenders, fairly present the consolidated financial condition and results of operations of Guarantor as of the date thereof and the consolidated results of its operations for such fiscal year in accordance with GAAP.
(h) Material Adverse Change. There has been no change in the financial condition or results of operations of Guarantor since December 31, 2000 which has had or would reasonably be expected to have a Material Adverse Effect as to Guarantor.
(i) No Guarantor Event of Default. No Guarantor Event of Default (as defined herein) has
5. Guarantor Events of Default. A "Guarantor Event of Default" shall mean that any of the following events has occurred and is continuing:
(a) Guarantor fails to (i) pay or prepay any principal of any Project Debt required to be paid by it pursuant to Section 1 hereof when due; or (ii) pay any interest with respect to any Project Debt required to be paid by it pursuant to Section 1 hereof, make any equity contribution or loan required to be made by it pursuant to Section 1 hereof, or pay any other amounts payable under this Guarantee, in the case of sub-clause (ii) only, within five (5) Business Days after the same shall become due and payable; or
(b) Any one or more of the representations and warranties made in this Guarantee, the Southern Equity Agreement or any certificate delivered by Guarantor or Borrower (with respect only to representations and warranties set forth in Section 4 of this Guarantee or Section 2 of the Southern Equity Agreement) in connection with the Credit Agreement proves to have been materially incorrect when made and, if the events giving rise to such representation or warranty are susceptible of cure, it shall not have been cured within 30 days after written notice of such default has been given to Guarantor by the Agent (or such longer period as the Majority Lenders may permit); or
(c) Guarantor shall fail to pay any principal of or premium or interest on any of its Debt that is outstanding in a principal or notional amount equal to or in excess of $100,000,000 in the aggregate for all such unpaid Debt when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under the agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Debt; or any such Debt shall be declared due and payable, or be required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the scheduled maturity thereof; or
(d) Guarantor or any Subsidiary of Guarantor which represents more than 25% of Guarantor's assets on a consolidated basis (each such Subsidiary, a "Significant Subsidiary") shall (1) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (2) make a general assignment for the benefit of its creditors, (3) commence a voluntary case under the U.S. Bankruptcy Code (as now or hereafter in effect) or any similar law of any applicable jurisdiction, (4) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, or (5) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the U.S. Bankruptcy Code or any similar law of any applicable jurisdiction; or a proceeding or case shall be commenced, without the application or consent of Guarantor or any Significant Subsidiary, in any court of competent jurisdiction, seeking (x) its liquidation, reorganization, dissolution or winding up, or the composition or readjustment of its debts, (y) the appointment of a trustee, receiver, custodian, liquidator or the like of Guarantor or the relevant Significant Subsidiary, as the case may be (as applicable), or of all or any substantial part of its assets, or (z) similar relief in respect of Guarantor or the relevant Significant Subsidiary (as the case may be) under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue unstayed and in effect for a period of 90 or more days; or a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of Guarantor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of Guarantor or any Significant Subsidiary or for any substantial part of its property or ordering the winding up or liquidation of its affairs, and such decree or order shall continue unstayed and in effect for a period of 90 or more days; or Guarantor or any Significant Subsidiary shall admit in writing its inability to pay its debts generally as they become due or any action shall be taken by Guarantor or any Significant Subsidiary in furtherance of any of the aforesaid purposes; or
(e) There has been a Change of Control (as defined herein) in Guarantor. For purposes of this Guarantee, "Change of Control" shall mean the direct or indirect acquisition by any person (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of beneficial ownership of more than 51% of the outstanding shares of the capital stock of Guarantor entitled to vote generally for the election of directors of Guarantor; or
(f) This Guarantee or the Southern Equity Agreement shall fail to be in full force and effect, or Guarantor so asserts in writing.
The occurrence of a Guarantor Event of Default will not result in the acceleration of any Advances but, instead, will result in: (A) with respect to those Projects which have not achieved Substantial Completion, acceleration of those Advances outstanding with respect to such Projects and Guarantor shall be obligated to pay (i) to the Agent for the account of the Lenders and on behalf of the Borrower, an amount equal to the principal amount of such Advances, together with interest related thereto, and (ii) all Commercial Paper with respect to such Projects and for which one or more CP Commitment Reservations are then outstanding, upon the maturity thereof, together with interest related thereto, and (B) with respect to those Projects which have achieved Substantial Completion but not Final Completion, an obligation on the part of the Borrower (and an obligation on the part of Guarantor to pay, on behalf of the Borrower) to (i) immediately prepay such amount of the Advances then outstanding and (ii) pay, on the maturity date thereof, all Commercial Paper for which one or more CP Commitment Reservations are then outstanding, with respect to such Projects, in each case, together with interested related thereto, as is equal, in the aggregate, to the applicable Buydown Amounts for such Projects; provided, that, failure to pay such amounts shall not cross-default any other Advances (although the default rate of interest under the Credit Agreement will be applicable thereto if any such Advances (or part thereof) are not paid in full when due).
6. Enforcement. Guarantor hereby agrees that the Agent shall have the right to directly enforce the provisions hereof which are binding upon Guarantor against Guarantor and Guarantor hereby agrees to pay within 30 days of demand all costs, including reasonable attorneys' fees, incurred with respect to the enforcement of such provisions of this Guarantee against Guarantor.
7. No Subrogation. Notwithstanding any payment or payments made or caused to be made by Guarantor hereunder, Guarantor shall not be entitled to be subrogated to any of the rights of the Lenders, nor shall Guarantor seek any reimbursement or indemnification from the Borrower in respect of payments made or caused to be made by Guarantor hereunder prior to the date when (a) all of the Guaranteed Obligations and all other amounts payable under this Guarantee shall have been paid in full in cash or by wire transfer of immediately available funds; and (b) the Commitments shall have been terminated and all Advances, interest thereon and all other amounts owing by the Borrower under the Credit Agreement shall have been paid in full in cash or by wire transfer of immediately available funds. If any amount shall be paid to Guarantor as a result of such subrogation rights at any time prior to the date when (i) all of the Guaranteed Obligations and all other amounts payable under this Guarantee shall have been paid in full in cash or by wire transfer of immediately available funds; and (ii) the Commitments shall have been terminated and all Advances, interest thereon and all other amounts owing by the Borrower under the Credit Agreement shall have been paid in full in cash or by wire transfer of immediately available funds, such amount shall be held by Guarantor in trust for the Lenders, segregated from other funds of Guarantor, and shall be turned over to the Agent for the benefit of the Lenders, in the exact form received by Guarantor (duly endorsed by Guarantor to the Agent for the benefit of itself and the other Lenders, if required), to be applied against obligations of the Borrower under the Credit Agreement in such order as the Agent acting pursuant to the Credit Agreement may elect.
8. No Setoff. Guarantor shall not have the right to withhold or offset against any payment due for any reason including, without limitation, any dispute between the Borrower and Guarantor.
9. Third Party Beneficiaries. The agreements of the parties hereto are intended to benefit the Lenders and their respective permitted successors and assigns.
10. Counterparts. This Guarantee may be executed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed counterpart of this Guarantee by telecopier shall be effective as delivery of an original executed counterpart of this Guarantee.
11. Notices. Except as otherwise expressly provided herein, (a) all notices and other communications provided for hereunder shall be provided in writing and shall be sent by personal delivery, telecopy, overnight courier or, if such courier service is not available, by certified mail with postage prepaid to any party at the address set forth below its signature on this Guarantee, or at such other address as shall be designated by a party in a written notice to the other parties hereto and (b) all such notices and communications shall be effective seven (7) days after being deposited in the mails in the manner as aforesaid, when delivered if sent by personal delivery, one (1) day after delivery to the courier if sent by overnight courier, or when sent by telecopier, upon confirmation of receipt.
12. Successors and Assigns. This Agreement shall inure to the benefit of the parties hereto, the Agent and each of the Lenders, as third party beneficiaries, and their successors and assigns permitted under the terms of the Credit Agreement, and shall bind the heirs, executors, administrators, personal representatives, successors and assigns of such Persons. Guarantor shall not assign or otherwise transfer all or any of its obligations hereunder. Any assignment by the Agent or the Lenders shall be in accordance with the terms and conditions of Section 8.07 of the Credit Agreement.
13. Amendments. This Guarantee or any provision hereof may not be amended, canceled, modified, changed or waived by any party hereto without the prior written consent of the Agent (acting upon the instructions of those Lenders holding at least 75% of the outstanding Advances or, if none, 75% of the Commitments; provided, that, no amendment, waiver or consent shall, unless in writing and signed by the Agent with the consent of all of the Lenders (a) reduce or limit the obligations of the Guarantor hereunder, release the Guarantor hereunder or otherwise limit the Guarantor's liability with respect to the Guaranteed Obligations; (b) postpone any date fixed for payment hereunder in respect of Guaranteed Obligations; or (c) change the number of Lenders or the percentage of the Commitments that, in each case, shall be required for the Lenders or any of them to take any action hereunder; provided, further that the Guarantor, the Borrower and the Agent may, from time to time, amend this Guarantee by way of one or more Completion Guarantee Supplements in the form of Exhibit A hereto. Any such amendment, cancellation, modification, change or waiver must be by a written instrument signed by Guarantor, the Borrower and the Agent.
14. Governing Law. This Guarantee is a contract made under the Laws of the State of New York of the United States and shall for all purposes be governed by and construed in accordance with the Laws of such State.
15. Waiver of Jury Trial. Each of the Guarantor and the Lenders and the Agent hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Guarantee or the actions of the Agent or any Lender in the negotiation, administration, performance or enforcement thereof.
16. No Waiver. No failure to exercise and no delay in exercise, on the part of the Agent or any Lender, of any right, remedy, power or privilege provided herein or by statute or at Law or in equity shall operate as a waiver thereof; nor shall any single or partial exercise of any thereof preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The remedies herein provided are cumulative and not exclusive of any remedies provided by Law.
IN WITNESS WHEREOF, Guarantor has executed this Completion Guarantee as of the date first above written.
The Southern Company
By:____________________________________________
Name: Gale E. Klappa
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
Address for Notices:
270 Peachtree Street, N.W.
Bin 931A / 20th Floor
Atlanta, Georgia 30303
Facsimile: (404) 506-0708
Attention: Allen L. Leverett
Agreed and accepted:
Southern Power Company
By:
-----------------------------------------
Name: Allen L. Leverett
Title: Treasurer
|
Address for Notices:
270 Peachtree Street, N.W.
Bin 931A / 20th Floor
Atlanta, Georgia 30303
Facsimile: (404) 506-0708
Attention: Allen L. Leverett
Citibank, N.A. (as Agent)
Address for Notices:
2 Penns Way
Suite 200
New Castle, DE 19720
Facsimile: (302)-894-6120
Attention: Dave Graber
Schedule I to Completion Guarantee Schedule 1 to Completion Guarantee
List of Projects
Autaugaville 1 Project
Autaugaville 2 Project
Goat Rock 1 Project
Goat Rock 2 Project
Wansley Project
Exhibit A Form of Completion Guarantee Supplement
Citibank, N.A.,
as Agent
under the Credit Agreement referred to below
2 Penns Way
Suite 200
New Castle, DE 19720
Attention: Dave Graber
[date]
Ladies and Gentlemen:
Reference is made to (a) the Credit Agreement, dated as of [ ], 2001 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Southern Power Company (the "Borrower"), the Lenders and the Co-Arrangers party thereto, Citibank, N.A., as administrative agent for the Lenders (the "Agent"), and Salomon Smith Barney Inc., as lead arranger and syndication agent; and (b) the Completion Guarantee, dated as of [ ], 2001 (as amended, restated, supplemented or otherwise modified from time to time, the " Completion Guarantee") between The Southern Company ("Southern"), the Borrower and the Agent. Terms defined in the Completion Guarantee, including by reference to the Credit Agreement, are used herein with the same meaning.
Each of the Borrower and Southern hereby agrees in favor of the Agent that, with effect on and from the date hereof, the following Subsequent Project shall be a "Project" for all purposes under the Completion Guarantee:
[ Describe Project ],
and Schedule 1 to the Completion Guarantee shall be supplemented with Schedule I to this Completion Guarantee Supplement.
Southern hereby confirms that each of the representations and warranties set forth in Section 4 of the Completion Guarantee are true and correct in all material respects as of the date hereof and, if different from the date hereof, as of the date of the first Utilization with respect to the Project set forth in Schedule I to this Completion Guarantee Supplement, before and after giving effect to such Utilization and to the application of the proceeds therefrom (or, if such Utilization is a CP Commitment Reservation, after giving effect to the application of the proceeds of the Commercial Paper for which such CP Commitment Reservation was requested), as though made on and as of such date (and each of the giving of this Completion Guarantee Supplement and the acceptance by the Borrower of such proceeds shall constitute a representation and warranty made herein, with respect to Section 4 of the Completion Guarantee, by Southern to such effect).
Southern hereby confirms, in favor of each of the Borrower and the Agent that its obligations under the Completion Guarantee shall, on and from the date hereof, extend in all respects, in accordance with the terms thereof, to the Project set forth in Schedule I hereto.
Except as expressly amended hereby, all of the provisions of the Completion Guarantee shall continue to be, and shall remain, in full force and effect in accordance with its terms.
This Completion Guarantee Supplement shall be construed as supplementing and forming part of the Completion Guarantee and shall be read accordingly.
This Completion Guarantee Supplement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of this Completion Guarantee Supplement by telecopier shall be effective as delivery of an original executed counterpart of this Completion Guarantee Supplement.
This Completion Guarantee Supplement shall be governed by, and construed in accordance with, the Laws of the State of New York.
THE SOUTHERN COMPANY
Title:
SOUTHERN POWER COMPANY
Title:
Accepted by:
CITIBANK, N.A., as Agent
Schedule I to Completion Guarantee Supplement
Schedule I to
Completion Guarantee Supplement
Subsequent Project
Exhibit 10-2(b) Completion Guarantee Supplement
Citibank, N.A.,
as Agent
under the Credit Agreement referred to below
2 Penns Way
Suite 200
New Castle, DE 19720
Attention: Dave Graber
April 22, 2002
Ladies and Gentlemen:
Reference is made to (a) the Credit Agreement, dated as of November 15, 2001 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Southern Power Company (the "Borrower"), the Lenders and the Co-Arrangers party thereto, Citibank, N.A., as administrative agent for the Lenders (the "Agent"), and Salomon Smith Barney Inc., as lead arranger and syndication agent; and (b) the Completion Guarantee, dated as of November 15, 2001 (as amended, restated, supplemented or otherwise modified from time to time, the " Completion Guarantee") between The Southern Company ("Southern"), the Borrower and the Agent. Terms defined in the Completion Guarantee, including by reference to the Credit Agreement, are used herein with the same meaning.
Each of the Borrower and Southern hereby agrees in favor of the Agent that, with effect on and from the date hereof, the following Subsequent Project shall be a "Project" for all purposes under the Completion Guarantee:
Southern Company - Florida LLC's undivided sixty-five percent
ownership interest in that certain nominal six hundred thirty-three
(633) megawatt gas-fired combined cycle electric generation plant and
related facilities to be constructed by Southern Company Services,
Inc. at the Curtis H. Stanton Energy Center power plant site located
in Orange County, Florida (the "Orlando Project"),
and Schedule 1 to the Completion Guarantee shall be supplemented with Schedule I to this Completion Guarantee Supplement.
Southern hereby confirms that each of the representations and warranties set forth in Section 4 of the Completion Guarantee are true and correct in all material respects as of the date hereof and, if different from the date hereof, as of the date of the first Utilization with respect to the Project set forth in Schedule I to this Completion Guarantee Supplement, before and after giving effect to such Utilization and to the application of the proceeds therefrom (or, if such Utilization is a CP Commitment Reservation, after giving effect to the application of the proceeds of the Commercial Paper for which such CP Commitment Reservation was requested), as though made on and
as of such date (and each of the giving of this Completion Guarantee Supplement and the acceptance by the Borrower of such proceeds shall constitute a representation and warranty made herein, with respect to Section 4 of the Completion Guarantee, by Southern to such effect).
Southern hereby confirms, in favor of each of the Borrower and the Agent that its obligations under the Completion Guarantee shall, on and from the date hereof, extend in all respects, in accordance with the terms thereof, to the Project set forth in Schedule I hereto.
Except as expressly amended hereby, all of the provisions of the Completion Guarantee shall continue to be, and shall remain, in full force and effect in accordance with its terms.
This Completion Guarantee Supplement shall be construed as supplementing and forming part of the Completion Guarantee and shall be read accordingly.
This Completion Guarantee Supplement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of this Completion Guarantee Supplement by telecopier shall be effective as delivery of an original executed counterpart of this Completion Guarantee Supplement.
This Completion Guarantee Supplement shall be governed by, and construed in accordance with, the Laws of the State of New York.
THE SOUTHERN COMPANY
By:
-----------------------------------------
Name: Gale E. Klappa
Title: Executive Vice President, Chief Financial Officer
and Treasurer
|
SOUTHERN POWER COMPANY
By:
-----------------------------------------
Name: Allen L. Leverett
Title: Treasurer
|
Accepted by:
CITIBANK, N.A., as Agent
Schedule I to Completion Guarantee Supplement
Subsequent Project
Orlando Project
Exhibit 10.3(a)
EQUITY CONTRIBUTION AGREEMENT
THIS EQUITY CONTRIBUTION AGREEMENT, dated as of November __, 2001 (this "Agreement"), is made and entered into by and among THE SOUTHERN COMPANY, a Delaware corporation ("Southern"), SOUTHERN POWER COMPANY, a Delaware corporation (the "Borrower"), and CITIBANK, N.A., a banking corporation organized and existing under the laws of the State of New York, in its capacity as agent for the benefit of the Lenders under, and as defined in, the Credit Agreement referred to below (in such capacity, the "Agent")
W I T N E S S E T H:
WHEREAS, the Borrower is the wholly-owned subsidiary of Southern;
WHEREAS, the Borrower has acquired or plans to acquire the generating facilities and the facilities under construction listed on Schedule 1 hereto as such Schedule 1 may be amended, modified, supplemented, replaced and/or superceded from time to time by an Equity Contribution Agreement Supplement in the form of Exhibit A hereto (the "Projects");
WHEREAS, the Borrower and the Agent have entered into that certain Credit Agreement of even date herewith (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") with the Borrower, Salomon Smith Barney Inc. as Lead Arranger and Syndication Agent, the Co-Arrangers and Lenders party thereto, and Citibank, N.A., as agent for the Lenders, pursuant to which the Lenders will make loans to the Borrower for the purpose of financing up to 60% of the costs of developing, acquiring and constructing the Projects and certain related expenses (the "Loans");
WHEREAS, it is a condition precedent to the effectiveness of the Credit Agreement that this Agreement shall have been entered into by the parties hereto and shall have become fully effective in accordance with its terms; and
WHEREAS, Southern will derive substantial benefit by the making of the Loans by the Lenders to the Borrower.
NOW, THEREFORE, in consideration of the above recited premises and in order to induce the Lenders to make the Loans to the Borrower, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows. Except as otherwise defined herein, capitalized terms used herein but not defined, shall have the respective meanings given to them in the Credit Agreement.
(a) The Borrower and Southern each hereby acknowledge and agree that upon written notice from the Borrower to Southern, Southern shall make equity contributions (each an "Equity Contribution") to the Borrower in cash or by wire transfer of immediately available funds on the date and in the amount specified in such notice. Equity Contributions shall be in such aggregate
amount as shall be required to cause the ratio of Project Debt to Project Equity
(the term "Project Equity" being, with respect to each Project, the aggregate
amount of all equity (cash or otherwise) contributed before or after the Funds
Availability Date (including by way of Equity Contributions), in each case, by
Southern to the equity capital of the Borrower with respect to such Project and
accounted, or to be accounted, as such in the financial statements of the
Borrower), in each case, as of the date of determination (and after giving
effect to all Loans and CP Commitment Reservations made or to be made on such
date, and the application of the proceeds of such Loans or Commercial Paper for
which such CP Commitment Reservations were made (as the case may be)) to not
exceed the Debt/Equity Ratio for such Project; provided that the Debt/Equity
Ratio for any Project shall not, in any event, exceed a ratio of 60:40. The
Initial Project Budget for each Project is attached hereto as part of Schedule
1. From time to time, but not more frequently than once per month, the Borrower
may execute and submit to Southern a written notice requesting an Equity
Contribution.
(b) Subject to the applicable Project Limit(s), in the event that the ratio of Project Debt to Project Equity for any Completed Project (the Total Project Costs for which does not exceed the Project Costs set forth in the Project Budget applicable to such Project) is less than the Debt/Equity Ratio applicable to such Project (after giving effect to all Loans and CP Commitment Reservations made or to be made on such date, and the application of the proceeds of such Loans or Commercial Paper for which such CP Commitment Reservations were made (as the case may be)), the amount by which such Project Equity exceeds the minimum amount of Project Equity required for purposes of achieving the required Debt/Equity Ratio, in each case, with respect to such Project, will be (i) deemed to be an Equity Contribution for any other Project (if so specified in writing by the Borrower to the Agent), or (ii) returned to Southern by the Borrower from proceeds of Loans.
2. Representations and Warranties. Southern represents and warrants to the Borrower and the Agent, for its own benefit and for the benefit of the other Lenders that:
(a) Organization and Good Standing. Southern is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware.
(b) Power, Authority and Due Authorization. Southern (i) has the requisite corporate power and authority to execute, deliver and perform this Agreement and to take all action necessary to consummate the transactions contemplated hereunder, and (ii) is duly authorized to, and has been authorized by all necessary corporate action, to execute, deliver and perform this Agreement.
(c) No Conflicts. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated herein, nor performance of and compliance with the terms and provisions hereof by Southern will (i) violate or conflict with any provision of its certificate or articles of incorporation or bylaws, (ii) conflict with or contravene any Law to which it or its properties are subject which has had or would reasonably be expected to have a Material Adverse Effect as to Southern, or (iii) violate any agreement to which it is a party or by which it may be bound, the violation of which has had or would reasonably be expected to have a Material Adverse Effect as to Southern.
(d) Consents. No approval or authorization or other action by, or filing, registration or qualification with, any governmental authority is required for the due execution, delivery or performance by Southern of this Agreement and the transactions contemplated hereby, except for those which have been duly obtained or made and are in full force and effect.
(e) Enforceable Obligations. This Agreement has been duly executed and delivered by Southern and constitutes the legal, valid and binding obligation of Southern enforceable against Southern in accordance with its terms, subject to laws affecting the enforcement of creditors' rights generally and to general principles of equity.
(f) Litigation. No litigation, arbitration, or administrative proceeding is currently pending or, to Southern's knowledge, threatened against Southern (i) to restrain the entry by Southern into, the enforcement of or exercise of any rights by the Lenders or the Agent under, or the performance or compliance by Southern with any obligations under this Agreement, or (ii) which has had or would reasonably be expected to have a Material Adverse Effect.
(g) Financial Condition. The consolidated balance sheet of Southern as at December 31, 2000 and the related consolidated statements of income, retained earnings and cash flow for the fiscal year then ended, heretofore furnished to the Lenders, fairly present the consolidated financial condition and results of operations of Southern as of the date thereof and the consolidated results of its operations for such fiscal year in accordance with GAAP.
(h) Material Adverse Change. There has been no change in the financial condition or results of operations of Southern since December 31, 2000 which has had or would reasonably be expected to have a Material Adverse Effect as to Southern.
(i) No Southern Event of Default. No Southern Event of Default (as defined herein) has occurred and is continuing A "Southern Event of Default" shall mean that any of the following events has occurred and is continuing:
(i) Southern fails to (A) pay or prepay any principal of any Project Debt required to be paid by it pursuant to the Southern Completion Guarantee when due; or (B) pay any interest with respect to any Project Debt required to be paid by it pursuant to the Southern Completion Guarantee, make any equity contribution or loan required to be made by it pursuant to the Southern Completion Guarantee, or pay any other amounts payable under the Southern Completion Guarantee, in the case of sub-clause (B) only, within five (5) Business Days after the same shall become due and payable; or
(ii) Any one or more of the representations and warranties made in this Agreement, the Southern Completion Guarantee, or in any certificate delivered by Southern or the Borrower (with respect only to representations and warranties set forth in Section 2 of this Agreement or Section 4 of the Southern Completion Guarantee) in connection with the Credit Agreement or the Southern Completion Guarantee, proves to have been materially incorrect when made and, if the events giving rise to such representation or warranty are susceptible of cure, it shall not have been cured within 30 days after written notice of such default has been given to Southern by the Agent (or such longer period as the Majority Lenders may permit); or
(iii) Southern shall fail to pay any principal of or premium or interest on any of its Debt that is outstanding in a principal or notional amount equal to or in excess of $100,000,000 in the aggregate for all such unpaid Debt when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under the agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Debt; or any such Debt shall be declared due and payable, or be required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the scheduled maturity thereof; or
(iv) Southern or any Subsidiary of Southern which
represents more than 25% of Southern's assets on a consolidated basis
(each such Subsidiary, a "Significant Subsidiary") shall (1) apply for
or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (2) make a general assignment for the
benefit of its creditors, (3) commence a voluntary case under the U.S.
Bankruptcy Code (as now or hereafter in effect) or any similar law of
any applicable jurisdiction, (4) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of debts, or
(5) fail to controvert in a timely and appropriate manner, or acquiesce
in writing to, any petition filed against it in an involuntary case
under the U.S. Bankruptcy Code or any similar law of any applicable
jurisdiction; or a proceeding or case shall be commenced, without the
application or consent of Southern or any Significant Subsidiary, in
any court of competent jurisdiction, seeking (x) its liquidation,
reorganization, dissolution or winding up, or the composition or
readjustment of its debts, (y) the appointment of a trustee, receiver,
custodian, liquidator or the like of Southern or the relevant
Significant Subsidiary (as applicable) or of all or any substantial
part of its assets, or (z) similar relief in respect of Southern or the
relevant Significant Subsidiary (as applicable) under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue
unstayed and in effect for a period of 90 or more days; or a court or
governmental agency having jurisdiction in the premises shall enter a
decree or order for relief in respect of Southern or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appoint
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of Southern or any Significant Subsidiary or for any
substantial part of its property or ordering the winding up or
liquidation of its affairs, and such decree or order shall continue
unstayed and in effect for a period of 90 or more days; or Southern or
any Significant Subsidiary shall admit in writing its inability to pay
its debts generally as they become due or any action shall be taken by
Southern or any Significant Subsidiary in furtherance of any of the
aforesaid purposes; or
(v) There has been a Change of Control (as defined herein) in Southern. For purposes of this Agreement, "Change of Control" shall mean the direct or indirect acquisition by any person (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of beneficial ownership of more than 51% of the outstanding shares of the capital stock of Southern entitled to vote generally for the election of directors of Southern; or
(vi) This Agreement or the Southern Completion Guarantee shall fail to be in full force and effect, or Southern so asserts in writing.
3. Enforcement. Southern hereby agrees that the Agent shall have the right to directly enforce the provisions hereof which are binding upon Southern against Southern and Southern hereby agrees to pay within 30 days of demand all costs, including reasonable attorneys' fees, incurred with respect to the enforcement of such provisions of this Agreement against Southern.
4. No Subrogation. Notwithstanding any payment or payments made or caused to be made by Southern hereunder, Southern shall not be entitled to be subrogated to any of the rights of the Lenders, nor shall Southern seek any reimbursement or indemnification from the Borrower in respect of payments made or caused to be made by Southern hereunder. If any amount shall be paid to Southern as a result of such subrogation rights at any time prior to the date when (a) all of the amounts payable under this Agreement shall have been paid in full in cash or by wire transfer of immediately available funds; and (b) the Commitments shall have been terminated and all Advances, interest thereon and all other amounts owing by the Borrower under the Credit Agreement shall have been paid in full in cash or by wire transfer of immediately available funds, such amount shall be held by Southern in trust for the Lenders, segregated from other funds of Southern, and shall be turned over to the Agent for the benefit of the Lenders, in the exact form received by Southern (duly endorsed by Southern to the Agent for the benefit of itself and the other Lenders, if required), to be applied against obligations of the Borrower under the Credit Agreement in such order as the Agent acting pursuant to the Credit Agreement may elect.
5. No Setoff. Southern shall not have the right to withhold or offset against any payment due for any reason including, without limitation, any dispute between the Borrower and Southern.
6. Third Party Beneficiaries. The agreements of the parties hereto are intended to benefit the Lenders and their respective permitted successors and assigns.
7. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed counterpart of this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement.
8. Notices. Except as otherwise expressly provided herein, (a) all notices and other communications provided for hereunder shall be provided in writing and shall be sent by personal delivery, telecopy, overnight courier or, if such courier service is not available, by certified mail with postage prepaid to any party at the address set forth below its signature on this Agreement, or
at such other address as shall be designated by a party in a written notice to the other parties hereto and (b) all such notices and communications shall be effective seven (7) days after being deposited in the mails in the manner as aforesaid, when delivered if sent by personal delivery, one (1) day after delivery to the courier if sent by overnight courier, or when sent by telecopier, upon confirmation of receipt.
9. Successors and Assigns. This Agreement shall inure to the benefit of the parties hereto, the Agent and each of the Lenders, as third party beneficiaries, and their successors and assigns permitted under the terms of the Credit Agreement, and shall bind the heirs, executors, administrators, personal representatives, successors and assigns of such Persons. Southern shall not assign or otherwise transfer all or any of its obligations hereunder. Any assignment by the Agent or the Lenders shall be in accordance with the terms and conditions of Section 8.07 of the Credit Agreement.
10. Amendments. This Agreement or any provision hereof may not be amended, canceled, modified, changed or waived by any party hereto without the prior written consent of the Agent (acting upon the instructions of those Lenders holding at least 75% of the outstanding Loans or, if none, 75% of the Commitments); provided, that, no amendment, waiver or consent shall, unless in writing and signed by the Agent with the consent of all of the Lenders (a) reduce or limit the obligations of Southern under Section 1 herein or, release or otherwise limit Southern's liability under Section 1; (b) postpone any date fixed for any payment required of Southern under Section 1; or (c) change the number of Lenders or the percentage of the Commitments that, in each case, shall be required for the Lenders or any of them to take any action hereunder; provided, further that Southern, the Borrower and the Agent may, from time to time, amend this Agreement by way of one or more Equity Contribution Agreement Supplements in the form of Exhibit A hereto. Any such amendment, cancellation, modification, change or waiver must be by a written instrument signed by Southern, the Borrower and the Agent.
11. Governing Law. This Agreement is a contract made under the Laws of the State of New York of the United States and shall for all purposes be governed by and construed in accordance with the Laws of such State.
12. Waiver of Jury Trial. Each of Southern, the Borrower, the Lenders and the Agent hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of Southern, the Borrower, the Agent or any Lender in the negotiation, administration, performance or enforcement thereof.
13. No Waiver. No failure to exercise and no delay in exercise, on the part of the Agent or any Lender, of any right, remedy, power or privilege provided herein or by statute or at Law or in equity shall operate as a waiver thereof; nor shall any single or partial exercise of any thereof preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The remedies herein provided are cumulative and not exclusive of any remedies provided by Law.
IN WITNESS WHEREOF, the undersigned have executed this Equity Commitment Agreement as of the date first above written.
The Southern Company
By: ______________________________________
Name: Gale E. Klappa
Title: Executive Vice President, Chief Financial Officer
and Treasurer
|
Address for Notices:
270 Peachtree Street, N.W.
Bin 931A / 20th Floor
Atlanta, Georgia 30303
Facsimile: (404) 506-0708
Attention: Allen L. Leverett
Southern Power Company
By: ______________________________________________ Name: Allen L. Leverett Title: Treasurer
Address for Notices:
270 Peachtree Street, N.W.
Bin 931A / 20th Floor
Atlanta, Georgia 30303
Facsimile: (404) 506-0708
Attention: Allen L. Leverett
Citibank, N.A. (as Agent)
By: ____________________________
Name: _________________________
Title: _________________________
Address for Notices:
2 Penns Way
Suite 200
New Castle, DE 19720
Facsimile: (302)-894-6120
Attention: Dave Graber
SCHEDULE 1
PROJECTS AND INITIAL PROJECT BUDGETS
Initial Project
Autaugaville 1 Project
Autaugaville 2 Project
Goat Rock 1 Project
Goat Rock 2 Project
Wansley Project
Wansley
Budget Description Budget Amount ------------------ ------------ General Construction $94,900,000 Engineering and Project 8,042,000 Management Construction Management 6,800,000 Owner Purchased Equipment 202,030,000 - CTGs, HRSGs, STGs Owner Purchased Balance of 47,500,000 Plant GSU Supply and 12,000,000 Installation Warehouse Relocation 4,800,000 Directs Subtotal $376,072,000 Insurance 573,765 Legal and Professional 1,623,745 Fees Sales Tax 2,200,000 Property Tax 150,000 Electrical Interconnection 14,900,000 Gas Interconnection 9,100,000 Start-up and Commissioning 13,500,000 Spares (included in a long 3,200,000 term service agreement) Co-Owner Recovery (10,000,000) Contingency 5,266,000 Interest During 31,801,622 Construction Financing Costs 3,000,000 Other Project Costs $75,315,132 Subtotal Project Total $451,387,132 -------------------------------------------- |
Goat Rock 1 & 2
Budget Description Goat Rock 1 Goat Rock 2 ---------------------------------------------------------------------- General Construction $48,668,000 $48,850,000 Engineering and Project 5,707,000 5,780,000 Management Construction 4,125,000 4,125,000 Management Owner Purchased 93,070,000 111,188,000 Equipment - CTGs, HRSGs, STGs Owner Purchased 24,000,000 25,000,000 Balance of Plant GSU Supply and 6,800,000 6,400,000 Installation Directs Subtotal $182,370,000 $201,343,000 Insurance 285,698 445,500 Legal and Professional 286,540 634,020 Fees Sales Tax 3,000,000 3,600,000 Property Tax 897,210 2,120,696 Electrical Interconnection 7,331,707 5,088,000 Gas Interconnection 7,800,000 0 Start-up and 7,300,000 7,300,000 Commissioning Spares (CT spares 2,200,000 3,000,000 included in the LTSA) Contingency 1,230,000 2,961,000 Interest During 13,703,415 18,212,861 Construction Financing Costs 1,500,000 1,500,000 Site and Owners Cost 1,579,000 0 (Land Purchase, etc.) Other Project Costs $46,813,570 $44,862,077 Subtotal Project Total $229,183,570 $246,205,077 ---------------------------------------------------------------------- |
Autaugaville 1 & 2 - Budget Description Autaugaville 1 Autaugaville 2 ---------------------------------------------------------------------- General $53,000,000 $42,000,000 Construction Engineering and 6,154,000 4,575,000 Project Management Construction 4,125,000 3,450,000 Management Owner Purchased 111,184,000 108,625,000 Equipment - CTGs, HRSGs, STGs Owner Purchased 25,000,000 24,000,000 Balance of Plant GSU Supply and 6,100,000 6,400,000 Installation Directs Subtotal $205,563,000 $189,050,000 Insurance 445,500 445,500 Legal and 1,529,031 396,194 Professional Fees Sales Tax 3,600,000 3,600,000 Property Tax 1,606,057 1,410,034 Electrical 7,179,000 15,000,000 Interconnection Gas Interconnection 12,170,000 0 Start-up and 7,300,000 7,300,000 Commissioning Spares (CT spares 2,100,000 2,100,000 included in the LTSA ) Contingency 4,606,000 3,400,000 Interest During 20,714,025 18,090,483 Construction Financing Costs 1,500,000 1,500,000 Site and Owner's 2,200,000 0 Cost (Land Purchase, etc.) Other Project Costs $64,949,613 $53,242,211 Subtotal Project Total $270,512,613 $242,292,211 ---------------------------------------------------------------------- |
EXHIBIT A
Form of Equity Contribution Agreement Supplement
Citibank, N.A.,
as Agent
under the Credit Agreement referred to below
[date]
Ladies and Gentlemen:
Reference is made to (a) the Credit Agreement, dated as of [ ], 2001 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Southern Power Company (the "Borrower"), the Lenders and the Co-Arrangers party thereto, Citibank, N.A., as administrative agent for the Lenders (the "Agent"), and Salomon Smith Barney Inc., as lead arranger and syndication agent; and (b) the Equity Contribution Agreement, dated as of [ ], 2001 (as amended, restated, supplemented or otherwise modified from time to time, the "Equity Contribution Agreement") between The Southern Company ("Southern"), the Borrower and the Agent. Terms defined in the Equity Contribution Agreement, including by reference to the Credit Agreement, are used herein with the same meaning.
Each of the Borrower and Southern hereby agrees in favor of the Agent that, with effect on and from the date hereof, the following Subsequent Project shall be a "Project" for all purposes under the Equity Contribution Agreement:
[ Describe Project ],
and Schedule 1 to the Equity Contribution Agreement shall be supplemented with Schedule 1 to this Equity Contribution Agreement Supplement.
Southern hereby confirms, in favor of each of the Borrower and the Agent that its obligations under the Equity Contribution Agreement shall, on and from the date hereof, extend in all respects, in accordance with the terms thereof, to the Project set forth in Schedule 1 hereto.
Southern hereby confirms that each of the representations and warranties set forth in Section 2 of the Equity Contribution Agreement are true and correct in all material respects as of the date hereof and, if different from the date hereof, as of the date of the first Utilization with respect to the Project set forth in Schedule 1 hereto, before and after giving effect to such Utilization and to the application of the proceeds therefrom (or, if such Utilization is a CP Commitment Reservation, after giving effect to the application of the proceeds of the Commercial Paper for which such CP Commitment Reservation was requested), as though made on and as of such date (and each of the giving of this Equity Contribution Agreement Supplement and the acceptance by the Borrower of such proceeds shall constitute a representation and warranty made herein, with respect to Section 2 of the Equity Contribution Agreement, by Southern to such effect).
Except as expressly amended hereby, all of the provisions of the Equity Contribution Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
This Equity Contribution Agreement Supplement shall be construed as supplementing and forming part of the Equity Contribution Agreement and shall be read accordingly.
This Equity Contribution Agreement Supplement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of this Equity Contribution Agreement Supplement by telecopier shall be effective as delivery of an original executed counterpart of this Equity Contribution Agreement Supplement.
This Equity Contribution Agreement Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.
THE SOUTHERN COMPANY
By:____________________________________
Name:
Title:
SOUTHERN POWER COMPANY
By: __________________________________
Name:
Title:
Accepted by:
CITIBANK, N.A., as Agent
SCHEDULE 1
SUBSEQUENT PROJECT AND
INITIAL PROJECT BUDGET
Exhibit 10.3(b)
Equity Contribution Agreement Supplement
Citibank, N.A.,
as Agent
under the Credit Agreement referred to below
2 Penns Way, Suite 200
New Castle, DE 19720
Attention: Dave Graber
April 22, 2002
Ladies and Gentlemen:
Reference is made to (a) the Credit Agreement, dated as of November 15, 2001 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among Southern Power Company (the "Borrower"), the Lenders and the Co-Arrangers party thereto, Citibank, N.A., as administrative agent for the Lenders (the "Agent"), and Salomon Smith Barney Inc., as lead arranger and syndication agent; and (b) the Equity Contribution Agreement, dated as of November 15, 2001 (as amended, restated, supplemented or otherwise modified from time to time, the "Equity Contribution Agreement") between The Southern Company ("Southern"), the Borrower and the Agent. Terms defined in the Equity Contribution Agreement, including by reference to the Credit Agreement, are used herein with the same meaning.
Each of the Borrower and Southern hereby agrees in favor of the Agent that, with effect on and from the date hereof, the following Subsequent Project shall be a "Project" for all purposes under the Equity Contribution Agreement:
Southern Company - Florida LLC's undivided sixty-five percent
ownership interest in that certain nominal six hundred thirty-three
(633) megawatt gas-fired combined cycle electric generation plant and
related facilities to be constructed by Southern Company Services,
Inc. at the Curtis H. Stanton Energy Center power plant site located
in Orange County, Florida (the "Orlando Project"),
and Schedule 1 to the Equity Contribution Agreement shall be supplemented with the Orlando Project.
Southern hereby confirms, in favor of each of the Borrower and the Agent that its obligations under the Equity Contribution Agreement shall, on and from the date hereof, extend in all respects, in accordance with the terms thereof, to the Project set forth in Schedule 1 hereto.
Southern hereby confirms that each of the representations and warranties set forth in Section 2 of the Equity Contribution Agreement are true and correct in all material respects as of the date hereof and, if different from the date hereof, as of the date of the first Utilization with respect to
the Project set forth in Schedule 1 hereto, before and after giving effect to such Utilization and to the application of the proceeds therefrom (or, if such Utilization is a CP Commitment Reservation, after giving effect to the application of the proceeds of the Commercial Paper for which such CP Commitment Reservation was requested), as though made on and as of such date (and each of the giving of this Equity Contribution Agreement Supplement and the acceptance by the Borrower of such proceeds shall constitute a representation and warranty made herein, with respect to Section 2 of the Equity Contribution Agreement, by Southern to such effect).
Except as expressly amended hereby, all of the provisions of the Equity Contribution Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
This Equity Contribution Agreement Supplement shall be construed as supplementing and forming part of the Equity Contribution Agreement and shall be read accordingly.
This Equity Contribution Agreement Supplement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of this Equity Contribution Agreement Supplement by telecopier shall be effective as delivery of an original executed counterpart of this Equity Contribution Agreement Supplement.
This Equity Contribution Agreement Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.
THE SOUTHERN COMPANY
By: _________________________________________
Name: Gale E. Klappa
Title: Executive Vice President, Chief Financial
Officer and Treasurer
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SOUTHERN POWER COMPANY
By: _________________________________________
Name: Allen L. Leverett
Title: Treasurer
Accepted by:
CITIBANK, N.A., as Agent
By:
---------------------------------
Name:
|
Title:
SCHEDULE 1
SUBSEQUENT PROJECT AND
INITIAL PROJECT BUDGET
Orlando Project
Budget Description Budget Amount
Orlando
-------------------------------------------------------------------
General Construction 56,260,000
Engineering and Project Management 6,800,000
Construction Management 4,900,000
Owner Purchased Equipment - 112,955,000
CTG's, HRSG's, STG's
Owner Purchased Balance of Plant 27,600,000
GSU Supply & Installation 6,785,000
Directs Subtotal $215,300,000
Insurance 880,000
Legal and Professional Fee's 2,155,818
Sales Tax 200,000
Property Tax 0
Electrical Interconnection 0
Gas Interconnection 0
Start-up and Commissioning including 10,085,812
spares
Contingency 2,884,308
Interest During Construction 20,061,784
Financing Costs 0
Site & Owners Cost (Land Purchase, etc) 650,000
Waste Water Treatment Plant 9,748,000
Other Project Costs Subtotal 46,665,722
Project Total for all Co-Owners 261,965,722
Southern Company-Florida LLC's 65% Share 170,277,719
of Project Costs
Project Limit for Orlando Project 102,166,631
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Exhibit 10.4
SERVICE AGREEMENT
THIS AGREEMENT, made and entered into as of January 10, 2001, between SOUTHERN COMPANY SERVICES, INC., a corporation organized under the laws of the State of Alabama (hereinafter sometimes referred to as the "Service Company") and SOUTHERN POWER COMPANY, a corporation organized under the laws of the State of Delaware (hereinafter sometimes referred to as "Client Company");
WITNESSETH:
THAT, WHEREAS, Service Company is willing to provide Client Company certain services upon request by Client Company; and
WHEREAS, Client Company wishes to obtain such services from Service Company;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein, the parties hereto agree as follows:
1. Agreement to Furnish Services
Service Company agrees to furnish to Client Company, upon the terms and conditions hereinafter set forth, such of the services described in Article 2 hereof, at such times, for such periods and in such manner as Client Company may from time to time require.
2. Description of Services
Service Company will, as and to the extent required for Client Company, keep itself and its personnel available and competent to render to Client Company, the following services:
A. Power Pool Operations
The maintenance of a central dispatching office to coordinate the bulk power supply, if any, of Client Company and other client companies working with their Operating Committee, with the objective of reducing power costs and improving service reliability; and in connection with the foregoing to act as Client Company's agent pursuant to the intercompany interchange contract; to prepare the intercompany billing under such contract; to assist in negotiating and administering power purchase contracts on behalf of Client Company and other client companies; to make studies of power costs for use in hearings before regulatory Commissions; to make studies of present and future load characteristics and of future requirements for additional generating and transmission facilities; and, where appropriate, to prepare reports related to these activities.
B. General Executive and Advisory Services
To advise and assist the officers and employees of Client Company in connection with various phases of its business and operations, including particularly but not exclusively, those phases which involve coordination of planning or operation between Client Company and other client companies or otherwise have a direct effect not only on Client Company but also on the Southern system or other members thereof.
C. General Engineering
The maintenance of an organization staffed and equipped to perform for Client Company general engineering work, including system production and transmission studies, preparation and analysis of electrical apparatus specifications, distribution studies and standards, civil engineering and hydraulic studies and problems, fuel supply studies, advice and assistance in connection with analyses of operations and operating and construction budgets. The members of this group will keep informed as to improvements and developments in the art of generation, transmission and distribution of electricity through frequent contacts with the manufacturers of electrical equipment, through membership in the various national and regional engineering societies and through participation in the committee work of such societies and trade associations of the utility industry. Service Company will make available to Client Company the information thus gained with respect to such developments.
D. Design Engineering
To perform detailed design work for Client Company for fossil-fueled generating plants, hydroelectric generating plants, transmission lines and substations and otherwise as required by Client Company; to make available to Client Company and other client companies as required, the services of a specialist or specialists on various phases of plant operation; and also to make available as required, inspection and supervision personnel for generating plant, transmission line and substation and other construction and operation.
E. Purchasing
To render services to Client Company in connection with purchasing, including the coordination of group purchasing, and to supply expediting services. All requests for bids shall be made by and purchases confirmed in the name of Client Company or of Service Company as agent therefor, and all contracts of purchase shall be likewise made.
F. Accounting
To advise and assist Client Company in connection with the installation of new accounting systems and similar problems, appearances before regulatory commissions, requirements of Federal and State regulatory bodies with respect to accounting, studies of accounting procedures and practices to improve efficiency, book entries resulting from unusual financial transactions, internal audits, employment of independent auditors, preparation and analyses of financial and operating reports and other statistical matters relating to Client Company and other client companies, analyses of securities of other utility companies, preparation of annual reports to stockholders, regulatory commissions, insurance companies and others, standardization of accounting and statistical forms in the interest of economy, and other accounting and statistical matters.
G. Finance and Treasury
To advise and assist Client Company on (a) financing matters,
including determination of types and times of sale of long and
short-term securities, refunding studies, sinking fund problems, and
(b) all treasury matters, including banking problems and investment of
surplus funds, and (c) maintenance of books of accounts and other
related corporate records.
H. Taxes
To advise and assist Client Company in connection with tax matters, including preparation of Federal and State income and other tax returns and of protests, claims and briefs where necessary, tax accruals, and other matters in connection with Client Company's taxes.
I. Insurance and Pensions
To advise and assist Client Company in connection with insurance and pension matters, including contracts with insurers, trustees and actuaries and the placing of blanket and group policies covering Client Company and other client companies, and other insurance problems as required.
J. Corporate
To advise and assist Client Company in connection with its corporate affairs, including assistance and suggestions in connection with the preparation of petitions and applications for the issuance of securities, contracts for the sale or underwriting of securities, preparation of schedules of steps required in connection with major financial and other corporate matters and the consummation thereof, and the preparation of various documents required in connection therewith, contacts with trustees, transfer agents and registrars; maintenance of minutes of directors' and stockholders' meetings and other proceedings and of other related corporate records; and also arrangements for stockholders' meetings, including notices, proxies and records thereof and for other types of meetings relating to its securities.
K. Rates
To study comparative rate levels for various classes of service, in different areas and for different operating conditions, and keep in touch with trends in rate design, and to make such information available to Client Company; to advise Client Company on matters relating to rates and valuation, the design of new and improved rate schedules, and their effect upon Client Company's revenues, the cost of competitive services, earning trends, the desirability of rate changes, rate audits, service rules and regulations, commodity and tax clauses, minimum charges, metering problems, special industrial contracts, resale rates and rural extension plans; and to assist Client Company in the preparation of petitions and applications required in connection with rate changes.
L. Budgeting
To advise and assist Client Company in matters involving the preparation and development of construction and operating budgets, cash and cost forecasts, and budgetary controls.
M. Business Promotion and Public Relations
To advise and assist Client Company in area development activities, in the development of residential, commercial and industrial sales programs, in the preparation and use of advertising, and in the determination and carrying out of public information programs, including those arising out of regulatory and legislative matters.
N. Employee Relations
To furnish Client Company with advisory services in connection with employee relations matters, including recruitment, employee placement, training, compensation, safety, labor relations and health, welfare and employee benefits.
O. Systems and Procedures
To advise and assist Client Company in the formation of good operating practices and methods of procedure, the standardization of forms, the purchase, rental and use of mechanical and electronic data processing, computing and communications equipment, in conducting economic research and planning and in the development of special economic studies.
P. Wholesale Power Purchase and Sale To render services to Client Company in connection with the purchase and sale of electric power on the wholesale market, including the purchase and sale of transportation and transmission capacity in connection with power generation and delivery and the negotiation and administration of derivative transactions, including without limitation those entered into pursuant to master swap agreements; to make studies and, where appropriate, prepare reports on present and future requirements and abilities concerning the purchase and sale of electric power for resale; and to perform other services in connection with such sales and purchase as are required.
Q. Other Services
To render advice and assistance in connection with such other matters as Client Company may request and Service Company may be able to perform with respect to Client Company's business and operations
3. Compensation of Service Company
As compensation for such services rendered to it by Service Company, Client Company hereby agrees to pay to Service Company the cost of such services. Bills will be rendered for the amount of such cost on or before the 10th day of the succeeding month and will be payable on or before the 20th day of such month. Cost of services to be paid by Client Company shall include direct charges and Client Company's pro rata share of certain of Service Company's costs, determined as set forth below:
Direct Charges
To the extent that the costs incurred by Service Company in connection with services rendered by it to Client Company can be identified and related to a particular transaction, direct charges will be made by Service Company against Client Company.
B. Prorated Charges
Such costs incurred by Service Company each month as cannot be charged by Service Company directly to the companies for which it performs services will be distributed among such companies in a fair and equitable manner as set forth in the Southern Company Services, Inc. Cost Allocation Manual which is incorporated herein by reference. The Service Company may revise the Cost Allocation Manual from time to time, subject to the approval of the Client Company and to any necessary regulatory approval, and the revised Cost Allocation Manual shall be incorporated herein by reference upon the effective date of the revision.
4. Companies to be Served
Service Company agrees that during the term hereof it will render services as required by companies in the Southern System and that all such companies will compensate Service Company as provided in Section 3 hereof.
5. Appointment of Service Company as Agent
Client Company hereby appoints Service Company to act as its agent in the performance of the services furnished pursuant to Sections 2 and 4. Such authorization shall include, without limitation, the rights and authority to perform, negotiate, execute and administer agreements pursuant to which Client Company will (i) purchase and sell electric power for resale, (ii) purchase and sell fuels and related services in connection with power generation, (iii) purchase and sell utility equipment and facilities and related services, (iv) purchase and sell transportation and transmission capacity in connection with power generation and delivery, (v) engage in derivative transactions, including (without limitation) those entered into pursuant to master swap agreements (the "Contracts"), and (vi) purchase and sell other goods and services. Service Company's agency with respect to the Contracts shall include without limitation the right to collect payments required under such Contracts, to advance payments on Client Company's behalf, and to accept and give notices and other communications on behalf of Client Company. .
6. Effective Date - Term - Cancellation
After execution by the parties hereto this agreement shall become effective as of January 10, 2001, subject to receipt of any required regulatory approval, and shall remain in effect until terminated by mutual agreement of said parties.
It is also understood and agreed that nothing herein shall be construed to release the officers and directors of Client Company from the obligation to perform their respective duties, or to limit the exercise of their powers in accordance with the provisions of law or otherwise, and this agreement shall be cancelled to the extent and from the time that performance hereunder may conflict with any rule, regulation or order of the Securities and Exchange Commission adopted before or after the execution hereof.
7. Limitation of Liability. As between Client Company and Service Company, Client Company will be solely responsible for all liabilities, obligations, and performance under any Contract executed pursuant to this Agreement, whether or not Service Company's role as agent for Client Company is disclosed to the other party to such contract. Service Company will not warrant or guaranty or otherwise be secondarily liable for performance by Client Company under any Contract or under any other agreement the Client Company may enter in relation to such Contract, including (without limitation) subcontracts, purchase orders and other similar agreements. Client Company shall defend, hold harmless, and indemnify Service Company against any claim made by any third party in connection with the subject matter of such Contract.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized officers and their respective seals to be affixed as of the day and year first above written.
SOUTHERN COMPANY SERVICES, INC.
By:
Its President
Attest:
Secretary
SOUTHERN POWER COMPANY
By:
Its President
Attest:
Secretary
Exhibit 10.5
SOUTHERN COMPANY SYSTEM
INTERCOMPANY INTERCHANGE CONTRACT
ARTICLE I - RECITALS
Section 1.1: This contract is made and entered into this 17th day of February, 2000, by and between Alabama Power Company, a corporation organized and existing under the laws of the State of Alabama with its principal office in Birmingham, Alabama; Georgia Power Company, a corporation organized and existing under the laws of the State of Georgia with its principal office in Atlanta, Georgia; Gulf Power Company, a corporation organized and existing under the laws of the State of Maine with its principal office in Pensacola, Florida; Mississippi Power Company, a corporation organized and existing under the laws of the State of Mississippi with its principal office in Gulfport, Mississippi; Savannah Electric and Power Company, a corporation organized and existing under the laws of the State of Georgia with its principal office in Savannah, Georgia; and Southern Power Company, a corporation organized and existing under the laws of the State of Delaware with its principal office in Birmingham, Alabama, all such companies being hereinafter collectively referred to as the
Southern Company Services, Inc. Original Sheet No. 2 First Revised Rate Schedule FERC No. 138
Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000
Issued on: June 20, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259
"OPERATING COMPANIES"; and Southern Company Services, Inc., a subsidiary service company under the Public Utility Holding Company Act of 1935 ("AGENT" or "SCSI").
WITNESSETH:
Section 1.2: WHEREAS, the common stock of the OPERATING COMPANIES is owned by The Southern Company, a public utility holding company organized and operating pursuant to the provisions of the Public Utility Holding Company Act of 1935 ("the Act"); and
Section 1.3: WHEREAS, the OPERATING COMPANIES can be operated as an integrated electric utility system pursuant to the standards of the Act; and
Section 1.4: WHEREAS, the OPERATING COMPANIES have so operated their respective electric facilities and conducted interconnected electric operations pursuant to and in accordance with the provisions of interchange contracts, the most recent of
Southern Company Services, Inc. Original Sheet No. 3 First Revised Rate Schedule FERC No. 138
Southern Company Services, Inc. Original Sheet No. 32 First Revised Rate Schedule FERC No. 138
which being The Southern Company System Intercompany Interchange Contract dated October 31, 1988, as amended ("the 1989 Contract"); and
Section 1.5: WHEREAS, the OPERATING COMPANIES desire to replace the 1989 Contract with an amended and restated contract to incorporate in one document the numerous amendments subsequently made thereto and also to make further revisions to reflect appropriate modifications to the current arrangement.
Section 1.6:WHEREAS, all of the Operating Companies (including New Power Company) will share in all of the benefits and burdens of this IIC, including complying with operating, dispatch and reserve requirements, participating in opportunity sales transactions, and bearing responsibility for their portion of purchases.
Section 1.7: NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter stated, the OPERATING COMPANIES agree and contract as follows:
ARTICLE II - TERM OF CONTRACT
Section 2.1: This contract will be referred to as the Southern Company
System Intercompany Interchange Contract ("IIC"). Except as provided in
Section 2.2, the IIC shall become effective on April 18, 2000, and shall
continue in effect from year to year thereafter subject to termination
as provided hereinafter. When this IIC has become effective, it shall
supersede and replace the 1989 Contract, and references to a section of
such superseded interchange contract in other agreements of the
OPERATING COMPANIES shall be taken to mean reference to the section of
substantially like import in this IIC.
Section 2.2: Section 3.5 of the Allocation Methodology and Periodic Rate Computation Manual to the 1989 Contract contained a provision pertaining to the treatment of Operation and Maintenance ("O&M") expenses for units that were projected to operate at less than a ten percent (10%) annual capacity factor ("Ten Percent Rule"). The Ten Percent Rule is eliminated in Section 3.4 of this Manual, which change directly affects the dispatch of system resources. In the event the Federal
Energy Regulatory Commission ("FERC") does not allow Section 3.4 of this
Manual to take effect without refund obligation, those provisions of
Section 3.5 of the Manual of the 1989 Contract setting forth the Ten
Percent Rule shall continue in effect until Section 3.4 of this Manual
is approved at the conclusion of the proceeding.
Section 2.3: This IIC may be terminated at any time by mutual agreement of the OPERATING COMPANIES or may be terminated at any time by any OPERATING COMPANY by its giving to each of the other OPERATING COMPANIES and the AGENT written notice of its election to so terminate its participation in this IIC at least five (5) years prior to the date of termination. This IIC shall continue in full force and effect as to each OPERATING COMPANY until terminated as hereinabove provided.
ARTICLE III - PRINCIPAL OBJECTIVES OF
INTERCOMPANY INTERCHANGE CONTRACT
Section 3.1: The purpose of this IIC is to provide the contractual basis for the continued operation of the electric facilities of the OPERATING COMPANIES in such
a manner as to achieve the maximum possible economies consistent with the highest practicable reliability of service, with the reasonable utilization of natural resources and effect on the environment, and to provide a basis for equitably sharing among the OPERATING COMPANIES the costs associated with the operation of facilities that are used for the mutual benefit of all the OPERATING COMPANIES.
Section 3.2: It is recognized that reliability of service and economy of operation require that the energy supply to the system be controlled from a centralized dispatching office and that this will require adequate communication facilities and the provision of economic dispatch computer facilities and automatic controls of generation.
Section 3.3: It is recognized that the IIC provides for the retention of lowest cost energy resources by each OPERATING COMPANY for its own customers. Energy in excess of that necessary to meet each OPERATING COMPANY's requirements is delivered to the Pool as Interchange Energy and may include: (i) energy generated from fossil fired generating plants and combustion turbines; and (ii) purchased energy.
Section 3.4: It is recognized that, under this IIC, each OPERATING
COMPANY will share in the benefits and pay its share of the costs of
coordinated operations as agreed upon in accordance with the terms
hereof. All costs and revenues associated with wholesale transactions
under this IIC will be shared among all OPERATING COMPANIES (including
New Power Company) on a comparable basis through the application of the
governing procedures and methodologies to all such OPERATING COMPANIES.
Section 3.5: It is recognized by the OPERATING COMPANIES that
coordinated electric operation contemplates minimum cost of power supply
upon the interconnected system at all times, consistent with service
requirements and other operating limitations. Benefits of integrated
operation accruing to the respective OPERATING COMPANIES are predicated
upon cooperative efforts toward this objective and are so reflected in
all IIC determinations.
ARTICLE IV - ESTABLISHMENT OF OPERATING COMMITTEE
AND DESIGNATION OF AGENT TO ACT UNDER
DIRECTION OF OPERATING COMMITTEE
Section 4.1 - Establishment of Operating Committee: A designated representative from each of the OPERATING COMPANIES, together with a designated representative of the AGENT who shall act as chairman, shall form and constitute an Operating Committee to meet at frequent intervals and determine the methods of operation hereunder.
Section 4.2 - Duties of Operating Committee: The Operating Committee's areas of responsibility include such matters as developing the concepts, terms and conditions of this IIC; providing guidance and direction to the AGENT regarding economic power system operations and the costs associated therewith; reviewing and recommending generation expansion plans for approval by the respective OPERATING COMPANIES; and other power system matters that relate to the overall coordinated operation of the Southern electric system. Each OPERATING COMPANY representative has one vote and all decisions must be unanimous.
Section 4.3 - Designation of AGENT: SCSI, as a party to this IIC, is designated as AGENT of the OPERATING COMPANIES for administrative and coordination functions.
Section 4.4 - Duties of AGENT: The AGENT will perform such services and will represent the OPERATING COMPANIES, or any of them, in all things to be done by their agent in the execution of and operation under existing contracts with nonaffiliated utilities or entities (hereinafter referred to as "OTHERS"), or contracts supplemental thereto, and under any other contracts in which SCSI has been designated to act as AGENT for the OPERATING COMPANIES.
The OPERATING COMPANIES have certain contracts with OTHERS that provide for the purchase and/or sale of capacity and/or energy by the OPERATING COMPANIES. The AGENT will make the payments associated with purchases under these contracts and under any other contracts or arrangements under which it acts as agent for the OPERATING COMPANIES in accordance with their terms. Each
OPERATING COMPANY will reimburse the AGENT for its portion of such total payments in accordance with the arrangement in effect with respect to the particular contract. Similarly, the AGENT will collect the payments due for sales under these contracts and under any other contracts or arrangements under which it acts as agent and will distribute such payments among the OPERATING COMPANIES in accordance with the arrangement in effect with respect to the particular contract.
Section 4.5 - Term of Agency: The provisions of this IIC providing for authority for the AGENT to act on behalf of the OPERATING COMPANIES, or any of them, shall be deemed to refer, insofar as applicable, to all contracts under which the AGENT acts as AGENT for the OPERATING COMPANIES and notwithstanding anything to the contrary in ARTICLE II hereof, this IIC shall continue in effect insofar as it pertains to other contracts under which the AGENT acts as agent for the OPERATING COMPANIES during the life of any of the said contracts. The OPERATING COMPANIES may, however, designate a new agent to act hereunder by giving thirty
(30) days written notice thereof to the AGENT whereupon such new agent shall be the AGENT hereunder.
ARTICLE V - OPERATION AND MAINTENANCE
OF THE OPERATING COMPANIES' ELECTRIC FACILITIES
Section 5.1: The OPERATING COMPANIES agree to maintain their respective electric facilities in good operating condition and to operate such facilities in coordination with those of the other OPERATING COMPANIES as an integrated electric system in accordance with determinations made from time to time by the Operating Committee in order that an adequate power supply shall be available to meet the requirements of the customers of the respective parties hereto at the lowest cost consistent with a high degree of service reliability.
ARTICLE VI - INCORPORATION OF THE ALLOCATION
METHODOLOGY AND PERIODIC RATE COMPUTATION MANUAL
Section 6.1 - Incorporation of Manual: The mechanics and methods for determining the charges for capacity and energy purchased and sold between the OPERATING COMPANIES, the monthly capability requirement determinations, and the monthly billings and payments between the OPERATING COMPANIES are described in detail in the Allocation Methodology and Periodic Rate Computation Manual ("Manual") attached hereto and incorporated herein by reference. The Manual also supplies more detailed explanation of provisions of this IIC and is necessary to effectuate its intent.
Section 6.2 - Purpose of Manual: The Manual contains a description of the methodology and procedure used to calculate the charges for the services provided for in this IIC. The OPERATING COMPANIES recognize that the cost of providing such services will change during the term of this IIC due to changes in loads, investment and expenses and the addition of electric facilities. Thus, in order for the OPERATING COMPANIES to share equitably in the cost of the services to be provided under this
IIC, it will be necessary to revise or update, on a periodic basis, the cost, expense, load and investment figures utilized in the derivation of the charges for the services to be provided. The Manual will serve as a formula rate allowing periodic revision of the charges to reflect changes in the cost of providing the services contemplated by this IIC.
Section 6.3 - Charges to be Shown on Informational Schedules: The Manual provides that charges derived by application of the formula rate will be shown on Informational Schedules. The Informational Schedules will be revised on a periodic basis to reflect application of the formula rate contained in the Manual.
Section 6.4 - Revision of Charges and Regulatory Filings: Since the charges for the services provided for in this IIC will be computed in accordance with the formula rate method and procedures established in the Manual, it is contemplated that revisions in such charges will not be changes in rates which would require a filing and suspension under the Federal Power Act and the applicable Rules and Regulations of the FERC. The initial Informational Schedules will be submitted to the FERC, or its successor in
interest, for informational purposes to show the application of the formula rate and the resulting charges. In addition, work papers will be included with the initial Informational Schedules showing a detailed application of the formula rate contained in the Manual. Revised Informational Schedules will be submitted to the FERC for informational purposes only.
Section 6.5 - Timing of Revisions to Charges: It is contemplated that charges, computed in accordance with the formula rate contained in the Manual, will be revised annually. It shall be the responsibility of the AGENT to obtain the data and figures required from the respective OPERATING COMPANIES for utilization in the formula rates. The AGENT will also be responsible for calculating the revised charges to be shown on the Informational Schedules, which will be submitted to the Operating Committee for review and confirmation.
Section 6.6 - Revision of Manual: The Operating Committee will review the Manual periodically to determine whether revisions to the formula rate are necessary to meet
changed or changing conditions. If the Operating Committee determines that revisions to the formula rate are appropriate or necessary, it will revise the Manual accordingly. In such event, it will be the responsibility of the AGENT to file the revised Manual with the FERC, or its successor in interest, in order to obtain timely approval or acceptance thereof.
ARTICLE VII - INTERCHANGE CAPACITY TRANSACTIONS
BETWEEN THE OPERATING COMPANIES
Section 7.1 - Provision for Sharing of Temporary Surpluses or Deficits of Capacity Between Operating Companies: The coordinated operation of the integrated electric system creates a pool of power, referred to herein as "the Pool," to which OPERATING COMPANIES commit their surplus power and from which OPERATING COMPANIES receive their deficit power. The OPERATING COMPANIES recognize that in a given year one or more of them may have a temporary surplus or deficit of capacity as a result of coordinated planning or other circumstances. It is the purpose of this IIC to allocate equitably between the OPERATING COMPANIES such
temporary surplus or deficit capacity so that each OPERATING COMPANY will share in the burdens and benefits of coordination of the integrated electric system. The OPERATING COMPANIES agree to purchase and sell such temporary surplus and deficit capacity among themselves on a monthly basis. The amount of capacity to be purchased or sold by the respective OPERATING COMPANIES is determined by the formula methodology set out in ARTICLE IV of the Manual.
Section 7.2 - Charge for Monthly Capacity Transactions Among the OPERATING COMPANIES: The OPERATING COMPANIES recognize that capacity reserves in the Pool are predominantly made up of peaking plant or equivalent resources. Accordingly, the monthly charge for capacity transactions among the OPERATING COMPANIES will be based on the most recently acquired peaking plant resource that is available for year-round operation and scheduling. Each OPERATING COMPANY's monthly charge for capacity sold to the Pool is developed in accordance with the formula rate set out in ARTICLE V of the Manual. The monthly capacity charge for each OPERATING COMPANY, as developed in accordance with such
formula rate, will be shown on Informational Schedules. The selling OPERATING COMPANIES will make capacity available monthly to the Pool for purposes of reserve sharing at the charge shown on such Informational Schedules, and the buying OPERATING COMPANIES will purchase capacity at the average cost of peaking capacity to the Pool.
ARTICLE VIII - INTERCHANGE ENERGY TRANSACTIONS
BETWEEN THE OPERATING COMPANIES
Section 8.1 - Provision for Interchange Energy: Coordinated electric system operation, utilizing the concept of centralized integrated electric system economic dispatch, results in energy transfers among the OPERATING COMPANIES. Such energy transfers are accounted for on an hourly basis and are referred to as Interchange Energy. The methodology for determining the amount of Interchange Energy supplied to or purchased from the Pool is set out in ARTICLE II of the Manual. Interchange Energy is composed of two categories designated as: (i) Associated Interchange Energy (energy purchased or delivered to serve an OPERATING COMPANY's requirements); and
(ii) Opportunity Interchange Energy (energy purchased or delivered to meet an OPERATING COMPANY's opportunity transactions).
Section 8.2 - Charge for Interchange Energy: The charge for Interchange Energy sales by an OPERATING COMPANY during any hour will be based on the variable costs of the generating resources that are considered as having supplied the Interchange Energy. The methodology for determining the charges for Associated and Opportunity Interchange Energy sales to the Pool during any hour is set out in ARTICLE III of the Manual.
ARTICLE IX - PROVISION FOR OTHER
INTERCHANGE TRANSACTIONS
Section 9.1 - Assignable Energy: Assignable Energy is defined as energy acquired from internal sources or from OTHERS for a purpose other than economic dispatch. Assignable Energy is assigned to one or more of the OPERATING COMPANIES consistent with the purpose for which it is acquired. Such assignment will be accomplished by first identifying the beneficiary (or beneficiaries) of the Assignable
Energy and then determining the appropriate share for each such Operating Company. For example, these shares might be based on a Peak Period Load Ratio (PPLR) in proportion to the PPLRs of other beneficiaries or relative participation in a bilateral sale. Once assigned, Assignable Energy will not be delivered to the Pool unless it becomes economically usable on the integrated electric system.
Section 9.2 - Hydroelectric Operation During Periods of Minimum Steam Operations: During certain periods of the year when unusually good flow conditions prevail, certain steam generating units may be taken out of service to increase the utilization of hydro energy. The OPERATING COMPANY having such hydro generation may elect to take a fossil fired generating unit out of service. In the alternative, if another OPERATING COMPANY takes a fossil fired generating unit out of service for the purpose of utilizing such hydro energy, the energy rate between the two OPERATING COMPANIES for that transaction will be the average of the operation and maintenance cost of such hydro energy and the variable cost of the fossil fired generating unit, or as otherwise agreed upon by the two OPERATING COMPANIES.
Section 9.3 - Tie-Line Frequency Regulation by Hydro Capacity: Tie-line load control and frequency regulation by hydro involves additional costs because of increased expenditures associated with such regulation. The charge for these transactions is computed in accordance with the formula rate contained in ARTICLE VI of the Manual.
Section 9.4 - Pool Transactions with OTHERS: Capacity and energy transactions with OTHERS that are entered into on behalf of all OPERATING COMPANIES will be governed by the following principles:
Section 9.4.1 - Pool Purchases of Capacity and Energy: The AGENT (or an individual OPERATING COMPANY for the AGENT) may periodically purchase capacity and energy from nonassociated sources for the benefit of the integrated electric system. Such Pool purchases will initially be allocated at cost to all OPERATING COMPANIES in proportion to their Peak-Period Load Ratios (as provided for in ARTICLE X of this IIC). Purchases so allocated may be sold as Interchange Energy
when they are economically usable on the integrated electric system. Adjustments may thereafter be made in order to reconcile any inequitable effects of this process among the OPERATING COMPANIES, with the intent being that none of the individual OPERATING COMPANIES should be adversely impacted by a purchase that benefits the system as a whole. These impacts will be determined through a system simulation that calculates each Operating Company's cost of generation that is avoided by the purchase. This avoided cost will be compared on an hourly basis to the cost of the purchase. To the extent the avoided cost exceeds the purchase cost, the effect is "positive" (i.e., cost savings) for that hour. These hourly results will be summed to determine the effect on each Operating Company for the day. In situations where individual Operating Companies are adversely impacted by a purchase that benefits the system as a whole, such adverse impacts will be offset through a proportional reduction in the positive net benefits realized by the other Operating Companies.
Section 9.4.2 - Pool Sales of Capacity and Energy: The AGENT may from time to time arrange for the sale to OTHERS of capacity and energy available on the
integrated electric system at rates provided for in contracts or at rates mutually agreed upon. The capacity and/or energy obligation for the sale, as well as the associated cost, is allocated to each OPERATING COMPANY on a Peak-Period Load Ratio basis (as provided for in Article X of this IIC). Payments by OTHERS are also distributed to the respective OPERATING COMPANIES on the basis of the Peak-Period Load Ratios.
ARTICLE X - UTILIZATION OF PEAK-PERIOD LOAD RATIOS
Section 10.1 - Certain Allocations and Payments to be Based on Peak-Period Load Ratios: The AGENT is responsible for the annual development of Peak-Period Load Ratios for each of the OPERATING COMPANIES and such values shall be submitted to the Operating Committee for review and confirmation. These Ratios will be utilized for allocation of certain costs, payments, receipts and other obligations as provided for in this IIC or the Manual. The procedure and methodology for developing the Peak-Period Load Ratios are set out in ARTICLE I of the Manual and the values for such Ratios are shown on an Informational Schedule.
Section 10.2 - Other Uses of Peak-Period Load Ratios: It is agreed that the Peak-Period Ratios shown on Informational Schedule No. 1 may be used, if appropriate, by the OPERATING COMPANIES to reimburse the AGENT for other expenses and costs not contemplated by this IIC.
ARTICLE XI - TRANSMISSION SERVICE
Section 11.1 - Applicability of Network Integration Transmission Service: Network Integration Transmission Service ("Network Service") provides for the integration, economic dispatch and regulation of current and planned Network Resources to serve Network Load. Since the OPERATING COMPANIES integrate, economically dispatch and regulate their generating resources to serve their native load pursuant to this IIC, the associated use of the transmission system is in the nature of Network Service. The OPERATING COMPANIES' native load is specifically included in the determination of Load Ratio Shares used to derive the charge for Network Service under the Open Access Transmission Tariff, and therefore the OPERATING
COMPANIES are bearing a cost responsibility for transactions hereunder comparable to that assigned to other Network Customers.
Section 11.2 - Transmission Service for Other Transactions: To the extent the OPERATING COMPANIES require transmission service associated with transactions that are entered into for purposes other than serving native load customers, such transmission service will be obtained pursuant to the Open Access Transmission Tariff and/or from other transmission providers.
ARTICLE XII - BILLING AND PAYMENT
Section 12.1 - Recording and Billing of Energy Transactions: Each OPERATING COMPANY shall transmit to the AGENT daily all data and information necessary to develop the monthly bill for the various energy transactions contemplated by this IIC. Each OPERATING COMPANY will transmit such data and information to the AGENT for each hour of the year to provide for such accounting and billing. All these data are recorded by the AGENT as required to meet the provisions of this IIC and
to
permit application of appropriate interchange charges. The OPERATING
COMPANIES are responsible for an arithmetical check of all figures
submitted. The AGENT is responsible for assembling all of the data and
information and for determining amounts of various classes of energy
delivered to and received from the Pool. The AGENT prepares intercompany
energy billing for each month in accordance with the provisions of this
IIC. The bills shall contain such details as required to permit review
and verification by the OPERATING COMPANIES.
Section 12.2 - Month-End Adjustment of Daily Energy Determinations: At the close of each month, the AGENT allocates energy from nonassociated sources to the OPERATING COMPANIES and determines the amounts of various classes of energy moved in interchange, based upon daily conditions. The sum of the daily totals in interchange does not exactly equal corresponding amounts determined by month-end meter readings because of certain minor transactions that are neither metered nor recorded daily. Such differences in energy receipts and deliveries are billed or credited to each OPERATING COMPANY at the average cost of
Interchange Energy to the Pool for the month.
Section 12.3 - Billing of Capacity Transactions: The AGENT prepares a monthly bill to the OPERATING COMPANIES for all capacity transactions contemplated by this IIC. The bill shall contain such details as required to permit review and verification by the OPERATING COMPANIES.
Section 12.4 - Billing and Payment Date: The AGENT renders all bills provided for in this IIC not later than the 10th day of the billing month. All payments by the OPERATING COMPANIES are made by the 20th day of the billing month.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed by their duly authorized representatives on the Operating Committee, which signatures may be set forth on separate counterpart pages.
ALABAMA POWER COMPANY MISSISSIPPI POWER COMPANY
By_________________________ By ___________________________
Its ___________________ Its__________________________
GEORGIA POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY
By_________________________ By __________________________
Its ___________________ Its__________________________
GULF POWER COMPANY SOUTHERN COMPANY SERVICES, INC.
By_________________________ By __________________________
Its ___________________ Its__________________________
[NEW POWER COMPANY]
By__[Information]_____________
Its __________________________
|
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed by their duly authorized representatives on the Operating Committee, which signatures may be set forth on separate counterpart pages.
ALABAMA POWER COMPANY MISSISSIPPI POWER COMPANY
By_________________________ By _________________________
Its ___________________ Its_________________________
GEORGIA POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY
By_________________________ By _________________________
Its ___________________ Its_________________________
GULF POWER COMPANY SOUTHERN COMPANY SERVICES,
INC.
By_________________________ By _________________________
Its ___________________ Its_________________________
[NEW POWER COMPANY]
By__[Information]__________
Its _______________________
|
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed by their duly authorized representatives on the Operating Committee, which signatures may be set forth on separate counterpart pages.
ALABAMA POWER COMPANY MISSISSIPPI POWER COMPANY
By_________________________ By __________________________
Its ___________________ Its__________________________
GEORGIA POWER COMPANY SAVANNAH ELECTRIC AND POWER
COMPANY
By_________________________ By __________________________
Its ___________________ Its__________________________
GULF POWER COMPANY SOUTHERN COMPANY SERVICES,
INC.
By_________________________ By __________________________
Its ___________________ Its__________________________
[NEW POWER COMPANY]
By [Information]____________
Its _________________________
|
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed by their duly authorized representatives on the Operating Committee, which signatures may be set forth on separate counterpart pages.
ALABAMA POWER COMPANY MISSISSIPPI POWER COMPANY
By_________________________ By ___________________________
Its ___________________ Its___________________________
GEORGIA POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY
By_________________________ By ___________________________
Its ___________________ Its___________________________
GULF POWER COMPANY SOUTHERN COMPANY SERVICES, INC.
By_________________________ By ___________________________
Its ___________________ Its___________________________
[NEW POWER COMPANY]
By__[Information]_____________
Its __________________________
|
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed by their duly authorized representatives on the Operating Committee, which signatures may be set forth on separate counterpart pages.
ALABAMA POWER COMPANY MISSISSIPPI POWER COMPANY
By_________________________ By _____________________________
Its ___________________ Its_____________________________
GEORGIA POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY
By_________________________ By _____________________________
Its ___________________ Its_____________________________
GULF POWER COMPANY SOUTHERN COMPANY SERVICES, INC.
By_________________________ By _____________________________
Its ___________________ Its_____________________________
[NEW POWER COMPANY]
By [Information]________________
Its ____________________________
|
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed by their duly authorized representatives on the Operating Committee, which signatures may be set forth on separate counterpart pages.
ALABAMA POWER COMPANY MISSISSIPPI POWER COMPANY
By_________________________ By __________________________
Its ___________________ Its__________________________
GEORGIA POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY
By_________________________ By __________________________
Its ___________________ Its__________________________
GULF POWER COMPANY SOUTHERN COMPANY SERVICES, INC.
By_________________________ By __________________________
Its ___________________ Its__________________________
[NEW POWER COMPANY]
By [Information]____________
Its _________________________
|
Southern Company Services, Inc. Original Sheet No. 32A First Revised Rate Schedule FERC No. 138
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed by their duly authorized representatives on the Operating Committee, which signatures may be set forth on separate counterpart pages.
ALABAMA POWER COMPANY MISSISSIPPI POWER COMPANY
By_________________________ By _____________________________
Its ___________________ Its_____________________________
GEORGIA POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY
By_________________________ By _____________________________
Its ___________________ Its_____________________________
GULF POWER COMPANY SOUTHERN COMPANY SERVICES, INC.
By_________________________ By _____________________________
Its ___________________ Its_____________________________
SOUTHERN POWER COMPANY
By ________________________
Its _____________________________
|
Southern Company Services, Inc. Original Sheet No. 33 First Revised Rate Schedule FERC Number 138
Issued by: Charles D. McCrary, Executive Vice Pres. Effective: April 18, 2000
Issued on: October 2, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259
Issued by: Charles D. McCrary, Executive Vice Pres. Effective: April 18, 2000
Issued on: June 20, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259
ALLOCATION METHODOLOGY AND PERIODIC
RATE COMPUTATION PROCEDURE MANUAL
Section 0.0 - Description and Purpose of Manual: This Manual is provided for in the Southern Company System Intercompany Interchange Contract ("IIC") entered into the 17th day of February, 2000, and contains a formula description of the methodology and procedure used to calculate the charges under the IIC. The Manual is divided into six (6) basic articles as follows:
ARTICLE I - Methodology for Determination of Peak-Period Load Ratios
ARTICLE II - Methodology for Determination of Amount of Interchange Energy Sold To and Purchased From the Pool
ARTICLE III - Rates for Interchange Energy
ARTICLE IV - Methodology for Determination of Monthly Amount of Capacity To Be Sold To or Purchased From the Pool
Southern Company Services, Inc. Original Sheet No. 34 First Revised Rate Schedule FERC Number 138
ARTICLE V - Monthly Capacity Rate of Each
OPERATING COMPANY Based on
Ownership or Purchase of Peaking Plant or
Equivalent Resources
ARTICLE VI - Rate for Tie-Line Load Control and Frequency Regulation by Hydro Facilities
ARTICLE I
METHODOLOGY FOR
DETERMINATION OF PEAK-PERIOD LOAD RATIOS
Section 1.1 - Provision for Peak-Period Load Ratios: This article of the Manual establishes and provides for the yearly derivation of Peak-Period Load Ratios that are utilized in energy and capacity transactions and in other allocations as provided for in the IIC. These Ratios are shown on Information Schedule No. 1.
Section 1.2 - Methodology for Determining Peak-Period Load Ratios: The Contract Year in the IIC is defined to be January 1st through December 31st of the calendar year. The peak
Southern Company Services, Inc. Substitute Original Sheet No. 35 First Revised Rate Schedule FERC Number 138 superseding Original Sheet No. 35
Issued by: Charles D. McCrary, Executive Vice Pres. Effective: April 18, 2000
Issued on: October 2, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259 and letter order issued September 27, 2000
period is defined to be the fourteen (14) hours between 7:00 a.m. and 9:00
p.m. (Prevailing Central Time) of each weekday, excluding holidays.
The Peak-Period Load Ratios for the Contract Year are based upon the prior
year's actual peak period energy in the critical months of June, July, and
August for each OPERATING COMPANY. The system peak period energy is equal
to the sum of all the OPERATING COMPANIES' peak period energy, excluding:
(i) opportunity transactions of a transient nature in the shorter term
markets (such as hourly, day ahead and week ahead); and (ii) any energy
sales transactions for which there are no underlying supply resources.
The Peak-Period Load Ratios are determined by dividing each OPERATING COMPANY's summation of the June, July, and August actual weekday peak-period energy by the total system June, July, and August actual weekday peak-period energy.
ARTICLE II
METHODOLOGY FOR
DETERMINATION OF AMOUNT OF INTERCHANGE
ENERGY SOLD TO AND PURCHASED FROM THE POOL
Section 2.1 - Methodology for Determination of Amount of Interchange Energy: The total of energy delivered by each OPERATING COMPANY to all other OPERATING COMPANIES and to OTHERS, less the total of energy received by each OPERATING COMPANY from all other OPERATING COMPANIES and from OTHERS, constitutes the
Southern Company Services, Inc. Original Sheet No. 36 First Revised Rate Schedule FERC Number 138 Issued by: Charles D. McCrary, Executive Vice Pres. Effective: April 18, 2000 Issued on: June 20, 2000 |
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259
net of interchange deliveries to and receipts from the Pool. Interchange
Energy is the net of such energy deliveries and receipts from the Pool
after adjustment for energy movements received from or delivered to sources
within or outside the territory of the OPERATING COMPANIES and settled for
under arrangements made for such energy movements; and after adjustment for
excess energy not required or usable by any of the OPERATING COMPANIES that
may be sold by one OPERATING COMPANY to OTHERS, not a party to this IIC;
and after adjustment for energy delivered to or received from Southern
Electric Generating Company, Greene County Steam Plant, Daniel Steam Plant,
Scherer Steam Plant Unit No. 3, Southeastern Power Administration, South
Mississippi Electric Power Association, and other similar arrangements; and
after adjustment for hydro energy losses due to tie-line frequency
regulation. The determination of the amount of Interchange Energy delivered
to or received from the Pool is computed hourly.
ARTICLE III
RATES FOR INTERCHANGE ENERGY
Section 3.1 - Procedure for Economic Dispatch: Centralized economic
dispatch is accomplished by dispatching system generating resources to meet
the requirements of the OPERATING COMPANIES and to supply energy for sales
to OTHERS. System resources are dispatched based on variable dispatch
costs, which include the marginal replacement fuel cost (as defined in
Section 3.6 of the Manual), variable operation and maintenance expenses,
in-plant fuel handling costs, emission allowance replacement cost,
compensation for
Southern Company Services, Inc. Original Sheet No. 38 First Revised Rate Schedule FERC Number 138
transmission losses, and other such energy related costs that would otherwise not have been incurred.
Section 3.2 - Associated Interchange Energy Rate: The Associated Interchange Energy Rate is determined for each hour and is defined as the system incremental energy cost. This cost shall be based on the variable cost of the resources that serve the requirements of the OPERATING COMPANIES. The variable cost of these resources shall include the marginal replacement fuel costs (as defined in Section 3.6 of the Manual), variable operation and maintenance expenses, in-plant fuel handling expenses, emission allowance replacement cost, compensation of incremental transmission losses, cost of purchases, and other such energy related costs that would otherwise not have been incurred. For each hour, an OPERATING COMPANY supplying Associated Interchange Energy to the Pool will receive a payment determined by multiplying the applicable Associated Interchange Energy Rate by the quantity of kilowatt-hours delivered to the Pool. For each hour, an OPERATING COMPANY purchasing Associated Interchange Energy from the Pool will be charged an amount determined by multiplying the Associated Interchange Energy Rate by the quantity of kilowatt-hours received from the Pool.
Section 3.3 - Opportunity Interchange Energy Rate: The rate for energy delivered to the Pool for purposes of an opportunity transaction will be based upon the variable cost of the resources that supply such energy. The variable cost of these resources shall include the marginal replacement fuel cost (as defined in Section 3.6 of the Manual), variable operation and maintenance expenses, in-plant fuel handling expenses, emission allowance replacement cost, compensation for transmission losses, cost of purchases, and other such energy related costs that would otherwise not have been incurred. For each hour of the transaction, an Opportunity Interchange Energy Rate will be developed based on the variable costs of the resources used to supply the energy. This rate will be applied to each OPERATING COMPANY's energy obligation for that transaction to derive the payment due from such OPERATING COMPANY. The resulting payments will then be used to reimburse the cost of the OPERATING COMPANIES that supplied the Opportunity Interchange Energy.
Section 3.3.1 - Opportunity Interchange Energy Rates Related to Certain
Contracts and Other Obligations of the Operating Companies: The OPERATING
COMPANIES are currently obligated to supply various types of energy on a
Peak-Period Load Ratio basis under contracts with Florida Power & Light
Company, Jacksonville Electric Authority, Florida Power Corporation, City
of Tallahassee, Florida, and South Mississippi Electric Power Association.
For purposes of these contracts, the variable cost of resources supplying
the energy shall include the blended replacement fuel cost (as defined in
Section 3.5 of this Manual), variable operation and maintenance expenses,
in-plant fuel handling expenses, emission allowance replacement cost,
compensation for transmission losses, cost of purchases, and other such
energy related costs that would otherwise not have been incurred.
Southern Company Services, Inc. Original Sheet No. 39 First Revised Rate Schedule FERC Number 138 Issued by: Charles D. McCrary, Executive Vice Pres. Effective: June 15, 2000 Issued on: June 20, 2000 |
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259
Section 3.4 - Variable Operation and Maintenance Expenses For Fossil Fired
Units: The variable Operation and Maintenance expenses for fossil steam and
combustion turbine units for the Contract Year are derived by summing the
following budgeted/forecasted components for each unit: (i) all operating
material, non-labor, and on-site contract labor charged to FERC Accounts
502 and 505 (Fossil Steam); and (ii) all maintenance material, non-labor,
and contract labor charged to FERC Accounts 512 and 513 (Fossil Steam), and
553 (Combustion Turbine). These budgeted expense estimates may be levelized
over the major maintenance cycle of a particular unit or set of units.
The estimated expenses are divided by the estimated net energy output of each unit to convert the values to mills per kilowatt-hour. The variable Operation and Maintenance expense for each fossil steam and combustion turbine unit is shown on Information Schedule No. 2 for the Contract Year.
Southern Company Services, Inc. Original Sheet No. 41 First Revised Rate Schedule FERC Number 138 Issued by: Charles D. McCrary, Executive Vice Pres. Effective: April 18, 2000 Issued on: June 20, 2000 |
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259
Section 3.4.1 - In-Plant Fuel Handling Costs for Fossil Fired Units:
In-Plant fuel handling costs for each fossil steam and combustion turbine
unit for the Contract Year are based on the budgeted/forecasted
expenditures for in-plant fuel handling expenses charged to FERC Account
501. These budgeted expense estimates may be levelized over the major
maintenance cycle of a particular unit or set of units.
The estimated expenses are divided by the estimated net energy output of each unit to convert the values to mills per kilowatt-hour. The in-plant fuel handling cost for each fossil steam and combustion turbine unit is shown on Informational Schedule No. 2 for the Contract Year.
Section 3.5 - Blended Replacement Fuel Cost: Blended replacement fuel costs are determined monthly by the AGENT and are defined as the weighted average cost, escalated for the current dispatch period, of fuel receipts for the previous month (both long-term contract and spot market receipts) and the projected fuel receipts for the current month, or as otherwise agreed to by the OPERATING COMPANIES.
Section 3.6 - Marginal Replacement Fuel Cost: Marginal replacement fuel costs are determined monthly by the AGENT, and reflect the costs of the next purchase of uncommitted fuel for a generating facility. Such marginal replacement fuel costs may be revised during the month if significant changes occur. For gas or oil-fired units, the marginal replacement fuel costs are based upon the volume of gas or oil necessary to replace the
projected monthly burn. Marginal replacement gas or oil prices may be changed during the month if a significant change occurs.
The above described procedures will be periodically reviewed by the AGENT and may be revised upon approval of the OPERATING COMPANIES.
Southern Company Services, Inc. Original Sheet No. 44 First Revised Rate Schedule FERC Number 138
ARTICLE IV
METHODOLOGY FOR
DETERMINATION OF MONTHLY AMOUNT OF
CAPACITY TO BE SOLD TO OR PURCHASED
FROM THE POOL
Section 4.1 - Formula for Determination of Monthly Capacity Sales/Purchases: The monthly capacity sale to or purchase from the pool for each OPERATING COMPANY is determined from the following formula:
CS or CP = RS - R
Where:
CS or CP = Capacity sales to the
Pool (CS) or capacity purchases
from the Pool (CP) by an
OPERATING COMPANY. A negative
value indicates a sale to the
Pool and a positive value
indicates a purchase from the
Pool
|
RS = Reserve responsibility for
each OPERATING COMPANY (See
Section 4.1.1)
R = Reserve capacity for each OPERATING COMPANY (See Section 4.1.2)
Section 4.1.1 - Reserve Responsibility (RS): The responsibility for the reserve capacity on the integrated electric system is allocated among the OPERATING COMPANIES on the basis of peak hour load ratios for each month.
RS = L/L' x R
Where:
RS = Reserve responsibility for each
OPERATING COMPANY
L = Monthly peak hour load
responsibility of each
OPERATING
COMPANY (See Section 4.3)
L' = Monthly peak hour load of the
integrated electric system (See
Section 4.3)
R = Sum of the reserve capacity
for all of the OPERATING
COMPANIES
|
Section 4.1.2 - Reserve Capacity (R): The reserve capacity for each of the respective OPERATING COMPANIES is determined monthly by the following formula:
R = C - CR
Where:
C = Total capacity available to the
OPERATING COMPANY (See Section
4.2)
CR = Total capacity required to meet
reliably the OPERATING
COMPANY's load responsibility
|
The capacity required to meet the OPERATING COMPANY's load responsibility is determined by the following formula:
CR = LC + LCR
Where:
LC = Portion of the total capacity
required to meet reliably the
OPERATING COMPANY'S load
responsibility
|
Southern Company Services, Inc. Original Sheet No. 45 First Revised Rate Schedule FERC Number 138 |
that is available for load service ("available portion").LCR = Portion of the capacity required to meet reliably the OPERATING COMPANY'S load responsibility that is unavailable for load service for any reason (including forced outage, partial outage or maintenance outage) during the ten (10) highest system peak hours during each month averaged over the most recent three-year period ("unavailable portion"). These unavailable portions of capacity are determined by identifying unavailability specific to each individual OPERATING COMPANY by each generation type. Individual OPERATING COMPANY unavailability factors for each type of generating capacity will be applied to their respective owned resources in determining their unavailable capacity associated with load service.
The available portion of the total capacity is determined from the following formula:
LC = CPS + DSO + Cha + Cna + Coa
Southern Company Services, Inc. Original Sheet No. 46 First Revised Rate Schedule FERC Number 138
Where:
CPS = Net contract purchases from and sales to OTHERS
DSO = Demand side option equivalent capacity
Cha = Total conventional hydro capacity less the
unavailable portion of conventional hydro capacity
Cna = Total nuclear capacity less the unavailable
portion of nuclear capacity
Coa = Total available pumped storage
hydro, coal, combustion turbine,
oil, and gas capacity required to
meet the remaining portion of the
OPERATING COMPANY's load
|
responsibility calculated as:
Coa = L - CPS - DSO - Cha - Cna
The unavailable portion of the total capacity is determined from the following formula:
LCR = Chu + Cnu + (Coa/(1 - (Cou/Cot)) - Coa) Where: Chu = Unavailable portion of conventional hydro capacity |
Southern Company Services, Inc. Original Sheet No. 47 First Revised Rate Schedule FERC Number 138
Cnu = Unavailable portion of nuclear capacity
Cou = Total unavailable pumped storage hydro,
coal, combustion turbine, oil, and gas
capacity
Cot = Total pumped storage hydro,
coal, combustion turbine, oil,
and gas capacity.
|
Section 4.2 - Determination of Capacity Available to Each OPERATING COMPANY
(C): The capacity available to each OPERATING COMPANY is determined monthly
as the sum of available owned, leased or otherwise available generating
units, net contract purchases from and sales to OTHERS, as approved by the
Operating Committee, and seasonal or other power exchange from reliable
sources. The capacity available is determined from the following formula:
C = Cc + Cn + Cog + Cp + Cct + Ch + Cpsh + DSO + CPS
Where:
Cc = Coal capacity
Cn = Nuclear capacity
Cog = Oil and gas capacity
Cp = Peak Load capacity
Cct = Combustion turbine capacity
|
Southern Company Services, Inc. Original Sheet No. 48
First Revised Rate Schedule FERC Number 138
Ch = Conventional hydro capacity
Cpsh = Pumped storage hydro capacity
DSO = Demand side option equivalent
capacity
CPS = Net contract purchases from and
|
sales to OTHERS
The components of the above formula shall be computed as detailed below.
Unless otherwise provided, the capability demonstrated in accord with such
procedures shall be used in establishing the following year's capacity
values. Where seasonal references are made, the seasons shall be defined as
follows: Summer (June through September); Fall (October through November);
Winter (December through February); and Spring (March through May).
Section 4.2.1 - Certified Rating: The production officer at each OPERATING
COMPANY will certify the full load capability of each coal electric
generating unit (excluding units from which Unit Power Sales and other
similar bulk power sales are made), oil and gas steam electric generating
unit and combustion turbine unit. Southern Nuclear Operating Company will
certify the capability of each nuclear steam electric generating unit.
These certified ratings ("Full Load" ratings) shall represent the full load
capability expected to be available continuously on a daily basis, under
normal operating conditions, with all units at a given plant demonstrating
concurrently. Where appropriate, certified ratings shall be adjusted to
reflect cogeneration and seasonal impacts.
Southern Company Services, Inc. Original Sheet No. 49 First Revised Rate Schedule FERC Number 138
The production officer at each OPERATING COMPANY will also certify the peak load capability of generating units demonstrating such capability ("Peak Load" capability). The Peak Load capability shall represent the additional amount of generation obtained for a limited period of time by operating all units at a given plant concurrently and under conditions such as, but not limited to, overpressure, valves wide open and top feedwater heaters out of service.
Section 4.2.2 - Coal (Cc)and Nuclear (Cn) Capacity: The Full Load rating of each coal and nuclear steam electric generating unit shall be based on the unit's capability during hours when such unit demonstrates full output during the months of June through August, adjusted for temporary identifiable deratings. Such demonstrated output shall be used to establish the following year's Full Load rating.
Section 4.2.3 - Oil and Gas Capacity (Cog): The Full Load rating of each oil and gas steam electric generating unit shall be based on the unit's demonstrated capability during hours when such unit demonstrates full output during the months of June through August, adjusted for temporary identifiable deratings. Such demonstrated output shall be used to establish the following year's Full Load rating.
Combined cycle units shall be demonstrated in accordance with the foregoing paragraph and the demonstrated output shall be used to determine the following year's summer rating. During the fall, winter and spring, adjustments may be made to the Full Load rating to reflect
Southern Company Services, Inc. Original Sheet No. 50 First Revised Rate Schedule FERC Number 138
the unit's capability at expected seasonal ambient temperatures.
Section 4.2.4 - Combustion Turbine Capacity (Cct): The Full Load rating of combustion turbine units is based on the demonstrated output of such unit and the manufacturer's base design curve rating. Combustion turbine units shall demonstrate daily sustained capability during the months of June through August, adjusted for temporary identifiable deratings. The demonstrated output shall be used to determine the following year's summer rating. During the fall, winter and spring, adjustments may be made to the Full Load rating to reflect the unit's capability at expected seasonal ambient temperatures.
Section 4.2.5- Peak Load Capacity (Cp): The Peak Load capacity of demonstrating generating units shall be the additional amount of generation obtained by operating all units at a given plant concurrently and under conditions such as, but not limited to, overpressure, valves wide open and top feedwater heaters out of service. The Peak Load capacity shall be based on such unit's demonstrated capability during hours when the unit demonstrates peak load capability during the months of June through August, adjusted for temporary identifiable deratings. The capability demonstrated will be used in establishing the following year's Peak Load rating.
Section 4.2.6 - Conventional (Ch) and Pumped Storage (Cpsh) Hydro Capacity:
For purpose of the IIC, hydro capability is the average simulated
generation during eight (8) consecutive hours occurring on five (5)
consecutive weekdays using the average water inflows from
Southern Company Services, Inc. Original Sheet No. 52 First Revised Rate Schedule FERC Number 138
historical data. The simulation process utilizes maximum (full) gate setting and best (most efficient) gate setting to determine the capability of the hydro facilities. The capability for the months June-August is the summer maximum gate simulated rating. For the months December-May, the capability is the winter maximum gate simulated rating. The capability of the months September-November is the summer best gate simulated rating. To the extent that an OPERATING COMPANY can demonstrate to the satisfaction of the Operating Committee that a hydro facility can actually achieve the maximum gate rating during the fall months, the capability of such hydro facility will be the maximum gate rating.
Section 4.2.7 - Adjustments to Unit Ratings: The Operating Committee periodically may evaluate and adjust determinations of unit ratings based upon evaluations of reliability. The Operating Committee will consider special circumstances to achieve precision in the ratings of units for IIC purposes for the forthcoming year when the aforementioned procedures do not yield an accurate result. The governing unit ratings will be included in the informational filing submitted in accordance with ARTICLE VI of the contract.
Section 4.2.8 - Active Demand Side Options - Equivalent Capacity (DSO): The equivalent capacity of each active demand side option for each month of the calendar year is determined from the following formula:
DSO = ((Cv x ICE) / (1 -(%TL/100))) x A Where:
DSO = Demand side option equivalent capacity Cv = Contracted value ICE = Incremental capacity equivalent factor %TL = Six (6) percent incremental transmission losses A = Availability Factor |
The Incremental Capacity Equivalent Factor is a measure of the effect of a demand side option on generating system reliability. The Availability Factor is a measure of the probability of an active demand side option being available at the time it is needed.
Section 4.2.9 - Contract Purchases and Sales (CPS): Contract purchases and sales include contracted capacity purchases from and sales to OTHERS for any month as agreed upon by the Operating Committee. The contracted capacity will be prorated according to the number of days in each month that it is available to an OPERATING COMPANY.
Section 4.3 - Determination of Peak Hour Load Responsibility of Each OPERATING COMPANY (L): The monthly peak hour load responsibility of each OPERATING COMPANY is determined by the following formula:
Southern Company Services, Inc. Original Sheet No. 53
First Revised Rate Schedule FERC Number 138
L = L' x La/100
Where:
L' = Monthly ten (10) highest hour average
load of the integrated
electric system
La = Monthly average percent contribution of
each OPERATING COMPANY's ten (10) highest
hour average loads to the monthly ten (10)
highest hour average loads of the system
for the most recent three-year period.
|
Section 4.4 - Capacity Adjustment For Generating Unit Schedule: For a generating unit scheduled for commercial operation, retirement, or sale for the coming year, an adjustment will be made in the capability resources of the appropriate OPERATING COMPANY based upon the actual date of commercial operation, retirement, or sale; provided however, that the adjustment will not be made in a month earlier than that approved by the Operating Committee. If the actual date is on or before the 15th day of the month, the capacity adjustment begins in that month. If the actual date is beyond the 15th day of the month, the capacity adjustment begins in the following month.
Southern Company Services, Inc. Original Sheet No. 54 First Revised Rate Schedule FERC Number 138
ARTICLE V
MONTHLY CAPACITY RATE OF
EACH OPERATING COMPANY BASED ON
OWNERSHIP OR PURCHASE OF
PEAKING PLANT OR EQUIVALENT RESOURCES
Section 5.1 - Provision for Monthly Capacity Rate: This article of the
Manual establishes the formula rate for deriving the monthly capacity
charge for each OPERATING COMPANY based on its most recently installed
peaking facilities (or equivalent purchased resources) available for
year-round operation or scheduling. OPERATING COMPANIES that have not
installed or purchased such facilities or resources within the last five
(5) years will utilize the weighted average rate of all the OPERATING
COMPANIES that have installed or purchased such facilities or resources.
The monthly capacity charges are utilized in the determination of payments
to the Pool by the OPERATING COMPANIES purchasing capacity during the month
and receipts from the Pool by the OPERATING COMPANIES selling capacity
during the month. Each OPERATING COMPANY that sells capacity to the Pool
will receive a payment based on the product of the amount of net capacity
sales (CS) times that OPERATING COMPANY's monthly capacity rate. Each
deficit OPERATING COMPANY will make payments to the Pool based on the
product of the amount of net capacity purchased (CP) times the weighted
average cost of such capacity sold to the Pool during the month. The
monthly capacity rate of each OPERATING COMPANY for each month of the
Contract
Southern Company Services, Inc. Original Sheet No. 56
First Revised Rate Schedule FERC Number 138
Year is shown on Informational Schedule No. 3. Such rates will be
|
revised in accordance with this Manual and the IIC in subsequent contract years.
Section 5.2 - Derivation of Monthly Capacity Costs of Each Operating Company: The derivation of the monthly capacity costs of each OPERATING COMPANY is based on one of the following: (i) the capacity cost of the most recently added peaking facilities; (ii) the capacity cost of the most recent long-term capacity purchase; or (iii) the weighted system average of the capacity costs of the most recently added peaking facilities or long-term purchases.
The monthly capacity rate of each OPERATING COMPANY for installed peaking facilities under (i) will be determined by the following formula:
R1 = (I x LFCC/100/C1) x MCWF
Where:
R1 = Monthly charges for peaking
plant or equivalent resource
($/kW-Month)
I = Gross investment in peaking facilities ($)
LFCC = 16.3%, levelized fixed capacity charge
C1 = Peaking facilities rated production capability
(kW), as
determined by Section 4.2 of this Manual
MCWF = Monthly Capacity Worth Factor for the applicable
month.
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The AGENT may periodically re-evaluate the monthly capacity worth factors based upon evaluations of system reliability. The governing MCWFs will be included in the Informational Schedules submitted in accordance with ARTICLE VI of the Contract.
For purposes of (ii), the monthly charge of each OPERATING COMPANY for purchased equivalent resources will be the annual capacity rate ($/kW-Year) paid for such purchased equivalent resources, multiplied by the applicable MCWF.
For purposes of (iii), the monthly capacity rate will be the weighted system average so determined, multiplied by the applicable MCWF.
Section 5.3 - Monthly Capacity Rate To Be Adjusted For Production Resource Change: If peaking facilities or purchased equivalent resources of an OPERATING COMPANY, approved by the Operating Committee, are to be in commercial operation or available for scheduling by the 15th day of a particular month, the budgeted investment cost or projected contract price will be used in the determination of the monthly capacity rate for such OPERATING COMPANY for that and subsequent months of the calendar year. If such facilities or resources are not placed in commercial operation or available for scheduling by the 15th day of such month, the monthly capacity charge for the previous month will remain
Southern Company Services, Inc. Original Sheet No. 57 First Revised Rate Schedule FERC Number 138
in effect until the month in which the facilities or resources are declared to be in commercial operation or available for scheduling on or before the 15th day.
ARTICLE VI
RATE FOR TIE-LINE LOAD CONTROL AND
FREQUENCY REGULATION BY HYDRO FACILITIES
Section 6.1 - Provision for Hydro Regulation Energy Losses: Because of energy losses from hydro regulation, the OPERATING COMPANIES supplying this service are deprived of hydro energy. To distribute equitably this loss of energy among the OPERATING COMPANIES in accordance with size of loads regulated and to compensate the OPERATING COMPANIES for regulating services rendered, adjustments in billing determinations are necessary. Hydro energy losses actually incurred by regulating OPERATING COMPANIES during each day are replaced by the Pool at zero cost, and the AGENT allocates such energy losses to all OPERATING COMPANIES in accordance with Peak-Period Load Ratios. Energy lost during high-flow periods is replaced during the period in which such losses occur, and energy lost from poorer efficiencies during normal and low-flow periods is replaced during the 14-hour peak period since hydro energy so lost could have been retained in storage and generated during this period.
Section 6.2 - Provision for Increases in Cost Due to Hydro Regulation: Payments are made to hydro regulating OPERATING COMPANIES for each hour of such regulation for the
Southern Company Services, Inc. Original Sheet No. 58 First Revised Rate Schedule FERC Number 138
increase in operating and maintenance expenditures for governor mechanisms and water turbine parts, and these expenses are allocated to all OPERATING COMPANIES in accordance with Peak-Period Load Ratios. Such payments are calculated using actual expenses incurred through the last calendar year available, adjusted to current-year dollars, for the cost of labor, engineering and supervision, and materials and supplies in the following FERC Accounts: 544-10, Generator and Exciters; 544-20, Hydraulic Turbines and Settings; 544-40, Governors and Control Apparatus; and 544-50, Powerhouse Remote Control Equipment. The basis for hourly payments is the difference in the average hourly costs for regulating plants and non-regulating plants, expressed in the following formula:
Hourly Charge = [MCW - (MCWO/HWO) x MCWH]/HOR
Where:
MCW = Summation of costs for regulating plants
MCWO = Summation of costs for non-regulating plants
HWO = Summation of hours for non-regulating plants
MCWH = Summation of hours for regulating plants
HOR = Summation of hours in the regulating mode for
regulating plants
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The regulating OPERATING COMPANIES shall supply the AGENT an hourly statement
Southern Company Services, Inc. Original Sheet No. 59 First Revised Rate Schedule FERC Number 138
of energy losses incurred in providing hydro regulating services. Such statement should include sufficient detail to permit review and verification by the AGENT. Data supporting energy loss determination and dollar allowance for increased operating and maintenance expenditures of hydraulic equipment shall be presented from time to time to the Operating Committee for review.
Section 6.3 - Regulation by Pumped Storage Hydro Projects: It is understood that pumped storage hydro projects owned by the OPERATING COMPANIES may also be used for regulation of the integrated electric system. In such event, the hourly charge for such regulation will be the same charge derived under the formula contained in Section 7.2 hereof.
Section 6.4 - Provision for Increases in Cost Due to Hydro Scheduling:
Because the use of hydro resources for tie-line load control and frequency
regulation does not allow the hydro energy to be scheduled in the most cost
effective manner, less economic gains are achieved than would have been if
the hydro energy had been used to displace only the highest cost other
energy sources. The difference in actual displacement costs represents the
value of the lost economic opportunity by the owning OPERATING COMPANY by
such use of hydro energy, or the costs of providing higher cost energy. The
AGENT shall allocate such costs to all the OPERATING COMPANIES in
accordance with Peak-Period Load Ratios.
[END OF MANUAL]
Southern Company Services, Inc. First Revised Sheet No. 60 First Revised Rate Schedule FERC Number 138 superseding Original Sheet No. 60
ADDENDUM TO THE SOUTHERN COMPANY
SYSTEM INTERCOMPANY INTERCHANGE CONTRACT
In a transmittal dated February 18, 2000, SCSI described the formation of a new Operating Company ("NewCo", subsequently named "Southern Power Company") that, upon requisite regulatory approval from the Securities and Exchange Commission, will aggregate into one business unit the same type of wholesale resources that are currently being developed on a piecemeal basis by the existing Operating Companies. The new company will be a full participant in the IIC, and will share in the benefits and burdens under that arrangement like any other Operating Company. By letter dated April 14, 2000, the Staff asked for more information concerning the kinds of transactions that NewCo will undertake, the role that NewCo will have in relation to the other Operating Companies, and the effect of NewCo on the cost allocation provisions in the IIC.
As explained in SCSI's supplemental filing letter dated May 8, 2000, NewCo is being created to simplify resource planning and expedite decision making among decentralized management groups. To this end, NewCo is expected to develop and build new wholesale generation that would otherwise have been developed by one or more of the existing Operating Companies.1 This new generation can be used to meet the needs of wholesale customers in the Southeast through bilateral arrangements and will also be made available to the Pool for reserve
1 The current plan is for NewCo to develop and build new generation, but if NewCo should later seek to be the owner of existing generation, the transfer of any such existing units would be subject to all requisite regulatory approvals.
Southern Company Services, Inc. Substitute Original Sheet No. 61 First Revised Rate Schedule FERC Number 138 superseding Original Sheet No. 61
Issued by: Charles D. McCrary, Executive Vice Pres. Effective: April 18, 2000 Issued on: October 2, 2000 Filed to comply with order of the Federal Energy Regulatory Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000, 91 FERC P. 61,259 and letter order issued September 27, 2000 sharing and opportunity transactions (just as the other Operating Companies do today). NewCo will not be engaged in any marketing activities. Rather, SCSI will continue to perform wholesale marketing functions in its capacity as agent for the Operating Companies of the Southern electric system (including NewCo). While NewCo's units will be marketed by SCSI for long term bilateral sale in the wholesale market, NewCo will not engage in transactions with the other Operating Companies (other than those under the IIC) except to the extent that requisite regulatory approvals are obtained from state retail commissions and/or this Commission.
As noted in the Staff's letter, NewCo is being added as a full participant in the IIC "to share the benefits and burdens like any other Operating Company." This means that NewCo's units will be subject to the Pool's operating, dispatch and reserve requirements. NewCo will also participate in opportunity sales transactions on a PPLR basis.2 In like manner, NewCo will bear its pro rata share of Pool purchases, as determined through the PPLR calculation. In short, NewCo will share in the benefits and burdens of the IIC and will participate in the wholesale markets -- just as if its generation had been developed and built by one of the existing Operating Companies.
2 Under the IIC, the Pool can engage in off-system opportunity transactions that are actually served out of the least expensive generation then available in the Pool. The Operating Companies whose units actually provide the generation are compensated for the variable cost of the energy provided, with any resulting "profits" to the Pool being shared among all IIC participants. In other words, only the Pool can engage in opportunity transactions of a transient nature in the shorter term markets (hourly, day ahead and week ahead) out of pool resources; neither NewCo nor any of the other Operating Companies can use such generation solely for its own benefit in those wholesale opportunity markets.
Issued by: Charles D. McCrary, Executive Vice-Pres. Effective: April 18, 2000
Issued on: June 20, 2000
Filed to comply with order of the Federal Energy Regulatory
Commission, Docket Nos. ER00-1655-000 and ER00-1655-001, issued June 15, 2000,
91 FERCP. 61,259
Exhibit 10.6
OPERATING AGREEMENT
between
ALABAMA POWER COMPANY
and
SOUTHERN POWER COMPANY
TABLE OF CONTENTS
ARTICLE 1 Definitions.............................................................................................2
-----------
1.1 "Fuel Services".............................................................................2
1.2 "Generation Facility".......................................................................2
1.3 "Governmental Authority"....................................................................3
1.4 "Legal Requirements"........................................................................3
1.5 "New Investment Projects"...................................................................3
1.6 "New Investment Services"...................................................................4
1.7 "Operating Services"........................................................................4
1.8 "Operation and Maintenance Services"........................................................4
1.9 "Prudent Utility Practice"..................................................................5
ARTICLE 2 [OPCO]'s Authority and Responsibility with Respect to Operation of the
-----------------------------------------------------------------------
Generation Facilities...........................................................................5
---------------------
2.1 Responsibility of [OPCO]....................................................................5
2.2 Authorization of [OPCO].....................................................................6
2.2.1. Plant Operation and Maintenance.................................................7
(a) Staff and Personnel.......................................................7
(b) Licenses and Permits for Generation Facilities............................8
(c) Reductions in Capacity and Outages at Each Plant..........................8
(d) Events About Which Owner is to be Notified................................9
(e) No Changes to Transmission or Distribution Facilities.....................9
(f) Operation in Accordance with Operating Plan...............................9
(g) Point of Interconnection.................................................10
2.2.2. New Investment Services........................................................10
2.2.3. Fuel Services..................................................................10
2.3 Retirement, Removal or Addition of Generating Facilities...................................10
2.4 Authority to Act as Agent for Owner and Right of Third Parties to Rely on
Agency................................................................................12
2.5 Assignment of Contracts; Liability and Allocation of Risks.................................12
2.5.1 Contracts with Third Parties....................................................12
2.5.2 Acceptance of Contract Provisions...............................................13
2.5.3 Enforcement of Rights Under Contracts...........................................13
2.6 Cooperation of Owner.......................................................................14
2.7 [OPCO] Interface Procedure.................................................................15
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2.8 Plans and Budgets..........................................................................15
2.8.1 Strategic Plan..................................................................16
(a) Five-year Operating and Planned Outage Schedule..........................16
(b) Availability and Performance Goals.......................................16
(c) Planned Mandatory Projects...............................................16
(d) Planned Improvement Projects.............................................17
(e) Authorized Level of Staffing.............................................17
2.8.2 Fuel Plan.......................................................................18
2.8.3 Operating Budget................................................................18
2.8.4 Capital Budget..................................................................18
2.8.5 Fuel Budget.....................................................................18
2.8.6 Material Contracts..............................................................19
2.9 Information and Reports....................................................................19
2.9.1 Generation Facility Data........................................................19
2.9.2 Generation Facility Budget Reports..............................................19
2.9.3 Generation Facility Strategic Plan Reports......................................19
2.9.4 Audit Reports...................................................................19
2.9.5 Correspondence to and from Regulatory Agencies..................................20
2.9.6 Responses to Owner Inquiries....................................................20
2.10 Plant Tours...............................................................................20
2.11 Management Audit..........................................................................20
ARTICLE 3 Entitlement to Output..................................................................................21
---------------------
3.1 Entitlement to Output......................................................................21
3.2 Determination of Output-Responsibility for Station Service and Losses......................21
ARTICLE 4 Costs, Billing, Accounting and Audit...................................................................21
------------------------------------
4.1 Cost of Operation and Maintenance..........................................................21
4.2 New Investment Costs.......................................................................22
4.3 Fuel Costs.................................................................................22
4.4 Other Costs Required by Legal Requirements.................................................23
4.5 Revision...................................................................................23
4.6 Billing....................................................................................23
4.7 Payment....................................................................................23
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4.8 General Accounting Matters.................................................................24
4.9 Right to Inspect Records...................................................................24
4.10 Disputed Invoice..........................................................................24
ARTICLE 5 Advancement of Funds...................................................................................25
--------------------
5.1 Advancement of Funds.......................................................................25
--------------------
ARTICLE 6 Taxes 25
-----
6.1 Taxes......................................................................................25
ARTICLE 7 Compliance with Provisions of Permits and Requirements of Governmental
-----------------------------------------------------------------------
Agencies.......................................................................................25
--------
7.1 Compliance with Provisions of Permits and Requirements of Governmental
Agencies..............................................................................25
ARTICLE 8 Confidentiality of Information.........................................................................26
------------------------------
ARTICLE 9 Damage to Persons or Property; Penalties; Fines........................................................26
-----------------------------------------------
9.1 Applicability of Article...................................................................26
9.2 Absence of Warranty........................................................................27
9.3 Liabilities to Third Parties and Owner.....................................................27
9.4 Willful Misconduct.........................................................................28
9.5 Limitation of Liability....................................................................29
9.6 Severability...............................................................................30
ARTICLE 10 Insurance.............................................................................................30
---------
10.1 Parties Obligations Generally.............................................................30
10.2 Commercial Liability Insurance............................................................31
10.3 Workmen's Compensation Insurance..........................................................31
10.4 Additional Insurance......................................................................32
10.5 Waiver of Subrogation - Allocation and Payment of Premium.................................32
ARTICLE 11 Term 32
11.1 Term......................................................................................32
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ARTICLE 12 Remedies..............................................................................................33
--------
12.1 Termination...............................................................................33
ARTICLE 13 Miscellaneous.........................................................................................35
-------------
13.1 No Partnership or Joint Venture...........................................................35
13.2 Owner's Designated Representatives........................................................35
13.3 [OPCO]'s Designated Representative........................................................36
13.4 Depreciation..............................................................................36
13.5 Holidays, Business Days...................................................................36
13.6 Owner's Services to be Furnished at Cost..................................................36
13.7 Entire Agreement..........................................................................36
13.8 Amendments................................................................................37
13.9 Notices...................................................................................37
13.10 Captions.................................................................................37
13.11 Counterparts.............................................................................38
13.12 No Waiver................................................................................38
13.13 Singular and Plural......................................................................38
13.14 Third Party Beneficiaries................................................................38
13.15 Severability.............................................................................38
ARTICLE 14 Successors and Assigns................................................................................38
14.1 Successors and Assigns....................................................................39
ARTICLE 15 Governing Law.........................................................................................39
15.1 Governing Law.............................................................................39
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OPERATING AGREEMENT
BETWEEN
ALABAMA POWER COMPANY
AND
SOUTHERN POWER COMPANY
THIS AGREEMENT is made and entered into this 26th day of June 2001, to be effective as of the close of business on June 30, 2001, (the "Effective Date") by and between Alabama Power Company ("Operator") and Southern Power Company ("Owner").
W I T N E S S E T H:
WHEREAS, Operator and Owner are each a wholly-owned subsidiary of The
Southern Company ("Southern"), a registered holding company under the Public
Utility Holding Company Act of 1935 (the "1935 Act"); and
WHEREAS, Owner owns certain generation stations, plants and other
generation-related facilities within the service territory of Operator and may construct or acquire additional facilities in the future; and
WHEREAS, Owner intends to sell on the wholesale market the electric
power generated by such facilities;
and
WHEREAS, Operator owns and operates generation stations, plants and
other related generation facilities and has developed the expertise and
experience to efficiently and economically operate such facilities; and
WHEREAS, Owner believes that in order to more efficiently and economically provide for the operation, maintenance, repair, and rehabilitation of its generating stations, plants and other generation-related facilities, such activities should be conducted and coordinated by Operator; and
WHEREAS, Owner desires that Operator undertake the operation, maintenance, repair and rehabilitation of its generating stations, plants and other generation-related facilities identified on Schedule 1, subject to the receipt of any necessary regulatory approvals, and Operator has agreed to do so under the terms and conditions set forth below.
NOW THEREFORE, in consideration of these premises, the parties, intending to be legally bound, do hereby agree as follows:
ARTICLE 1
Definitions
As used herein, the following terms and phrases shall have, respectively, the following meanings:
1.1 "Fuel Services" shall mean work related to supplying and managing all necessary fuels for the Generation Facilities, including, without limitation, planning, procurement, contract administration, fuel quality assurance, administration of payables and receivables, and all activities relating to procurement, transportation, installation, monitoring, repairing, storage, reprocessing and disposal of fuel for the Generation Facilities, related materials and waste products.
1.2 "Generation Facility" shall mean, and refer to, respectively, each of the fossil fuel, hydro-electric and pumped storage generation stations, plants and other generation-related facilities owned by Owner, located within the service territory of Operator and identified on Schedule 1 attached hereto and incorporated herein; provided, however, that should activities concerning a Generation Facility be undertaken with respect to one unit of such station, plant or facility, the phrase "Generation Facility" shall mean and refer to that unit and related common facilities. Generation stations, plants and other
generation-related facilities may be removed from or added to the definition of "Generation Facilities" as contemplated in Section 2.3.
1.3 "Governmental Authority" shall mean any local, state, regional or federal legislative, regulatory, administrative, legal, judicial or executive agency, commission, department or other entity and any person acting on behalf of any such entity.
1.4 "Legal Requirements" shall mean all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, written agreements, regulations and requirements of or issued by every Governmental Authority having jurisdiction over the matter in question, whether federal, regional, state or local, which may be applicable to Operator, or to Owner, or to any Generation Facility or any of the real or personal property comprising the Generation Facilities, or to services to be provided to Owner hereunder, or the use, occupancy, possession, operation, maintenance, construction, retirement, acquisition, installation, alteration, replacement, reconstruction or disposal of any one or more of the Generation Facilities or any part thereof.
1.5 "New Investment Projects" shall mean projects for the Generation Facilities relating to the planning, design, licensing, acquisition, construction, completion, renewal, improvement, addition, repair, replacement or enlargement of any Unit of Property (as described in the Federal Energy Regulatory Commission's "Units of Property for Use in Accounting for Additions and Retirements of Electric Plants"), under circumstances where expenditures on or for such projects are to be capitalized in accordance with the Electric Plant Instructions of the Uniform System of Accounts prescribed for Class A and B utilities by the Federal Energy Regulatory Commission.
1.6 "New Investment Services" shall mean work on or for any New Investment Project, including, but not limited to, any planning, design, engineering, labor, procurement of materials and supplies, materials management, quality assurance, training, security, and environmental protection, together with maintaining or obtaining licenses and regulatory approvals related thereto, governmental affairs or regulatory relationships, administration of payables and receivables, and all other activity required for the safe and reliable operation of the New Investment Project and/or the relevant Generation Facility or that may be required to comply with Legal Requirements.
1.7 "Operating Services" shall mean Fuel Services, New Investment Services, and Operation and Maintenance Services.
1.8 "Operation and Maintenance Services" shall mean work for Owner relating to the possession, management, control, start-up, operation, availability, production of energy, maintenance, improvement, renewal, replacement, and shutdown, including, but not limited to, any planning, design, engineering, labor, procurement of materials and supplies, materials management, quality assurance, training, security, and environmental protection, together with maintaining or obtaining licenses and regulatory approvals related thereto, governmental affairs or regulatory relationships, administration of payables and receivables, and all other activity required for the safe and reliable operation of the Generation Facilities or that may be required to comply with Legal Requirements.
1.9 "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 the exercise of reasonable judgment in light of
the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable 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 the requirements of governmental agencies of competent jurisdiction.
ARTICLE 2
Operator's Authority and Responsibility with Respect to Operation of the Generation Facilities
2.1 Responsibility of Operator. Operator, consistent with such written guidelines as may be jointly developed with Owner, shall provide and be responsible for (i) the operation and maintenance of the Generation Facilities in a safe and reliable manner in accordance with all Legal Requirements and with Prudent Utility Practice, (ii) the generation of power and energy at the Generation Facilities to the credit of and for the benefit of the Owner as economically as is reasonably practicable, (iii) the repair and rehabilitation of the Generation Facilities as may, from time to time, be necessary, appropriate or reasonably practicable and advisable and (iv) as and to the extent deemed by Owner to be necessary or appropriate, the construction of new or additional non-nuclear generation facilities for Owner. Operator also shall make such further changes and additions to and retirements from the Generation Facilities in its service territory as shall be consistent with such operation, maintenance, repair and rehabilitation. Such services and construction may be provided by Operator through its own personnel or, in part, by others, including without limitation affiliate personnel, under contractual or other arrangements, including the use of Owner's personnel under the direction and supervision of Operator.
2.2 Authorization of Operator. In furtherance of the foregoing, Owner authorizes Operator, and Operator agrees to provide, Operation and Maintenance Services and Fuel Services for the Generation Facilities and, as authorized herein, New Investment Services. Owner hereby authorizes Operator to take all actions that, in the discretion and judgment of Operator consistent with Prudent Utility Practice, are deemed necessary or advisable in providing these Operating Services. Owner hereby authorizes Operator, as operator, to take any and all action necessary to comply with all Legal Requirements and to take all action necessary to fulfill any requirements for the safe and reliable operation of the Generation Facilities. The authority vested in Operator shall include, but not be limited to, the authority to incur costs, liabilities, and obligations, to purchase equipment, materials and supplies, to perform and arrange for performance of work, to select and retain contractors, engineers, consultants, architect-engineers, attorneys, accountants and other firms or persons, and to take all actions in connection with the Generation Facilities that are within the scope set forth above. Without limiting the foregoing, the authority vested in Operator shall include the following:
2.2.1. Plant Operation and Maintenance. Operator shall have the authority to possess, operate and maintain the Generation Facilities in accordance with policies and decisions established and made by Owner. Subject to the provisions of this Agreement, Operator shall in accordance with Prudent Utility Practice endeavor to achieve reliable performance of each Generation Facility, to maximize the capacity and availability factors and minimize forced outage rates and durations at each Generation Facility and to produce busbar costs as low as reasonably possible.
(a) Staff and Personnel. Subject to the provisions of
Section 2.8.1 respecting Strategic Plans and approval of Owner or
Owner's designated representative, Operator shall have the
authority to select, hire, compensate, control and discharge
(when deemed appropriate by Operator) those persons, firms or
corporations which are required to satisfy its obligations under
this Agreement. Operator shall keep Owner informed of any plans
to change either the Operator officer responsible for any of
Owner's Generation Facilities or the Operator manager of such
Generation Facility. Any input from Owner on such plans will be
considered by Operator, but Operator's decisions on personnel
matters shall be final. Operator shall also consider any positive
or negative comments from Owner regarding the performance of any
of Operator's officers or managers, but management decisions on
whether to take personnel or salary administration actions shall
be made solely by Operator.
(b) Licenses and Permits for Generation Facilities. Operator is authorized to obtain and maintain compliance with all licenses, approvals and permits for each Generation Facility from Governmental Authorities required for operation and maintenance of the Generation Facility. Upon mutual agreement of Operator and Owner, or as required by Legal Requirements, Operator will be designated in such licenses, approvals and permits as having operating responsibility for the Generation Facilities.
(c) Reductions in Capacity and Outages at Each Plant. Owner recognizes that, in the course of operating the Generation Facilities, it may be necessary to decide whether to operate the Generation Facilities at less than full power or to terminate or
suspend such operations altogether in light of technical, legal, regulatory, safety, economic, power system, testing, or other considerations. Operator recognizes the need to minimize periods of reduced capacity or outages at the Generation Facilities that could have an adverse effect on Owner's power supply system or its cost of providing reliable electric service. Operator will endeavor to consult with Owner concerning any operating conditions which are expected to result in capacity reductions of fifty percent (50%) or more at a Generation Facility or outages at a unit of any Generation Facility, and Operator will only take those actions when they determine they are prudent and necessary from an operating standpoint.
(d) Events About Which Owner is to be Notified. In the event of an occurrence at a Generation Facility of any unplanned outage, any significant extension of a planned outage, any unplanned reduction in the capacity of a unit for an extended period, or any event at a Generation Facility or any regulatory action which is likely to attract substantial media attention or to affect substantially the operation of the Generation Facility, Operator shall inform Owner as soon as practical, or in accordance with guidelines acceptable to Owner, after the occurrence of such event.
(e) No Changes to Transmission or Distribution Facilities. In order that the safe operation of the Generation Facilities is assured, Owner shall not effect any operating or physical changes to its transmission and distribution facilities which may adversely affect the safe operation of the Generation Facilities without prior consultation with and the concurrence of Operator.
(f) Operation in Accordance with Operating Plan. Each Generation Facility shall be operated in accordance with Prudent Utility Practice and pursuant to an operating plan developed and updated regularly by Operator and Owner and in accordance with Owner's obligations, if any, under any interconnection agreements, power pooling arrangements or other applicable arrangements, as such obligations may presently exist or may hereafter be modified from time to time, including the obligations, if any, of Owner to maintain the design integrity of each Generation Facility under the requirements of the Southeast Electric Reliability Council and the National Electric Reliability Council.
(g) Point of Interconnection. The point of interconnection between any Generation Facility and Operator's or a third party's transmission system and the extent of Operator's operational responsibility therefor shall be determined from time to time by Owner and Operator.
2.2.2. New Investment Services. Operator shall have responsibility for all New Investment Services. Operator is authorized to enter into such arrangements as it deems appropriate for the Generation Facilities and to make all decisions regarding the completion of New Investment Projects that were contemplated in the construction budgets for the Generation Facilities as of this acquisition by Owner or that have been approved and provided for in an Operating Budget or Capital Budget under the procedures contemplated in Section 2.8 and as applicable Section 2.3.3. All equipment, materials and supplies included in such New Investment Projects for each Generation Facility shall be acquired in the name of Owner and shall be the property of Owner.
2.2.3. Fuel Services. Operator shall have responsibility for Fuel Services. Operator is authorized to enter into such arrangements as it deems appropriate and to make all decisions regarding fuel and fuel services.
2.3 Retirement, Removal or Addition of Generating Facilities. Owner shall retain the exclusive authority (i) to determine when the economic life of the Generation Facility has ended and thereupon to retire the Generation Facility from commercial operation or (ii) to remove a particular generation station, plant or other generation-related Facility from the provisions of this Agreement and to arrange for other means for its operation and maintenance. Owner and Operator may agree to add new generation stations, plants or other generation-related facilities of Owner within Operator's service territory to this Agreement.
2.3.1 Retirement. Upon Owner informing Operator of any retirement or removal of a Generation Facility, Operator shall take such action as may be necessary to reduce operation of the Generation Facility or to terminate operation and place the Generation Facility or unit in a safe shutdown condition. Owner retains the authority to determine whether any to-be-retired Generation Facility should be placed in standby status or operated at reduced output for economic reasons or Owner's need for the capacity or energy of the Generation Facility. Operator shall also take such steps as may be necessary to decommission and dispose of and thereafter maintain, to the extent necessary, any to-be-retired Generation Facility or any unit thereof designated for retirement.
2.3.2 Removal. Upon Owner informing Operator of any removal of a Generation Facility from this Agreement, Operator shall take such action as may be necessary to transfer operational control of such Generation Facility, and to comply with the provisions of Sections 12.1.2 and 12.1.3,
which shall also apply. Upon the transfer of operational control of a Generation Facility as contemplated above and in Sections 12.1.2 and 12.1.3, such generation station, plant or other generation-related facility shall cease to be a "Generation Facility."
2.3.3 Addition. Upon Owner and Operator agreeing to the addition of a generation station, plant or other generation-related facility to this Agreement, such generation station, plant or other generation-related facility shall be a "Generation Facility" and shall be subject to all of the provisions of this Agreement.
2.4 Authority to Act as Agent for Owner and Right of Third Parties to Rely on Agency. In the conduct of the authority vested in Operator in Sections 2.1 and 2.2 above, Owner hereby designates and authorizes Operator to act as its attorney-in-fact and agent for such purposes, including, without limitation, authority to enter into and administer contracts on behalf of Owner for procurement of material, equipment or services and authority to administer contracts entered into by Owner with respect to the Generation Facilities. As relates to all third parties, the designation of Operator as agent shall be binding on Owner. Operator accepts such appointment as agent of Owner. Upon request from Operator, Owner shall provide written confirmation of this agency relationship to third parties.
2.5 Assignment of Contracts; Liability and Allocation of Risks.
2.5.1 Contracts with Third Parties. Upon mutual agreement of Operator and Owner, Owner shall assign and transfer to Operator those contracts with third parties relating to the operation of each Generation Facility. Prior to assignment and transfer of such contracts, Operator may request Owner to appoint Operator as agent for administration of any such contracts. After receipt of any such assignment, transfer or authorization to administer, Operator shall have the exclusive responsibility for the administration and enforcement thereof in accordance with the terms thereof.
2.5.2 Acceptance of Contract Provisions. To the extent permitted
pursuant to Section 2.8, Operator in such contracts with third parties may
agree to such matters as limitations on the liability of contractors for
work performed or materials furnished, restrictions on warranties,
agreements to indemnify the contractors from liability, requirements that
Owner be bound by financial protection provisions, waivers, releases,
indemnifications, limitations of liability and further transfers or
assignments under such contracts, and other similar provisions (each
contract with a third party that contains any of the provisions, terms or
other effects described in this sentence, shall be referred to as a
"Material Contract"). Owner waives any claims against Operator for entering
into Material Contracts approved pursuant to the process provided in
Section 2.8. Owner also agrees to be bound by the requirements for
financial protection, waivers, releases, indemnification, limitation of
liability and further transfers or assignments that bind Operator as they
now exist in existing Material Contracts or as they may exist in the future
with respect to Material Contracts approved or entered into pursuant to
such process provided in Section 2.8.
2.5.3 Enforcement of Rights Under Contracts. Owner covenants that, Owner will notify Operator in writing in advance if Owner intends to threaten suit or bring suit against third parties or otherwise make any claim under any contract or arrangement relating to any of the Generation Facilities or Operating Services being provided by Operator. If Owner desires for Operator to threaten or bring suit or otherwise to make any claim, or desires that such action contemplated by Operator shall not be
taken, Owner shall, by written notice to Operator, request it so to act or refrain from acting. Upon Operator's receipt of a notice under one of the previous two sentences, Owner and Operator shall arrange for consultation within ten (10) working days thereafter on the questions raised, or such lesser period of time as Operator or Owner shall specify in the light of circumstances requiring a more expeditious determination. Neither Operator nor Owner shall make its final determination whether it will or will not bring any such suit or make any such claim until after such consultation; however, the determination by Operator regarding the action that it will or will not take, shall be final and binding (irrespective of what Owner decides to do), and the decision of Owner regarding the action that it will or will not take will also be final and binding (irrespective of what Operator decides to do).
2.6 Cooperation of Owner. Subject to the requirements and procedures of Sections 2.5.2 and 2.8, and in the case of New Investment Services Section 2.2.2 and as applicable Section 2.3.3, Owner agrees that it will take all necessary action in a prompt manner to execute any agreements with respect to the provision of Operation and Maintenance Services and Fuel Services for the Generation Facilities, and New Investment Services, as and when requested by Operator to permit Operator to carry out its authority and responsibilities pursuant to this Article 2. Operator may request Owner to furnish services or assistance, materials, supplies, licenses, offices and real property rights including, without limitation, power supply services, transmission and distribution system repair, replacement, construction and maintenance, accounting services, maintenance personnel, security services, and other personnel, services or assistance as Operator may require with respect to any one or more Generation Facilities. Any such items which Owner agrees to furnish to Operator shall be provided at cost.
2.7 Operator Interface Procedure. Operator and Owner will jointly establish and maintain an Operator Interface Procedure to govern the working relationships between the two companies. The Operator Interface Procedure shall contain procedures by which Owner can maintain an overview of Generation Facility operations, procedures for administering this Operating Agreement through designated executive points of contact, and procedures to define interfaces for support services and assistance provided by Owner pursuant to Section 2.6 hereof.
2.8 Plans and Budgets. Strategic Plans, Fuel Plans, Operating Budgets, Capital Budgets, Fuel Budgets and Material Contracts shall be submitted to Owner by Operator as provided in Paragraphs 2.8.1 through 2.8.5 below. The contents of these plans, budgets and Material Contracts shall conform to the requirements and guidelines established pursuant to the Operator Interface Procedure. Owner shall approve or disapprove each such plan, budget or Material Contract within thirty (30) days after its submittal. In the event Owner disapproves a plan, budget or Material Contract, Owner shall inform Operator of the basis for such disapproval. Operator shall then modify such plan, budget or Material Contracts as required to make it acceptable to Owner and shall resubmit it for approval; provided, however, that in no event shall Operator be required to submit plans, budgets or Material Contracts which would cause Operator to operate a Generation Facility in violation of any Legal Requirements or in a manner that fails to provide reasonable assurance of health and safety to employees. Operator shall attempt to provide Operating Services in accordance with such approved plans and within the aggregate annual amount of such budgets. Notwithstanding the foregoing, Operator makes no representation, warranty or promise of any kind as to accuracy of any such plan or budget, or that any attempt referred to in the preceding sentence will be successful, and in no event shall Owner be relieved of its responsibility to pay costs incurred by Operator as required in Article 4 hereof.
2.8.1 Strategic Plan. A Strategic Plan for each Generating Facility shall be submitted to Owner by Operator no later than July 1 of each year. Owner may separately approve or disapprove individual projects which are classified as planned improvement projects pursuant to Paragraph (d) below, but shall otherwise approve or disapprove each Strategic Plan in its entirety. Strategic Plans may cover one or more Generation Facilities. Each Strategic Plan shall identify key assumptions to be used in the preparation of budgets and forecasts, including:
(a) Five-year Operating and Planned Outage Schedule. This section shall identify the scheduled operating cycles and planned outages for maintenance and other work during the succeeding five years. The schedule shall describe in reasonable detail the time and duration of each planned outage and the maintenance and other work planned to be performed during such outage.
(b) Availability and Performance Goals. This section shall contain overall performance goals which have been established by Operator for the Generation Facility for the current year.
(c) Planned Mandatory Projects. A mandatory project is any project with a total estimated cost in excess of one million dollars ($1,000,000) or such other amount as Owner may establish, including but not limited to any upgrade, replacement, addition or program, which is needed in order to support normal operations in accordance with Prudent Utility Practice or in order to comply with regulatory or safety requirements. The associated schedule and estimated annual funding requirements shall be included.
(d) Planned Improvement Projects. An improvement project is any project with a total estimated cost in excess of one million dollars ($1,000,000) or such other amount as Owner may establish, including but not limited to any upgrade, replacement, addition, or program, which is not mandatory as defined in (c) above. Examples of such projects include efforts to improve performance of a Generation Facility or conditions, such as improved Generation Facility capacity or efficiency, enhanced working conditions, and appearance. The associated schedule and estimated annual funding requirements shall be included.
(e) Authorized Level of Staffing. This section shall provide the current authorized number of permanent staff positions which are assigned to the Generation Facility and its offsite support. Such number of positions shall be broken down by functional areas (e.g., operations, maintenance, administrative, technical, corporate support), shall include positions which are located either on-site or off-site, and shall include all positions regardless of the actual employer. This section shall also show any estimates of planned changes in such authorized number of positions over the succeeding five years.
2.8.2 Fuel Plan. A five-year Fuel Plan for each Generation Facility shall be submitted to Owner by September 15 of each year. Owner shall approve or disapprove each Fuel Plan within thirty days after submittal. Each Fuel Plan shall describe in reasonable detail plans for procurement and utilization of fuel for the Generation Facility and information on disposal of waste products. A Fuel Plan may cover one or more Generation Facilities.
2.8.3 Operating Budget. By September 1 of each year, Operator shall submit to Owner a written Operating Budget showing the estimated costs of operating and maintaining Owner's Generation Facilities during the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Each budget shall be supported by detail reasonably adequate for the purpose of review by Owner.
2.8.4 Capital Budget. By September 1 of each year, Operator shall submit to Owner a written Capital Budget estimate of capital expenditures for each of Owner's Generation Facilities for the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Each budget shall be supported by detail reasonably adequate for the purpose of review by Owner.
2.8.5 Fuel Budget. By September 15 of each year, Operator shall submit to Owner a written Fuel Budget estimate of fuel expenditures for each of Owner's Generation Facilities for the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Each budget shall be supported by detail reasonably adequate for the purpose of review by Owner.
2.8.6 Material Contracts. Reasonably in advance of the time it plans to enter into a Material Contract with a third party, Operator shall submit to Owner a draft of such Material Contract. Each draft Material Contract will be supported with all attachments and sufficient information for Owner to evaluate the provisions that render such draft a Material Contract.
2.9 Information and Reports. Operator shall furnish to Owner the following
information and reports:
2.9.1 Generation Facility Data. At the time of submittal of each Strategic Plan, Operator shall also furnish a comparison of the performance of each Generation Facility with other generating facilities using performance indicators in common use in the electric utility industry or as may be specified by Owner.
2.9.2 Generation Facility Budget Reports. Operator shall furnish monthly data showing actual costs for operation and maintenance, capital expenditures, and direct fuel expenditures with comparisons to the respective budgets. This report will normally be provided by the end of the succeeding month.
2.9.3 Generation Facility Strategic Plan Reports. At least quarterly, Operator shall furnish data showing actual performance for each unit at each Generation Facility compared to goals contained in the Strategic Plan for the Generation Facility.
2.9.4 Audit Reports. Operator shall make available for review by Owner copies of financial or accounting reports concerning Owner's Generation Facilities containing the results of audits by or for Southern Company Services, Inc., or any affiliate or subsidiary of The Southern Company, or by any regulatory agency.
2.9.5 Correspondence to and from Regulatory Agencies. At the request of Owner, Operator shall furnish to Owner copies of correspondence to and from regulatory agencies concerning one or more of Owner's Generation Facilities.
2.9.6 Responses to Owner Inquiries. In addition to the obligation of Operator to provide the information as explicitly required herein, Operator shall respond to reasonable written or verbal requests from Owner for information not otherwise specifically provided for herein.
2.10 Plant Tours. Owner shall have the right to have its representatives and guests visit its Generation Facilities, to tour the facilities, and observe activities at the Generation Facilities; provided that such visits or tours will not interfere with the operation of the Generation Facilities, or the security or safety of such facilities. Owner shall assure that its representatives and guests comply with all applicable rules and regulations in effect at a Generation Facility whether imposed by Governmental Authority or by Operator.
2.11 Management Audit. Owner shall have the right to conduct a management audit, at its own cost, of Operator's performance hereunder either by Owner officers and employees or through their duly authorized agents or representatives. Operator shall cooperate with Owner in the conducting of such audit and, subject to applicable Legal Requirements and the requirements of vendors, give Owner reasonable access to all contracts, records and other documents relating to the Generating Facilities. Following any such management audit, Operator shall respond to the findings of such audit if requested to do so by Owner. Management audits by Owner shall be scheduled so as to minimize the number of audits required and so as to not to exceed one management audit in any consecutive twelve-month period.
ARTICLE 3
Entitlement to Output
3.1 Entitlement to Output. Owner shall be entitled to all of the output from its Generation Facilities at the time generation in such units occurs. Subject to Operator's primary responsibility for safe operation of the Generation Facilities, Owner shall have the right to schedule and dispatch the capacity and energy needed from the facilities, and Operator shall use its best efforts to honor such schedule.
3.2 Determination of Output-Responsibility for Station Service and Losses. Output of each Generation Facility shall be the gross generation of the facility, less station service requirements, and less adjustments for losses experienced. Owner shall be responsible for providing all off-site electric power required at the Generation Facility whenever the station service and losses exceed the gross generation of the Generation Facility.
ARTICLE 4
Costs, Billing, Accounting and Audit
4.1......Cost of Operation and
Maintenance. Owner shall pay to Operator all direct costs incurred by Operator
relating to Operation and Maintenance Services for the Generation Facilities
(including all costs identified in Section 9.3 and any costs incurred by
Operator as a consequence of termination hereunder). Such costs shall include
all payments made to Operator employees (including payment of wages, salaries,
workmen's compensation and other benefits) relating to work performed by such
employees while on the premises of any of the Generation Facilities. Operator
and Owner acknowledge that all such payments made to Operator employees,
relating to work performed by such employees while on Generation Facility
premises, are effectively made by Owner, since Owner is responsible for such
payments and they are made from funds placed on deposit by Owner for those
purposes. Owner shall also pay to Operator the Generation Facility allocated
share of other of Operator's costs. Allocation of costs to Operation and
Maintenance Services shall be performed in accordance with the methodology
agreed-upon from time to time by Owner and Operator.
4.2 New Investment Costs. Owner shall pay to Operator all costs incurred by Operator relating to New Investment Services for the Generation Facilities, including obligations incurred to third parties, direct costs of Operator associated with such New Investment Services and the Generation Facilities' allocated share of Operator's other costs associated with such activities. Allocation of costs to New Investment Services shall be performed in accordance with the methodology agreed-upon from time to time by Owner and Operator pursuant to Section 4.1 hereof.
4.3 Fuel Costs. Owner shall pay to Operator all direct costs incurred by Operator relating to Fuel Services for the Generation Facilities and the Generation Facilities allocated share of other of Operator's costs. Allocation of costs to Fuel Costs shall be performed in accordance with the methodology agreed-upon from time to time by Owner and Operator pursuant to Section 4.1 hereof.
4.4 Other Costs Required by Legal Requirements. Owner shall pay to Operator all direct costs incurred by Operator and the Generation Facilities' allocated share of other of Operator's costs associated with any other activities of Operator relative to the Generation Facilities that are required to meet Legal Requirements.
4.5 Revision. Should Operator undertake to perform services for any other affiliated company or for any non-affiliated company where the cost to Operator of providing such services affects the cost of Operator to provide Operating Services pursuant to this Agreement, Operator shall discuss the matter and reach agreement with Owner respecting the need for or the terms of any amendment of this Section 4 as may be appropriate to assure the continued fairness of the determination of the responsibility for costs payable to Operator hereunder.
4.6 Billing. Operator shall render to Owner a monthly billing statement,
with detailed data in a computer readable form as reasonably requested by Owner,
no later than the fifth (5th) day of each month detailing costs incurred for
Operation and Maintenance Services during the preceding month pursuant to
Section 4.1; costs incurred for New Investment Services during the preceding
month pursuant to Section 4.2; costs incurred for Fuel Services during the
preceding month pursuant to Section 4.3; and the other costs incurred during the
preceding month pursuant to Section 4.4.
4.7 Payment. The obligation to make payments as specified herein shall continue notwithstanding the capability (or lack of capability) of the Generation Facilities to produce power for any reason.
4.8 General Accounting Matters. Determinations by Operator on all accounting matters related to the transactions contemplated by this Agreement will be in accordance with Generally Accepted Accounting Principles and the Securities and Exchange Commission's Uniform System of Accounts for Mutual and Subsidiary Service Companies, utilizing the accrual method of accounting, unless otherwise specifically provided in this Agreement or mutually agreed by Operator and Owner or as prescribed by other regulatory agencies having jurisdiction, as in effect from time to time.
4.9 Right to Inspect Records. During normal business hours and subject to conditions consistent with the conduct by Operator of its regular business affairs and responsibilities, Operator will provide Owner or any auditor utilized by Owner and reasonably acceptable to Operator, or any nationally
recognized accounting firm retained by Owner, access to Operator's books, records, and other documents directly related to the performance of Operator's obligations under this Agreement and, upon request, copies thereof, which pertain to (a) costs applicable to Operation and Maintenance Services, New Investment Services, Fuel Services, and Other Costs for Owner's Generation Facilities to the extent necessary to enable Owner to verify the costs which have been billed to Owner pursuant to the provisions of this Agreement; (b) compliance with all environmental Legal Requirements; and (c) matters relating to the design, construction and operation and retirement of Owner's Generation Facilities in proceedings before any Governmental Authority.
4.10 Disputed Invoice. In the event Owner shall question any statement
rendered by Operator in accordance with the provisions of Section 4.1 hereof,
Owner shall nevertheless promptly pay amounts called for by Operator under
Section 4.1 hereof but such payment shall not be deemed to prevent Owner from
claiming an adjustment of any statement rendered.
ARTICLE 5
Advancement of Funds
5.1 Operator shall prepare forecasts, in such frequency, form and detail as Owner shall direct, of the funds required to pay Operator's anticipated costs of the services to be provided to Owner and the dates on which payment of such costs shall become due. Owner shall advance funds to Operator in such amounts and at such times determined on the basis of such forecasts, to enable Operator to pay its costs of services on or before payment of such costs shall be due. Such advances shall be made by deposits or bank transfers to accounts of Operator with such financial institutions as Operator shall designate. Any excess funds in such accounts shall be invested by Operator in accordance with prudent cash management practices and all investment income and appreciation received on such funds shall be credited against the cost of service provided to Owner.
ARTICLE 6
Taxes
6.1 Owner shall report, file returns with respect to, be responsible for and pay all real property, franchise, business or other taxes, except payroll and sales or use taxes, arising out of or relating to its ownership of the Generation Facilities.
ARTICLE 7
Compliance with Provisions of Permits
and Requirements of Governmental Agencies
7.1 Owner and Operator shall cooperate in taking whatever action may be necessary to comply with the terms and provisions of all permits and licenses for the Generation Facilities and with all applicable lawful requirements of any federal, state or local agency or regulatory body having jurisdiction in or over the Generation Facilities.
ARTICLE 8
Confidentiality of Information
8.1 Each party to this Agreement may, from time to time, come into possession of information of the other parties that is either confidential or proprietary. Any party having any such information which is known to be considered by any other party as either confidential or proprietary will not reproduce, copy, use or disclose (except when required by a Governmental Authority) any such information in whole or in part for any purpose without the written consent of the other party. In disclosing confidential or proprietary information to a Governmental Authority, the disclosing party shall cooperate with the other party in minimizing the amount of such information furnished. At the specific request of the other party, the disclosing party will endeavor to secure the agreement of such Governmental Authority to maintain specified
portions of such information in confidence. Public dissemination of information by the furnishing party before or after it is furnished shall constitute a termination of the confidentiality requirement as to that specific information.
ARTICLE 9
Damage to Persons or Property; Penalties; Fines
9.1 Applicability of Article. Since Operator is undertaking its responsibilities hereunder (i) at cost and (ii) in order to assist Owner in meeting its responsibilities with respect to its Generation Facilities, the following provisions shall be applicable to loss or damage to the property of any or all of the parties hereto (including Generation Facilities property) or of third parties, or injuries to or loss of life by any person, including employees of the parties hereto, and to penalties or fines assessed with respect to the Generation Facilities:
9.2 Absence of Warranty. Operator does not warrant that its performance of Operating Services will meet the standards set forth in Sections 2.1 and 2.2 hereof, and its sole obligation if it fails to meet such standards is to reperform at the request of Owner the deficient work at cost payable by Owner in a manner that complies with such standards. Owner acknowledges that such services are not subject to any warranty of any nature, express or implied, including, without limitation, any warranty of merchantability or fitness for a particular purpose.
9.3 Liabilities to Third Parties and Owner. (a) To the fullest extent provided by law, all liability to third parties other than liability for Operator's Willful Misconduct (as defined in 9.4 below), fraud or gross negligence whether arising in contract (including breach of warranty), tort (including negligence, product liability, breach of fiduciary duty or any other theory of tort liability), under the laws of real property or otherwise, or as a result of fines or other penalties imposed by any Governmental Authority, that
results from or is in any way connected with the provision of Operation and Maintenance Services, New Investment Services, or Fuel Services for the Generation Facilities shall be borne by Owner in their entirety. Owner shall indemnify and hold harmless Operator, its agents servants, directors, employees and affiliates (the "Indemnified Parties") from and against any and all claims, losses, damages, expenses and costs of any kind, including without limitation attorneys fees, costs of investigation and court costs, other than those attributable to Willful Misconduct, fraud or gross negligence of Operator, whether direct or indirect, on account of or by reason of bodily injuries (including death) to any person or persons or property damage arising out of or occurring in connection with the provision of Operation and Maintenance Services, New Investment Services, or Fuel Services for the Generation Facilities, whether or not such claims, losses, damages, expenses or costs were caused by or alleged to have been caused by or contributed to by the active, passive, affirmative, sole or concurrent negligence or by breach of any statutory or other duty (whether non-delegable or otherwise) of any of the Indemnified Parties.
Except for consequences of Operator's Willful Misconduct or fraud, Owner and its affiliates, servants, employees, agents and insurers hereby release, acquit and forever discharge the Indemnified Parties, to the fullest extent permitted by applicable law, from any and all damages, claims, causes of action, damage to property of Owner or expenses of whatever kind or nature, that are in any manner connected with the provision of any Operating Services or the performance and prosecution of any project or work by any of the Indemnified Parties for or on behalf of Owner for its Generation Facilities, whether arising in tort (including negligence, strict liability, breach of fiduciary duty or any other theory of tort liability), contract (including breach of warranty), under the laws of real property or otherwise, or as a result of any fine or other penalty imposed by any Governmental Authority. This release shall be effective whether or not such claims, causes of action, damages, or expenses were caused
or alleged to have been caused by or contributed to by the active, passive, affirmative, sole or concurrent negligence or by breach of any statutory or other duty (whether non-delegable or otherwise) of any of the Indemnified Parties.
9.4 Willful Misconduct. As used in this Agreement, the term "Willful Misconduct" shall mean any act or omission by any of the Indemnified Parties that is performed or omitted consciously with actual knowledge that such conduct is likely to result in damage or injury to persons or property; provided, however, that any such act or omission, if performed or omitted by an Indemnified Party, shall not be deemed Willful Misconduct unless an officer or employee of Operator at or above the officer level of Vice President or the employee level of plant manager shall have expressly authorized such act or omission. Operator shall exercise reasonable and customary supervision or control over the activities of its agents, servants and employees, and its affiliates, so as to minimize the potential for adverse willful actions by such agents, servants or employees or affiliates; provided, however, that failure of Operator to prevent such adverse willful actions shall not itself be considered Willful Misconduct. Liability attributable to Operator's Willful Misconduct, fraud or gross negligence shall be borne by Operator, subject to the limitations of liability in Section 9.5 below and the last paragraph of Section 9.3 above in the case of liability to Owner.
9.5 Limitation of Liability. Notwithstanding Sections 9.3 and 9.4 hereof, Owner agrees that in no event shall any of the Indemnified Parties be liable to Owner for any indirect, special, punitive, incidental or consequential damages including, without limitation, (1) loss of profits or revenues, (2) damages suffered as a result of the loss of the use of Owner's power system, Generation Facilities or equipment, (3) cost of purchase of replacement power
(including any differential in fuel or power costs), or (4) cost of capital with
respect to any claim based on or in any way connected with this Agreement
whether arising in contract (including breach of warranty), tort (including
negligence, strict liability, breach of fiduciary duty or any other theory of
tort liability), under the laws of real property or any other legal or equitable
theory of law, or as a result of any fine or other penalty imposed by any
Governmental Authority. Owner shall release, acquit, forever discharge,
indemnify, and hold harmless the Indemnified Parties from and against any claim
by any customer of Owner, or any other third party, for any direct, indirect,
special, punitive, incidental or consequential damages arising out of any
performance or failure to perform under this Agreement. The provisions of this
Section 9.5 shall apply to the fullest extent permitted by law.
9.6 Severability. In the event that any particular application of any of the limitations of liability contained in this Article 9 should be finally adjudicated to be void as a violation of the public policy of the State of Alabama, then such limitation of liability shall not apply with respect to such application to the extent (but only to the extent) required in order for such limitation of liability not to be void as a violation of such public policy, and such limitations of liability shall remain in full force and effect with respect to all other applications to the fullest extent permitted by law.
ARTICLE 10
Insurance
10.1 Parties' Obligations Generally. During the term of this Agreement, Owner and Operator shall make reasonable efforts to procure and maintain in force such physical damage and loss, public liability, worker's compensation, officers' liability and other insurance as Owner may deem appropriate with respect to all losses, damages, liability and claims arising
out of Owner's ownership of its Generation Facilities and Operator's operation thereof and the provision of Operating Services hereunder. All such insurance policies shall identify Operator and Owner as additional insureds thereunder as their interests may appear, and shall contain a waiver of subrogation clause in favor of Operator and Owner to the extent of the applicable limits of such policies. The aggregate cost of all insurance, applicable to each Generation Facility and procured by Operator pursuant to this Agreement, and any payment by Operator of any deductible, self-insured retention, or co-payment in connection with any policy claim arising out of Operator's performance of this Agreement shall be included in the costs of Operating Services. Operator will take steps to meet the requirements of such insurance policies and cooperate with Owner to furnish information, establish procedures, erect or change physical facilities and otherwise meet the requirements of the insurers to maintain coverage in effect and to collect claims that may be made under such insurance. In the event that any of the insurance described in this Article 10 is canceled by a party, that party shall give written notice of such cancellation to the other party at least sixty (60) days prior to the effective date of such cancellation.
10.2 Commercial Liability Insurance. Operator will carry insurance to cover the legal obligations to pay damages because of bodily injury or property damage. The limits and deductibles of such coverage shall be as mutually agreed by Operator and Owner.
10.3 Workmen's Compensation Insurance. Operator shall qualify as a self-insurer in Alabama and with the U.S. Department of Labor for purposes of the U.S. Longshoreman's and Harbor Worker's Act, but will provide an umbrella policy to cover benefits in excess of its assumed liability for workmen's compensation, the Longshoreman's and Harbor Worker's Act, and employers liability. Owner and Operator acknowledge that, pursuant to the terms of this
Agreement, all premiums for Operator's workmen's compensation insurance and all payments to Operator employees, including workmen's compensation benefits, relating to work performed by such employees while on the premises of a Generation Facility, are effectively made by the Owner, since such premiums and payments constitute direct charges incurred by Operator in relation to the performance of Operating Services for such Generation Facility. It is the intent of Owner and Operator that for purposes of workmen's compensation Owner not be exposed to greater liability by virtue of this Agreement than Owner would have if Owner had utilized Owner employees to perform Operating Services. If Operator and Owner agree, as an alternative, the parties can purchase any such insurance.
10.4 Additional Insurance. In the event Owner at any time or from time to time shall have elected to participate in supplemental insurance programs to cover other risks arising from the ownership and operation of a Generation Facility, including the extra costs of replacement power, the costs of such protection shall be borne by Owner.
10.5 Waiver of Subrogation - Allocation and Payment of Premium. Each insurance policy obtained by a party hereto shall contain waivers of subrogation against the other party, if obtainable from the insurer. The aggregate cost of all insurance, applicable to the Generation Facilities and procured by Operator pursuant to this Agreement, shall be considered an operating cost subject to reimbursement under Section 4.1. In the event that any of the foregoing insurance policies is canceled by a party, that party shall give written notice of such cancellation to the other party sixty (60) days prior to the effective date of such cancellation.
ARTICLE 11
Term
11.1 Term. The term of this Agreement shall commence on the Effective Date, subject nevertheless to any applicable rules, regulations or approvals of any regulatory authority whose approval is required. This Agreement shall expire (i) when all Generation Facilities have been retired and each site has been returned to a condition acceptable to Owner, all in compliance with Legal Requirements; (ii) upon termination pursuant to Section 12.1; or (c) upon mutual agreement of the parties. Owner's obligation to make payments to Operator under this Agreement that have not been satisfied prior to the expiration of the term of this Agreement shall survive such expiration of the term.
. 11.1.1 It is recognized in the case of expiration under Sections 11.1(i) or 11.1(iii), however, that this Agreement shall not expire, unless all necessary regulatory approvals, if any, have been obtained to transfer the operating responsibility for all Generation Facilities to Owner or Owner's designee. Until the date on which such transfer of operating responsibility is accomplished, or as Owner may otherwise notify Operator in writing, Operator agrees to continue to provide Operating Services for the Generation Facilities.
ARTICLE 12
Remedies
12.1 Termination. In the event Owner determines that it is in its
interest to do so, or Operator determines that it is in Operator's
interest to do so, either Operator or Owner may at will terminate this
Agreement as provided below. Except as may be otherwise provided in
Section 11.1, this Section 12.1 and Article 9 hereof, this right of
termination shall be Owner's sole and exclusive remedy, legal or
equitable, for any failure by Operator at any time to perform its
duties, responsibilities, obligations, or functions under this
Agreement, or for any other breach by Operator of this Agreement. The procedure for exercise of this right of termination shall be as follows:
12.1.1 Owner shall give written notice to Operator of Owner's determination to terminate this Agreement or Operator shall give written notice to Owner of its determination to terminate this Agreement.
12.1.2 Following the giving of such notice, the parties agree to cooperate, in good faith, to accomplish the transfer of operating responsibility in a prompt manner, including without limitation assigning contracts, transferring employees, and modifying licenses, approvals and permits as necessary to reflect such change (including, if required to effectuate transfer to Owner for regulatory purposes of the operating responsibility for the Generation Facilities).
12.1.3 It is recognized that no termination shall be accomplished until all necessary regulatory approvals, if any, have been obtained to transfer the operating responsibility for all Generation Facilities to Owner or Owner's designee. During the period between the giving of the notice of determination to terminate, and the date on which such transfer of operating responsibility is accomplished, Operator agrees to continue the provision of Operating Services for the Generation Facilities.
12.1.4 Upon receipt of all necessary governmental
authorization for transfer of operating responsibility for each
Generation Facility from Operator to Owner or Owner's designee, this
Agreement shall terminate. Except as may otherwise be provided in
Section 11.1 and this Section 12.1 and except for the consequences of
Operator's Willful Misconduct, fraud or gross negligence and the other
limitations provided in Article 9 hereof, Owner hereby agrees that from
and after such termination Owner shall indemnify and forever hold Operator, its servants, directors, employees, affiliates and its agents harmless from and against any and all liability, costs, expenses (including reasonable attorneys' fees) and judgments, which may thereafter be experienced by Operator, which are in any way related to, arise out of or are in connection with the activities of Operator, its agents, servants, directors, employees and affiliates under this Agreement (whether the cause occurred before or after termination). Except as may otherwise be provided in Section 11.1 and this Section 12.1 and except for the consequences of Operator's Willful Misconduct or fraud and the other limitations provided in Article 9 hereof, Owner further waives any claim Owner may have against Operator, its officers, directors, employees, affiliates and agents for damage to property of Owner, that arose out of or in connection with the activities of Operator, its officers, directors, employees, affiliates and agents under this Agreement. The indemnification and waiver contained herein shall survive termination and shall be specifically enforceable by Operator against Owner.
ARTICLE 13
Miscellaneous
13.1 No Partnership or Joint Venture. Nothing in this Agreement shall be deemed to create or constitute a partnership, joint venture or association among the parties hereto or any of them, the sole purpose of this Agreement being limited to providing for the orderly and efficient operation, maintenance, repair, upgrade, rehabilitation, renewal, replacement, additions and construction of the Generation Facilities.
13.2 Owner's Designated Representatives. Owner hereby designates its President as Owner's Representative, who shall receive notices and
communications from Operator under the provisions of this Agreement and who shall send to the designated Representative of Operator all notices and communications under the provisions of this Agreement.
13.3 Operator's Designated Representative, Operator hereby designates its President as the Operator Representative, who shall receive notices and communications from Owner's Representative under the provisions of this Agreement and who shall send to Owner's Representative all notices and communications concerning the provisions of this Agreement.
13.4 Depreciation. Owner shall determine the basis and method it will use for purposes of depreciation and other matters where investment in Generation Facilities property is relevant.
13.5 Holidays, Business Days. Any obligations to perform under this Agreement, including payment obligations, which shall become due on a non-business day shall become due upon the next business day. The term "business day" shall mean any day other than a day on which banking institutions in the City of Birmingham, Alabama are authorized by law to close.
13.6 Owner's Services to be Furnished at Cost. To the extent that Owner may, from time to time, provide goods or services to Operator, Operator shall pay for such goods and services at Owner's cost determined as herein provided, which payments shall thereupon be treated as Generation Facilities costs under Article 4.
13.7 Entire Agreement. This Agreement constitutes the entire understanding among the parties hereto, superseding any and all previous understandings, oral or written, pertaining to the subject matter contained herein. No party hereto has relied or will rely upon any verbal or written representation or verbal or written information made or given to such party by any representative of the other party or anyone on its behalf.
13.8 Amendments. This Agreement may not be amended, modified, or terminated, nor may any obligation hereunder be waived verbally, and no such amendment, modification, termination or waiver shall be effective for any purpose unless it is in writing, and signed by both parties hereto, and all necessary regulatory approvals have been obtained.
13.9 Notices. Any notice, request, consent or other communication permitted or required by this Agreement shall be in writing and shall be deemed given when deposited in the United States Mail, first class postage prepaid, and addressed as follows:
If to Operator: Alabama Power Company
600 North 18th Street
Birmingham, AL 35291
Attention: President
If to Owner: Southern Power Company
270 Peachtree Street
Atlanta, GA 30303
Attention: President
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Unless a different officer or address shall have been designated by the respective party by notice in writing.
13.10....Captions. The descriptive captions of the various Articles, Sections and Paragraphs of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions hereof.
13.11....Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
13.12....No Waiver. Failure of any party to enforce any rights or to require performance of any other party of any of the provisions of this Agreement shall not release any party of any of its obligations under this
Agreement and shall not be deemed a waiver of any rights of the parties to insist on performance thereof, or of any of the parties' rights or remedies hereunder, and in no way shall affect the validity of these terms and conditions or any part thereof, or the right of any party thereafter to enforce every provision hereof.
13.13 Singular and Plural. Throughout this Agreement, whenever any word in the singular number is used, it shall include the plural unless the context otherwise requires; and whenever the plural number is used, it shall include the singular unless the context otherwise requires.
13.14 Third Party Beneficiaries. This Agreement is for the benefit of Owner and Operator, and no person or entity other than Owner and Operator is or shall be entitled to bring any action to enforce any provision of this Agreement against anyone.
13.15 Severability. Should any provision of this Agreement be held to be invalid or unenforceable by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect, provided that deletion of the invalid or unenforceable provision does not materially affect the agreement of the parties contained herein.
ARTICLE 14
Successors and Assigns
14.1 This Agreement and all of the terms and conditions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any of Operator's obligations hereunder shall be assignable by Operator, in whole or in part, without the express written consent of Owner. Any mortgage indenture trustee which shall foreclose on substantially all of the electric generation properties of Owner may, at such trustee's own election, be deemed to be a successor and assign of Owner under this Agreement.
ARTICLE 15
Governing Law
15.1 This Agreement shall be construed in accordance with, and to be governed by, the laws of the State of Alabama.
[Signatures on following page]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and by their duly authorized representatives as of the day and year
first above written.
"Operator"
ALABAMA POWER COMPANY
By: _________________________________
William B. Hutchins, III
Executive Vice President and CFO
"Owner"
SOUTHERN POWER COMPANY
By: __________________________________
C.B. Harreld
Vice President, Comptroller and
Chief Financial Officer
SCHEDULE 1
SOUTHERN POWER COMPANY GENERATION FACILITIES
GENERATING STATION LOCATION
Autaugaville 1 and 2 Autauga County, Alabama
Exhibit 10.7
OPERATING AGREEMENT
between
Georgia Power Company
and
Southern Power Company
TABLE OF CONTENTS
ARTICLE 1 Definitions.............................................................................................2
-----------
1.1 "Fuel Services".............................................................................2
1.2 "Generation Facility".......................................................................2
1.3 "Governmental Authority"....................................................................3
1.4 "Legal Requirements"........................................................................3
1.5 "New Investment Projects"...................................................................3
1.6 "New Investment Services"...................................................................4
1.7 "Operating Services"........................................................................4
1.8 "Operation and Maintenance Services"........................................................4
1.9 "Prudent Utility Practice"..................................................................4
ARTICLE 2 Operator's Authority and Responsibility with Respect to Operation of the
-------------------------------------------------------------------------
Generation Facilities...........................................................................5
---------------------
2.1 Responsibility of Operator..................................................................5
2.2 Authorization of Operator...................................................................6
2.2.1. Plant Operation and Maintenance.................................................6
(a) Staff and Personnel.......................................................7
(b) Licenses and Permits for Generation Facilities............................7
(c) Reductions in Capacity and Outages at Each Plant..........................7
(d) Events About Which Owner is to be Notified................................8
(e) No Changes to Transmission or Distribution Facilities.....................8
(f) Operation in Accordance with Operating Plan...............................9
(g) Point of Interconnection..................................................9
2.2.2. New Investment Services.........................................................9
2.2.3. Fuel Services..................................................................10
2.3 Retirement, Removal or Addition of Generating Facilities...................................10
2.4 Authority to Act as Agent for Owner and Right of Third Parties to Rely on
Agency................................................................................11
2.5 Assignment of Contracts; Liability and Allocation of Risks.................................11
2.5.1 Contracts with Third Parties....................................................11
2.5.2 Acceptance of Contract Provisions...............................................12
2.5.3 Enforcement of Rights Under Contracts...........................................12
2.6 Cooperation of Owner.......................................................................13
2.7 Operator Interface Procedure...............................................................14
2.8 Plans and Budgets..........................................................................14
2.8.1 Strategic Plan..................................................................15
(a) Five-year Operating and Planned Outage Schedule..........................15
(b) Availability and Performance Goals.......................................15
(c) Planned Mandatory Projects...............................................15
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(d) Planned Improvement Projects.............................................16
(e) Authorized Level of Staffing.............................................16
2.8.2 Fuel Plan.......................................................................16
2.8.3 Operating Budget................................................................17
2.8.4 Capital Budget..................................................................17
2.8.5 Fuel Budget.....................................................................17
2.8.6 Material Contracts..............................................................17
2.9 Information and Reports....................................................................17
2.9.1 Generation Facility Data........................................................18
2.9.2 Generation Facility Budget Reports..............................................18
2.9.3 Generation Facility Strategic Plan Reports......................................18
2.9.4 Audit Reports...................................................................18
2.9.5 Correspondence to and from Regulatory Agencies..................................18
2.9.6 Responses to Owner Inquiries....................................................18
2.10 Plant Tours...............................................................................19
2.11 Management Audit..........................................................................19
ARTICLE 3 Entitlement to Output..................................................................................20
---------------------
3.1 Entitlement to Output......................................................................20
3.2 Determination of Output-Responsibility for Station Service and Losses......................20
ARTICLE 4 Costs, Billing, Accounting and Audit...................................................................20
------------------------------------
4.1 Cost of Operation and Maintenance..........................................................20
4.2 New Investment Costs.......................................................................21
4.3 Fuel Costs.................................................................................21
4.4 Other Costs Required by Legal Requirements.................................................21
4.5 Revision...................................................................................21
4.6 Billing....................................................................................22
4.7 Payment....................................................................................22
4.8 General Accounting Matters.................................................................22
4.9 Right to Inspect Records...................................................................22
4.10 Disputed Invoice..........................................................................23
ARTICLE 5 Advancement of Funds...................................................................................23
--------------------
5.1 Advancement of Funds.......................................................................23
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ARTICLE 6 Taxes 24
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6.1 Taxes......................................................................................24
ARTICLE 7 Compliance with Provisions of Permits and Requirements of Governmental
-----------------------------------------------------------------------
Agencies.......................................................................................24
--------
7.1 Compliance with Provisions of Permits and Requirements of Governmental
Agencies..............................................................................24
ARTICLE 8 Confidentiality of Information.........................................................................24
------------------------------
ARTICLE 9 Damage to Persons or Property; Penalties; Fines........................................................25
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9.1 Applicability of Article...................................................................25
9.2 Absence of Warranty........................................................................25
9.3 Liabilities to Third Parties and Owner.....................................................25
9.4 Willful Misconduct.........................................................................27
9.5 Limitation of Liability....................................................................27
9.6 Severability...............................................................................28
ARTICLE 10 Insurance.............................................................................................28
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10.1 Parties Obligations Generally.............................................................28
10.2 Commercial Liability Insurance............................................................29
10.3 Workmen's Compensation Insurance..........................................................29
10.4 Additional Insurance......................................................................30
10.5 Waiver of Subrogation - Allocation and Payment of Premium.................................30
ARTICLE 11 Term 31
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11.1 Term......................................................................................31
ARTICLE 12 Remedies..............................................................................................31
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12.1 Termination...............................................................................31
ARTICLE 13 Miscellaneous.........................................................................................34
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13.1 No Partnership or Joint Venture...........................................................34
13.2 Owner's Designated Representatives........................................................34
13.3 Operator's Designated Representative......................................................34
13.4 Depreciation..............................................................................34
13.5 Holidays, Business Days...................................................................34
13.6 Owner's Services to be Furnished at Cost..................................................35
13.7 Entire Agreement..........................................................................35
13.8 Amendments................................................................................35
13.9 Notices...................................................................................35
13.10 Captions.................................................................................36
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13.11 Counterparts.............................................................................36
13.12 No Waiver................................................................................36
13.13 Singular and Plural......................................................................36
13.14 Third Party Beneficiaries................................................................36
13.15 Severability.............................................................................36
ARTICLE 14 Successors and Assigns................................................................................37
----------------------
14.1 Successors and Assigns....................................................................37
ARTICLE 15 Governing Law.........................................................................................37
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15.1 Governing Law.............................................................................37
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OPERATING AGREEMENT
between
Georgia Power Company
and
Southern Power Company
THIS AGREEMENT is made and entered into this 31st day of July 2001 (the "Effective Date") by and between Georgia Power Company ("Operator") and Southern Power Company ("Owner").
WHEREAS, Operator and Owner are each a wholly-owned subsidiary of The Southern Company ("Southern"), a registered holding company under the Public Utility Holding Company Act of 1935 (the "1935 Act"); and
WHEREAS, Owner owns certain generation stations, plants and other generation-related facilities within the service territory of Operator and may construct or acquire additional facilities in the future; and
WHEREAS, Owner intends to sell on the wholesale market the electric power generated by such facilities; and
WHEREAS, Operator owns and operates generation stations, plants and other related generation facilities and has developed the expertise and experience to efficiently and economically operate such facilities; and
WHEREAS, Owner believes that in order to more efficiently and economically provide for the operation, maintenance, repair, and rehabilitation of its generating stations, plants and other generation-related facilities, such activities should be conducted and coordinated by Operator; and
WHEREAS, Owner desires that Operator undertake the operation, maintenance, repair and rehabilitation of its generating stations, plants and other generation-related facilities identified on Schedule 1, subject to the receipt of any necessary regulatory approvals, and Operator has agreed to do so under the terms and conditions set forth below.
NOW THEREFORE, in consideration of these premises, the parties, intending to be legally bound, do hereby agree as follows:
ARTICLE 1
Definitions
As used herein, the following terms and phrases shall have, respectively, the following meanings:
1.1 "Fuel Services" shall mean work related to supplying and managing all necessary fuels for the Generation Facilities, including, without limitation, planning, procurement, contract administration, fuel quality assurance, administration of payables and receivables, and all activities relating to procurement, transportation, installation, monitoring, repairing, storage, reprocessing and disposal of fuel for the Generation Facilities, related materials and waste products.
1.2 "Generation Facility" shall mean, and refer to, respectively,
each of the fossil fuel, hydro-electric and pumped storage generation
stations, plants and other generation-related facilities owned by
Owner, located within the service territory of Operator and identified
on Schedule 1 attached hereto and incorporated herein; provided,
however, that should activities concerning a Generation Facility be
undertaken with respect to one unit of such station, plant or
facility, the phrase "Generation Facility" shall mean and refer to
that unit and related common facilities. Generation stations, plants
and other generation-related facilities may be removed from or added
to the definition of "Generation Facilities" as contemplated in
Section 2.3.
1.3 "Governmental Authority" shall mean any local, state, regional or federal legislative, regulatory, administrative, legal, judicial or executive agency, commission, department or other entity and any person acting on behalf of any such entity.
1.4 "Legal Requirements" shall mean all laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, written agreements, regulations and requirements of or issued by every Goernmental Authority having jurisdiction over the matter in question, whether federal, regional, state or local, which may be applicable to Operator, or to Owner, or to any Generation Facility or any of the real or personal property comprising the Generation Facilities, or to services to be provided to Owner hereunder, or the use, occupancy, possession, operation, maintenance, construction, retirement, acquisition, installation, alteration, replacement, reconstruction or disposal of any one or more of the Generation Facilities or any part thereof.
1.5 "New Investment Projects" shall mean projects for the Generation Facilities relating to the planning, design, licensing, acquisition, construction, completion, renewal, improvement, addition, repair, replacement or enlargement of any Unit of Property (as described in the Federal Energy Regulatory Commission's "Units of Property for Use in Accounting for Additions and Retirements of Electric Plants"), under circumstances where expenditures on or for such projects are to be capitalized in accordance with the Electric Plant Instructions of the Uniform System of Accounts prescribed for Class A and B utilities by the Federal Energy Regulatory Commission.
1.6 "New Investment Services" shall mean work on or for any New Investment Project, including, but not limited to, any planning, design, engineering, labor, procurement of materials and supplies, materials management, quality assurance, training, security, and environmental protection, together with maintaining or obtaining licenses and regulatory approvals related thereto, governmental affairs or regulatory relationships, administration of payables and receivables, and all other activity required for the safe and reliable operation of the New Investment Project and/or the relevant Generation Facility or that may be required to comply with Legal Requirements.
1.7 "Operating Services" shall mean Fuel Services, New Investment Services, and Operation and Maintenance Services.
1.8 "Operation and Maintenance Services" shall mean work for Owner relating to the possession, management, control, start-up, operation, availability, production of energy, maintenance, improvement, renewal, replacement, and shutdown, including, but not limited to, any planning, design, engineering, labor, procurement of materials and supplies, materials management, quality assurance, training, security, and environmental protection, together with maintaining or obtaining licenses and regulatory approvals related thereto, governmental affairs or regulatory relationships, administration of payables and receivables, and all other activity required for the safe and reliable operation of the Generation Facilities or that may be required to comply with Legal Requirements.
1.9 "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 the exercise
of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable 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 the requirements of governmental agencies of competent jurisdiction.
ARTICLE 2
Operator's Authority and Responsibility with Respect to Operation of the Generation Facilities
2.1 Responsibility of Operator. Operator, consistent with such written guidelines as may be jointly developed with Owner, shall provide and be responsible for (i) the operation and maintenance of the Generation Facilities in a safe and reliable manner in accordance with all Legal Requirements and with Prudent Utility Practice, (ii) the generation of power and energy at the Generation Facilities to the credit of and for the benefit of the Owner as economically as is reasonably practicable, (iii) the repair and rehabilitation of the Generation Facilities as may, from time to time, be necessary, appropriate or reasonably practicable and advisable and (iv) as and to the extent deemed by Owner to be necessary or appropriate, the construction of new or additional non-nuclear generation facilities for Owner. Operator also shall make such further changes and additions to and retirements from the Generation Facilities in its service territory as shall be consistent with such operation, maintenance, repair and rehabilitation. Such services and construction may be provided by Operator through its own personnel or, in part, by others, including
without limitation affiliate personnel, under contractual or other arrangements, including the use of Owner's personnel under the direction and supervision of Operator.
2.2 Authorization of Operator. In furtherance of the foregoing, Owner authorizes Operator, and Operator agrees to provide, Operation and Maintenance Services and Fuel Services for the Generation Facilities and, as authorized herein, New Investment Services. Owner hereby authorizes Operator to take all actions that, in the discretion and judgment of Operator consistent with Prudent Utility Practice, are deemed necessary or advisable in providing these Operating Services. Owner hereby authorizes Operator, as operator, to take any and all action necessary to comply with all Legal Requirements and to take all action necessary to fulfill any requirements for the safe and reliable operation of the Generation Facilities. The authority vested in Operator shall include, but not be limited to, the authority to incur costs, liabilities, and obligations, to purchase equipment, materials and supplies, to perform and arrange for performance of work, to select and retain contractors, engineers, consultants, architect-engineers, attorneys, accountants and other firms or persons, and to take all actions in connection with the Generation Facilities that are within the scope set forth above. Without limiting the foregoing, the authority vested in Operator shall include the following:
2.2.1. Plant Operation and Maintenance. Operator shall have the authority to possess, operate and maintain the Generation Facilities in accordance with policies and decisions established and made by Owner. Subject to the provisions of this Agreement, Operator shall in accordance with Prudent Utility Practice endeavor to achieve reliable performance of each Generation Facility, to maximize the capacity and availability factors and minimize forced outage rates and durations at each Generation Facility and to produce busbar costs as low as reasonably possible.
(a) Staff and Personnel. Subject to the provisions of
Section 2.8.1 respecting Strategic Plans and approval of Owner
or Owner's designated representative, Operator shall have the
authority to select, hire, compensate, control and discharge
(when deemed appropriate by Operator) those persons, firms or
corporations which are required to satisfy its obligations
under this Agreement. Operator shall keep Owner informed of
any plans to change either the Operator officer responsible
for any of Owner's Generation Facilities or the Operator
manager of such Generation Facility. Any input from Owner on
such plans will be considered by Operator, but Operator's
decisions on personnel matters shall be final. Operator shall
also consider any positive or negative comments from Owner
regarding the performance of any of Operator's officers or
managers, but management decisions on whether to take
personnel or salary administration actions shall be made
solely by Operator.
(b) Licenses and Permits for Generation Facilities. Operator is authorized to obtain and maintain compliance with all licenses, approvals and permits for each Generation Facility from Governmental Authorities required for operation and maintenance of the Generation Facility. Upon mutual agreement of Operator and Owner, or as required by Legal Requirements, Operator will be designated in such licenses, approvals and permits as having operating responsibility for the Generation Facilities.
(c) Reductions in Capacity and Outages at Each Plant. Owner recognizes that, in the course of operating the Generation Facilities, it may be necessary to decide whether to operate the Generation Facilities at less than full power
or to terminate or suspend such operations altogether in light of technical, legal, regulatory, safety, economic, power system, testing, or other considerations. Operator recognizes the need to minimize periods of reduced capacity or outages at the Generation Facilities that could have an adverse effect on Owner's power supply system or its cost of providing reliable electric service. Operator will endeavor to consult with Owner concerning any operating conditions which are expected to result in capacity reductions of fifty percent (50%) or more at a Generation Facility or outages at a unit of any Generation Facility, and Operator will only take those actions when they determine they are prudent and necessary from an operating standpoint.
(d) Events About Which Owner is to be Notified. In the event of an occurrence at a Generation Facility of any unplanned outage, any significant extension of a planned outage, any unplanned reduction in the capacity of a unit for an extended period, or any event at a Generation Facility or any regulatory action which is likely to attract substantial media attention or to affect substantially the operation of the Generation Facility, Operator shall inform Owner as soon as practical, or in accordance with guidelines acceptable to Owner, after the occurrence of such event.
(e) No Changes to Transmission or Distribution Facilities. In order that the safe operation of the Generation Facilities is assured, Owner shall not effect any operating or physical changes to its transmission and distribution facilities which may adversely affect the safe operation of the Generation Facilities without prior consultation with and the concurrence of Operator.
(f) Operation in Accordance with Operating Plan. Each Generation Facility shall be operated in accordance with Prudent Utility Practice and pursuant to an operating plan developed and updated regularly by Operator and Owner and in accordance with Owner's obligations, if any, under any interconnection agreements, power pooling arrangements or other applicable arrangements, as such obligations may presently exist or may hereafter be modified from time to time, including the obligations, if any, of Owner to maintain the design integrity of each Generation Facility under the requirements of the Southeast Electric Reliability Council and the National Electric Reliability Council.
(g) Point of Interconnection. The point of interconnection between any Generation Facility and Operator's or a third party's transmission system and the extent of Operator's operational responsibility therefor shall be determined from time to time by Owner and Operator.
2.2.2. New Investment Services. Operator shall have responsibility for all New Investment Services. Operator is authorized to enter into such arrangements as it deems appropriate for the Generation Facilities and to make all decisions regarding the completion of New Investment Projects that were contemplated in the construction budgets for the Generation Facilities as of this acquisition by Owner or that have been approved and provided for in an Operating Budget or Capital Budget under the procedures contemplated in Section 2.8 and as applicable Section 2.3.3. All equipment, materials and supplies included in such New Investment Projects for each Generation Facility shall be acquired in the name of Owner and shall be the property of Owner.
2.2.3. Fuel Services. Operator shall have responsibility for Fuel Services. Operator is authorized to enter into such arrangements as it deems appropriate and to make all decisions regarding fuel and fuel services.
2.3 Retirement, Removal or Addition of Generating Facilities. Owner shall retain the exclusive authority (i) to determine when the economic life of the Generation Facility has ended and thereupon to retire the Generation Facility from commercial operation or (ii) to remove a particular generation station, plant or other generation-related Facility from the provisions of this Agreement and to arrange for other means for its operation and maintenance. Owner and Operator may agree to add new generation stations, plants or other generation-related facilities of Owner within Operator's service territory to this Agreement.
2.3.1 Retirement. Upon Owner informing Operator of any retirement or removal of a Generation Facility, Operator shall take such action as may be necessary to reduce operation of the Generation Facility or to terminate operation and place the Generation Facility or unit in a safe shutdown condition. Owner retains the authority to determine whether any to-be-retired Generation Facility should be placed in standby status or operated at reduced output for economic reasons or Owner's need for the capacity or energy of the Generation Facility. Operator shall also take such steps as may be necessary to decommission and dispose of and thereafter maintain, to the extent necessary, any to-be-retired Generation Facility or any unit thereof designated for retirement.
2.3.2 Removal. Upon Owner informing Operator of any removal of a Generation Facility from this Agreement, Operator shall take such action as may be necessary to transfer operational control of such Generation Facility, and to comply with the provisions of Sections
12.1.2 and 12.1.3, which shall also apply. Upon the transfer of operational control of a Generation Facility as contemplated above and in Sections 12.1.2 and 12.1.3, such generation station, plant or other generation-related facility shall cease to be a "Generation Facility."
2.3.3 Addition. Upon Owner and Operator agreeing to the addition of a generation station, plant or other generation-related facility to this Agreement, such generation station, plant or other generation-related facility shall be a "Generation Facility" and shall be subject to all of the provisions of this Agreement.
2.4 Authority to Act as Agent for Owner and Right of Third Parties to Rely on Agency. In the conduct of the authority vested in Operator in Sections 2.1 and 2.2 above, Owner hereby designates and authorizes Operator to act as its attorney-in-fact and agent for such purposes, including, without limitation, authority to enter into and administer contracts on behalf of Owner for procurement of material, equipment or services and authority to administer contracts entered into by Owner with respect to the Generation Facilities. As relates to all third parties, the designation of Operator as agent shall be binding on Owner. Operator accepts such appointment as agent of Owner. Upon request from Operator, Owner shall provide written confirmation of this agency relationship to third parties.
2.5 Assignment of Contracts; Liability and Allocation of Risks.
2.5.1 Contracts with Third Parties. Upon mutual agreement of Operator and Owner, Owner shall assign and transfer to Operator those contracts with third parties relating to the operation of each Generation Facility. Prior to assignment and transfer of such contracts, Operator may request Owner to appoint Operator as agent for administration of any such contracts. After receipt of any such assignment, transfer or authorization to administer, Operator shall have the exclusive responsibility for the administration and enforcement thereof in accordance with the terms thereof.
2.5.2 Acceptance of Contract Provisions. To the extent
permitted pursuant to Section 2.8, Operator in such contracts with
third parties may agree to such matters as limitations on the liability
of contractors for work performed or materials furnished, restrictions
on warranties, agreements to indemnify the contractors from liability,
requirements that Owner be bound by financial protection provisions,
waivers, releases, indemnifications, limitations of liability and
further transfers or assignments under such contracts, and other
similar provisions (each contract with a third party that contains any
of the provisions, terms or other effects described in this sentence,
shall be referred to as a "Material Contract"). Owner waives any claims
against Operator for entering into Material Contracts approved pursuant
to the process provided in Section 2.8. Owner also agrees to be bound
by the requirements for financial protection, waivers, releases,
indemnification, limitation of liability and further transfers or
assignments that bind Operator as they now exist in existing Material
Contracts or as they may exist in the future with respect to Material
Contracts approved or entered into pursuant to such process provided in
Section 2.8.
2.5.3 Enforcement of Rights Under Contracts. Owner covenants that, Owner will notify Operator in writing in advance if Owner intends to threaten suit or bring suit against third parties or otherwise make any claim under any contract or arrangement relating to any of the Generation Facilities or Operating Services being provided by Operator. If Owner desires for Operator to threaten or bring suit or otherwise to make any claim, or desires that such action contemplated by Operator shall not be taken, Owner shall, by written
notice to Operator, request it so to act or refrain from acting. Upon Operator's receipt of a notice under one of the previous two sentences, Owner and Operator shall arrange for consultation within ten (10) working days thereafter on the questions raised, or such lesser period of time as Operator or Owner shall specify in the light of circumstances requiring a more expeditious determination. Neither Operator nor Owner shall make its final determination whether it will or will not bring any such suit or make any such claim until after such consultation; however, the determination by Operator regarding the action that it will or will not take, shall be final and binding (irrespective of what Owner decides to do), and the decision of Owner regarding the action that it will or will not take will also be final and binding (irrespective of what Operator decides to do).
2.6 Cooperation of Owner. Subject to the requirements and procedures
of Sections 2.5.2 and 2.8, and in the case of New Investment Services
Section 2.2.2 and as applicable Section 2.3.3, Owner agrees that it will
take all necessary action in a prompt manner to execute any agreements with
respect to the provision of Operation and Maintenance Services and Fuel
Services for the Generation Facilities, and New Investment Services, as and
when requested by Operator to permit Operator to carry out its authority
and responsibilities pursuant to this Article 2. Operator may request Owner
to furnish services or assistance, materials, supplies, licenses, offices
and real property rights including, without limitation, power supply
services, transmission and distribution system repair, replacement,
construction and maintenance, accounting services, maintenance personnel,
security services, and other personnel, services or assistance as Operator
may require with respect to any one or more Generation Facilities. Any such
items which Owner agrees to furnish to Operator shall be provided at cost.
2.7 Operator Interface Procedure. Operator and Owner will jointly establish and maintain an Operator Interface Procedure to govern the working relationships between the two companies. The Operator Interface Procedure shall contain procedures by which Owner can maintain an overview of Generation Facility operations, procedures for administering this Operating Agreement through designated executive points of contact, and procedures to define interfaces for support services and assistance provided by Owner pursuant to Section 2.6 hereof.
2.8 Plans and Budgets. Strategic Plans, Fuel Plans, Operating Budgets, Capital Budgets, Fuel Budgets and Material Contracts shall be submitted to Owner by Operator as provided in Paragraphs 2.8.1 through 2.8.5 below. The contents of these plans, budgets and Material Contracts shall conform to the requirements and guidelines established pursuant to the Operator Interface Procedure. Owner shall approve or disapprove each such plan, budget or Material Contract within thirty (30) days after its submittal. In the event Owner disapproves a plan, budget or Material Contract, Owner shall inform Operator of the basis for such disapproval. Operator shall then modify such plan, budget or Material Contracts as required to make it acceptable to Owner and shall resubmit it for approval; provided, however, that in no event shall Operator be required to submit plans, budgets or Material Contracts which would cause Operator to operate a Generation Facility in violation of any Legal Requirements or in a manner that fails to provide reasonable assurance of health and safety to employees. Operator shall attempt to provide Operating Services in accordance with such approved plans and within the aggregate annual amount of such budgets. Notwithstanding the foregoing, Operator makes no representation, warranty or promise of any kind as to accuracy of any such plan or budget, or that any attempt referred to in the preceding sentence will be successful, and in no event shall Owner be relieved of its responsibility to pay costs incurred by Operator as required in Article 4 hereof.
2.8.1 Strategic Plan. A Strategic Plan for each Generating Facility shall be submitted to Owner by Operator no later than July 1 of each year. Owner may separately approve or disapprove individual projects which are classified as planned improvement projects pursuant to Paragraph (d) below, but shall otherwise approve or disapprove each Strategic Plan in its entirety. Strategic Plans may cover one or more Generation Facilities. Each Strategic Plan shall identify key assumptions to be used in the preparation of budgets and forecasts, including:
(a) Five-year Operating and Planned Outage Schedule. This section shall identify the scheduled operating cycles and planned outages for maintenance and other work during the succeeding five years. The schedule shall describe in reasonable detail the time and duration of each planned outage and the maintenance and other work planned to be performed during such outage.
(b) Availability and Performance Goals. This section shall contain overall performance goals which have been established by Operator for the Generation Facility for the current year.
(c) Planned Mandatory Projects. A mandatory project is any project with a total estimated cost in excess of one million dollars ($1,000,000) or such other amount as Owner may establish, including but not limited to any upgrade, replacement, addition or program, which is needed in order to support normal operations in accordance with Prudent Utility Practice or in order to comply with regulatory or safety requirements. The associated schedule and estimated annual funding requirements shall be included.
(d) Planned Improvement Projects. An improvement project is any project with a total estimated cost in excess of one million dollars ($1,000,000) or such other amount as Owner may establish, including but not limited to any upgrade, replacement, addition, or program, which is not mandatory as defined in (c) above. Examples of such projects include efforts to improve performance of a Generation Facility or conditions, such as improved Generation Facility capacity or efficiency, enhanced working conditions, and appearance. The associated schedule and estimated annual funding requirements shall be included.
(e) Authorized Level of Staffing. This section shall provide the current authorized number of permanent staff positions which are assigned to the Generation Facility and its offsite support. Such number of positions shall be broken down by functional areas (e.g., operations, maintenance, administrative, technical, corporate support), shall include positions which are located either on-site or off-site, and shall include all positions regardless of the actual employer. This section shall also show any estimates of planned changes in such authorized number of positions over the succeeding five years.
2.8.2 Fuel Plan. A five-year Fuel Plan for each Generation Facility shall be submitted to Owner by September 15 of each year. Owner shall approve or disapprove each Fuel Plan within thirty days after submittal. Each Fuel Plan shall describe in reasonable detail plans for procurement and tilization of fuel for the Generation Facility and information on disposal of waste products. A Fuel Plan may cover one or more Generation Facilities.
2.8.3 Operating Budget. By September 1 of each year, Operator shall submit to Owner a written Operating Budget showing the estimated costs of operating and maintaining Owner's Generation Facilities during the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Each budget shall be supported by detail reasonably adequate for the purpose of review by Owner.
2.8.4 Capital Budget. By September 1 of each year, Operator shall submit to Owner a written Capital Budget estimate of capital expenditures for each of Owner's Generation Facilities for the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Each budget shall be supported by detail reasonably adequate for the purpose of review by Owner.
2.8.5 Fuel Budget. By September 15 of each year, Operator shall submit to Owner a written Fuel Budget estimate of fuel expenditures for each of Owner's Generation Facilities for the next calendar year, with a forecast of budget requirements for the succeeding four calendar years. Each budget shall be supported by detail reasonably adequate for the purpose of review by Owner.
2.8.6 Material Contracts. Reasonably in advance of the time it plans to enter into a Material Contract with a third party, Operator shall submit to Owner a draft of such Material Contract. Each draft Material Contract will be supported with all attachments and sufficient information for Owner to evaluate the provisions that render such draft a Material Contract.
2.9 Information and Reports. Operator shall furnish to Owner the following information and reports:
2.9.1 Generation Facility Data. At the time of submittal of each Strategic Plan, Operator shall also furnish a comparison of the performance of each Generation Facility with other generating facilities using performance indicators in common use in the electric utility industry or as may be specified by Owner.
2.9.2 Generation Facility Budget Reports. Operator shall furnish monthly data showing actual costs for operation and maintenance, capital expenditures, and direct fuel expenditures with comparisons to the respective budgets. This report will normally be provided by the end of the succeeding month.
2.9.3 Generation Facility Strategic Plan Reports. At least quarterly, Operator shall furnish data showing actual performance for each unit at each Generation Facility compared to goals contained in the Strategic Plan for the Generation Facility.
2.9.4 Audit Reports. Operator shall make available for review by Owner copies of financial or accounting reports concerning Owner's Generation Facilities containing the results of audits by or for Southern Company Services, Inc., or any affiliate or subsidiary of The Southern Company, or by any regulatory agency.
2.9.5 Correspondence to and from Regulatory Agencies. At the request of Owner, Operator shall furnish to Owner copies of correspondence to and from regulatory agencies concerning one or more of Owner's Generation Facilities.
2.9.6 Responses to Owner Inquiries. In addition to the obligation of Operator to provide the information as explicitly required herein, Operator shall respond to reasonable written or verbal requests from Owner for information not otherwise specifically provided for herein.
2.10 Plant Tours. Owner shall have the right to have its representatives and guests visit its Generation Facilities, to tour the facilities, and observe activities at the Generation Facilities; provided that such visits or tours will not interfere with the operation of the Generation Facilities, or the security or safety of such facilities. Owner shall assure that its representatives and guests comply with all applicable rules and regulations in effect at a Generation Facility whether imposed by Governmental Authority or by Operator.
2.11 Management Audit. Owner shall have the right to conduct a management audit, at its own cost, of Operator's performance hereunder either by Owner officers and employees or through their duly authorized agents or representatives. Operator shall cooperate with Owner in the conducting of such audit and, subject to applicable Legal Requirements and the requirements of vendors, give Owner reasonable access to all contracts, records and other documents relating to the Generating Facilities. Following any such management audit, Operator shall respond to the findings of such audit if requested to do so by Owner. Management audits by Owner shall be scheduled so as to minimize the number of audits required and so as to not to exceed one management audit in any consecutive twelve-month period.
ARTICLE 3
Entitlement to Output
3.1 Entitlement to Output. Owner shall be entitled to all of the output from its Generation Facilities at the time generation in such units occurs. Subject to Operator's primary responsibility for safe operation of the Generation Facilities, Owner shall have the right to schedule and dispatch the capacity and energy needed from the facilities, and Operator shall use its best efforts to honor such schedule.
3.2 Determination of Output-Responsibility for Station Service and Losses. Output of each Generation Facility shall be the gross generation of the facility, less station service requirements, and less adjustments for losses experienced. Owner shall be responsible for providing all off-site electric power required at the Generation Facility whenever the station service and losses exceed the gross generation of the Generation Facility.
ARTICLE 4
Costs, Billing, Accounting and Audit
4.1 Cost of Operation and Maintenance. Owner shall pay to Operator all direct costs incurred by Operator relating to Operation and Maintenance Services for the Generation Facilities (including all costs identified in Section 9.3 and any costs incurred by Operator as a consequence of termination hereunder). Such costs shall include all payments made to Operator employees (including payment of wages, salaries, workmen's compensation and other benefits) relating to work performed by such employees while on the premises of any of the Generation Facilities. Operator and Owner acknowledge that all such payments made to
Operator employees, relating to work performed by such employees while on Generation Facility premises, are effectively made by Owner, since Owner is responsible for such payments and they are made from funds placed on deposit by Owner for those purposes. Owner shall also pay to Operator the Generation Facility allocated share of other of Operator's costs. Allocation of costs to Operation and Maintenance Services shall be performed in accordance with the methodology agreed-upon from time to time by Owner and Operator.
4.2 New Investment Costs. Owner shall pay to Operator all costs incurred by Operator relating to New Investment Services for the Generation Facilities, including obligations incurred to third parties, direct costs of Operator associated with such New Investment Services and the Generation Facilities' allocated share of Operator's other costs associated with such activities. Allocation of costs to New Investment Services shall be performed in accordance with the methodology agreed-upon from time to time by Owner and Operator pursuant to Section 4.1 hereof.
4.3 Fuel Costs. Owner shall pay to Operator all direct costs incurred
by Operator relating to Fuel Services for the Generation Facilities and the
Generation Facilities allocated share of other of Operator's costs. Allocation
of costs to Fuel Costs shall be performed in accordance with the methodology
agreed-upon from time to time by Owner and Operator pursuant to Section 4.1
hereof.
4.4 Other Costs Required by Legal Requirements. Owner shall pay to
Operator all direct costs incurred by Operator and the Generation Facilities'
allocated share of other of Operator's costs associated with any other
activities of Operator relative to the Generation Facilities that are required
to meet Legal Requirements.
4.5 Revision. Should Operator undertake to perform services for any other affiliated company or for any non-affiliated company where the cost to Operator of providing such services affects the cost of Operator to provide Operating Services pursuant to this Agreement, Operator shall discuss the matter
and reach agreement with Owner respecting the need for or the terms of any amendment of this Section 4 as may be appropriate to assure the continued fairness of the determination of the responsibility for costs payable to Operator hereunder.
4.6 Billing. Operator shall render to Owner a monthly billing statement, with detailed data in a computer readable form as reasonably requested by Owner, no later than the fifth (5th) day of each month detailing costs incurred for Operation and Maintenance Services during the preceding month pursuant to Section 4.1; costs incurred for New Investment Services during the preceding month pursuant to Section 4.2; costs incurred for Fuel Services during the preceding month pursuant to Section 4.3; and the other costs incurred during the preceding month pursuant to Section 4.4.
4.7 Payment. The obligation to make payments as specified herein shall continue notwithstanding the capability (or lack of capability) of the Generation Facilities to produce power for any reason.
4.8 General Accounting Matters. Determinations by Operator on all accounting matters related to the transactions contemplated by this Agreement will be in accordance with Generally Accepted Accounting Principles and the Securities and Exchange Commission's Uniform System of Accounts for Mutual and Subsidiary Service Companies, utilizing the accrual method of accounting, unless otherwise specifically provided in this Agreement or mutually agreed by Operator and Owner or as prescribed by other regulatory agencies having jurisdiction, as in effect from time to time.
4.9 Right to Inspect Records. During normal business hours and subject to conditions consistent with the conduct by Operator of its regular business affairs and responsibilities, Operator will provide Owner or any auditor utilized by Owner and reasonably acceptable to Operator, or any nationally
recognized accounting firm retained by Owner, access to Operator's books, records, and other documents directly related to the performance of Operator's obligations under this Agreement and, upon request, copies thereof, which pertain to (a) costs applicable to Operation and Maintenance Services, New Investment Services, Fuel Services, and Other Costs for Owner's Generation Facilities to the extent necessary to enable Owner to verify the costs which have been billed to Owner pursuant to the provisions of this Agreement; (b) compliance with all environmental Legal Requirements; and (c) matters relating to the design, construction and operation and retirement of Owner's Generation Facilities in proceedings before any Governmental Authority.
4.10 Disputed Invoice. In the event Owner shall question any statement
rendered by Operator in accordance with the provisions of Section 4.1 hereof,
Owner shall nevertheless promptly pay amounts called for by Operator under
Section 4.1 hereof but such payment shall not be deemed to prevent Owner from
claiming an adjustment of any statement rendered.
ARTICLE 5
Advancement of Funds
5.1 Operator shall prepare forecasts, in such frequency, form and detail as Owner shall direct, of the funds required to pay Operator's anticipated costs of the services to be provided to Owner and the dates on which payment of such costs shall become due. Owner shall advance funds to Operator in such amounts and at such times determined on the basis of such forecasts, to enable Operator to pay its costs of services on or before payment of such costs shall be due. Such advances shall be made by deposits or bank transfers to accounts of Operator with such financial institutions as Operator shall designate. Any excess funds in such accounts shall be invested by Operator in accordance with prudent cash management practices and all investment income and appreciation received on such funds shall be credited against the cost of service provided to Owner.
ARTICLE 6
Taxes
6.1 Owner shall report, file returns with respect to, be responsible for and pay all real property, franchise, business or other taxes, except payroll and sales or use taxes, arising out of or relating to its ownership of the Generation Facilities.
ARTICLE 7
Compliance with Provisions of Permits
and Requirements of Governmental Agencies
7.1 Owner and Operator shall cooperate in taking whatever action may be necessary to comply with the terms and provisions of all permits and licenses for the Generation Facilities and with all applicable lawful requirements of any federal, state or local agency or regulatory body having jurisdiction in or over the Generation Facilities.
ARTICLE 8
Confidentiality of Information
8.1 Each party to this Agreement may, from time to time, come into possession of information of the other parties that is either confidential or proprietary. Any party having any such information which is known to be considered by any other party as either confidential or proprietary will not reproduce, copy, use or disclose (except when required by a Governmental Authority) any such information in whole or in part for any purpose without the written consent of the other party. In disclosing confidential or proprietary information to a Governmental Authority, the disclosing party shall cooperate with the other party in minimizing the amount of such information furnished. At
the specific request of the other party, the disclosing party will endeavor to secure the agreement of such Governmental Authority to maintain specified portions of such information in confidence. Public dissemination of information by the furnishing party before or after it is furnished shall constitute a termination of the confidentiality requirement as to that specific information.
ARTICLE 9
Damage to Persons or Property; Penalties; Fines
9.1 Applicability of Article. Since Operator is undertaking its responsibilities hereunder (i) at cost and (ii) in order to assist Owner in meeting its responsibilities with respect to its Generation Facilities, the following provisions shall be applicable to loss or damage to the property of any or all of the parties hereto (including Generation Facilities property) or of third parties, or injuries to or loss of life by any person, including employees of the parties hereto, and to penalties or fines assessed with respect to the Generation Facilities:
9.2 Absence of Warranty. Operator does not warrant that its performance of Operating Services will meet the standards set forth in Sections 2.1 and 2.2 hereof, and its sole obligation if it fails to meet such standards is to reperform at the request of Owner the deficient work at cost payable by Owner in a manner that complies with such standards. Owner acknowledges that such services are not subject to any warranty of any nature, express or implied, including, without limitation, any warranty of merchantability or fitness for a particular purpose.
9.3 Liabilities to Third Parties and Owner. (a) To the fullest extent provided by law, all liability to third parties other than liability for Operator's Willful Misconduct (as defined in 9.4 below), fraud or gross negligence whether arising in contract (including breach of warranty), tort (including negligence, product liability, breach of fiduciary duty or any other theory of tort liability), under the laws of real property or otherwise, or as a
result of fines or other penalties imposed by any Governmental Authority, that results from or is in any way connected with the provision of Operation and Maintenance Services, New Investment Services, or Fuel Services for the Generation Facilities shall be borne by Owner in their entirety. Owner shall indemnify and hold harmless Operator, its agents servants, directors, employees and affiliates (the "Indemnified Parties") from and against any and all claims, losses, damages, expenses and costs of any kind, including without limitation attorneys fees, costs of investigation and court costs, other than those attributable to Willful Misconduct, fraud or gross negligence of Operator, whether direct or indirect, on account of or by reason of bodily injuries (including death) to any person or persons or property damage arising out of or occurring in connection with the provision of Operation and Maintenance Services, New Investment Services, or Fuel Services for the Generation Facilities, whether or not such claims, losses, damages, expenses or costs were caused by or alleged to have been caused by or contributed to by the active, passive, affirmative, sole or concurrent negligence or by breach of any statutory or other duty (whether non-delegable or otherwise) of any of the Indemnified Parties.
Except for consequences of Operator's Willful Misconduct or fraud, Owner and its affiliates, servants, employees, agents and insurers hereby release, acquit and forever discharge the Indemnified Parties, to the fullest extent permitted by applicable law, from any and all damages, claims, causes of action, damage to property of Owner or expenses of whatever kind or nature, that are in any manner connected with the provision of any Operating Services or the performance and prosecution of any project or work by any of the Indemnified Parties for or on behalf of Owner for its Generation Facilities, whether arising in tort (including negligence, strict liability, breach of fiduciary duty or any other theory of tort liability), contract (including breach of warranty), under
the laws of real property or otherwise, or as a result of any fine or other penalty imposed by any Governmental Authority. This release shall be effective whether or not such claims, causes of action, damages, or expenses were caused or alleged to have been caused by or contributed to by the active, passive, affirmative, sole or concurrent negligence or by breach of any statutory or other duty (whether non-delegable or otherwise) of any of the Indemnified Parties.
9.4 Willful Misconduct. As used in this Agreement, the term "Willful Misconduct" shall mean any act or omission by any of the Indemnified Parties that is performed or omitted consciously with actual knowledge that such conduct is likely to result in damage or injury to persons or property; provided, however, that any such act or omission, if performed or omitted by an Indemnified Party, shall not be deemed Willful Misconduct unless an officer or employee of Operator at or above the officer level of Vice President or the employee level of plant manager shall have expressly authorized such act or omission. Operator shall exercise reasonable and customary supervision or control over the activities of its agents, servants and employees, and its affiliates, so as to minimize the potential for adverse willful actions by such agents, servants or employees or affiliates; provided, however, that failure of Operator to prevent such adverse willful actions shall not itself be considered Willful Misconduct. Liability attributable to Operator's Willful Misconduct, fraud or gross negligence shall be borne by Operator, subject to the limitations of liability in Section 9.5 below and the last paragraph of Section 9.3 above in the case of liability to Owner.
9.5 Limitation of Liability. Notwithstanding Sections 9.3 and 9.4 hereof, Owner agrees that in no event shall any of the Indemnified Parties be liable to Owner for any indirect, special, punitive, incidental or consequential damages including, without limitation, (1) loss of profits or revenues, (2) damages suffered as a result of the loss of the use of Owner's power system,
Generation Facilities or equipment, (3) cost of purchase of replacement power
(including any differential in fuel or power costs), or (4) cost of capital with
respect to any claim based on or in any way connected with this Agreement
whether arising in contract (including breach of warranty), tort (including
negligence, strict liability, breach of fiduciary duty or any other theory of
tort liability), under the laws of real property or any other legal or equitable
theory of law, or as a result of any fine or other penalty imposed by any
Governmental Authority. Owner shall release, acquit, forever discharge,
indemnify, and hold harmless the Indemnified Parties from and against any claim
by any customer of Owner, or any other third party, for any direct, indirect,
special, punitive, incidental or consequential damages arising out of any
performance or failure to perform under this Agreement. The provisions of this
Section 9.5 shall apply to the fullest extent permitted by law.
9.6 Severability. In the event that any particular application of any of the limitations of liability contained in this Article 9 should be finally adjudicated to be void as a violation of the public policy of the State of Georgia then such limitation of liability shall not apply with respect to such application to the extent (but only to the extent) required in order for such limitation of liability not to be void as a violation of such public policy, and such limitations of liability shall remain in full force and effect with respect to all other applications to the fullest extent permitted by law.
ARTICLE 10
Insurance
10.1 Parties' Obligations Generally. During the term of this Agreement, Owner and Operator shall make reasonable efforts to procure and maintain in force such physical damage and loss, public liability, worker's compensation,
officers' liability and other insurance as Owner may deem appropriate with respect to all losses, damages, liability and claims arising out of Owner's ownership of its Generation Facilities and Operator's operation thereof and the provision of Operating Services hereunder. All such insurance policies shall identify Operator and Owner as additional insureds thereunder as their interests may appear, and shall contain a waiver of subrogation clause in favor of Operator and Owner to the extent of the applicable limits of such policies. The aggregate cost of all insurance, applicable to each Generation Facility and procured by Operator pursuant to this Agreement, and any payment by Operator of any deductible, self-insured retention, or co-payment in connection with any policy claim arising out of Operator's performance of this Agreement shall be included in the costs of Operating Services. Operator will take steps to meet the requirements of such insurance policies and cooperate with Owner to furnish information, establish procedures, erect or change physical facilities and otherwise meet the requirements of the insurers to maintain coverage in effect and to collect claims that may be made under such insurance. In the event that any of the insurance described in this Article 10 is canceled by a party, that party shall give written notice of such cancellation to the other party at least sixty (60) days prior to the effective date of such cancellation.
10.2 Commercial Liability Insurance. Operator will carry insurance to cover the legal obligations to pay damages because of bodily injury or property damage. The limits and deductibles of such coverage shall be as mutually agreed by Operator and Owner.
10.3 Workmen's Compensation Insurance. Operator shall qualify as a self-insurer in Georgia and with the U.S. Department of Labor for purposes of the U.S. Longshoreman's and Harbor Worker's Act, but will provide an umbrella policy to cover benefits in excess of its assumed liability for workmen's compensation, the Longshoreman's and Harbor Worker's Act, and employers
liability. Owner and Operator acknowledge that, pursuant to the terms of this Agreement, all premiums for Operator's workmen's compensation insurance and all payments to Operator employees, including workmen's compensation benefits, relating to work performed by such employees while on the premises of a Generation Facility, are effectively made by the Owner, since such premiums and payments constitute direct charges incurred by Operator in relation to the performance of Operating Services for such Generation Facility. It is the intent of Owner and Operator that for purposes of workmen's compensation Owner not be exposed to greater liability by virtue of this Agreement than Owner would have if Owner had utilized Owner employees to perform Operating Services. If Operator and Owner agree, as an alternative, the parties can purchase any such insurance.
10.4 Additional Insurance. In the event Owner at any time or from time to time shall have elected to participate in supplemental insurance programs to cover other risks arising from the ownership and operation of a Generation Facility, including the extra costs of replacement power, the costs of such protection shall be borne by Owner.
10.5 Waiver of Subrogation - Allocation and Payment of Premium. Each insurance policy obtained by a party hereto shall contain waivers of subrogation against the other party, if obtainable from the insurer. The aggregate cost of all insurance, applicable to the Generation Facilities and procured by Operator pursuant to this Agreement, shall be considered an operating cost subject to reimbursement under Section 4.1. In the event that any of the foregoing insurance policies is canceled by a party, that party shall give written notice of such cancellation to the other party sixty (60) days prior to the effective date of such cancellation.
ARTICLE 11
Term
11.1 Term. The term of this Agreement shall commence on the Effective
Date, subject nevertheless to any applicable rules, regulations or approvals of
any regulatory authority whose approval is required. This Agreement shall expire
(i) when all Generation Facilities have been retired and each site has been
returned to a condition acceptable to Owner, all in compliance with Legal
Requirements; (ii) upon termination pursuant to Section 12.1; or (c) upon mutual
agreement of the parties. Owner's obligation to make payments to Operator under
this Agreement that have not been satisfied prior to the expiration of the term
of this Agreement shall survive such expiration of the term.
11.1.1 It is recognized in the case of expiration under Sections 11.1(i) or 11.1(iii), however, that this Agreement shall not expire, unless all necessary regulatory approvals, if any, have been obtained to transfer the operating responsibility for all Generation Facilities to Owner or Owner's designee. Until the date on which such transfer of operating responsibility is accomplished, or as Owner may otherwise notify Operator in writing, Operator agrees to continue to provide Operating Services for the Generation Facilities.
ARTICLE 12
Remedies
12.1 Termination. In the event Owner determines that it is in its interest to do so, or Operator determines that it is in Operator's interest to do so, either Operator or Owner may at will terminate this Agreement as provided below. Except as may be otherwise provided in Section 11.1, this Section 12.1 and Article 9 hereof, this right of termination shall be Owner's sole and
exclusive remedy, legal or equitable, for any failure by Operator at any time to perform its duties, responsibilities, obligations, or functions under this Agreement, or for any other breach by Operator of this Agreement. The procedure for exercise of this right of termination shall be as follows:
12.1.1 Owner shall give written notice to Operator of Owner's determination to terminate this Agreement or Operator shall give written notice to Owner of its determination to terminate this Agreement.
12.1.2 Following the giving of such notice, the parties agree to cooperate, in good faith, to accomplish the transfer of operating responsibility in a prompt manner, including without limitation assigning contracts, transferring employees, and modifying licenses, approvals and permits as necessary to reflect such change (including, if required to effectuate transfer to Owner for regulatory purposes of the operating responsibility for the Generation Facilities).
12.1.3 It is recognized that no termination shall be accomplished until all necessary regulatory approvals, if any, have been obtained to transfer the operating responsibility for all Generation Facilities to Owner or Owner's designee. During the period between the giving of the notice of determination to terminate, and the date on which such transfer of operating responsibility is accomplished, Operator agrees to continue the provision of Operating Services for the Generation Facilities.
12.1.4 Upon receipt of all necessary governmental
authorization for transfer of operating responsibility for each
Generation Facility from Operator to Owner or Owner's designee, this
Agreement shall terminate. Except as may otherwise be provided in
Section 11.1 and this Section 12.1 and except for the consequences of
Operator's Willful Misconduct, fraud or gross negligence and the other
limitations provided in Article 9 hereof, Owner hereby agrees that from and after such termination Owner shall indemnify and forever hold Operator, its servants, directors, employees, affiliates and its agents harmless from and against any and all liability, costs, expenses (including reasonable attorneys' fees) and judgments, which may thereafter be experienced by Operator, which are in any way related to, arise out of or are in connection with the activities of Operator, its agents, servants, directors, employees and affiliates under this Agreement (whether the cause occurred before or after termination). Except as may otherwise be provided in Section 11.1 and this Section 12.1 and except for the consequences of Operator's Willful Misconduct or fraud and the other limitations provided in Article 9 hereof, Owner further waives any claim Owner may have against Operator, its officers, directors, employees, affiliates and agents for damage to property of Owner, that arose out of or in connection with the activities of Operator, its officers, directors, employees, affiliates and agents under this Agreement. The indemnification and waiver contained herein shall survive termination and shall be specifically enforceable by Operator against Owner.
ARTICLE 13
Miscellaneous
13.1 No Partnership or Joint Venture. Nothing in this Agreement shall be deemed to create or constitute a partnership, joint venture or association among the parties hereto or any of them, the sole purpose of this Agreement being limited to providing for the orderly and efficient operation, maintenance, repair, upgrade, rehabilitation, renewal, replacement, additions and construction of the Generation Facilities.
13.2 Owner's Designated Representatives. Owner hereby designates its President as Owner's Representative, who shall receive notices and communications from Operator under the provisions of this Agreement and who shall send to the designated Representative of Operator all notices and communications under the provisions of this Agreement.
13.3 Operator's Designated Representative, Operator hereby designates its President as the Operator Representative, who shall receive notices and communications from Owner's Representative under the provisions of this Agreement and who shall send to Owner's Representative all notices and communications concerning the provisions of this Agreement.
13.4 Depreciation. Owner shall determine the basis and method it will use for purposes of depreciation and other matters where investment in Generation Facilities property is relevant.
13.5 Holidays, Business Days. Any obligations to perform under this Agreement, including payment obligations, which shall become due on a non-business day shall become due upon the next business day. The term "business day" shall mean any day other than a day on which banking institutions in the City of Atlanta, Georgia are authorized by law to close.
13.6 Owner's Services to be Furnished at Cost. To the extent that Owner may, from time to time, provide goods or services to Operator, Operator shall pay for such goods and services at Owner's cost determined as herein provided, which payments shall thereupon be treated as Generation Facilities costs under Article 4.
13.7 Entire Agreement. This Agreement constitutes the entire understanding among the parties hereto, superseding any and all previous understandings, oral or written, pertaining to the subject matter contained herein. No party hereto has relied or will rely upon any verbal or written representation or verbal or written information made or given to such party by any representative of the other party or anyone on its behalf.
13.8 Amendments. This Agreement may not be amended, modified, or terminated, nor may any obligation hereunder be waived verbally, and no such amendment, modification, termination or waiver shall be effective for any purpose unless it is in writing, and signed by both parties hereto, and all necessary regulatory approvals have been obtained.
13.9 Notices. Any notice, request, consent or other communication permitted or required by this Agreement shall be in writing and shall be deemed given when deposited in the United States Mail, first class postage prepaid, and addressed as follows:
If to Operator: Georgia Power Company
333 Piedmont Ave.
Atlanta, GA 30308
Attention: President
If to Owner: Southern Power Company
270 Peachtree Street, N.E.
Atlanta, GA 30303
Attention: President
|
Unless a different officer or address shall have been designated by the respective party by notice in writing.
13.10 Captions. The descriptive captions of the various Articles, Sections and Paragraphs of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions hereof.
13.11 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
13.12 No Waiver. Failure of any party to enforce any rights or to require performance of any other party of any of the provisions of this Agreement shall not release any party of any of its obligations under this Agreement and shall not be deemed a waiver of any rights of the parties to insist on performance thereof, or of any of the parties' rights or remedies hereunder, and in no way shall affect the validity of these terms and conditions or any part thereof, or the right of any party thereafter to enforce every provision hereof.
13.13 Singular and Plural. Throughout this Agreement, whenever any word in the singular number is used, it shall include the plural unless the context otherwise requires; and whenever the plural number is used, it shall include the singular unless the context otherwise requires.
13.14 Third Party Beneficiaries. This Agreement is for the benefit of Owner and Operator, and no person or entity other than Owner and Operator is or shall be entitled to bring any action to enforce any provision of this Agreement against anyone.
13.15 Severability. Should any provision of this Agreement be held to be invalid or unenforceable by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect, provided that deletion of the invalid or unenforceable provision does not materially affect the agreement of the parties contained herein.
ARTICLE 14
Successors and Assigns
14.1 This Agreement and all of the terms and conditions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any of Operator's obligations hereunder shall be assignable by Operator, in whole or in part, without the express written consent of Owner. Any mortgage indenture trustee which shall foreclose on substantially all of the electric generation properties of Owner may, at such trustee's own election, be deemed to be a successor and assign of Owner under this Agreement.
ARTICLE 15
Governing Law
15.1 This Agreement shall be construed in accordance with, and to be governed by, the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and by their duly authorized representatives as of the day and year first above written.
"Operator"
GEORGIA POWER COMPANY
"Owner"
SOUTHERN POWER COMPANY
SCHEDULE 1
SOUTHERN POWER COMPANY GENERATION FACILITIES
GENERATING STATION LOCATION
Plant Dahlberg Jackson County, Georgia
Exhibit 10.8
INTERCONNECTION AGREEMENT
By and Between
SOUTHERN POWER COMPANY
and
GEORGIA POWER COMPANY
for
PLANT DAHLBERG
Dated as of July 31, 2001
TABLE OF CONTENTS
SECTION 1: DEFINITIONS............................................................................................1
SECTION 2: INTERCONNECTION SERVICE.................................................................................6
2.1 SERVICE.....................................................................................................6
2.2 FACILITY....................................................................................................6
2.3 PERMITS.....................................................................................................6
2.4 EASEMENTS AND ACCESS RIGHTS.................................................................................6
2.5 INTERCONNECTION POINT.......................................................................................7
2.6 STATION SERVICE ARRANGEMENTS................................................................................7
2.7 GENERATOR BALANCING SERVICE ARRANGEMENTS....................................................................8
2.8 INTERCONNECTION PROCEDURES..................................................................................8
2.9 INTERCONNECTED OPERATION SERVICES...........................................................................8
2.10 CONTROL AREA OPERATIONS....................................................................................8
2.11 INADVERTENT FLOW...........................................................................................8
SECTION 3: TERM, TERMINATION AND DISCONNECTION....................................................................8
3.1 TERM........................................................................................................9
3.2 DEFAULT.....................................................................................................9
3.3 PERMANENT DISCONNECTION.....................................................................................9
3.4 TEMPORARY DISCONNECTION.....................................................................................9
3.5 SURVIVAL OF RIGHTS.........................................................................................10
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY.....................................................10
4.1 GENERAL STANDARDS..........................................................................................10
4.2 MAINTENANCE AND OPERATION..................................................................................11
SECTION 5: INTERCONNECTION FACILITIES............................................................................11
5.1 INTERCONNECTION FACILITIES.................................................................................11
5.2 COSTS OF INTERCONNECTION FACILITIES........................................................................11
5.3 ADDITIONAL INTERCONNECTORS.................................................................................11
5.4 PAYMENT OF COST OF ON-GOING MAINTENANCE AND OPERATION OF THE INTERCONNECTION FACILITIES....................12
5.5 CARE OF EQUIPMENT..........................................................................................13
5.6 PAYMENT OF THE COST OF THE INTERCONNECTION FACILITIES......................................................13
SECTION 6: LIABILITY AND INDEMNIFICATION.........................................................................14
6.1 REMEDIES FOR BREACH........................................................................................14
6.2 LIMITATION OF LIABILITY....................................................................................14
6.3 NO LIABILITY FOR OTHER PARTY'S RESPONSIBILITIES............................................................15
6.4 RESPONSIBILITY FOR PROPERTY................................................................................15
6.5 INDEMNIFICATION............................................................................................15
SECTION 7: METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT..........................................16
7.1 METERING...................................................................................................16
7.2 DATA ACQUISITION AND PROTECTION EQUIPMENT..................................................................16
7.3 PAYMENT OF COST OF METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT............................17
7.4 CARE OF EQUIPMENT..........................................................................................17
7.5 INSPECTION AND TESTING.....................................................................................18
7.6 INACCURACIES...............................................................................................18
SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING..........................................................18
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8.1 FACILITY EVALUATION BASED ON ACTUAL EQUIPMENT DATA.........................................................18
8.2 IMPLEMENTATION OF CONTROL AND OPERATING PROCEDURES.........................................................19
8.3 FACILITY INSPECTION........................................................................................19
8.4 INITIAL SYNCHRONIZATION....................................................................................19
8.5 REVIEW OF SYNCHRONIZATION TESTS............................................................................19
SECTION 9: ADMINISTRATION CHARGE.................................................................................20
SECTION 10: PAYMENT PROCEDURE....................................................................................20
10.1 BILLING...................................................................................................20
10.2 FAILURE TO TIMELY PAY.....................................................................................20
10.3 INTEREST..................................................................................................20
10.4 CREDITWORTHINESS..........................................................................................21
10.5 AUDIT RIGHTS..............................................................................................21
10.6 DISPUTED BILLS............................................................................................21
10.7 NO WAIVER.................................................................................................21
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS............................................................21
11.1 GENERATOR REPRESENTATIONS, WARRANTIES AND COVENANTS.......................................................21
11.2 GEORGIA POWER REPRESENTATIONS, WARRANTIES AND COVENANTS...................................................22
11.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................................23
SECTION 12: COMPLIANCE WITH LAWS.................................................................................23
12.1 COMPLIANCE................................................................................................23
12.2 CHANGE OF LAW.............................................................................................23
12.3 REGULATORY FILINGS........................................................................................23
12.4 TAXES.....................................................................................................24
SECTION 13: INSURANCE............................................................................................24
13.1 GENERATOR'S INSURANCE.....................................................................................24
13.2 NOTICE AND CERTIFICATION..................................................................................26
SECTION 14: FORCE MAJEURE........................................................................................26
14.1 DEFINITION OF FORCE MAJEURE EVENT.........................................................................26
14.2 NO BREACH OR LIABILITY....................................................................................26
14.3 SUSPENSION OF PERFORMANCE.................................................................................27
SECTION 15: OPERATING COMMITTEE..................................................................................27
15.1 ESTABLISHMENT OF COMMITTEE................................................................................27
15.2 DUTIES....................................................................................................27
SECTION 16: ASSIGNMENT............................................................................................28
16.1 ASSIGNMENT BY GENERATOR...................................................................................28
16.2 ASSIGNMENT BY GEORGIA POWER...............................................................................29
SECTION 17: MISCELLANEOUS.........................................................................................30
17.1 GEORGIA POWER'S AGENT.....................................................................................30
17.2 NO PARTNERSHIP............................................................................................30
17.3 SUCCESSORS AND ASSIGNS....................................................................................30
17.4 NO THIRD PARTY BENEFIT....................................................................................30
17.5 NO AFFILIATE LIABILITY....................................................................................30
17.6 TIME OF ESSENCE...........................................................................................30
17.7 NO WAIVER.................................................................................................30
17.8 AMENDMENTS................................................................................................30
17.9 NOTICE....................................................................................................31
17.10 COUNTERPARTS.............................................................................................32
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17.11 CROSS-REFERENCES.........................................................................................32 17.12 SECTION HEADINGS.........................................................................................32 17.13 INCLUDING................................................................................................32 17.14 GOVERNING LAW............................................................................................32 17.15 MERGER...................................................................................................32 17.16 NERC.....................................................................................................32 17.17 GOOD UTILITY PRACTICES...................................................................................32 17.18 SAFETY...................................................................................................32 17.19 CONFIDENTIAL INFORMATION.................................................................................33 17.20 COOPERATION..............................................................................................33 17.21 NEGOTIATED AGREEMENT.....................................................................................33 17.22 SUBCONTRACTORS...........................................................................................33 17.23 EWG STATUS...............................................................................................34 APPENDIX A INTERCONNECTION PROCEDURES.............................................................................1 APPENDIX B SPECIFICATIONS.........................................................................................1 APPENDIX C QUARTERLY ESTIMATED CONSTRUCTION COSTS..................................................................1 |
INTERCONNECTION AGREEMENT
This Interconnection Agreement ("Agreement") is made and entered into by and between Southern Power Company, organized and existing under the laws of the State of Delaware and having its principal place of business at Birmingham, Alabama (hereinafter referred to as the "Generator"), and Georgia Power Company, a corporation organized and existing under the laws of the State of Georgia and having its principal place of business at Atlanta, Georgia (hereinafter referred to as "Georgia Power"). Generator and Georgia Power may be hereinafter referred to individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, Generator desires to engage in the interconnected operation of Generator's generating facility with the transmission facilities of the Georgia Power Electric System; and
WHEREAS, Generator desires to engage in sales of electric energy to be generated by Generator's generating facility.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties covenant and agree as follows:
SECTION 1: DEFINITIONS
1.1 In addition to the initially capitalized terms and phrases defined in the preamble of this Agreement, the following initially capitalized terms and phrases as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "Affiliate" - shall mean, with respect to any Party, another Person (i) which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Party, (ii) which, directly or indirectly, of record or beneficially, owns or holds 10% or more of the shares of any class of capital stock or other ownership interest of such Party having voting power or (iii) of which 10% or more of the shares of any of the capital stock or other ownership interest of the Affiliate having voting power is owned or held, directly or indirectly, of record or beneficially, by or for such Party. For purposes of this definition, "control" when used with respect to any 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 "controlled" have meanings correlative to the foregoing.
1.1.2 "Appendix" or "Appendices" - means any of the schedules, exhibits and attachments, including the Interconnection Procedures, which are appended hereto and are incorporated by reference herein and made a part of this Agreement.
1.1.3 "Business Day" - means any Day excluding Saturday and Sunday and excluding any Day on which banking institutions in Georgia are closed because of a federal holiday.
1.1.4 "Day" or "Calendar Day" - means a calendar day unless otherwise specified.
1.1.5 "Effective Date" - shall be July 31, 2001, or such other date as the FERC shall order.
1.1.6 "Emergency" - means a condition or situation associated with the transmission and distribution of electricity, including voltage abnormalities, that, in the sole reasonable judgment of Georgia Power, exercised on a non-discriminatory basis as the transmission asset owner, adversely affects or is imminently likely to adversely affect: (i) public health, life or property; (ii) Georgia Power's employees, agents or property; or (iii) Georgia Power's ability to maintain safe, adequate, and continuous electric service to its customers and/or the customers of any member of NERC consistent with Good Utility Practices; provided, however, that if there is no adverse condition associated with distribution or transmission facilities, then the inability of Georgia Power to meet its load requirements solely because of insufficient generation resources shall not constitute an Emergency.
1.1.7 "Facility" - means all of Generator's equipment (including the Generator's Interconnection Equipment), as described in Appendix B of this Agreement, used to produce electric energy and required for parallel operation with Georgia Power which equipment is located near the city of Athens, Jackson County, Georgia.
1.1.8 "FERC" - means the Federal Energy Regulatory Commission and any successor.
1.1.9 "Force Majeure Event" - shall have the meaning ascribed to it in Section 14.1.
1.1.10 "Generator" - shall have the meaning ascribed to it in the first paragraph of this Agreement, and its agents or permitted successors and assigns.
1.1.11 "Generator's Interconnection Equipment" - means all equipment which is owned, operated, or maintained by or for Generator as such is described in Appendix B (including without limitation, equipment for connection, switching, protective relaying and safety) that is required to be installed for the delivery of electric energy onto the Georgia Power Electric System on behalf of Generator. Generator's Interconnection Equipment does not include the Interconnection Facilities.
1.1.12 "Georgia ITS" - means the Georgia Integrated Transmission System, the electric transmission systems owned individually by
Georgia Power, Georgia Transmission Corporation, the Municipal Electric Authority of Georgia and the City of Dalton, Georgia, and operated as an integrated transmission system.
1.1.13 "Georgia Power" - shall have the meaning ascribed to it in the first paragraph of this Agreement, including any of its agents or permitted successors and assigns.
1.1.14 "Georgia Power Electric System" - means collectively, the entire network of electric generation, transmission and distribution facilities, equipment and other devices owned (in whole or in part) or controlled by Georgia Power, including the Georgia ITS, for the purposes of generating, transmitting, receiving, and distributing electric energy and capacity.
1.1.15 "Good Utility Practices" - 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 the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result(s) at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practices are 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties, Legal Requirements, NERC and SERC guides, and applicable safety and maintenance codes.
1.1.16 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department, taxing authority, or other authority thereof having jurisdiction over either Party, the Facility, the Interconnection Facilities, the Generator's Interconnection Equipment, or the Georgia Power Electric System, whether acting under actual or assumed authority.
1.1.17 "Indenture Trustee" - means a trust company chartered or other Person incorporated under the laws of the United States or a state of the United States and based in the United States which is the indenture trustee, mortgagee or secured party under any Indenture.
1.1.18 "Initial Synchronization Date" - means the date that includes the first instant in time when energy generated by the Facility is delivered to the Georgia Power Electric System at the Interconnection Point. Such Initial Synchronization Date is projected in Appendix B.
1.1.19 "Interconnection Facilities" - means all equipment which is constructed, owned, operated, or maintained by or for Georgia Power, as such are generally identified and described in Appendix B, (including without limitation, equipment for connection, switching, transmission, distribution, protective relaying and safety) that, in Georgia Power's reasonable judgment, is required to be installed for the delivery of electric energy onto the Georgia Power Electric System on behalf of Generator and for the receipt by Generator of electric service in accordance with Section 2.6 hereof.
1.1.20 "Interconnection Point" - means the point of interconnection of Generator's Facility to the Georgia Power Electric System as defined in the Specifications to this Agreement set forth in Appendix B.
1.1.21 "Interconnection Procedures" - means the procedures for interconnection and operations set forth in Appendix A.
1.1.22 "Interconnection Service" - means the services provided by Georgia Power to Generator to safely and reliably interconnect Generator's Facility to the Georgia Power Electric System and receive electric energy and capacity from the Facility at the Interconnection Point pursuant to the terms of this Agreement and, if applicable, the Tariff.
1.1.23 "Interest Rate" - means the prime rate of interest as published from time to time in the Wall Street Journal or comparable successor publication.
1.1.24 "kW" - means kilowatts. In addition, "MW" may be used to mean megawatts, which are 1000 kilowatts.
1.1.25 "kWh" - means kilowatt-hours. In addition, "MWh" may be used to mean megawatt-hours, which are 1000 kilowatt-hours.
1.1.26 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, treaty, judgment, injunction, order or other legally binding announcement, directive, published practice or requirement enacted, issued or promulgated by a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question at the time of the Effective Date or anytime thereafter during the Term of this Agreement.
1.1.27 "Lien" - means any and all liens, mortgages, encumbrances, pledges, claims, leases, charges and security interests of any kind.
1.1.28 "Month" - means a calendar Month, or such other period as may be mutually agreed by the Parties. "Monthly" has a meaning correlative to that of Month.
1.1.29 "Monthly Administration Charge" - for a particular Month of the Term, means the Monthly amount to be paid by Generator to Georgia Power as set forth in Section 9.
1.1.30 "NERC" - means the North American Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.31 "Party" or "Parties" - means either Georgia Power or Generator or both.
1.1.32 "Permitted Financing Assignee" - shall have the meaning ascribed to it in Section 16.1 hereof.
1.1.33 "Permitted Liens" - means:
(a) any Lien on this Agreement and/or Georgia Power's rights, obligations, title or interest in, to and under this Agreement pursuant to that certain First Mortgage Bond Indenture from Georgia Power to The Chase Manhattan Bank, Trustee, dated as of March 1, 1941, or pursuant to any other mortgage or security agreement as heretofore and hereafter amended (the "Indenture");
(b) any Lien for taxes, assessments or other governmental charges which are not delinquent or the validity of which is being contested in good faith by appropriate proceedings diligently prosecuted so long as appropriate reserves are maintained in respect of such taxes, assessments or charges; and
(c) attachments, judgments and other similar Liens arising in connection with court proceedings, provided that within sixty (60) Days of the attachment thereof (but not less than five (5) Days prior to any execution or sale pursuant thereto), the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being contested in good faith and by appropriate proceedings so long as any material risk of liability is covered by a bond, or appropriate reserves are maintained in respect of such proceedings.
1.1.34 "Person" - means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court.
1.1.35 "Persons Indemnified" - means, when used with respect to a Party, collectively or individually (as the context might indicate), the Party, the Party's Affiliates and permitted successors and assigns, and the directors, officers, representatives, agents and employees of each of them.
1.1.36 "Qualified Person" - shall mean any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court who is an owner or operator of transmission facilities, or belongs to a regional transmission organization.
1.1.37 "Quarter" - means for each year of the Term four distinct time periods for planning and budgeting purposes comprised of January through March, April through June, July through September, and October through December. "Quarterly" has a meaning correlative to that of Quarter. In the event that this Agreement becomes effective during any Quarter, the obligations herein that arise on a Quarterly basis shall begin in the Quarter immediately following the initial Effective Date of this Agreement.
1.1.38 "Quarterly Estimated Construction Cost" - shall have the meaning set forth in Section 5.6.1.
1.1.39 "SERC" - means the Southeastern Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.40 "Southern Companies" - means, collectively, the electric utility operating company subsidiaries of Southern Company engaged in common dispatch and control of generating resources within the Southern Company Control Area, currently including Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, and Southern Power Company.
1.1.41 "Southern Company Control Area" - means that electric system of the Southern Companies that has been recognized by NERC and SERC as a control area.
1.1.42 "Specifications" - mean the interconnection specifications provided in Appendix B to this Agreement, which are attached hereto and incorporated herein by reference.
1.1.43 "Tariff" - means Southern Companies Open Access Transmission Tariff or a successor arrangement that governs transmission and interconnection services on the transmission facilities of Georgia Power.
1.1.44 "Term" - means the duration of this Agreement as specified in Section 3.1.
SECTION 2: INTERCONNECTION SERVICE
2.1 Service. Georgia Power shall supply Generator with Interconnection Service at the Interconnection Point for the Facility in accordance with and for the Term of this Agreement. Interconnection Service does not include transmission delivery service beyond the Interconnection Point. Neither Georgia Power nor any of its Affiliates shall have any obligation under this Agreement to purchase any power from the Facility, it being the intent and understanding of the Parties that Generator shall be responsible for its power sales to third parties.
2.2 Facility. The Facility is located near the city of Athens, Jackson County, Georgia.
2.3 Permits. Generator shall obtain and maintain, at its sole expense, any and all governmental permits, certificates or authorizations that Generator is required to obtain and maintain for the performance of its obligations under this Agreement. Georgia Power shall obtain and maintain any and all permits, certificates or authorizations that are required for the construction, operation, maintenance, and testing of the Interconnection Facilities, the expense of which shall be paid by Generator in accordance with Section 5.
2.4 Easements and Access Rights.
2.4.1 To the extent that Generator has any such rights, Generator shall convey to Georgia Power at no cost to Georgia Power any and all rights of way and easements, including adequate and continued access rights to
property of Generator necessary to provide Interconnection Service to Generator. Generator agrees that such parcel, rights of way, and easements shall survive termination or expiration of this Agreement, if and to the extent necessary for the continued use or the removal of the Interconnection Facilities. Such easements and access rights are specifically intended to permit Georgia Power to install, operate, maintain, replace and/or remove the Interconnection Facilities.
2.4.2 Upon reasonable advance notice given to Generator,
representatives of Georgia Power (as the transmission asset owner) shall at all
reasonable times have access to the Generator's Interconnection Equipment and to
property owned or controlled by Generator to the extent necessary in order to:
(i) inspect, maintain, and test meters and other Georgia Power equipment; (ii)
interconnect, disconnect (in accordance with Section 3), monitor, or measure
energy generated by the Facility; (iii) inspect the operation, maintenance or
testing of the Generator's Interconnection Equipment; or (iv) take such other
action as may be reasonably necessary to exercise Georgia Power's rights under
this Agreement. Georgia Power shall take reasonable steps to ensure such access
does not materially interfere with the operations, maintenance or testing of the
Facility, and that Georgia Power's use of such property complies with Legal
Requirements with respect to the Facility as well as with Generator's reasonable
policies and procedures applicable to the Facility, including those regarding
safety. Generator shall cooperate in such physical inspections of the
Generator's Interconnection Equipment as may be reasonably required by Georgia
Power. Georgia Power's technical review and inspection of the Generator's
Interconnection Equipment shall not be construed as endorsing the design thereof
nor as any warranty of the safety, durability or reliability of the Facility.
2.4.3 To the extent that Georgia Power has any such rights, Georgia Power agrees to furnish at no cost to Generator any necessary licenses or other access rights to permit Generator to construct, connect, operate and maintain its facilities located in Georgia Power's substation or to otherwise fulfill its obligations under this Agreement. After the Interconnection Facilities are energized, such access rights for Generator's facilities located inside the substation shall be exercised by Generator only with supervision by Georgia Power. Generator shall provide to Georgia Power reasonable notice under the circumstances of a request for such supervised access to the substation, and Georgia Power and Generator shall mutually agree upon the date and time of such supervised access, such agreement not to be unreasonably withheld. In addition to the aforementioned requirement, in exercising such access rights, Generator shall not unreasonably disrupt or interfere with normal operations of Georgia Power's business and shall act consistent with Good Utility Practice.
2.5 Interconnection Point. Georgia Power shall establish and maintain the Interconnection Point, as described in Appendix B to this Agreement.
2.6 Station Service Arrangements. Generator is responsible for making all appropriate arrangements for station service requirements. Generator must demonstrate, to Georgia Power's reasonable satisfaction, that it has adequate arrangements in place to supply its station service requirements. If Generator supplies its running station service on Generator's side of the Interconnection Point, then energy consumed and demand requirements are deemed to be netted from Generator's capability. In this same arrangement, starting station service energy is also assumed to be netted out of energy delivered to the Interconnection Point.
2.7 Generator Balancing Service Arrangements. Generator is responsible for ensuring that its actual generation matches its scheduled delivery, on an integrated clock hour basis (in whole MW), to the Georgia Power Electric System at the Interconnection Point. Generator shall make arrangements for the supply of energy and/or capacity when there is a difference between the actual generation and the scheduled delivery. Generator may satisfy its obligation for making such generator balancing service arrangements by: (a) obtaining such service from another entity that (i) has generating resources within the Southern Company Control Area, (ii) agrees to assume responsibility for providing generator balancing service to the Generator and (iii) has a control area coordination services agreement with the Southern Companies that addresses generator balancing service for all generating resources for which the entity is responsible; (b) committing sufficient additional unscheduled generating resources to the control of and dispatch by the Southern Company Control Area that are capable of supplying any capacity and energy not supplied by the scheduled resource and entering into a control area coordination services agreement with the Southern Company Control Area operator that addresses generator balancing service obligations; (c) entering into an arrangement with another NERC-approved control area to dynamically schedule the Generator's Facility out of the Southern Company Control Area and into such other control area; (d) entering into a generator balancing service agreement with Southern Companies pursuant to their Generator Balancing Service Tariff on file with FERC; or (e) in the event the load/generation balancing function of the control area in which Georgia Power is a participant is provided by an entity other than Southern Companies, by entering into an alternate arrangement with such control area service provider.
2.8 Interconnection Procedures. When the Facility is operated as part of the Southern Company Control Area, Generator shall comply with the Interconnection Procedures (Appendix A) for the Facility at all times. When the Facility is not operated as part of the Southern Company Control Area, the Operating Committee shall determine which (if any) of the Interconnection Procedures are not applicable.
2.9 Interconnected Operation Services. Generator retains any right it may have to pursue compensation for the provision of interconnected operation services by making a filing with FERC. Georgia Power retains any right it may have to support or oppose such filing.
2.10 Control Area Operations. Nothing in this Agreement shall obligate Generator to operate the Facility as a part of the Southern Company Control Area.
2.11 Inadvertent Flow. Generator is not a transmission provider; and Georgia Power shall have no obligation under this Agreement to pay Generator any charge for flows of electric power and/or energy through Generator's Interconnection Equipment.
SECTION 3: TERM, TERMINATION AND DISCONNECTION
3.1 Term. This Agreement shall become effective on the Effective Date and shall continue in effect for a period of forty (40) years from the initial Effective Date unless terminated earlier by mutual written agreement of the Parties or otherwise pursuant to the provisions of this Agreement subject to any applicable Legal Requirement, and shall continue thereafter until terminated by either Party on at least one (1) year's notice.
3.2 Default.
3.2.1 A Party shall be in "Default" under this Agreement, if:
(i) the Party fails to comply with any material term or condition of this
Agreement; (ii) any material representation or warranty of the Party made
pursuant to this Agreement shall prove to be false or misleading in any material
respect when made or deemed made; or (iii) Generator makes an assignment for the
benefit of Generator's creditors, or voluntary or involuntary proceedings in
bankruptcy are instituted seeking to adjudge Generator a bankrupt, or if
Generator be adjudged a bankrupt, or if Generator's affairs are placed in the
hands of any court for administration.
3.2.2 This Agreement may be terminated by either Party, upon written notice, if the other Party is in Default hereunder and such Party (or its Permitted Financing Assignee) has not cured such breach within thirty (30) Days following written notice of such breach to the other Party. Provided, however, that in the event the Default is not capable of being cured within thirty (30) Days, the Agreement shall not be terminated if the Party in Default (or its Permitted Financing Assignee) has begun in good faith taking actions to cure within thirty (30) Days following such written notice and diligently proceeds to completion.
3.2.3 In the event of a Default by either Party and subject to that Party's right to cure, the non-defaulting Party may pursue any and all judicial and administrative remedies and relief available to it.
3.3 Permanent Disconnection. Upon termination of this Agreement
(whether due to the expiration of the Term or due to a Default as described in
Section 3.2), Georgia Power may permanently disconnect the Facility from the
Georgia Power Electric System in accordance with Good Utility Practices.
3.4 Temporary Disconnection.
3.4.1. Georgia Power (as transmission asset owner) may, consistent with Good Utility Practice and on a non-discriminatory basis, direct that the Facility be temporarily disconnected from the Georgia Power Electric System: (i) during an Emergency; (ii) if the operation and output of the Facility do not meet the requirements of this Agreement (even if Generator has commenced actions to cure such Default) and such condition could materially adversely affect the safe and reliable operation of the Georgia Power Electric System; (iii) if an inspection of the Facility reveals a hazardous condition, lack of scheduled maintenance or testing, or an operating characteristic of the Facility that could materially adversely affect the safe and reliable operation of the Georgia Power Electric System; (iv) if Generator has modified the Facility or interconnection protective devices in a manner that could reasonably
be expected to materially adversely affect the safe and reliable operation of the Georgia Power Electric System without the knowledge and approval of Georgia Power; (v) in the event of tampering with, or unauthorized use of, Georgia Power's equipment; (vi) if the operation of Generator's equipment materially adversely affects Georgia Power's equipment or the safe and reliable operation of the Georgia Power Electric System; or (vii) if necessary to construct, install, maintain, repair, replace, remove, investigate, inspect or test any part of the Interconnection Facilities or the transmission facilities of Georgia Power, in accordance with Section 15.2.4.
3.4.2 In the event of the occurrence of any of the conditions described in Section 3.4.1, Georgia Power shall give as much advance notice as practicable under the circumstances of the need for disconnection of the Facility to employees of Generator designated from time to time by Generator to receive such notice. Upon receipt of notice directing disconnection, Generator shall carry out the required action. Where circumstances do not permit such advance notice to Generator or Generator's employees, Georgia Power may disconnect the Facility from the Georgia Power Electric System without such notice in accordance with Good Utility Practices. Georgia Power shall reconnect the Facility as soon as reasonably practicable following the cessation or remedy of the event that led to the temporary disconnection. The Parties agree to cooperate and coordinate with each other to the extent necessary in order to restore the Facility, Interconnection Facilities, and the Georgia Power Electric System to their normal operating state.
3.4.3 Generator shall bear any direct cost incurred by Georgia Power as a result of any disconnection or reconnection caused by Generator's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Generator. Georgia Power shall bear any direct cost incurred by Generator as a result of any disconnection or reconnection caused by Georgia Power's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Georgia Power.
3.4.4 Generator reserves the right, in its sole discretion, to isolate or disconnect its Facility from the Georgia Power Electric System.
3.5 Survival of Rights. Upon termination or expiration of this Agreement, the Parties shall be relieved of their obligations under this Agreement except for the following obligations which shall survive termination or expiration: (i) the obligation to pay each other all amounts then owed and not paid under this Agreement; (ii) obligations arising from action or inaction during the period the Agreement was in effect under the indemnities provided for in this Agreement; and (iii) any other obligations which the Agreement specifically indicates shall survive termination or expiration.
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY
4.1 General Standards. During the Term, Generator shall have the sole responsibility to, and at its sole expense shall manage, control, operate and maintain the Facility in accordance with Good Utility Practices and the requirements set forth in this Agreement. Generator shall operate its generating equipment in parallel with the Georgia Power Electric System in accordance with the operating procedures in Appendix A to this Agreement and those established
by the Operating Committee in accordance with Section 15 and in accordance with the requirements of the NERC-recognized control area in which the Facility operates. All wiring, apparatus and other equipment necessary to receive or deliver electric energy on Generator's side of the Interconnection Point shall be supplied, maintained and operated by and at the expense of Generator.
4.2 Maintenance and Operation. Generator shall maintain and operate the Facility in accordance with Good Utility Practices. Generator shall not, without Georgia Power's prior written approval (which shall not be unreasonably withheld or delayed), make any change to its Facility which might adversely affect the operation of the Georgia Power Electric System.
SECTION 5: INTERCONNECTION FACILITIES
5.1.1 Georgia Power shall design, procure, install, and own the Interconnection Facilities needed for Georgia Power to provide Interconnection Service to Generator. Georgia Power shall be responsible for acquiring all necessary real property rights, easements, licenses, and rights of way and for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement. All Interconnection Facilities shall be and remain the property of Georgia Power. Georgia Power's obligations hereunder are dependent upon its securing and retaining the necessary rights, easements, privileges, franchises, permits and equipment for meeting such obligations; provided, however, that Georgia Power shall exercise reasonable efforts to secure and retain for the Term of this Agreement those rights, easements, privileges, franchises, permits and equipment.
5.1.2 Following commencement of commercial operation of the Facility and throughout the Term, Georgia Power shall be responsible for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement.
5.2 Costs of Interconnection Facilities. To the extent consistent with FERC policy, Generator shall be responsible for, and shall reimburse Georgia Power for, all costs and expenses reasonably incurred by or on behalf of Georgia Power in connection with the planning, design, construction, installation, testing, inspection, ownership, operation and maintenance of all or any part of the Interconnection Facilities during the Term of this Agreement.
5.3 Additional Interconnectors. In the instance where an entity other than Generator seeks to be the first additional Person to interconnect to the Georgia Power Electric System through the Interconnection Facilities that have been paid for by Generator (such other Person is referred to as the "Additional Interconnector") and where the Additional Interconnector seeks to interconnect for any purpose other than for Georgia Power to make a network upgrade, then
Georgia Power agrees that the Additional Interconnector shall be charged a pro rata share of the cost of its interconnection, as defined hereafter. For purposes of this subparagraph, the Additional Interconnector's pro rata share of its cost of interconnection shall be the sum of the incremental cost of physically interconnecting the Additional Interconnector to the Interconnection Facilities and the original cost of the Interconnection Facilities paid by Generator, including the price of the land provided by Generator (the sum of the incremental cost and the original cost hereafter referred to as "Combined Cost of Interconnection") and then dividing the Combined Cost of Interconnection by two (2) in order to determine both Generator's and the Additional Interconnector's "Pro Rata Share of the Combined Cost of Interconnection." Georgia Power shall then pay to Generator, or have the Additional Interconnector pay to Generator, the difference between the original cost of the Interconnection Facilities paid by Generator and Generator's Pro Rata Share of the Combined Cost of Interconnection; provided, however, that no such payment shall be required if it would result in the Generator bearing less than its Pro Rata Share of the Combined Cost of Interconnection. In the event that Persons additional and subsequent to the Additional Interconnector seek to interconnect to the Georgia Power Electric System through the Interconnection Facilities that have been paid for by Generator (such additional interconnectors referred to as "Subsequent Additional Interconnectors") and where the Subsequent Additional Interconnectors seek to interconnect for any purpose other than for Georgia Power to make a network upgrade, then Georgia Power agrees that the Subsequent Additional Interconnectors shall be charged a pro rata share of the cost of their respective interconnection, such cost to be determined in accordance with the methodology described above, and Georgia Power agrees further that in such event it shall pay, or have such Subsequent Additional Interconnectors pay to Generator and Additional Interconnector, reimbursement calculated based on the method described above, taking into account Generator's Pro Rata Share of the Combined Cost of Interconnection. Except in accordance with the cost sharing methodology set forth herein, Generator shall not be responsible for the costs of any modifications of the Interconnection Facilities that are not caused by the Generator. In no event shall Generator be obligated to pay any increased amount as a result of any Additional Interconnector or Subsequent Additional Interconnector. To the extent that all interconnectors do not have comparable interconnection points, the Combined Cost of Interconnection shall be adjusted appropriately.
5.4 Payment of Cost of On-Going Maintenance and Operation of the Interconnection Facilities
5.4.1 Georgia Power shall operate and maintain the Interconnection Facilities in accordance with Good Utility Practices and in a non-discriminatory manner.
5.4.2 Georgia Power shall develop an estimate of all costs and expenses to be paid by Generator for the operation and maintenance of the Interconnection Facilities on an annual basis and provide the annual estimate to Generator at least eight (8) weeks before December 31 of each year. In the case of Additional Interconnectors or Subsequent Additional Interconnectors,
Generator shall be responsible for up to its pro rata share, calculated in accordance with Section 5.3, of the costs of operation and maintenance of the Interconnection Facilities. Generator shall pay one-twelfth (1/12) of such estimated costs each Month in accordance with Section 10. In addition, Generator shall pay its pro rata share of all costs reasonably incurred by Georgia Power (excluding any such costs reimbursed to Georgia Power through insurance proceeds) to repair and restore the Interconnection Facilities caused by any Force Majeure Event upon receipt of an invoice in accordance with Section 10.
5.4.3 Georgia Power shall true-up this estimate to Georgia
Power's actual costs and expenses within a reasonable period of time after such
actual costs and expenses are known but not less often than annually. In the
event that the actual costs and expenses to be paid by Generator under this
Section 5.4 are more or less than Georgia Power's initial estimate, the
difference (either a credit or an additional charge) shall be reflected on a
subsequent invoice.
5.5 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect the Interconnection Facilities located on Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to the Interconnection Facilities arising from the failure of Generator to properly protect those Interconnection Facilities in accordance with Good Utility Practices.
5.6 Payment of the Cost of the Interconnection Facilities.
5.6.1 Generator shall pay Georgia Power in advance for the costs incurred related to the installation and construction of the Interconnection Facilities. Georgia Power shall develop a quarterly payment schedule that shall be based upon (i) the estimated costs to be incurred by Georgia Power in the installation and construction of the Interconnection Facilities, and (ii) the time periods that Georgia Power estimates that such costs will be incurred by Georgia Power ("Quarterly Estimated Construction Costs"). A current estimate of the Quarterly Estimated Construction Costs and the projected payment schedule are attached as Appendix C. Georgia Power may revise the schedule from time to time to more accurately reflect more current estimates of costs and/or to incorporate any needed true-up of estimated costs to actual costs. Georgia Power shall obtain authorization to proceed prior to proceeding with planning, construction, installation or testing of the Interconnection Facilities. Generator shall pay such estimated costs as specified in the payment schedule in accordance with Section 10. Generator shall have the right to approve any deviation in the scope of the work if such deviation would result in an estimated increase of ten percent (10%) or more over the estimated costs. In no event shall Georgia Power collect from Generator any estimated payment for any costs unless Georgia Power reasonably expects to actually incur such costs during the forthcoming Quarter.
5.6.2 During the construction of the Interconnection Facilities, Georgia Power shall true-up the estimated payments to Georgia Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator are more or less than Georgia Power's estimate, the difference (either a credit or additional charge) shall be reflected on a subsequent invoice. Georgia Power shall issue a final cost report within one hundred twenty (120) Days of the Facility's commercial operation date. The final report shall set forth in reasonable detail the actual costs of the Interconnection Facilities and shall true-up the estimated payments to actual costs. To the extent that the final, actual costs that are Generator's cost responsibility under this Agreement exceed the estimated costs already paid by Generator, Georgia Power shall invoice Generator in accordance with Section 10.1. To the extent that the
estimated costs already paid by Generator exceed the final, actual costs that are Generator's cost responsibility under this Agreement, Georgia Power shall refund to Generator an amount equal to the difference within twenty (20) Days of the issuance of the final cost report.
5.6.3 Georgia Power shall inform Generator on a monthly basis, and at such other times as Generator reasonably requests, of the status of the construction and installation of the Interconnection Facilities, including, but not limited to, the following information: progress to date; a description of scheduled activities for the next period; the delivery status of all equipment ordered; and the identification of any event which Georgia Power reasonably expects may delay construction of, or increase the cost of, the Interconnection Facilities.
5.6.4 Generator reserves the right, upon written notice to Georgia Power, to suspend at any time all work by Georgia Power associated with the construction and installation of the Interconnection Facilities. In such event, Generator shall be responsible for the costs which Georgia Power (i) has incurred prior to the suspension to the extent such costs previously were authorized by Generator and (ii) reasonably incurs in suspending such work, including without limitation, the costs incurred to ensure the safety of persons and property and the integrity of the Georgia Power Electric System and the costs incurred in connection with the cancellation of material and labor contracts, provided such cancellation has been authorized by Generator. Georgia Power will invoice Generator pursuant to Section 10.1 and agrees to use reasonable efforts to minimize its costs. If, after such suspension, Generator does not provide Georgia Power with written notice to proceed within three hundred sixty-five (365) Days after the notice of suspension, this Agreement shall be deemed terminated. If this Agreement is deemed terminated, Generator shall be responsible for costs reasonably incurred in winding up such work and the costs incurred in connection with the cancellation of material and labor contracts, to the extent to which Generator has not already reimbursed Georgia Power for such costs. Any non-returnable equipment that has not already been installed by Georgia Power shall become the property of Generator "as is" upon payment of Georgia Power's costs.
SECTION 6: LIABILITY AND INDEMNIFICATION
6.1 Remedies for Breach. Subject to Section 6.2, either Party shall be liable to the other for any loss resulting directly from any breach of this Agreement and which at the time of the breach was a reasonable foreseeable consequence of such breach.
6.2 Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT, NEITHER PARTY NOR ITS PERSONS INDEMNIFIED SHALL BE LIABLE TO THE
OTHER PARTY OR ITS PERSONS INDEMNIFIED FOR ANY CLAIMS, SUITS, ACTIONS OR CAUSES
OF ACTION FOR INCIDENTAL, PUNITIVE, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, DAMAGES IN THE CHARACTER OF LOSS OF PROFITS OR
REVENUES, DAMAGES SUFFERED BY GENERATOR'S OR GEORGIA POWER'S CUSTOMERS DUE TO
SERVICE INTERRUPTIONS, OR COST OF CAPITAL) CONNECTED WITH, RELATING TO, OR
ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY SUCH DAMAGES WHICH ARE BASED UPON CAUSES OF ACTION FOR BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE AND MISREPRESENTATION), BREACH OF WARRANTY, STRICT LIABILITY OR OTHERWISE. THE PROVISIONS OF THIS SECTION 6.2 SHALL APPLY REGARDLESS OF FAULT AND SHALL SURVIVE TERMINATION, CANCELLATION, SUSPENSION, COMPLETION, OR EXPIRATION OF THIS AGREEMENT.
6.3 No Liability for Other Party's Responsibilities. Neither Party nor its Persons Indemnified assumes any obligation or responsibility of any kind with respect to the other Party's equipment, including, without limitation, obligation or responsibility with respect to the condition or operation of said equipment, except for Generator's obligations and responsibilities hereunder for the Interconnection Facilities. Neither Party nor its Persons Indemnified shall be responsible for the transmission, distribution or control of electrical energy on the other Party's side of the Interconnection Point.
6.4 Responsibility for Property. Each Party shall be responsible for all physical damage to or destruction of, or any personal injury or death associated with, the property, equipment and/or facilities owned by it and located on its premises, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party or its Persons Indemnified for such damage, except in cases of the sole negligence or intentional wrongdoing by the other Party or its Persons Indemnified. Without limiting the generality of the foregoing, neither Party nor its Persons Indemnified shall be liable for damages or injury arising out of or resulting from the simple failure (i.e., failure of a device not caused by breach of contract, negligence or intentional wrongful act) of protective devices (e.g., circuit breakers).
6.5 Indemnification.
6.5.1 Generator shall at all times indemnify, defend, and hold harmless Georgia Power and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) the Generator's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction of Georgia Power's property properly located, pursuant to this Agreement, on premises owned, leased or controlled by Generator, except in cases of sole negligence or intentional wrongdoing by Georgia Power or its Persons Indemnified, or (iii) activities on Generator's property, except in the case of sole negligence or intentional wrongdoing by Georgia Power or its Persons Indemnified.
6.5.2 Georgia Power shall at all times indemnify, defend, and hold harmless Generator and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) Georgia Power's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction
of Generator's property located, pursuant to this Agreement, on premises owned, leased, or controlled by Georgia Power, except in cases of sole negligence or intentional wrongdoing by the Generator or its Persons Indemnified, or (iii) activities on Georgia Power's property, except in the case of sole negligence or intentional wrongdoing by Generator or its Persons Indemnified.
SECTION 7: METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT
7.1 Metering.
7.1.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all metering equipment necessary to provide information regarding power flow and voltage conditions at the Interconnection Point. All metering equipment of Generator shall conform to Good Utility Practices. Prior to its installation, Georgia Power and Generator shall review the metering equipment to ensure conformance with Good Utility Practices and Generator shall maintain the metering equipment in conformance with Good Utility Practices throughout the Term. The metering equipment described herein does not include station service metering equipment.
7.1.2 Electric capacity and energy received by the Georgia Power Electric System from Generator shall be measured by meters installed at the Interconnection Point. If and to the extent Generator's meters are not physically located at the Interconnection Point, the metered amount of energy shall be adjusted for losses as mutually agreed from the point of metering to the Interconnection Point in accordance with Good Utility Practices. Any Party performing such a study to determine the loss adjustment shall provide a copy to the other Party.
7.1.3 Generator shall provide, as required by Good Utility Practices and requested by Georgia Power, real-time telemetered load signals of its energy delivered to the Interconnection Point. Generator shall also read the meters owned by it and shall furnish to Georgia Power all meter readings and other information reasonably required for operations and for billing purposes under this Agreement. Such information shall remain available to Georgia Power for one (1) year or such longer period as may be required by any Legal Requirement.
7.1.4 The Parties agree that the meter readings provided by the Generator to Georgia Power, under normal circumstances, shall be used as the official measurement between the Parties of the amount of capacity and energy delivered from the Facility to the Interconnection Point.
7.1.5 Any time during the Term and after initial acceptance of the accuracy of Generator's telemetered information, if telemetered information is unavailable to Georgia Power, for any reason, the Generator shall provide integrated hourly meter readings to Georgia Power each hour until telemetry is returned to service in conformance with Good Utility Practices and Section 7.1.2.
7.2 Data Acquisition and Protection Equipment.
7.2.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all data acquisition equipment, protection equipment, and any other associated equipment and software, which may be reasonably required at any time during the Term by either Party for Generator to operate its facilities in parallel with Georgia Power. Such equipment shall conform to Good Utility Practices. Prior to its installation, Georgia Power and Generator shall review the equipment and software required by this Section 7 to ensure conformance with Good Utility Practices.
7.2.2 The selection of real time telemetry and data to be received by Georgia Power and Generator shall be at the reasonable discretion of Georgia Power, as deemed by Georgia Power necessary for reliability, security, revenue metering, and/or monitoring of the Facility's operations in conformance with Good Utility Practices. This telemetry includes, but is not limited to, voltages, generator output (MW, MVAR, and MWh) at the Interconnection Point and breaker status. Georgia Power shall provide to Generator real time telemetry of Georgia Power's breaker status. To the extent telemetry is required, Generator shall, at its own expense, install any telemetering equipment, data acquisition equipment, or other equipment and software necessary at the Facility for the telemetry of information to Georgia Power.
7.2.3 Generator shall be responsible for the reasonable cost that Georgia Power incurs in making any computer modifications or changes to Georgia Power's facilities or equipment necessary to implement this Section 7.
7.3 Payment of Cost of Metering, Data Acquisition, and Related Protection Equipment.
7.3.1 Prior to the commencement of Interconnection Service under this Agreement, Georgia Power shall develop and provide Generator an estimate of all costs and expenses that may be incurred by Georgia Power in connection with the installation of equipment and software under Sections 7.1 and 7.2. Georgia Power shall obtain Generator's consent thereto prior to proceeding with activities in connection with Sections 7.1 and 7.2. Generator shall pay such estimated costs in accordance with Section 10.
7.3.2 Georgia Power shall true-up this estimate to Georgia Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator to Georgia Power under Section 7.1 and 7.2 are more or less than Georgia Power's initial estimate, the difference (either a credit or an additional charge) shall be reflected on a subsequent invoice.
7.4 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect all equipment of Georgia Power located on Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to such equipment arising from the failure of Generator to properly protect such equipment in accordance with Good Utility Practices.
7.5 Inspection and Testing.
7.5.1 Meters, data acquisition, and related protection equipment at Generator's Interconnection Point shall be tested at least biennially by Generator in accordance with the provisions for meter testing as established in American National Standard Institute Code for Electricity Metering (ANSI) Standard C12.16 for Solid State Electricity Meters, as the same may be updated from time to time. Representatives of each Party shall be afforded an opportunity to witness such tests.
7.5.2 Generator shall, upon the reasonable request of Georgia Power, test its meters and data acquisition equipment at the Interconnection Point used for determining the receipt or delivery of capacity and energy by Georgia Power. In the event a test shows such equipment to be inaccurate, Generator shall make any necessary adjustments, repairs or replacements thereon.
7.6 Inaccuracies. If the metering fails to register, or if the measurement made by a metering device is found upon testing to vary by more than one percent (1.0%) from the measurement made by the standard meter used in the test, an adjustment shall be made correcting all measurements of energy made by the metering during (i) the actual period when inaccurate measurements were made by the metering, if that period can be determined to the mutual satisfaction of the Parties, or (ii) if the actual period cannot be determined to the mutual satisfaction of the Parties, one-half of the period from the date of the last test of the metering to the date such failure is discovered or such test is made (such period herein the "Adjustment Period"). If the Parties are unable to agree on the amount of the adjustment to be applied to the Adjustment Period, the amount of the adjustment shall be determined (a) by correcting the error if the percentage of error is ascertainable by calibration, tests or mathematical calculation, or (b) if not so ascertainable, by estimating on the basis of deliveries under similar conditions during the period since the last test. In the event Generator's metering equipment is found to be insufficiently reliable and/or inaccurate during any consecutive three (3) Month period, Georgia Power shall have the right to install suitable metering equipment at the Interconnection Point for the purpose of checking the meters installed by Generator, and Generator shall pay all costs related to such metering equipment.
SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING
8.1 Facility Evaluation Based on Actual Equipment Data. Generator agrees to provide updated application data ("actual equipment data") to Georgia Power that reflects information provided by equipment manufacturers for the actual equipment purchased by Generator for this Facility, as soon as it is available, but not later than ninety (90) Days prior to Initial Synchronization Date. Georgia Power agrees to review the actual equipment data to identify any adverse impacts to Georgia Power's Electric System caused by any material change in the Facility's operation and performance specifications that were not reasonably identifiable in studies performed using Generator's application data as initially provided. In the event any such adverse impacts are identified, Generator is responsible for modifying its equipment to eliminate such identified adverse impacts.
8.2 Implementation of Control and Operating Procedures. At least forty-five (45) Days prior to the Initial Synchronization Date, Generator and Georgia Power will: (a) jointly review the Control and Operating Procedures as developed by the Operating Committee, under Section 15 of this Agreement; (b) develop a training schedule for Facility and Georgia Power personnel under the Control and Operating Procedures; and (c) install and verify that communication links are complete for: (i) data telemetry, (ii) voice communications between Generator's Facility and Georgia Power's Transmission System control centers, and (iii) the transmittal of Facility and transmission system information on the Southern Company Generator Information Network.
8.3 Facility Inspection. Consistent with Good Utility Practices and unless otherwise agreed to by the Parties, all Interconnection Facilities shall be complete prior to the initial synchronization of the Facility with the Georgia Power Electric System. Within fifteen (15) Days after written notice is given to Georgia Power by Generator, an inspection shall be performed by Georgia Power to insure the proper installation and operation of the interconnection protective devices. The inspection shall include, without limitation, verification: (a) that the installation of Generator's equipment at the Facility is in accordance with the interconnection study; and (b) of proper voltage and phase rotation.
8.4 Initial Synchronization. Upon completion of the actions and reviews required under Sections 8.1, 8.2, and 8.3, Generator may request approval for initial synchronization of the Facility with the Georgia Power Electric System. Such request for approval shall be made no less than seven (7) Calendar Days in advance of the date which the Generator proposes for the Initial Synchronization Date. Initial synchronization shall not occur without the prior documented approval of Georgia Power, and such approval shall not be unreasonably withheld. Representatives of Georgia Power shall have the right to be present during the initial synchronization and facility testing. The activities under this Section 8, including without limitation, facility inspection, evaluation of actual equipment data, personnel training, use of Southern Company Generator Information Network, or the granting of approval to Generator for operation of the Facility in parallel with the Georgia Power Electric System shall not serve to relieve Generator of liability for injury, death or damage attributable to the negligence of Generator, and Georgia Power shall not be responsible as a result of such activities.
8.5 Review of Synchronization Tests. No less than forty-five (45) Days prior to the commercial operation date of the Facility, Generator shall provide Georgia Power copies of all applicable excitation system field test results (including chart recordings and actual data points in electronic form) and field settings, including (if applicable) Power System Stabilizer test results and settings in a format that conforms to the models previously submitted with the original application data. These tests include but are not limited to excitation system open circuit step in voltage tests, and (if applicable) Power System Stabilizer gain margin and phase compensation tests. Excitation system open circuit step in voltage test response chart recordings shall be provided showing generator terminal voltage, field voltage, and field current (exciter field voltage and current for brushless excitation systems) with sufficient resolution
such that the change in voltages and currents are clearly distinguishable. The excitation system open circuit step in voltage test data points corresponding to the chart recordings should also be submitted in electronic form. Georgia Power may require that Generator perform more detailed tests if there are significant differences between the excitation system open circuit step in voltage test response and the step response predicted through dynamic simulation of model data. Any problems identified as a result of changes from application data to actual field settings of the excitation system including (if applicable) Power System Stabilizers must be addressed and resolved as soon as practicable by the Generator in order for the Generator to continue to deliver power to the Interconnection Point.
SECTION 9: ADMINISTRATION CHARGE
Generator shall pay Georgia Power a Monthly Administration Charge of $5,000 per Month for all costs and expenses incurred by Georgia Power during such Month in connection with: (i) Georgia Power's administration of this Agreement; (ii) any taxes, assessments or other impositions for which Georgia Power may be liable as a result of any activity undertaken pursuant to this Agreement; (iii) reading meters; and (iv) accounting for capacity and energy flowing into or out of Generator's Facility. Georgia Power may revise the amount of the Monthly Administration Charge on an annual basis by making a filing in accordance with Section 12.3.
SECTION 10: PAYMENT PROCEDURE
10.1 Billing. Bills shall be issued to Generator in accordance with the following procedures:
10.1.1 Georgia Power shall issue a Quarterly invoice to Generator for the Quarterly Estimated Construction Costs.
10.1.2 Georgia Power shall issue a Monthly invoice to Generator for the estimated operation and maintenance charge, administrative charge, and other charges/credits determined pursuant to this Agreement as soon as practicable following the close of each Month.
10.1.3 All amounts owing to Georgia Power from Generator shall be due and payable in immediately available funds through wire transfer of funds or other means acceptable to Georgia Power within twenty (20) Calendar Days after the date of Georgia Power's invoice.
10.2 Failure to Timely Pay. If Generator fails to pay the amount billed by Georgia Power within twenty (20) Calendar Days after the date of Georgia Power's invoice (and such amount is not disputed in accordance with Section 10.6), Georgia Power may, at any time thereafter upon five (5) Business Days written notice, draw upon the letter of credit (or other form of security) of Generator to obtain payment for such invoice, as well as reasonable costs incurred to exercise its rights under this Section 10. In addition, Georgia Power may, at its option, treat such non-payment as a Default of this Agreement under Section 3.2 hereof.
10.3 Interest. Any amount due and payable from Generator to Georgia Power pursuant to this Agreement that is not received by the due date shall accrue interest from the due date at the Interest Rate.
10.4 Creditworthiness. Generator shall provide and maintain in effect during the Term of this Agreement an unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Georgia Power, including an appropriate parent security) as security to meet its responsibilities and obligations under this Agreement. The unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Georgia Power) shall be in the amount of $3,100,000.00 in immediately available funds through wire transfer of funds or other means acceptable to Georgia Power for activities arising prior to commercial operation of the Facility and in the amount of $175,000 for activities arising from the date of commercial operation of the Facility. Georgia Power shall be entitled to draw upon such letter of credit for amounts due it under this Agreement if not paid when due in accordance with Section 10.1 and not disputed in accordance with Section 10.6.
10.5 Audit Rights. Either Party shall have the right, during normal business hours, and upon prior reasonable notice to the other Party to audit each other's accounts and records pertaining to either Party's performance and/or satisfaction of obligations arising under this Agreement within one (1) year from the date of such performance or satisfaction of such obligation, including specifically, but not limited to, delivery of the final cost report as provided in Section 5.7.2. Said audit shall be performed at the offices where such accounts and records are maintained and shall be limited to those portions of such accounts and records that specifically relate to obligations under this Agreement. To the extent such accounts and records contain confidential information, the Parties agree to maintain the confidentiality of such information consistent with Section 17.19 hereof. In the event an audit reveals an improper assignment or allocation of costs or an error in billing, the Parties will make appropriate adjustments (either refunds or additional payments), with interest, within thirty (30) Days.
10.6 Disputed Bills. In the event of a billing dispute between Generator and Georgia Power, Georgia Power shall not terminate this Agreement, draw on the letter of credit for any disputed amounts, nor disconnect the Facility for failure to pay the disputed amount if Generator (i) continues to make all payments not in dispute and (ii), if requested by Georgia Power, pays into an independent escrow account the portion of the invoice in dispute.
10.7 No Waiver. Payment of any cost or invoice by Generator will not constitute a waiver of any rights or claims that Generator may have under or relating to this Agreement.
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS
11.1 Generator Representations, Warranties and Covenants. Generator makes the following representations, warranties and covenant as the basis for the benefits and obligations contained in this Agreement:
11.1.1 Generator is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, that it is qualified to do business in the State of Georgia and that it has the power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.1.2 The execution, delivery and performance by Generator of this Agreement has been duly authorized by all necessary company action, and does not and shall not require any consent or approval of Generator's Board of Directors or members, other than those which have been obtained.
11.1.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and shall not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirement, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Generator is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
11.1.4 This Agreement is the legal, valid and binding obligation of the Generator and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.1.5 There is no pending or, to the knowledge of Generator, threatened action or proceeding affecting Generator before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2 Georgia Power Representations, Warranties and Covenants. Georgia Power makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.2.1 Georgia Power is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia that it is qualified to do business in the State of Georgia and that it has the corporate power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.2.2 The execution, delivery and performance by Georgia Power of this Agreement has been duly authorized by all necessary corporate action, and does not and shall not require any consent or approval of Georgia Power's Board of Directors or shareholders, other than those which have been obtained.
11.2.3 This Agreement is the legal, valid and binding obligation of Georgia Power and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.2.4 There is no pending or, to the knowledge of Georgia Power, threatened action or proceeding affecting Georgia Power before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2.5 Georgia Power covenants to Generator that it will file this Agreement, and any amendments and/or modifications thereto, with FERC in accordance with all Legal Requirements.
11.3 Survival of Representations, Warranties and Covenants. The representations, warranties and covenants made by Generator and by Georgia Power (as the case may be) in Sections 11.1.1, 11.1.3, 11.1.4, 11.2.1, 11.2.3, and 11.2.5 shall survive the execution and delivery of this Agreement and any action taken pursuant hereto. The representations, warranties and covenants made by Generator and Georgia Power (as the case may be) in Sections 11.1.2, 11.1.5, 11.2.2 and 11.2.4 shall be true and accurate as of the date of execution of this Agreement.
SECTION 12: COMPLIANCE WITH LAWS
12.1 Compliance. Generator represents, warrants and covenants that as
of the Initial Synchronization Date and for the Term, Generator shall (i) be in
compliance with all Legal Requirements with respect to the ownership, operation
and maintenance of Generator's Interconnection Equipment, including without
limitation, all requirements to seek, obtain, maintain, comply with and, as
necessary, renew and modify from time to time, any and all applicable
certificates, licenses, permits and government approvals and all applicable
environmental certificates, licenses, permits and approvals, environmental
impact analysis, and if applicable, the mitigation of environmental impacts, and
(ii) pay all costs, expenses, charges and fees in connection with Section
12.1(i).
12.2 Change of Law. In the event that after the Execution Date there are changes to Legal Requirements, including, without limitation, changes to laws or regulations regulating or imposing a tax, fee or other charge, which cause Georgia Power to incur additional costs in providing Interconnection Service under this Agreement, Generator agrees to pay, to the extent consistent with FERC policy, such reasonable incremental costs incurred by Georgia Power in complying with such changes to Legal Requirements; provided, however, Generator shall be entitled to take reasonable action to mitigate, reduce or otherwise avoid the imposition of any such charges or costs.
12.3 Regulatory Filings. This Agreement is subject to approval by any
Governmental Authority having jurisdiction over the matters provided herein.
Nothing contained in this Agreement shall be construed as affecting in any way
(i) the right of Georgia Power to unilaterally make application to any and all
Governmental Authorities (including FERC) that may have jurisdiction over this
Agreement for a change in terms and conditions, charges, classification of
service, or for termination of this Agreement pursuant to applicable statutes
(including Sections 205 and 206 of the Federal Power Act) and those Governmental Authorities' rules and regulations or (ii) the ability of Georgia Power to exercise its rights under the rules and regulations of any Governmental Authority having jurisdiction over this Agreement. Nothing contained in this Agreement shall be construed as affecting in any way (i) the right of Generator to unilaterally make application to any and all Governmental Authorities (including FERC) that may have jurisdiction over this Agreement for a change in terms and conditions, charges, classification of service or for termination of this Agreement pursuant to applicable statutes (including Sections 205 and 206 of the Federal Power Act) and those Governmental Authorities' rules and regulations or (ii) the ability of Generator to exercise its rights under the rules and regulations of any Governmental Authority having jurisdiction over this Agreement. At least thirty (30) Days prior to any such unilateral filing, the Party intending to make the filing shall notify the other of such intent. The Parties agree to reasonably cooperate with each other with respect to such filings and to provide any information reasonably required by the requesting Party to comply with applicable filing requirements. This Agreement shall be modified or amended as necessary to reflect binding determinations with respect to such filings.
12.4 Taxes.
12.4.1 Generator shall not be required to pay taxes associated with reimbursement of construction costs or transfer of the Interconnection Facilities constructed by Generator unless Georgia Power is required to pay such tax. With respect to the payment by Generator of taxes associated with reimbursement of construction costs or transfer of the Interconnection Facilities, Georgia Power commits that in the event that any taxing authority, including but not limited to the Internal Revenue Service, taxes or attempts to tax the reimbursement or transfer, Georgia Power shall (i) exercise reasonable efforts to contest and defeat the taxation or attempted taxation of the reimbursement or transfer; (ii) promptly notify Generator in writing of that event in the manner provided in Paragraph 17.9 of this Agreement; and (iii) exercise reasonable efforts to cooperate with Generator in contesting any such taxation including, for example, allowing Generator to prepare at its own expense a private letter ruling request or other submission to the Internal Revenue Service or other taxing authority.
12.4.2 Generator shall at all times during the Term pay all charges, taxes, assessments and fees which may be assessed upon or against the Facility or upon or against Generator through Georgia Power by a Governmental Authority in accordance with Legal Requirements by reason of the sale or purchase of electricity by Generator or from Generator's Facility.
SECTION 13: INSURANCE
13.1 Generator's Insurance. If Generator is no longer an Affiliate of Georgia Power, Generator, at its expense, shall procure and maintain in effect during the Term, policies of insurance with insurance companies authorized to transact insurance in the State of Georgia or adequate self-insurance, reasonably acceptable to Georgia Power, providing, at a minimum, the coverage and limits specified and complying with the requirements stated below:
13.1.1 Worker's Compensation in statutory amounts and Employer's Liability with a minimum limit of $1,000,000 per person.
13.1.2 Commercial General Liability Insurance on an occurrence basis or AEGIS "claims made" form, with the following coverage and limits:
General Aggregate $1,000,000 Products-Completed Operations-Aggregate $1,000,000 Personal & Advertising Injury $1,000,000 Each Occurrence $1,000,000 Fire Damage (any one fire) $50,000 Medical Expense (any one person) $5,000 |
13.1.3 Business Automobile Liability covering autos of Generator, including owned, hired and non-owned autos, for Bodily Injury and Property Damage with a combined single limit of $1,000,000 each occurrence.
13.1.4 Excess Liability in Umbrella Form with a limit of $4,000,000 each occurrence, $4,000,000 Aggregate.
13.1.5 By signing this Agreement, Generator thereby waives all rights of subrogation against Georgia Power and its Persons Indemnified with respect to any claim or loss payable or paid under each of the policies set forth in 13.1.1, 13.1.2, 13.1.3, and 13.1.4 above and under any property insurance policy for the Facility that Generator has or acquires.
13.1.6 Generator shall cause its insurer(s) to add Georgia Power and its Persons Indemnified as an Additional Insured on the policies set forth in 13.1.2, 13.1.3, and 13.1.4 above with respect to liability of Georgia Power and its Persons Indemnified (a) arising out of the performance of operations, maintenance, work or services under this Agreement, and (b) arising out of the conduct contemplated in the ownership, maintenance or use of Generator's autos, but only to the extent of Generator's indemnity obligations under this Agreement and the coverages and limits specified in Sections 13.1.2, 13.1.3, and 13.1.4.
13.1.7 Subject to the limitations in Section 13.1.6, Generator's insurance shall be primary insurance with respect to the installation, operations, maintenance, work, or services contemplated under this Agreement and insurance of Georgia Power and its Persons Indemnified shall be excess of the Generator's insurance and shall not contribute with it.
13.1.8 To the extent that Generator utilizes deductibles or self-insurance in connection with the insurance coverage required herein, all such deductible and self-insured amounts shall be for the account and expense of Generator and shall not be considered as costs or fees provided for in this Agreement.
13.1.9 If the Generator uses contractors and/or subcontractors to perform any of the work contemplated under this Agreement, Generator shall require such contractors and/or subcontractors to maintain in effect insurance meeting these minimum limits and incorporating the contractual requirements prescribed by this Section 13.
13.2 Notice and Certification. Each of the above required policies shall contain a provision whereby the insurance carrier shall notify Georgia Power at least thirty (30) Days prior to the effective date of cancellation, non-renewal or material change in any of said policies. Generator shall submit to Georgia Power a Certificate, signed by an authorized representative of the insurance carrier, listing the policies, coverage and limits and certifying that the said policies shall be in effect for the time periods stated in the Certificate. The obligations for Generator to procure and maintain insurance shall not be construed to waive or restrict other obligations.
SECTION 14: FORCE MAJEURE
14.1 Definition of Force Majeure Event. For the purposes of this
Agreement, a "Force Majeure Event" as to a Party means any occurrence,
nonoccurrence or set of circumstances that is beyond the reasonable control of
such Party and is not caused by such Party's fault, negligence or lack of due
diligence, including, without limitation, flood, ice, lightning, earthquake,
windstorm or eruption; fire; explosion; invasion, war, civil disturbance,
commotion or insurrection; sabotage or vandalism; military or usurped power; or
act of God or of a public enemy; provided, however, in no event shall (i) the
inability to meet a Legal Requirement or the change in a Legal Requirement; or
(ii) a site specific strike, walkout, lockout or other labor dispute constitute
a Force Majeure Event.
14.2 No Breach or Liability. Each Party shall be excused from performing its respective obligations under this Agreement and shall not be liable in damages or otherwise if and to the extent that it is unable to so perform or is prevented from performing by a Force Majeure Event, provided that the non-performing Party shall:
14.2.1 Give the other Party notice thereof, followed by written notice if the first notice is not written, both notices to be given as promptly as possible after the non-performing Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
14.2.2 Use its reasonable best efforts to remedy its inability to perform as soon as practicable; provided, however, that this Section 14.2.2 shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest; provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of the Party having the difficulty; and
14.2.3 Resume performance of its obligations under this Agreement and give the other Party written notice to that effect, as soon as reasonably practicable following cessation of the Force Majeure Event.
14.3 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
SECTION 15: OPERATING COMMITTEE
15.1 Establishment of Committee. At least six (6) months prior to the estimated Initial Synchronization Date, Generator and Georgia Power shall each appoint one representative and one alternate to the Georgia Power - Generator Operating Committee ("Committee"). Each Party shall notify the other party of its appointment in writing. Such appointments may be changed at any time by similar notice. The Committee shall meet as necessary, but not less than once each calendar year, to carry out the duties set forth herein. The Committee shall hold a meeting at the request of either Party, at a time and place agreed upon by the representatives. Each representative and alternate shall be a responsible person working in the day-to-day operations of their respective electrical facilities. The Committee shall represent the Parties in all matters arising under this Agreement which may be delegated to it by mutual agreement of the Parties.
15.2 Duties. The duties of the Committee shall include, but are not limited to, the following:
15.2.1 Establish and maintain control and operating procedures, including those pertaining to information transfers between the Facility and Georgia Power consistent with the provisions of this Agreement.
15.2.2 Establish data requirements and operating record requirements in accordance with the terms and conditions of this Agreement.
15.2.3 Review the requirements, standards, and procedures data acquisition equipment, protective equipment, and any other equipment or software.
15.2.4 Annually review ten (10) year forecast of maintenance and availability schedules of Georgia Power's and Generator's facilities at the Interconnection Point and coordinate the scheduling of outages of and maintenance on the Interconnection Facilities, the Facility and any other facilities that impact the normal operation of the Interconnection Facilities.
15.2.5 Ensure that information is being provided by each Party regarding equipment availability.
15.2.6 Perform such other duties as may be conferred upon it by mutual agreement of the Parties.
15.2.7 Each Party shall cooperate in providing to the Committee all information required in the performance of the Committee's duties. All decisions and agreements, if any, made by the Committee shall be evidenced in writing. The Committee shall have no power to amend or alter the provisions of this Agreement.
SECTION 16: ASSIGNMENT
16.1 Assignment by Generator.
16.1.1 EXCEPT AS EXPRESSLY PERMITTED BELOW OR OTHERWISE AGREED TO BY THE PARTIES, GENERATOR SHALL NOT ASSIGN, TRANSFER, DELEGATE OR ENCUMBER THIS AGREEMENT AND/OR ANY OR ALL OF ITS RIGHTS, INTERESTS OR OBLIGATIONS UNDER THIS AGREEMENT AND ANY ASSIGNMENT, TRANSFER, DELEGATION OR ENCUMBERING BY GENERATOR (EXCEPT AS PERMITTED BELOW) SHALL BE NULL AND VOID. Notwithstanding the foregoing, so long as Generator is not in default under or breach of this Agreement, upon prior written notice to Georgia Power, Generator may collaterally assign its rights, interests and obligations under this Agreement to its lender or an agent for the benefit of its lenders providing financing or refinancing for the design, construction or operation of Generator's Facility in Jackson County, Georgia (a "Permitted Financing Assignee"); provided, however, that GENERATOR'S RIGHTS AND OBLIGATIONS (FINANCIAL OR OTHERWISE) UNDER THIS AGREEMENT SHALL CONTINUE IN THEIR ENTIRETY IN FULL FORCE AND EFFECT AS THE RIGHTS AND OBLIGATIONS OF A PRINCIPAL AND NOT AS A SURETY. Generator may collaterally assign its rights, interests and obligations hereunder to multiple Permitted Financing Assignees, but only if those Permitted Financing Assignees designate one agent to act for them collectively under this Agreement.
16.1.2 Georgia Power shall, upon serving Generator any notice of Default or the termination of this Agreement, also serve a copy of such notice upon the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. No notice of Default purporting to terminate this Agreement shall be deemed to have been given unless and until a copy thereof shall have been given to the Permitted Financing Assignee or the agent for multiple Permitted Financing Assignees. A Permitted Financing Assignee shall be entitled to cure any Default during any cure period provided herein.
16.1.3 The Permitted Financing Assignee shall not be entitled to assign or transfer this Agreement to any purchaser in foreclosure, purchaser in lieu of foreclosure or similar purchaser or transferee ("Purchaser in Foreclosure") unless and until such Purchaser in Foreclosure has (i) executed and delivered to Georgia Power and is in compliance with an agreement in form and substance acceptable to Georgia Power whereby such Purchaser in Foreclosure assumes and agrees to pay and perform all then outstanding and thereafter arising obligations of Generator under this Agreement and (ii) established to Georgia Power's reasonable satisfaction that such Purchaser in Foreclosure has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Notwithstanding the foregoing, all obligations of Generator to Georgia Power under this Agreement incurred prior to the time the Purchaser in Foreclosure fully assumes this Agreement shall also be and remain enforceable by Georgia Power against Generator. Any assignment to a Purchaser in Foreclosure shall be subject to Georgia Power's rights hereunder.
16.1.4 So long as Generator is not in Default under or breach of this Agreement, upon prior written notice to Georgia Power, Generator may absolutely assign all, but not less than all, of its rights, interests and obligations under this Agreement to another generator ("Outright Assignee") provided however, that Generator's obligations under this Agreement shall continue and Georgia Power shall have no obligations to such Outright Assignee unless and until such Outright Assignee has (i) executed and delivered to Georgia Power and is in compliance with an agreement in form and substance reasonably acceptable to Georgia Power whereby such Outright Assignee assumes and agrees to pay and perform all thereafter arising obligations of Generator under this Agreement and (ii) established to Georgia Power's reasonable satisfaction that such Outright Assignee has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Any assignment to an Outright Assignee shall be subject to Georgia Power's rights hereunder.
16.1.5 Generator shall indemnify, defend and hold harmless
Georgia Power and its Persons Indemnified from and against any and all losses,
liabilities, obligations, claims, demands, damages, penalties, judgments, costs
and expenses, including, without limitation, reasonable attorneys' fees and
expenses, howsoever and by whomsoever asserted, arising out of or in any way
connected with any collateral, outright or other assignment by Generator or any
foreclosure or other exercise of remedies by the Permitted Financing Assignee of
this Agreement or Generator's or the Permitted Financing Assignee's rights or
interests under this Agreement. Notwithstanding any other provision of this
Section 16.1, Generator shall not be obligated to indemnify and hold harmless
Georgia Power from and against any loss, liability, obligation, claim, demand,
damage, penalty, judgment, cost or expense to the extent caused by the sole
negligence or willful misconduct Georgia Power or its Persons Indemnified.
16.1.6 No agreement between the Parties modifying, amending, canceling or surrendering this Agreement shall be effective without the prior written consent of the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. Subject to any cure periods provided to the Permitted Financing Assignee in this Agreement or in any consents to assignment, no such prior written consent is required for Georgia Power to take unilateral action under this Agreement, including (without limitation) Sections 3.2, 3.3, 3.4, 10.2, 12.2 and 12.3.
16.1.7 Georgia Power agrees to reasonably cooperate with Generator and any Permitted Financing Assignee in connection with the collateral assignment of this Agreement; provided, however, that Georgia Power shall not be obligated to take any action that could, in its judgment, result in an expansion of its obligations, risks or liabilities or a violation of any law, regulation or order of a Governmental Authority.
16.2 Assignment by Georgia Power. So long as Georgia Power is not in breach of this Agreement, Georgia Power may, at any time, without notice to, or the consent of, Generator or any other Person, including, without limitation, any Permitted Financing Assignee, Purchaser in Foreclosure or Outright Assignee,
sell, assign, delegate, encumber or transfer to any Indenture Trustee, Affiliate, any successor by merger or otherwise of Georgia Power or any Qualified Person, and/or create or permit to exist Permitted Liens against, all or any part of this Agreement and/or Georgia Power's rights, obligations, title or interest in, to and under this Agreement. Provided, however, Generator reserves its right to oppose any such assignment before any Governmental Authority having jurisdiction.
SECTION 17: MISCELLANEOUS
17.1 Georgia Power's Agent. Wherever this Agreement requires Generator to provide information, schedules, notice or the like to, or to take direction from, Georgia Power, Generator shall provide information, schedules, notice or the like to, or receive from, Georgia Power or such agent of Georgia Power as Georgia Power may direct from time to time.
17.2 No Partnership. Generator and Georgia Power do not intend for this Agreement to, and this Agreement shall not, create any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit.
17.3 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon any respective successors and assigns of Generator and Georgia Power.
17.4 No Third Party Benefit. Nothing in this Agreement shall be construed to create any duty, obligation or liability of a Party to any person or entity not a Party to this Agreement.
17.5 No Affiliate Liability. Notwithstanding any other provision of this Agreement, no Affiliate of either Party (including without limitation any Affiliate acting as either Party's agent where said agent is given certain authorities pursuant hereto) shall have any liability whatsoever for either Party's performance, nonperformance or delay in performance under this Agreement.
17.6 Time of Essence. Time is of the essence of this Agreement.
17.7 No Waiver. Neither Georgia Power's nor Generator's failure to enforce any provision or provisions of this Agreement shall in any way be construed as a waiver of any such provision or provisions as to any future violation thereof, nor prevent it from enforcing each and every other provision of this Agreement at such time or at any time thereafter. The waiver by either Georgia Power or Generator of any right or remedy shall not constitute a waiver of its right to assert said right or remedy, at any time thereafter, or any other rights or remedies available to it at the time of or any time after such waiver.
17.8 Amendments. Except as provided in Section 12.3, this Agreement may be amended by and only by a written instrument duly executed by each of Generator and Georgia Power, which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
17.9 Notice. Any notice, request, consent or other communication
permitted or required by this Agreement shall be in writing and shall be deemed
given on the Day hand-delivered to the representative identified below, on the
Day of facsimile transmission to the facsimile number stated below, or the third
(3rd) Day after the same is deposited in the United States Mail, first class
postage prepaid, and if given to Georgia Power shall be addressed to:
Georgia Power Company
Attn: Vice President, Transmission
241 Ralph McGill Boulevard
Atlanta, Georgia 30308
Facsimile: (404) 506-2433
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Transmission Services
600 North 18th Street
Birmingham, Alabama 35203
Facsimile: (205) 257-6663
and if given to Generator, it shall be addressed to:
Southern Power Company
Attn: Vice President, Generation, Planning and Development
600 North 18th Street
Bin 15N-8181
Birmingham, Alabama 35203
Facsimile: (205) 257-5703
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Generation Development
600 North 18th Street
Bin 15N-8186
Birmingham, Alabama 35203
Facsimile: (205) 257-6336
unless Georgia Power or Generator shall have designated a different representative or address for itself by written notice to the other. Generator shall comply with reasonable requirements of Georgia Power regarding communications with Georgia Power relative to the performance of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
17.11 Cross-References. All cross-references contained in this Agreement to Sections, are to the Sections of this Agreement, unless otherwise expressly noted.
17.12 Section Headings. The descriptive headings of the various Sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof.
17.13 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.
17.14 Governing Law. The validity, interpretation and performance of this Agreement, and each of its provisions, are subject to and shall be governed by applicable federal law, and where not preempted by federal law, by the laws of the State of Georgia, without giving effect to conflict of laws principles.
17.15 Merger. This Agreement represents the entire agreement between the Parties and all previous communications, representations and agreements between the Parties regarding the subject matter of this Agreement, whether oral or written, are hereby superseded.
17.16 NERC. To the extent not inconsistent herewith, Generator shall comply with any operational specifications and requirements specified by Georgia Power and all planning standards and operating guidelines of the North American Electric Reliability Council or its successor.
17.17 Good Utility Practices. Each Party shall discharge its respective obligations under this Agreement in accordance with Good Utility Practices.
17.18 Safety. Each Party shall comply with the applicable provisions of the National Fire Protection Association Code, the American National Electrical Code, the National Electrical Safety Code and other applicable code requirements. Each Party shall furnish and maintain, at its own expense, proper and adequate facilities, equipment, machinery, tools and supplies necessary to maintain its facilities and premises as a safe workplace and have available at all times for use by its employees, agents, independent contractors, suppliers, vendors and borrowed employees and all safety equipment needed for the protection of that Party's employees, agents, independent contractors, suppliers, vendors and borrowed employees against injuries. Each Party shall be solely responsible for providing for the safety of its facilities and premises and of its employees, agents, independent contractors, suppliers, vendors and borrowed employees.
17.19 Confidential Information. Confidential Information shall mean any confidential and/or proprietary information provided by Georgia Power or Generator ("Disclosing Party") to the other party ("Receiving Party") and which is clearly marked or otherwise designated as "CONFIDENTIAL." For purposes of this Agreement, all design, operating specifications and metering data provided by Generator shall be deemed confidential regardless of whether it is clearly marked or otherwise designated as such. Except as otherwise provided herein, each Party shall hold in confidence and shall not disclose Confidential Information to any person (except employees, officers, representatives and agents that agree to be bound by this Section 17 or FERC's Standards of Conduct). Confidential Information shall not include information that the Receiving Party can demonstrate: (a) is generally available to the public other than as a result of a disclosure by the Receiving Party; (b) was in the lawful possession of the Receiving Party on a non-confidential basis before receiving it from the Disclosing Party; (c) was supplied to the Receiving Party without restriction by a third party, who, to the knowledge of the Receiving Party, was under no obligation to the Disclosing Party to keep such information confidential; (d) was independently developed by the Receiving Party without reference to Confidential Information of the Disclosing Party; or (e) was disclosed with the prior written approval of the Disclosing Party. Georgia Power, or its agent acting as Transmission Provider under the Tariff, may release or disclose certain Confidential Information of the Disclosing Party to other Transmission Providers, SERC, or NERC if necessary or appropriate in connection with its role as Transmission Provider. If a court, government agency or entity with the right, power, and authority to do so, requests or requires either Party, by subpoena, oral deposition, interrogatories, requests for production of documents, administrative order, or otherwise, to disclose Confidential Information, that Party shall provide the other Party with prompt notice of such request(s) or requirement(s) so that the other Party may seek an appropriate protective order or waive compliance with the terms of this Agreement. In the absence of a protective order or waiver the Party shall disclose such Confidential Information which, in the opinion of its counsel, the Party is legally compelled to disclose. Each Party will use reasonable efforts to obtain reliable assurance that confidential treatment will be accorded any Confidential Information so furnished.
17.20 Cooperation. Each Party to this Agreement shall reasonably cooperate with the other as to all aspects relating to the performance of its respective obligations under this Agreement; provided, however, this agreement of cooperation shall not constitute a waiver or relinquishment of either Party's rights under this Agreement in law or equity.
17.21 Negotiated Agreement. The Parties agree that this Agreement is the result of mutual compromise and shall not be construed as having been drafted by either Party. The Parties agree to support the acceptance of the Agreement in its entirety by FERC.
17.22 Subcontractors. Nothing in this Agreement shall be construed as preventing either Party from utilizing the services of subcontractors as it deems appropriate; provided, however, that all such contractors comply with the applicable terms and conditions of this Agreement. The creation of any subcontract relationship shall not relieve the retaining Party of any of its obligations under this Agreement.
17.23 EWG Status. Nothing in this Agreement shall require Generator to take any action that could result in its inability to obtain, or its loss of, status as an Exempt Wholesale Generator within the meaning of the Public Utility Holding Company Act of 1935, as amended.
IN WITNESS WHEREOF, Generator and Georgia Power have caused this Agreement to be executed by their duly authorized representatives on the Day and year first above written.
SOUTHERN POWER COMPANY
"Generator"
By: _________________________
Title: ________________________
Date:_________________________
GEORGIA POWER COMPANY
"Georgia Power"
By: _________________________
Title: ________________________
Date:_________________________
APPENDIX A
INTERCONNECTION PROCEDURESAPPENDIX AINTERCONNECTION PROCEDURES
INTERCONNECTION PROCEDURES
The following requirements apply to Generator's Facility when operated in parallel with the Georgia Power Electric System.
In order to minimize objectionable and adverse operating conditions on the electric service provided to other customers by Georgia Power, the Facility shall meet the following operating criteria:
When Generator is delivering power to the Georgia
Power Electric System, Generator shall operate its generation to meet the
voltage schedule, as measured at the transmission bus serving the Facility,
communicated by the Georgia ITS operator. The current voltage schedules
for the Interconnection Point to the Facility is attached to this Appendix A.
If the Generator cannot hold the voltage schedule but is producing or absorbing
its maximum amount of MVARs for the level of MW output that it is then
operating at, then that is acceptable performance provided that each unit
of the Generator that is then generating is producing no less than 0.33
MVAR/MW x the unit's Continuous Rated MW Output or absorbing no less than
0.23 MVAR/MW x the unit's Continuous Rated MW Output. For purposes of this
paragraph, the "Continuous Rated MW Output" for each of the Generator's
units comprising the Facility shall be ten (10) CT's with a total output of
800 MW.
The Facility shall maintain a nominal operating frequency of 60 hertz. Generator may be required to assist in supporting system frequency if requested by Georgia Power.
The Facility shall be capable of providing an immediate and sustained response to abnormal frequency excursions within the machine design parameters. The governors shall be properly maintained and shall provide droop characteristics consistent with the requirements of NERC, SERC and the Georgia Power Electric System. At a minimum, governors shall be fully responsive to frequency deviations consistent with the requirements of NERC, SERC and the Georgia Power Electric System during normal operating conditions only, as defined by Good Utility Practices. In no event shall the governors be blocked by Generator without the express written permission of Georgia Power.
Appendix A page 1 of 4
a. Reactive Power Production. At continuous rated output, simulations must show that Generator's Facility shall have the capability of dynamically supplying at least 0.33 MVARS at the 230 kV Interconnection Point for each MW supplied when the Facility is tested at 101% of nominal voltage.
b. Reactive Power Absorption. The Facility shall also be capable of dynamically absorbing 0.23 MVARs from the transmission system for each MW supplied at the 230 kV Interconnection Point during simulations when the Facility is tested at 104% of nominal voltage. Simple Cycle combustion turbines used as peaking generation may be exempted from the MVAR absorption requirements.
The Facility shall not introduce excessive distortion to the Georgia Power Electric System's voltage profile and current waveforms. The harmonic distortion measurements shall be made at the transmission facility serving the Facility and be within the limits specified in the tables below.
MAXIMUM ALLOWABLE HARMONIC CONTENT (CURRENT)
(in percent of total current)
Harmonic Order Number (h)
h 11 11h 17 17 h 23 23 h35 35h
ODD 2.0 1.0 0.75 0.30 0.15
EVEN 0.50 0.25 0.19 0.075 0.04
|
Total current harmonic distortion may not exceed 2.5%
MAXIMUM ALLOWABLE HARMONIC CONTENT (VOLTAGE)
(in percent)
For nominal voltage at interconnection point of 69 kV to 115 kV Maximum Individual Harmonic: 1.50 Maximum Total Harmonic Distortion: 2.50
For nominal voltage at interconnection point of 161 kV and above Maximum Individual Harmonic: 1.00 Maximum Total Harmonic Distortion: 1.50
Appendix A page 2 of 4
To minimize possible adverse effects on other Georgia Power customers, a power transformer is required between the Facility and the Georgia Power Electric System. This transformer's windings shall be connected according to the requirements of Georgia Power.
Generator shall not energize, or de-energize, Georgia Power equipment. The necessary control devices shall be installed by Generator on the Facility to prevent the energization of de-energized Georgia Power equipment by Generator's Facility.
Generator is responsible for the synchronization of the Facility to the Georgia Power Electric System. Georgia Power shall have relaying on the ring bus segment at the Interconnection Point and Generator must insure that its Facility is disconnected from Georgia Power whenever a ring bus segment at the Interconnection Point is de-energized. Georgia Power may re-energize the ring bus segment by remote control and Georgia Power shall not be responsible for damage to Facility due to an out of phase condition during re-energization.
Georgia Power shall provide the data protocol, and Generator shall install as part of the Interconnection Facilities any equipment necessary to deliver telemetered signals to Georgia Power specifying the voltage and watts, vars, and watthours delivered to the Georgia Power Electric System at the Interconnection Point.
Appendix A page 3 of 4
VOLTAGE SCHEDULES
AT THE INTERCONNECTION POINT
SOUTHERN POWER COMPANY
Commencing with the Effective Date of the Interconnection Agreement, Generator shall maintain the following voltage schedules as communicated by Georgia Power from time to time:
Schedule #1 - Southern Company Control Area Maximum Load for the Day greater
than 33,000 MW
Operating Time Voltage
-------------- --------
0000-0700 236 kV
0700-2100 238 kV
2100-2400 236 kV
|
Schedule #2 - Southern Company Control Area Maximum Load for the Day between 28,000 and 33,000 MW
Operating Time Voltage
-------------- --------
0000-0700 235 kV
0700-2000 238 kV
2000-2400 236 kV
|
Schedule #3 - Southern Company Control Area Maximum Load for the Day between 23,000 and 28,000MW
Operating Time Voltage
-------------- --------
0000-0800 235 kV
0800-1900 236 kV
1900-2400 236 kV
|
Schedule #4 - Southern Company Control Area Maximum load for the Day below 23,000 MW
Operating Time Voltage
-------------- --------
0000-0600 234 kV
0600-2100 236 kV
2100-2400 234 kV
|
The Georgia ITS system operator's determination of whether Schedule 1, 2, 3, or 4 should be used for a given period shall be based on expectations of system requirements and conditions. The voltage schedule to be used, for the upcoming week, shall be communicated to Generator each Friday and at such other times as changing system requirements and conditions may require.
Appendix A page 4 of 4
APPENDIX B
SPECIFICATIONS
TO
INTERCONNECTION AGREEMENT
BETWEEN
SOUTHERN POWER COMPANY
AND
GEORGIA POWER COMPANY
1. Location of Interconnection Point:
The Interconnection Point will be at the Center Primary 230 kV Substation located in Jackson County, Georgia.
2. Projected Dates Generator's Facilities will connect to Georgia Power:
This is an existing facility, which is currently connected and operating with the Georgia Power Electric System.
3. Description of Interconnection Point:
The point, as shown on the attached one line diagram, at which the Generator's 230 kV conductors connect to the 230 kV breaker line side disconnect and bypass switches at the Center Primary 230 kV Substation.
4. Description of Station Service Connections:
Should Generator require station service in addition to that which Generator can self-provide, separate arrangements will be made by Generator.
5. Description of Generator's Facility:
The Generator's Facility under this Agreement is an 800 MW Combustion Turbine (CT) facility.
6. Interconnection Facility Requirements:
The Interconnection Facilities are sufficient to accommodate approximately 800 MW.
Appendix B page 1 of 3
7. Description of Georgia Power's Interconnection Facilities:
Interconnection Facilities under this Agreement include the Estimated Cost
following: (000's)
1. 230 kV line terminal at the Center Primary 230 kV $ 560
substation.
2. Two (2) 230 kV line structures and one (1) span of 230 kV $ 326
line and fiber optic cable between Generator's Facility
and Center Primary 230 kV substation.
3. Adjustments to existing transmission facilities to provide $ 240
for installation of item 2. above
8. Description of Generator's Interconnection Equipment:
Interconnection Equipment under this Agreement include the Estimated Cost
following:
1. Five (5) GSU transformers connected delta on the generator Owned by Southern Power
side and solidly grounded wye on the 230 kV side
2. Five (5) 230 kV circuit switchers used for GSU protection. Owned by Southern Power
3. 230 kV collector bus. Owned by Southern Power
4. One (1) 230 kV circuit and fiber optic circuit from Owned by Southern Power
Generator's Facility to the Center Primary 230kV
Substation (except for item 2 in section 7. Above).
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The specifications for all such equipment in items 7 and 8 above will be determined in accordance with this Agreement, Georgia Power specifications provided to the Generator in writing and Good Utility Practices.
Appendix B Paged 2 of 3
SOUTHERN POWER COMPANY- DAHLBERG
SINGLE LINE DIAGRAM
APPENDIX C
QUARTERLY ESTIMATED
CONSTRUCTION COSTS
The Generator's estimated total cost responsibility for the Interconnection Facilities is $1,126,000.
Appendix C Page 1 of 1
Exhibit 10.9
INTERCONNECTION AGREEMENT
By and Between
SOUTHERN POWER COMPANY
and
GEORGIA POWER COMPANY
for
WANSLEY CC UNITS 6 & 7
Dated as of May 10, 2001
TABLE OF CONTENTS
SECTION 1: DEFINITIONS............................................................................................1
SECTION 2: INTERCONNECTION SERVICE.................................................................................6
2.1 SERVICE.....................................................................................................6
2.2 FACILITY....................................................................................................6
2.3 PERMITS.....................................................................................................6
2.4 EASEMENTS AND ACCESS RIGHTS.................................................................................6
2.5 INTERCONNECTION POINT.......................................................................................7
2.6 STATION SERVICE ARRANGEMENTS................................................................................7
2.7 GENERATOR BALANCING SERVICE ARRANGEMENTS....................................................................7
2.8 INTERCONNECTION PROCEDURES..................................................................................8
2.9 INTERCONNECTED OPERATION SERVICES...........................................................................8
2.10 CONTROL AREA OPERATIONS....................................................................................8
2.11 INADVERTENT FLOW...........................................................................................8
SECTION 3: TERM, TERMINATION AND DISCONNECTION....................................................................8
3.1 TERM........................................................................................................8
3.2 DEFAULT.....................................................................................................9
3.3 PERMANENT DISCONNECTION.....................................................................................9
3.4 TEMPORARY DISCONNECTION.....................................................................................9
3.5 SURVIVAL OF RIGHTS.........................................................................................10
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY.....................................................10
4.1 GENERAL STANDARDS..........................................................................................10
4.2 MAINTENANCE AND OPERATION..................................................................................10
SECTION 5: INTERCONNECTION FACILITIES............................................................................11
5.1 INTERCONNECTION FACILITIES.................................................................................11
5.2 COSTS OF INTERCONNECTION FACILITIES........................................................................11
5.3 ADDITIONAL INTERCONNECTORS.................................................................................11
5.4 PAYMENT OF COST OF ON-GOING MAINTENANCE AND OPERATION OF THE INTERCONNECTION FACILITIES....................12
5.5 CARE OF EQUIPMENT..........................................................................................13
5.6 PAYMENT OF THE COST OF THE INTERCONNECTION FACILITIES......................................................13
SECTION 6: LIABILITY AND INDEMNIFICATION.........................................................................14
6.1 REMEDIES FOR BREACH........................................................................................14
6.2 LIMITATION OF LIABILITY....................................................................................14
6.3 NO LIABILITY FOR OTHER PARTY'S RESPONSIBILITIES............................................................14
6.4 RESPONSIBILITY FOR PROPERTY................................................................................15
6.5 INDEMNIFICATION............................................................................................15
SECTION 7: METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT..........................................15
7.1 METERING...................................................................................................15
7.2 DATA ACQUISITION AND PROTECTION EQUIPMENT..................................................................16
7.3 PAYMENT OF COST OF METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT............................17
7.4 CARE OF EQUIPMENT..........................................................................................17
7.5 INSPECTION AND TESTING.....................................................................................17
7.6 INACCURACIES...............................................................................................18
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SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING..........................................................18
8.1 FACILITY EVALUATION BASED ON ACTUAL EQUIPMENT DATA.........................................................18
8.2 IMPLEMENTATION OF CONTROL AND OPERATING PROCEDURES.........................................................18
8.3 FACILITY INSPECTION........................................................................................18
8.4 INITIAL SYNCHRONIZATION....................................................................................19
8.5 REVIEW OF SYNCHRONIZATION TESTS............................................................................19
SECTION 9: ADMINISTRATION CHARGE.................................................................................19
SECTION 10: PAYMENT PROCEDURE....................................................................................20
10.1 BILLING...................................................................................................20
10.2 FAILURE TO TIMELY PAY.....................................................................................20
10.3 INTEREST..................................................................................................20
10.4 CREDITWORTHINESS..........................................................................................20
10.5 AUDIT RIGHTS..............................................................................................20
10.6 DISPUTED BILLS............................................................................................21
10.7 NO WAIVER.................................................................................................21
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS............................................................21
11.1 GENERATOR REPRESENTATIONS, WARRANTIES AND COVENANTS.......................................................21
11.2 GEORGIA POWER REPRESENTATIONS, WARRANTIES AND COVENANTS...................................................22
11.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................................22
SECTION 12: COMPLIANCE WITH LAWS.................................................................................23
12.1 COMPLIANCE................................................................................................23
12.2 CHANGE OF LAW.............................................................................................23
12.3 REGULATORY FILINGS........................................................................................23
12.4 TAXES.....................................................................................................24
SECTION 13: INSURANCE............................................................................................24
13.1 GENERATOR'S INSURANCE.....................................................................................24
13.2 NOTICE AND CERTIFICATION..................................................................................25
SECTION 14: FORCE MAJEURE........................................................................................25
14.1 DEFINITION OF FORCE MAJEURE EVENT.........................................................................25
14.2 NO BREACH OR LIABILITY....................................................................................26
14.3 SUSPENSION OF PERFORMANCE.................................................................................26
SECTION 15: OPERATING COMMITTEE..................................................................................26
15.1 ESTABLISHMENT OF COMMITTEE................................................................................26
15.2 DUTIES....................................................................................................26
SECTION 16: ASSIGNMENT............................................................................................27
16.1 ASSIGNMENT BY GENERATOR...................................................................................27
16.2 ASSIGNMENT BY GEORGIA POWER...............................................................................29
SECTION 17: MISCELLANEOUS.........................................................................................29
17.1 GEORGIA POWER'S AGENT.....................................................................................29
17.2 NO PARTNERSHIP............................................................................................29
17.3 SUCCESSORS AND ASSIGNS....................................................................................29
17.4 NO THIRD PARTY BENEFIT....................................................................................29
17.5 NO AFFILIATE LIABILITY....................................................................................30
17.6 TIME OF ESSENCE...........................................................................................30
17.7 NO WAIVER.................................................................................................30
17.8 AMENDMENTS................................................................................................30
17.9 NOTICE....................................................................................................30
17.10 COUNTERPARTS.............................................................................................31
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17.11 CROSS-REFERENCES.........................................................................................31 17.12 SECTION HEADINGS.........................................................................................31 17.13 INCLUDING................................................................................................31 17.14 GOVERNING LAW............................................................................................31 17.15 MERGER...................................................................................................31 17.16 NERC.....................................................................................................32 17.17 GOOD UTILITY PRACTICES...................................................................................32 17.18 SAFETY...................................................................................................32 17.19 CONFIDENTIAL INFORMATION.................................................................................32 17.20 COOPERATION..............................................................................................33 17.21 NEGOTIATED AGREEMENT.....................................................................................33 17.22 SUBCONTRACTORS...........................................................................................33 17.23 EWG STATUS...............................................................................................33 APPENDIX A INTERCONNECTION PROCEDURES.............................................................................1 APPENDIX B SPECIFICATIONS.........................................................................................1 APPENDIX C QUARTERLY ESTIMATED CONSTRUCTION COSTS..................................................................1 |
INTERCONNECTION AGREEMENT
This Interconnection Agreement ("Agreement") is made and entered into by and between Southern Power Company, organized and existing under the laws of the State of Delaware and having its principal place of business at Birmingham, Alabama (hereinafter referred to as the "Generator"), and Georgia Power Company, a corporation organized and existing under the laws of the State of Georgia and having its principal place of business at Atlanta, Georgia (hereinafter referred to as "Georgia Power"). Generator and Georgia Power may be hereinafter referred to individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, Generator desires to engage in the interconnected operation of Generator's generating facility with the transmission facilities of the Georgia Power Electric System; and
WHEREAS, Generator desires to engage in sales of electric energy to be generated by Generator's generating facility.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties covenant and agree as follows:
SECTION 1: DEFINITIONS
1.1 In addition to the initially capitalized terms and phrases defined in the preamble of this Agreement, the following initially capitalized terms and phrases as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "Affiliate" - shall mean, with respect to any Party, another Person (i) which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Party, (ii) which, directly or indirectly, of record or beneficially, owns or holds 10% or more of the shares of any class of capital stock or other ownership interest of such Party having voting power or (iii) of which 10% or more of the shares of any of the capital stock or other ownership interest of the Affiliate having voting power is owned or held, directly or indirectly, of record or beneficially, by or for such Party. For purposes of this definition, "control" when used with respect to any 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 "controlled" have meanings correlative to the foregoing.
1.1.2 "Appendix" or "Appendices" - means any of the schedules, exhibits and attachments, including the Interconnection Procedures, which are appended hereto and are incorporated by reference herein and made a part of this Agreement.
1.1.3 "Business Day" - means any Day excluding Saturday and Sunday and excluding any Day on which banking institutions in Georgia are closed because of a federal holiday.
1.1.4 "Day" or "Calendar Day" - means a calendar day unless otherwise specified.
1.1.5 "Effective Date" - shall be June 1, 2001, or such other date as the FERC shall order.
1.1.6 "Emergency" - means a condition or situation associated with the transmission and distribution of electricity, including voltage abnormalities, that, in the sole reasonable judgment of Georgia Power, exercised on a non-discriminatory basis as the transmission asset owner, adversely affects or is imminently likely to adversely affect: (i) public health, life or property; (ii) Georgia Power's employees, agents or property; or (iii) Georgia Power's ability to maintain safe, adequate, and continuous electric service to its customers and/or the customers of any member of NERC consistent with Good Utility Practices; provided, however, that if there is no adverse condition associated with distribution or transmission facilities, then the inability of Georgia Power to meet its load requirements solely because of insufficient generation resources shall not constitute an Emergency.
1.1.7 "Facility" - means all of Generator's equipment (including the Generator's Interconnection Equipment), as described in Appendix B of this Agreement, used to produce electric energy and required for parallel operation with Georgia Power which equipment is located in Heard County, Georgia.
1.1.8 "FERC" - means the Federal Energy Regulatory Commission and any successor.
1.1.9 "Force Majeure Event" - shall have the meaning ascribed to it in Section 14.1.
1.1.10 "Generator" - shall have the meaning ascribed to it in the first paragraph of this Agreement, and its agents or permitted successors and assigns.
1.1.11 "Generator's Interconnection Equipment" - means all equipment which is owned, operated, or maintained by or for Generator as such is described in Appendix B (including without limitation, equipment for connection, switching, protective relaying and safety) that is required to be installed for the delivery of electric energy onto the Georgia Power Electric System on behalf of Generator. Generator's Interconnection Equipment does not include the Interconnection Facilities.
1.1.12 "Georgia ITS" - means the Georgia Integrated Transmission System, the electric transmission systems owned individually by Georgia Power, Georgia Transmission Corporation, the Municipal Electric Authority of Georgia and the City of Dalton, Georgia, and operated as an integrated transmission system.
1.1.13 "Georgia Power" - shall have the meaning ascribed to it in the first paragraph of this Agreement, including any of its agents or permitted successors and assigns.
1.1.14 "Georgia Power Electric System" - means collectively, the entire network of electric generation, transmission and distribution facilities, equipment and other devices owned (in whole or in part) or controlled by Georgia Power, including the Georgia ITS, for the purposes of generating, transmitting, receiving, and distributing electric energy and capacity.
1.1.15 "Good Utility Practices" - 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 the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result(s) at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practices are 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties, Legal Requirements, NERC and SERC guides, and applicable safety and maintenance codes.
1.1.16 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department, taxing authority, or other authority thereof having jurisdiction over either Party, the Facility, the Interconnection Facilities, the Generator's Interconnection Equipment, or the Georgia Power Electric System, whether acting under actual or assumed authority.
1.1.17 "Indenture Trustee" - means a trust company chartered or other Person incorporated under the laws of the United States or a state of the United States and based in the United States which is the indenture trustee, mortgagee or secured party under any Indenture.
1.1.18 "Initial Synchronization Date" - means the date that includes the first instant in time when energy generated by the Facility is delivered to the Georgia Power Electric System at the Interconnection Point. Such Initial Synchronization Date is projected in Appendix B.
1.1.19 "Interconnection Facilities" - means all equipment which is constructed, owned, operated, or maintained by or for Georgia Power, as such are generally identified and described in Appendix B, (including without limitation, equipment for connection, switching, transmission, distribution, protective relaying and safety) that, in Georgia Power's reasonable judgment, is required to be installed for the delivery of electric energy onto the Georgia Power Electric System on behalf of Generator and for the receipt by Generator of electric service in accordance with Section 2.6 hereof.
1.1.20 "Interconnection Point" - means the point of interconnection of Generator's Facility to the Georgia Power Electric System as defined in the Specifications to this Agreement set forth in Appendix B.
1.1.21 "Interconnection Procedures" - means the procedures for interconnection and operations set forth in Appendix A.
1.1.22 "Interconnection Service" - means the services provided by Georgia Power to Generator to safely and reliably interconnect Generator's Facility to the Georgia Power Electric System and receive electric energy and capacity from the Facility at the Interconnection Point pursuant to the terms of this Agreement and, if applicable, the Tariff.
1.1.23 "Interest Rate" - means the prime rate of interest as published from time to time in the Wall Street Journal or comparable successor publication.
1.1.24 "kW" - means kilowatts. In addition, "MW" may be used to mean megawatts, which are 1000 kilowatts.
1.1.25 "kWh" - means kilowatt-hours. In addition, "MWh" may be used to mean megawatt-hours, which are 1000 kilowatt-hours.
1.1.26 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, treaty, judgment, injunction, order or other legally binding announcement, directive, published practice or requirement enacted, issued or promulgated by a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question at the time of the Effective Date or anytime thereafter during the Term of this Agreement.
1.1.27 "Lien" - means any and all liens, mortgages, encumbrances, pledges, claims, leases, charges and security interests of any kind.
1.1.28 "Month" - means a calendar Month, or such other period as may be mutually agreed by the Parties. "Monthly" has a meaning correlative to that of Month.
1.1.29 "Monthly Administration Charge" - for a particular Month of the Term, means the Monthly amount to be paid by Generator to Georgia Power as set forth in Section 9.
1.1.30 "NERC" - means the North American Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.31 "Party" or "Parties" - means either Georgia Power or Generator or both.
1.1.32 "Permitted Financing Assignee" - shall have the meaning ascribed to it in Section 16.1 hereof.
1.1.33 "Permitted Liens" - means:
(a) any Lien on this Agreement and/or Georgia Power's rights, obligations, title or interest in, to and under this Agreement pursuant to that certain First Mortgage Bond Indenture from Georgia Power to The Chase Manhattan Bank, Trustee, dated as of March 1, 1941, or pursuant to any other mortgage or security agreement as heretofore and hereafter amended (the "Indenture");
(b) any Lien for taxes, assessments or other governmental charges which are not delinquent or the validity of which is being contested in good faith by appropriate proceedings diligently prosecuted so long as appropriate reserves are maintained in respect of such taxes, assessments or charges; and
(c) attachments, judgments and other similar Liens arising in connection with court proceedings, provided that within sixty (60) Days of the attachment thereof (but not less than five (5) Days prior to any execution or sale pursuant thereto), the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being contested in good faith and by appropriate proceedings so long as any material risk of liability is covered by a bond, or appropriate reserves are maintained in respect of such proceedings.
1.1.34 "Person" - means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court.
1.1.35 "Persons Indemnified" - means, when used with respect to a Party, collectively or individually (as the context might indicate), the Party, the Party's Affiliates and permitted successors and assigns, and the directors, officers, representatives, agents and employees of each of them.
1.1.36 "Qualified Person" - shall mean any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court who is an owner or operator of transmission facilities, or belongs to a regional transmission organization.
1.1.37 "Quarter" - means for each year of the Term four distinct time periods for planning and budgeting purposes comprised of January through March, April through June, July through September, and October through December. "Quarterly" has a meaning correlative to that of Quarter. In the event that this Agreement becomes effective during any Quarter, the obligations herein that arise on a Quarterly basis shall begin in the Quarter immediately following the initial Effective Date of this Agreement.
1.1.38 "Quarterly Estimated Construction Cost" - shall have the meaning set forth in Section 5.6.1.
1.1.39 "SERC" - means the Southeastern Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.40 "Southern Companies" - means, collectively, the electric utility operating company subsidiaries of Southern Company engaged in common dispatch and control of generating resources within the Southern Company Control Area, currently including Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, and Southern Power Company.
1.1.41 "Southern Company Control Area" - means that electric system of the Southern Companies that has been recognized by NERC and SERC as a control area.
1.1.42 "Specifications" - mean the interconnection specifications provided in Appendix B to this Agreement, which are attached hereto and incorporated herein by reference.
1.1.43 "Tariff" - means Southern Companies Open Access Transmission Tariff or a successor arrangement that governs transmission and interconnection services on the transmission facilities of Georgia Power.
1.1.44 "Term" - means the duration of this Agreement as specified in Section 3.1.
SECTION 2: INTERCONNECTION SERVICE
2.1 Service. Georgia Power shall supply Generator with Interconnection Service at the Interconnection Point for the Facility in accordance with and for the Term of this Agreement. Interconnection Service does not include transmission delivery service beyond the Interconnection Point. Neither Georgia Power nor any of its Affiliates shall have any obligation under this Agreement to purchase any power from the Facility, it being the intent and understanding of the Parties that Generator shall be responsible for its power sales to third parties.
2.3 Permits. Generator shall obtain and maintain, at its sole expense, any and all governmental permits, certificates or authorizations that Generator is required to obtain and maintain for the performance of its obligations under this Agreement. Georgia Power shall obtain and maintain any and all permits, certificates or authorizations that are required for the construction, operation, maintenance, and testing of the Interconnection Facilities, the expense of which shall be paid by Generator in accordance with Section 5.
2.4.1 To the extent that Generator has any such rights, Generator shall convey to Georgia Power at no cost to Georgia Power any and all rights of way and easements, including adequate and continued access rights to property of Generator necessary to provide Interconnection Service to Generator.
Generator agrees that such parcel, rights of way, and easements shall survive termination or expiration of this Agreement, if and to the extent necessary for the continued use or the removal of the Interconnection Facilities. Such easements and access rights are specifically intended to permit Georgia Power to install, operate, maintain, replace and/or remove the Interconnection Facilities.
2.4.2 Upon reasonable advance notice given to Generator,
representatives of Georgia Power (as the transmission asset owner) shall at all
reasonable times have access to the Generator's Interconnection Equipment and to
property owned or controlled by Generator to the extent necessary in order to:
(i) inspect, maintain, and test meters and other Georgia Power equipment; (ii)
interconnect, disconnect (in accordance with Section 3), monitor, or measure
energy generated by the Facility; (iii) inspect the operation, maintenance or
testing of the Generator's Interconnection Equipment; or (iv) take such other
action as may be reasonably necessary to exercise Georgia Power's rights under
this Agreement. Georgia Power shall take reasonable steps to ensure such access
does not materially interfere with the operations, maintenance or testing of the
Facility, and that Georgia Power's use of such property complies with Legal
Requirements with respect to the Facility as well as with Generator's reasonable
policies and procedures applicable to the Facility, including those regarding
safety. Generator shall cooperate in such physical inspections of the
Generator's Interconnection Equipment as may be reasonably required by Georgia
Power. Georgia Power's technical review and inspection of the Generator's
Interconnection Equipment shall not be construed as endorsing the design thereof
nor as any warranty of the safety, durability or reliability of the Facility.
2.4.3 To the extent that Georgia Power has any such rights, Georgia Power agrees to furnish at no cost to Generator any necessary licenses or other access rights to permit Generator to construct, connect, operate and maintain its facilities located in Georgia Power's substation or to otherwise fulfill its obligations under this Agreement. After the Interconnection Facilities are energized, such access rights for Generator's facilities located inside the substation shall be exercised by Generator only with supervision by Georgia Power. Generator shall provide to Georgia Power reasonable notice under the circumstances of a request for such supervised access to the substation, and Georgia Power and Generator shall mutually agree upon the date and time of such supervised access, such agreement not to be unreasonably withheld. In addition to the aforementioned requirement, in exercising such access rights, Generator shall not unreasonably disrupt or interfere with normal operations of Georgia Power's business and shall act consistent with Good Utility Practice.
2.5 Interconnection Point. Georgia Power shall establish and maintain the Interconnection Point, as described in Appendix B to this Agreement.
2.6 Station Service Arrangements. Generator is responsible for making all appropriate arrangements for station service requirements. Generator must demonstrate, to Georgia Power's reasonable satisfaction, that it has adequate arrangements in place to supply its station service requirements. If Generator supplies its running station service on Generator's side of the Interconnection Point, then energy consumed and demand requirements are deemed to be netted from Generator's capability. In this same arrangement, starting station service energy is also assumed to be netted out of energy delivered to the Interconnection Point.
2.7 Generator Balancing Service Arrangements. Generator is responsible for ensuring that its actual generation matches its scheduled delivery, on an integrated clock hour basis (in whole MW), to the Georgia Power Electric System at the Interconnection Point. Generator shall make arrangements for the supply of energy and/or capacity when there is a difference between the actual generation and the scheduled delivery. Generator may satisfy its obligation for making such generator balancing service arrangements by: (a) obtaining such service from another entity that (i) has generating resources within the Southern Company Control Area, (ii) agrees to assume responsibility for providing generator balancing service to the Generator and (iii) has a control area coordination services agreement with the Southern Companies that addresses generator balancing service for all generating resources for which the entity is responsible; (b) committing sufficient additional unscheduled generating resources to the control of and dispatch by the Southern Company Control Area that are capable of supplying any capacity and energy not supplied by the scheduled resource and entering into a control area coordination services agreement with the Southern Company Control Area operator that addresses generator balancing service obligations; (c) entering into an arrangement with another NERC-approved control area to dynamically schedule the Generator's Facility out of the Southern Company Control Area and into such other control area; (d) entering into a generator balancing service agreement with Southern Companies pursuant to their Generator Balancing Service Tariff on file with FERC; or (e) in the event the load/generation balancing function of the control area in which Georgia Power is a participant is provided by an entity other than Southern Companies, by entering into an alternate arrangement with such control area service provider.
2.8 Interconnection Procedures. When the Facility is operated as part of the Southern Company Control Area, Generator shall comply with the Interconnection Procedures (Appendix A) for the Facility at all times. When the Facility is not operated as part of the Southern Company Control Area, the Operating Committee shall determine which (if any) of the Interconnection Procedures are not applicable.
2.9 Interconnected Operation Services. Generator retains any right it may have to pursue compensation for the provision of interconnected operation services by making a filing with FERC. Georgia Power retains any right it may have to support or oppose such filing.
2.10 Control Area Operations. Nothing in this Agreement shall obligate Generator to operate the Facility as a part of the Southern Company Control Area.
2.11 Inadvertent Flow. Generator is not a transmission provider; and Georgia Power shall have no obligation under this Agreement to pay Generator any charge for flows of electric power and/or energy through Generator's Interconnection Equipment.
SECTION 3: TERM, TERMINATION AND DISCONNECTION
3.1 Term. This Agreement shall become effective on the Effective Date and shall continue in effect for a period of forty (40) years from the initial Effective Date unless terminated earlier by mutual written agreement of the Parties or otherwise pursuant to the provisions of this Agreement subject to any applicable Legal Requirement, and shall continue thereafter until terminated by either Party on at least one (1) year's notice.
3.2.1 A Party shall be in "Default" under this Agreement, if:
(i) the Party fails to comply with any material term or condition of this
Agreement; (ii) any material representation or warranty of the Party made
pursuant to this Agreement shall prove to be false or misleading in any material
respect when made or deemed made; or (iii) Generator makes an assignment for the
benefit of Generator's creditors, or voluntary or involuntary proceedings in
bankruptcy are instituted seeking to adjudge Generator a bankrupt, or if
Generator be adjudged a bankrupt, or if Generator's affairs are placed in the
hands of any court for administration.
3.2.2 This Agreement may be terminated by either Party, upon written notice, if the other Party is in Default hereunder and such Party (or its Permitted Financing Assignee) has not cured such breach within thirty (30) Days following written notice of such breach to the other Party. Provided, however, that in the event the Default is not capable of being cured within thirty (30) Days, the Agreement shall not be terminated if the Party in Default (or its Permitted Financing Assignee) has begun in good faith taking actions to cure within thirty (30) Days following such written notice and diligently proceeds to completion.
3.2.3 In the event of a Default by either Party and subject to that Party's right to cure, the non-defaulting Party may pursue any and all judicial and administrative remedies and relief available to it.
3.3 Permanent Disconnection. Upon termination of this Agreement
(whether due to the expiration of the Term or due to a Default as described in
Section 3.2), Georgia Power may permanently disconnect the Facility from the
Georgia Power Electric System in accordance with Good Utility Practices.
3.4.1. Georgia Power (as transmission asset owner) may, consistent with Good Utility Practice and on a non-discriminatory basis, direct that the Facility be temporarily disconnected from the Georgia Power Electric System: (i) during an Emergency; (ii) if the operation and output of the Facility do not meet the requirements of this Agreement (even if Generator has commenced actions to cure such Default) and such condition could materially adversely affect the safe and reliable operation of the Georgia Power Electric System; (iii) if an inspection of the Facility reveals a hazardous condition, lack of scheduled maintenance or testing, or an operating characteristic of the
Facility that could materially adversely affect the safe and reliable operation of the Georgia Power Electric System; (iv) if Generator has modified the Facility or interconnection protective devices in a manner that could reasonably be expected to materially adversely affect the safe and reliable operation of the Georgia Power Electric System without the knowledge and approval of Georgia Power; (v) in the event of tampering with, or unauthorized use of, Georgia Power's equipment; (vi) if the operation of Generator's equipment materially adversely affects Georgia Power's equipment or the safe and reliable operation of the Georgia Power Electric System; or (vii) if necessary to construct, install, maintain, repair, replace, remove, investigate, inspect or test any part of the Interconnection Facilities or the transmission facilities of Georgia Power, in accordance with Section 15.2.4.
3.4.2 In the event of the occurrence of any of the conditions described in Section 3.4.1, Georgia Power shall give as much advance notice as practicable under the circumstances of the need for disconnection of the Facility to employees of Generator designated from time to time by Generator to receive such notice. Upon receipt of notice directing disconnection, Generator shall carry out the required action. Where circumstances do not permit such advance notice to Generator or Generator's employees, Georgia Power may disconnect the Facility from the Georgia Power Electric System without such notice in accordance with Good Utility Practices. Georgia Power shall reconnect the Facility as soon as reasonably practicable following the cessation or remedy of the event that led to the temporary disconnection. The Parties agree to cooperate and coordinate with each other to the extent necessary in order to restore the Facility, Interconnection Facilities, and the Georgia Power Electric System to their normal operating state.
3.4.3 Generator shall bear any direct cost incurred by Georgia Power as a result of any disconnection or reconnection caused by Generator's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Generator. Georgia Power shall bear any direct cost incurred by Generator as a result of any disconnection or reconnection caused by Georgia Power's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Georgia Power.
3.4.4 Generator reserves the right, in its sole discretion, to isolate or disconnect its Facility from the Georgia Power Electric System.
3.5 Survival of Rights. Upon termination or expiration of this Agreement, the Parties shall be relieved of their obligations under this Agreement except for the following obligations which shall survive termination or expiration: (i) the obligation to pay each other all amounts then owed and not paid under this Agreement; (ii) obligations arising from action or inaction during the period the Agreement was in effect under the indemnities provided for in this Agreement; and (iii) any other obligations which the Agreement specifically indicates shall survive termination or expiration.
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY
4.1 General Standards. During the Term, Generator shall have the sole responsibility to, and at its sole expense shall manage, control, operate and maintain the Facility in accordance with Good Utility Practices and the
requirements set forth in this Agreement. Generator shall operate its generating equipment in parallel with the Georgia Power Electric System in accordance with the operating procedures in Appendix A to this Agreement and those established by the Operating Committee in accordance with Section 15 and in accordance with the requirements of the NERC-recognized control area in which the Facility operates. All wiring, apparatus and other equipment necessary to receive or deliver electric energy on Generator's side of the Interconnection Point shall be supplied, maintained and operated by and at the expense of Generator.
4.2 Maintenance and Operation. Generator shall maintain and operate the Facility in accordance with Good Utility Practices. Generator shall not, without Georgia Power's prior written approval (which shall not be unreasonably withheld or delayed), make any change to its Facility which might adversely affect the operation of the Georgia Power Electric System.
SECTION 5: INTERCONNECTION FACILITIES
5.1.1 Georgia Power shall design, procure, install, and own the Interconnection Facilities needed for Georgia Power to provide Interconnection Service to Generator. Georgia Power shall be responsible for acquiring all necessary real property rights, easements, licenses, and rights of way and for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement. All Interconnection Facilities shall be and remain the property of Georgia Power. Georgia Power's obligations hereunder are dependent upon its securing and retaining the necessary rights, easements, privileges, franchises, permits and equipment for meeting such obligations; provided, however, that Georgia Power shall exercise reasonable efforts to secure and retain for the Term of this Agreement those rights, easements, privileges, franchises, permits and equipment.
5.1.2 Following commencement of commercial operation of the Facility and throughout the Term, Georgia Power shall be responsible for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement.
5.2 Costs of Interconnection Facilities. To the extent consistent with FERC policy, Generator shall be responsible for, and shall reimburse Georgia Power for, all costs and expenses reasonably incurred by or on behalf of Georgia Power in connection with the planning, design, construction, installation, testing, inspection, ownership, operation and maintenance of all or any part of the Interconnection Facilities during the Term of this Agreement.
5.3 Additional Interconnectors. In the instance where an entity other than Generator seeks to be the first additional Person to interconnect to the Georgia Power Electric System through the Interconnection Facilities that have
been paid for by Generator (such other Person is referred to as the "Additional Interconnector") and where the Additional Interconnector seeks to interconnect for any purpose other than for Georgia Power to make a network upgrade, then Georgia Power agrees that the Additional Interconnector shall be charged a pro rata share of the cost of its interconnection, as defined hereafter. For purposes of this subparagraph, the Additional Interconnector's pro rata share of its cost of interconnection shall be the sum of the incremental cost of physically interconnecting the Additional Interconnector to the Interconnection Facilities and the original cost of the Interconnection Facilities paid by Generator, including the price of the land provided by Generator (the sum of the incremental cost and the original cost hereafter referred to as "Combined Cost of Interconnection") and then dividing the Combined Cost of Interconnection by two (2) in order to determine both Generator's and the Additional Interconnector's "Pro Rata Share of the Combined Cost of Interconnection." Georgia Power shall then pay to Generator, or have the Additional Interconnector pay to Generator, the difference between the original cost of the Interconnection Facilities paid by Generator and Generator's Pro Rata Share of the Combined Cost of Interconnection; provided, however, that no such payment shall be required if it would result in the Generator bearing less than its Pro Rata Share of the Combined Cost of Interconnection. In the event that Persons additional and subsequent to the Additional Interconnector seek to interconnect to the Georgia Power Electric System through the Interconnection Facilities that have been paid for by Generator (such additional interconnectors referred to as "Subsequent Additional Interconnectors") and where the Subsequent Additional Interconnectors seek to interconnect for any purpose other than for Georgia Power to make a network upgrade, then Georgia Power agrees that the Subsequent Additional Interconnectors shall be charged a pro rata share of the cost of their respective interconnection, such cost to be determined in accordance with the methodology described above, and Georgia Power agrees further that in such event it shall pay, or have such Subsequent Additional Interconnectors pay to Generator and Additional Interconnector, reimbursement calculated based on the method described above, taking into account Generator's Pro Rata Share of the Combined Cost of Interconnection. Except in accordance with the cost sharing methodology set forth herein, Generator shall not be responsible for the costs of any modifications of the Interconnection Facilities that are not caused by the Generator. In no event shall Generator be obligated to pay any increased amount as a result of any Additional Interconnector or Subsequent Additional Interconnector. To the extent that all interconnectors do not have comparable interconnection points, the Combined Cost of Interconnection shall be adjusted appropriately.
5.4.1 Georgia Power shall operate and maintain the Interconnection Facilities in accordance with Good Utility Practices and in a non-discriminatory manner.
5.4.2 Georgia Power shall develop an estimate of all costs and expenses to be paid by Generator for the operation and maintenance of the Interconnection Facilities on an annual basis and provide the annual estimate to Generator at least eight (8) weeks before December 31 of each year. In the case of Additional Interconnectors or Subsequent Additional Interconnectors, Generator shall be responsible for up to its pro rata share, calculated in
accordance with Section 5.3, of the costs of operation and maintenance of the Interconnection Facilities. Generator shall pay one-twelfth (1/12) of such estimated costs each Month in accordance with Section 10. In addition, Generator shall pay its pro rata share of all costs reasonably incurred by Georgia Power (excluding any such costs reimbursed to Georgia Power through insurance proceeds) to repair and restore the Interconnection Facilities caused by any Force Majeure Event upon receipt of an invoice in accordance with Section 10.
5.4.3 Georgia Power shall true-up this estimate to Georgia
Power's actual costs and expenses within a reasonable period of time after such
actual costs and expenses are known but not less often than annually. In the
event that the actual costs and expenses to be paid by Generator under this
Section 5.4 are more or less than Georgia Power's initial estimate, the
difference (either a credit or an additional charge) shall be reflected on a
subsequent invoice.
5.5 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect the Interconnection Facilities located on Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to the Interconnection Facilities arising from the failure of Generator to properly protect those Interconnection Facilities in accordance with Good Utility Practices.
5.6.1 Generator shall pay Georgia Power in advance for the costs incurred related to the installation and construction of the Interconnection Facilities. Georgia Power shall develop a quarterly payment schedule that shall be based upon (i) the estimated costs to be incurred by Georgia Power in the installation and construction of the Interconnection Facilities, and (ii) the time periods that Georgia Power estimates that such costs will be incurred by Georgia Power ("Quarterly Estimated Construction Costs"). A current estimate of the Quarterly Estimated Construction Costs and the projected payment schedule are attached as Appendix C. Georgia Power may revise the schedule from time to time to more accurately reflect more current estimates of costs and/or to incorporate any needed true-up of estimated costs to actual costs. Georgia Power shall obtain authorization to proceed prior to proceeding with planning, construction, installation or testing of the Interconnection Facilities. Generator shall pay such estimated costs as specified in the payment schedule in accordance with Section 10. Generator shall have the right to approve any deviation in the scope of the work if such deviation would result in an estimated increase of ten percent (10%) or more over the estimated costs. In no event shall Georgia Power collect from Generator any estimated payment for any costs unless Georgia Power reasonably expects to actually incur such costs during the forthcoming Quarter.
5.6.2 During the construction of the Interconnection Facilities, Georgia Power shall true-up the estimated payments to Georgia Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator are more or less than Georgia Power's estimate, the difference (either a credit or additional charge) shall be reflected on a subsequent invoice. Georgia Power shall issue a final cost report within one hundred twenty (120) Days of the Facility's commercial operation date. The final report shall set forth in
reasonable detail the actual costs of the Interconnection Facilities and shall true-up the estimated payments to actual costs. To the extent that the final, actual costs that are Generator's cost responsibility under this Agreement exceed the estimated costs already paid by Generator, Georgia Power shall invoice Generator in accordance with Section 10.1. To the extent that the estimated costs already paid by Generator exceed the final, actual costs that are Generator's cost responsibility under this Agreement, Georgia Power shall refund to Generator an amount equal to the difference within twenty (20) Days of the issuance of the final cost report.
5.6.3 Georgia Power shall inform Generator on a monthly basis, and at such other times as Generator reasonably requests, of the status of the construction and installation of the Interconnection Facilities, including, but not limited to, the following information: progress to date; a description of scheduled activities for the next period; the delivery status of all equipment ordered; and the identification of any event which Georgia Power reasonably expects may delay construction of, or increase the cost of, the Interconnection Facilities.
5.6.4 Generator reserves the right, upon written notice to Georgia Power, to suspend at any time all work by Georgia Power associated with the construction and installation of the Interconnection Facilities. In such event, Generator shall be responsible for the costs which Georgia Power (i) has incurred prior to the suspension to the extent such costs previously were authorized by Generator and (ii) reasonably incurs in suspending such work, including without limitation, the costs incurred to ensure the safety of persons and property and the integrity of the Georgia Power Electric System and the costs incurred in connection with the cancellation of material and labor contracts, provided such cancellation has been authorized by Generator. Georgia Power will invoice Generator pursuant to Section 10.1 and agrees to use reasonable efforts to minimize its costs. If, after such suspension, Generator does not provide Georgia Power with written notice to proceed within three hundred sixty-five (365) Days after the notice of suspension, this Agreement shall be deemed terminated. If this Agreement is deemed terminated, Generator shall be responsible for costs reasonably incurred in winding up such work and the costs incurred in connection with the cancellation of material and labor contracts, to the extent to which Generator has not already reimbursed Georgia Power for such costs. Any non-returnable equipment that has not already been installed by Georgia Power shall become the property of Generator "as is" upon payment of Georgia Power's costs.
SECTION 6: LIABILITY AND INDEMNIFICATION
6.1 Remedies for Breach. Subject to Section 6.2, either Party shall be liable to the other for any loss resulting directly from any breach of this Agreement and which at the time of the breach was a reasonable foreseeable consequence of such breach.
6.2 Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT, NEITHER PARTY NOR ITS PERSONS INDEMNIFIED SHALL BE LIABLE TO THE
OTHER PARTY OR ITS PERSONS INDEMNIFIED FOR ANY CLAIMS, SUITS, ACTIONS OR CAUSES
OF ACTION FOR INCIDENTAL, PUNITIVE, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, DAMAGES IN THE CHARACTER OF LOSS OF PROFITS OR
REVENUES, DAMAGES SUFFERED BY GENERATOR'S OR GEORGIA POWER'S CUSTOMERS DUE TO SERVICE INTERRUPTIONS, OR COST OF CAPITAL) CONNECTED WITH, RELATING TO, OR ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY SUCH DAMAGES WHICH ARE BASED UPON CAUSES OF ACTION FOR BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE AND MISREPRESENTATION), BREACH OF WARRANTY, STRICT LIABILITY OR OTHERWISE. THE PROVISIONS OF THIS SECTION 6.2 SHALL APPLY REGARDLESS OF FAULT AND SHALL SURVIVE TERMINATION, CANCELLATION, SUSPENSION, COMPLETION, OR EXPIRATION OF THIS AGREEMENT.
6.3 No Liability for Other Party's Responsibilities. Neither Party nor its Persons Indemnified assumes any obligation or responsibility of any kind with respect to the other Party's equipment, including, without limitation, obligation or responsibility with respect to the condition or operation of said equipment, except for Generator's obligations and responsibilities hereunder for the Interconnection Facilities. Neither Party nor its Persons Indemnified shall be responsible for the transmission, distribution or control of electrical energy on the other Party's side of the Interconnection Point.
6.4 Responsibility for Property. Each Party shall be responsible for all physical damage to or destruction of, or any personal injury or death associated with, the property, equipment and/or facilities owned by it and located on its premises, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party or its Persons Indemnified for such damage, except in cases of the sole negligence or intentional wrongdoing by the other Party or its Persons Indemnified. Without limiting the generality of the foregoing, neither Party nor its Persons Indemnified shall be liable for damages or injury arising out of or resulting from the simple failure (i.e., failure of a device not caused by breach of contract, negligence or intentional wrongful act) of protective devices (e.g., circuit breakers).
6.5.1 Generator shall at all times indemnify, defend, and hold harmless Georgia Power and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) the Generator's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction of Georgia Power's property properly located, pursuant to this Agreement, on premises owned, leased or controlled by Generator, except in cases of sole negligence or intentional wrongdoing by Georgia Power or its Persons Indemnified, or (iii) activities on Generator's property, except in the case of sole negligence or intentional wrongdoing by Georgia Power or its Persons Indemnified.
6.5.2 Georgia Power shall at all times indemnify, defend, and hold harmless Generator and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or
death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) Georgia Power's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction of Generator's property located, pursuant to this Agreement, on premises owned, leased, or controlled by Georgia Power, except in cases of sole negligence or intentional wrongdoing by the Generator or its Persons Indemnified, or (iii) activities on Georgia Power's property, except in the case of sole negligence or intentional wrongdoing by Generator or its Persons Indemnified.
SECTION 7: METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT
7.1.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all metering equipment necessary to provide information regarding power flow and voltage conditions at the Interconnection Point. All metering equipment of Generator shall conform to Good Utility Practices. Prior to its installation, Georgia Power and Generator shall review the metering equipment to ensure conformance with Good Utility Practices and Generator shall maintain the metering equipment in conformance with Good Utility Practices throughout the Term. The metering equipment described herein does not include station service metering equipment.
7.1.2 Electric capacity and energy received by the Georgia Power Electric System from Generator shall be measured by meters installed at the Interconnection Point. If and to the extent Generator's meters are not physically located at the Interconnection Point, the metered amount of energy shall be adjusted for losses as mutually agreed from the point of metering to the Interconnection Point in accordance with Good Utility Practices. Any Party performing such a study to determine the loss adjustment shall provide a copy to the other Party.
7.1.3 Generator shall provide, as required by Good Utility Practices and requested by Georgia Power, real-time telemetered load signals of its energy delivered to the Interconnection Point. Generator shall also read the meters owned by it and shall furnish to Georgia Power all meter readings and other information reasonably required for operations and for billing purposes under this Agreement. Such information shall remain available to Georgia Power for one (1) year or such longer period as may be required by any Legal Requirement.
7.1.4 The Parties agree that the meter readings provided by the Generator to Georgia Power, under normal circumstances, shall be used as the official measurement between the Parties of the amount of capacity and energy delivered from the Facility to the Interconnection Point.
7.1.5 Any time during the Term and after initial acceptance of the accuracy of Generator's telemetered information, if telemetered information is unavailable to Georgia Power, for any reason, the Generator shall provide integrated hourly meter readings to Georgia Power each hour until telemetry is returned to service in conformance with Good Utility Practices and Section 7.1.2.
7.2.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all data acquisition equipment, protection equipment, and any other associated equipment and software, which may be reasonably required at any time during the Term by either Party for Generator to operate its facilities in parallel with Georgia Power. Such equipment shall conform to Good Utility Practices. Prior to its installation, Georgia Power and Generator shall review the equipment and software required by this Section 7 to ensure conformance with Good Utility Practices.
7.2.2 The selection of real time telemetry and data to be received by Georgia Power and Generator shall be at the reasonable discretion of Georgia Power, as deemed by Georgia Power necessary for reliability, security, revenue metering, and/or monitoring of the Facility's operations in conformance with Good Utility Practices. This telemetry includes, but is not limited to, voltages, generator output (MW, MVAR, and MWh) at the Interconnection Point and breaker status. Georgia Power shall provide to Generator real time telemetry of Georgia Power's breaker status. To the extent telemetry is required, Generator shall, at its own expense, install any telemetering equipment, data acquisition equipment, or other equipment and software necessary at the Facility for the telemetry of information to Georgia Power.
7.2.3 Generator shall be responsible for the reasonable cost that Georgia Power incurs in making any computer modifications or changes to Georgia Power's facilities or equipment necessary to implement this Section 7.
7.3.1 Prior to the commencement of Interconnection Service under this Agreement, Georgia Power shall develop and provide Generator an estimate of all costs and expenses that may be incurred by Georgia Power in connection with the installation of equipment and software under Sections 7.1 and 7.2. Georgia Power shall obtain Generator's consent thereto prior to proceeding with activities in connection with Sections 7.1 and 7.2. Generator shall pay such estimated costs in accordance with Section 10.
7.3.2 Georgia Power shall true-up this estimate to Georgia Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator to Georgia Power under Section 7.1 and 7.2 are more or less than Georgia Power's initial estimate, the difference (either a credit or an additional charge) shall be reflected on a subsequent invoice.
7.4 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect all equipment of Georgia Power located on Generator's premises, and agrees to pay the cost of repairs or replacement in
the event of loss or damage to such equipment arising from the failure of Generator to properly protect such equipment in accordance with Good Utility Practices.
7.5.1 Meters, data acquisition, and related protection equipment at Generator's Interconnection Point shall be tested at least biennially by Generator in accordance with the provisions for meter testing as established in American National Standard Institute Code for Electricity Metering (ANSI) Standard C12.16 for Solid State Electricity Meters, as the same may be updated from time to time. Representatives of each Party shall be afforded an opportunity to witness such tests.
7.5.2 Generator shall, upon the reasonable request of Georgia Power, test its meters and data acquisition equipment at the Interconnection Point used for determining the receipt or delivery of capacity and energy by Georgia Power. In the event a test shows such equipment to be inaccurate, Generator shall make any necessary adjustments, repairs or replacements thereon.
7.6 Inaccuracies. If the metering fails to register, or if the measurement made by a metering device is found upon testing to vary by more than one percent (1.0%) from the measurement made by the standard meter used in the test, an adjustment shall be made correcting all measurements of energy made by the metering during (i) the actual period when inaccurate measurements were made by the metering, if that period can be determined to the mutual satisfaction of the Parties, or (ii) if the actual period cannot be determined to the mutual satisfaction of the Parties, one-half of the period from the date of the last test of the metering to the date such failure is discovered or such test is made (such period herein the "Adjustment Period"). If the Parties are unable to agree on the amount of the adjustment to be applied to the Adjustment Period, the amount of the adjustment shall be determined (a) by correcting the error if the percentage of error is ascertainable by calibration, tests or mathematical calculation, or (b) if not so ascertainable, by estimating on the basis of deliveries under similar conditions during the period since the last test. In the event Generator's metering equipment is found to be insufficiently reliable and/or inaccurate during any consecutive three (3) Month period, Georgia Power shall have the right to install suitable metering equipment at the Interconnection Point for the purpose of checking the meters installed by Generator, and Generator shall pay all costs related to such metering equipment.
SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING
8.1 Facility Evaluation Based on Actual Equipment Data. Generator agrees to provide updated application data ("actual equipment data") to Georgia Power that reflects information provided by equipment manufacturers for the actual equipment purchased by Generator for this Facility, as soon as it is available, but not later than ninety (90) Days prior to Initial Synchronization Date. Georgia Power agrees to review the actual equipment data to identify any adverse impacts to Georgia Power's Electric System caused by any material change
in the Facility's operation and performance specifications that were not reasonably identifiable in studies performed using Generator's application data as initially provided. In the event any such adverse impacts are identified, Generator is responsible for modifying its equipment to eliminate such identified adverse impacts.
8.2 Implementation of Control and Operating Procedures. At least forty-five (45) Days prior to the Initial Synchronization Date, Generator and Georgia Power will: (a) jointly review the Control and Operating Procedures as developed by the Operating Committee, under Section 15 of this Agreement; (b) develop a training schedule for Facility and Georgia Power personnel under the Control and Operating Procedures; and (c) install and verify that communication links are complete for: (i) data telemetry, (ii) voice communications between Generator's Facility and Georgia Power's Transmission System control centers, and (iii) the transmittal of Facility and transmission system information on the Southern Company Generator Information Network.
8.3 Facility Inspection. Consistent with Good Utility Practices and unless otherwise agreed to by the Parties, all Interconnection Facilities shall be complete prior to the initial synchronization of the Facility with the Georgia Power Electric System. Within fifteen (15) Days after written notice is given to Georgia Power by Generator, an inspection shall be performed by Georgia Power to insure the proper installation and operation of the interconnection protective devices. The inspection shall include, without limitation, verification: (a) that the installation of Generator's equipment at the Facility is in accordance with the interconnection study; and (b) of proper voltage and phase rotation.
8.4 Initial Synchronization. Upon completion of the actions and reviews required under Sections 8.1, 8.2, and 8.3, Generator may request approval for initial synchronization of the Facility with the Georgia Power Electric System. Such request for approval shall be made no less than seven (7) Calendar Days in advance of the date which the Generator proposes for the Initial Synchronization Date. Initial synchronization shall not occur without the prior documented approval of Georgia Power, and such approval shall not be unreasonably withheld. Representatives of Georgia Power shall have the right to be present during the initial synchronization and facility testing. The activities under this Section 8, including without limitation, facility inspection, evaluation of actual equipment data, personnel training, use of Southern Company Generator Information Network, or the granting of approval to Generator for operation of the Facility in parallel with the Georgia Power Electric System shall not serve to relieve Generator of liability for injury, death or damage attributable to the negligence of Generator, and Georgia Power shall not be responsible as a result of such activities.
8.5 Review of Synchronization Tests. No less than forty-five (45) Days prior to the commercial operation date of the Facility, Generator shall provide Georgia Power copies of all applicable excitation system field test results (including chart recordings and actual data points in electronic form) and field settings, including (if applicable) Power System Stabilizer test results and settings in a format that conforms to the models previously submitted with the original application data. These tests include but are not limited to excitation system open circuit step in voltage tests, and (if applicable) Power System Stabilizer gain margin and phase compensation tests. Excitation system open circuit step in voltage test response chart recordings shall be provided showing generator terminal voltage, field voltage, and field current (exciter field
voltage and current for brushless excitation systems) with sufficient resolution such that the change in voltages and currents are clearly distinguishable. The excitation system open circuit step in voltage test data points corresponding to the chart recordings should also be submitted in electronic form. Georgia Power may require that Generator perform more detailed tests if there are significant differences between the excitation system open circuit step in voltage test response and the step response predicted through dynamic simulation of model data. Any problems identified as a result of changes from application data to actual field settings of the excitation system including (if applicable) Power System Stabilizers must be addressed and resolved as soon as practicable by the Generator in order for the Generator to continue to deliver power to the Interconnection Point.
SECTION 9: ADMINISTRATION CHARGE
Generator shall pay Georgia Power a Monthly Administration Charge of $5,000 per Month for all costs and expenses incurred by Georgia Power during such Month in connection with: (i) Georgia Power's administration of this Agreement; (ii) any taxes, assessments or other impositions for which Georgia Power may be liable as a result of any activity undertaken pursuant to this Agreement; (iii) reading meters; and (iv) accounting for capacity and energy flowing into or out of Generator's Facility. Georgia Power may revise the amount of the Monthly Administration Charge on an annual basis by making a filing in accordance with Section 12.3.
SECTION 10: PAYMENT PROCEDURE
10.1 Billing. Bills shall be issued to Generator in accordance with the following procedures:
10.1.1 Georgia Power shall issue a Quarterly invoice to Generator for the Quarterly Estimated Construction Costs.
10.1.2 Georgia Power shall issue a Monthly invoice to Generator for the estimated operation and maintenance charge, administrative charge, and other charges/credits determined pursuant to this Agreement as soon as practicable following the close of each Month.
10.1.3 All amounts owing to Georgia Power from Generator shall be due and payable in immediately available funds through wire transfer of funds or other means acceptable to Georgia Power within twenty (20) Calendar Days after the date of Georgia Power's invoice.
10.2 Failure to Timely Pay. If Generator fails to pay the amount billed by Georgia Power within twenty (20) Calendar Days after the date of Georgia Power's invoice (and such amount is not disputed in accordance with Section 10.6), Georgia Power may, at any time thereafter upon five (5) Business Days written notice, draw upon the letter of credit (or other form of security) of Generator to obtain payment for such invoice, as well as reasonable costs incurred to exercise its rights under this Section 10. In addition, Georgia Power may, at its option, treat such non-payment as a Default of this Agreement under Section 3.2 hereof.
10.3 Interest. Any amount due and payable from Generator to Georgia Power pursuant to this Agreement that is not received by the due date shall accrue interest from the due date at the Interest Rate.
10.4 Creditworthiness. Generator shall provide and maintain in effect during the Term of this Agreement an unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Georgia Power, including an appropriate parent security) as security to meet its responsibilities and obligations under this Agreement. The unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Georgia Power) shall be in the amount of $3,100,000.00 in immediately available funds through wire transfer of funds or other means acceptable to Georgia Power for activities arising prior to commercial operation of the Facility and in the amount of $175,000 for activities arising from the date of commercial operation of the Facility. Georgia Power shall be entitled to draw upon such letter of credit for amounts due it under this Agreement if not paid when due in accordance with Section 10.1 and not disputed in accordance with Section 10.6.
10.5 Audit Rights. Either Party shall have the right, during normal business hours, and upon prior reasonable notice to the other Party to audit each other's accounts and records pertaining to either Party's performance and/or satisfaction of obligations arising under this Agreement within one (1) year from the date of such performance or satisfaction of such obligation, including specifically, but not limited to, delivery of the final cost report as provided in Section 5.7.2. Said audit shall be performed at the offices where such accounts and records are maintained and shall be limited to those portions of such accounts and records that specifically relate to obligations under this Agreement. To the extent such accounts and records contain confidential information, the Parties agree to maintain the confidentiality of such information consistent with Section 17.19 hereof. In the event an audit reveals an improper assignment or allocation of costs or an error in billing, the Parties will make appropriate adjustments (either refunds or additional payments), with interest, within thirty (30) Days.
10.6 Disputed Bills. In the event of a billing dispute between Generator and Georgia Power, Georgia Power shall not terminate this Agreement, draw on the letter of credit for any disputed amounts, nor disconnect the Facility for failure to pay the disputed amount if Generator (i) continues to make all payments not in dispute and (ii), if requested by Georgia Power, pays into an independent escrow account the portion of the invoice in dispute.
10.7 No Waiver. Payment of any cost or invoice by Generator will not constitute a waiver of any rights or claims that Generator may have under or relating to this Agreement.
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS
11.1 Generator Representations, Warranties and Covenants. Generator makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.1.1 Generator is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, that it is qualified to do business in the State of Georgia and that it has the power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.1.2 The execution, delivery and performance by Generator of this Agreement has been duly authorized by all necessary company action, and does not and shall not require any consent or approval of Generator's Board of Directors or members, other than those which have been obtained.
11.1.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and shall not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirement, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Generator is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
11.1.4 This Agreement is the legal, valid and binding obligation of the Generator and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.1.5 There is no pending or, to the knowledge of Generator, threatened action or proceeding affecting Generator before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2 Georgia Power Representations, Warranties and Covenants. Georgia Power makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.2.1 Georgia Power is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia that it is qualified to do business in the State of Georgia and that it has the corporate power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.2.2 The execution, delivery and performance by Georgia Power of this Agreement has been duly authorized by all necessary corporate action, and does not and shall not require any consent or approval of Georgia Power's Board of Directors or shareholders, other than those which have been obtained.
11.2.3 This Agreement is the legal, valid and binding obligation of Georgia Power and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.2.4 There is no pending or, to the knowledge of Georgia Power, threatened action or proceeding affecting Georgia Power before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2.5 Georgia Power covenants to Generator that it will file this Agreement, and any amendments and/or modifications thereto, with FERC in accordance with all Legal Requirements.
11.3 Survival of Representations, Warranties and Covenants. The representations, warranties and covenants made by Generator and by Georgia Power (as the case may be) in Sections 11.1.1, 11.1.3, 11.1.4, 11.2.1, 11.2.3, and 11.2.5 shall survive the execution and delivery of this Agreement and any action taken pursuant hereto. The representations, warranties and covenants made by Generator and Georgia Power (as the case may be) in Sections 11.1.2, 11.1.5, 11.2.2 and 11.2.4 shall be true and accurate as of the date of execution of this Agreement.
SECTION 12: COMPLIANCE WITH LAWS
12.1 Compliance. Generator represents, warrants and covenants that as
of the Initial Synchronization Date and for the Term, Generator shall (i) be in
compliance with all Legal Requirements with respect to the ownership, operation
and maintenance of Generator's Interconnection Equipment, including without
limitation, all requirements to seek, obtain, maintain, comply with and, as
necessary, renew and modify from time to time, any and all applicable
certificates, licenses, permits and government approvals and all applicable
environmental certificates, licenses, permits and approvals, environmental
impact analysis, and if applicable, the mitigation of environmental impacts, and
(ii) pay all costs, expenses, charges and fees in connection with Section
12.1(i).
12.2 Change of Law. In the event that after the Execution Date there are changes to Legal Requirements, including, without limitation, changes to laws or regulations regulating or imposing a tax, fee or other charge, which cause Georgia Power to incur additional costs in providing Interconnection Service under this Agreement, Generator agrees to pay, to the extent consistent with FERC policy, such reasonable incremental costs incurred by Georgia Power in complying with such changes to Legal Requirements; provided, however, Generator shall be entitled to take reasonable action to mitigate, reduce or otherwise avoid the imposition of any such charges or costs.
12.3 Regulatory Filings. This Agreement is subject to approval by any
Governmental Authority having jurisdiction over the matters provided herein.
Nothing contained in this Agreement shall be construed as affecting in any way
(i) the right of Georgia Power to unilaterally make application to any and all
Governmental Authorities (including FERC) that may have jurisdiction over this
Agreement for a change in terms and conditions, charges, classification of
service, or for termination of this Agreement pursuant to applicable statutes
(including Sections 205 and 206 of the Federal Power Act) and those Governmental
Authorities' rules and regulations or (ii) the ability of Georgia Power to
exercise its rights under the rules and regulations of any Governmental
Authority having jurisdiction over this Agreement. Nothing contained in this
Agreement shall be construed as affecting in any way (i) the right of Generator
to unilaterally make application to any and all Governmental Authorities
(including FERC) that may have jurisdiction over this Agreement for a change in
terms and conditions, charges, classification of service or for termination of
this Agreement pursuant to applicable statutes (including Sections 205 and 206
of the Federal Power Act) and those Governmental Authorities' rules and
regulations or (ii) the ability of Generator to exercise its rights under the
rules and regulations of any Governmental Authority having jurisdiction over
this Agreement. At least thirty (30) Days prior to any such unilateral filing,
the Party intending to make the filing shall notify the other of such intent.
The Parties agree to reasonably cooperate with each other with respect to such
filings and to provide any information reasonably required by the requesting
Party to comply with applicable filing requirements. This Agreement shall be
modified or amended as necessary to reflect binding determinations with respect
to such filings.
12.4.1 Generator shall not be required to pay taxes associated with reimbursement of construction costs or transfer of the Interconnection Facilities constructed by Generator unless Georgia Power is required to pay such tax. With respect to the payment by Generator of taxes associated with reimbursement of construction costs or transfer of the Interconnection Facilities, Georgia Power commits that in the event that any taxing authority, including but not limited to the Internal Revenue Service, taxes or attempts to tax the reimbursement or transfer, Georgia Power shall (i) exercise reasonable efforts to contest and defeat the taxation or attempted taxation of the reimbursement or transfer; (ii) promptly notify Generator in writing of that event in the manner provided in Paragraph 17.9 of this Agreement; and (iii) exercise reasonable efforts to cooperate with Generator in contesting any such taxation including, for example, allowing Generator to prepare at its own expense a private letter ruling request or other submission to the Internal Revenue Service or other taxing authority.
12.4.2 Generator shall at all times during the Term pay all charges, taxes, assessments and fees which may be assessed upon or against the Facility or upon or against Generator through Georgia Power by a Governmental Authority in accordance with Legal Requirements by reason of the sale or purchase of electricity by Generator or from Generator's Facility.
SECTION 13: INSURANCE
13.1 Generator's Insurance. If Generator is no longer an Affiliate of Georgia Power, Generator, at its expense, shall procure and maintain in effect during the Term, policies of insurance with insurance companies authorized to transact insurance in the State of Georgia or adequate self-insurance, reasonably acceptable to Georgia Power, providing, at a minimum, the coverage and limits specified and complying with the requirements stated below:
13.1.1 Worker's Compensation in statutory amounts and Employer's Liability with a minimum limit of $1,000,000 per person.
13.1.2 Commercial General Liability Insurance on an occurrence basis or AEGIS "claims made" form, with the following coverage and limits:
General Aggregate $1,000,000 Products-Completed Operations-Aggregate $1,000,000 Personal & Advertising Injury $1,000,000 Each Occurrence $1,000,000 Fire Damage (any one fire) $50,000 Medical Expense (any one person) $5,000 |
13.1.3 Business Automobile Liability covering autos of Generator, including owned, hired and non-owned autos, for Bodily Injury and Property Damage with a combined single limit of $1,000,000 each occurrence.
13.1.4 Excess Liability in Umbrella Form with a limit of $4,000,000 each occurrence, $4,000,000 Aggregate.
13.1.5 By signing this Agreement, Generator thereby waives all rights of subrogation against Georgia Power and its Persons Indemnified with respect to any claim or loss payable or paid under each of the policies set forth in 13.1.1, 13.1.2, 13.1.3, and 13.1.4 above and under any property insurance policy for the Facility that Generator has or acquires.
13.1.6 Generator shall cause its insurer(s) to add Georgia Power and its Persons Indemnified as an Additional Insured on the policies set forth in 13.1.2, 13.1.3, and 13.1.4 above with respect to liability of Georgia Power and its Persons Indemnified (a) arising out of the performance of operations, maintenance, work or services under this Agreement, and (b) arising out of the conduct contemplated in the ownership, maintenance or use of Generator's autos, but only to the extent of Generator's indemnity obligations under this Agreement and the coverages and limits specified in Sections 13.1.2, 13.1.3, and 13.1.4.
13.1.7 Subject to the limitations in Section 13.1.6, Generator's insurance shall be primary insurance with respect to the
installation, operations, maintenance, work, or services contemplated under this Agreement and insurance of Georgia Power and its Persons Indemnified shall be excess of the Generator's insurance and shall not contribute with it.
13.1.8 To the extent that Generator utilizes deductibles or self-insurance in connection with the insurance coverage required herein, all such deductible and self-insured amounts shall be for the account and expense of Generator and shall not be considered as costs or fees provided for in this Agreement.
13.1.9 If the Generator uses contractors and/or subcontractors to perform any of the work contemplated under this Agreement, Generator shall require such contractors and/or subcontractors to maintain in effect insurance meeting these minimum limits and incorporating the contractual requirements prescribed by this Section 13.
13.2 Notice and Certification. Each of the above required policies shall contain a provision whereby the insurance carrier shall notify Georgia Power at least thirty (30) Days prior to the effective date of cancellation, non-renewal or material change in any of said policies. Generator shall submit to Georgia Power a Certificate, signed by an authorized representative of the insurance carrier, listing the policies, coverage and limits and certifying that the said policies shall be in effect for the time periods stated in the Certificate. The obligations for Generator to procure and maintain insurance shall not be construed to waive or restrict other obligations.
SECTION 14: FORCE MAJEURE
14.1 Definition of Force Majeure Event. For the purposes of this
Agreement, a "Force Majeure Event" as to a Party means any occurrence,
nonoccurrence or set of circumstances that is beyond the reasonable control of
such Party and is not caused by such Party's fault, negligence or lack of due
diligence, including, without limitation, flood, ice, lightning, earthquake,
windstorm or eruption; fire; explosion; invasion, war, civil disturbance,
commotion or insurrection; sabotage or vandalism; military or usurped power; or
act of God or of a public enemy; provided, however, in no event shall (i) the
inability to meet a Legal Requirement or the change in a Legal Requirement; or
(ii) a site specific strike, walkout, lockout or other labor dispute constitute
a Force Majeure Event.
14.2 No Breach or Liability. Each Party shall be excused from performing its respective obligations under this Agreement and shall not be liable in damages or otherwise if and to the extent that it is unable to so perform or is prevented from performing by a Force Majeure Event, provided that the non-performing Party shall:
14.2.1 Give the other Party notice thereof, followed by written notice if the first notice is not written, both notices to be given as promptly as possible after the non-performing Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
14.2.2 Use its reasonable best efforts to remedy its inability to perform as soon as practicable; provided, however, that this Section 14.2.2
shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest; provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of the Party having the difficulty; and
14.2.3 Resume performance of its obligations under this Agreement and give the other Party written notice to that effect, as soon as reasonably practicable following cessation of the Force Majeure Event.
14.3 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
SECTION 15: OPERATING COMMITTEE
15.1 Establishment of Committee. At least six (6) months prior to the estimated Initial Synchronization Date, Generator and Georgia Power shall each appoint one representative and one alternate to the Georgia Power - Generator Operating Committee ("Committee"). Each Party shall notify the other party of its appointment in writing. Such appointments may be changed at any time by similar notice. The Committee shall meet as necessary, but not less than once each calendar year, to carry out the duties set forth herein. The Committee shall hold a meeting at the request of either Party, at a time and place agreed upon by the representatives. Each representative and alternate shall be a responsible person working in the day-to-day operations of their respective electrical facilities. The Committee shall represent the Parties in all matters arising under this Agreement which may be delegated to it by mutual agreement of the Parties.
15.2 Duties. The duties of the Committee shall include, but are not limited to, the following:
15.2.1 Establish and maintain control and operating procedures, including those pertaining to information transfers between the Facility and Georgia Power consistent with the provisions of this Agreement.
15.2.2 Establish data requirements and operating record requirements in accordance with the terms and conditions of this Agreement.
15.2.3 Review the requirements, standards, and procedures data acquisition equipment, protective equipment, and any other equipment or software.
15.2.4 Annually review ten (10) year forecast of maintenance and availability schedules of Georgia Power's and Generator's facilities at the Interconnection Point and coordinate the scheduling of outages of and maintenance on the Interconnection Facilities, the Facility and any other facilities that impact the normal operation of the Interconnection Facilities.
15.2.5 Ensure that information is being provided by each Party regarding equipment availability.
15.2.6 Perform such other duties as may be conferred upon it by mutual agreement of the Parties.
15.2.7 Each Party shall cooperate in providing to the Committee all information required in the performance of the Committee's duties. All decisions and agreements, if any, made by the Committee shall be evidenced in writing. The Committee shall have no power to amend or alter the provisions of this Agreement.
SECTION 16: ASSIGNMENT
16.1.1 EXCEPT AS EXPRESSLY PERMITTED BELOW OR OTHERWISE AGREED TO BY THE PARTIES, GENERATOR SHALL NOT ASSIGN, TRANSFER, DELEGATE OR ENCUMBER THIS AGREEMENT AND/OR ANY OR ALL OF ITS RIGHTS, INTERESTS OR OBLIGATIONS UNDER THIS AGREEMENT AND ANY ASSIGNMENT, TRANSFER, DELEGATION OR ENCUMBERING BY GENERATOR (EXCEPT AS PERMITTED BELOW) SHALL BE NULL AND VOID. Notwithstanding the foregoing, so long as Generator is not in default under or breach of this Agreement, upon prior written notice to Georgia Power, Generator may collaterally assign its rights, interests and obligations under this Agreement to its lender or an agent for the benefit of its lenders providing financing or refinancing for the design, construction or operation of Generator's Facility in Heard County, Georgia (a "Permitted Financing Assignee"); provided, however, that GENERATOR'S RIGHTS AND OBLIGATIONS (FINANCIAL OR OTHERWISE) UNDER THIS AGREEMENT SHALL CONTINUE IN THEIR ENTIRETY IN FULL FORCE AND EFFECT AS THE RIGHTS AND OBLIGATIONS OF A PRINCIPAL AND NOT AS A SURETY. Generator may collaterally assign its rights, interests and obligations hereunder to multiple Permitted Financing Assignees, but only if those Permitted Financing Assignees designate one agent to act for them collectively under this Agreement.
16.1.2 Georgia Power shall, upon serving Generator any notice of Default or the termination of this Agreement, also serve a copy of such notice upon the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. No notice of Default purporting to terminate this Agreement shall be deemed to have been given unless and until a copy thereof shall have been given to the Permitted Financing Assignee or the agent for multiple Permitted Financing Assignees. A Permitted Financing Assignee shall be entitled to cure any Default during any cure period provided herein.
16.1.3 The Permitted Financing Assignee shall not be entitled to assign or transfer this Agreement to any purchaser in foreclosure, purchaser in lieu of foreclosure or similar purchaser or transferee ("Purchaser in Foreclosure") unless and until such Purchaser in Foreclosure has (i) executed
and delivered to Georgia Power and is in compliance with an agreement in form and substance acceptable to Georgia Power whereby such Purchaser in Foreclosure assumes and agrees to pay and perform all then outstanding and thereafter arising obligations of Generator under this Agreement and (ii) established to Georgia Power's reasonable satisfaction that such Purchaser in Foreclosure has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Notwithstanding the foregoing, all obligations of Generator to Georgia Power under this Agreement incurred prior to the time the Purchaser in Foreclosure fully assumes this Agreement shall also be and remain enforceable by Georgia Power against Generator. Any assignment to a Purchaser in Foreclosure shall be subject to Georgia Power's rights hereunder.
16.1.4 So long as Generator is not in Default under or breach of this Agreement, upon prior written notice to Georgia Power, Generator may absolutely assign all, but not less than all, of its rights, interests and obligations under this Agreement to another generator ("Outright Assignee") provided however, that Generator's obligations under this Agreement shall continue and Georgia Power shall have no obligations to such Outright Assignee unless and until such Outright Assignee has (i) executed and delivered to Georgia Power and is in compliance with an agreement in form and substance reasonably acceptable to Georgia Power whereby such Outright Assignee assumes and agrees to pay and perform all thereafter arising obligations of Generator under this Agreement and (ii) established to Georgia Power's reasonable satisfaction that such Outright Assignee has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Any assignment to an Outright Assignee shall be subject to Georgia Power's rights hereunder.
16.1.5 Generator shall indemnify, defend and hold harmless
Georgia Power and its Persons Indemnified from and against any and all losses,
liabilities, obligations, claims, demands, damages, penalties, judgments, costs
and expenses, including, without limitation, reasonable attorneys' fees and
expenses, howsoever and by whomsoever asserted, arising out of or in any way
connected with any collateral, outright or other assignment by Generator or any
foreclosure or other exercise of remedies by the Permitted Financing Assignee of
this Agreement or Generator's or the Permitted Financing Assignee's rights or
interests under this Agreement. Notwithstanding any other provision of this
Section 16.1, Generator shall not be obligated to indemnify and hold harmless
Georgia Power from and against any loss, liability, obligation, claim, demand,
damage, penalty, judgment, cost or expense to the extent caused by the sole
negligence or willful misconduct Georgia Power or its Persons Indemnified.
16.1.6 No agreement between the Parties modifying, amending, canceling or surrendering this Agreement shall be effective without the prior written consent of the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. Subject to any cure periods provided to the Permitted Financing Assignee in this Agreement or in any consents to assignment, no such prior written consent is required for Georgia Power to take unilateral action under this Agreement, including (without limitation) Sections 3.2, 3.3, 3.4, 10.2, 12.2 and 12.3.
16.1.7 Georgia Power agrees to reasonably cooperate with Generator and any Permitted Financing Assignee in connection with the collateral
assignment of this Agreement; provided, however, that Georgia Power shall not be obligated to take any action that could, in its judgment, result in an expansion of its obligations, risks or liabilities or a violation of any law, regulation or order of a Governmental Authority.
16.2 Assignment by Georgia Power. So long as Georgia Power is not in breach of this Agreement, Georgia Power may, at any time, without notice to, or the consent of, Generator or any other Person, including, without limitation, any Permitted Financing Assignee, Purchaser in Foreclosure or Outright Assignee, sell, assign, delegate, encumber or transfer to any Indenture Trustee, Affiliate, any successor by merger or otherwise of Georgia Power or any Qualified Person, and/or create or permit to exist Permitted Liens against, all or any part of this Agreement and/or Georgia Power's rights, obligations, title or interest in, to and under this Agreement. Provided, however, Generator reserves its right to oppose any such assignment before any Governmental Authority having jurisdiction.
SECTION 17: MISCELLANEOUS
17.1 Georgia Power's Agent. Wherever this Agreement requires Generator to provide information, schedules, notice or the like to, or to take direction from, Georgia Power, Generator shall provide information, schedules, notice or the like to, or receive from, Georgia Power or such agent of Georgia Power as Georgia Power may direct from time to time.
17.2 No Partnership. Generator and Georgia Power do not intend for this Agreement to, and this Agreement shall not, create any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit.
17.3 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon any respective successors and assigns of Generator and Georgia Power.
17.4 No Third Party Benefit. Nothing in this Agreement shall be construed to create any duty, obligation or liability of a Party to any person or entity not a Party to this Agreement.
17.5 No Affiliate Liability. Notwithstanding any other provision of this Agreement, no Affiliate of either Party (including without limitation any Affiliate acting as either Party's agent where said agent is given certain authorities pursuant hereto) shall have any liability whatsoever for either Party's performance, nonperformance or delay in performance under this Agreement.
17.7 No Waiver. Neither Georgia Power's nor Generator's failure to enforce any provision or provisions of this Agreement shall in any way be construed as a waiver of any such provision or provisions as to any future violation thereof, nor prevent it from enforcing each and every other provision of this Agreement at such time or at any time thereafter. The waiver by either Georgia Power or Generator of any right or remedy shall not constitute a waiver of its right to assert said right or remedy, at any time thereafter, or any other rights or remedies available to it at the time of or any time after such waiver.
17.8 Amendments. Except as provided in Section 12.3, this Agreement may be amended by and only by a written instrument duly executed by each of Generator and Georgia Power, which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
17.9 Notice. Any notice, request, consent or other communication
permitted or required by this Agreement shall be in writing and shall be deemed
given on the Day hand-delivered to the representative identified below, on the
Day of facsimile transmission to the facsimile number stated below, or the third
(3rd) Day after the same is deposited in the United States Mail, first class
postage prepaid, and if given to Georgia Power shall be addressed to:
Georgia Power Company
Attn: Vice President, Transmission
241 Ralph McGill Boulevard
Atlanta, Georgia 30308
Facsimile: (404) 506-2433
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Transmission Services
600 North 18th Street
Birmingham, Alabama 35203
Facsimile: (205) 257-6663
and if given to Generator, it shall be addressed to:
Southern Power Company
Attn: Vice President, Generation, Planning and Development
600 North 18th Street
Bin 15N-8181
Birmingham, Alabama 35203
Facsimile: (205) 257-5703
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Generation Development
600 North 18th Street
Bin 15N-8186
Birmingham, Alabama 35203
Fcsimile: (205) 257-6336
unless Georgia Power or Generator shall have designated a different representative or address for itself by written notice to the other. Generator shall comply with reasonable requirements of Georgia Power regarding communications with Georgia Power relative to the performance of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
17.11 Cross-References. All cross-references contained in this Agreement to Sections, are to the Sections of this Agreement, unless otherwise expressly noted.
17.12 Section Headings. The descriptive headings of the various Sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof.
17.13 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.
17.14 Governing Law. The validity, interpretation and performance of this Agreement, and each of its provisions, are subject to and shall be governed by applicable federal law, and where not preempted by federal law, by the laws of the State of Georgia, without giving effect to conflict of laws principles.
17.15 Merger. This Agreement represents the entire agreement between the Parties and all previous communications, representations and agreements between the Parties regarding the subject matter of this Agreement, whether oral or written, are hereby superseded.
17.16 NERC. To the extent not inconsistent herewith, Generator shall comply with any operational specifications and requirements specified by Georgia Power and all planning standards and operating guidelines of the North American Electric Reliability Council or its successor.
17.17 Good Utility Practices. Each Party shall discharge its respective obligations under this Agreement in accordance with Good Utility Practices.
17.18 Safety. Each Party shall comply with the applicable provisions of the National Fire Protection Association Code, the American National Electrical Code, the National Electrical Safety Code and other applicable code requirements. Each Party shall furnish and maintain, at its own expense, proper and adequate facilities, equipment, machinery, tools and supplies necessary to maintain its facilities and premises as a safe workplace and have available at
all times for use by its employees, agents, independent contractors, suppliers, vendors and borrowed employees and all safety equipment needed for the protection of that Party's employees, agents, independent contractors, suppliers, vendors and borrowed employees against injuries. Each Party shall be solely responsible for providing for the safety of its facilities and premises and of its employees, agents, independent contractors, suppliers, vendors and borrowed employees.
17.19 Confidential Information. Confidential Information shall mean any confidential and/or proprietary information provided by Georgia Power or Generator ("Disclosing Party") to the other party ("Receiving Party") and which is clearly marked or otherwise designated as "CONFIDENTIAL." For purposes of this Agreement, all design, operating specifications and metering data provided by Generator shall be deemed confidential regardless of whether it is clearly marked or otherwise designated as such. Except as otherwise provided herein, each Party shall hold in confidence and shall not disclose Confidential Information to any person (except employees, officers, representatives and agents that agree to be bound by this Section 17 or FERC's Standards of Conduct). Confidential Information shall not include information that the Receiving Party can demonstrate: (a) is generally available to the public other than as a result of a disclosure by the Receiving Party; (b) was in the lawful possession of the Receiving Party on a non-confidential basis before receiving it from the Disclosing Party; (c) was supplied to the Receiving Party without restriction by a third party, who, to the knowledge of the Receiving Party, was under no obligation to the Disclosing Party to keep such information confidential; (d) was independently developed by the Receiving Party without reference to Confidential Information of the Disclosing Party; or (e) was disclosed with the prior written approval of the Disclosing Party. Georgia Power, or its agent acting as Transmission Provider under the Tariff, may release or disclose certain Confidential Information of the Disclosing Party to other Transmission Providers, SERC, or NERC if necessary or appropriate in connection with its role as Transmission Provider. If a court, government agency or entity with the right, power, and authority to do so, requests or requires either Party, by subpoena, oral deposition, interrogatories, requests for production of documents, administrative order, or otherwise, to disclose Confidential Information, that Party shall provide the other Party with prompt notice of such request(s) or requirement(s) so that the other Party may seek an appropriate protective order or waive compliance with the terms of this Agreement. In the absence of a protective order or waiver the Party shall disclose such Confidential Information which, in the opinion of its counsel, the Party is legally compelled to disclose. Each Party will use reasonable efforts to obtain reliable assurance that confidential treatment will be accorded any Confidential Information so furnished.
17.20 Cooperation. Each Party to this Agreement shall reasonably cooperate with the other as to all aspects relating to the performance of its respective obligations under this Agreement; provided, however, this agreement of cooperation shall not constitute a waiver or relinquishment of either Party's rights under this Agreement in law or equity.
17.21 Negotiated Agreement. The Parties agree that this Agreement is the result of mutual compromise and shall not be construed as having been drafted by either Party. The Parties agree to support the acceptance of the Agreement in its entirety by FERC.
17.22 Subcontractors. Nothing in this Agreement shall be construed as preventing either Party from utilizing the services of subcontractors as it deems appropriate; provided, however, that all such contractors comply with the applicable terms and conditions of this Agreement. The creation of any subcontract relationship shall not relieve the retaining Party of any of its obligations under this Agreement.
17.23 EWG Status. Nothing in this Agreement shall require Generator to take any action that could result in its inability to obtain, or its loss of, status as an Exempt Wholesale Generator within the meaning of the Public Utility Holding Company Act of 1935, as amended.
IN WITNESS WHEREOF, Generator and Georgia Power have caused this Agreement to be executed by their duly authorized representatives on the Day and year first above written.
SOUTHERN POWER COMPANY
"Generator"
By: _________________________
Title: ________________________
Date:_________________________
GEORGIA POWER COMPANY
"Georgia Power"
By: _________________________
Title: ________________________
Date:_________________________
APPENDIX A
INTERCONNECTION PROCEDURES
INTERCONNECTION PROCEDURES
The following requirements apply to Generator's Facility when operated in parallel with the Georgia Power Electric System.
In order to minimize objectionable and adverse operating conditions on the electric service provided to other customers by Georgia Power, the Facility shall meet the following operating criteria:
When Generator is delivering power to the Georgia Power Electric System, Generator shall operate its generation to meet the voltage schedule, as measured at the 500 kV transmission bus serving the Facility communicated by the Georgia ITS operator. The current voltage schedule for the Interconnection Point to the Facility is included in this Appendix. If the generator cannot hold voltage schedule but is producing its maximum amount of MVARS, then that is acceptable performance. It is anticipated that the generator shall be producing MVARS below its maximum capability under normal system conditions.
The Facility shall maintain a nominal operating frequency of 60 hertz. Generator may be required to assist in supporting system frequency if requested by Georgia Power.
The Facility shall be capable of providing an immediate and sustained response to abnormal frequency excursions within the machine design parameters. The governors shall be properly maintained and shall provide droop characteristics consistent with the requirements of NERC, SERC and the Georgia Power Electric System. At a minimum, governors shall be fully responsive to frequency deviations consistent with the requirements of NERC, SERC and the Georgia Power Electric System during normal operating conditions only, as defined by Good Utility Practices. In no event shall the governors be blocked by Generator without the express written permission of Georgia Power.
a. Reactive Power Production. At continuous rated output, simulations must show that Generator's Facility shall have the capability of dynamically supplying at least 0.33 MVARS at the 500 kV Interconnection Point for each MW supplied when the Facility is tested at 102% of nominal voltage.
Appendix A Page 1 of 4
b. Reactive Power Absorption. The Facility shall also be capable of dynamically absorbing 0.23 MVARs from the transmission system for each MW supplied at the 500 kV Interconnection Point during simulations when the Facility is tested at 105% of nominal voltage. Simple Cycle combustion turbines used as peaking generation may be exempted from the MVAR absorption requirements.
The Facility shall not introduce excessive distortion to the Georgia Power Electric System's voltage profile and current waveforms. The harmonic distortion measurements shall be made at the transmission facility serving the Facility and be within the limits specified in the tables below.
MAXIMUM ALLOWABLE HARMONIC CONTENT (CURRENT)
(in percent of total current)
Harmonic Order Number (h)
h 11 11 h 17 17 h 23 23 h 35 35 h
- - - -
ODD 2.0 1.0 0.75 0.30 0.15
EVEN 0.50 0.25 0.19 0.075 0.04
|
Total current harmonic distortion may not exceed 2.5%
MAXIMUM ALLOWABLE HARMONIC CONTENT (VOLTAGE)
(in percent)
For nominal voltage at interconnection point of 69 kV to 115 kV Maximum Individual Harmonic: 1.50 Maximum Total Harmonic Distortion: 2.50
For nominal voltage at interconnection point of 161 kV and above Maximum Individual Harmonic: 1.00 Maximum Total Harmonic Distortion: 1.50
To minimize possible adverse effects on other Georgia Power customers, a power transformer is required between the Facility and the Georgia Power Electric System. This transformer's windings shall be connected according to the requirements of Georgia Power.
Appendix A Page 2 of 4
Generator shall not energize, or de-energize, Georgia Power equipment. The necessary control devices shall be installed by Generator on the Facility to prevent the energization of de-energized Georgia Power equipment by Generator's Facility.
Generator is responsible for the synchronization of the Facility to the Georgia Power Electric System. Georgia Power shall have relaying on the breaker and a half segment at the Interconnection Point and Generator must insure that its Facility is disconnected from Georgia Power whenever the breaker and a half segment at an Interconnection Point is de-energized. Georgia Power may re-energize the breaker and a half segment by remote control and Georgia Power shall not be responsible for damage to Facility due to an out of phase condition during re-energization.
Georgia Power shall provide the data protocol, and Generator shall install as part of the Interconnection Facilities any equipment necessary to deliver telemetered signals to Georgia Power specifying the voltage and watts, vars, and watthours delivered to the Georgia Power Electric System at the Interconnection Point.
Appendix A Page 3 of 4
VOLTAGE SCHEDULES
AT THE INTERCONNECTION POINT
SOUTHERN POWER COMPANY
Commencing with the Effective Date of the Interconnection Agreement, Generator shall maintain the following voltage schedules as communicated by Georgia Power from time to time:
Schedule #1 - Southern Company Control Area Maximum Load for the Day greater
than 33,000 MW
Operating Time Voltage
0000-0700 515 kV
0700-2100 522 kV
2100-2400 515 kV
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Schedule #2 - Southern Company Control Area Maximum Load for the Day between 28,000 and 33,000 MW
Operating Time Voltage
0000-0700 515 kV
0700-2000 522 kV
2000-2400 515 kV
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Schedule #3 - Southern Company Control Area Maximum Load for the Day between 23,000 and 28,000MW
Operating Time Voltage
0000-0800 515 kV
0800-1900 522 kV
1900-2400 515 kV
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Schedule #4 - Southern Company Control Area Maximum load for the Day below 23,000 MW
Operating Time Voltage
0000-0600 515 kV
0600-2100 515 kV
2100-2400 515 kV
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The Georgia ITS system operator's determination of whether Schedule 1, 2, 3, or 4 should be used for a given period shall be based on expectations of system requirements and conditions. The voltage schedule to be used, for the upcoming week, shall be communicated to Generator each Friday and at such other times as changing system requirements and conditions may require.
Appendix A Page 4 of 4
APPENDIX B
SPECIFICATIONSSPECIFICATIONS
TO
INTERCONNECTION AGREEMENT
BETWEEN
SOUTHERN POWER COMPANY
AND
GEORGIA POWER COMPANY
1. Location of Interconnection Point:
The Interconnection Point will be at the Wansley 500 kV Substation located in Heard County Georgia.
2. Projected Dates Generator's Facilities will connect to Georgia Power:
Station Service Date: July 15, 2001
Initial Synchronization of Generator for Testing Date: October 1, 2001
Commercial Operation Date: June 1, 2002
3. Description of Interconnection Point:
The point, as shown on the attached one line diagram, at which the Generator's 500 kV conductors connect to the new breaker and a half bus element at the Wansley 500 kV Substation.
4. Description of Station Service Connections:
Should Generator require station service in addition to that which Generator can self-provide, separate arrangements will be made by Generator. Nothing herein prevents the Generator from receiving Station Service requirements through the Interconnection Facilities before the projected Station Service Date.
5. Description of Generator's Facility:
The Generator's Facility under this Agreement is a 1220 MW Combined Cycle (CC) facility which is more fully described in the Interconnection Application made by Southern Power Company to Southern Company on May 5, 2000.
6. Interconnection Facility Requirements:
The Interconnection Facilities are sufficient to accommodate approximately 1220 MW upon completion.
Appendix B Page 1 of 3
7. Description of Georgia Power's Interconnection Facilities:
Interconnection Facilities under this Agreement include the Estimated Cost
-------------
following at the Estimated Cost Wansley 500 kV Substation: (000's)
1. Install five (5) 63 kA 500 kV circuit breakers and $ 5,000
associated switches and control equipment.
Terminate line from Generator's Facility. Convert the
substation to a breaker and a half arrangement.
2. Upgrade five (5) 500 kV overstressed circuit breakers to 63 kA $ 1,800
capability.
8. Description of Generator's Interconnection Equipment:
Interconnection Equipment under this Agreement include the
following: Estimated Cost
--------------
1. Six (6) GSU transformers connected delta on the generator
side and solidly grounded wye on the 500 kV side Design & Construction by
Southern Power
2. Six (6) 500 kV circuit breakers used for GSU protection and Design & Construction by
generator synchronization. Southern Power
3. 500 kV Collector bus. Design & Construction by
Southern Power
4. One (1) 500 kV circuit from Generator's Facility to the Design & Construction by
Wansley 500 kV Substation. Southern Power
5. One (1) Fiber Optic circuit from Generator's Facility to
the Wansley 500 kV Substation. Design & Construction by
Southern Power
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The specifications for all such equipment in items 7 and 8 above will be determined in accordance with this Agreement, the results of the Interconnection Studies dated September 26, 2000, and November 11, 2000, Georgia Power specifications provided to the Generator in writing and Good Utility Practices.
Appendix B Page 2 of 3
SOUTHERN POWER COMPANY- WANSLEY
SINGLE LINE DIAGRAM
[OBJECT OMITTED]
Appendix B Page 3 of 3
APPENDIX C
QUARTERLY ESTIMATED
CONSTRUCTION COSTS
A. Quarterly Estimated Construction Costs of Interconnection Facilities.
The Quarterly Estimated Construction Costs are based on the Generator's total cost of the Interconnection Facilities. Generator's estimated total construction cost responsibility for the Interconnection Facilities is $ 6,800,000.
The Schedule is based on constructing the Wansley 500 kV Substation Interconnection Facilities.
2000 2001 2002
---------------------------------------------------------------------------------------------------------------------------
Project Activity 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Additions and
and
modifications to 2.0 10.0 20.0 15.0 11.0 10.0
Wansley 500 kV
substation
Payment Schedule
(100,000s) 2.0 10.0 20.0 15.0 11.0 10.0
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Appendix C Page 1 of 1
Exhibit 10.10
INTERCONNECTION AGREEMENT
By and Between
SOUTHERN POWER COMPANY
and
GEORGIA POWER COMPANY
for
GOAT ROCK CC UNIT 1
Dated as of May 10, 2001
TABLE OF CONTENTS
SECTION 1: DEFINITIONS............................................................................................1
SECTION 2: INTERCONNECTION SERVICE.................................................................................6
2.1 SERVICE.....................................................................................................6
2.2 FACILITY....................................................................................................6
2.3 PERMITS.....................................................................................................6
2.4 EASEMENTS AND ACCESS RIGHTS.................................................................................6
2.5 INTERCONNECTION POINT.......................................................................................7
2.6 STATION SERVICE ARRANGEMENTS................................................................................7
2.7 GENERATOR BALANCING SERVICE ARRANGEMENTS....................................................................8
2.8 INTERCONNECTION PROCEDURES..................................................................................8
2.9 INTERCONNECTED OPERATION SERVICES...........................................................................8
2.10 CONTROL AREA OPERATIONS....................................................................................8
2.11 INADVERTENT FLOW...........................................................................................9
SECTION 3: TERM, TERMINATION AND DISCONNECTION....................................................................9
3.1 TERM........................................................................................................9
3.2 DEFAULT.....................................................................................................9
3.3 PERMANENT DISCONNECTION.....................................................................................9
3.4 TEMPORARY DISCONNECTION.....................................................................................9
3.5 SURVIVAL OF RIGHTS.........................................................................................10
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY.....................................................11
4.1 GENERAL STANDARDS..........................................................................................11
4.2 MAINTENANCE AND OPERATION..................................................................................11
SECTION 5: INTERCONNECTION FACILITIES............................................................................11
5.1 INTERCONNECTION FACILITIES.................................................................................11
5.2 COSTS OF INTERCONNECTION FACILITIES........................................................................12
5.3 ADDITIONAL INTERCONNECTORS.................................................................................12
5.4 PAYMENT OF COST OF ON-GOING MAINTENANCE AND OPERATION OF THE INTERCONNECTION FACILITIES....................13
5.5 CARE OF EQUIPMENT..........................................................................................13
5.6 PAYMENT OF THE COST OF THE INTERCONNECTION FACILITIES......................................................13
SECTION 6: LIABILITY AND INDEMNIFICATION.........................................................................15
6.1 REMEDIES FOR BREACH........................................................................................15
6.2 LIMITATION OF LIABILITY....................................................................................15
6.3 NO LIABILITY FOR OTHER PARTY'S RESPONSIBILITIES............................................................15
6.4 RESPONSIBILITY FOR PROPERTY................................................................................15
6.5 INDEMNIFICATION............................................................................................16
SECTION 7: METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT..........................................16
7.1 METERING...................................................................................................16
7.2 DATA ACQUISITION AND PROTECTION EQUIPMENT..................................................................17
7.3 PAYMENT OF COST OF METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT............................18
7.4 CARE OF EQUIPMENT..........................................................................................18
7.5 INSPECTION AND TESTING.....................................................................................18
7.6 INACCURACIES...............................................................................................18
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SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING..........................................................19
8.1 FACILITY EVALUATION BASED ON ACTUAL EQUIPMENT DATA.........................................................19
8.2 IMPLEMENTATION OF CONTROL AND OPERATING PROCEDURES.........................................................19
8.3 FACILITY INSPECTION........................................................................................19
8.4 INITIAL SYNCHRONIZATION....................................................................................20
8.5 REVIEW OF SYNCHRONIZATION TESTS............................................................................20
SECTION 9: ADMINISTRATION CHARGE.................................................................................20
SECTION 10: PAYMENT PROCEDURE....................................................................................21
10.1 BILLING...................................................................................................21
10.2 FAILURE TO TIMELY PAY.....................................................................................21
10.3 INTEREST..................................................................................................21
10.4 CREDITWORTHINESS..........................................................................................21
10.5 AUDIT RIGHTS..............................................................................................22
10.6 DISPUTED BILLS............................................................................................22
10.7 NO WAIVER.................................................................................................22
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS............................................................22
11.1 GENERATOR REPRESENTATIONS, WARRANTIES AND COVENANTS.......................................................22
11.2 GEORGIA POWER REPRESENTATIONS, WARRANTIES AND COVENANTS...................................................23
11.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................................24
SECTION 12: COMPLIANCE WITH LAWS.................................................................................24
12.1 COMPLIANCE................................................................................................24
12.2 CHANGE OF LAW.............................................................................................24
12.3 REGULATORY FILINGS........................................................................................24
12.4 TAXES.....................................................................................................25
SECTION 13: INSURANCE............................................................................................25
13.1 GENERATOR'S INSURANCE.....................................................................................25
13.2 NOTICE AND CERTIFICATION..................................................................................27
SECTION 14: FORCE MAJEURE........................................................................................27
14.1 DEFINITION OF FORCE MAJEURE EVENT.........................................................................27
14.2 NO BREACH OR LIABILITY....................................................................................27
14.3 SUSPENSION OF PERFORMANCE.................................................................................28
SECTION 15: OPERATING COMMITTEE..................................................................................28
15.1 ESTABLISHMENT OF COMMITTEE................................................................................28
15.2 DUTIES....................................................................................................28
SECTION 16: ASSIGNMENT............................................................................................29
16.1 ASSIGNMENT BY GENERATOR...................................................................................29
16.2 ASSIGNMENT BY GEORGIA POWER...............................................................................31
SECTION 17: MISCELLANEOUS.........................................................................................31
17.1 GEORGIA POWER'S AGENT.....................................................................................31
17.2 NO PARTNERSHIP............................................................................................31
17.3 SUCCESSORS AND ASSIGNS....................................................................................31
17.4 NO THIRD PARTY BENEFIT....................................................................................31
17.5 NO AFFILIATE LIABILITY....................................................................................31
17.6 TIME OF ESSENCE...........................................................................................31
17.7 NO WAIVER.................................................................................................31
17.8 AMENDMENTS................................................................................................32
17.9 NOTICE....................................................................................................32
17.10 COUNTERPARTS.............................................................................................33
iii
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17.11 CROSS-REFERENCES.........................................................................................33 17.12 SECTION HEADINGS.........................................................................................33 17.13 INCLUDING................................................................................................33 17.14 GOVERNING LAW............................................................................................33 17.15 MERGER...................................................................................................33 17.16 NERC.....................................................................................................33 17.17 GOOD UTILITY PRACTICES...................................................................................34 17.18 SAFETY...................................................................................................34 17.19 CONFIDENTIAL INFORMATION.................................................................................34 17.20 COOPERATION..............................................................................................35 17.21 NEGOTIATED AGREEMENT.....................................................................................35 17.22 SUBCONTRACTORS...........................................................................................35 17.23 EWG STATUS...............................................................................................35 APPENDIX A INTERCONNECTION PROCEDURES.............................................................................1 APPENDIX B SPECIFICATIONS TO INTERCONNECTION AGREEMENT............................................................1 APPENDIX C QUARTERLY ESTIMATED CONSTRUCTION COSTS.................................................................1 |
INTERCONNECTION AGREEMENT
This Interconnection Agreement ("Agreement") is made and entered into by and between Southern Power Company, organized and existing under the laws of the State of Delaware and having its principal place of business at Birmingham, Alabama (hereinafter referred to as the "Generator"), and Georgia Power Company, a corporation organized and existing under the laws of the State of Georgia and having its principal place of business at Atlanta, Georgia (hereinafter referred to as "Georgia Power"). Generator and Georgia Power may be hereinafter referred to individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, Generator desires to engage in the interconnected operation of Generator's generating facility with the transmission facilities of the Georgia Power Electric System; and
WHEREAS, Generator desires to engage in sales of electric energy to be generated by Generator's generating facility.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties covenant and agree as follows:
SECTION 1: DEFINITIONS
1.1 In addition to the initially capitalized terms and phrases defined in the preamble of this Agreement, the following initially capitalized terms and phrases as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "Affiliate" - shall mean, with respect to any Party, another Person (i) which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Party, (ii) which, directly or indirectly, of record or beneficially, owns or holds 10% or more of the shares of any class of capital stock or other ownership interest of such Party having voting power or (iii) of which 10% or more of the shares of any of the capital stock or other ownership interest of the Affiliate having voting power is owned or held, directly or indirectly, of record or beneficially, by or for such Party. For purposes of this definition, "control" when used with respect to any 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 "controlled" have meanings correlative to the foregoing.
1.1.2 "Appendix" or "Appendices" - means any of the schedules, exhibits and attachments, including the Interconnection Procedures, which are appended hereto and are incorporated by reference herein and made a part of this Agreement.
1.1.3 "Business Day" - means any Day excluding Saturday and Sunday and excluding any Day on which banking institutions in Georgia are closed because of a federal holiday.
1.1.4 "Day" or "Calendar Day" - means a calendar day unless otherwise specified.
1.1.5 "Effective Date" - shall be June 1, 2001, or such other date as the FERC shall order.
1.1.6 "Emergency" - means a condition or situation associated with the transmission and distribution of electricity, including voltage abnormalities, that, in the sole reasonable judgment of Georgia Power, exercised on a non-discriminatory basis as the transmission asset owner, adversely affects or is imminently likely to adversely affect: (i) public health, life or property; (ii) Georgia Power's employees, agents or property; or (iii) Georgia Power's ability to maintain safe, adequate, and continuous electric service to its customers and/or the customers of any member of NERC consistent with Good Utility Practices; provided, however, that if there is no adverse condition associated with distribution or transmission facilities, then the inability of Georgia Power to meet its load requirements solely because of insufficient generation resources shall not constitute an Emergency.
1.1.7 "Facility" - means all of Generator's equipment (including the Generator's Interconnection Equipment), as described in Appendix B of this Agreement, used to produce electric energy and required for parallel operation with Georgia Power, which equipment is located in Lee County, Georgia.
1.1.8 "FERC" - means the Federal Energy Regulatory Commission and any successor.
1.1.9 "Force Majeure Event" - shall have the meaning ascribed to it in Section 14.1.
1.1.10 "Generator" - shall have the meaning ascribed to it in the first paragraph of this Agreement, and its agents or permitted successors and assigns.
1.1.11 "Generator's Interconnection Equipment" - means all equipment which is owned, operated, or maintained by or for Generator as such is described in Appendix B (including without limitation, equipment for connection, switching, protective relaying and safety) that is required to be installed for the delivery of electric energy onto the Georgia Power Electric System on behalf of Generator. Generator's Interconnection Equipment does not include the Interconnection Facilities.
1.1.12 "Georgia ITS" - means the Georgia Integrated Transmission System, the electric transmission systems owned individually by Georgia Power, Georgia Transmission Corporation, the Municipal Electric
Authority of Georgia and the City of Dalton, Georgia, and operated as an integrated transmission system.
1.1.13 "Georgia Power" - shall have the meaning ascribed to it in the first paragraph of this Agreement, including any of its agents or permitted successors and assigns.
1.1.14 "Georgia Power Electric System" - means collectively, the entire network of electric generation, transmission and distribution facilities, equipment and other devices owned (in whole or in part) or controlled by Georgia Power, including the Georgia ITS, for the purposes of generating, transmitting, receiving, and distributing electric energy and capacity.
1.1.15 "Good Utility Practices" - 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 the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result(s) at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practices are 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties, Legal Requirements, NERC and SERC guides, and applicable safety and maintenance codes.
1.1.16 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department, taxing authority, or other authority thereof having jurisdiction over either Party, the Facility, the Interconnection Facilities, the Generator's Interconnection Equipment, or the Georgia Power Electric System, whether acting under actual or assumed authority.
1.1.17 "Indenture Trustee" - means a trust company chartered or other Person incorporated under the laws of the United States or a state of the United States and based in the United States which is the indenture trustee, mortgagee or secured party under any Indenture.
1.1.18 "Initial Synchronization Date" - means the date that includes the first instant in time when energy generated by the Facility is delivered to the Georgia Power Electric System at the Interconnection Point. Such Initial Synchronization Date is projected in Appendix B.
1.1.19 "Interconnection Facilities" - means all equipment which is constructed, owned, operated, or maintained by or for Georgia Power, as such are generally identified and described in Appendix B, (including without limitation, equipment for connection, switching, transmission, distribution, protective relaying and safety) that, in Georgia Power's reasonable judgment, is required to be installed for the delivery of electric energy onto the Georgia Power Electric System on behalf of Generator and for the receipt by Generator of electric service in accordance with Section 2.6 hereof.
1.1.20 "Interconnection Point" - means the point of interconnection of Generator's Facility to the Georgia Power Electric System as defined in the Specifications to this Agreement set forth in Appendix B.
1.1.21 "Interconnection Procedures" - means the procedures for interconnection and operations set forth in Appendix A.
1.1.22 "Interconnection Service" - means the services provided by Georgia Power to Generator to safely and reliably interconnect Generator's Facility to the Georgia Power Electric System and receive electric energy and capacity from the Facility at the Interconnection Point pursuant to the terms of this Agreement and, if applicable, the Tariff.
1.1.23 "Interest Rate" - means the prime rate of interest as published from time to time in the Wall Street Journal or comparable successor publication.
1.1.24 "kW" - means kilowatts. In addition, "MW" may be used to mean megawatts, which are 1000 kilowatts.
1.1.25 "kWh" - means kilowatt-hours. In addition, "MWh" may be used to mean megawatt-hours, which are 1000 kilowatt-hours.
1.1.26 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, treaty, judgment, injunction, order or other legally binding announcement, directive, published practice or requirement enacted, issued or promulgated by a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question at the time of the Effective Date or anytime thereafter during the Term of this Agreement.
1.1.27 "Lien" - means any and all liens, mortgages, encumbrances, pledges, claims, leases, charges and security interests of any kind.
1.1.28 "Month" - means a calendar Month, or such other period as may be mutually agreed by the Parties. "Monthly" has a meaning correlative to that of Month.
1.1.29 "Monthly Administration Charge" - for a particular Month of the Term, means the Monthly amount to be paid by Generator to Georgia Power as set forth in Section 9.
1.1.30 "NERC" - means the North American Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.31 "Party" or "Parties" - means either Georgia Power or Generator or both.
1.1.32 "Permitted Financing Assignee" - shall have the meaning ascribed to it in Section 16.1 hereof.
1.1.33 "Permitted Liens" - means:
(a) any Lien on this Agreement and/or Georgia Power's rights, obligations, title or interest in, to and under this Agreement pursuant to that certain First Mortgage Bond Indenture from Georgia Power to The Chase Manhattan Bank, Trustee, dated as of March 1, 1941, or pursuant to any other mortgage or security agreement as heretofore and hereafter amended (the "Indenture");
(b) any Lien for taxes, assessments or other governmental charges which are not delinquent or the validity of which is being contested in good faith by appropriate proceedings diligently prosecuted so long as appropriate reserves are maintained in respect of such taxes, assessments or charges; and
(c) attachments, judgments and other similar Liens arising in connection with court proceedings, provided that within sixty (60) Days of the attachment thereof (but not less than five (5) Days prior to any execution or sale pursuant thereto), the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being contested in good faith and by appropriate proceedings so long as any material risk of liability is covered by a bond, or appropriate reserves are maintained in respect of such proceedings.
1.1.34 "Person" - means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court.
1.1.35 "Persons Indemnified" - means, when used with respect to a Party, collectively or individually (as the context might indicate), the Party, the Party's Affiliates and permitted successors and assigns, and the directors, officers, representatives, agents and employees of each of them.
1.1.36 "Qualified Person" - shall mean any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court who is an owner or operator of transmission facilities, or belongs to a regional transmission organization.
1.1.37 "Quarter" - means for each year of the Term four distinct time periods for planning and budgeting purposes comprised of January through March, April through June, July through September, and October through December. "Quarterly" has a meaning correlative to that of Quarter. In the event that this Agreement becomes effective during any Quarter, the obligations herein that arise on a Quarterly basis shall begin in the Quarter immediately following the initial Effective Date of this Agreement.
1.1.38 "Quarterly Estimated Construction Cost" - shall have the meaning set forth in Section 5.6.1.
1.1.39 "SERC" - means the Southeastern Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.40 "Southern Companies" - means, collectively, the electric utility operating company subsidiaries of Southern Company engaged in common dispatch and control of generating resources within the Southern Company Control Area, currently including Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, and Southern Power Company.
1.1.41 "Southern Company Control Area" - means that electric system of the Southern Companies that has been recognized by NERC and SERC as a control area.
1.1.42 "Specifications" - mean the interconnection specifications provided in Appendix B to this Agreement, which are attached hereto and incorporated herein by reference.
1.1.43 "Tariff" - means Southern Companies Open Access Transmission Tariff or a successor arrangement that governs transmission and interconnection services on the transmission facilities of Georgia Power.
1.1.44 "Term" - means the duration of this Agreement as specified in Section 3.1.
SECTION 2: INTERCONNECTION SERVICE
2.1 Service. Georgia Power shall supply Generator with Interconnection Service at the Interconnection Point for the Facility in accordance with and for the Term of this Agreement. Interconnection Service does not include transmission delivery service beyond the Interconnection Point. Neither Georgia Power nor any of its Affiliates shall have any obligation under this Agreement to purchase any power from the Facility, it being the intent and understanding of the Parties that Generator shall be responsible for its power sales to third parties.
2.3 Permits. Generator shall obtain and maintain, at its sole expense, any and all governmental permits, certificates or authorizations that Generator is required to obtain and maintain for the performance of its obligations under this Agreement. Georgia Power shall obtain and maintain any and all permits, certificates or authorizations that are required for the construction, operation, maintenance, and testing of the Interconnection Facilities, the expense of which shall be paid by Generator in accordance with Section 5.
2.4.1 To the extent that Generator has any such rights, Generator shall convey to Georgia Power at no cost to Georgia Power any and all rights of way and easements, including adequate and continued access rights to property of Generator necessary to provide Interconnection Service to Generator.
Generator agrees that such parcel, rights of way, and easements shall survive termination or expiration of this Agreement, if and to the extent necessary for the continued use or the removal of the Interconnection Facilities. Such easements and access rights are specifically intended to permit Georgia Power to install, operate, maintain, replace and/or remove the Interconnection Facilities.
2.4.2 Upon reasonable advance notice given to Generator,
representatives of Georgia Power (as the transmission asset owner) shall at all
reasonable times have access to the Generator's Interconnection Equipment and to
property owned or controlled by Generator to the extent necessary in order to:
(i) inspect, maintain, and test meters and other Georgia Power equipment; (ii)
interconnect, disconnect (in accordance with Section 3), monitor, or measure
energy generated by the Facility; (iii) inspect the operation, maintenance or
testing of the Generator's Interconnection Equipment; or (iv) take such other
action as may be reasonably necessary to exercise Georgia Power's rights under
this Agreement. Georgia Power shall take reasonable steps to ensure such access
does not materially interfere with the operations, maintenance or testing of the
Facility, and that Georgia Power's use of such property complies with Legal
Requirements with respect to the Facility as well as with Generator's reasonable
policies and procedures applicable to the Facility, including those regarding
safety. Generator shall cooperate in such physical inspections of the
Generator's Interconnection Equipment as may be reasonably required by Georgia
Power. Georgia Power's technical review and inspection of the Generator's
Interconnection Equipment shall not be construed as endorsing the design thereof
nor as any warranty of the safety, durability or reliability of the Facility.
2.4.3 To the extent that Georgia Power has any such rights, Georgia Power agrees to furnish at no cost to Generator any necessary licenses or other access rights to permit Generator to construct, connect, operate and maintain its facilities located in Georgia Power's substation or to otherwise fulfill its obligations under this Agreement. After the Interconnection Facilities are energized, such access rights for Generator's facilities located inside the substation shall be exercised by Generator only with supervision by Georgia Power. Generator shall provide to Georgia Power reasonable notice under the circumstances of a request for such supervised access to the substation, and Georgia Power and Generator shall mutually agree upon the date and time of such supervised access, such agreement not to be unreasonably withheld. In addition to the aforementioned requirement, in exercising such access rights, Generator shall not unreasonably disrupt or interfere with normal operations of Georgia Power's business and shall act consistent with Good Utility Practice.
2.5 Interconnection Point. Georgia Power shall establish and maintain the Interconnection Point, as described in Appendix B to this Agreement.
2.6 Station Service Arrangements. Generator is responsible for making all appropriate arrangements for station service requirements. Generator must demonstrate, to Georgia Power's reasonable satisfaction, that it has adequate arrangements in place to supply its station service requirements. If Generator supplies its running station service on Generator's side of the Interconnection Point, then energy consumed and demand requirements are deemed to be netted from Generator's capability. In this same arrangement, starting station service energy is also assumed to be netted out of energy delivered to the Interconnection Point.
2.7 Generator Balancing Service Arrangements. Generator is responsible for ensuring that its actual generation matches its scheduled delivery, on an integrated clock hour basis (in whole MW), to the Georgia Power Electric System at the Interconnection Point. Generator shall make arrangements for the supply of energy and/or capacity when there is a difference between the actual generation and the scheduled delivery. Generator may satisfy its obligation for making such generator balancing service arrangements by: (a) obtaining such service from another entity that (i) has generating resources within the Southern Company Control Area, (ii) agrees to assume responsibility for providing generator balancing service to the Generator and (iii) has a control area coordination services agreement with the Southern Companies that addresses generator balancing service for all generating resources for which the entity is responsible; (b) committing sufficient additional unscheduled generating resources to the control of and dispatch by the Southern Company Control Area that are capable of supplying any capacity and energy not supplied by the scheduled resource and entering into a control area coordination services agreement with the Southern Company Control Area operator that addresses generator balancing service obligations; (c) entering into an arrangement with another NERC-approved control area to dynamically schedule the Generator's Facility out of the Southern Company Control Area and into such other control area; (d) entering into a generator balancing service agreement with Southern Companies pursuant to their Generator Balancing Service Tariff on file with FERC; or (e) in the event the load/generation balancing function of the control area in which Georgia Power is a participant is provided by an entity other than Southern Companies, by entering into an alternate arrangement with such control area service provider.
2.8 Interconnection Procedures. When the Facility is operated as part of the Southern Company Control Area, Generator shall comply with the Interconnection Procedures (Appendix A) for the Facility at all times. When the Facility is not operated as part of the Southern Company Control Area, the Operating Committee shall determine which (if any) of the Interconnection Procedures are not applicable.
2.9 Interconnected Operation Services. Generator retains any right it may have to pursue compensation for the provision of interconnected operation services by making a filing with FERC. Georgia Power retains any right it may have to support or oppose such filing.
2.10 Control Area Operations. Nothing in this Agreement shall obligate Generator to operate the Facility as a part of the Southern Company Control Area.
2.11 Inadvertent Flow. Generator is not a transmission provider; and Georgia Power shall have no obligation under this Agreement to pay Generator any charge for flows of electric power and/or energy through Generator's Interconnection Equipment.
SECTION 3: TERM, TERMINATION AND DISCONNECTION
3.1 Term. This Agreement shall become effective on the Effective Date and shall continue in effect for a period of forty (40) years from the initial Effective Date unless terminated earlier by mutual written agreement of the Parties or otherwise pursuant to the provisions of this Agreement subject to any applicable Legal Requirement, and shall continue thereafter until terminated by either Party on at least one (1) year's notice.
3.2.1 A Party shall be in "Default" under this Agreement, if:
(i) the Party fails to comply with any material term or condition of this
Agreement; (ii) any material representation or warranty of the Party made
pursuant to this Agreement shall prove to be false or misleading in any material
respect when made or deemed made; or (iii) Generator makes an assignment for the
benefit of Generator's creditors, or voluntary or involuntary proceedings in
bankruptcy are instituted seeking to adjudge Generator a bankrupt, or if
Generator be adjudged a bankrupt, or if Generator's affairs are placed in the
hands of any court for administration.
3.2.2 This Agreement may be terminated by either Party, upon written notice, if the other Party is in Default hereunder and such Party (or its Permitted Financing Assignee) has not cured such breach within thirty (30) Days following written notice of such breach to the other Party. Provided, however, that in the event the Default is not capable of being cured within thirty (30) Days, the Agreement shall not be terminated if the Party in Default (or its Permitted Financing Assignee) has begun in good faith taking actions to cure within thirty (30) Days following such written notice and diligently proceeds to completion.
3.2.3 In the event of a Default by either Party and subject to that Party's right to cure, the non-defaulting Party may pursue any and all judicial and administrative remedies and relief available to it.
3.3 Permanent Disconnection. Upon termination of this Agreement
(whether due to the expiration of the Term or due to a Default as described in
Section 3.2), Georgia Power may permanently disconnect the Facility from the
Georgia Power Electric System in accordance with Good Utility Practices.
3.4.1. Georgia Power (as transmission asset owner) may, consistent with Good Utility Practice and on a non-discriminatory basis, direct that the Facility be temporarily disconnected from the Georgia Power Electric System: (i) during an Emergency; (ii) if the operation and output of the Facility do not meet the requirements of this Agreement (even if Generator has commenced actions to cure such Default) and such condition could materially adversely affect the safe and reliable operation of the Georgia Power Electric System; (iii) if an inspection of the Facility reveals a hazardous condition,
lack of scheduled maintenance or testing, or an operating characteristic of the Facility that could materially adversely affect the safe and reliable operation of the Georgia Power Electric System; (iv) if Generator has modified the Facility or interconnection protective devices in a manner that could reasonably be expected to materially adversely affect the safe and reliable operation of the Georgia Power Electric System without the knowledge and approval of Georgia Power; (v) in the event of tampering with, or unauthorized use of, Georgia Power's equipment; (vi) if the operation of Generator's equipment materially adversely affects Georgia Power's equipment or the safe and reliable operation of the Georgia Power Electric System; or (vii) if necessary to construct, install, maintain, repair, replace, remove, investigate, inspect or test any part of the Interconnection Facilities or the transmission facilities of Georgia Power, in accordance with Section 15.2.4.
3.4.2 In the event of the occurrence of any of the conditions described in Section 3.4.1, Georgia Power shall give as much advance notice as practicable under the circumstances of the need for disconnection of the Facility to employees of Generator designated from time to time by Generator to receive such notice. Upon receipt of notice directing disconnection, Generator shall carry out the required action. Where circumstances do not permit such advance notice to Generator or Generator's employees, Georgia Power may disconnect the Facility from the Georgia Power Electric System without such notice in accordance with Good Utility Practices. Georgia Power shall reconnect the Facility as soon as reasonably practicable following the cessation or remedy of the event that led to the temporary disconnection. The Parties agree to cooperate and coordinate with each other to the extent necessary in order to restore the Facility, Interconnection Facilities, and the Georgia Power Electric System to their normal operating state.
3.4.3 Generator shall bear any direct cost incurred by Georgia Power as a result of any disconnection or reconnection caused by Generator's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Generator. Georgia Power shall bear any direct cost incurred by Generator as a result of any disconnection or reconnection caused by Georgia Power's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Georgia Power.
3.4.4 Generator reserves the right, in its sole discretion, to isolate or disconnect its Facility from the Georgia Power Electric System.
3.5 Survival of Rights. Upon termination or expiration of this Agreement, the Parties shall be relieved of their obligations under this Agreement except for the following obligations which shall survive termination or expiration: (i) the obligation to pay each other all amounts then owed and not paid under this Agreement; (ii) obligations arising from action or inaction during the period the Agreement was in effect under the indemnities provided for in this Agreement; and (iii) any other obligations which the Agreement specifically indicates shall survive termination or expiration.
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY
4.1 General Standards. During the Term, Generator shall have the sole responsibility to, and at its sole expense shall manage, control, operate and maintain the Facility in accordance with Good Utility Practices and the
requirements set forth in this Agreement. Generator shall operate its generating equipment in parallel with the Georgia Power Electric System in accordance with the operating procedures in Appendix A to this Agreement and those established by the Operating Committee in accordance with Section 15 and in accordance with the requirements of the NERC-recognized control area in which the Facility operates. All wiring, apparatus and other equipment necessary to receive or deliver electric energy on Generator's side of the Interconnection Point shall be supplied, maintained and operated by and at the expense of Generator.
4.2 Maintenance and Operation. Generator shall maintain and operate the Facility in accordance with Good Utility Practices. Generator shall not, without Georgia Power's prior written approval (which shall not be unreasonably withheld or delayed), make any change to its Facility which might adversely affect the operation of the Georgia Power Electric System.
SECTION 5: INTERCONNECTION FACILITIES
5.1.1 Georgia Power shall design, procure, install, and own the Interconnection Facilities needed for Georgia Power to provide Interconnection Service to Generator. Georgia Power shall be responsible for acquiring all necessary real property rights, easements, licenses, and rights of way and for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement. All Interconnection Facilities shall be and remain the property of Georgia Power. Georgia Power's obligations hereunder are dependent upon its securing and retaining the necessary rights, easements, privileges, franchises, permits and equipment for meeting such obligations; provided, however, that Georgia Power shall exercise reasonable efforts to secure and retain for the Term of this Agreement those rights, easements, privileges, franchises, permits and equipment.
5.1.2 Following commencement of commercial operation of the Facility and throughout the Term, Georgia Power shall be responsible for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement.
5.2 Costs of Interconnection Facilities. To the extent consistent with FERC policy, Generator shall be responsible for, and shall reimburse Georgia Power for, all costs and expenses reasonably incurred by or on behalf of Georgia Power in connection with the planning, design, construction, installation, testing, inspection, ownership, operation and maintenance of all or any part of the Interconnection Facilities during the Term of this Agreement.
5.3 Additional Interconnectors. In the instance where an entity other than Generator seeks to be the first additional Person to interconnect to the Georgia Power Electric System through the Interconnection Facilities that have
been paid for by Generator (such other Person is referred to as the "Additional Interconnector") and where the Additional Interconnector seeks to interconnect for any purpose other than for Georgia Power to make a network upgrade, then Georgia Power agrees that the Additional Interconnector shall be charged a pro rata share of the cost of its interconnection, as defined hereafter. For purposes of this subparagraph, the Additional Interconnector's pro rata share of its cost of interconnection shall be the sum of the incremental cost of physically interconnecting the Additional Interconnector to the Interconnection Facilities and the original cost of the Interconnection Facilities paid by Generator, including the price of the land provided by Generator (the sum of the incremental cost and the original cost hereafter referred to as "Combined Cost of Interconnection") and then dividing the Combined Cost of Interconnection by two (2) in order to determine both Generator's and the Additional Interconnector's "Pro Rata Share of the Combined Cost of Interconnection." Georgia Power shall then pay to Generator, or have the Additional Interconnector pay to Generator, the difference between the original cost of the Interconnection Facilities paid by Generator and Generator's Pro Rata Share of the Combined Cost of Interconnection; provided, however, that no such payment shall be required if it would result in the Generator bearing less than its Pro Rata Share of the Combined Cost of Interconnection. In the event that Persons additional and subsequent to the Additional Interconnector seek to interconnect to the Georgia Power Electric System through the Interconnection Facilities that have been paid for by Generator (such additional interconnectors referred to as "Subsequent Additional Interconnectors") and where the Subsequent Additional Interconnectors seek to interconnect for any purpose other than for Georgia Power to make a network upgrade, then Georgia Power agrees that the Subsequent Additional Interconnectors shall be charged a pro rata share of the cost of their respective interconnection, such cost to be determined in accordance with the methodology described above, and Georgia Power agrees further that in such event it shall pay, or have such Subsequent Additional Interconnectors pay to Generator and Additional Interconnector, reimbursement calculated based on the method described above, taking into account Generator's Pro Rata Share of the Combined Cost of Interconnection. Except in accordance with the cost sharing methodology set forth herein, Generator shall not be responsible for the costs of any modifications of the Interconnection Facilities that are not caused by the Generator. In no event shall Generator be obligated to pay any increased amount as a result of any Additional Interconnector or Subsequent Additional Interconnector. To the extent that all interconnectors do not have comparable interconnection points, the Combined Cost of Interconnection shall be adjusted appropriately.
5.4 Payment of Cost of On-Going Maintenance and Operation of the Interconnection Facilities
5.4.1 Georgia Power shall operate and maintain the Interconnection Facilities in accordance with Good Utility Practices and in a non-discriminatory manner.
5.4.2 Georgia Power shall develop an estimate of all costs and expenses to be paid by Generator for the operation and maintenance of the Interconnection Facilities on an annual basis and provide the annual estimate to Generator at least eight (8) weeks before December 31 of each year. In the case of Additional Interconnectors or Subsequent Additional Interconnectors, Generator shall be responsible for up to its pro rata share, calculated in
accordance with Section 5.3, of the costs of operation and maintenance of the Interconnection Facilities. Generator shall pay one-twelfth (1/12) of such estimated costs each Month in accordance with Section 10. In addition, Generator shall pay its pro rata share of all costs reasonably incurred by Georgia Power (excluding any such costs reimbursed to Georgia Power through insurance proceeds) to repair and restore the Interconnection Facilities caused by any Force Majeure Event upon receipt of an invoice in accordance with Section 10.
5.4.3 Georgia Power shall true-up this estimate to Georgia
Power's actual costs and expenses within a reasonable period of time after such
actual costs and expenses are known but not less often than annually. In the
event that the actual costs and expenses to be paid by Generator under this
Section 5.4 are more or less than Georgia Power's initial estimate, the
difference (either a credit or an additional charge) shall be reflected on a
subsequent invoice.
5.5 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect the Interconnection Facilities located on Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to the Interconnection Facilities arising from the failure of Generator to properly protect those Interconnection Facilities in accordance with Good Utility Practices.
5.6.1 Generator shall pay Georgia Power in advance for the costs incurred related to the installation and construction of the Interconnection Facilities. Georgia Power shall develop a quarterly payment schedule that shall be based upon (i) the estimated costs to be incurred by Georgia Power in the installation and construction of the Interconnection Facilities, and (ii) the time periods that Georgia Power estimates that such costs will be incurred by Georgia Power ("Quarterly Estimated Construction Costs"). A current estimate of the Quarterly Estimated Construction Costs and the projected payment schedule are attached as Appendix C. Georgia Power may revise the schedule from time to time to more accurately reflect more current estimates of costs and/or to incorporate any needed true-up of estimated costs to actual costs. Georgia Power shall obtain authorization to proceed prior to proceeding with planning, construction, installation or testing of the Interconnection Facilities. Generator shall pay such estimated costs as specified in the payment schedule in accordance with Section 10. Generator shall have the right to approve any deviation in the scope of the work if such deviation would result in an estimated increase of ten percent (10%) or more over the estimated costs. In no event shall Georgia Power collect from Generator any estimated payment for any costs unless Georgia Power reasonably expects to actually incur such costs during the forthcoming Quarter.
5.6.2 During the construction of the Interconnection Facilities, Georgia Power shall true-up the estimated payments to Georgia Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator are more or less than Georgia Power's estimate, the difference (either a credit or additional charge) shall be reflected on a subsequent invoice. Georgia Power shall issue a final cost report within one hundred twenty (120) Days of the Facility's commercial operation date. The final report shall set forth in
reasonable detail the actual costs of the Interconnection Facilities and shall true-up the estimated payments to actual costs. To the extent that the final, actual costs that are Generator's cost responsibility under this Agreement exceed the estimated costs already paid by Generator, Georgia Power shall invoice Generator in accordance with Section 10.1. To the extent that the estimated costs already paid by Generator exceed the final, actual costs that are Generator's cost responsibility under this Agreement, Georgia Power shall refund to Generator an amount equal to the difference within twenty (20) Days of the issuance of the final cost report.
5.6.3 Georgia Power shall inform Generator on a monthly basis, and at such other times as Generator reasonably requests, of the status of the construction and installation of the Interconnection Facilities, including, but not limited to, the following information: progress to date; a description of scheduled activities for the next period; the delivery status of all equipment ordered; and the identification of any event which Georgia Power reasonably expects may delay construction of, or increase the cost of, the Interconnection Facilities.
5.6.4 Generator reserves the right, upon written notice to Georgia Power, to suspend at any time all work by Georgia Power associated with the construction and installation of the Interconnection Facilities. In such event, Generator shall be responsible for the costs which Georgia Power (i) has incurred prior to the suspension to the extent such costs previously were authorized by Generator and (ii) reasonably incurs in suspending such work, including without limitation, the costs incurred to ensure the safety of persons and property and the integrity of the Georgia Power Electric System and the costs incurred in connection with the cancellation of material and labor contracts, provided such cancellation has been authorized by Generator. Georgia Power will invoice Generator pursuant to Section 10.1 and agrees to use reasonable efforts to minimize its costs. If, after such suspension, Generator does not provide Georgia Power with written notice to proceed within three hundred sixty-five (365) Days after the notice of suspension, this Agreement shall be deemed terminated. If this Agreement is deemed terminated, Generator shall be responsible for costs reasonably incurred in winding up such work and the costs incurred in connection with the cancellation of material and labor contracts, to the extent to which Generator has not already reimbursed Georgia Power for such costs. Any non-returnable equipment that has not already been installed by Georgia Power shall become the property of Generator "as is" upon payment of Georgia Power's costs.
SECTION 6: LIABILITY AND INDEMNIFICATION
6.1 Remedies for Breach. Subject to Section 6.2, either Party shall be liable to the other for any loss resulting directly from any breach of this Agreement and which at the time of the breach was a reasonable foreseeable consequence of such breach.
6.2 Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT, NEITHER PARTY NOR ITS PERSONS INDEMNIFIED SHALL BE LIABLE TO THE
OTHER PARTY OR ITS PERSONS INDEMNIFIED FOR ANY CLAIMS, SUITS, ACTIONS OR CAUSES
OF ACTION FOR INCIDENTAL, PUNITIVE, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, DAMAGES IN THE CHARACTER OF LOSS OF PROFITS OR
REVENUES, DAMAGES SUFFERED BY GENERATOR'S OR GEORGIA POWER'S CUSTOMERS DUE TO SERVICE INTERRUPTIONS, OR COST OF CAPITAL) CONNECTED WITH, RELATING TO, OR ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY SUCH DAMAGES WHICH ARE BASED UPON CAUSES OF ACTION FOR BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE AND MISREPRESENTATION), BREACH OF WARRANTY, STRICT LIABILITY OR OTHERWISE. THE PROVISIONS OF THIS SECTION 6.2 SHALL APPLY REGARDLESS OF FAULT AND SHALL SURVIVE TERMINATION, CANCELLATION, SUSPENSION, COMPLETION, OR EXPIRATION OF THIS AGREEMENT.
6.3 No Liability for Other Party's Responsibilities. Neither Party nor its Persons Indemnified assumes any obligation or responsibility of any kind with respect to the other Party's equipment, including, without limitation, obligation or responsibility with respect to the condition or operation of said equipment, except for Generator's obligations and responsibilities hereunder for the Interconnection Facilities. Neither Party nor its Persons Indemnified shall be responsible for the transmission, distribution or control of electrical energy on the other Party's side of the Interconnection Point.
6.4 Responsibility for Property. Each Party shall be responsible for all physical damage to or destruction of, or any personal injury or death associated with, the property, equipment and/or facilities owned by it and located on its premises, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party or its Persons Indemnified for such damage, except in cases of the sole negligence or intentional wrongdoing by the other Party or its Persons Indemnified. Without limiting the generality of the foregoing, neither Party nor its Persons Indemnified shall be liable for damages or injury arising out of or resulting from the simple failure (i.e., failure of a device not caused by breach of contract, negligence or intentional wrongful act) of protective devices (e.g., circuit breakers).
6.5.1 Generator shall at all times indemnify, defend, and hold harmless Georgia Power and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) the Generator's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction of Georgia Power's property properly located, pursuant to this Agreement, on premises owned, leased or controlled by Generator, except in cases of sole negligence or intentional wrongdoing by Georgia Power or its Persons Indemnified, or (iii) activities on Generator's property, except in the case of sole negligence or intentional wrongdoing by Georgia Power or its Persons Indemnified.
6.5.2 Georgia Power shall at all times indemnify, defend, and hold harmless Generator and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or
death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) Georgia Power's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction of Generator's property located, pursuant to this Agreement, on premises owned, leased, or controlled by Georgia Power, except in cases of sole negligence or intentional wrongdoing by the Generator or its Persons Indemnified, or (iii) activities on Georgia Power's property, except in the case of sole negligence or intentional wrongdoing by Generator or its Persons Indemnified.
SECTION 7: METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT
7.1.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all metering equipment necessary to provide information regarding power flow and voltage conditions at the Interconnection Point. All metering equipment of Generator shall conform to Good Utility Practices. Prior to its installation, Georgia Power and Generator shall review the metering equipment to ensure conformance with Good Utility Practices and Generator shall maintain the metering equipment in conformance with Good Utility Practices throughout the Term. The metering equipment described herein does not include station service metering equipment.
7.1.2 Electric capacity and energy received by the Georgia Power Electric System from Generator shall be measured by meters installed at the Interconnection Point. If and to the extent Generator's meters are not physically located at the Interconnection Point, the metered amount of energy shall be adjusted for losses as mutually agreed from the point of metering to the Interconnection Point in accordance with Good Utility Practices. Any Party performing such a study to determine the loss adjustment shall provide a copy to the other Party.
7.1.3 Generator shall provide, as required by Good Utility Practices and requested by Georgia Power, real-time telemetered load signals of its energy delivered to the Interconnection Point. Generator shall also read the meters owned by it and shall furnish to Georgia Power all meter readings and other information reasonably required for operations and for billing purposes under this Agreement. Such information shall remain available to Georgia Power for one (1) year or such longer period as may be required by any Legal Requirement.
7.1.4 The Parties agree that the meter readings provided by the Generator to Georgia Power, under normal circumstances, shall be used as the official measurement between the Parties of the amount of capacity and energy delivered from the Facility to the Interconnection Point.
7.1.5 Any time during the Term and after initial acceptance of the accuracy of Generator's telemetered information, if telemetered information is unavailable to Georgia Power, for any reason, the Generator shall provide integrated hourly meter readings to Georgia Power each hour until telemetry is returned to service in conformance with Good Utility Practices and Section 7.1.2.
7.2.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all data acquisition equipment, protection equipment, and any other associated equipment and software, which may be reasonably required at any time during the Term by either Party for Generator to operate its facilities in parallel with Georgia Power. Such equipment shall conform to Good Utility Practices. Prior to its installation, Georgia Power and Generator shall review the equipment and software required by this Section 7 to ensure conformance with Good Utility Practices.
7.2.2 The selection of real time telemetry and data to be received by Georgia Power and Generator shall be at the reasonable discretion of Georgia Power, as deemed by Georgia Power necessary for reliability, security, revenue metering, and/or monitoring of the Facility's operations in conformance with Good Utility Practices. This telemetry includes, but is not limited to, voltages, generator output (MW, MVAR, and MWh) at the Interconnection Point and breaker status. Georgia Power shall provide to Generator real time telemetry of Georgia Power's breaker status. To the extent telemetry is required, Generator shall, at its own expense, install any telemetering equipment, data acquisition equipment, or other equipment and software necessary at the Facility for the telemetry of information to Georgia Power.
7.2.3 Generator shall be responsible for the reasonable cost that Georgia Power incurs in making any computer modifications or changes to Georgia Power's facilities or equipment necessary to implement this Section 7.
7.3 Payment of Cost of Metering, Data Acquisition, and Related Protection Equipment.
7.3.1 Prior to the commencement of Interconnection Service under this Agreement, Georgia Power shall develop and provide Generator an estimate of all costs and expenses that may be incurred by Georgia Power in connection with the installation of equipment and software under Sections 7.1 and 7.2. Georgia Power shall obtain Generator's consent thereto prior to proceeding with activities in connection with Sections 7.1 and 7.2. Generator shall pay such estimated costs in accordance with Section 10.
7.3.2 Georgia Power shall true-up this estimate to Georgia Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator to Georgia Power under Section 7.1 and 7.2 are more or less than Georgia Power's initial estimate, the difference (either a credit or an additional charge) shall be reflected on a subsequent invoice.
7.4 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect all equipment of Georgia Power located on Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to such equipment arising from the failure of Generator to properly protect such equipment in accordance with Good Utility Practices.
7.5.1 Meters, data acquisition, and related protection equipment at Generator's Interconnection Point shall be tested at least biennially by Generator in accordance with the provisions for meter testing as established in American National Standard Institute Code for Electricity Metering (ANSI) Standard C12.16 for Solid State Electricity Meters, as the same may be updated from time to time. Representatives of each Party shall be afforded an opportunity to witness such tests.
7.5.2 Generator shall, upon the reasonable request of Georgia Power, test its meters and data acquisition equipment at the Interconnection Point used for determining the receipt or delivery of capacity and energy by Georgia Power. In the event a test shows such equipment to be inaccurate, Generator shall make any necessary adjustments, repairs or replacements thereon.
7.6 Inaccuracies. If the metering fails to register, or if the measurement made by a metering device is found upon testing to vary by more than one percent (1.0%) from the measurement made by the standard meter used in the test, an adjustment shall be made correcting all measurements of energy made by the metering during (i) the actual period when inaccurate measurements were made by the metering, if that period can be determined to the mutual satisfaction of the Parties, or (ii) if the actual period cannot be determined to the mutual satisfaction of the Parties, one-half of the period from the date of the last test of the metering to the date such failure is discovered or such test is made (such period herein the "Adjustment Period"). If the Parties are unable to agree on the amount of the adjustment to be applied to the Adjustment Period, the amount of the adjustment shall be determined (a) by correcting the error if the percentage of error is ascertainable by calibration, tests or mathematical calculation, or (b) if not so ascertainable, by estimating on the basis of deliveries under similar conditions during the period since the last test. In the event Generator's metering equipment is found to be insufficiently reliable and/or inaccurate during any consecutive three (3) Month period, Georgia Power shall have the right to install suitable metering equipment at the Interconnection Point for the purpose of checking the meters installed by Generator, and Generator shall pay all costs related to such metering equipment.
SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING
8.1 Facility Evaluation Based on Actual Equipment Data. Generator agrees to provide updated application data ("actual equipment data") to Georgia Power that reflects information provided by equipment manufacturers for the actual equipment purchased by Generator for this Facility, as soon as it is available, but not later than ninety (90) Days prior to Initial Synchronization Date. Georgia Power agrees to review the actual equipment data to identify any adverse impacts to Georgia Power's Electric System caused by any material change
in the Facility's operation and performance specifications that were not reasonably identifiable in studies performed using Generator's application data as initially provided. In the event any such adverse impacts are identified, Generator is responsible for modifying its equipment to eliminate such identified adverse impacts.
8.2 Implementation of Control and Operating Procedures. At least forty-five (45) Days prior to the Initial Synchronization Date, Generator and Georgia Power will: (a) jointly review the Control and Operating Procedures as developed by the Operating Committee, under Section 15 of this Agreement; (b) develop a training schedule for Facility and Georgia Power personnel under the Control and Operating Procedures; and (c) install and verify that communication links are complete for: (i) data telemetry, (ii) voice communications between Generator's Facility and Georgia Power's Transmission System control centers, and (iii) the transmittal of Facility and transmission system information on the Southern Company Generator Information Network.
8.3 Facility Inspection. Consistent with Good Utility Practices and unless otherwise agreed to by the Parties, all Interconnection Facilities shall be complete prior to the initial synchronization of the Facility with the Georgia Power Electric System. Within fifteen (15) Days after written notice is given to Georgia Power by Generator, an inspection shall be performed by Georgia Power to insure the proper installation and operation of the interconnection protective devices. The inspection shall include, without limitation, verification: (a) that the installation of Generator's equipment at the Facility is in accordance with the interconnection study; and (b) of proper voltage and phase rotation.
8.4 Initial Synchronization. Upon completion of the actions and reviews required under Sections 8.1, 8.2, and 8.3, Generator may request approval for initial synchronization of the Facility with the Georgia Power Electric System. Such request for approval shall be made no less than seven (7) Calendar Days in advance of the date which the Generator proposes for the Initial Synchronization Date. Initial synchronization shall not occur without the prior documented approval of Georgia Power, and such approval shall not be unreasonably withheld. Representatives of Georgia Power shall have the right to be present during the initial synchronization and facility testing. The activities under this Section 8, including without limitation, facility inspection, evaluation of actual equipment data, personnel training, use of Southern Company Generator Information Network, or the granting of approval to Generator for operation of the Facility in parallel with the Georgia Power Electric System shall not serve to relieve Generator of liability for injury, death or damage attributable to the negligence of Generator, and Georgia Power shall not be responsible as a result of such activities.
8.5 Review of Synchronization Tests. No less than forty-five (45) Days prior to the commercial operation date of the Facility, Generator shall provide Georgia Power copies of all applicable excitation system field test results (including chart recordings and actual data points in electronic form) and field settings, including (if applicable) Power System Stabilizer test results and settings in a format that conforms to the models previously submitted with the original application data. These tests include but are not limited to excitation system open circuit step in voltage tests, and (if applicable) Power System Stabilizer gain margin and phase compensation tests. Excitation system open
circuit step in voltage test response chart recordings shall be provided showing generator terminal voltage, field voltage, and field current (exciter field voltage and current for brushless excitation systems) with sufficient resolution such that the change in voltages and currents are clearly distinguishable. The excitation system open circuit step in voltage test data points corresponding to the chart recordings should also be submitted in electronic form. Georgia Power may require that Generator perform more detailed tests if there are significant differences between the excitation system open circuit step in voltage test response and the step response predicted through dynamic simulation of model data. Any problems identified as a result of changes from application data to actual field settings of the excitation system including (if applicable) Power System Stabilizers must be addressed and resolved as soon as practicable by the Generator in order for the Generator to continue to deliver power to the Interconnection Point.
SECTION 9: ADMINISTRATION CHARGE
Generator shall pay Georgia Power a Monthly Administration Charge of $5,000 per Month for all costs and expenses incurred by Georgia Power during such Month in connection with: (i) Georgia Power's administration of this Agreement; (ii) any taxes, assessments or other impositions for which Georgia Power may be liable as a result of any activity undertaken pursuant to this Agreement; (iii) reading meters; and (iv) accounting for capacity and energy flowing into or out of Generator's Facility. Georgia Power may revise the amount of the Monthly Administration Charge on an annual basis by making a filing in accordance with Section 12.3.
SECTION 10: PAYMENT PROCEDURE
10.1 Billing. Bills shall be issued to Generator in accordance with the following procedures:
10.1.1 Georgia Power shall issue a Quarterly invoice to Generator for the Quarterly Estimated Construction Costs.
10.1.2 Georgia Power shall issue a Monthly invoice to Generator for the estimated operation and maintenance charge, administrative charge, and other charges/credits determined pursuant to this Agreement as soon as practicable following the close of each Month.
10.1.3 All amounts owing to Georgia Power from Generator shall be due and payable in immediately available funds through wire transfer of funds or other means acceptable to Georgia Power within twenty (20) Calendar Days after the date of Georgia Power's invoice.
10.2 Failure to Timely Pay. If Generator fails to pay the amount billed
by Georgia Power within twenty (20) Calendar Days after the date of Georgia
Power's invoice (and such amount is not disputed in accordance with Section
10.6), Georgia Power may, at any time thereafter upon five (5) Business Days
written notice, draw upon the letter of credit (or other form of security) of
Generator to obtain payment for such invoice, as well as reasonable costs
incurred to exercise its rights under this Section. In addition, Georgia Power
may, at its option, treat such non-payment as a Default of this Agreement under
Section 3.2 hereof.
10.3 Interest. Any amount due and payable from Generator to Georgia Power pursuant to this Agreement that is not received by the due date shall accrue interest from the due date at the Interest Rate.
10.4 Creditworthiness. Generator shall provide and maintain in effect during the Term of this Agreement an unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Georgia Power, including an appropriate parent security) as security to meet its responsibilities and obligations under this Agreement. The unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Georgia Power) shall be in the amount of $1,500,000.00 in immediately available funds through wire transfer of funds or other means acceptable to Georgia Power for activities arising prior to commercial operation of the Facility and in the amount of $175,000.00 for activities arising from the date of commercial operation of the Facility. Georgia Power shall be entitled to draw upon such letter of credit for amounts due it under this Agreement if not paid when due in accordance with Section 10.1 and not disputed in accordance with Section 10.6.
10.5 Audit Rights. Either Party shall have the right, during normal business hours, and upon prior reasonable notice to the other Party to audit each other's accounts and records pertaining to either Party's performance and/or satisfaction of obligations arising under this Agreement within one (1) year from the date of such performance or satisfaction of such obligation, including specifically, but not limited to, delivery of the final cost report as provided in Section 5.7.2. Said audit shall be performed at the offices where such accounts and records are maintained and shall be limited to those portions of such accounts and records that specifically relate to obligations under this Agreement. To the extent such accounts and records contain confidential information, the Parties agree to maintain the confidentiality of such information consistent with Section 17.19 hereof. In the event an audit reveals an improper assignment or allocation of costs or an error in billing, the Parties will make appropriate adjustments (either refunds or additional payments), with interest, within thirty (30) Days.
10.6 Disputed Bills. In the event of a billing dispute between Generator and Georgia Power, Georgia Power shall not terminate this Agreement, draw on the letter of credit for any disputed amounts, nor disconnect the Facility for failure to pay the disputed amount if Generator (i) continues to make all payments not in dispute and (ii), if requested by Georgia Power, pays into an independent escrow account the portion of the invoice in dispute.
10.7 No Waiver. Payment of any cost or invoice by Generator will not constitute a waiver of any rights or claims that Generator may have under or relating to this Agreement.
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS
11.1 Generator Representations, Warranties and Covenants. Generator makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.1.1 Generator is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, that it is qualified to do business in the State of Georgia and that it has the power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.1.2 The execution, delivery and performance by Generator of this Agreement has been duly authorized by all necessary company action, and does not and shall not require any consent or approval of Generator's Board of Directors or members, other than those which have been obtained.
11.1.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and shall not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirement, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Generator is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
11.1.4 This Agreement is the legal, valid and binding obligation of the Generator and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.1.5 There is no pending or, to the knowledge of Generator, threatened action or proceeding affecting Generator before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2 Georgia Power Representations, Warranties and Covenants. Georgia Power makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.2.1 Georgia Power is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia that it is qualified to do business in the State of Georgia and that it has the corporate power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.2.2 The execution, delivery and performance by Georgia Power of this Agreement has been duly authorized by all necessary corporate action, and does not and shall not require any consent or approval of Georgia Power's Board of Directors or shareholders, other than those which have been obtained.
11.2.3 This Agreement is the legal, valid and binding obligation of Georgia Power and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.2.4 There is no pending or, to the knowledge of Georgia Power, threatened action or proceeding affecting Georgia Power before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2.5 Georgia Power covenants to Generator that it will file this Agreement, and any amendments and/or modifications thereto, with FERC in accordance with all Legal Requirements.
11.3 Survival of Representations, Warranties and Covenants. The representations, warranties and covenants made by Generator and by Georgia Power (as the case may be) in Sections 11.1.1, 11.1.3, 11.1.4, 11.2.1, 11.2.3, and 11.2.5 shall survive the execution and delivery of this Agreement and any action taken pursuant hereto. The representations, warranties and covenants made by Generator and Georgia Power (as the case may be) in Sections 11.1.2, 11.1.5, 11.2.2 and 11.2.4 shall be true and accurate as of the date of execution of this Agreement.
SECTION 12: COMPLIANCE WITH LAWS
12.1 Compliance. Generator represents, warrants and covenants that as
of the Initial Synchronization Date and for the Term, Generator shall (i) be in
compliance with all Legal Requirements with respect to the ownership, operation
and maintenance of Generator's Interconnection Equipment, including without
limitation, all requirements to seek, obtain, maintain, comply with and, as
necessary, renew and modify from time to time, any and all applicable
certificates, licenses, permits and government approvals and all applicable
environmental certificates, licenses, permits and approvals, environmental
impact analysis, and if applicable, the mitigation of environmental impacts, and
(ii) pay all costs, expenses, charges and fees in connection with Section
12.1(i).
12.2 Change of Law. In the event that after the Execution Date there are changes to Legal Requirements, including, without limitation, changes to laws or regulations regulating or imposing a tax, fee or other charge, which cause Georgia Power to incur additional costs in providing Interconnection Service under this Agreement, Generator agrees to pay, to the extent consistent with FERC policy, such reasonable incremental costs incurred by Georgia Power in complying with such changes to Legal Requirements; provided, however, Generator shall be entitled to take reasonable action to mitigate, reduce or otherwise avoid the imposition of any such charges or costs.
12.3 Regulatory Filings. This Agreement is subject to approval by any
Governmental Authority having jurisdiction over the matters provided herein.
Nothing contained in this Agreement shall be construed as affecting in any way
(i) the right of Georgia Power to unilaterally make application to any and all
Governmental Authorities (including FERC) that may have jurisdiction over this
Agreement for a change in terms and conditions, charges, classification of
service, or for termination of this Agreement pursuant to applicable statutes
(including Sections 205 and 206 of the Federal Power Act) and those Governmental
Authorities' rules and regulations or (ii) the ability of Georgia Power to
exercise its rights under the rules and regulations of any Governmental
Authority having jurisdiction over this Agreement. Nothing contained in this
Agreement shall be construed as affecting in any way (i) the right of Generator
to unilaterally make application to any and all Governmental Authorities
(including FERC) that may have jurisdiction over this Agreement for a change in
terms and conditions, charges, classification of service or for termination of
this Agreement pursuant to applicable statutes (including Sections 205 and 206
of the Federal Power Act) and those Governmental Authorities' rules and
regulations or (ii) the ability of Generator to exercise its rights under the
rules and regulations of any Governmental Authority having jurisdiction over
this Agreement. At least thirty (30) Days prior to any such unilateral filing,
the Party intending to make the filing shall notify the other of such intent.
The Parties agree to reasonably cooperate with each other with respect to such
filings and to provide any information reasonably required by the requesting
Party to comply with applicable filing requirements. This Agreement shall be
modified or amended as necessary to reflect binding determinations with respect
to such filings.
12.4.1 Generator shall not be required to pay taxes associated with reimbursement of construction costs or transfer of the Interconnection Facilities constructed by Generator unless Georgia Power is required to pay such tax. With respect to the payment by Generator of taxes associated with reimbursement of construction costs or transfer of the Interconnection Facilities, Georgia Power commits that in the event that any taxing authority, including but not limited to the Internal Revenue Service, taxes or attempts to tax the reimbursement or transfer, Georgia Power shall (i) exercise reasonable efforts to contest and defeat the taxation or attempted taxation of the reimbursement or transfer; (ii) promptly notify Generator in writing of that event in the manner provided in Paragraph 17.9 of this Agreement; and (iii) exercise reasonable efforts to cooperate with Generator in contesting any such taxation including, for example, allowing Generator to prepare at its own expense a private letter ruling request or other submission to the Internal Revenue Service or other taxing authority.
12.4.2 Generator shall at all times during the Term pay all charges, taxes, assessments and fees which may be assessed upon or against the Facility or upon or against Generator through Georgia Power by a Governmental Authority in accordance with Legal Requirements by reason of the sale or purchase of electricity by Generator or from Generator's Facility.
SECTION 13: INSURANCE
13.1 Generator's Insurance. If Generator is no longer an Affiliate of Georgia Power, Generator, at its expense, shall procure and maintain in effect during the Term, policies of insurance with insurance companies authorized to transact insurance in the State of Georgia or adequate self-insurance, reasonably acceptable to Georgia Power, providing, at a minimum, the coverage and limits specified and complying with the requirements stated below:
13.1.1 Worker's Compensation in statutory amounts and Employer's Liability with a minimum limit of $1,000,000 per person.
13.1.2 Commercial General Liability Insurance on an occurrence basis or AEGIS "claims made" form, with the following coverage and limits:
General Aggregate $1,000,000 Products-Completed Operations-Aggregate $1,000,000 Personal & Advertising Injury $1,000,000 Each Occurrence $1,000,000 Fire Damage (any one fire) $50,000 Medical Expense (any one person) $5,000 |
13.1.3 Business Automobile Liability covering autos of Generator, including owned, hired and non-owned autos, for Bodily Injury and Property Damage with a combined single limit of $1,000,000 each occurrence.
13.1.4 Excess Liability in Umbrella Form with a limit of $4,000,000 each occurrence, $4,000,000 Aggregate.
13.1.5 By signing this Agreement, Generator thereby waives all rights of subrogation against Georgia Power and its Persons Indemnified with respect to any claim or loss payable or paid under each of the policies set forth in 13.1.1, 13.1.2, 13.1.3, and 13.1.4 above and under any property insurance policy for the Facility that Generator has or acquires.
13.1.6 Generator shall cause its insurer(s) to add Georgia Power and its Persons Indemnified as an Additional Insured on the policies set forth in 13.1.2, 13.1.3, and 13.1.4 above with respect to liability of Georgia Power and its Persons Indemnified (a) arising out of the performance of operations, maintenance, work or services under this Agreement, and (b) arising out of the conduct contemplated in the ownership, maintenance or use of Generator's autos, but only to the extent of Generator's indemnity obligations under this Agreement and the coverages and limits specified in Sections 13.1.2, 13.1.3, and 13.1.4.
13.1.7 Subject to the limitations in Section 13.1.6, Generator's insurance shall be primary insurance with respect to the installation, operations, maintenance, work, or services contemplated under this
Agreement and insurance of Georgia Power and its Persons Indemnified shall be excess of the Generator's insurance and shall not contribute with it.
13.1.8 To the extent that Generator utilizes deductibles or self-insurance in connection with the insurance coverage required herein, all such deductible and self-insured amounts shall be for the account and expense of Generator and shall not be considered as costs or fees provided for in this Agreement.
13.1.9 If the Generator uses contractors and/or subcontractors to perform any of the work contemplated under this Agreement, Generator shall require such contractors and/or subcontractors to maintain in effect insurance meeting these minimum limits and incorporating the contractual requirements prescribed by this Section 13.
13.2 Notice and Certification. Each of the above required policies shall contain a provision whereby the insurance carrier shall notify Georgia Power at least thirty (30) Days prior to the effective date of cancellation, non-renewal or material change in any of said policies. Generator shall submit to Georgia Power a Certificate, signed by an authorized representative of the insurance carrier, listing the policies, coverage and limits and certifying that the said policies shall be in effect for the time periods stated in the Certificate. The obligations for Generator to procure and maintain insurance shall not be construed to waive or restrict other obligations.
SECTION 14: FORCE MAJEURE
14.1 Definition of Force Majeure Event. For the purposes of this
Agreement, a "Force Majeure Event" as to a Party means any occurrence,
nonoccurrence or set of circumstances that is beyond the reasonable control of
such Party and is not caused by such Party's fault, negligence or lack of due
diligence, including, without limitation, flood, ice, lightning, earthquake,
windstorm or eruption; fire; explosion; invasion, war, civil disturbance,
commotion or insurrection; sabotage or vandalism; military or usurped power; or
act of God or of a public enemy; provided, however, in no event shall (i) the
inability to meet a Legal Requirement or the change in a Legal Requirement; or
(ii) a site specific strike, walkout, lockout or other labor dispute constitute
a Force Majeure Event.
14.2 No Breach or Liability. Each Party shall be excused from performing its respective obligations under this Agreement and shall not be liable in damages or otherwise if and to the extent that it is unable to so perform or is prevented from performing by a Force Majeure Event, provided that the non-performing Party shall:
14.2.1 Give the other Party notice thereof, followed by written notice if the first notice is not written, both notices to be given as promptly as possible after the non-performing Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
14.2.2 Use its reasonable best efforts to remedy its inability to perform as soon as practicable; provided, however, that this Section 14.2.2
shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest; provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of the Party having the difficulty; and
14.2.3 Resume performance of its obligations under this Agreement and give the other Party written notice to that effect, as soon as reasonably practicable following cessation of the Force Majeure Event.
14.3 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
SECTION 15: OPERATING COMMITTEE
15.1 Establishment of Committee. At least six (6) months prior to the estimated Initial Synchronization Date, Generator and Georgia Power shall each appoint one representative and one alternate to the Georgia Power - Generator Operating Committee ("Committee"). Each Party shall notify the other party of its appointment in writing. Such appointments may be changed at any time by similar notice. The Committee shall meet as necessary, but not less than once each calendar year, to carry out the duties set forth herein. The Committee shall hold a meeting at the request of either Party, at a time and place agreed upon by the representatives. Each representative and alternate shall be a responsible person working in the day-to-day operations of their respective electrical facilities. The Committee shall represent the Parties in all matters arising under this Agreement which may be delegated to it by mutual agreement of the Parties.
15.2 Duties. The duties of the Committee shall include, but are not limited to, the following:
15.2.1 Establish and maintain control and operating procedures, including those pertaining to information transfers between the Facility and Georgia Power consistent with the provisions of this Agreement.
15.2.2 Establish data requirements and operating record requirements in accordance with the terms and conditions of this Agreement.
15.2.3 Review the requirements, standards, and procedures data acquisition equipment, protective equipment, and any other equipment or software.
15.2.4 Annually review ten (10) year forecast of maintenance and availability schedules of Georgia Power's and Generator's facilities at the Interconnection Point and coordinate the scheduling of outages of and maintenance on the Interconnection Facilities, the Facility and any other facilities that impact the normal operation of the Interconnection Facilities.
15.2.5 Ensure that information is being provided by each Party regarding equipment availability.
15.2.6 Perform such other duties as may be conferred upon it by mutual agreement of the Parties.
15.2.7 Each Party shall cooperate in providing to the Committee all information required in the performance of the Committee's duties. All decisions and agreements, if any, made by the Committee shall be evidenced in writing. The Committee shall have no power to amend or alter the provisions of this Agreement.
SECTION 16: ASSIGNMENT
16.1.1 EXCEPT AS EXPRESSLY PERMITTED BELOW OR OTHERWISE AGREED TO BY THE PARTIES, GENERATOR SHALL NOT ASSIGN, TRANSFER, DELEGATE OR ENCUMBER THIS AGREEMENT AND/OR ANY OR ALL OF ITS RIGHTS, INTERESTS OR OBLIGATIONS UNDER THIS AGREEMENT AND ANY ASSIGNMENT, TRANSFER, DELEGATION OR ENCUMBERING BY GENERATOR (EXCEPT AS PERMITTED BELOW) SHALL BE NULL AND VOID. Notwithstanding the foregoing, so long as Generator is not in default under or breach of this Agreement, upon prior written notice to Georgia Power, Generator may collaterally assign its rights, interests and obligations under this Agreement to its lender or an agent for the benefit of its lenders providing financing or refinancing for the design, construction or operation of Generator's Facility in Lee County, Georgia (a "Permitted Financing Assignee"); provided, however, that GENERATOR'S RIGHTS AND OBLIGATIONS (FINANCIAL OR OTHERWISE) UNDER THIS AGREEMENT SHALL CONTINUE IN THEIR ENTIRETY IN FULL FORCE AND EFFECT AS THE RIGHTS AND OBLIGATIONS OF A PRINCIPAL AND NOT AS A SURETY. Generator may collaterally assign its rights, interests and obligations hereunder to multiple Permitted Financing Assignees, but only if those Permitted Financing Assignees designate one agent to act for them collectively under this Agreement.
16.1.2 Georgia Power shall, upon serving Generator any notice of Default or the termination of this Agreement, also serve a copy of such notice upon the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. No notice of Default purporting to terminate this Agreement shall be deemed to have been given unless and until a copy thereof shall have been given to the Permitted Financing Assignee or the agent for multiple Permitted Financing Assignees. A Permitted Financing Assignee shall be entitled to cure any Default during any cure period provided herein.
16.1.3 The Permitted Financing Assignee shall not be entitled to assign or transfer this Agreement to any purchaser in foreclosure, purchaser in lieu of foreclosure or similar purchaser or transferee ("Purchaser in Foreclosure") unless and until such Purchaser in Foreclosure has (i) executed and delivered to Georgia Power and is in compliance with an agreement in form
and substance acceptable to Georgia Power whereby such Purchaser in Foreclosure assumes and agrees to pay and perform all then outstanding and thereafter arising obligations of Generator under this Agreement and (ii) established to Georgia Power's reasonable satisfaction that such Purchaser in Foreclosure has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Notwithstanding the foregoing, all obligations of Generator to Georgia Power under this Agreement incurred prior to the time the Purchaser in Foreclosure fully assumes this Agreement shall also be and remain enforceable by Georgia Power against Generator. Any assignment to a Purchaser in Foreclosure shall be subject to Georgia Power's rights hereunder.
16.1.4 So long as Generator is not in Default under or breach of this Agreement, upon prior written notice to Georgia Power, Generator may absolutely assign all, but not less than all, of its rights, interests and obligations under this Agreement to another generator ("Outright Assignee") provided however, that Generator's obligations under this Agreement shall continue and Georgia Power shall have no obligations to such Outright Assignee unless and until such Outright Assignee has (i) executed and delivered to Georgia Power and is in compliance with an agreement in form and substance reasonably acceptable to Georgia Power whereby such Outright Assignee assumes and agrees to pay and perform all thereafter arising obligations of Generator under this Agreement and (ii) established to Georgia Power's reasonable satisfaction that such Outright Assignee has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Any assignment to an Outright Assignee shall be subject to Georgia Power's rights hereunder.
16.1.5 Generator shall indemnify, defend and hold harmless
Georgia Power and its Persons Indemnified from and against any and all losses,
liabilities, obligations, claims, demands, damages, penalties, judgments, costs
and expenses, including, without limitation, reasonable attorneys' fees and
expenses, howsoever and by whomsoever asserted, arising out of or in any way
connected with any collateral, outright or other assignment by Generator or any
foreclosure or other exercise of remedies by the Permitted Financing Assignee of
this Agreement or Generator's or the Permitted Financing Assignee's rights or
interests under this Agreement. Notwithstanding any other provision of this
Section 16.1, Generator shall not be obligated to indemnify and hold harmless
Georgia Power from and against any loss, liability, obligation, claim, demand,
damage, penalty, judgment, cost or expense to the extent caused by the sole
negligence or willful misconduct Georgia Power or its Persons Indemnified.
16.1.6 No agreement between the Parties modifying, amending, canceling or surrendering this Agreement shall be effective without the prior written consent of the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. Subject to any cure periods provided to the Permitted Financing Assignee in this Agreement or in any consents to assignment, no such prior written consent is required for Georgia Power to take unilateral action under this Agreement, including (without limitation) Sections 3.2, 3.3, 3.4, 10.2, 12.2 and 12.3.
16.1.7 Georgia Power agrees to reasonably cooperate with Generator and any Permitted Financing Assignee in connection with the collateral
assignment of this Agreement; provided, however, that Georgia Power shall not be obligated to take any action that could, in its judgment, result in an expansion of its obligations, risks or liabilities or a violation of any law, regulation or order of a Governmental Authority.
16.2 Assignment by Georgia Power. So long as Georgia Power is not in breach of this Agreement, Georgia Power may, at any time, without notice to, or the consent of, Generator or any other Person, including, without limitation, any Permitted Financing Assignee, Purchaser in Foreclosure or Outright Assignee, sell, assign, delegate, encumber or transfer to any Indenture Trustee, Affiliate, any successor by merger or otherwise of Georgia Power or any Qualified Person, and/or create or permit to exist Permitted Liens against, all or any part of this Agreement and/or Georgia Power's rights, obligations, title or interest in, to and under this Agreement. Provided, however, Generator reserves its right to oppose any such assignment before any Governmental Authority having jurisdiction.
SECTION 17: MISCELLANEOUS
17.1 Georgia Power's Agent. Wherever this Agreement requires Generator to provide information, schedules, notice or the like to, or to take direction from, Georgia Power, Generator shall provide information, schedules, notice or the like to, or receive from, Georgia Power or such agent of Georgia Power as Georgia Power may direct from time to time.
17.2 No Partnership. Generator and Georgia Power do not intend for this Agreement to, and this Agreement shall not, create any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit.
17.3 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon any respective successors and assigns of Generator and Georgia Power.
17.4 No Third Party Benefit. Nothing in this Agreement shall be construed to create any duty, obligation or liability of a Party to any person or entity not a Party to this Agreement.
17.5 No Affiliate Liability. Notwithstanding any other provision of this Agreement, no Affiliate of either Party (including without limitation any Affiliate acting as either Party's agent where said agent is given certain authorities pursuant hereto) shall have any liability whatsoever for either Party's performance, nonperformance or delay in performance under this Agreement.
17.6 Time of Essence. Time is of the essence of this Agreement.
17.7 No Waiver. Neither Georgia Power's nor Generator's failure to enforce any provision or provisions of this Agreement shall in any way be construed as a waiver of any such provision or provisions as to any future violation thereof, nor prevent it from enforcing each and every other provision of this Agreement at such time or at any time thereafter. The waiver by either Georgia Power or Generator of any right or remedy shall not constitute a waiver of its right to assert said right or remedy, at any time thereafter, or any other rights or remedies available to it at the time of or any time after such waiver.
17.8 Amendments. Except as provided in Section 12.3, this Agreement may be amended by and only by a written instrument duly executed by each of Generator and Georgia Power, which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
17.9 Notice. Any notice, request, consent or other communication
permitted or required by this Agreement shall be in writing and shall be deemed
given on the Day hand-delivered to the representative identified below, on the
Day of facsimile transmission to the facsimile number stated below, or the third
(3rd) Day after the same is deposited in the United States Mail, first class
postage prepaid, and if given to Georgia Power shall be addressed to:
Georgia Power Company
Attn: Vice President, Transmission
241 Ralph McGill Boulevard
Atlanta, Georgia 30308
Facsimile: (404) 506-2433
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Transmission Services
600 North 18th Street
Birmingham, Alabama 35203
Facsimile: (205) 257-6663
and if given to Generator, it shall be addressed to:
Southern Power Company
Attn: Vice President, Generation, Planning and Development
600 North 18th Street
Bin 15N-8181
Birmingham, Alabama 35203
Facsimile: (205) 257-5703
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Generation Development
600 North 18th Street
Bin 15N-8186
Birmingham, Alabama 35203
Facsimile: (205) 257-6336
unless Georgia Power or Generator shall have designated a different representative or address for itself by written notice to the other. Generator shall comply with reasonable requirements of Georgia Power regarding communications with Georgia Power relative to the performance of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
17.11 Cross-References. All cross-references contained in this Agreement to Sections, are to the Sections of this Agreement, unless otherwise expressly noted.
17.12 Section Headings. The descriptive headings of the various Sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof.
17.13 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.
17.14 Governing Law. The validity, interpretation and performance of this Agreement, and each of its provisions, are subject to and shall be governed by applicable federal law, and where not preempted by federal law, by the laws of the State of Georgia, without giving effect to conflict of laws principles.
17.15 Merger. This Agreement represents the entire agreement between the Parties and all previous communications, representations and agreements between the Parties regarding the subject matter of this Agreement, whether oral or written, are hereby superseded.
17.16 NERC. To the extent not inconsistent herewith, Generator shall comply with any operational specifications and requirements specified by Georgia Power and all planning standards and operating guidelines of the North American Electric Reliability Council or its successor.
17.17 Good Utility Practices. Each Party shall discharge its respective obligations under this Agreement in accordance with Good Utility Practices.
17.18 Safety. Each Party shall comply with the applicable provisions of the National Fire Protection Association Code, the American National Electrical Code, the National Electrical Safety Code and other applicable code requirements. Each Party shall furnish and maintain, at its own expense, proper and adequate facilities, equipment, machinery, tools and supplies necessary to maintain its facilities and premises as a safe workplace and have available at
all times for use by its employees, agents, independent contractors, suppliers, vendors and borrowed employees and all safety equipment needed for the protection of that Party's employees, agents, independent contractors, suppliers, vendors and borrowed employees against injuries. Each Party shall be solely responsible for providing for the safety of its facilities and premises and of its employees, agents, independent contractors, suppliers, vendors and borrowed employees.
17.19 Confidential Information. Confidential Information shall mean any confidential and/or proprietary information provided by Georgia Power or Generator ("Disclosing Party") to the other party ("Receiving Party") and which is clearly marked or otherwise designated as "CONFIDENTIAL." For purposes of this Agreement, all design, operating specifications and metering data provided by Generator shall be deemed confidential regardless of whether it is clearly marked or otherwise designated as such. Except as otherwise provided herein, each Party shall hold in confidence and shall not disclose Confidential Information to any person (except employees, officers, representatives and agents that agree to be bound by this Section 17 or FERC's Standards of Conduct). Confidential Information shall not include information that the Receiving Party can demonstrate: (a) is generally available to the public other than as a result of a disclosure by the Receiving Party; (b) was in the lawful possession of the Receiving Party on a non-confidential basis before receiving it from the Disclosing Party; (c) was supplied to the Receiving Party without restriction by a third party, who, to the knowledge of the Receiving Party, was under no obligation to the Disclosing Party to keep such information confidential; (d) was independently developed by the Receiving Party without reference to Confidential Information of the Disclosing Party; or (e) was disclosed with the prior written approval of the Disclosing Party. Georgia Power, or its agent acting as Transmission Provider under the Tariff, may release or disclose certain Confidential Information of the Disclosing Party to other Transmission Providers, SERC, or NERC if necessary or appropriate in connection with its role as Transmission Provider. If a court, government agency or entity with the right, power, and authority to do so, requests or requires either Party, by subpoena, oral deposition, interrogatories, requests for production of documents, administrative order, or otherwise, to disclose Confidential Information, that Party shall provide the other Party with prompt notice of such request(s) or requirement(s) so that the other Party may seek an appropriate protective order or waive compliance with the terms of this Agreement. In the absence of a protective order or waiver the Party shall disclose such Confidential Information which, in the opinion of its counsel, the Party is legally compelled to disclose. Each Party will use reasonable efforts to obtain reliable assurance that confidential treatment will be accorded any Confidential Information so furnished.
17.20 Cooperation. Each Party to this Agreement shall reasonably cooperate with the other as to all aspects relating to the performance of its respective obligations under this Agreement; provided, however, this agreement of cooperation shall not constitute a waiver or relinquishment of either Party's rights under this Agreement in law or equity.
17.21 Negotiated Agreement. The Parties agree that this Agreement is the result of mutual compromise and shall not be construed as having been drafted by either Party. The Parties agree to support the acceptance of the Agreement in its entirety by FERC.
17.22 Subcontractors. Nothing in this Agreement shall be construed as preventing either Party from utilizing the services of subcontractors as it deems appropriate; provided, however, that all such contractors comply with the applicable terms and conditions of this Agreement. The creation of any subcontract relationship shall not relieve the retaining Party of any of its obligations under this Agreement.
17.23 EWG Status. Nothing in this Agreement shall require Generator to take any action that could result in its inability to obtain, or its loss of, status as an Exempt Wholesale Generator within the meaning of the Public Utility Holding Company Act of 1935, as amended.
IN WITNESS WHEREOF, Generator and Georgia Power have caused this Agreement to be executed by their duly authorized representatives on the Day and year first above written.
SOUTHERN POWER COMPANY
"Generator"
By: --------------------------
Title: ----------------------
Date:-------------------------
GEORGIA POWER COMPANY
"Georgia Power"
By: --------------------------
Title: ------------------------
Date:--------------------------
APPENDIX A
INTERCONNECTION PROCEDURES APPENDIX A
INTERCONNECTION PROCEDURES
The following requirements apply to Generator's Facility when operated in parallel with the Georgia Power Electric System.
In order to minimize objectionable and adverse operating conditions on the electric service provided to other customers by Georgia Power, the Facility shall meet the following operating criteria:
When Generator is delivering power to the Georgia Power Electric System, Generator shall operate its generation to meet the voltage schedule, as measured at the 230 kV transmission bus serving the Facility communicated by the Georgia ITS operator. The current voltage schedule for the Interconnection Point to the Facility is included in this Appendix. If the generator cannot hold voltage schedule but is producing its maximum amount of MVARS, then that is acceptable performance. It is anticipated that the generator shall be producing MVARS below its maximum capability under normal system conditions.
The Facility shall maintain a nominal operating frequency of 60 hertz. Generator may be required to assist in supporting ystem frequency if requested by Georgia Power.
The Facility shall be capable of providing an immediate and sustained response to abnormal frequency excursions within the machine design parameters. The governors shall be properly maintained and shall provide droop characteristics consistent with the requirements of NERC, SERC and the Georgia Power Electric System. At a minimum, governors shall be fully responsive to frequency deviations consistent with the requirements of NERC, SERC and the Georgia Power Electric System during normal operating conditions only, as defined by Good Utility Practices. In no event shall the governors be blocked by Generator without the express written permission of Georgia Power.
a. Reactive Power Production. At continuous ated output, simulations must show that Generator's Facility shall have the
Appendix A Page 1 of 4
capability of dynamically supplying at least 0.33 MVARS at the 230 kV Interconnection Point for each MW supplied when the Facility is tested at 101% of nominal voltage.
b. Reactive Power Absorption. The Facility shall also be capable of dynamically absorbing 0.23 MVARs from the transmission system for each MW supplied at the 230 kV Interconnection Point during simulations when the Facility is tested at 104% of nominal voltage. Simple Cycle combustion turbines used as peaking generation may be exempted from the MVAR absorption requirements.
The Facility shall not introduce excessive distortion to the Georgia Power Electric System's voltage profile and current waveforms. The harmonic distortion measurements shall be made at the transmission facility serving the Facility and be within the limits specified in the tables below.
MAXIMUM ALLOWABLE HARMONIC CONTENT (CURRENT)
(in percent of total current)
Harmonic Order Number (h)
h 11 11 h 17 17 h 23 23 h 35 35 h
ODD 2.0 1.0 0.75 0.30 0.15
EVEN 0.50 0.25 0.19 0.075 0.04
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Total current harmonic distortion may not exceed 2.5%
MAXIMUM ALLOWABLE HARMONIC CONTENT (VOLTAGE)
(in percent)
For nominal voltage at interconnection point of 69 kV to 115 kV Maximum Individual Harmonic: 1.50 Maximum Total Harmonic Distortion: 2.50
For nominal voltage at interconnection point of 161 kV and above Maximum Individual Harmonic: 1.00 Maximum Total Harmonic Distortion: 1.50
To minimize possible adverse effects on other Georgia Power customers, a power transformer is required between the Facility and the Georgia Power Electric System. This transformer's windings shall be connected according to the requirements of Georgia Power.
Appendix A Page 2 of 4
Generator shall not energize, or de-energize, Georgia Power equipment. The necessary control devices shall be installed by Generator on the Facility to prevent the energization of de-energized Georgia Power equipment by Generator's Facility.
Generator is responsible for the synchronization of the Facility to the Georgia Power Electric System. Georgia Power shall have relaying on the ring bus segment at the Interconnection Point and Generator must insure that its Facility is disconnected from Georgia Power whenever a ring bus segment at the Interconnection Point is de-energized. Georgia Power may re-energize the ring bus segment by remote control and Georgia Power shall not be responsible for damage to Facility due to an out of phase condition during re-energization.
Georgia Power shall provide the data protocol, and Generator shall install as part of the Interconnection Facilities any equipment necessary to deliver telemetered signals to Georgia Power specifying the voltage and watts, vars, and watthours delivered to the Georgia Power Electric System at the Interconnection Point.
Appendix A Page 3 of 4
VOLTAGE SCHEDULES
AT THE INTERCONNECTION POINT
SOUTHERN POWER COMPANY
Commencing with the Effective Date of the Interconnection Agreement, Generator shall maintain the following voltage schedules as communicated by Georgia Power from time to time:
Schedule #1 - Southern Company Control Area Maximum Load for the Day greater
than 33,000 MW
Operating Time Voltage
0000-0700 237 kV
0700-2100 237 kV
2100-2400 237 kV
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Schedule #2 - Southern Company Control Area Maximum Load for the Day between 28,000 and 33,000 MW
Operating Time Voltage
0000-0700 236 kV
0700-2100 237 kV
2100-2400 236 kV
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Schedule #3 - Southern Company Control Area Maximum Load for the Day between 23,000 and 28,000MW
Operating Time Voltage
0000-0800 236 kV
0800-2100 236 kV
2100-2400 236 kV
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Schedule #4 - Southern Company Control Area Maximum load for the Day below 23,000 MW
Operating Time Voltage
0000-0600 235 kV
0600-2100 236 kV
2100-2400 235 kV
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The Georgia ITS system operator's determination of whether Schedule 1, 2, 3, or 4 should be used for a given period shall be based on expectations of system requirements and conditions. The voltage schedule to be used, for the upcoming week, shall be communicated to Generator each Friday and at such other times as changing system requirements and conditions may require.
Appendix A Page 4 of 4
APPENDIX B
SPECIFICATIONS
TO
INTERCONNECTION AGREEMENT
BETWEEN
SOUTHERN POWER COMPANY
AND
GEORGIA POWER COMPANY
1. Location of Interconnection Point:
The Interconnection Point will be at the Georgia Power's Goat Rock 230/115 kV Substation located in Lee County Alabama.
2. Projected Dates Generator's Facilities will connect to Georgia Power:
Station Service Date: July 1, 2001
Initial Synchronization of Generator for
Testing Date: September 1, 2001
Commercial Operation Date: April 1, 2002
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3. Description of Interconnection Point:
The point, as shown on the attached one line diagram, at which the Generator's 230 kV conductors connect to the new ring bus element at Georgia Power's Goat Rock 230/115 kV Substation.
4. Description of Station Service Connections:
Should Generator require station service in addition to that which Generator can self-provide, separate arrangements will be made by Generator. Nothing herein prevents the Generator from receiving Station Service requirements through the Interconnection Facilities before the projected Station Service Date.
5. Description of Generator's Facility:
The Generator's Facility under this Agreement is a 610 MW Combined Cycle (CC) facility which is more fully described in the Interconnection Application made by Southern Power Company to Southern Company on October 21, 1999.
6. Interconnection Facility Requirements:
The Interconnection Facilities are sufficient to accommodate approximately 610 MW upon completion.
Appendix B Page 1 of 4
7. Description of Georgia Power's Interconnection Facilities:
-------------------------------------------------------------------------------------------------------
Interconnection Facilities under this Agreement include the following at the Estimated Cost
Goat Rock 230 kV Substation: --------------
(000's)
------
-------------------------------------------------------------------------------------------------------
1. Install one (1) IPO 63 kA 230 kV circuit breaker and associated $ 1,350
switches and control equipment. Terminate line from the Generator's
Facility.
-------------------------------------------------------------------------------------------------------
2. Replace one (1) 115 kV overstressed circuit breaker. $ 150
-------------------------------------------------------------------------------------------------------
3. IPO incremental cost for five (5) overstressed 230 kV circuit $ 1,250
breaker replacements and one (1) additional 230 kV circuit breakers.
-------------------------------------------------------------------------------------------------------
4. Relocate the Goat Rock-SEGCO 230 kV line and fiber optic circuit. $ 250
-------------------------------------------------------------------------------------------------------
5. Replace control house. $ 150
-------------------------------------------------------------------------------------------------------
6. Twenty percent (20 %) of the cost to install a conduit system and $ 100
replace all direct buried control cable.
-------------------------------------------------------------------------------------------------------
8. Description of Generator's Interconnection Equipment:
-------------------------------------------------------------------------------------------------------
Interconnection Equipment under this Agreement include the following: Estimated Cost
--------------------------------------------------------------------- --------------
1. Three (3) GSU transformers connected delta on the generator side Design & Construction by
and solidly grounded wye on the 230 kV side Southern Power
-------------------------------------------------------------------------------------------------------
2. Three (3) 230 kV circuit breakers used for GSU protection and Design & Construction by
generator synchronization. Southern Power
-------------------------------------------------------------------------------------------------------
3. 230 kV collector bus. Design & Construction by
Southern Power
-------------------------------------------------------------------------------------------------------
4. One (1) 230 kV circuit from Generator's Facility to the Goat Rock Design & Construction by
230 kV Substation. Southern Power
-------------------------------------------------------------------------------------------------------
1. One (1) fiber optic circuit from Generator's Facility to the Goat Design & Construction by
Rock 230 kV Substation. Southern Power
-------------------------------------------------------------------------------------------------------
The specifications for all such equipment in items 7 and 8 above will be determined in accordance with this Agreement,
the results of the Interconnection Studies dated September 26, 2000, and November 1, 2000, Georgia Power specifications
provided to the Generator in writing and Good Utility Practices.
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Appendix B Page 3 of 4
SOUTHERN POWER COMPANY - GOAT ROCK CC UNIT # 1
SINGLE LINE DIAGRAM
OBJECT OBMITTED
Appendix B Page 4 of 4
APPENDIX C
QUARTERLY ESTIMATED CONSTRUCTION COSTS
QUARTERLY ESTIMATED CONSTRUCTION COSTSAPPENDIX CQUARTERLY
A. Quarterly Estimated Construction Costs of Interconnection Facilities.
The Quarterly Estimated Construction Costs are based on the Generator's total cost of the Interconnection Facilities. Generator's estimated total construction cost responsibility for the Interconnection Facilities is $ 3,250,000.
The Schedule is based on constructing the Goat Rock Unit # 1 230 kV Substation Interconnection Facilities.
---------------------------------------------------------------------------------------------------------
2000 2001 2002
---------------------------------------------------------------------------------------------------------
Project Activity 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
---------------------------------------------------------------------------------------------------------
Additions and
modifications to Goat 9.0 6.0 6.0 6.0 3.0 2.5
at Rock 230 kV
substation
---------------------------------------------------------------------------------------------------------
Payment Schedule
(100,000s) 9.0 6.0 6.0 6.0 3.0 2.5
---------------------------------------------------------------------------------------------------------
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Appendix C Page 1 of 1
Exhibit 10.11
REVISED AND RESTATED
INTERCONNECTION AGREEMENT
By and Between
SOUTHERN POWER COMPANY
and
GEORGIA POWER COMPANY
for
GOAT ROCK CC UNIT 2
Effective as of October 18, 2001
Filed on June 28, 2002, in compliance with Southern Company Services, Inc., 99 FERC P. 61,249 (2002)
TABLE OF CONTENTS
SECTION 1: DEFINITIONS............................................................................................1
SECTION 2: INTERCONNECTION SERVICE.................................................................................6
2.1 SERVICE..................................................................................................7
2.2 FACILITY.................................................................................................7
2.3 PERMITS..................................................................................................7
2.4 EASEMENTS AND ACCESS RIGHTS..............................................................................7
2.5 INTERCONNECTION POINT....................................................................................8
2.6 STATION SERVICE ARRANGEMENTS.............................................................................8
2.7 GENERATOR BALANCING SERVICE ARRANGEMENTS.................................................................8
2.8 INTERCONNECTION PROCEDURES...............................................................................9
2.9 INTERCONNECTED OPERATION SERVICES........................................................................9
2.10 CONTROL AREA OPERATIONS..................................................................................9
2.11 INADVERTENT FLOW.........................................................................................9
SECTION 3: TERM, TERMINATION AND DISCONNECTION....................................................................9
3.1 TERM.....................................................................................................9
3.2 DEFAULT..................................................................................................9
3.3 PERMANENT DISCONNECTION.................................................................................10
3.4 TEMPORARY DISCONNECTION.................................................................................10
3.5 SURVIVAL OF RIGHTS......................................................................................11
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY.....................................................11
4.1 GENERAL STANDARDS.......................................................................................11
4.2 MAINTENANCE AND OPERATION...............................................................................11
SECTION 5: INTERCONNECTION FACILITIES AND INTERCONNECTION FACILITY UPGRADES......................................11
5.1 INTERCONNECTION FACILITIES AND INTERCONNECTION FACILITY UPGRADES........................................11
5.2 COSTS OF INTERCONNECTION FACILITIES AND INTERCONNECTION FACILITY UPGRADES..............................12
5.3 [RESERVED]..............................................................................................12
5.4 PAYMENT OF COST OF ON-GOING MAINTENANCE AND OPERATION OF THE INTERCONNECTION FACILITIES.................12
5.5 CARE OF EQUIPMENT.......................................................................................12
5.6 PAYMENT OF COSTS OF INTERCONNECTION FACILITIES AND INTERCONNECTION FACILITY UPGRADES....................13
5.7 CREDITS FOR INTERCONNECTION FACILITY UPGRADES...........................................................14
SECTION 6: LIABILITY AND INDEMNIFICATION.........................................................................14
6.1 REMEDIES FOR BREACH.....................................................................................15
6.2 LIMITATION OF LIABILITY.................................................................................15
6.3 NO LIABILITY FOR OTHER PARTY'S RESPONSIBILITIES.........................................................15
6.4 RESPONSIBILITY FOR PROPERTY.............................................................................15
6.5 INDEMNIFICATION.........................................................................................15
SECTION 7: METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT..........................................16
7.1 METERING................................................................................................16
7.2 DATA ACQUISITION AND PROTECTION EQUIPMENT...............................................................17
7.3 PAYMENT OF COST OF METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT.........................17
7.4 CARE OF EQUIPMENT.......................................................................................18
7.5 INSPECTION AND TESTING..................................................................................18
7.6 INACCURACIES............................................................................................18
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SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING..........................................................19
8.1 FACILITY EVALUATION BASED ON ACTUAL EQUIPMENT DATA......................................................19
8.2 IMPLEMENTATION OF CONTROL AND OPERATING PROCEDURES......................................................19
8.3 FACILITY INSPECTION.....................................................................................19
8.4 INITIAL SYNCHRONIZATION.................................................................................19
8.5 REVIEW OF SYNCHRONIZATION TESTS.........................................................................20
SECTION 9: ADMINISTRATION CHARGE.................................................................................20
SECTION 10: PAYMENT PROCEDURE....................................................................................20
10.1 BILLING.................................................................................................20
10.2 FAILURE TO TIMELY PAY...................................................................................21
10.3 INTEREST................................................................................................21
10.4 CREDITWORTHINESS........................................................................................21
10.5 AUDIT RIGHTS............................................................................................21
10.6 DISPUTED BILLS..........................................................................................21
10.7 NO WAIVER...............................................................................................22
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS............................................................22
11.1 GENERATOR REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................................22
11.2 GEORGIA POWER REPRESENTATIONS, WARRANTIES AND COVENANTS.................................................22
11.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS...................................................23
SECTION 12: COMPLIANCE WITH LAWS.................................................................................23
12.1 COMPLIANCE..............................................................................................23
12.2 CHANGE OF LAW...........................................................................................24
12.3 REGULATORY FILINGS......................................................................................24
12.4 TAXES...................................................................................................24
SECTION 13: INSURANCE............................................................................................25
13.1 GENERATOR'S INSURANCE...................................................................................26
13.2 NOTICE AND CERTIFICATION................................................................................27
SECTION 14: FORCE MAJEURE........................................................................................27
14.1 DEFINITION OF FORCE MAJEURE EVENT.......................................................................27
14.2 NO BREACH OR LIABILITY..................................................................................27
14.3 SUSPENSION OF PERFORMANCE...............................................................................28
SECTION 15: OPERATING COMMITTEE..................................................................................28
15.1 ESTABLISHMENT OF COMMITTEE..............................................................................28
15.2 DUTIES..................................................................................................28
SECTION 16: ASSIGNMENT............................................................................................29
16.1 ASSIGNMENT BY GENERATOR.................................................................................29
16.2 ASSIGNMENT BY GEORGIA POWER.............................................................................31
SECTION 17: MISCELLANEOUS.........................................................................................31
17.1 GEORGIA POWER'S AGENT...................................................................................31
17.2 NO PARTNERSHIP..........................................................................................31
17.3 SUCCESSORS AND ASSIGNS..................................................................................31
17.4 NO THIRD PARTY BENEFIT..................................................................................31
17.5 NO AFFILIATE LIABILITY..................................................................................31
17.6 TIME OF ESSENCE.........................................................................................31
17.7 NO WAIVER...............................................................................................31
17.8 AMENDMENTS..............................................................................................32
17.9 NOTICE..................................................................................................32
17.10 COUNTERPARTS............................................................................................33
iii
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17.11 CROSS-REFERENCES.....................................................................................33 17.12 SECTION HEADINGS.....................................................................................33 17.13 INCLUDING............................................................................................33 17.14 GOVERNING LAW........................................................................................33 17.15 MERGER...............................................................................................33 17.16 NERC.................................................................................................33 17.17 GOOD UTILITY PRACTICES...............................................................................33 17.18 SAFETY...............................................................................................33 17.19 CONFIDENTIAL INFORMATION.............................................................................33 17.20 COOPERATION..........................................................................................34 17.21 NEGOTIATED AGREEMENT.................................................................................35 17.22 SUBCONTRACTORS.......................................................................................35 17.23 EWG STATUS...........................................................................................35 APPENDIX A INTERCONNECTION PROCEDURES.............................................................................1 APPENDIX B SPECIFICATIONS TO INTERCONNECTION AGREEMENT............................................................1 APPENDIX C INTERCONNECTION FACILITY UPGRADES......................................................................1 APPENDIX D MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA INTERCONNECTION FACILITY UPGRADES..............................1 APPENDIX E QUARTERLY ESTIMATED CONSTRUCTION COSTS.................................................................1 |
REVISED AND RESTATED
INTERCONNECTION AGREEMENT
This Revised and Restated Interconnection Agreement ("Agreement") is made and entered into by and between Southern Power Company, organized and existing under the laws of the State of Delaware and having its principal place of business at Birmingham, Alabama (hereinafter referred to as the "Generator"), and Georgia Power Company, a corporation organized and existing under the laws of the State of Georgia and having its principal place of business at Atlanta, Georgia (hereinafter referred to as "Georgia Power"). Generator and Georgia Power may be hereinafter referred to individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, Generator desires to engage in the interconnected operation of Generator's generating facility with the transmission facilities of the Georgia Power Electric System;
WHEREAS, Generator desires to engage in sales of electric energy to be generated by Generator's generating facility;
WHEREAS, Generator and Georgia Power have executed and entered into that certain Interconnection Agreement by and between Generator and Georgia Power for Goat Rock CC Unit 2 dated as of October 18, 2001 (the "Initial IA"); and
WHEREAS, Georgia Power has been directed by the Federal Energy Regulatory Commission pursuant to an order dated May 31, 2002 in FERC Docket Nos. ER02-352-000, 001 and 002 to revise certain terms and restate the remaining terms of the Initial IA which, upon its effectiveness, shall supercede and replace the Initial IA in its entirety.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties covenant and agree as follows:
SECTION 1: DEFINITIONS
1.1 In addition to the initially capitalized terms and phrases defined in the preamble of this Agreement, the following initially capitalized terms and phrases as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "Affiliate" - shall mean, with respect to any Party, another Person (i) which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Party, (ii) which, directly or indirectly, of record or beneficially, owns or holds 10% or more of the shares of any class of capital stock or other ownership interest of such Party having voting power or (iii) of which 10% or more of the shares of any of the capital stock or other ownership interest of the Affiliate having voting power is owned or held, directly or indirectly, of
record or beneficially, by or for such Party. For purposes of this definition, "control" when used with respect to any 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 "controlled" have meanings correlative to the foregoing.
1.1.2 "Appendix" or "Appendices" - means any of the schedules, exhibits and attachments, including the Interconnection Procedures, which are appended hereto and are incorporated by reference herein and made a part of this Agreement.
1.1.3 "Business Day" - means any Day excluding Saturday and Sunday and excluding any Day on which banking institutions in Georgia are closed because of a federal holiday.
1.1.4 "Day" or "Calendar Day" - means a calendar day unless otherwise specified.
1.1.5 "Effective Date" - shall be October 18, 2001, or such other date as the FERC shall order.
1.1.6 "Emergency" - means a condition or situation associated with the transmission and distribution of electricity, including voltage abnormalities, that, in the sole reasonable judgment of Georgia Power, exercised on a non-discriminatory basis as the transmission asset owner, adversely affects or is imminently likely to adversely affect: (i) public health, life or property; (ii) Georgia Power's employees, agents or property; or (iii) Georgia Power's ability to maintain safe, adequate, and continuous electric service to its customers and/or the customers of any member of NERC consistent with Good Utility Practices; provided, however, that if there is no adverse condition associated with distribution or transmission facilities, then the inability of Georgia Power to meet its load requirements solely because of insufficient generation resources shall not constitute an Emergency.
1.1.7 "Facility" - means all of Generator's equipment (including the Generator's Interconnection Equipment), as described in Appendix B of this Agreement, used to produce electric energy and required for parallel operation with Georgia Power, which equipment is located in Lee County, Georgia.
1.1.8 "FERC" - means the Federal Energy Regulatory Commission and any successor.
1.1.9 "Force Majeure Event" - shall have the meaning ascribed to it in Section 14.1.
1.1.10 "Generator" - shall have the meaning ascribed to it in the first paragraph of this Agreement, and its agents or permitted successors and assigns.
1.1.11 "Generator's Interconnection Equipment" - means all equipment which is owned, operated, or maintained by or for Generator as such is described in Appendix B (including without limitation, equipment for connection, switching, protective relaying and safety) that is required to be installed for the delivery of electric energy onto the Georgia Power Electric System on behalf of Generator. Generator's Interconnection Equipment does not include the Interconnection Facilities.
1.1.12 "Georgia ITS" - means the Georgia Integrated Transmission System, the electric transmission systems owned individually by Georgia Power, Georgia Transmission Corporation, the Municipal Electric Authority of Georgia and the City of Dalton, Georgia, and operated as an integrated transmission system.
1.1.13 "Georgia Power" - shall have the meaning ascribed to it in the first paragraph of this Agreement, including any of its agents or permitted successors and assigns.
1.1.14 "Georgia Power Electric System" - means collectively, the entire network of electric generation, transmission and distribution facilities, equipment and other devices owned (in whole or in part) or controlled by Georgia Power, or to which Georgia Power has a right to use, including the Georgia ITS, for the purposes of generating, transmitting, receiving, and distributing electric energy and capacity.
1.1.15 "Good Utility Practices" - 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 the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result(s) at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practices are 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties, Legal Requirements, NERC and SERC guides, and applicable safety and maintenance codes.
1.1.16 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department, taxing authority, or other authority thereof having jurisdiction over either Party, the Facility, the Interconnection Facilities, the Generator's Interconnection Equipment, or the Georgia Power Electric System, whether acting under actual or assumed authority.
1.1.17 "Indenture Trustee" - means a trust company chartered or other Person incorporated under the laws of the United States or a state of the United States and based in the United States which is the indenture trustee, mortgagee or secured party under any Indenture.
1.1.18 "Initial Synchronization Date" - means the date that includes the first instant in time when energy generated by the Facility is
delivered to the Georgia Power Electric System at the Interconnection Point. Such Initial Synchronization Date is projected in Appendix B.
1.1.19 "Interconnection Facilities" - means all equipment which is constructed, owned, operated, or maintained by or for Georgia Power, as such are generally identified and described in Appendix B, (including without limitation, equipment for connection, switching, transmission, distribution, protective relaying and safety) that, in Georgia Power's reasonable judgment, is required to be installed for the delivery of electric energy onto the Georgia Power Electric System on behalf of Generator and for the receipt by Generator of electric service in accordance with Section 2.6 hereof.
1.1.20 "Interconnection Facility Upgrades" - means all equipment to be located on the Georgia Power Electric System at or beyond the Interconnection Point which is constructed, owned, operated, or maintained by or for Georgia Power, as such are generally identified and described in Appendix C, (including without limitation, equipment for connection, switching, transmission, distribution, protective relaying and safety) that, in Georgia Power's reasonable judgment, is required to be installed for the safe parallel operation of the Facility and the delivery of electric energy at the Interconnection Point onto the Georgia Power Electric System on behalf of Generator and for the receipt by Generator of electric service in accordance with Section 2.6 hereof.
1.1.21 "Interconnection Point" - means the point of interconnection of Generator's Facility to the Georgia Power Electric System as defined in the Specifications to this Agreement set forth in Appendix B.
1.1.22 "Interconnection Procedures" - means the procedures for interconnection and operations set forth in Appendix A.
1.1.23 "Interconnection Service" - means the services provided by Georgia Power to Generator to safely and reliably interconnect Generator's Facility to the Georgia Power Electric System and receive electric energy and capacity from the Facility at the Interconnection Point pursuant to the terms of this Agreement and, if applicable, the Tariff.
1.1.24 "Interest Rate" - means the prime rate of interest as published from time to time in the Wall Street Journal or comparable successor publication.
1.1.25 "kW" - means kilowatts. In addition, "MW" may be used to mean megawatts, which are 1000 kilowatts.
1.1.26 "kWh" - means kilowatt-hours. In addition, "MWh" may be used to mean megawatt-hours, which are 1000 kilowatt-hours.
1.1.27 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, treaty, judgment, injunction, order or other legally binding announcement, directive, published practice or requirement enacted, issued or promulgated by a Governmental Authority having jurisdiction
over the matter in question, which is valid and applicable to the matter in question at the time of the Effective Date or anytime thereafter during the Term of this Agreement.
1.1.28 "Lien" - means any and all liens, mortgages, encumbrances, pledges, claims, leases, charges and security interests of any kind.
1.1.29 "Month" - means a calendar Month, or such other period as may be mutually agreed by the Parties. "Monthly" has a meaning correlative to that of Month.
1.1.30 "Monthly Administration Charge" - for a particular Month of the Term, means the Monthly amount to be paid by Generator to Georgia Power as set forth in Section 9.
1.1.31 "NERC" - means the North American Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.32 "Party" or "Parties" - means either Georgia Power or Generator or both.
1.1.33 "Permitted Financing Assignee" - shall have the meaning ascribed to it in Section 16.1 hereof.
1.1.34 "Permitted Liens" - means:
(a) any Lien on this Agreement and/or Georgia Power's rights, obligations, title or interest in, to and under this Agreement pursuant to that certain First Mortgage Bond Indenture from Georgia Power to The Chase Manhattan Bank, Trustee, dated as of March 1, 1941, or pursuant to any other mortgage or security agreement as heretofore and hereafter amended (the "Indenture");
(b) any Lien for taxes, assessments or other governmental charges which are not delinquent or the validity of which is being contested in good faith by appropriate proceedings diligently prosecuted so long as appropriate reserves are maintained in respect of such taxes, assessments or charges; and
(c) attachments, judgments and other similar Liens arising in connection with court proceedings, provided that within sixty (60) Days of the attachment thereof (but not less than five (5) Days prior to any execution or sale pursuant thereto), the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being contested in good faith and by appropriate proceedings so long as any material risk of liability is covered by a bond, or appropriate reserves are maintained in respect of such proceedings.
1.1.35 "Person" - means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court.
1.1.36 "Persons Indemnified" - means, when used with respect to a Party, collectively or individually (as the context might indicate), the Party, the Party's Affiliates and permitted successors and assigns, and the directors, officers, representatives, agents and employees of each of them.
1.1.37 "Qualified Person" - shall mean any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court who is an owner or operator of transmission facilities, or belongs to a regional transmission organization.
1.1.38 "Quarter" - means for each year of the Term four distinct time periods for planning and budgeting purposes comprised of January through March, April through June, July through September, and October through December. "Quarterly" has a meaning correlative to that of Quarter. In the event that this Agreement becomes effective during any Quarter, the obligations herein that arise on a Quarterly basis shall begin in the Quarter immediately following the initial Effective Date of this Agreement.
1.1.39 "Quarterly Estimated Construction Cost" - shall have the meaning set forth in Section 5.6.1.
1.1.40 "SERC" - means the Southeastern Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.41 "Southern Companies" - means, collectively, the electric utility operating company subsidiaries of Southern Company engaged in common dispatch and control of generating resources within the Southern Company Control Area, currently including Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, and Southern Power Company.
1.1.42 "Southern Company Control Area" - means that electric system of the Southern Companies that has been recognized by NERC and SERC as a control area.
1.1.43 "Specifications" - mean the interconnection specifications provided in Appendix B to this Agreement, which are attached hereto and incorporated herein by reference.
1.1.44 "Tariff" - means Southern Companies Open Access Transmission Tariff or a successor arrangement that governs transmission and interconnection services on the transmission facilities of Georgia Power.
1.1.45 "Term" - means the duration of this Agreement as specified in Section 3.1.
SECTION 2: INTERCONNECTION SERVICE
2.1 Service. Georgia Power shall supply Generator with Interconnection Service at the Interconnection Point for the Facility in accordance with and for the Term of this Agreement. Interconnection Service does not include transmission delivery service beyond the Interconnection Point. Neither Georgia Power nor any of its Affiliates shall have any obligation under this Agreement to purchase any power from the Facility, it being the intent and understanding of the Parties that Generator shall be responsible for its power sales to third parties.
2.3 Permits. Generator shall obtain and maintain, at its sole expense, any and all governmental permits, certificates or authorizations that Generator is required to obtain and maintain for the performance of its obligations under this Agreement. Georgia Power shall obtain and maintain any and all permits, certificates or authorizations that are required for the construction, operation, maintenance, and testing of the Interconnection Facilities, the expense of which shall be paid by Generator in accordance with Section 5.
2.4.1 To the extent that Generator has any such rights, Generator shall convey to Georgia Power at no cost to Georgia Power any and all rights of way and easements, including adequate and continued access rights to property of Generator necessary to provide Interconnection Service to Generator. Generator agrees that such parcel, rights of way, and easements shall survive termination or expiration of this Agreement, if and to the extent necessary for the continued use or the removal of the Interconnection Facilities. Such easements and access rights are specifically intended to permit Georgia Power to install, operate, maintain, replace and/or remove the Interconnection Facilities.
2.4.2 Upon reasonable advance notice given to Generator,
representatives of Georgia Power (as the transmission asset owner) shall at all
reasonable times have access to the Generator's Interconnection Equipment and to
property owned or controlled by Generator to the extent necessary in order to:
(i) inspect, maintain, and test meters and other Georgia Power equipment; (ii)
interconnect, disconnect (in accordance with Section 3), monitor, or measure
energy generated by the Facility; (iii) inspect the operation, maintenance or
testing of the Generator's Interconnection Equipment; or (iv) take such other
action as may be reasonably necessary to exercise Georgia Power's rights under
this Agreement. Georgia Power shall take reasonable steps to ensure such access
does not materially interfere with the operations, maintenance or testing of the
Facility, and that Georgia Power's use of such property complies with Legal
Requirements with respect to the Facility as well as with Generator's reasonable
policies and procedures applicable to the Facility, including those regarding
safety. Generator shall cooperate in such physical inspections of the
Generator's Interconnection Equipment as may be reasonably required by Georgia
Power. Georgia Power's technical review and inspection of the Generator's
Interconnection Equipment shall not be construed as endorsing the design thereof
nor as any warranty of the safety, durability or reliability of the Facility.
2.4.3 To the extent that Georgia Power has any such rights, Georgia Power agrees to furnish at no cost to Generator any necessary licenses or other access rights to permit Generator to construct, connect, operate and maintain its facilities located in Georgia Power's substation or to otherwise fulfill its obligations under this Agreement. After the Interconnection Facilities are energized, such access rights for Generator's facilities located inside the substation shall be exercised by Generator only with supervision by Georgia Power. Generator shall provide to Georgia Power reasonable notice under the circumstances of a request for such supervised access to the substation, and Georgia Power and Generator shall mutually agree upon the date and time of such supervised access, such agreement not to be unreasonably withheld. In addition to the aforementioned requirement, in exercising such access rights, Generator shall not unreasonably disrupt or interfere with normal operations of Georgia Power's business and shall act consistent with Good Utility Practice.
2.5 Interconnection Point. Georgia Power shall establish and maintain the Interconnection Point, as described in Appendix B to this Agreement.
2.6 Station Service Arrangements. Generator is responsible for making all appropriate arrangements for station service requirements. Generator must demonstrate, to Georgia Power's reasonable satisfaction, that it has adequate arrangements in place to supply its station service requirements. If Generator supplies its running station service on Generator's side of the Interconnection Point, then energy consumed and demand requirements are deemed to be netted from Generator's capability. In this same arrangement, starting station service energy is also assumed to be netted out of energy delivered to the Interconnection Point.
2.7 Generator Balancing Service Arrangements. Generator is responsible for ensuring that its actual generation matches its scheduled delivery, on an integrated clock hour basis (in whole MW), to the Georgia Power Electric System at the Interconnection Point. Generator shall make arrangements for the supply of energy and/or capacity when there is a difference between the actual generation and the scheduled delivery. Generator may satisfy its obligation for making such generator balancing service arrangements by: (a) obtaining such service from another entity that (i) has generating resources within the Southern Company Control Area, (ii) agrees to assume responsibility for providing generator balancing service to the Generator and (iii) has a control area coordination services agreement with the Southern Companies that addresses generator balancing service for all generating resources for which the entity is responsible; (b) committing sufficient additional unscheduled generating resources to the control of and dispatch by the Southern Company Control Area that are capable of supplying any capacity and energy not supplied by the scheduled resource and entering into a control area coordination services agreement with the Southern Company Control Area operator that addresses generator balancing service obligations; (c) entering into an arrangement with another NERC-approved control area to dynamically schedule the Generator's Facility out of the Southern Company Control Area and into such other control area; (d) entering into a generator balancing service agreement with Southern Companies pursuant to their Generator Balancing Service Tariff on file with FERC; or (e) in the event the load/generation balancing function of the control area in which Georgia Power is a participant is provided by an entity other than Southern Companies, by entering into an alternate arrangement with such control area service provider.
2.8 Interconnection Procedures. When the Facility is operated as part of the Southern Company Control Area, Generator shall comply with the Interconnection Procedures (Appendix A) for the Facility at all times. When the Facility is not operated as part of the Southern Company Control Area, the Operating Committee shall determine which (if any) of the Interconnection Procedures are not applicable.
2.9 Interconnected Operation Services. Generator retains any right it may have to pursue compensation for the provision of interconnected operation services by making a filing with FERC. Georgia Power retains any right it may have to support or oppose such filing.
2.10 Control Area Operations. Nothing in this Agreement shall obligate Generator to operate the Facility as a part of the Southern Company Control Area.
2.11 Inadvertent Flow. Generator is not a transmission provider; and Georgia Power shall have no obligation under this Agreement to pay Generator any charge for flows of electric power and/or energy through Generator's Interconnection Equipment.
SECTION 3: TERM, TERMINATION AND DISCONNECTION
3.1 Term. This Agreement shall become effective on the Effective Date and shall continue in effect for a period of forty (40) years from the initial Effective Date unless terminated earlier by mutual written agreement of the Parties or otherwise pursuant to the provisions of this Agreement subject to any applicable Legal Requirement, and shall continue thereafter until terminated by either Party on at least one (1) year's notice.
3.2.1 A Party shall be in "Default" under this Agreement, if:
(i) the Party fails to comply with any material term or condition of this
Agreement; (ii) any material representation or warranty of the Party made
pursuant to this Agreement shall prove to be false or misleading in any material
respect when made or deemed made; or (iii) Generator makes an assignment for the
benefit of Generator's creditors, or voluntary or involuntary proceedings in
bankruptcy are instituted seeking to adjudge Generator a bankrupt, or if
Generator be adjudged a bankrupt, or if Generator's affairs are placed in the
hands of any court for administration.
3.2.2 This Agreement may be terminated by either Party, upon written notice, if the other Party is in Default hereunder and such Party (or its Permitted Financing Assignee) has not cured such breach within thirty (30) Days following written notice of such breach to the other Party. Provided, however, that in the event the Default is not capable of being cured within thirty (30) Days, the Agreement shall not be terminated if the Party in Default (or its Permitted Financing Assignee) has begun in good faith taking actions to cure within thirty (30) Days following such written notice and diligently proceeds to completion.
3.2.3 In the event of a Default by either Party and subject to that Party's right to cure, the non-defaulting Party may pursue any and all judicial and administrative remedies and relief available to it.
3.3 Permanent Disconnection. Upon termination of this Agreement
(whether due to the expiration of the Term or due to a Default as described in
Section 3.2), Georgia Power may permanently disconnect the Facility from the
Georgia Power Electric System in accordance with Good Utility Practices.
3.4.1. Georgia Power (as transmission asset owner) may, consistent with Good Utility Practice and on a non-discriminatory basis, direct that the Facility be temporarily disconnected from the Georgia Power Electric System: (i) during an Emergency; (ii) if the operation and output of the Facility do not meet the requirements of this Agreement (even if Generator has commenced actions to cure such Default) and such condition could materially adversely affect the safe and reliable operation of the Georgia Power Electric System; (iii) if an inspection of the Facility reveals a hazardous condition, lack of scheduled maintenance or testing, or an operating characteristic of the Facility that could materially adversely affect the safe and reliable operation of the Georgia Power Electric System; (iv) if Generator has modified the Facility or interconnection protective devices in a manner that could reasonably be expected to materially adversely affect the safe and reliable operation of the Georgia Power Electric System without the knowledge and approval of Georgia Power; (v) in the event of tampering with, or unauthorized use of, Georgia Power's equipment; (vi) if the operation of Generator's equipment materially adversely affects Georgia Power's equipment or the safe and reliable operation of the Georgia Power Electric System; or (vii) if necessary to construct, install, maintain, repair, replace, remove, investigate, inspect or test any part of the Interconnection Facilities or the transmission facilities of Georgia Power, in accordance with Section 15.2.4.
3.4.2 In the event of the occurrence of any of the conditions described in Section 3.4.1, Georgia Power shall give as much advance notice as practicable under the circumstances of the need for disconnection of the Facility to employees of Generator designated from time to time by Generator to receive such notice. Upon receipt of notice directing disconnection, Generator shall carry out the required action. Where circumstances do not permit such advance notice to Generator or Generator's employees, Georgia Power may disconnect the Facility from the Georgia Power Electric System without such notice in accordance with Good Utility Practices. Georgia Power shall reconnect the Facility as soon as reasonably practicable following the cessation or remedy of the event that led to the temporary disconnection. The Parties agree to cooperate and coordinate with each other to the extent necessary in order to restore the Facility, Interconnection Facilities, and the Georgia Power Electric System to their normal operating state.
3.4.3 Generator shall bear any direct cost incurred by Georgia Power as a result of any disconnection or reconnection caused by Generator's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Generator. Georgia Power shall bear any direct cost incurred by Generator as a result of any disconnection or reconnection
caused by Georgia Power's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Georgia Power.
3.4.4 Generator reserves the right, in its sole discretion, to isolate or disconnect its Facility from the Georgia Power Electric System.
3.5 Survival of Rights. Upon termination or expiration of this Agreement, the Parties shall be relieved of their obligations under this Agreement except for the following obligations which shall survive termination or expiration: (i) the obligation to pay each other all amounts then owed and not paid under this Agreement; (ii) obligations arising from action or inaction during the period the Agreement was in effect under the indemnities provided for in this Agreement; and (iii) any other obligations which the Agreement specifically indicates shall survive termination or expiration.
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY
4.1 General Standards. During the Term, Generator shall have the sole responsibility to, and at its sole expense shall manage, control, operate and maintain the Facility in accordance with Good Utility Practices and the requirements set forth in this Agreement. Generator shall operate its generating equipment in parallel with the Georgia Power Electric System in accordance with the operating procedures in Appendix A to this Agreement and those established by the Operating Committee in accordance with Section 15 and in accordance with the requirements of the NERC-recognized control area in which the Facility operates. All wiring, apparatus and other equipment necessary to receive or deliver electric energy on Generator's side of the Interconnection Point shall be supplied, maintained and operated by and at the expense of Generator.
4.2 Maintenance and Operation. Generator shall maintain and operate the Facility in accordance with Good Utility Practices. Generator shall not, without Georgia Power's prior written approval (which shall not be unreasonably withheld or delayed), make any change to its Facility which might adversely affect the operation of the Georgia Power Electric System.
SECTION 5: INTERCONNECTION FACILITIES AND INTERCONNECTION FACILITY UPGRADES
5.1.1 Georgia Power shall design, procure, install, and own the Interconnection Facilities and Interconnection Facility Upgrades needed for Georgia Power to provide Interconnection Service to Generator. Georgia Power shall be responsible for acquiring all necessary real property rights, easements, licenses, and rights of way and for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement. Such equipment has been identified and set forth in Appendices B, C and D. All Interconnection Facilities and
Interconnection Facility Upgrades shall be and remain the property of Georgia Power. Georgia Power's obligations hereunder are dependent upon its securing and retaining the necessary rights, easements, privileges, franchises, permits and equipment for meeting such obligations; provided, however, that Georgia Power shall exercise reasonable efforts to secure and retain for the Term of this Agreement those rights, easements, privileges, franchises, permits and equipment.
5.1.2 Following commencement of commercial operation of the Facility and throughout the Term, Georgia Power shall be responsible for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement.
5.2 Costs of Interconnection Facilities and Interconnection Facility Upgrades. To the extent consistent with FERC policy, Generator shall be responsible for, and shall reimburse Georgia Power for, all costs and expenses reasonably incurred by or on behalf of Georgia Power in connection with the planning, design, construction, installation, testing, inspection, ownership, operation and maintenance of all or any part of the Interconnection Facilities and Interconnection Facility Upgrades during the Term of this Agreement.
5.4 Payment of Cost of On-Going Maintenance and Operation of the Interconnection Facilities.
5.4.1 Georgia Power shall operate and maintain the Interconnection Facilities in accordance with Good Utility Practices and in a non-discriminatory manner.
5.4.2 Georgia Power shall develop an estimate of all costs and expenses to be paid by Generator for the operation and maintenance of the Interconnection Facilities on an annual basis and provide the annual estimate to Generator at least eight (8) weeks before December 31 of each year. Generator shall pay one-twelfth (1/12) of such estimated costs each Month in accordance with Section 10. In addition, Generator shall pay its pro rata share of all costs reasonably incurred by Georgia Power (excluding any such costs reimbursed to Georgia Power through insurance proceeds) to repair and restore the Interconnection Facilities caused by any Force Majeure Event upon receipt of an invoice in accordance with Section 10.
5.4.3 Georgia Power shall true-up this estimate to Georgia
Power's actual costs and expenses within a reasonable period of time after such
actual costs and expenses are known but not less often than annually. In the
event that the actual costs and expenses to be paid by Generator under this
Section 5.4 are more or less than Georgia Power's initial estimate, the
difference (either a credit or an additional charge) shall be reflected on a
subsequent invoice.
5.5 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect the Interconnection Facilities located on
Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to the Interconnection Facilities arising from the failure of Generator to properly protect those Interconnection Facilities in accordance with Good Utility Practices.
5.6 Payment of Costs of Interconnection Facilities and Interconnection Facility Upgrades.
5.6.1 Generator shall pay Georgia Power in advance for the costs incurred related to the installation and construction of the Interconnection Facilities and Interconnection Facility Upgrades. Georgia Power shall develop a quarterly payment schedule that shall be based upon (i) the estimated costs to be incurred by Georgia Power in the installation and construction of the Interconnection Facilities and Interconnection Facility Upgrades, and (ii) the time periods that Georgia Power estimates that such costs will be incurred by Georgia Power ("Quarterly Estimated Construction Costs"). A current estimate of the Quarterly Estimated Construction Costs and the projected payment schedule is attached as Appendix E. Georgia Power may revise the schedule from time to time to more accurately reflect more current estimates of costs and/or to incorporate any needed true-up of estimated costs to actual costs. Georgia Power shall obtain authorization to proceed prior to proceeding with planning, construction, installation or testing of the Interconnection Facilities. Generator shall pay such estimated costs as specified in the payment schedule in accordance with Section 10. Generator shall have the right to approve any deviation in the scope of the work if such deviation would result in an estimated increase of ten percent (10%) or more over the estimated costs. In no event shall Georgia Power collect from Generator any estimated payment for any costs unless Georgia Power reasonably expects to actually incur such costs during the forthcoming Quarter.
5.6.2 During the construction of the Interconnection
Facilities and Interconnection Facility Upgrades, Georgia Power shall true-up
the estimated payments to Georgia Power's actual costs and expenses within a
reasonable period of time after such actual costs and expenses are known but not
less often than annually. In the event that the actual costs and expenses to be
paid by Generator are more or less than Georgia Power's estimate, the difference
(either a credit or additional charge) shall be reflected on a subsequent
invoice. Georgia Power shall issue a final cost report within one hundred twenty
(120) Days of the Facility's commercial operation date. The final report shall
set forth in reasonable detail the actual costs of the Interconnection
Facilities and Interconnection Facility Upgrades and shall true-up the estimated
payments to actual costs. To the extent that the final, actual costs that are
Generator's cost responsibility under this Agreement exceed the estimated costs
already paid by Generator, Georgia Power shall invoice Generator in accordance
with Section 10.1. To the extent that the estimated costs already paid by
Generator exceed the final, actual costs that are Generator's cost
responsibility under this Agreement, Georgia Power shall refund to Generator an
amount equal to the difference within twenty (20) Days of the issuance of the
final cost report.
5.6.3 Georgia Power shall inform Generator on a monthly basis, and at such other times as Generator reasonably requests, of the status of the construction and installation of the Interconnection Facilities and Interconnection Facility Upgrades, including, but not limited to, the following information: progress to date; a description of scheduled activities for the
next period; the delivery status of all equipment ordered; and the identification of any event which Georgia Power reasonably expects may delay construction of, or increase the cost of, the Interconnection Facilities and Interconnection Facility Upgrades.
5.6.4 Suspension of Work. Generator reserves the right, upon
written notice to Georgia Power, to suspend at any time all work by Georgia
Power associated with the construction and installation of the Interconnection
Facilities and Interconnection Facility Upgrades. In such event, Generator shall
be responsible for the costs which Georgia Power (i) has incurred prior to the
suspension to the extent such costs previously were authorized by Generator and
(ii) reasonably incurs in suspending such work, including without limitation,
the costs incurred to ensure the safety of persons and property and the
integrity of the Georgia Power Electric System and the costs incurred in
connection with the cancellation of material and labor contracts, provided such
cancellation has been authorized by Generator. Georgia Power will invoice
Generator pursuant to Section 10.1 and agrees to use reasonable efforts to
minimize its costs. If, after such suspension, Generator does not provide
Georgia Power with written notice to proceed within 365 Days after the notice of
suspension, this Agreement shall be deemed terminated. If this Agreement is
deemed terminated, Generator shall be responsible for costs reasonably incurred
in winding up such work and the costs incurred in connection with the
cancellation of material and labor contracts, to the extent to which Generator
has not already reimbursed Georgia Power for such costs. Any non-returnable
equipment that has not already been installed by Georgia Power shall become the
property of Generator "as is" upon payment of Georgia Power's costs.
5.7 Credits for Interconnection Facility Upgrades. Generator,
Generator's marketing agent, or Generator's customers will be responsible for
arranging for the transmission service necessary for deliveries from the
Facility across the Georgia Power transmission system. For all revenues Georgia
Power receives under the Tariff for transmission service, not including
ancillary services, (a) reserved with the Facility designated as the source, or
(b) from the Facility on the Georgia Power transmission system under a Tariff
transmission service agreement, Georgia Power shall credit Generator in an
amount equal to the equivalent point-to-point transmission service rate based on
the kW of capacity reserved or on the kWh delivered on a dollar-for-dollar basis
applied to Generator's total monthly bill for services, until such time as the
cost of Georgia Power's Interconnection Facility Upgrades that has been
previously paid by Generator to Georgia Power, has been fully offset, after
which time such offset or credits shall no longer apply. Any said credit shall
be separately identified by Georgia Power and applied monthly against charges
due Georgia Power from Generator (if any), or paid directly to Generator to the
extent that no charges are due Georgia Power from Generator for such month
either because: (i) Generator has not entered into a transmission service
agreement with Georgia Power, or (ii) the total amount of said credits due
Generator for the month exceeds charges due Georgia Power from Generator. Any
credits provided to Generator hereunder shall reflect interest on monies paid by
Generator to Georgia Power for Interconnection Facility Upgrades from the date
paid until the date the credit is applied. Such interest shall be calculated
consistent with FERC requirements.
SECTION 6: LIABILITY AND INDEMNIFICATION
6.1 Remedies for Breach. Subject to Section 6.2, either Party shall be liable to the other for any loss resulting directly from any breach of this Agreement and which at the time of the breach was a reasonable foreseeable consequence of such breach.
6.2 Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT, NEITHER PARTY NOR ITS PERSONS INDEMNIFIED SHALL BE LIABLE TO THE
OTHER PARTY OR ITS PERSONS INDEMNIFIED FOR ANY CLAIMS, SUITS, ACTIONS OR CAUSES
OF ACTION FOR INCIDENTAL, PUNITIVE, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, DAMAGES IN THE CHARACTER OF LOSS OF PROFITS OR
REVENUES, DAMAGES SUFFERED BY GENERATOR'S OR GEORGIA POWER'S CUSTOMERS DUE TO
SERVICE INTERRUPTIONS, OR COST OF CAPITAL) CONNECTED WITH, RELATING TO, OR
ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY SUCH DAMAGES
WHICH ARE BASED UPON CAUSES OF ACTION FOR BREACH OF CONTRACT, TORT (INCLUDING
NEGLIGENCE AND MISREPRESENTATION), BREACH OF WARRANTY, STRICT LIABILITY OR
OTHERWISE. THE PROVISIONS OF THIS SECTION 6.2 SHALL APPLY REGARDLESS OF FAULT
AND SHALL SURVIVE TERMINATION, CANCELLATION, SUSPENSION, COMPLETION, OR
EXPIRATION OF THIS AGREEMENT.
6.3 No Liability for Other Party's Responsibilities. Neither Party nor its Persons Indemnified assumes any obligation or responsibility of any kind with respect to the other Party's equipment, including, without limitation, obligation or responsibility with respect to the condition or operation of said equipment, except for Generator's obligations and responsibilities hereunder for the Interconnection Facilities. Neither Party nor its Persons Indemnified shall be responsible for the transmission, distribution or control of electrical energy on the other Party's side of the Interconnection Point.
6.4 Responsibility for Property. Each Party shall be responsible for all physical damage to or destruction of, or any personal injury or death associated with, the property, equipment and/or facilities owned by it and located on its premises, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party or its Persons Indemnified for such damage, except in cases of the sole negligence or intentional wrongdoing by the other Party or its Persons Indemnified. Without limiting the generality of the foregoing, neither Party nor its Persons Indemnified shall be liable for damages or injury arising out of or resulting from the simple failure (i.e., failure of a device not caused by breach of contract, negligence or intentional wrongful act) of protective devices (e.g., circuit breakers).
6.5.1 Generator shall at all times indemnify, defend, and hold harmless Georgia Power and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of
or resulting from (i) the Generator's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction of Georgia Power's property properly located, pursuant to this Agreement, on premises owned, leased or controlled by Generator, except in cases of sole negligence or intentional wrongdoing by Georgia Power or its Persons Indemnified, or (iii) activities on Generator's property, except in the case of sole negligence or intentional wrongdoing by Georgia Power or its Persons Indemnified.
6.5.2 Georgia Power shall at all times indemnify, defend, and hold harmless Generator and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) Georgia Power's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction of Generator's property located, pursuant to this Agreement, on premises owned, leased, or controlled by Georgia Power, except in cases of sole negligence or intentional wrongdoing by the Generator or its Persons Indemnified, or (iii) activities on Georgia Power's property, except in the case of sole negligence or intentional wrongdoing by Generator or its Persons Indemnified.
SECTION 7: METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT
7.1.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all metering equipment necessary to provide information regarding power flow and voltage conditions at the Interconnection Point. All metering equipment of Generator shall conform to Good Utility Practices. Prior to its installation, Georgia Power and Generator shall review the metering equipment to ensure conformance with Good Utility Practices and Generator shall maintain the metering equipment in conformance with Good Utility Practices throughout the Term. The metering equipment described herein does not include station service metering equipment.
7.1.2 Electric capacity and energy received by the Georgia Power Electric System from Generator shall be measured by meters installed at the Interconnection Point. If and to the extent Generator's meters are not physically located at the Interconnection Point, the metered amount of energy shall be adjusted for losses as mutually agreed from the point of metering to the Interconnection Point in accordance with Good Utility Practices. Any Party performing such a study to determine the loss adjustment shall provide a copy to the other Party.
7.1.3 Generator shall provide, as required by Good Utility Practices and requested by Georgia Power, real-time telemetered load signals of its energy delivered to the Interconnection Point. Generator shall also read the meters owned by it and shall furnish to Georgia Power all meter readings and other information reasonably required for operations and for billing purposes under this Agreement. Such information shall remain available to Georgia Power for one (1) year or such longer period as may be required by any Legal Requirement.
7.1.4 The Parties agree that the meter readings provided by the Generator to Georgia Power, under normal circumstances, shall be used as the official measurement between the Parties of the amount of capacity and energy delivered from the Facility to the Interconnection Point.
7.1.5 Any time during the Term and after initial acceptance of the accuracy of Generator's telemetered information, if telemetered information is unavailable to Georgia Power, for any reason, the Generator shall provide integrated hourly meter readings to Georgia Power each hour until telemetry is returned to service in conformance with Good Utility Practices and Section 7.1.2.
7.2.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all data acquisition equipment, protection equipment, and any other associated equipment and software, which may be reasonably required at any time during the Term by either Party for Generator to operate its facilities in parallel with Georgia Power. Such equipment shall conform to Good Utility Practices. Prior to its installation, Georgia Power and Generator shall review the equipment and software required by this Section 7 to ensure conformance with Good Utility Practices.
7.2.2 The selection of real time telemetry and data to be received by Georgia Power and Generator shall be at the reasonable discretion of Georgia Power, as deemed by Georgia Power necessary for reliability, security, revenue metering, and/or monitoring of the Facility's operations in conformance with Good Utility Practices. This telemetry includes, but is not limited to, voltages, generator output (MW, MVAR, and MWh) at the Interconnection Point and breaker status. Georgia Power shall provide to Generator real time telemetry of Georgia Power's breaker status. To the extent telemetry is required, Generator shall, at its own expense, install any telemetering equipment, data acquisition equipment, or other equipment and software necessary at the Facility for the telemetry of information to Georgia Power.
7.2.3 Generator shall be responsible for the reasonable cost that Georgia Power incurs in making any computer modifications or changes to Georgia Power's facilities or equipment necessary to implement this Section 7.
7.3 Payment of Cost of Metering, Data Acquisition, and Related Protection Equipment.
7.3.1 Prior to the commencement of Interconnection Service under this Agreement, Georgia Power shall develop and provide Generator an estimate of all costs and expenses that may be incurred by Georgia Power in connection with the installation of equipment and software under Sections 7.1 and 7.2. Georgia Power shall obtain Generator's consent thereto prior to proceeding with activities in connection with Sections 7.1 and 7.2. Generator shall pay such estimated costs in accordance with Section 10.
7.3.2 Georgia Power shall true-up this estimate to Georgia Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator to Georgia Power under Section 7.1 and 7.2 are more or less than Georgia Power's initial estimate, the difference (either a credit or an additional charge) shall be reflected on a subsequent invoice.
7.4 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect all equipment of Georgia Power located on Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to such equipment arising from the failure of Generator to properly protect such equipment in accordance with Good Utility Practices.
7.5.1 Meters, data acquisition, and related protection equipment at Generator's Interconnection Point shall be tested at least biennially by Generator in accordance with the provisions for meter testing as established in American National Standard Institute Code for Electricity Metering (ANSI) Standard C12.16 for Solid State Electricity Meters, as the same may be updated from time to time. Representatives of each Party shall be afforded an opportunity to witness such tests.
7.5.2 Generator shall, upon the reasonable request of Georgia Power, test its meters and data acquisition equipment at the Interconnection Point used for determining the receipt or delivery of capacity and energy by Georgia Power. In the event a test shows such equipment to be inaccurate, Generator shall make any necessary adjustments, repairs or replacements thereon.
7.6 Inaccuracies. If the metering fails to register, or if the measurement made by a metering device is found upon testing to vary by more than one percent (1.0%) from the measurement made by the standard meter used in the test, an adjustment shall be made correcting all measurements of energy made by the metering during (i) the actual period when inaccurate measurements were made by the metering, if that period can be determined to the mutual satisfaction of the Parties, or (ii) if the actual period cannot be determined to the mutual satisfaction of the Parties, one-half of the period from the date of the last test of the metering to the date such failure is discovered or such test is made (such period herein the "Adjustment Period"). If the Parties are unable to agree on the amount of the adjustment to be applied to the Adjustment Period, the amount of the adjustment shall be determined (a) by correcting the error if the percentage of error is ascertainable by calibration, tests or mathematical calculation, or (b) if not so ascertainable, by estimating on the basis of deliveries under similar conditions during the period since the last test. In the event Generator's metering equipment is found to be insufficiently reliable and/or inaccurate during any consecutive three (3) Month period, Georgia Power shall have the right to install suitable metering equipment at the Interconnection Point for the purpose of checking the meters installed by Generator, and Generator shall pay all costs related to such metering equipment.
SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING
8.1 Facility Evaluation Based on Actual Equipment Data. Generator agrees to provide updated application data ("actual equipment data") to Georgia Power that reflects information provided by equipment manufacturers for the actual equipment purchased by Generator for this Facility, as soon as it is available, but not later than ninety (90) Days prior to Initial Synchronization Date. Georgia Power agrees to review the actual equipment data to identify any adverse impacts to Georgia Power's Electric System caused by any material change in the Facility's operation and performance specifications that were not reasonably identifiable in studies performed using Generator's application data as initially provided. In the event any such adverse impacts are identified, Generator is responsible for modifying its equipment to eliminate such identified adverse impacts.
8.2 Implementation of Control and Operating Procedures. At least forty-five (45) Days prior to the Initial Synchronization Date, Generator and Georgia Power will: (a) jointly review the Control and Operating Procedures as developed by the Operating Committee, under Section 15 of this Agreement; (b) develop a training schedule for Facility and Georgia Power personnel under the Control and Operating Procedures; and (c) install and verify that communication links are complete for: (i) data telemetry, (ii) voice communications between Generator's Facility and Georgia Power's Transmission System control centers, and (iii) the transmittal of Facility and transmission system information on the Southern Company Generator Information Network.
8.3 Facility Inspection. Consistent with Good Utility Practices and unless otherwise agreed to by the Parties, all Interconnection Facilities shall be complete prior to the initial synchronization of the Facility with the Georgia Power Electric System. Within fifteen (15) Days after written notice is given to Georgia Power by Generator, an inspection shall be performed by Georgia Power to insure the proper installation and operation of the interconnection protective devices. The inspection shall include, without limitation, verification: (a) that the installation of Generator's equipment at the Facility is in accordance with the interconnection study; and (b) of proper voltage and phase rotation.
8.4 Initial Synchronization. Upon completion of the actions and reviews required under Sections 8.1, 8.2, and 8.3, Generator may request approval for initial synchronization of the Facility with the Georgia Power Electric System. Such request for approval shall be made no less than seven (7) Calendar Days in advance of the date which the Generator proposes for the Initial Synchronization Date. Initial synchronization shall not occur without the prior documented approval of Georgia Power, and such approval shall not be unreasonably withheld. Representatives of Georgia Power shall have the right to be present during the initial synchronization and facility testing. The activities under this Section 8, including without limitation, facility inspection, evaluation of actual equipment data, personnel training, use of Southern Company Generator Information Network, or the granting of approval to Generator for operation of the Facility in parallel with the Georgia Power Electric System shall not serve to relieve Generator of liability for injury, death or damage attributable to the negligence of Generator, and Georgia Power shall not be responsible as a result of such activities.
8.5 Review of Synchronization Tests. No less than forty-five (45) Days prior to the commercial operation date of the Facility, Generator shall provide Georgia Power copies of all applicable excitation system field test results (including chart recordings and actual data points in electronic form) and field settings, including (if applicable) Power System Stabilizer test results and settings in a format that conforms to the models previously submitted with the original application data. These tests include but are not limited to excitation system open circuit step in voltage tests, and (if applicable) Power System Stabilizer gain margin and phase compensation tests. Excitation system open circuit step in voltage test response chart recordings shall be provided showing generator terminal voltage, field voltage, and field current (exciter field voltage and current for brushless excitation systems) with sufficient resolution such that the change in voltages and currents are clearly distinguishable. The excitation system open circuit step in voltage test data points corresponding to the chart recordings should also be submitted in electronic form. Georgia Power may require that Generator perform more detailed tests if there are significant differences between the excitation system open circuit step in voltage test response and the step response predicted through dynamic simulation of model data. Any problems identified as a result of changes from application data to actual field settings of the excitation system including (if applicable) Power System Stabilizers must be addressed and resolved as soon as practicable by the Generator in order for the Generator to continue to deliver power to the Interconnection Point.
SECTION 9: ADMINISTRATION CHARGE
Generator shall pay Georgia Power a Monthly Administration Charge of $5,000 per Month for all costs and expenses incurred by Georgia Power during such Month in connection with: (i) Georgia Power's administration of this Agreement; (ii) any taxes, assessments or other impositions for which Georgia Power may be liable as a result of any activity undertaken pursuant to this Agreement; (iii) reading meters; and (iv) accounting for capacity and energy flowing into or out of Generator's Facility. Georgia Power may revise the amount of the Monthly Administration Charge on an annual basis by making a filing in accordance with Section 12.3.
SECTION 10: PAYMENT PROCEDURE
10.1.1 Georgia Power shall issue a Quarterly invoice to Generator for the Quarterly Estimated Construction Costs.
10.1.2 Georgia Power shall issue a Monthly invoice to Generator for the estimated operation and maintenance charge, administrative charge, and other charges/credits determined pursuant to this Agreement as soon as practicable following the close of each Month.
10.1.3 All amounts owing to Georgia Power from Generator shall be due and payable in immediately available funds through wire transfer of funds or other means acceptable to Georgia Power within twenty (20) Calendar Days after the date of Georgia Power's invoice.
10.2 Failure to Timely Pay. If Generator fails to pay the amount billed
by Georgia Power within twenty (20) Calendar Days after the date of Georgia
Power's invoice (and such amount is not disputed in accordance with Section
10.6), Georgia Power may, at any time thereafter upon five (5) Business Days
written notice, draw upon the letter of credit (or other form of security) of
Generator to obtain payment for such invoice, as well as reasonable costs
incurred to exercise its rights under this Section. In addition, Georgia Power
may, at its option, treat such non-payment as a Default of this Agreement under
Section 3.2 hereof.
10.3 Interest. Any amount due and payable from Generator to Georgia Power pursuant to this Agreement that is not received by the due date shall accrue interest from the due date at the Interest Rate.
10.4 Creditworthiness. Generator shall provide and maintain in effect during the Term of this Agreement an unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Georgia Power, including an appropriate parent security) as security to meet its responsibilities and obligations under this Agreement. The unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Georgia Power) shall be in the amount of $1,950,000.00 in immediately available funds through wire transfer of funds or other means acceptable to Georgia Power for activities arising prior to commercial operation of the Facility and in the amount of $175,000.00 for activities arising from the date of commercial operation of the Facility. Georgia Power shall be entitled to draw upon such letter of credit for amounts due it under this Agreement if not paid when due in accordance with Section 10.1 and not disputed in accordance with Section 10.6.
10.5 Audit Rights. Either Party shall have the right, during normal business hours, and upon prior reasonable notice to the other Party to audit each other's accounts and records pertaining to either Party's performance and/or satisfaction of obligations arising under this Agreement within one (1) year from the date of such performance or satisfaction of such obligation, including specifically, but not limited to, delivery of the final cost report as provided in Section 5.7.2. Said audit shall be performed at the offices where such accounts and records are maintained and shall be limited to those portions of such accounts and records that specifically relate to obligations under this Agreement. To the extent such accounts and records contain confidential information, the Parties agree to maintain the confidentiality of such information consistent with Section 17.19 hereof. In the event an audit reveals an improper assignment or allocation of costs or an error in billing, the Parties will make appropriate adjustments (either refunds or additional payments), with interest, within thirty (30) Days.
10.6 Disputed Bills. In the event of a billing dispute between Generator and Georgia Power, Georgia Power shall not terminate this Agreement, draw on the letter of credit for any disputed amounts, nor disconnect the Facility for failure to pay the disputed amount if Generator (i) continues to make all payments not in dispute and (ii), if requested by Georgia Power, pays into an independent escrow account the portion of the invoice in dispute.
10.7 No Waiver. Payment of any cost or invoice by Generator will not constitute a waiver of any rights or claims that Generator may have under or relating to this Agreement.
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS
11.1 Generator Representations, Warranties and Covenants. Generator makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.1.1 Generator is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, that it is qualified to do business in the State of Georgia and that it has the power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.1.2 The execution, delivery and performance by Generator of this Agreement has been duly authorized by all necessary company action, and does not and shall not require any consent or approval of Generator's Board of Directors or members, other than those which have been obtained.
11.1.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and shall not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirement, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Generator is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
11.1.4 This Agreement is the legal, valid and binding obligation of the Generator and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.1.5 There is no pending or, to the knowledge of Generator, threatened action or proceeding affecting Generator before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2 Georgia Power Representations, Warranties and Covenants. Georgia Power makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.2.1 Georgia Power is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia that it is qualified to do business in the State of Georgia and that it has the corporate power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.2.2 The execution, delivery and performance by Georgia Power of this Agreement has been duly authorized by all necessary corporate action, and does not and shall not require any consent or approval of Georgia Power's Board of Directors or shareholders, other than those which have been obtained.
11.2.3 This Agreement is the legal, valid and binding obligation of Georgia Power and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.2.4 There is no pending or, to the knowledge of Georgia Power, threatened action or proceeding affecting Georgia Power before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2.5 Georgia Power covenants to Generator that it will file this Agreement, and any amendments and/or modifications thereto, with FERC in accordance with all Legal Requirements.
11.3 Survival of Representations, Warranties and Covenants. The representations, warranties and covenants made by Generator and by Georgia Power (as the case may be) in Sections 11.1.1, 11.1.3, 11.1.4, 11.2.1, 11.2.3, and 11.2.5 shall survive the execution and delivery of this Agreement and any action taken pursuant hereto. The representations, warranties and covenants made by Generator and Georgia Power (as the case may be) in Sections 11.1.2, 11.1.5, 11.2.2 and 11.2.4 shall be true and accurate as of the date of execution of this Agreement.
SECTION 12: COMPLIANCE WITH LAWS
12.1 Compliance. Generator represents, warrants and covenants that as
of the Initial Synchronization Date and for the Term, Generator shall (i) be in
compliance with all Legal Requirements with respect to the ownership, operation
and maintenance of Generator's Interconnection Equipment, including without
limitation, all requirements to seek, obtain, maintain, comply with and, as
necessary, renew and modify from time to time, any and all applicable
certificates, licenses, permits and government approvals and all applicable
environmental certificates, licenses, permits and approvals, environmental
impact analysis, and if applicable, the mitigation of environmental impacts, and
(ii) pay all costs, expenses, charges and fees in connection with Section
12.1(i).
12.2 Change of Law. In the event that after the Execution Date there are changes to Legal Requirements, including, without limitation, changes to laws or regulations regulating or imposing a tax, fee or other charge, which cause Georgia Power to incur additional costs in providing Interconnection Service under this Agreement, Generator agrees to pay, to the extent consistent with FERC policy, such reasonable incremental costs incurred by Georgia Power in complying with such changes to Legal Requirements; provided, however, Generator shall be entitled to take reasonable action to mitigate, reduce or otherwise avoid the imposition of any such charges or costs.
12.3 Regulatory Filings. This Agreement is subject to approval by any
Governmental Authority having jurisdiction over the matters provided herein.
Nothing contained in this Agreement shall be construed as affecting in any way
(i) the right of Georgia Power to unilaterally make application to any and all
Governmental Authorities (including FERC) that may have jurisdiction over this
Agreement for a change in terms and conditions, charges, classification of
service, or for termination of this Agreement pursuant to applicable statutes
(including Sections 205 and 206 of the Federal Power Act) and those Governmental
Authorities' rules and regulations or (ii) the ability of Georgia Power to
exercise its rights under the rules and regulations of any Governmental
Authority having jurisdiction over this Agreement. Nothing contained in this
Agreement shall be construed as affecting in any way (i) the right of Generator
to unilaterally make application to any and all Governmental Authorities
(including FERC) that may have jurisdiction over this Agreement for a change in
terms and conditions, charges, classification of service or for termination of
this Agreement pursuant to applicable statutes (including Sections 205 and 206
of the Federal Power Act) and those Governmental Authorities' rules and
regulations or (ii) the ability of Generator to exercise its rights under the
rules and regulations of any Governmental Authority having jurisdiction over
this Agreement. At least thirty (30) Days prior to any such unilateral filing,
the Party intending to make the filing shall notify the other of such intent.
The Parties agree to reasonably cooperate with each other with respect to such
filings and to provide any information reasonably required by the requesting
Party to comply with applicable filing requirements. This Agreement shall be
modified or amended as necessary to reflect binding determinations with respect
to such filings.
12.4.1 Generator shall be required to make a Tax Payment (as defined in Section 12.4.3 hereto) in connection with any Taxable Transfer (as defined in Section 12.4.2 hereto). Any Tax Payment due under this Agreement shall be included by Georgia Power in the next Monthly invoice following Georgia Power's calculation of such Tax Payment in accordance with this Section 12.4. Generator shall pay such Tax Payment to Georgia Power in accordance with Section 10.
12.4.2 A "Taxable Transfer" means Generator's reimbursement of Georgia Power's costs associated with the Interconnection Facilities, the transfer of the Interconnection Facilities constructed by Generator or real property by Generator to Georgia Power, all in accordance with Section 5 of this Agreement, or any other transactions contemplated by this Agreement which are
determined by Georgia Power, in its sole reasonable discretion, to be taxable to Georgia Power. A Taxable Transfer shall not include Generator's payment of the costs of any optional System Upgrades to the extent to which Generator is entitled to a credit payment pursuant to Section 7 of Attachment J of the Tariff.
12.4.3 With respect to any Taxable Transfer, the "Tax Payment" shall be an amount sufficient to cover the tax liability associated with both the Taxable Transfer Amount and the Tax Payment itself. In computing the Tax Payment, Georgia Power shall use the highest applicable marginal tax rate and shall include such computation with the Monthly invoice described in Section 12.4.1 hereto. The "Taxable Transfer Amount" shall be equal to the excess, if any, of (i) the amount of cash or the value of property transferred by Generator pursuant to a Taxable Transfer, over (ii) the present value of any tax benefits (whether in the form of deductions, credits or otherwise) that Georgia Power can utilize as a result of any such Taxable Transfer. Georgia Power shall include the computation of the Taxable Transfer Amount with the Monthly invoice described in Section 12.4.1 hereto.
12.4.4 In the event Georgia Power receives a refund from a Governmental Authority for any taxes associated with a Taxable Transfer, Georgia Power shall reimburse Generator, to the extent of such refund, for any Tax Payment paid by Generator in connection with such Taxable Transfer. Such reimbursement shall be due to Generator within thirty (30) Days after receipt of such refund by Georgia Power.
12.4.5 In the event Georgia Power has not applied for a refund of the taxes associated with a Taxable Transfer, and Generator desires that Georgia Power apply for such a refund, then Georgia Power shall apply for such a refund, provided that the following conditions are first satisfied:
12.4.5.1 Generator obtains and pays for a written tax opinion from a reputable law or accounting firm, addressed to Georgia Power, that it is more likely than not that Georgia Power would be successful if it applied for such a refund; and
12.4.5.2 Generator agrees to reimburse Georgia Power for all reasonable expenses involved in applying for such refund and pays in advance the estimated amount of such expenses, as prepared by Georgia Power.
If such conditions are satisfied, Georgia Power shall apply for such a refund. If such refund is ultimately received, then the disposition of such refund shall be governed by Section 12.4.4 hereto, except that Georgia Power shall (i) decrease the amount due to Generator if the actual expenses were more than the estimated amount paid in advance by Generator, or (ii) increase the amount due to Generator if the actual expenses were less than the estimated amount paid in advance by Generator.
SECTION 13: INSURANCE
13.1 Generator's Insurance. If Generator is no longer an Affiliate of Georgia Power, Generator, at its expense, shall procure and maintain in effect during the Term, policies of insurance with insurance companies authorized to transact insurance in the State of Georgia or adequate self-insurance, reasonably acceptable to Georgia Power, providing, at a minimum, the coverage and limits specified and complying with the requirements stated below:
13.1.1 Worker's Compensation in statutory amounts and Employer's Liability with a minimum limit of $1,000,000 per person.
13.1.2 Commercial General Liability Insurance on an occurrence basis or AEGIS "claims made" form, with the following coverage and limits:
General Aggregate $1,000,000 Products-Completed Operations-Aggregate $1,000,000 Personal & Advertising Injury $1,000,000 Each Occurrence $1,000,000 Fire Damage (any one fire) $50,000 Medical Expense (any one person) $5,000 |
13.1.3 Business Automobile Liability covering autos of Generator, including owned, hired and non-owned autos, for Bodily Injury and Property Damage with a combined single limit of $1,000,000 each occurrence.
13.1.4 Excess Liability in Umbrella Form with a limit of $4,000,000 each occurrence, $4,000,000 Aggregate.
13.1.5 By signing this Agreement, Generator thereby waives all rights of subrogation against Georgia Power and its Persons Indemnified with respect to any claim or loss payable or paid under each of the policies set forth in 13.1.1, 13.1.2, 13.1.3, and 13.1.4 above and under any property insurance policy for the Facility that Generator has or acquires.
13.1.6 Generator shall cause its insurer(s) to add Georgia Power and its Persons Indemnified as an Additional Insured on the policies set forth in 13.1.2, 13.1.3, and 13.1.4 above with respect to liability of Georgia Power and its Persons Indemnified (a) arising out of the performance of operations, maintenance, work or services under this Agreement, and (b) arising out of the conduct contemplated in the ownership, maintenance or use of Generator's autos, but only to the extent of Generator's indemnity obligations under this Agreement and the coverages and limits specified in Sections 13.1.2, 13.1.3, and 13.1.4.
13.1.7 Subject to the limitations in Section 13.1.6, Generator's insurance shall be primary insurance with respect to the installation, operations, maintenance, work, or services contemplated under this Agreement and insurance of Georgia Power and its Persons Indemnified shall be excess of the Generator's insurance and shall not contribute with it.
13.1.8 To the extent that Generator utilizes deductibles or self-insurance in connection with the insurance coverage required herein, all such deductible and self-insured amounts shall be for the account and expense of Generator and shall not be considered as costs or fees provided for in this Agreement.
13.1.9 If the Generator uses contractors and/or subcontractors to perform any of the work contemplated under this Agreement, Generator shall require such contractors and/or subcontractors to maintain in effect insurance meeting these minimum limits and incorporating the contractual requirements prescribed by this Section 13.
13.2 Notice and Certification. Each of the above required policies shall contain a provision whereby the insurance carrier shall notify Georgia Power at least thirty (30) Days prior to the effective date of cancellation, non-renewal or material change in any of said policies. Generator shall submit to Georgia Power a Certificate, signed by an authorized representative of the insurance carrier, listing the policies, coverage and limits and certifying that the said policies shall be in effect for the time periods stated in the Certificate. The obligations for Generator to procure and maintain insurance shall not be construed to waive or restrict other obligations.
SECTION 14: FORCE MAJEURE
14.1 Definition of Force Majeure Event. For the purposes of this
Agreement, a "Force Majeure Event" as to a Party means any occurrence,
nonoccurrence or set of circumstances that is beyond the reasonable control of
such Party and is not caused by such Party's fault, negligence or lack of due
diligence, including, without limitation, flood, ice, lightning, earthquake,
windstorm or eruption; fire; explosion; invasion, war, civil disturbance,
commotion or insurrection; sabotage or vandalism; military or usurped power; or
act of God or of a public enemy; provided, however, in no event shall (i) the
inability to meet a Legal Requirement or the change in a Legal Requirement; or
(ii) a site specific strike, walkout, lockout or other labor dispute constitute
a Force Majeure Event.
14.2 No Breach or Liability. Each Party shall be excused from performing its respective obligations under this Agreement and shall not be liable in damages or otherwise if and to the extent that it is unable to so perform or is prevented from performing by a Force Majeure Event, provided that the non-performing Party shall:
14.2.1 Give the other Party notice thereof, followed by written notice if the first notice is not written, both notices to be given as promptly as possible after the non-performing Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
14.2.2 Use its reasonable best efforts to remedy its inability to perform as soon as practicable; provided, however, that this Section 14.2.2 shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest; provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of the Party having the difficulty; and
14.2.3 Resume performance of its obligations under this Agreement and give the other Party written notice to that effect, as soon as reasonably practicable following cessation of the Force Majeure Event.
14.3 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
SECTION 15: OPERATING COMMITTEE
15.1 Establishment of Committee. At least six (6) months prior to the estimated Initial Synchronization Date, Generator and Georgia Power shall each appoint one representative and one alternate to the Georgia Power - Generator Operating Committee ("Committee"). Each Party shall notify the other party of its appointment in writing. Such appointments may be changed at any time by similar notice. The Committee shall meet as necessary, but not less than once each calendar year, to carry out the duties set forth herein. The Committee shall hold a meeting at the request of either Party, at a time and place agreed upon by the representatives. Each representative and alternate shall be a responsible person working in the day-to-day operations of their respective electrical facilities. The Committee shall represent the Parties in all matters arising under this Agreement which may be delegated to it by mutual agreement of the Parties.
15.2 Duties. The duties of the Committee shall include, but are not limited to, the following:
15.2.1 Establish and maintain control and operating procedures, including those pertaining to information transfers between the Facility and Georgia Power consistent with the provisions of this Agreement.
15.2.2 Establish data requirements and operating record requirements in accordance with the terms and conditions of this Agreement.
15.2.3 Review the requirements, standards, and procedures data acquisition equipment, protective equipment, and any other equipment or software.
15.2.4 Annually review ten (10) year forecast of maintenance and availability schedules of Georgia Power's and Generator's facilities at the Interconnection Point and coordinate the scheduling of outages of and maintenance on the Interconnection Facilities, the Facility and any other facilities that impact the normal operation of the Interconnection Facilities.
15.2.5 Ensure that information is being provided by each Party regarding equipment availability.
15.2.6 Perform such other duties as may be conferred upon it by mutual agreement of the Parties.
15.2.7 Each Party shall cooperate in providing to the Committee all information required in the performance of the Committee's duties. All decisions and agreements, if any, made by the Committee shall be evidenced in writing. The Committee shall have no power to amend or alter the provisions of this Agreement.
SECTION 16: ASSIGNMENT
16.1.1 EXCEPT AS EXPRESSLY PERMITTED BELOW OR OTHERWISE AGREED TO BY THE PARTIES, GENERATOR SHALL NOT ASSIGN, TRANSFER, DELEGATE OR ENCUMBER THIS AGREEMENT AND/OR ANY OR ALL OF ITS RIGHTS, INTERESTS OR OBLIGATIONS UNDER THIS AGREEMENT AND ANY ASSIGNMENT, TRANSFER, DELEGATION OR ENCUMBERING BY GENERATOR (EXCEPT AS PERMITTED BELOW) SHALL BE NULL AND VOID. Notwithstanding the foregoing, so long as Generator is not in default under or breach of this Agreement, upon prior written notice to Georgia Power, Generator may collaterally assign its rights, interests and obligations under this Agreement to its lender or an agent for the benefit of its lenders providing financing or refinancing for the design, construction or operation of Generator's Facility in Lee County, Georgia (a "Permitted Financing Assignee"); provided, however, that GENERATOR'S RIGHTS AND OBLIGATIONS (FINANCIAL OR OTHERWISE) UNDER THIS AGREEMENT SHALL CONTINUE IN THEIR ENTIRETY IN FULL FORCE AND EFFECT AS THE RIGHTS AND OBLIGATIONS OF A PRINCIPAL AND NOT AS A SURETY. Generator may collaterally assign its rights, interests and obligations hereunder to multiple Permitted Financing Assignees, but only if those Permitted Financing Assignees designate one agent to act for them collectively under this Agreement.
16.1.2 Georgia Power shall, upon serving Generator any notice of Default or the termination of this Agreement, also serve a copy of such notice upon the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. No notice of Default purporting to terminate this Agreement shall be deemed to have been given unless and until a copy thereof shall have been given to the Permitted Financing Assignee or the agent for multiple Permitted Financing Assignees. A Permitted Financing Assignee shall be entitled to cure any Default during any cure period provided herein.
16.1.3 The Permitted Financing Assignee shall not be entitled to assign or transfer this Agreement to any purchaser in foreclosure, purchaser in lieu of foreclosure or similar purchaser or transferee ("Purchaser in Foreclosure") unless and until such Purchaser in Foreclosure has (i) executed and delivered to Georgia Power and is in compliance with an agreement in form and substance acceptable to Georgia Power whereby such Purchaser in Foreclosure assumes and agrees to pay and perform all then outstanding and thereafter arising obligations of Generator under this Agreement and (ii) established to
Georgia Power's reasonable satisfaction that such Purchaser in Foreclosure has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Notwithstanding the foregoing, all obligations of Generator to Georgia Power under this Agreement incurred prior to the time the Purchaser in Foreclosure fully assumes this Agreement shall also be and remain enforceable by Georgia Power against Generator. Any assignment to a Purchaser in Foreclosure shall be subject to Georgia Power's rights hereunder.
16.1.4 So long as Generator is not in Default under or breach of this Agreement, upon prior written notice to Georgia Power, Generator may absolutely assign all, but not less than all, of its rights, interests and obligations under this Agreement to another generator ("Outright Assignee") provided however, that Generator's obligations under this Agreement shall continue and Georgia Power shall have no obligations to such Outright Assignee unless and until such Outright Assignee has (i) executed and delivered to Georgia Power and is in compliance with an agreement in form and substance reasonably acceptable to Georgia Power whereby such Outright Assignee assumes and agrees to pay and perform all thereafter arising obligations of Generator under this Agreement and (ii) established to Georgia Power's reasonable satisfaction that such Outright Assignee has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Any assignment to an Outright Assignee shall be subject to Georgia Power's rights hereunder.
16.1.5 Generator shall indemnify, defend and hold harmless
Georgia Power and its Persons Indemnified from and against any and all losses,
liabilities, obligations, claims, demands, damages, penalties, judgments, costs
and expenses, including, without limitation, reasonable attorneys' fees and
expenses, howsoever and by whomsoever asserted, arising out of or in any way
connected with any collateral, outright or other assignment by Generator or any
foreclosure or other exercise of remedies by the Permitted Financing Assignee of
this Agreement or Generator's or the Permitted Financing Assignee's rights or
interests under this Agreement. Notwithstanding any other provision of this
Section 16.1, Generator shall not be obligated to indemnify and hold harmless
Georgia Power from and against any loss, liability, obligation, claim, demand,
damage, penalty, judgment, cost or expense to the extent caused by the sole
negligence or willful misconduct Georgia Power or its Persons Indemnified.
16.1.6 No agreement between the Parties modifying, amending, canceling or surrendering this Agreement shall be effective without the prior written consent of the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. Subject to any cure periods provided to the Permitted Financing Assignee in this Agreement or in any consents to assignment, no such prior written consent is required for Georgia Power to take unilateral action under this Agreement, including (without limitation) Sections 3.2, 3.3, 3.4, 10.2, 12.2 and 12.3.
16.1.7 Georgia Power agrees to reasonably cooperate with Generator and any Permitted Financing Assignee in connection with the collateral assignment of this Agreement; provided, however, that Georgia Power shall not be obligated to take any action that could, in its judgment, result in an expansion of its obligations, risks or liabilities or a violation of any law, regulation or order of a Governmental Authority.
16.2 Assignment by Georgia Power. So long as Georgia Power is not in breach of this Agreement, Georgia Power may, at any time, without notice to, or the consent of, Generator or any other Person, including, without limitation, any Permitted Financing Assignee, Purchaser in Foreclosure or Outright Assignee, sell, assign, delegate, encumber or transfer to any Indenture Trustee, Affiliate, any successor by merger or otherwise of Georgia Power or any Qualified Person, and/or create or permit to exist Permitted Liens against, all or any part of this Agreement and/or Georgia Power's rights, obligations, title or interest in, to and under this Agreement. Provided, however, Generator reserves its right to oppose any such assignment before any Governmental Authority having jurisdiction.
SECTION 17: MISCELLANEOUS
17.1 Georgia Power's Agent. Wherever this Agreement requires Generator to provide information, schedules, notice or the like to, or to take direction from, Georgia Power, Generator shall provide information, schedules, notice or the like to, or receive from, Georgia Power or such agent of Georgia Power as Georgia Power may direct from time to time.
17.2 No Partnership. Generator and Georgia Power do not intend for this Agreement to, and this Agreement shall not, create any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit.
17.3 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon any respective successors and assigns of Generator and Georgia Power.
17.4 No Third Party Benefit. Nothing in this Agreemen shall be construed to create any duty, obligation or liability of a Party to any person or entity not a Party to this Agreement.
17.5 No Affiliate Liability. Notwithstanding any other provision of this Agreement, no Affiliate of either Party (including without limitation any Affiliate acting as either Party's agent where said agent is given certain authorities pursuant hereto) shall have any liability whatsoever for either Party's performance, nonperformance or delay in performance under this Agreement.
17.7 No Waiver. Neither Georgia Power's nor Generator's failure to enforce any provision or provisions of this Agreement shall in any way be construed as a waiver of any such provision or provisions as to any future violation thereof, nor prevent it from enforcing each and every other provision of this Agreement at such time or at any time thereafter. The waiver by either Georgia Power or Generator of any right or remedy shall not constitute a waiver of its right to assert said right or remedy, at any time thereafter, or any other rights or remedies available to it at the time of or any time after such waiver.
17.8 Amendments. Except as provided in Section 12.3, this Agreement may be amended by and only by a written instrument duly executed by each of Generator and Georgia Power, which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
17.9 Notice. Any notice, request, consent or other communication
permitted or required by this Agreement shall be in writing and shall be deemed
given on the Day hand-delivered to the representative identified below, on the
Day of facsimile transmission to the facsimile number stated below, or the third
(3rd) Day after the same is deposited in the United States Mail, first class
postage prepaid, and if given to Georgia Power shall be addressed to:
Georgia Power Company
Attn: Vice President, Transmission
241 Ralph McGill Boulevard
Atlanta, Georgia 30308
Facsimile: (404) 506-2433
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Transmission Services
600 North 18th Street
Birmingham, Alabama 35203
Facsimile: (205) 257-6663
and if given to Generator, it shall be addressed to:
Southern Power Company
Attn: Vice President, Generation, Planning and Development
600 North 18th Street
Bin 15N-8181
Birmingham, Alabama 35203
Facsimile: (205) 257-5703
with a copy to:
Southern Company Services, Inc. Attn: Manager, Generation Development 600 North 18th Street, Bin 15N-8186 Birmingham, Alabama 35203 Facsimile: (205) 257-6336
unless Georgia Power or Generator shall have designated a different representative or address for itself by written notice to the other. Generator shall comply with reasonable requirements of Georgia Power regarding communications with Georgia Power relative to the performance of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
17.11 Cross-References. All cross-references contained in this Agreement to Sections, are to the Sections of this Agreement, unless otherwise expressly noted.
17.12 Section Headings. The descriptive headings of the various Sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof.
17.13 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.
17.14 Governing Law. The validity, interpretation and performance of this Agreement, and each of its provisions, are subject to and shall be governed by applicable federal law, and where not preempted by federal law, by the laws of the State of Georgia, without giving effect to conflict of laws principles.
17.15 Merger. This Agreement represents the entire agreement between the Parties and all previous communications, representations and agreements between the Parties regarding the subject matter of this Agreement, whether oral or written, are hereby superseded.
17.16 NERC. To the extent not inconsistent herewith, Generator shall comply with any operational specifications and requirements specified by Georgia Power and all planning standards and operating guidelines of the North American Electric Reliability Council or its successor.
17.17 Good Utility Practices. Each Party shall discharge its respective obligations under this Agreement in accordance with Good Utility Practices.
17.18 Safety. Each Party shall comply with the applicable provisions of the National Fire Protection Association Code, the American National Electrical Code, the National Electrical Safety Code and other applicable code requirements. Each Party shall furnish and maintain, at its own expense, proper and adequate facilities, equipment, machinery, tools and supplies necessary to maintain its facilities and premises as a safe workplace and have available at all times for use by its employees, agents, independent contractors, suppliers, vendors and borrowed employees and all safety equipment needed for the protection of that Party's employees, agents, independent contractors, suppliers, vendors and borrowed employees against injuries. Each Party shall be solely responsible for providing for the safety of its facilities and premises and of its employees, agents, independent contractors, suppliers, vendors and borrowed employees.
17.19.1 Confidential Information shall mean any confidential and/or proprietary information provided by Georgia Power or Generator ("Disclosing Party") to the other party ("Receiving Party") and which is clearly marked or otherwise designated as "CONFIDENTIAL." For purposes of this Agreement, all design, operating specifications and metering data provided by Generator shall be deemed confidential regardless of whether it is clearly marked or otherwise designated as such. Except as otherwise provided herein, each Party shall hold in confidence and shall not disclose Confidential Information to any person (except employees, officers, representatives and agents that agree to be bound by this Section 17 or FERC's Standards of Conduct). Confidential Information shall not include information that the Receiving Party can demonstrate: (a) is generally available to the public other than as a result of a disclosure by the Receiving Party; (b) was in the lawful possession of the Receiving Party on a non-confidential basis before receiving it from the Disclosing Party; (c) was supplied to the Receiving Party without restriction by a third party, who, to the knowledge of the Receiving Party, was under no obligation to the Disclosing Party to keep such information confidential; (d) was independently developed by the Receiving Party without reference to Confidential Information of the Disclosing Party; or (e) was disclosed with the prior written approval of the Disclosing Party. Georgia Power, or its agent acting as Transmission Provider under the Tariff, may release or disclose certain Confidential Information of the Disclosing Party to other Transmission Providers, SERC, or NERC if necessary or appropriate in connection with its role as Transmission Provider. If a court, government agency or entity with the right, power, and authority to do so, requests or requires either Party, by subpoena, oral deposition, interrogatories, requests for production of documents, administrative order, or otherwise, to disclose Confidential Information, that Party shall provide the other Party with prompt notice of such request(s) or requirement(s) so that the other Party may seek an appropriate protective order or waive compliance with the terms of this Agreement. In the absence of a protective order or waiver the Party shall disclose such Confidential Information which, in the opinion of its counsel, the Party is legally compelled to disclose. Each Party will use reasonable efforts to obtain reliable assurance that confidential treatment will be accorded any Confidential Information so furnished.
17.19.2 Notwithstanding anything in this Section 17.19 to the contrary, if FERC or its staff, during the course of an investigation or otherwise, requests information from one of the Parties that is otherwise required to be maintained in confidence pursuant to this Agreement, the Party shall provide the requested information to the FERC or its staff, within the time provided for in the request for information. In providing the Confidential Information to FERC or its staff, the Party may, consistent with 18 C.F.R. ss. 388.112, request that the information be treated as confidential and non-public by FERC and its staff and that the information be withheld from public disclosure. The Party shall notify the other Party to this Agreement when it is notified by FERC or its staff that a request for disclosure of, or decision to disclose, Confidential Information has been received, at which time either of the Parties may respond before such Confidential Information is made public, pursuant to 18 C.F.R. ss. 388.112.
17.20 Cooperation. Each Party to this Agreement shall reasonably cooperate with the other as to all aspects relating to the performance of its
respective obligations under this Agreement; provided, however, this agreement of cooperation shall not constitute a waiver or relinquishment of either Party's rights under this Agreement in law or equity.
17.21 Negotiated Agreement. The Parties agree that this Agreement is the result of mutual compromise and shall not be construed as having been drafted by either Party. The Parties agree to support the acceptance of the Agreement in its entirety by FERC.
17.22 Subcontractors. Nothing in this Agreement shall be construed as preventing either Party from utilizing the services of subcontractors as it deems appropriate; provided, however, that all such contractors comply with the applicable terms and conditions of this Agreement. The creation of any subcontract relationship shall not relieve the retaining Party of any of its obligations under this Agreement.
17.23 EWG Status. Nothing in this Agreement shall require Generator to take any action that could result in its inability to obtain, or its loss of, status as an Exempt Wholesale Generator within the meaning of the Public Utility Holding Company Act of 1935, as amended.
IN WITNESS WHEREOF, Generator and Georgia Power have caused this Agreement to be executed by their duly authorized representatives on the Day and year first above written.
SOUTHERN POWER COMPANY
"Generator"
By: _________________________
Title: ________________________
Date:_________________________
GEORGIA POWER COMPANY
"Georgia Power"
By: _________________________
Title: ________________________
Date:_________________________
APPENDIX A
INTERCONNECTION PROCEDURES
The following requirements apply to Generator's Facility when operated in parallel with the Georgia Power Electric System.
In order to minimize objectionable and adverse operating conditions on the electric service provided to other customers by Georgia Power, the Facility shall meet the following operating criteria:
When Generator is delivering power to the Georgia Power Electric System, Generator shall operate its generation to meet the voltage schedule, as measured at the transmission bus serving the Facility, communicated by the Georgia ITS operator. The current voltage schedules for the Interconnection Point to the Facility is attached to this Appendix A. If the Generator cannot hold the voltage schedule but is producing or absorbing its maximum amount of MVARs for the level of MW output that it is then operating at, then that is acceptable performance provided that each unit of the Generator that is then generating is producing no less than 0.33 MVAR/MW x the unit's Continuous Rated MW Output or absorbing no less than 0.23 MVAR/MW x the unit's Continuous Rated MW Output. For purposes of this paragraph, the "Continuous Rated MW Output" for each of the Generator's units comprising the Facility shall be 2 - 175 MW CT units and 1 - 282 MW Steam turbine generator with a total output of 630 MW.
The Facility shall maintain a nominal operating frequency of 60 hertz. Generator may be required to assist in supporting system frequency if requested by Georgia Power.
The Facility shall be capable of providing an immediate and sustained response to abnormal frequency excursions within the machine design parameters. The governors shall be properly maintained and shall provide droop characteristics consistent with the requirements of NERC, SERC and the Georgia Power Electric System. At a minimum, governors shall be fully responsive to frequency deviations consistent with the requirements of NERC, SERC and the Georgia Power Electric System during normal operating conditions only, as defined by Good Utility Practices. In no event shall the governors be blocked by Generator without the express written permission of Georgia Power.
Appendix A Page 1 of 5
a. Reactive Power Production. At continuous rated output, simulations must show that Generator's Facility shall have the capability of dynamically supplying at least 0.33 MVARS at the 230 kV Interconnection Point for each MW supplied when the Facility is tested at 101% of nominal voltage.
b. Reactive Power Absorption. The Facility shall also be capable of dynamically absorbing 0.23 MVARs from the transmission system for each MW supplied at the 230 kV Interconnection Point during simulations when the Facility is tested at 104% of nominal voltage. Simple Cycle combustion turbines used as peaking generation may be exempted from the MVAR absorption requirements.
The Facility shall not introduce excessive distortion to the Georgia Power Electric System's voltage profile and current waveforms. The harmonic distortion measurements shall be made at the transmission facility serving the Facility and be within the limits specified in the tables below.
MAXIMUM ALLOWABLE HARMONIC CONTENT (CURRENT)
(in percent of total current)
Harmonic Order Number (h)
h 11 11 h 17 17 h 23 23 h 5 35 h
- - - -
ODD 2.0 1.0 0.75 0.30 0.15
EVEN 0.50 0.25 0.19 0.075 0.04
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Total current harmonic distortion may not exceed 2.5%
MAXIMUM ALLOWABLE HARMONIC CONTENT (VOLTAGE)
(in percent)
For nominal voltage at interconnection point of 69 kV to 115
kV
Maximum Individual Harmonic: 1.50
Maximum Total Harmonic Distortion: 2.50
For nominal voltage at interconnection point of 161 kV and
above
Maximum Individual Harmonic: 1.00
Maximum Total Harmonic Distortion: 1.50
Appendix A Page 2 of 5
To minimize possible adverse effects on other Georgia Power customers, a power transformer is required between Generator's generating units and the Georgia Power Electric System. This transformer's windings shall be connected according to the requirements of Georgia Power.
Generator shall not energize, or de-energize, Georgia Power equipment. The necessary control devices shall be installed by Generator on the Facility to prevent the energization of de-energized Georgia Power equipment by Generator's Facility.
Generator is responsible for the synchronization of the Facility to the Georgia Power Electric System. Georgia Power shall have relaying on the ring bus segment at the Interconnection Point and Generator must insure that its Facility is disconnected from Georgia Power whenever a ring bus segment at the Interconnection Point is de-energized. Georgia Power may re-energize the ring bus segment by remote control and Georgia Power shall not be responsible for damage to Facility due to an out of phase condition during re-energization.
Georgia Power shall provide the data protocol, and Generator shall install as part of the Interconnection Facilities any equipment necessary to deliver telemetered signals to Georgia Power specifying the voltage and watts, vars, and watthours delivered to the Georgia Power Electric System at the Interconnection Point.
Appendix A Page 3 of 5
VOLTAGE SCHEDULES
AT THE INTERCONNECTION POINT
SOUTHERN POWER COMPANY
Commencing with the Effective Date of the Interconnection Agreement, Generator shall maintain the following voltage schedules as communicated by Georgia Power from time to time:
Schedule #1 - Southern Company Control Area Maximum Load for the day greater
than 33,000 MW
Operating Time Voltage
0000-0700 237 kV
0700-2100 237 kV
2100-2400 237 kV
Schedule #2 - Southern Company Control Area Maximum Load for
the day between 28,000 and 33,000 MW Operating Time
Voltage
0000-0700 236 kV
0700-2100 237 kV
2100-2400 236 kV
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Schedule #3 - Southern Company Control Area Maximum Load for the day between 23,000 and 28,000MW
Operating Time Voltage
0000-0800 236 kV
0800-2100 236 kV
2100-2400 236 kV
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Schedule #4 - Southern Company Control Area Maximum load for the day below 23,000 MW
Operating Time Voltage
0000-0600 235 kV
0600-2100 236 kV
2100-2400 235 kV
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The Georgia ITS System Operator's determination of whether Schedule 1, 2, 3, or 4 should be used for a given period shall be based on expectations of system requirements and conditions. The voltage schedule to be used, for the upcoming week, shall be communicated to Generator each Friday and at such other times as changing system requirements and conditions may require.
Appendix A Page 4 of 5
APPENDIX B
SPECIFICATIONS
TO
INTERCONNECTION AGREEMENT
BETWEEN
SOUTHERN POWER COMPANY
AND
GEORGIA POWER COMPANY
APPENDIX B
1. Location of Interconnection Point:
The Interconnection Point will be at the Georgia Power's Goat Rock 230/115 kV Substation located in Lee County Alabama.
2. Projected Dates Generator's Facilities will connect to Georgia Power:
Station Service Date: July 1, 2002
Initial Synchronization of Generator for
Testing Date: September 1, 2002
Commercial Operation Date: April 1, 2003
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3. Description of Interconnection Point:
The point, as shown on the attached one line diagram, at which the Generator's 230 kV conductors connect to the new ring bus element at Georgia Power's Goat Rock 230/115 kV Substation.
4. Description of Station Service Connections:
Should Generator require station service in addition to that which Generator can self-provide, separate arrangements will be made by Generator. Nothing herein prevents the Generator from receiving Station Service requirements through the Interconnection Facilities before the projected Station Service Date.
5. Description of Generator's Facility:
The Generator's Facility under this Agreement is a 620 MW Combined Cycle (CC) facility which is more fully described in the Interconnection Application made by Southern Power Company to Southern Company on August 7, 2000.
Appendix B Page 1 of 4
6. Interconnection Facility Requirements:
The Interconnection Facilities are sufficient to accommodate
approximately 630 MW upon completion.
7. Description of Georgia Power's Interconnection Facilities:
Interconnection Facilities under this Agreement Estimated Cost:
include the following: (000)
Install disconnect switches and associated $ 50 insulators and jumpers
to terminate the 230 kV circuit from the Facility to the Goat Rock
230/115 kV substation.
------------------------------------------------------------------------------------------------------
8. Description of Generator's Interconnection Equipment:
------------------------------------------------------------------------------------------------------
Interconnection Equipment under this Agreement include the following: Estimated Cost
--------------------------------------------------------------------- --------------
------------------------------------------------------------------------------------------------------
1. Three (3) GSU transformers connected delta on the generator side Design & Construction by
and solidly grounded wye on the 230 kV side Southern Power
----------------------------------------------------------------------------------------------------
2. Three (3) 230 kV circuit breakers used for GSU protection and Design & Construction by
generator synchronization. Southern Power
------------------------------------------------------------------------------------------------------
3. 230 kV collector bus. Design & Construction by
Southern Power
------------------------------------------------------------------------------------------------------
4. One (1) 230 kV circuit from Generator's Facility to the Goat Rock Design & Construction by
230 kV Substation. Southern Power
-------------------------------------------------------------------------------------------------
5. One (1) fiber optic circuit from Generator's Facility to the Goat Design & Construction by
Rock 230 kV Substation. Southern Power
--------------------------------------------------------------------------------------------------
6. Note: Generator will install station service equipment including Design & Construction by
two (2) 230 kV breakers and one (1) station service transformers Southern Power
connected to Generator's 230 kV collector bus.
--------------------------------------------------------------------------------------------------
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The specifications for all such equipment in items 7 & 8, above, will be determined in accordance with this Agreement, the Interconnection Study Results for Goat Rock Generation, 630 MW CC #2, dated April 6, 2001, Georgia Power's specifications (provided to the Generator in writing), and Good Utility Practices.
SOUTHERN POWER COMPANY - GOAT ROCK CC UNIT # 2
SINGLE LINE DIAGRAM
[OBJECT OMITTED]
APPENDIX C
INTERCONNECTION FACILITY UPGRADES
Description of Georgia Power's Interconnection Facility Upgrades:
-----------------------------------------------------------------------------------------------------
Interconnection Facility Upgrades under this Agreement include the following: Estimated Cost
----------------------------------------------------------------------------- --------------
(000's)
----------------------------------------------------------------------------------------------------
1. Install one (1) IPO 63 kA 230 kV circuit breaker and associated $ 850
switches and control equipment at the Goat Rock 230/115 kV substation.
-----------------------------------------------------------------------------------------------------
2. Replace two (2) existing 230 kV breakers with two (2) IPO 63 kA 230 $ 800
kV two (2) cycle breakers
-----------------------------------------------------------------------------------------------------
3. Install additional transfer trip and breaker failure relaying and $ 300
communication channels at the Goat Rock 230/115 kV substation.
-----------------------------------------------------------------------------------------------------
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The specifications for all such equipment listed above will be determined in accordance with this Agreement, the Interconnection Study Results for Goat Rock Generation, 630 MW CC #2, dated April 6, 2001, Georgia Power's specifications (provided to the Generator in writing), and Good Utility Practices.
APPENDIX D
MUNICIPAL ELECTRIC AUTHORITY OF GEORGIA INTERCONNECTION
FACILITY UPGRADES
The facilities listed below were identified and reported to the Generator pursuant to the Interconnection Study Results for Goat Rock Generation, 630 MW CC #2, dated April 6, 2001. Georgia Power will assist Generator in coordinating with the Municipal Electric Authority of Georgia ("MEAG") to complete the installation of the MEAG Interconnection Facility Upgrades. Generator shall pay MEAG directly for the cost of the MEAG Interconnection Facility Upgrades.
-------------------------------------------------------------------------------
MEAG Interconnection Facility Upgrades under this Agreement Estimated Cost
------------------------------------------------------------ --------------
include the following: (000's)
-------
1. Install additional transfer trip and breaker failure
relaying and communication channels at MEAG's Fortson $300
500/230/115 kV substation
-------------------------------------------------------------------------------
2. Replace one (1) 115 kV overstressed circuit breaker at
MEAG's Fortson 500/230/115 kV substation. $250
------------------------------------------------------------- -----------------
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APPENDIX E
QUARTERLY ESTIMATED CONSTRUCTION COSTS
A. Quarterly Estimated Construction Costs of Interconnection Facilities. The Quarterly Estimated Construction Costs are based on the Generator's total cost responsibility for Georgia Power's Interconnection Facilities and Interconnection Facility Upgrades. Generator's estimated total construction cost responsibility for such Interconnection Facilities is $ 50,000. Generator's estimated total construction cost responsibility for such Interconnection Facility Upgrades is $1,950,000. The Schedule is based on constructing the Goat Rock Unit # 2 230/115 kV substation Interconnection Facilities and Interconnection Facility Upgrades.
2001 2002
------------------------------------------------------------------------------
Project Activity 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Interconnection Facilities at 50
Goat Rock 230/115 kV substation
------------------------------------------------------------------------------
Interconnection Facility 200 600 800 300 50
Upgrades at Goat Rock 230/115
kV substation
------------------------------------------------------------------------------
Payment Schedule 200 600 800 350 50
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(100,000s) -------------------------------------------------------------------
Exhibit 10.12
INTERCONNECTION AGREEMENT
By and Between
SOUTHERN POWER COMPANY
and
ALABAMA POWER COMPANY
for
AUTAUGAVILLE COMBINED CYCLE UNIT 1
Dated as of June 25, 2001
TABLE OF CONTENTS
SECTION 1: DEFINITIONS....................................................................................1
SECTION 2: INTERCONNECTION SERVICE........................................................................6
2.1 Service..............................................................................................6
2.2 Facility.............................................................................................6
2.3 Permits..............................................................................................6
2.4 Easements and Access Rights..........................................................................6
2.5 Interconnection Point................................................................................7
2.6 Station Service Arrangements.........................................................................7
2.7 Generator Balancing Service Arrangements.............................................................8
2.8 Interconnection Procedures...........................................................................8
2.9 Interconnected Operation Services....................................................................8
2.10 Control Area Operations..............................................................................8
2.11 Inadvertent Flow.....................................................................................8
SECTION 3: TERM, TERMINATION AND DISCONNECTION............................................................8
3.1 Term.................................................................................................8
3.2 Default..............................................................................................9
3.3 Permanent Disconnection..............................................................................9
3.4 Temporary Disconnection..............................................................................9
3.5 Survival of Rights..................................................................................10
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY.............................................10
4.1 General Standards...................................................................................10
4.2 Maintenance and Operation...........................................................................11
SECTION 5: INTERCONNECTION FACILITIES....................................................................11
5.1 Interconnection Facilities..........................................................................11
5.2 Costs of Interconnection Facilities.................................................................11
5.3 Additional Interconnectors..........................................................................11
5.4 Payment of Cost of On-Going Maintenance and Operation
of the Interconnection Facilities...................................................................12
5.5 Care of Equipment...................................................................................13
5.6 Payment of the Cost of the Interconnection Facilities...............................................13
SECTION 6: LIABILITY AND INDEMNIFICATION.................................................................14
6.1 Remedies for Breach.................................................................................14
6.2 Limitation of Liability.............................................................................14
6.3 No Liability for Other Party's Responsibilities.....................................................15
6.4 Responsibility for Property.........................................................................15
6.5 Indemnification.....................................................................................15
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SECTION 7: METERING, DATA ACQUISITION, AND RELATED
PROTECTION EQUIPMENT..........................................................................16
7.1 Metering............................................................................................16
7.2 Data Acquisition and Protection Equipment...........................................................17
7.3 Payment of Cost of Metering, Data Acquisition, and Related Protection Equipment.....................17
7.4 Care of Equipment...................................................................................18
7.5 Inspection and Testing..............................................................................18
7.6 Inaccuracies........................................................................................18
SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING..................................................19
8.1 Facility Evaluation Based on Actual Equipment Data..................................................19
8.2 Implementation of Control and Operating Procedures..................................................19
8.3 Facility Inspection.................................................................................19
8.4 Initial Synchronization.............................................................................19
8.5 Review of Synchronization Tests.....................................................................20
SECTION 9: ADMINISTRATION CHARGE.........................................................................20
SECTION 10: PAYMENT PROCEDURE.............................................................................20
10.1 Billing.............................................................................................20
10.2 Failure to Timely Pay...............................................................................21
10.3 Interest............................................................................................21
10.4 Creditworthiness....................................................................................21
10.5 Audit Rights........................................................................................21
10.6 Disputed Bills......................................................................................21
10.7 No Waiver...........................................................................................22
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................................22
11.1 Generator Representations, Warranties and Covenants.................................................22
11.2 Alabama Power Representations, Warranties and Covenants.............................................22
11.3 Survival of Representations, Warranties and Covenants...............................................23
SECTION 12: COMPLIANCE WITH LAWS..........................................................................23
12.1 Compliance..........................................................................................23
12.2 Change of Law.......................................................................................24
12.3 Regulatory Filings..................................................................................24
12.4 Taxes...............................................................................................24
SECTION 13: INSURANCE.....................................................................................25
13.1 Generator's Insurance...............................................................................25
13.2 Notice and Certification............................................................................26
SECTION 14: FORCE MAJEURE.................................................................................26
14.1 Definition of Force Majeure Event...................................................................26
14.2 No Breach or Liability..............................................................................26
14.3 Suspension of Performance...........................................................................27
SECTION 15: OPERATING COMMITTEE...........................................................................27
15.1 Establishment of Committee..........................................................................27
15.2 Duties..............................................................................................27
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SECTION 16: ASSIGNMENT....................................................................................28
16.1 Assignment by Generator.............................................................................28
16.2 Assignment by Alabama Power.........................................................................30
SECTION 17: MISCELLANEOUS.................................................................................30
17.1 Alabama Power's Agent...............................................................................30
17.2 No Partnership......................................................................................30
17.3 Successors and Assigns..............................................................................30
17.4 No Third Party Benefit..............................................................................30
17.5 No Affiliate Liability..............................................................................30
17.6 Time of Essence.....................................................................................31
17.7 No Waiver...........................................................................................31
17.8 Amendments..........................................................................................31
17.9 Notice..............................................................................................31
17.10 Counterparts........................................................................................32
17.11 Cross-References....................................................................................32
17.12 Section Headings....................................................................................32
17.13 Including...........................................................................................32
17.14 Governing Law.......................................................................................32
17.15 Merger..............................................................................................32
17.16 NERC................................................................................................32
17.17 Good Utility Practices..............................................................................32
17.18 Safety..............................................................................................33
17.19 Confidential Information............................................................................33
17.20 Cooperation.........................................................................................33
17.21 Negotiated Agreement................................................................................34
17.22 Subcontractors......................................................................................34
17.23 EWG Status..........................................................................................34
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APPENDIX A INTERCONNECTION PROCEDURES APPENDIX B SPECIFICATIONS TO INTERCONNECTION AGREEMENT APPENDIX C QUARTERLY ESTIMATED CONSTRUCTION COSTS |
INTERCONNECTION AGREEMENT
This Interconnection Agreement ("Agreement") is made and entered into on June 25, 2001 by and between Southern Power Company, organized and existing under the laws of the State of Delaware and having its principal place of business at Birmingham, Alabama (hereinafter referred to as the "Generator"), and Alabama Power Company, a corporation organized and existing under the laws of the State of Alabama and having its principal place of business at Birmingham, Alabama (hereinafter referred to as "Alabama Power"). Generator and Alabama Power may be hereinafter referred to individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, Generator desires to engage in the interconnected operation of Generator's generating facility with the transmission facilities of the Alabama Power Electric System; and
WHEREAS, Generator desires to engage in sales of electric energy to be generated by Generator's generating facility.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties covenant and agree as follows:
SECTION 1: DEFINITIONS
1.1 In addition to the initially capitalized terms and phrases defined in the preamble of this Agreement, the following initially capitalized terms and phrases as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "Affiliate" - shall mean, with respect to any Party, another Person (i) which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Party, (ii) which, directly or indirectly, of record or beneficially, owns or holds 10% or more of the shares of any class of capital stock or other ownership interest of such Party having voting power or (iii) of which 10% or more of the shares of any of the capital stock or other ownership interest of the Affiliate having voting power is owned or held, directly or indirectly, of record or beneficially, by or for such Party. For purposes of this definition, "control" when used with respect to any 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 "controlled" have meanings correlative to the foregoing.
1.1.2 "Alabama Power" - shall have the meaning ascribed to it in the first paragraph of this Agreement, including any of its agents or permitted successors and assigns.
1.1.3 "Alabama Power Electric System" - means collectively, the entire network of electric generation, transmission and distribution facilities, equipment and other devices owned (in whole or in part) or controlled by Alabama Power, for the purposes of generating, transmitting, receiving, and distributing electric energy and capacity.
1.1.4 "Appendix" or "Appendices" - means any of the schedules, exhibits and attachments, including the Interconnection Procedures, which are appended hereto and are incorporated by reference herein and made a part of this Agreement.
1.1.5 "Business Day" - means any Day excluding Saturday and Sunday and excluding any Day on which banking institutions in Alabama are closed because of a federal holiday.
1.1.6 "Day" or "Calendar Day" - means a calendar day unless otherwise specified.
1.1.7 "Effective Date" - shall mean the date first written above, or such other date as the FERC shall order.
1.1.8 "Emergency" - means a condition or situation associated with the transmission and distribution of electricity, including voltage abnormalities, that, in the sole reasonable judgment of Alabama Power, exercised on a non-discriminatory basis as the transmission asset owner, adversely affects or is imminently likely to adversely affect: (i) public health, life or property; (ii) Alabama Power's employees, agents or property; or (iii) Alabama Power's ability to maintain safe, adequate, and continuous electric service to its customers and/or the customers of any member of NERC consistent with Good Utility Practices; provided, however, that if there is no adverse condition associated with distribution or transmission facilities, then the inability of Alabama Power to meet its load requirements solely because of insufficient generation resources shall not constitute an Emergency.
1.1.9 "Facility" - means all of Generator's equipment (including the Generator's Interconnection Equipment), as described in Appendix B of this Agreement, used to produce electric energy and required for parallel operation with Alabama Power, which equipment is located in Autauga County, Alabama and is connected to the Interconnection Point.
1.1.10 "FERC" - means the Federal Energy Regulatory Commission and any successor.
1.1.11 "Force Majeure Event" - shall have the meaning ascribed to it in Section 14.1.
1.1.12 "Generator" - shall have the meaning ascribed to it in the first paragraph of this Agreement, and its agents or permitted successors and assigns.
1.1.13 "Generator's Interconnection Equipment" - means all equipment which is owned, operated, or maintained by or for Generator as such is described in Appendix B (including without limitation, equipment for connection, switching, protective relaying and safety) that is required to be installed for the delivery of electric energy onto the Alabama Power Electric System on behalf of Generator. Generator's Interconnection Equipment does not include the Interconnection Facilities.
1.1.14 "Good Utility Practices" - 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 the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result(s) at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practices are 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties, Legal Requirements, NERC and SERC guides, and applicable safety and maintenance codes.
1.1.15 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department, taxing authority, or other authority thereof having jurisdiction over either Party, the Facility, the Interconnection Facilities, the Generator's Interconnection Equipment, or the Alabama Power Electric System, whether acting under actual or assumed authority.
1.1.16 "Indenture Trustee" - means a trust company chartered or other Person incorporated under the laws of the United States or a state of the United States and based in the United States which is the indenture trustee, mortgagee or secured party under any Indenture.
1.1.17 "Initial Synchronization Date" - means the date that includes the first instant in time when energy generated by the Facility is delivered to the Alabama Power Electric System at the Interconnection Point. Such Initial Synchronization Date is projected in Appendix B.
1.1.18 "Interconnection Facilities" - means all equipment which is constructed, owned, operated, or maintained by or for Alabama Power, as such are generally identified and described in Appendix B, (including without limitation, equipment for connection, switching, transmission, distribution, protective relaying and safety) that, in Alabama Power's reasonable judgment, is required to be installed for the delivery of electric energy onto the Alabama Power Electric System on behalf of Generator and for the receipt by Generator of electric service in accordance with Section 2.6 hereof.
1.1.19 "Interconnection Point" - means the point of interconnection of Generator's Facility to the Alabama Power Electric System as defined in the Specifications to this Agreement set forth in Appendix B.
1.1.20 "Interconnection Procedures" - means the procedures for interconnection and operations set forth in Appendix A.
1.1.21 "Interconnection Service" - means the services provided by Alabama Power to Generator to safely and reliably interconnect Generator's Facility to the Alabama Power Electric System and receive electric energy and capacity from the Facility at the Interconnection Point pursuant to the terms of this Agreement and, if applicable, the Tariff.
1.1.22 "Interest Rate" - means the prime rate of interest as published from time to time in the Wall Street Journal or comparable successor publication.
1.1.23 "kW" - means kilowatts. In addition, "MW" may be used to mean megawatts, which are 1000 kilowatts.
1.1.24 "kWh" - means kilowatt-hours. In addition, "MWh" may be used to mean megawatt-hours, which are 1000 kilowatt-hours.
1.1.25 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, treaty, judgment, injunction, order or other legally binding announcement, directive, published practice or requirement enacted, issued or promulgated by a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question at the time of the Effective Date or anytime thereafter during the Term of this Agreement.
1.1.26 "Lien" - means any and all liens, mortgages, encumbrances, pledges, claims, leases, charges and security interests of any kind.
1.1.27 "Month" - means a calendar Month, or such other period as may be mutually agreed by the Parties. "Monthly" has a meaning correlative to that of Month.
1.1.28 "Monthly Administration Charge" - for a particular Month of the Term, means the Monthly amount to be paid by Generator to Alabama Power as set forth in Section 9.
1.1.29 "NERC" - means the North American Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.30 "Party" or "Parties" - means either Alabama Power or Generator or both.
1.1.31 "Permitted Financing Assignee" - shall have the meaning ascribed to it in Section 16.1 hereof.
1.1.32 "Permitted Liens" - means:
(a) any Lien on this Agreement and/or Alabama Power's rights, obligations, title or interest in, to and under this Agreement pursuant to that certain Indenture from Alabama
Power to Chemical Bank & Trust Company, Trustee, dated as of January 1, 1942, or pursuant to any other mortgage or security agreement as heretofore and hereafter amended (the "Indenture");
(b) any Lien for taxes, assessments or other governmental charges which are not delinquent or the validity of which is being contested in good faith by appropriate proceedings diligently prosecuted so long as appropriate reserves are maintained in respect of such taxes, assessments or charges; and
(c) attachments, judgments and other similar Liens arising in connection with court proceedings, provided that within sixty (60) Days of the attachment thereof (but not less than five (5) Days prior to any execution or sale pursuant thereto), the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being contested in good faith and by appropriate proceedings so long as any material risk of liability is covered by a bond, or appropriate reserves are maintained in respect of such proceedings.
1.1.33 "Person" - means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court.
1.1.34 "Persons Indemnified" - means, when used with respect to a Party, collectively or individually (as the context might indicate), the Party, the Party's Affiliates and permitted successors and assigns, and the directors, officers, representatives, agents and employees of each of them.
1.1.35 "Qualified Person" - shall mean any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court who is an owner or operator of transmission facilities, or belongs to a regional transmission organization.
1.1.36 "Quarter" - means for each year of the Term four distinct time periods for planning and budgeting purposes comprised of January through March, April through June, July through September, and October through December. "Quarterly" has a meaning correlative to that of Quarter. In the event that this Agreement becomes effective during any Quarter, the obligations herein that arise on a Quarterly basis shall begin in the Quarter immediately following the initial Effective Date of this Agreement.
1.1.37 "Quarterly Estimated Construction Cost" - shall have the meaning set forth in Section 5.6.1.
1.1.38 "SERC" - means the Southeastern Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.39 "Southern Companies" - means, collectively, the electric utility operating company subsidiaries of Southern Company engaged in common dispatch and control of generating resources within the Southern Company Control Area, currently including Alabama Power Company, Alabama Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, and Southern Power Company.
1.1.40 "Southern Company Control Area" - means that electric system of the Southern Companies that has been recognized by NERC and SERC as a control area.
1.1.41 "Specifications" - mean the interconnection specifications provided in Appendix B to this Agreement, which are attached hereto and incorporated herein by reference.
1.1.42 "Tariff" - means Southern Companies Open Access Transmission Tariff or a successor arrangement that governs transmission and interconnection services on the transmission facilities of Alabama Power.
1.1.43 "Term" - means the duration of this Agreement as specified in Section 3.1.
SECTION 2: INTERCONNECTION SERVICE
2.1 Service. Alabama Power shall supply Generator with Interconnection Service at the Interconnection Point for the Facility in accordance with and for the Term of this Agreement. Interconnection Service does not include transmission delivery service beyond the Interconnection Point. Neither Alabama Power nor any of its Affiliates shall have any obligation under this Agreement to purchase any power from the Facility, it being the intent and understanding of the Parties that Generator shall be responsible for its power sales to third parties.
2.2 Facility. The Facility is located in Autauga County, Alabama.
2.3 Permits. Generator shall obtain and maintain, at its sole expense, any and all governmental permits, certificates or authorizations that Generator is required to obtain and maintain for the performance of its obligations under this Agreement. Alabama Power shall obtain and maintain any and all permits, certificates or authorizations that are required for the construction, operation, maintenance, and testing of the Interconnection Facilities, the expense of which shall be paid by Generator in accordance with Section 5.
2.4 Easements and Access Rights.
2.4.1 To the extent that Generator has any such rights, Generator shall convey to Alabama Power at no cost to Alabama Power any and all rights of way and easements, including adequate and continued access rights to
property of Generator necessary to provide Interconnection Service to Generator. Generator agrees that such parcel, rights of way, and easements shall survive termination or expiration of this Agreement, if and to the extent necessary for the continued use or the removal of the Interconnection Facilities. Such easements and access rights are specifically intended to permit Alabama Power to install, operate, maintain, replace and/or remove the Interconnection Facilities.
2.4.2 Upon reasonable advance notice given to Generator,
representatives of Alabama Power (as the transmission asset owner) shall at all
reasonable times have access to the Generator's Interconnection Equipment and to
property owned or controlled by Generator to the extent necessary in order to:
(i) inspect, maintain, and test meters and other Alabama Power equipment; (ii)
interconnect, disconnect (in accordance with Section 3), monitor, or measure
energy generated by the Facility; (iii) inspect the operation, maintenance or
testing of the Generator's Interconnection Equipment; or (iv) take such other
action as may be reasonably necessary to exercise Alabama Power's rights under
this Agreement. Alabama Power shall take reasonable steps to ensure such access
does not materially interfere with the operations, maintenance or testing of the
Facility, and that Alabama Power's use of such property complies with Legal
Requirements with respect to the Facility as well as with Generator's reasonable
policies and procedures applicable to the Facility, including those regarding
safety. Generator shall cooperate in such physical inspections of the
Generator's Interconnection Equipment as may be reasonably required by Alabama
Power. Alabama Power's technical review and inspection of the Generator's
Interconnection Equipment shall not be construed as endorsing the design thereof
nor as any warranty of the safety, durability or reliability of the Facility.
2.4.3 To the extent that Alabama Power has any such rights, Alabama Power agrees to furnish at no cost to Generator any necessary licenses or other access rights to permit Generator to construct, connect, operate and maintain its facilities located in Alabama Power's substation or to otherwise fulfill its obligations under this Agreement. After the Interconnection Facilities are energized, such access rights for Generator's facilities located inside the substation shall be exercised by Generator only with supervision by Alabama Power. Generator shall provide to Alabama Power reasonable notice under the circumstances of a request for such supervised access to the substation, and Alabama Power and Generator shall mutually agree upon the date and time of such supervised access, such agreement not to be unreasonably withheld. In addition to the aforementioned requirement, in exercising such access rights, Generator shall not unreasonably disrupt or interfere with normal operations of Alabama Power's business and shall act consistent with Good Utility Practice.
2.5 Interconnection Point. Alabama Power shall establish and maintain the Interconnection Point, as described in Appendix B to this Agreement.
2.6 Station Service Arrangements. Generator is responsible for making all appropriate arrangements for station service requirements. Generator must demonstrate, to Alabama Power's reasonable satisfaction, that it has adequate arrangements in place to supply its station service requirements. If Generator supplies its running station service on Generator's side of the Interconnection Point, then energy consumed and demand requirements are deemed to be netted from Generator's capability. In this same arrangement, starting station service energy is also assumed to be netted out of energy delivered to the Interconnection Point.
2.7 Generator Balancing Service Arrangements. Generator is responsible for ensuring that its actual generation matches its scheduled delivery, on an integrated clock hour basis (in whole MW), to the Alabama Power Electric System at the Interconnection Point. Generator shall make arrangements for the supply of energy and/or capacity when there is a difference between the actual generation and the scheduled delivery. Generator may satisfy its obligation for making such generator balancing service arrangements by: (a) obtaining such service from another entity that (i) has generating resources within the Southern Company Control Area, (ii) agrees to assume responsibility for providing generator balancing service to the Generator and (iii) has a control area coordination services agreement with the Southern Companies that addresses generator balancing service for all generating resources for which the entity is responsible; (b) committing sufficient additional unscheduled generating resources to the control of and dispatch by the Southern Company Control Area that are capable of supplying any capacity and energy not supplied by the scheduled resource and entering into a control area coordination services agreement with the Southern Company Control Area operator that addresses generator balancing service obligations; (c) entering into an arrangement with another NERC-approved control area to dynamically schedule the Generator's Facility out of the Southern Company Control Area and into such other control area; (d) entering into a generator balancing service agreement with Southern Companies pursuant to their Generator Balancing Service Tariff on file with FERC; or (e) in the event the load/generation balancing function of the control area in which Alabama Power is a participant is provided by an entity other than Southern Companies, by entering into an alternate arrangement with such control area service provider.
2.8 Interconnection Procedures. When the Facility is operated as part of the Southern Company Control Area, Generator shall comply with the Interconnection Procedures (Appendix A) for the Facility at all times. When the Facility is not operated as part of the Southern Company Control Area, the Operating Committee shall determine which (if any) of the Interconnection Procedures are not applicable.
2.9 Interconnected Operation Services. Generator retains any right it may have to pursue compensation for the provision of interconnected operation services by making a filing with FERC. Alabama Power retains any right it may have to support or oppose such filing.
2.10 Control Area Operations. Nothing in this Agreement shall obligate Generator to operate the Facility as a part of the Southern Company Control Area.
2.11 Inadvertent Flow. Generator is not a transmission provider; and Alabama Power shall have no obligation under this Agreement to pay Generator any charge for flows of electric power and/or energy through Generator's Interconnection Equipment.
SECTION 3: TERM, TERMINATION AND DISCONNECTION
3.1 Term. This Agreement shall become effective on the Effective Date and shall continue in effect for a period of forty (40) years from the initial Effective Date unless terminated earlier by mutual written agreement of the Parties or otherwise pursuant to the provisions of this Agreement subject to any applicable Legal Requirement, and shall continue thereafter until terminated by either Party on at least one (1) year's notice.
3.2 Default.
3.2.1 A Party shall be in "Default" under this Agreement, if:
(i) the Party fails to comply with any material term or condition of this
Agreement; (ii) any material representation or warranty of the Party made
pursuant to this Agreement shall prove to be false or misleading in any material
respect when made or deemed made; or (iii) in the case of Generator, Generator
makes an assignment for the benefit of Generator's creditors, or voluntary or
involuntary proceedings in bankruptcy are instituted seeking to adjudge
Generator a bankrupt, or if Generator be adjudged a bankrupt, or if Generator's
affairs are placed in the hands of any court for administration.
3.2.2 This Agreement may be terminated by either Party, upon written notice, if the other Party is in Default hereunder and such Party (or its Permitted Financing Assignee) has not cured such breach within thirty (30) Days following written notice of such breach to the other Party. Provided, however, that in the event the Default is not capable of being cured within thirty (30) Days, the Agreement shall not be terminated if the Party in Default (or its Permitted Financing Assignee) has begun in good faith taking actions to cure within thirty (30) Days following such written notice and diligently proceeds to completion.
3.2.3 In the event of a Default by either Party and subject to that Party's right to cure, the non-defaulting Party may pursue any and all judicial and administrative remedies and relief available to it.
3.3 Permanent Disconnection. Upon termination of this Agreement
(whether due to the expiration of the Term or due to a Default as described in
Section 3.2), Alabama Power may permanently disconnect the Facility from the
Alabama Power Electric System in accordance with Good Utility Practices.
3.4 Temporary Disconnection.
3.4.1. Alabama Power (as transmission asset owner) may, consistent with Good Utility Practice and on a non-discriminatory basis, direct that the Facility be temporarily disconnected from the Alabama Power Electric System: (i) during an Emergency; (ii) if the operation and output of the Facility do not meet the requirements of this Agreement (even if Generator has commenced actions to cure such Default) and such condition could materially adversely affect the safe and reliable operation of the Alabama Power Electric System; (iii) if an inspection of the Facility reveals a hazardous condition, lack of scheduled maintenance or testing, or an operating characteristic of the Facility that could materially adversely affect the safe and reliable operation of the Alabama Power Electric System; (iv) if Generator has modified the Facility or interconnection protective devices in a manner that could reasonably be expected to materially adversely affect the safe and reliable operation of the Alabama Power Electric System without the knowledge and approval of Alabama Power; (v) in the event of tampering with, or unauthorized use of, Alabama
Power's equipment; (vi) if the operation of Generator's equipment materially adversely affects Alabama Power's equipment or the safe and reliable operation of the Alabama Power Electric System; or (vii) if necessary to construct, install, maintain, repair, replace, remove, investigate, inspect or test any part of the Interconnection Facilities or the transmission facilities of Alabama Power, in accordance with Section 15.2.4.
3.4.2 In the event of the occurrence of any of the conditions described in Section 3.4.1, Alabama Power shall give as much advance notice as practicable under the circumstances of the need for disconnection of the Facility to employees of Generator designated from time to time by Generator to receive such notice. Upon receipt of notice directing disconnection, Generator shall carry out the required action. Where circumstances do not permit such advance notice to Generator or Generator's employees, Alabama Power may disconnect the Facility from the Alabama Power Electric System without such notice in accordance with Good Utility Practices. Alabama Power shall reconnect the Facility as soon as reasonably practicable following the cessation or remedy of the event that led to the temporary disconnection. The Parties agree to cooperate and coordinate with each other to the extent necessary in order to restore the Facility, Interconnection Facilities, and the Alabama Power Electric System to their normal operating state.
3.4.3 Generator shall bear any direct cost incurred by Alabama Power as a result of any disconnection or reconnection caused by Generator's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Generator. Alabama Power shall bear any direct cost incurred by Generator as a result of any disconnection or reconnection caused by Alabama Power's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Alabama Power.
3.4.4 Generator reserves the right, in its sole discretion, to isolate or disconnect its Facility from the Alabama Power Electric System.
3.5 Survival of Rights. Upon termination or expiration of this Agreement, the Parties shall be relieved of their obligations under this Agreement except for the following obligations which shall survive termination or expiration: (i) the obligation to pay each other all amounts then owed and not paid under this Agreement; (ii) obligations arising from action or inaction during the period the Agreement was in effect under the indemnities provided for in this Agreement; and (iii) any other obligations which the Agreement specifically indicates shall survive termination or expiration.
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY
4.1 General Standards. During the Term, Generator shall have the sole responsibility to, and at its sole expense shall manage, control, operate and maintain the Facility in accordance with Good Utility Practices and the requirements set forth in this Agreement. Generator shall operate its generating equipment in parallel with the Alabama Power Electric System in accordance with the operating procedures in Appendix A to this Agreement and those established
by the Operating Committee in accordance with Section 15 and in accordance with the requirements of the NERC-recognized control area in which the Facility operates. All wiring, apparatus and other equipment necessary to receive or deliver electric energy on Generator's side of the Interconnection Point shall be supplied, maintained and operated by and at the expense of Generator.
4.2 Maintenance and Operation. Generator shall maintain and operate the Facility in accordance with Good Utility Practices. Generator shall not, without Alabama Power's prior written approval (which shall not be unreasonably withheld or delayed), make any change to its Facility which might adversely affect the operation of the Alabama Power Electric System.
SECTION 5: INTERCONNECTION FACILITIES
5.1 Interconnection Facilities.
5.1.1 Alabama Power shall design, procure, install, and own the Interconnection Facilities needed for Alabama Power to provide Interconnection Service to Generator. Alabama Power shall be responsible for acquiring all necessary real property rights, easements, licenses, and rights of way and for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement. All Interconnection Facilities shall be and remain the property of Alabama Power. Alabama Power's obligations hereunder are dependent upon its securing and retaining the necessary rights, easements, privileges, franchises, permits and equipment for meeting such obligations; provided, however, that Alabama Power shall exercise reasonable efforts to secure and retain for the Term of this Agreement those rights, easements, privileges, franchises, permits and equipment.
5.1.2 Following commencement of commercial operation of the Facility and throughout the Term, Alabama Power shall be responsible for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement.
5.2 Costs of Interconnection Facilities. To the extent consistent with FERC policy, Generator shall be responsible for, and shall reimburse Alabama Power for, all costs and expenses reasonably incurred by or on behalf of Alabama Power in connection with the planning, design, construction, installation, testing, inspection, ownership, operation and maintenance of all or any part of the Interconnection Facilities during the Term of this Agreement.
5.3 Additional Interconnectors. In the instance where an entity other than Generator seeks to be the first additional Person to interconnect to the Alabama Power Electric System through the Interconnection Facilities that have been paid for by Generator (such other Person is referred to as the "Additional Interconnector") and where the Additional Interconnector seeks to interconnect
for any purpose other than for Alabama Power to make a network upgrade, then Alabama Power agrees that the Additional Interconnector shall be charged a pro rata share of the cost of its interconnection, as defined hereafter. For purposes of this subparagraph, the Additional Interconnector's pro rata share of its cost of interconnection shall be the sum of the incremental cost of physically interconnecting the Additional Interconnector to the Interconnection Facilities and the original cost of the Interconnection Facilities paid by Generator, including the price of the land provided by Generator (the sum of the incremental cost and the original cost hereafter referred to as "Combined Cost of Interconnection") and then dividing the Combined Cost of Interconnection by two (2) in order to determine both Generator's and the Additional Interconnector's "Pro Rata Share of the Combined Cost of Interconnection." Alabama Power shall then pay to Generator, or have the Additional Interconnector pay to Generator, the difference between the original cost of the Interconnection Facilities paid by Generator and Generator's Pro Rata Share of the Combined Cost of Interconnection; provided, however, that no such payment shall be required if it would result in the Generator bearing less than its Pro Rata Share of the Combined Cost of Interconnection. In the event that Persons additional and subsequent to the Additional Interconnector seek to interconnect to the Alabama Power Electric System through the Interconnection Facilities that have been paid for by Generator (such additional interconnectors referred to as "Subsequent Additional Interconnectors") and where the Subsequent Additional Interconnectors seek to interconnect for any purpose other than for Alabama Power to make a network upgrade, then Alabama Power agrees that the Subsequent Additional Interconnectors shall be charged a pro rata share of the cost of their respective interconnection, such cost to be determined in accordance with the methodology described above, and Alabama Power agrees further that in such event it shall pay, or have such Subsequent Additional Interconnectors pay to Generator and Additional Interconnector, reimbursement calculated based on the method described above, taking into account Generator's Pro Rata Share of the Combined Cost of Interconnection. Except in accordance with the cost sharing methodology set forth herein, Generator shall not be responsible for the costs of any modifications of the Interconnection Facilities that are not caused by the Generator. In no event shall Generator be obligated to pay any increased amount as a result of any Additional Interconnector or Subsequent Additional Interconnector. To the extent that all interconnectors do not have comparable interconnection points, the Combined Cost of Interconnection shall be adjusted appropriately.
5.4 Payment of Cost of On-Going Maintenance and Operation of the Interconnection Facilities
5.4.1 Alabama Power shall operate and maintain the Interconnection Facilities in accordance with Good Utility Practices and in a non-discriminatory manner.
5.4.2 Alabama Power shall develop an estimate of all costs and expenses to be paid by Generator for the operation and maintenance of the Interconnection Facilities on an annual basis and provide the annual estimate to Generator at least eight (8) weeks before December 31 of each year. In the case of Additional Interconnectors or Subsequent Additional Interconnectors, Generator shall be responsible for up to its pro rata share, calculated in accordance with Section 5.3, of the costs of operation and maintenance of the Interconnection Facilities. Generator shall pay one-twelfth (1/12) of such estimated costs each Month in accordance with Section 10. In addition, Generator
shall pay its pro rata share of all costs reasonably incurred by Alabama Power (excluding any such costs reimbursed to Alabama Power through insurance proceeds) to repair and restore the Interconnection Facilities caused by any Force Majeure Event upon receipt of an invoice in accordance with Section 10.
5.4.3 Alabama Power shall true-up this estimate to Alabama
Power's actual costs and expenses within a reasonable period of time after such
actual costs and expenses are known but not less often than annually. In the
event that the actual costs and expenses to be paid by Generator under this
Section 5.4 are more or less than Alabama Power's initial estimate, the
difference (either a credit or an additional charge) shall be reflected on a
subsequent invoice.
5.5 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect the Interconnection Facilities located on Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to the Interconnection Facilities arising from the failure of Generator to properly protect those Interconnection Facilities in accordance with Good Utility Practices.
5.6 Payment of the Cost of the Interconnection Facilities
5.6.1 Generator shall pay Alabama Power in advance for the costs incurred related to the installation and construction of the Interconnection Facilities. Alabama Power shall develop a quarterly payment schedule that shall be based upon (i) the estimated costs to be incurred by Alabama Power in the installation and construction of the Interconnection Facilities, and (ii) the time periods that Alabama Power estimates that such costs will be incurred by Alabama Power ("Quarterly Estimated Construction Costs"). A current estimate of the Quarterly Estimated Construction Costs and the projected payment schedule are attached as Appendix C. Alabama Power may revise the schedule from time to time to more accurately reflect more current estimates of costs and/or to incorporate any needed true-up of estimated costs to actual costs. Alabama Power shall obtain authorization to proceed prior to proceeding with planning, construction, installation or testing of the Interconnection Facilities. Generator shall pay such estimated costs as specified in the payment schedule in accordance with Section 10. Generator shall have the right to approve any deviation in the scope of the work if such deviation would result in an estimated increase of ten percent (10%) or more over the estimated costs. In no event shall Alabama Power collect from Generator any estimated payment for any costs unless Alabama Power reasonably expects to actually incur such costs during the forthcoming Quarter.
5.6.2 During the construction of the Interconnection Facilities, Alabama Power shall true-up the estimated payments to Alabama Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator are more or less than Alabama Power's estimate, the difference (either a credit or additional charge) shall be reflected on a subsequent invoice. Alabama Power shall issue a final cost report within one hundred twenty (120) Days of the Facility's commercial operation date. The final report shall set forth in reasonable detail the actual costs of the Interconnection Facilities and shall true-up the estimated payments to actual costs. To the extent that the final, actual costs that are Generator's cost responsibility under this Agreement exceed the estimated costs already paid by Generator, Alabama Power shall invoice Generator in accordance with Section 10.1. To the extent that the
estimated costs already paid by Generator exceed the final, actual costs that are Generator's cost responsibility under this Agreement, Alabama Power shall refund to Generator an amount equal to the difference within twenty (20) Days of the issuance of the final cost report.
5.6.3 Alabama Power shall inform Generator on a monthly basis, and at such other times as Generator reasonably requests, of the status of the construction and installation of the Interconnection Facilities, including, but not limited to, the following information: progress to date; a description of scheduled activities for the next period; the delivery status of all equipment ordered; and the identification of any event which Alabama Power reasonably expects may delay construction of, or increase the cost of, the Interconnection Facilities.
5.6.4 Generator reserves the right, upon written notice to Alabama Power, to suspend at any time all work by Alabama Power associated with the construction and installation of the Interconnection Facilities. In such event, Generator shall be responsible for the costs which Alabama Power (i) has incurred prior to the suspension to the extent such costs previously were authorized by Generator and (ii) reasonably incurs in suspending such work, including without limitation, the costs incurred to ensure the safety of persons and property and the integrity of the Alabama Power Electric System and the costs incurred in connection with the cancellation of material and labor contracts, provided such cancellation has been authorized by Generator. Alabama Power will invoice Generator pursuant to Section 10.1 and agrees to use reasonable efforts to minimize its costs. If, after such suspension, Generator does not provide Alabama Power with written notice to proceed within three hundred sixty-five (365) Days after the notice of suspension, this Agreement shall be deemed terminated. If this Agreement is deemed terminated, Generator shall be responsible for costs reasonably incurred in winding up such work and the costs incurred in connection with the cancellation of material and labor contracts, to the extent to which Generator has not already reimbursed Alabama Power for such costs. Any non-returnable equipment that has not already been installed by Alabama Power shall become the property of Generator "as is" upon payment of Alabama Power's costs.
SECTION 6: LIABILITY AND INDEMNIFICATION
6.1 Remedies for Breach. Subject to Section 6.2, either Party shall be liable to the other for any loss resulting directly from any breach of this Agreement and which at the time of the breach was a reasonable foreseeable consequence of such breach.
6.2 Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT, NEITHER PARTY NOR ITS PERSONS INDEMNIFIED SHALL BE LIABLE TO THE
OTHER PARTY OR ITS PERSONS INDEMNIFIED FOR ANY CLAIMS, SUITS, ACTIONS OR CAUSES
OF ACTION FOR INCIDENTAL, PUNITIVE, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, DAMAGES IN THE CHARACTER OF LOSS OF PROFITS OR
REVENUES, DAMAGES SUFFERED BY GENERATOR'S OR ALABAMA POWER'S CUSTOMERS DUE TO
SERVICE INTERRUPTIONS, OR COST OF CAPITAL) CONNECTED WITH, RELATING TO, OR
ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY SUCH DAMAGES
WHICH ARE BASED UPON CAUSES OF ACTION FOR BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE AND MISREPRESENTATION), BREACH OF WARRANTY, STRICT LIABILITY OR OTHERWISE. THE PROVISIONS OF THIS SECTION 6.2 SHALL APPLY REGARDLESS OF FAULT AND SHALL SURVIVE TERMINATION, CANCELLATION, SUSPENSION, COMPLETION, OR EXPIRATION OF THIS AGREEMENT.
6.3 No Liability for Other Party's Responsibilities. Neither Party nor its Persons Indemnified assumes any obligation or responsibility of any kind with respect to the other Party's equipment, including, without limitation, obligation or responsibility with respect to the condition or operation of said equipment, except for Generator's obligations and responsibilities hereunder for the Interconnection Facilities. Neither Party nor its Persons Indemnified shall be responsible for the transmission, distribution or control of electrical energy on the other Party's side of the Interconnection Point.
6.4 Responsibility for Property. Each Party shall be responsible for all physical damage to or destruction of, or any personal injury or death associated with, the property, equipment and/or facilities owned by it and located on its premises, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party or its Persons Indemnified for such damage, except in cases of breach of this Agreement or the sole negligence or intentional wrongdoing by the other Party or its Persons Indemnified. Without limiting the generality of the foregoing, neither Party nor its Persons Indemnified shall be liable for damages or injury arising out of or resulting from the simple failure (i.e., failure of a device not caused by breach of contract, negligence or intentional wrongful act) of protective devices (e.g., circuit breakers). For purposes of this Section, a breach of this Agreement by Alabama Power shall be limited to a failure by it to comply with its obligations under this Agreement regarding the installation, operation and maintenance of the Interconnection Facilities.
6.5 Indemnification.
6.5.1 Generator shall at all times indemnify, defend, and hold harmless Alabama Power and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) the Generator's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction of Alabama Power's property properly located, pursuant to this Agreement, on premises owned, leased or controlled by Generator, except in cases of sole negligence or intentional wrongdoing by Alabama Power or its Persons Indemnified, or (iii) activities on Generator's property, except, in each case, in the case of sole negligence or intentional wrongdoing by Alabama Power or its Persons Indemnified.
6.5.2 Alabama Power shall at all times indemnify, defend, and hold harmless Generator and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or
death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) Alabama Power's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction of Generator's property properly located, pursuant to this Agreement, on premises owned, leased, or controlled by Alabama Power, except in cases of sole negligence or intentional wrongdoing by the Generator or its Persons Indemnified, or (iii) activities on Alabama Power's property relating to the installation, operation and maintenance of the Interconnection Facilities, except, in each case, in the case of sole negligence or intentional wrongdoing by Generator or its Persons Indemnified.
SECTION 7: METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT
7.1 Metering.
7.1.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all metering equipment necessary to provide information regarding power flow and voltage conditions at the Interconnection Point; provided, however, that Alabama Power shall operate, maintain, repair and replace any meters located on the Interconnection Facilities, the costs of such activities to be paid by Generator consistent with its payment of expenses under Section 5.4. All metering equipment of Generator shall conform to Good Utility Practices. Prior to its installation, Alabama Power and Generator shall review the metering equipment to ensure conformance with Good Utility Practices and Generator shall maintain the metering equipment in conformance with Good Utility Practices throughout the Term. The metering equipment described herein does not include station service metering equipment.
7.1.2 Electric capacity and energy received by the Alabama Power Electric System from Generator shall be measured by meters installed at the Interconnection Point. If and to the extent Generator's meters are not physically located at the Interconnection Point, the metered amount of energy shall be adjusted for losses as mutually agreed from the point of metering to the Interconnection Point in accordance with Good Utility Practices. Any Party performing such a study to determine the loss adjustment shall provide a copy to the other Party.
7.1.3 Generator shall provide, as required by Good Utility Practices and requested by Alabama Power, real-time telemetered load signals of its energy delivered to the Interconnection Point. Generator shall also read the meters owned by it and shall furnish to Alabama Power all meter readings and other information reasonably required for operations and for billing purposes under this Agreement. Such information shall remain available to Alabama Power for one (1) year or such longer period as may be required by any Legal Requirement.
7.1.4 The Parties agree that the meter readings provided by the Generator to Alabama Power, under normal circumstances, shall be used as the official measurement between the Parties of the amount of capacity and energy delivered from the Facility to the Interconnection Point.
7.1.5 Any time during the Term and after initial acceptance of the accuracy of Generator's telemetered information, if telemetered information is unavailable to Alabama Power, for any reason, the Generator shall provide integrated hourly meter readings to Alabama Power each hour until telemetry is returned to service in conformance with Good Utility Practices and Section 7.1.2.
7.2 Data Acquisition and Protection Equipment.
7.2.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all data acquisition equipment, protection equipment, and any other associated equipment and software, which may be reasonably required at any time during the Term by either Party for Generator to operate its facilities in parallel with Alabama Power. Such equipment shall conform to Good Utility Practices. Prior to its installation, Alabama Power and Generator shall review the equipment and software required by this Section 7 to ensure conformance with Good Utility Practices.
7.2.2 The selection of real time telemetry and data to be received by Alabama Power and Generator shall be at the reasonable discretion of Alabama Power, as deemed by Alabama Power necessary for reliability, security, revenue metering, and/or monitoring of the Facility's operations in conformance with Good Utility Practices. This telemetry includes, but is not limited to, voltages, generator output (MW, MVAR, and MWh) at the Interconnection Point and breaker status. Alabama Power shall provide to Generator real time telemetry of Alabama Power's breaker status. To the extent telemetry is required, Generator shall, at its own expense, install any telemetering equipment, data acquisition equipment, or other equipment and software necessary at the Facility for the telemetry of information to Alabama Power.
7.2.3 Generator shall be responsible for the reasonable cost that Alabama Power incurs in making any computer modifications or changes to Alabama Power's facilities or equipment necessary to implement this Section 7.
7.3 Payment of Cost of Metering, Data Acquisition, and Related Protection Equipment.
7.3.1 Prior to the commencement of Interconnection Service under this Agreement, Alabama Power shall develop and provide Generator an estimate of all costs and expenses that may be incurred by Alabama Power in connection with the installation of equipment and software under Sections 7.1 and 7.2. Alabama Power shall obtain Generator's consent thereto prior to proceeding with activities in connection with Sections 7.1 and 7.2. Generator shall pay such estimated costs in accordance with Section 10.
7.3.2 Alabama Power shall true-up this estimate to Alabama Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator to Alabama Power under Section 7.1 and 7.2 are more or less than Alabama Power's initial estimate, the difference (either a credit or an additional charge) shall be reflected on a subsequent invoice.
7.4 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect all equipment of Alabama Power located on Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to such equipment arising from the failure of Generator to properly protect such equipment in accordance with Good Utility Practices.
7.5 Inspection and Testing.
7.5.1 Meters, data acquisition, and related protection equipment at Generator's Interconnection Point shall be tested at least biennially by Generator in accordance with the provisions for meter testing as established in American National Standard Institute Code for Electricity Metering (ANSI) Standard C12.16 for Solid State Electricity Meters, as the same may be updated from time to time. Representatives of each Party shall be afforded an opportunity to witness such tests.
7.5.2 Generator shall, upon the reasonable request of Alabama Power, test its meters and data acquisition equipment at the Interconnection Point used for determining the receipt or delivery of capacity and energy by Alabama Power. In the event a test shows such equipment to be inaccurate, Generator shall make any necessary adjustments, repairs or replacements thereon.
7.6 Inaccuracies. If the metering fails to register, or if the measurement made by a metering device is found upon testing to vary by more than one percent (1.0%) from the measurement made by the standard meter used in the test, an adjustment shall be made correcting all measurements of energy made by the metering during (i) the actual period when inaccurate measurements were made by the metering, if that period can be determined to the mutual satisfaction of the Parties, or (ii) if the actual period cannot be determined to the mutual satisfaction of the Parties, one-half of the period from the date of the last test of the metering to the date such failure is discovered or such test is made (such period herein the "Adjustment Period"). If the Parties are unable to agree on the amount of the adjustment to be applied to the Adjustment Period, the amount of the adjustment shall be determined (a) by correcting the error if the percentage of error is ascertainable by calibration, tests or mathematical calculation, or (b) if not so ascertainable, by estimating on the basis of deliveries under similar conditions during the period since the last test. In the event Generator's metering equipment is found to be insufficiently reliable and/or inaccurate during any consecutive three (3) Month period, Alabama Power shall have the right to install suitable metering equipment at the Interconnection Point for the purpose of checking the meters installed by Generator, and Generator shall pay all costs related to such metering equipment.
SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING
8.1 Facility Evaluation Based on Actual Equipment Data. Generator agrees to provide updated application data ("actual equipment data") to Alabama Power that reflects information provided by equipment manufacturers for the actual equipment purchased by Generator for this Facility, as soon as it is available, but not later than ninety (90) Days prior to Initial Synchronization Date. Alabama Power agrees to review the actual equipment data to identify any adverse impacts to Alabama Power's Electric System caused by any material change in the Facility's operation and performance specifications that were not reasonably identifiable in studies performed using Generator's application data as initially provided. In the event any such adverse impacts are identified, Generator is responsible for modifying its equipment to eliminate such identified adverse impacts.
8.2 Implementation of Control and Operating Procedures. At least forty-five (45) Days prior to the Initial Synchronization Date, Generator and Alabama Power will: (a) jointly review the Control and Operating Procedures as developed by the Operating Committee, under Section 15 of this Agreement; (b) develop a training schedule for Facility and Alabama Power personnel under the Control and Operating Procedures; and (c) install and verify that communication links are complete for: (i) data telemetry, (ii) voice communications between Generator's Facility and Alabama Power's Transmission System control centers, and (iii) the transmittal of Facility and transmission system information on the Southern Company Generator Information Network.
8.3 Facility Inspection. Consistent with Good Utility Practices and unless otherwise agreed to by the Parties, all Interconnection Facilities shall be complete prior to the initial synchronization of the Facility with the Alabama Power Electric System. Within fifteen (15) Days after written notice is given to Alabama Power by Generator, an inspection shall be performed by Alabama Power to insure the proper installation and operation of the interconnection protective devices. The inspection shall include, without limitation, verification: (a) that the installation of Generator's equipment at the Facility is in accordance with the interconnection study; and (b) of proper voltage and phase rotation.
8.4 Initial Synchronization. Upon completion of the actions and reviews required under Sections 8.1, 8.2, and 8.3, Generator may request approval for initial synchronization of the Facility with the Alabama Power Electric System. Such request for approval shall be made no less than seven (7) Calendar Days in advance of the date which the Generator proposes for the Initial Synchronization Date. Initial synchronization shall not occur without the prior documented approval of Alabama Power, and such approval shall not be unreasonably withheld. Representatives of Alabama Power shall have the right to be present during the initial synchronization and facility testing. The activities under this Section 8, including without limitation, facility inspection, evaluation of actual equipment data, personnel training, use of Southern Company Generator Information Network, or the granting of approval to Generator for operation of the Facility in parallel with the Alabama Power Electric System shall not serve to relieve Generator of liability for injury, death or damage attributable to the negligence of Generator, and Alabama Power shall not be responsible as a result of such activities.
8.5 Review of Synchronization Tests. No less than forty-five (45) Days prior to the commercial operation date of the Facility, Generator shall provide Alabama Power copies of all applicable excitation system field test results (including chart recordings and actual data points in electronic form) and field settings, including (if applicable) Power System Stabilizer test results and settings in a format that conforms to the models previously submitted with the original application data. These tests include but are not limited to excitation system open circuit step in voltage tests, and (if applicable) Power System Stabilizer gain margin and phase compensation tests. Excitation system open circuit step in voltage test response chart recordings shall be provided showing generator terminal voltage, field voltage, and field current (exciter field voltage and current for brushless excitation systems) with sufficient resolution such that the change in voltages and currents are clearly distinguishable. The excitation system open circuit step in voltage test data points corresponding to the chart recordings should also be submitted in electronic form. Alabama Power may require that Generator perform more detailed tests if there are significant differences between the excitation system open circuit step in voltage test response and the step response predicted through dynamic simulation of model data. Any problems identified as a result of changes from application data to actual field settings of the excitation system including (if applicable) Power System Stabilizers must be addressed and resolved as soon as practicable by the Generator in order for the Generator to continue to deliver power to the Interconnection Point.
SECTION 9: ADMINISTRATION CHARGE
Generator shall pay Alabama Power a Monthly Administration Charge of $5,000 per Month for all costs and expenses incurred by Alabama Power during such Month in connection with: (i) Alabama Power's administration of this Agreement; (ii) any taxes, assessments or other impositions for which Alabama Power may be liable as a result of any activity undertaken pursuant to this Agreement; (iii) reading meters; and (iv) accounting for capacity and energy flowing into or out of Generator's Facility. Alabama Power may revise the amount of the Monthly Administration Charge on an annual basis by making a filing in accordance with Section 12.3.
SECTION 10: PAYMENT PROCEDURE
10.1 Billing. Bills shall be issued to Generator in accordance with the following procedures:
10.1.1 Alabama Power shall issue a Quarterly invoice to Generator for the Quarterly Estimated Construction Costs.
10.1.2 Alabama Power shall issue a Monthly invoice to Generator for the estimated operation and maintenance charge, administrative charge, and other charges/credits determined pursuant to this Agreement as soon as practicable following the close of each Month.
10.1.3 All amounts owing to Alabama Power from Generator shall be due and payable in immediately available funds through wire transfer of funds or other means acceptable to Alabama Power within twenty (20) Calendar Days after the date of Alabama Power's invoice.
10.2 Failure to Timely Pay. If Generator fails to pay the amount billed
by Alabama Power within twenty (20) Calendar Days after the date of Alabama
Power's invoice (and such amount is not disputed in accordance with Section
10.6), Alabama Power may, at any time thereafter upon five (5) Business Days
written notice, draw upon the letter of credit (or other form of security) of
Generator to obtain payment for such invoice, as well as reasonable costs
incurred to exercise its rights under this Section. In addition, Alabama Power
may, at its option, treat such non-payment as a Default of this Agreement under
Section 3.2 hereof.
10.3 Interest. Any amount due and payable from Generator to Alabama Power pursuant to this Agreement that is not received by the due date shall accrue interest from the due date at the Interest Rate.
10.4 Creditworthiness. Generator shall provide and maintain in effect during the Term of this Agreement an unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Alabama Power, including an appropriate parent security) as security to meet its responsibilities and obligations under this Agreement. The unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Alabama Power) shall be in the amount of $2,600,000 in immediately available funds through wire transfer of funds or other means acceptable to Alabama Power for activities arising prior to commercial operation of the Facility and in the amount of $175,000 for activities arising from the date of commercial operation of the Facility. Alabama Power shall be entitled to draw upon such letter of credit for amounts due it under this Agreement if not paid when due in accordance with Section 10.1 and not disputed in accordance with Section 10.6.
10.5 Audit Rights. Either Party shall have the right, during normal business hours, and upon prior reasonable notice to the other Party to audit each other's accounts and records pertaining to either Party's performance and/or satisfaction of obligations arising under this Agreement within one (1) year from the date of such performance or satisfaction of such obligation, including specifically, but not limited to, delivery of the final cost report as provided in Section 5.6.2. Said audit shall be performed at the offices where such accounts and records are maintained and shall be limited to those portions of such accounts and records that specifically relate to obligations under this Agreement. To the extent such accounts and records contain confidential information, the Parties agree to maintain the confidentiality of such information consistent with Section 17.19 hereof. In the event an audit reveals an improper assignment or allocation of costs or an error in billing, the Parties will make appropriate adjustments (either refunds or additional payments), with interest, within thirty (30) Days.
10.6 Disputed Bills. In the event of a billing dispute between Generator and Alabama Power, Alabama Power shall not terminate this Agreement, draw on the letter of credit for any disputed amounts, nor disconnect the Facility for failure to pay the disputed amount if Generator (i) continues to make all payments not in dispute and (ii), if requested by Alabama Power, pays into an independent escrow account the portion of the invoice in dispute.
10.7 No Waiver. Payment of any cost or invoice by Generator will not constitute a waiver of any rights or claims that Generator may have under or relating to this Agreement.
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS
11.1 Generator Representations, Warranties and Covenants. Generator makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.1.1 Generator is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, that it is qualified to do business in the State of Alabama and that it has the power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.1.2 The execution, delivery and performance by Generator of this Agreement has been duly authorized by all necessary company action, and does not and shall not require any consent or approval of Generator's Board of Directors or members, other than those which have been obtained.
11.1.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and shall not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirement, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Generator is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
11.1.4 This Agreement is the legal, valid and binding obligation of the Generator and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.1.5 There is no pending or, to the knowledge of Generator, threatened action or proceeding affecting Generator before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2 Alabama Power Representations, Warranties and Covenants. Alabama Power makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.2.1 Alabama Power is a corporation duly organized, validly existing and in good standing under the laws of the State of Alabama that it is qualified to do business in the State of Alabama and that it has the corporate power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.2.2 The execution, delivery and performance by Alabama Power of this Agreement has been duly authorized by all necessary corporate action, and does not and shall not require any consent or approval of Alabama Power's Board of Directors or shareholders, other than those which have been obtained.
11.2.3 This Agreement is the legal, valid and binding obligation of Alabama Power and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.2.4 There is no pending or, to the knowledge of Alabama Power, threatened action or proceeding affecting Alabama Power before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2.5 Alabama Power covenants to Generator that it will file this Agreement, and any amendments and/or modifications thereto, with FERC in accordance with all Legal Requirements.
11.3 Survival of Representations, Warranties and Covenants. The representations, warranties and covenants made by Generator and by Alabama Power (as the case may be) in Sections 11.1.1, 11.1.3, 11.1.4, 11.2.1, 11.2.3, and 11.2.5 shall survive the execution and delivery of this Agreement and any action taken pursuant hereto. The representations, warranties and covenants made by Generator and Alabama Power (as the case may be) in Sections 11.1.2, 11.1.5, 11.2.2 and 11.2.4 shall be true and accurate as of the date of execution of this Agreement.
SECTION 12: COMPLIANCE WITH LAWS
12.1 Compliance. Generator represents, warrants and covenants that as
of the Initial Synchronization Date and for the Term, Generator shall (i) be in
compliance with all Legal Requirements with respect to the ownership, operation
and maintenance of Generator's Interconnection Equipment, including without
limitation, all requirements to seek, obtain, maintain, comply with and, as
necessary, renew and modify from time to time, any and all applicable
certificates, licenses, permits and government approvals and all applicable
environmental certificates, licenses, permits and approvals, environmental
impact analysis, and if applicable, the mitigation of environmental impacts, and
(ii) pay all costs, expenses, charges and fees in connection with Section
12.1(i).
12.2 Change of Law. In the event that after the Effective Date there are changes to Legal Requirements, including, without limitation, changes to laws or regulations regulating or imposing a tax, fee or other charge, which cause Alabama Power to incur additional costs in providing Interconnection Service under this Agreement, Generator agrees to pay, to the extent consistent with FERC policy, such reasonable incremental costs incurred by Alabama Power in complying with such changes to Legal Requirements; provided, however, Generator shall be entitled to take reasonable action to mitigate, reduce or otherwise avoid the imposition of any such charges or costs.
12.3 Regulatory Filings. This Agreement is subject to approval by any
Governmental Authority having jurisdiction over the matters provided herein.
Nothing contained in this Agreement shall be construed as affecting in any way
(i) the right of Alabama Power to unilaterally make application to any and all
Governmental Authorities (including FERC) that may have jurisdiction over this
Agreement for a change in terms and conditions, charges, classification of
service, or for termination of this Agreement pursuant to applicable statutes
(including Sections 205 and 206 of the Federal Power Act) and those Governmental
Authorities' rules and regulations or (ii) the ability of Alabama Power to
exercise its rights under the rules and regulations of any Governmental
Authority having jurisdiction over this Agreement. Nothing contained in this
Agreement shall be construed as affecting in any way (i) the right of Generator
to unilaterally make application to any and all Governmental Authorities
(including FERC) that may have jurisdiction over this Agreement for a change in
terms and conditions, charges, classification of service or for termination of
this Agreement pursuant to applicable statutes (including Sections 205 and 206
of the Federal Power Act) and those Governmental Authorities' rules and
regulations or (ii) the ability of Generator to exercise its rights under the
rules and regulations of any Governmental Authority having jurisdiction over
this Agreement. At least thirty (30) Days prior to any such unilateral filing,
the Party intending to make the filing shall notify the other of such intent.
The Parties agree to reasonably cooperate with each other with respect to such
filings and to provide any information reasonably required by the requesting
Party to comply with applicable filing requirements. This Agreement shall be
modified or amended as necessary to reflect binding determinations with respect
to such filings.
12.4 Taxes.
12.4.1 Generator shall not be required to pay taxes associated with reimbursement of construction costs or transfer of the Interconnection Facilities constructed by Generator unless Alabama Power is required to pay such tax. With respect to the payment by Generator of taxes associated with reimbursement of construction costs or transfer of the Interconnection Facilities, Alabama Power commits that in the event that any taxing authority, including but not limited to the Internal Revenue Service, taxes or attempts to tax the reimbursement or transfer, Alabama Power shall (i) exercise reasonable efforts to contest and defeat the taxation or attempted taxation of the reimbursement or transfer; (ii) promptly notify Generator in writing of that event in the manner provided in Paragraph 17.9 of this Agreement; and (iii) exercise reasonable efforts to cooperate with Generator in contesting any such
taxation including, for example, allowing Generator to prepare at its own expense a private letter ruling request or other submission to the Internal Revenue Service or other taxing authority.
12.4.2 Generator shall at all times during the Term pay all charges, taxes, assessments and fees which may be assessed upon or against the Facility or upon or against Generator through Alabama Power by a Governmental Authority in accordance with Legal Requirements by reason of the sale or purchase of electricity by Generator or from Generator's Facility.
SECTION 13: INSURANCE
13.1 Generator's Insurance. If Generator is no longer an Affiliate of Alabama Power, Generator, at its expense, shall procure and maintain in effect during the Term, policies of insurance with insurance companies authorized to transact insurance in the State of Alabama or adequate self-insurance, reasonably acceptable to Alabama Power, providing, at a minimum, the coverage and limits specified and complying with the requirements stated below:
13.1.1 Worker's Compensation in statutory amounts and Employer's Liability with a minimum limit of $1,000,000 per person.
13.1.2 Commercial General Liability Insurance on an occurrence basis or AEGIS "claims made" form, with the following coverage and limits:
General Aggregate $1,000,000 Products-Completed Operations-Aggregate $1,000,000 Personal & Advertising Injury $1,000,000 Each Occurrence $1,000,000 Fire Damage (any one fire) $50,000 Medical Expense (any one person) $5,000 |
13.1.3 Business Automobile Liability covering autos of Generator, including owned, hired and non-owned autos, for Bodily Injury and Property Damage with a combined single limit of $1,000,000 each occurrence.
13.1.4 Excess Liability in Umbrella Form with a limit of $4,000,000 each occurrence, $4,000,000 Aggregate.
13.1.5 By signing this Agreement, Generator thereby waives all rights of subrogation against Alabama Power and its Persons Indemnified with respect to any claim or loss payable or paid under each of the policies set forth in 13.1.1, 13.1.2, 13.1.3, and 13.1.4 above and under any property insurance policy for the Facility that Generator has or acquires.
13.1.6 Generator shall cause its insurer(s) to add Alabama Power and its Persons Indemnified as an Additional Insured on the policies set forth in 13.1.2, 13.1.3, and 13.1.4 above with respect to liability of Alabama
Power and its Persons Indemnified (a) arising out of the performance of operations, maintenance, work or services under this Agreement, and (b) arising out of the conduct contemplated in the ownership, maintenance or use of Generator's autos, but only to the extent of Generator's indemnity obligations under this Agreement and the coverages and limits specified in Sections 13.1.2, 13.1.3, and 13.1.4.
13.1.7 Subject to the limitations in Section 13.1.6, Generator's insurance shall be primary insurance with respect to the installation, operations, maintenance, work, or services contemplated under this Agreement and insurance of Alabama Power and its Persons Indemnified shall be excess of the Generator's insurance and shall not contribute with it.
13.1.8 To the extent that Generator utilizes deductibles or self-insurance in connection with the insurance coverage required herein, all such deductible and self-insured amounts shall be for the account and expense of Generator and shall not be considered as costs or fees provided for in this Agreement.
13.1.9 If the Generator uses contractors and/or subcontractors to perform any of the work contemplated under this Agreement, Generator shall require such contractors and/or subcontractors to maintain in effect insurance meeting these minimum limits and incorporating the contractual requirements prescribed by this Section 13.
13.2 Notice and Certification. Each of the above required policies shall contain a provision whereby the insurance carrier shall notify Alabama Power at least thirty (30) Days prior to the effective date of cancellation, non-renewal or material change in any of said policies. Generator shall submit to Alabama Power a Certificate, signed by an authorized representative of the insurance carrier, listing the policies, coverage and limits and certifying that the said policies shall be in effect for the time periods stated in the Certificate. The obligations for Generator to procure and maintain insurance shall not be construed to waive or restrict other obligations.
SECTION 14: FORCE MAJEURE
14.1 Definition of Force Majeure Event. For the purposes of this
Agreement, a "Force Majeure Event" as to a Party means any occurrence,
nonoccurrence or set of circumstances that is beyond the reasonable control of
such Party and is not caused by such Party's fault, negligence or lack of due
diligence, including, without limitation, flood, ice, lightning, earthquake,
windstorm or eruption; fire; explosion; invasion, war, civil disturbance,
commotion or insurrection; sabotage or vandalism; military or usurped power; or
act of God or of a public enemy; provided, however, in no event shall (i) the
inability to meet a Legal Requirement or the change in a Legal Requirement; or
(ii) a site specific strike, walkout, lockout or other labor dispute constitute
a Force Majeure Event.
14.2 No Breach or Liability. Each Party shall be excused from performing its respective obligations under this Agreement and shall not be liable in damages or otherwise if and to the extent that it is unable to so perform or is prevented from performing by a Force Majeure Event, provided that the non-performing Party shall:
14.2.1 Give the other Party notice thereof, followed by written notice if the first notice is not written, both notices to be given as promptly as possible after the non-performing Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
14.2.2 Use its reasonable best efforts to remedy its inability to perform as soon as practicable; provided, however, that this Section 14.2.2 shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest; provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of the Party having the difficulty; and
14.2.3 Resume performance of its obligations under this Agreement and give the other Party written notice to that effect, as soon as reasonably practicable following cessation of the Force Majeure Event.
14.3 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
SECTION 15: OPERATING COMMITTEE
15.1 Establishment of Committee. At least six (6) months prior to the estimated Initial Synchronization Date, Generator and Alabama Power shall each appoint one representative and one alternate to the Alabama Power - Generator Operating Committee ("Committee"). Each Party shall notify the other party of its appointment in writing. Such appointments may be changed at any time by similar notice. The Committee shall meet as necessary, but not less than once each calendar year, to carry out the duties set forth herein. The Committee shall hold a meeting at the request of either Party, at a time and place agreed upon by the representatives. Each representative and alternate shall be a responsible person working in the day-to-day operations of their respective electrical facilities. The Committee shall represent the Parties in all matters arising under this Agreement which may be delegated to it by mutual agreement of the Parties.
15.2 Duties. The duties of the Committee shall include, but are kjnot limited to, the following:
15.2.1 Establish and maintain control and operating procedures, including those pertaining to information transfers between the Facility and Alabama Power consistent with the provisions of this Agreement.
15.2.2 Establish data requirements and operating record requirements in accordance with the terms and conditions of this Agreement.
15.2.3 Review the requirements, standards, and procedures data acquisition equipment, protective equipment, and any other equipment or software.
15.2.4 Annually review ten (10) year forecast of maintenance and availability schedules of Alabama Power's and Generator's facilities at the Interconnection Point and coordinate the scheduling of outages of and maintenance on the Interconnection Facilities, the Facility and any other facilities that impact the normal operation of the Interconnection Facilities.
15.2.5 Ensure that information is being provided by each Party regarding equipment availability.
15.2.6 Perform such other duties as may be conferred upon it by mutual agreement of the Parties.
15.2.7 Each Party shall cooperate in providing to the Committee all information required in the performance of the Committee's duties. All decisions and agreements, if any, made by the Committee shall be evidenced in writing. The Committee shall have no power to amend or alter the provisions of this Agreement.
SECTION 16: ASSIGNMENT
16.1 Assignment by Generator.
16.1.1 EXCEPT AS EXPRESSLY PERMITTED BELOW OR OTHERWISE AGREED TO BY THE PARTIES, GENERATOR SHALL NOT ASSIGN, TRANSFER, DELEGATE OR ENCUMBER THIS AGREEMENT AND/OR ANY OR ALL OF ITS RIGHTS, INTERESTS OR OBLIGATIONS UNDER THIS AGREEMENT AND ANY ASSIGNMENT, TRANSFER, DELEGATION OR ENCUMBERING BY GENERATOR (EXCEPT AS PERMITTED BELOW) SHALL BE NULL AND VOID. Notwithstanding the foregoing, so long as Generator is not in default under or breach of this Agreement, upon prior written notice to Alabama Power, Generator may collaterally assign its rights, interests and obligations under this Agreement to its lender or an agent for the benefit of its lenders providing financing or refinancing for the design, construction or operation of Generator's Facility in Autauga County, Alabama (a "Permitted Financing Assignee"); provided, however, that GENERATOR'S RIGHTS AND OBLIGATIONS (FINANCIAL OR OTHERWISE) UNDER THIS AGREEMENT SHALL CONTINUE IN THEIR ENTIRETY IN FULL FORCE AND EFFECT AS THE RIGHTS AND OBLIGATIONS OF A PRINCIPAL AND NOT AS A SURETY. Generator may collaterally assign its rights, interests and obligations hereunder to multiple Permitted Financing Assignees, but only if those Permitted Financing Assignees designate one agent to act for them collectively under this Agreement.
16.1.2 Alabama Power shall, upon serving Generator any notice of Default or the termination of this Agreement, also serve a copy of such notice upon the Permitted Financing Assignee or, in the case of multiple
Permitted Financing Assignees, the agent of those Permitted Financing Assignees. No notice of Default purporting to terminate this Agreement shall be deemed to have been given unless and until a copy thereof shall have been given to the Permitted Financing Assignee or the agent for multiple Permitted Financing Assignees. A Permitted Financing Assignee shall be entitled to cure any Default during any cure period provided herein.
16.1.3 The Permitted Financing Assignee shall not be entitled to assign or transfer this Agreement to any purchaser in foreclosure, purchaser in lieu of foreclosure or similar purchaser or transferee ("Purchaser in Foreclosure") unless and until such Purchaser in Foreclosure has (i) executed and delivered to Alabama Power and is in compliance with an agreement in form and substance acceptable to Alabama Power whereby such Purchaser in Foreclosure assumes and agrees to pay and perform all then outstanding and thereafter arising obligations of Generator under this Agreement and (ii) established to Alabama Power's reasonable satisfaction that such Purchaser in Foreclosure has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Notwithstanding the foregoing, all obligations of Generator to Alabama Power under this Agreement incurred prior to the time the Purchaser in Foreclosure fully assumes this Agreement shall also be and remain enforceable by Alabama Power against Generator. Any assignment to a Purchaser in Foreclosure shall be subject to Alabama Power's rights hereunder.
16.1.4 So long as Generator is not in Default under or breach of this Agreement, upon prior written notice to Alabama Power, Generator may absolutely assign all, but not less than all, of its rights, interests and obligations under this Agreement to another generator ("Outright Assignee") provided however, that Generator's obligations under this Agreement shall continue and Alabama Power shall have no obligations to such Outright Assignee unless and until such Outright Assignee has (i) executed and delivered to Alabama Power and is in compliance with an agreement in form and substance reasonably acceptable to Alabama Power whereby such Outright Assignee assumes and agrees to pay and perform all thereafter arising obligations of Generator under this Agreement and (ii) established to Alabama Power's reasonable satisfaction that such Outright Assignee has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Any assignment to an Outright Assignee shall be subject to Alabama Power's rights hereunder.
16.1.5 Generator shall indemnify, defend and hold harmless
Alabama Power and its Persons Indemnified from and against any and all losses,
liabilities, obligations, claims, demands, damages, penalties, judgments, costs
and expenses, including, without limitation, reasonable attorneys' fees and
expenses, howsoever and by whomsoever asserted, arising out of or in any way
connected with any collateral, outright or other assignment by Generator or any
foreclosure or other exercise of remedies by the Permitted Financing Assignee of
this Agreement or Generator's or the Permitted Financing Assignee's rights or
interests under this Agreement. Notwithstanding any other provision of this
Section 16.1, Generator shall not be obligated to indemnify and hold harmless
Alabama Power from and against any loss, liability, obligation, claim, demand,
damage, penalty, judgment, cost or expense to the extent caused by the sole
negligence or willful misconduct Alabama Power or its Persons Indemnified.
16.1.6 No agreement between the Parties modifying, amending, canceling or surrendering this Agreement shall be effective without the prior written consent of the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. Subject to any cure periods provided to the Permitted Financing Assignee in this Agreement or in any consents to assignment, no such prior written consent is required for Alabama Power to take unilateral action under this Agreement, including (without limitation) Sections 3.2, 3.3, 3.4, 10.2, 12.2 and 12.3.
16.1.7 Alabama Power agrees to reasonably cooperate with Generator and any Permitted Financing Assignee in connection with the collateral assignment of this Agreement; provided, however, that Alabama Power shall not be obligated to take any action that could, in its judgment, result in an expansion of its obligations, risks or liabilities or a violation of any law, regulation or order of a Governmental Authority.
16.2 Assignment by Alabama Power. So long as Alabama Power is not in breach of this Agreement, Alabama Power may, at any time, without notice to, or the consent of, Generator or any other Person, including, without limitation, any Permitted Financing Assignee, Purchaser in Foreclosure or Outright Assignee, sell, assign, delegate, encumber or transfer to any Indenture Trustee, Affiliate, any successor by merger or otherwise of Alabama Power or any Qualified Person, and/or create or permit to exist Permitted Liens against, all or any part of this Agreement and/or Alabama Power's rights, obligations, title or interest in, to and under this Agreement. Provided, however, Generator reserves its right to oppose any such assignment before any Governmental Authority having jurisdiction.
SECTION 17: MISCELLANEOUS
17.1 Alabama Power's Agent. Wherever this Agreement requires Generator to provide information, schedules, notice or the like to, or to take direction from, Alabama Power, Generator shall provide information, schedules, notice or the like to, or receive from, Alabama Power or such agent of Alabama Power as Alabama Power may direct from time to time.
17.2 No Partnership. Generator and Alabama Power do not intend for this Agreement to, and this Agreement shall not, create any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit.
17.3 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon any respective successors and assigns of Generator and Alabama Power.
17.4 No Third Party Benefit. Nothing in this Agreement shall be construed to create any duty, obligation or liability of a Party to any person or entity not a Party to this Agreement.
17.5 No Affiliate Liability. Notwithstanding any other provision of this Agreement, no Affiliate of either Party (including without limitation any Affiliate acting as either Party's agent where said agent is given certain authorities pursuant hereto) shall have any liability whatsoever for either Party's performance, nonperformance or delay in performance under this Agreement.
17.6 Time of Essence. Time is of the essence of this Agreement.
17.7 No Waiver. Neither Alabama Power's nor Generator's failure to enforce any provision or provisions of this Agreement shall in any way be construed as a waiver of any such provision or provisions as to any future violation thereof, nor prevent it from enforcing each and every other provision of this Agreement at such time or at any time thereafter. The waiver by either Alabama Power or Generator of any right or remedy shall not constitute a waiver of its right to assert said right or remedy, at any time thereafter, or any other rights or remedies available to it at the time of or any time after such waiver.
17.8 Amendments. Except as provided in Section 12.3, this Agreement may be amended by and only by a written instrument duly executed by each of Generator and Alabama Power, which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
17.9 Notice. Any notice, request, consent or other communication
permitted or required by this Agreement shall be in writing and shall be deemed
given on the Day hand-delivered to the representative identified below, on the
Day of facsimile transmission to the facsimile number stated below, or the third
(3rd) Day after the same is deposited in the United States Mail, first class
postage prepaid, and if given to Alabama Power shall be addressed to:
Alabama Power Company
Attn: Senior Vice President, Power Delivery
600 North 18th Street
Birmingham, Al 35203
Facsimile: (205) 257-1818
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Transmission Services
600 North 18th Street
Birmingham, Alabama 35203
Facsimile: (205) 257-6663
and if given to Generator, it shall be addressed to:
Southern Power Company
Attn: Vice President, Generation, Planning and Development
600 North 18th Street
Bin 15N-8181
Birmingham, Alabama 35203
Facsimile: (205) 257-5703
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Generation Development
600 North 18th Street
Bin 15N-8186
Birmingham, Alabama 35203
Facsimile: (205) 257-6336
unless Alabama Power or Generator shall have designated a different representative or address for itself by written notice to the other. Generator shall comply with reasonable requirements of Alabama Power regarding communications with Alabama Power relative to the performance of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
17.11 Cross-References. All cross-references contained in this Agreement to Sections, are to the Sections of this Agreement, unless otherwise expressly noted.
17.12 Section Headings. The descriptive headings of the various Sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof.
17.13 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.
17.14 Governing Law. The validity, interpretation and performance of this Agreement, and each of its provisions, are subject to and shall be governed by applicable federal law, and where not preempted by federal law, by the laws of the State of Alabama, without giving effect to conflict of laws principles.
17.15 Merger. This Agreement represents the entire agreement between the Parties and all previous communications, representations and agreements between the Parties regarding the subject matter of this Agreement, whether oral or written, are hereby superseded.
17.16 NERC. To the extent not inconsistent herewith, Generator shall comply with any operational specifications and requirements specified by Alabama Power and all planning standards and operating guidelines of the North American Electric Reliability Council or its successor.
17.17 Good Utility Practices. Each Party shall discharge its respective obligations under this Agreement in accordance with Good Utility Practices.
17.18 Safety. Each Party shall comply with the applicable provisions of the National Fire Protection Association Code, the American National Electrical Code, the National Electrical Safety Code and other applicable code requirements. Each Party shall furnish and maintain, at its own expense, proper and adequate facilities, equipment, machinery, tools and supplies necessary to maintain its facilities and premises as a safe workplace and have available at all times for use by its employees, agents, independent contractors, suppliers, vendors and borrowed employees and all safety equipment needed for the protection of that Party's employees, agents, independent contractors, suppliers, vendors and borrowed employees against injuries. Each Party shall be solely responsible for providing for the safety of its facilities and premises and of its employees, agents, independent contractors, suppliers, vendors and borrowed employees.
17.19 Confidential Information. Confidential Information shall mean any confidential and/or proprietary information provided by Alabama Power or Generator ("Disclosing Party") to the other party ("Receiving Party") and which is clearly marked or otherwise designated as "CONFIDENTIAL." For purposes of this Agreement, all design, operating specifications and metering data provided by Generator shall be deemed confidential regardless of whether it is clearly marked or otherwise designated as such. Except as otherwise provided herein, each Party shall hold in confidence and shall not disclose Confidential Information to any person (except employees, officers, representatives and agents that agree to be bound by this Section 17 or FERC's Standards of Conduct). Confidential Information shall not include information that the Receiving Party can demonstrate: (a) is generally available to the public other than as a result of a disclosure by the Receiving Party; (b) was in the lawful possession of the Receiving Party on a non-confidential basis before receiving it from the Disclosing Party; (c) was supplied to the Receiving Party without restriction by a third party, who, to the knowledge of the Receiving Party, was under no obligation to the Disclosing Party to keep such information confidential; (d) was independently developed by the Receiving Party without reference to Confidential Information of the Disclosing Party; or (e) was disclosed with the prior written approval of the Disclosing Party. Alabama Power, or its agent acting as Transmission Provider under the Tariff, may release or disclose certain Confidential Information of the Disclosing Party to other Transmission Providers, SERC, or NERC if necessary or appropriate in connection with its role as Transmission Provider. If a court, government agency or entity with the right, power, and authority to do so, requests or requires either Party, by subpoena, oral deposition, interrogatories, requests for production of documents, administrative order, or otherwise, to disclose Confidential Information, that Party shall provide the other Party with prompt notice of such request(s) or requirement(s) so that the other Party may seek an appropriate protective order or waive compliance with the terms of this Agreement. In the absence of a protective order or waiver the Party shall disclose such Confidential Information which, in the opinion of its counsel, the Party is legally compelled to disclose. Each Party will use reasonable efforts to obtain reliable assurance that confidential treatment will be accorded any Confidential Information so furnished.
17.20 Cooperation. Each Party to this Agreement shall reasonably cooperate with the other as to all aspects relating to the performance of its respective obligations under this Agreement; provided, however, this agreement of cooperation shall not constitute a waiver or relinquishment of either Party's rights under this Agreement in law or equity.
17.21 Negotiated Agreement. The Parties agree that this Agreement is the result of mutual compromise and shall not be construed as having been drafted by either Party. The Parties agree to support the acceptance of the Agreement in its entirety by FERC.
17.22 Subcontractors. Nothing in this Agreement shall be construed as preventing either Party from utilizing the services of subcontractors as it deems appropriate; provided, however, that all such contractors comply with the applicable terms and conditions of this Agreement. The creation of any subcontract relationship shall not relieve the retaining Party of any of its obligations under this Agreement.
17.23 EWG Status. Nothing in this Agreement shall require Generator to take any action that could result in its inability to obtain, or its loss of, status as an Exempt Wholesale Generator within the meaning of the Public Utility Holding Company Act of 1935, as amended.
[THE FOLLOWING PAGE IS THE SIGNATURE PAGE]
IN WITNESS WHEREOF, Generator and Alabama Power have caused this Agreement to be executed by their duly authorized representatives on the Day and year first above written.
SOUTHERN POWER COMPANY
"Generator"
By: _________________________
Title: ______________________
Date:_________________________
ALABAMA POWER COMPANY
"Alabama Power"
By: _________________________
Title: ______________________
Date:_________________________
APPENDIX A
INTERCONNECTION PROCEDURES
The following requirements apply to Generator's Facility when operated in parallel with the Alabama Power Electric System.
In order to minimize objectionable and adverse operating conditions on the electric service provided to other customers by Alabama Power, the Facility shall meet the following operating criteria:
When Generator is delivering power to the Alabama Power Electric System, Generator shall operate its generation to meet the voltage schedule, as measured at the transmission bus serving the Facility, communicated by Alabama Power. The current voltage schedules for the Interconnection Point to the Facility is attached to this Appendix A. If the Generator cannot hold the voltage schedule but is producing or absorbing its maximum amount of MVARs for the level of MW output that it is then operating at, then that is acceptable performance provided that each unit of the Generator that is then generating is producing no less than 0.33 MVAR/MW x the unit's Continuous Rated MW Output or absorbing no less than 0.23 MVAR/MW x the unit's Continuous Rated MW Output. For purposes of this paragraph, the "Continuous Rated MW Output" for each of the Generator's units comprising the Facility shall be two (2) CT's and one (1) ST with a total output of 630 MW.
The Facility shall maintain a nominal operating frequency of 60 hertz. Generator may be required to assist in supporting system frequency if requested by Alabama Power.
The Facility shall be capable of providing an immediate and sustained response to abnormal frequency excursions within the machine design parameters. The governors shall be properly maintained and shall provide droop characteristics consistent with the requirements of NERC, SERC and the Alabama Power Electric System. At a minimum, governors shall be fully responsive to frequency deviations consistent with the requirements of NERC, SERC and the Alabama Power Electric System during normal operating conditions only, as defined by Good Utility Practices. In no event shall the governors be blocked by Generator without the express written permission of Alabama Power.
a. Reactive Power Production. At continuous rated output, simulations must show that Generator's Facility shall have the capability of dynamically supplying at least 0.33 MVARs at the 230 kV Interconnection Point for each MW supplied when the Facility is tested at 1.02% of nominal voltage.
b. Reactive Power Absorption. The Facility shall also be capable of dynamically absorbing 0.23 MVARs from the transmission system for each MW supplied at the 230 kV Interconnection Point during simulations when the Facility is tested at 1.05% of nominal voltage,. Simple Cycle combustion turbines used as peaking generation may be exempted from the MVAR absorption requirements.
The Facility shall not introduce excessive distortion to the Alabama Power Electric System's voltage and current waveforms. The harmonic distortion measurements shall be made at the transmission facility serving the Facility and be within the limits specified in the tables below.
MAXIMUM ALLOWABLE HARMONIC CONTENT (CURRENT)
(in percent of total current)
Harmonic Order Number (h)
h 11 11 h 17 17 h 23 23 h 35 35 h
- - - -
ODD 2.0 1.0 0.75 0.30 0.15
EVEN 0.50 0.25 0.19 0.075 0.04
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Total current harmonic distortion may not exceed 2.5%
MAXIMUM ALLOWABLE HARMONIC CONTENT (VOLTAGE)
(in percent)
For nominal voltage at interconnection point of 69 kV to 115 kV Maximum Individual Harmonic: 1.50 Maximum Total Harmonic Distortion: 2.50
For nominal voltage at interconnection point of 161 kV and above Maximum Individual Harmonic: 1.00 Maximum Total Harmonic Distortion: 1.50
To minimize possible adverse effects on other Alabama Power customers, a power transformer is required between the Facility and the Alabama Power Electric System. This transformer's windings shall be connected according to the requirements of Alabama Power.
Generator shall not energize, or de-energize, Alabama Power equipment. The necessary control devices shall be installed by Generator on the Facility to prevent the energization of de-energized Alabama Power equipment by Generator's Facility.
Generator is responsible for the synchronization of the Facility to the Alabama Power Electric System. Alabama Power shall have bus differential relaying at the Interconnection Point and Generator must insure that its Facility is disconnected from Alabama Power whenever the bus is de-energized. Alabama Power may re-energize the bus by remote control and Alabama Power shall not be responsible for damage to Facility due to an out of phase condition during re-energization.
Alabama Power shall provide the data protocol, and Generator shall install as part of the Interconnection Facilities any equipment necessary to deliver telemetered signals to Alabama Power specifying the voltage and watts, vars, and watthours delivered to the Alabama Power Electric System at the Interconnection Point.
VOLTAGE SCHEDULES
AT THE INTERCONNECTION POINT
FOR
SOUTHERN POWER AUTAUGAVILLE COMBINED CYCLE UNIT 1
Commencing with the effective date of the Interconnection Agreement, Generator shall maintain the following voltage schedules as communicated by Alabama Power from time to time:
Operating Time Autaugaville CC1 230 kV 0000 - 0500 237 0500 - 2200 238 2200 - 2400 237 |
Schedule #2 - Southern Control Area Maximum Load for the day Between 28,000 and 33,000MW
Operating Time Autaugaville CC1 230 kV 0000 - 0600 237 0600 - 2100 238 2100 - 2400 237 |
Schedule #3 - Southern Control Area Maximum Load for the day Between 23,000 and 28,000MW
Operating Time Autaugaville CC1 230 kV 0000 - 0600 236 0600 - 2100 237 2100 - 2400 236 |
Schedule #4 - Southern Control Area Maximum Load for the day Below 23,000MW
Operating Time Autaugaville CC1 230 kV 0000 - 0600 236 0600 - 2100 237 2100 - 2400 236 |
Alabama Power's determination of whether Schedule 1, 2, 3, or 4 should be used for a given period shall be based on expectations of system requirements and conditions. The voltage schedule to be used, for the upcoming week, shall be communicated to Generator each Friday and at such other times as changing system requirements and conditions may require.
APPENDIX B
SPECIFICATIONS
TO
INTERCONNECTION AGREEMENT
BETWEEN
SOUTHERN POWER (AUTAUGAVILLE CC UNIT 1)
AND
ALABAMA POWER COMPANY
1. Location of Interconnection Point:
The location of the Interconnection Point will be in Autauga County, Alabama, near Montgomery, Alabama.
2. Projected Dates Generator's Facilities will connect to Alabama Power:
Station Service Date: July 1, 2002
Initial Synchronization Date: September 1, 2002
Commercial Operation Date: May 1, 2003
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3. Description of Interconnection Point:
The point at which Generator's one (1) 230 kV circuit connects to Alabama Power's motor operated disconnect switch in the new Alabama Power Autaugaville 230 kV Switching Station, as such is indicated on the single line diagram below.
Autaugaville 230kV Interconnection Layout
[OBJECT OMITTED]
4. Description of Generator's Facility
The Generator's Facility under this Agreement is a 630 MW Combined Cycle (CC) facility located in Autauga County, AL, which is more fully described in the Interconnection Application made by Southern Power Autaugaville to Southern Company on August 07, 2000.
5. Description of Station Service Connections:
Should Generator require station service in addition to that which Generator can self-provide, separate arrangements will be made by Generator.
6. Interconnection Facility Requirements:
The Interconnection Facilities are sufficient to accommodate approximately 630 MW Summer rating upon completion.
7. Description of Alabama Power's Interconnection Facilities:
Interconnection Facilities under this Agreement
include the following: Responsible
Party/Estimated
Cost
1. Loop the North Selma - Montgomery SS 230 kVTL
(4.4 miles total) into the 230 kV Design & Construction By
Autaugaville SS Alabama Power
($ 2,561,000)
2. 3 PCB Ring Bus at Autaugaville 230 kV SS
(includes 2-230 kV line erminals, 1-230 kV Design & Construction By
generator terminal, and space for 1 Alabama Power
additional 230 kV line terminals) ($ 2,100,000)
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8. Description of Generator's Interconnection Equipment:
Generator's Interconnection Equipment under this
Agreement includes the following: Estimated Cost
1. 3 PCB Collector Bus at the 230 kV
Autaugaville SS Design & Construction by
Southern Power
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2. 230 kV transmission line between the SS and the Collector Bus Design & Construction by Southern Power
The specifications for all such equipment in Items 7 and 8, above, will be determined in accordance with this Agreement, the results of the Interconnection Study dated March 5, 2001, Alabama Power specifications provided to the Generator in writing and Good Utility Practices.
APPENDIX C
Quarterly Estimated Construction Costs
The Quarterly Estimated Construction Costs are based on the Generator's cost for the 230 kV Autaugaville Switching Station with accommodations to loop in the North Selma - Montgomery SS 230 kV line. Generator's estimated total construction cost responsibility for the Interconnection Facilities, not including the 230 kV collector bus and the 230 kV lines between the Generator's equipment and switching station, is $ 4,661,000
----------------------------------------------------------------------------------------------------
2001 2002 2003
----------------------------------------------------------------------------------------------------
Project Activity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
----------------------------------------------------------------------------------------------------
Loop-in the 230kVTL to the Autaugaville Switching Station
----------------------------------------------------------------------------------------------------
4 PCB Ring Bus
----------------------------------------------------------------------------------------------------
Payment Schedule $950,000 $1,300,000 $1,300,000 $1,000,000 $111,000
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Exhibit 10.13
INTERCONNECTION AGREEMENT
By and Between
SOUTHERN POWER COMPANY
and
ALABAMA POWER COMPANY
for
AUTAUGAVILLE COMBINED CYCLE UNIT 2
Dated as of June 25, 2001
TABLE OF CONTENTS
SECTION 1: DEFINITIONS....................................................................................1
SECTION 2: INTERCONNECTION SERVICE........................................................................6
2.1 Service.................................................................................................6
2.2 Facility................................................................................................6
2.3 Permits.................................................................................................6
2.4 Easements and Access Rights.............................................................................6
2.5 Interconnection Point...................................................................................7
2.6 Station Service Arrangements............................................................................7
2.7 Generator Balancing Service Arrangements................................................................8
2.8 Interconnection Procedures..............................................................................8
2.9 Interconnected Operation Services.......................................................................8
2.10 Control Area Operations.................................................................................8
2.11 Inadvertent Flow........................................................................................8
SECTION 3: TERM, TERMINATION AND DISCONNECTION............................................................8
3.1 Term....................................................................................................8
3.2 Default.................................................................................................9
3.3 Permanent Disconnection.................................................................................9
3.4 Temporary Disconnection.................................................................................9
3.5 Survival of Rights.....................................................................................10
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY.............................................10
4.1 General Standards......................................................................................10
4.2 Maintenance and Operation..............................................................................11
SECTION 5: INTERCONNECTION FACILITIES....................................................................11
5.1 Interconnection Facilities.............................................................................11
5.2 Costs of Interconnection Facilities....................................................................11
5.3 Additional Interconnectors.............................................................................11
5.4 Payment of Cost of On-Going Maintenance and Operation
of the Interconnection Facilities......................................................................12
5.5 Care of Equipment......................................................................................13
5.6 Payment of the Cost of the Interconnection Facilities..................................................13
SECTION 6: LIABILITY AND INDEMNIFICATION.................................................................14
6.1 Remedies for Breach....................................................................................14
6.2 Limitation of Liability................................................................................14
6.3 No Liability for Other Party's Responsibilities........................................................15
6.4 Responsibility for Property............................................................................15
6.5 Indemnification........................................................................................15
SECTION 7: METERING, DATA ACQUISITION, AND RELATED
PROTECTION EQUIPMENT..........................................................................16
7.1 Metering...............................................................................................16
7.2 Data Acquisition and Protection Equipment..............................................................17
7.3 Payment of Cost of Metering, Data Acquisition, and Related Protection Equipment........................17
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7.4 Care of Equipment......................................................................................17 7.5 Inspection and Testing.................................................................................18 7.6 Inaccuracies...........................................................................................18 SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING..................................................18 8.1 Facility Evaluation Based on Actual Equipment Data.....................................................18 8.2 Implementation of Control and Operating Procedures.....................................................19 8.3 Facility Inspection....................................................................................19 8.4 Initial Synchronization................................................................................19 8.5 Review of Synchronization Tests........................................................................19 SECTION 9: ADMINISTRATION CHARGE.........................................................................20 SECTION 10: PAYMENT PROCEDURE............................................................................20 10.1 Billing................................................................................................20 10.2 Failure to Timely Pay..................................................................................20 10.3 Interest...............................................................................................21 10.4 Creditworthiness.......................................................................................21 10.5 Audit Rights...........................................................................................21 10.6 Disputed Bills.........................................................................................21 10.7 No Waiver..............................................................................................21 SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS....................................................22 11.1 Generator Representations, Warranties and Covenants....................................................22 11.2 Alabama Power Representations, Warranties and Covenants................................................22 11.3 Survival of Representations, Warranties and Covenants..................................................23 SECTION 12: COMPLIANCE WITH LAWS.........................................................................23 12.1 Compliance.............................................................................................23 12.2 Change of Law..........................................................................................23 12.3 Regulatory Filings.....................................................................................24 12.4 Taxes..................................................................................................24 SECTION 13: INSURANCE....................................................................................25 13.1 Generator's Insurance..................................................................................25 13.2 Notice and Certification...............................................................................26 14.1 Definition of Force Majeure Event......................................................................26 14.2 No Breach or Liability.................................................................................26 14.3 Suspension of Performance..............................................................................27 SECTION 15: OPERATING COMMITTEE..........................................................................27 15.1 Establishment of Committee.............................................................................27 15.2 Duties.................................................................................................27 SECTION 16: ASSIGNMENT...................................................................................28 16.1 Assignment by Generator................................................................................28 16.2 Assignment by Alabama Power............................................................................30 SECTION 17: MISCELLANEOUS................................................................................30 17.1 Alabama Power's Agent..................................................................................30 |
17.2 No Partnership.........................................................................................30 17.3 Successors and Assigns.................................................................................30 17.4 No Third Party Benefit.................................................................................30 17.5 No Affiliate Liability.................................................................................30 17.6 Time of Essence........................................................................................30 17.7 No Waiver..............................................................................................30 17.8 Amendments.............................................................................................31 17.9 Notice.................................................................................................31 17.10 Counterparts...........................................................................................32 17.11 Cross-References.......................................................................................32 17.12 Section Headings.......................................................................................32 17.13 Including..............................................................................................32 17.14 Governing Law..........................................................................................32 17.15 Merger.................................................................................................32 17.16 NERC...................................................................................................32 17.17 Good Utility Practices.................................................................................32 17.18 Safety.................................................................................................32 17.19 Confidential Information...............................................................................33 17.20 Cooperation............................................................................................33 17.21 Negotiated Agreement...................................................................................33 17.22 Subcontractors.........................................................................................33 17.23 EWG Status.............................................................................................34 APPENDIX A APPENDIX B APPENDIX C |
INTERCONNECTION AGREEMENT
This Interconnection Agreement ("Agreement") is made and entered into on June 25, 2001 by and between Southern Power Company, organized and existing under the laws of the State of Delaware and having its principal place of business at Birmingham, Alabama (hereinafter referred to as the "Generator"), and Alabama Power Company, a corporation organized and existing under the laws of the State of Alabama and having its principal place of business at Birmingham, Alabama (hereinafter referred to as "Alabama Power"). Generator and Alabama Power may be hereinafter referred to individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, Generator desires to engage in the interconnected operation of Generator's generating facility with the transmission facilities of the Alabama Power Electric System; and
WHEREAS, Generator desires to engage in sales of electric energy to be generated by Generator's generating facility.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties covenant and agree as follows:
SECTION 1: DEFINITIONS
1.1 In addition to the initially capitalized terms and phrases defined in the preamble of this Agreement, the following initially capitalized terms and phrases as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "Affiliate" - shall mean, with respect to any Party, another Person (i) which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Party, (ii) which, directly or indirectly, of record or beneficially, owns or holds 10% or more of the shares of any class of capital stock or other ownership interest of such Party having voting power or (iii) of which 10% or more of the shares of any of the capital stock or other ownership interest of the Affiliate having voting power is owned or held, directly or indirectly, of record or beneficially, by or for such Party. For purposes of this definition, "control" when used with respect to any 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 "controlled" have meanings correlative to the foregoing.
1.1.2 "Alabama Power" - shall have the meaning ascribed to it in the first paragraph of this Agreement, including any of its agents or permitted successors and assigns.
1.1.3 "Alabama Power Electric System" - means collectively, the entire network of electric generation, transmission and distribution facilities, equipment and other devices owned (in whole or in part) or controlled by Alabama Power, for the purposes of generating, transmitting, receiving, and distributing electric energy and capacity.
1.1.4 "Appendix" or "Appendices" - means any of the schedules, exhibits and attachments, including the Interconnection Procedures, which are appended hereto and are incorporated by reference herein and made a part of this Agreement.
1.1.5 "Business Day" - means any Day excluding Saturday and Sunday and excluding any Day on which banking institutions in Alabama are closed because of a federal holiday.
1.1.6 "Day" or "Calendar Day" - means a calendar day unless otherwise specified.
1.1.7 "Effective Date" - shall mean the date first written above, or such other date as the FERC shall order.
1.1.8 "Emergency" - means a condition or situation associated with the transmission and distribution of electricity, including voltage abnormalities, that, in the sole reasonable judgment of Alabama Power, exercised on a non-discriminatory basis as the transmission asset owner, adversely affects or is imminently likely to adversely affect: (i) public health, life or property; (ii) Alabama Power's employees, agents or property; or (iii) Alabama Power's ability to maintain safe, adequate, and continuous electric service to its customers and/or the customers of any member of NERC consistent with Good Utility Practices; provided, however, that if there is no adverse condition associated with distribution or transmission facilities, then the inability of Alabama Power to meet its load requirements solely because of insufficient generation resources shall not constitute an Emergency.
1.1.9 "Facility" - means all of Generator's equipment (including the Generator's Interconnection Equipment), as described in Appendix B of this Agreement, used to produce electric energy and required for parallel operation with Alabama Power, which equipment is located in Autauga County, Alabama and is connected to the Interconnection Point.
1.1.10 "FERC" - means the Federal Energy Regulatory Commission and any successor.
1.1.11 "Force Majeure Event" - shall have the meaning ascribed to it in Section 14.1.
1.1.12 "Generator" - shall have the meaning ascribed to it in the first paragraph of this Agreement, and its agents or permitted successors and assigns.
1.1.13 "Generator's Interconnection Equipment" - means all equipment which is owned, operated, or maintained by or for Generator as such is described in Appendix B (including without limitation, equipment for connection, switching, protective relaying and safety) that is required to be installed for the delivery of electric energy onto the Alabama Power Electric System on behalf of Generator. Generator's Interconnection Equipment does not include the Interconnection Facilities.
1.1.14 "Good Utility Practices" - 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 the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result(s) at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practices are 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties, Legal Requirements, NERC and SERC guides, and applicable safety and maintenance codes.
1.1.15 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department, taxing authority, or other authority thereof having jurisdiction over either Party, the Facility, the Interconnection Facilities, the Generator's Interconnection Equipment, or the Alabama Power Electric System, whether acting under actual or assumed authority.
1.1.16 "Indenture Trustee" - means a trust company chartered or other Person incorporated under the laws of the United States or a state of the United States and based in the United States which is the indenture trustee, mortgagee or secured party under any Indenture.
1.1.17 "Initial Synchronization Date" - means the date that includes the first instant in time when energy generated by the Facility is delivered to the Alabama Power Electric System at the Interconnection Point. Such Initial Synchronization Date is projected in Appendix B.
1.1.18 "Interconnection Facilities" - means all equipment which is constructed, owned, operated, or maintained by or for Alabama Power, as such are generally identified and described in Appendix B, (including without limitation, equipment for connection, switching, transmission, distribution, protective relaying and safety) that, in Alabama Power's reasonable judgment, is required to be installed for the delivery of electric energy onto the Alabama Power Electric System on behalf of Generator and for the receipt by Generator of electric service in accordance with Section 2.6 hereof.
1.1.19 "Interconnection Point" - means the point of interconnection of Generator's Facility to the Alabama Power Electric System as defined in the Specifications to this Agreement set forth in Appendix B.
1.1.20 "Interconnection Procedures" - means the procedures for interconnection and operations set forth in Appendix A.
1.1.21 "Interconnection Service" - means the services provided by Alabama Power to Generator to safely and reliably interconnect Generator's Facility to the Alabama Power Electric System and receive electric energy and capacity from the Facility at the Interconnection Point pursuant to the terms of this Agreement and, if applicable, the Tariff.
1.1.22 "Interest Rate" - means the prime rate of interest as published from time to time in the Wall Street Journal or comparable successor publication.
1.1.23 "kW" - means kilowatts. In addition, "MW" may be used to mean megawatts, which are 1000 kilowatts.
1.1.24 "kWh" - means kilowatt-hours. In addition, "MWh" may be used to mean megawatt-hours, which are 1000 kilowatt-hours.
1.1.25 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, treaty, judgment, injunction, order or other legally binding announcement, directive, published practice or requirement enacted, issued or promulgated by a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question at the time of the Effective Date or anytime thereafter during the Term of this Agreement.
1.1.26 "Lien" - means any and all liens, mortgages, encumbrances, pledges, claims, leases, charges and security interests of any kind.
1.1.27 "Month" - means a calendar Month, or such other period as may be mutually agreed by the Parties. "Monthly" has a meaning correlative to that of Month.
1.1.28 "Monthly Administration Charge" - for a particular Month of the Term, means the Monthly amount to be paid by Generator to Alabama Power as set forth in Section 9.
1.1.29 "NERC" - means the North American Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.30 "Party" or "Parties" - means either Alabama Power or Generator or both.
1.1.31 "Permitted Financing Assignee" - shall have the meaning ascribed to it in Section 16.1 hereof.
1.1.32 "Permitted Liens" - means:
(a) any Lien on this Agreement and/or Alabama Power's rights, obligations, title or interest in, to and under this Agreement pursuant to that certain Indenture from Alabama Power to Chemical Bank & Trust Company, Trustee, dated as of January 1, 1942, or pursuant to any other mortgage or security agreement as heretofore and hereafter amended (the "Indenture");
(b) any Lien for taxes, assessments or other governmental charges which are not delinquent or the validity of which is being contested in good faith by appropriate proceedings diligently prosecuted so long as appropriate reserves are maintained in respect of such taxes, assessments or charges; and
(c) attachments, judgments and other similar Liens arising in connection with court proceedings, provided that within sixty (60) Days of the attachment thereof (but not less than five (5) Days prior to any execution or sale pursuant thereto), the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being contested in good faith and by appropriate proceedings so long as any material risk of liability is covered by a bond, or appropriate reserves are maintained in respect of such proceedings.
1.1.33 "Person" - means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court.
1.1.34 "Persons Indemnified" - means, when used with respect to a Party, collectively or individually (as the context might indicate), the Party, the Party's Affiliates and permitted successors and assigns, and the directors, officers, representatives, agents and employees of each of them.
1.1.35 "Qualified Person" - shall mean any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee(s) of a trust, unincorporated organization, or any federal, state, county, municipal or regional governmental authority, agency, board, body, instrumentality or court who is an owner or operator of transmission facilities, or belongs to a regional transmission organization.
1.1.36 "Quarter" - means for each year of the Term four distinct time periods for planning and budgeting purposes comprised of January through March, April through June, July through September, and October through December. "Quarterly" has a meaning correlative to that of Quarter. In the event that this Agreement becomes effective during any Quarter, the obligations herein that arise on a Quarterly basis shall begin in the Quarter immediately following the initial Effective Date of this Agreement.
1.1.37 "Quarterly Estimated Construction Cost" - shall have the meaning set forth in Section 5.6.1.
1.1.38 "SERC" - means the Southeastern Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.39 "Southern Companies" - means, collectively, the electric utility operating company subsidiaries of Southern Company engaged in common dispatch and control of generating resources within the Southern Company Control Area, currently including Alabama Power Company, Alabama Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, and Southern Power Company.
1.1.40 "Southern Company Control Area" - means that electric system of the Southern Companies that has been recognized by NERC and SERC as a control area.
1.1.41 "Specifications" - mean the interconnection specifications provided in Appendix B to this Agreement, which are attached hereto and incorporated herein by reference.
1.1.42 "Tariff" - means Southern Companies Open Access Transmission Tariff or a successor arrangement that governs transmission and interconnection services on the transmission facilities of Alabama Power.
1.1.43 "Term" - means the duration of this Agreement as specified in Section 3.1.
SECTION 2: INTERCONNECTION SERVICE
2.1 Service. Alabama Power shall supply Generator with Interconnection Service at the Interconnection Point for the Facility in accordance with and for the Term of this Agreement. Interconnection Service does not include transmission delivery service beyond the Interconnection Point. Neither Alabama Power nor any of its Affiliates shall have any obligation under this Agreement to purchase any power from the Facility, it being the intent and understanding of the Parties that Generator shall be responsible for its power sales to third parties.
2.3 Permits. Generator shall obtain and maintain, at its sole expense, any and all governmental permits, certificates or authorizations that Generator is required to obtain and maintain for the performance of its obligations under this Agreement. Alabama Power shall obtain and maintain any and all permits, certificates or authorizations that are required for the construction, operation, maintenance, and testing of the Interconnection Facilities, the expense of which shall be paid by Generator in accordance with Section 5.
2.4.1 To the extent that Generator has any such rights, Generator shall convey to Alabama Power at no cost to Alabama Power any and all rights of way and easements, including adequate and continued access rights to property of Generator necessary to provide Interconnection Service to Generator. Generator agrees that such parcel, rights of way, and easements shall survive termination or expiration of this Agreement, if and to the extent necessary for the continued use or the removal of the Interconnection Facilities. Such easements and access rights are specifically intended to permit Alabama Power to install, operate, maintain, replace and/or remove the Interconnection Facilities.
2.4.2 Upon reasonable advance notice given to Generator,
representatives of Alabama Power (as the transmission asset owner) shall at all
reasonable times have access to the Generator's Interconnection Equipment and to
property owned or controlled by Generator to the extent necessary in order to:
(i) inspect, maintain, and test meters and other Alabama Power equipment; (ii)
interconnect, disconnect (in accordance with Section 3), monitor, or measure
energy generated by the Facility; (iii) inspect the operation, maintenance or
testing of the Generator's Interconnection Equipment; or (iv) take such other
action as may be reasonably necessary to exercise Alabama Power's rights under
this Agreement. Alabama Power shall take reasonable steps to ensure such access
does not materially interfere with the operations, maintenance or testing of the
Facility, and that Alabama Power's use of such property complies with Legal
Requirements with respect to the Facility as well as with Generator's reasonable
policies and procedures applicable to the Facility, including those regarding
safety. Generator shall cooperate in such physical inspections of the
Generator's Interconnection Equipment as may be reasonably required by Alabama
Power. Alabama Power's technical review and inspection of the Generator's
Interconnection Equipment shall not be construed as endorsing the design thereof
nor as any warranty of the safety, durability or reliability of the Facility.
2.4.3 To the extent that Alabama Power has any such rights, Alabama Power agrees to furnish at no cost to Generator any necessary licenses or other access rights to permit Generator to construct, connect, operate and maintain its facilities located in Alabama Power's substation or to otherwise fulfill its obligations under this Agreement. After the Interconnection Facilities are energized, such access rights for Generator's facilities located inside the substation shall be exercised by Generator only with supervision by Alabama Power. Generator shall provide to Alabama Power reasonable notice under the circumstances of a request for such supervised access to the substation, and Alabama Power and Generator shall mutually agree upon the date and time of such supervised access, such agreement not to be unreasonably withheld. In addition to the aforementioned requirement, in exercising such access rights, Generator shall not unreasonably disrupt or interfere with normal operations of Alabama Power's business and shall act consistent with Good Utility Practice.
2.5 Interconnection Point. Alabama Power shall establish and maintain the Interconnection Point, as described in Appendix B to this Agreement.
2.6 Station Service Arrangements. Generator is responsible for making all appropriate arrangements for station service requirements. Generator must demonstrate, to Alabama Power's reasonable satisfaction, that it has adequate arrangements in place to supply its station service requirements. If Generator supplies its running station service on Generator's side of the Interconnection Point, then energy consumed and demand requirements are deemed to be netted from Generator's capability. In this same arrangement, starting station service energy is also assumed to be netted out of energy delivered to the Interconnection Point.
2.7 Generator Balancing Service Arrangements. Generator is responsible for ensuring that its actual generation matches its scheduled delivery, on an integrated clock hour basis (in whole MW), to the Alabama Power Electric System at the Interconnection Point. Generator shall make arrangements for the supply of energy and/or capacity when there is a difference between the actual generation and the scheduled delivery. Generator may satisfy its obligation for making such generator balancing service arrangements by: (a) obtaining such service from another entity that (i) has generating resources within the Southern Company Control Area, (ii) agrees to assume responsibility for providing generator balancing service to the Generator and (iii) has a control area coordination services agreement with the Southern Companies that addresses generator balancing service for all generating resources for which the entity is responsible; (b) committing sufficient additional unscheduled generating resources to the control of and dispatch by the Southern Company Control Area that are capable of supplying any capacity and energy not supplied by the scheduled resource and entering into a control area coordination services agreement with the Southern Company Control Area operator that addresses generator balancing service obligations; (c) entering into an arrangement with another NERC-approved control area to dynamically schedule the Generator's Facility out of the Southern Company Control Area and into such other control area; (d) entering into a generator balancing service agreement with Southern Companies pursuant to their Generator Balancing Service Tariff on file with FERC; or (e) in the event the load/generation balancing function of the control area in which Alabama Power is a participant is provided by an entity other than Southern Companies, by entering into an alternate arrangement with such control area service provider.
2.8 Interconnection Procedures. When the Facility is operated as part of the Southern Company Control Area, Generator shall comply with the Interconnection Procedures (Appendix A) for the Facility at all times. When the Facility is not operated as part of the Southern Company Control Area, the Operating Committee shall determine which (if any) of the Interconnection Procedures are not applicable.
2.9 Interconnected Operation Services. Generator retains any right it may have to pursue compensation for the provision of interconnected operation services by making a filing with FERC. Alabama Power retains any right it may have to support or oppose such filing.
2.10 Control Area Operations. Nothing in this Agreement shall obligate Generator to operate the Facility as a part of the Southern Company Control Area.
2.11 Inadvertent Flow. Generator is not a transmission provider; and Alabama Power shall have no obligation under this Agreement to pay Generator any charge for flows of electric power and/or energy through Generator's Interconnection Equipment.
SECTION 3: TERM, TERMINATION AND DISCONNECTION
3.1 Term. This Agreement shall become effective on the Effective Date and shall continue in effect for a period of forty (40) years from the initial Effective Date unless terminated earlier by mutual written agreement of the Parties or otherwise pursuant to the provisions of this Agreement subject to any applicable Legal Requirement, and shall continue thereafter until terminated by either Party on at least one (1) year's notice.
3.2.1 A Party shall be in "Default" under this Agreement, if:
(i) the Party fails to comply with any material term or condition of this
Agreement; (ii) any material representation or warranty of the Party made
pursuant to this Agreement shall prove to be false or misleading in any material
respect when made or deemed made; or (iii) in the case of Generator, Generator
makes an assignment for the benefit of Generator's creditors, or voluntary or
involuntary proceedings in bankruptcy are instituted seeking to adjudge
Generator a bankrupt, or if Generator be adjudged a bankrupt, or if Generator's
affairs are placed in the hands of any court for administration.
3.2.2 This Agreement may be terminated by either Party, upon written notice, if the other Party is in Default hereunder and such Party (or its Permitted Financing Assignee) has not cured such breach within thirty (30) Days following written notice of such breach to the other Party. Provided, however, that in the event the Default is not capable of being cured within thirty (30) Days, the Agreement shall not be terminated if the Party in Default (or its Permitted Financing Assignee) has begun in good faith taking actions to cure within thirty (30) Days following such written notice and diligently proceeds to completion.
3.2.3 In the event of a Default by either Party and subject to that Party's right to cure, the non-defaulting Party may pursue any and all judicial and administrative remedies and relief available to it.
3.3 Permanent Disconnection. Upon termination of this Agreement
(whether due to the expiration of the Term or due to a Default as described in
Section 3.2), Alabama Power may permanently disconnect the Facility from the
Alabama Power Electric System in accordance with Good Utility Practices.
3.4.1. Alabama Power (as transmission asset owner) may, consistent with Good Utility Practice and on a non-discriminatory basis, direct that the Facility be temporarily disconnected from the Alabama Power Electric System: (i) during an Emergency; (ii) if the operation and output of the Facility do not meet the requirements of this Agreement (even if Generator has commenced actions to cure such Default) and such condition could materially adversely affect the safe and reliable operation of the Alabama Power Electric System; (iii) if an inspection of the Facility reveals a hazardous condition, lack of scheduled maintenance or testing, or an operating characteristic of the Facility that could materially adversely affect the safe and reliable operation of the Alabama Power Electric System; (iv) if Generator has modified the Facility or interconnection protective devices in a manner that could reasonably be expected to materially adversely affect the safe and reliable operation of the Alabama Power Electric System without the knowledge and approval of Alabama Power; (v) in the event of tampering with, or unauthorized use of, Alabama Power's equipment; (vi) if the operation of Generator's equipment materially adversely affects Alabama Power's equipment or the safe and reliable operation
of the Alabama Power Electric System; or (vii) if necessary to construct, install, maintain, repair, replace, remove, investigate, inspect or test any part of the Interconnection Facilities or the transmission facilities of Alabama Power, in accordance with Section 15.2.4.
3.4.2 In the event of the occurrence of any of the conditions described in Section 3.4.1, Alabama Power shall give as much advance notice as practicable under the circumstances of the need for disconnection of the Facility to employees of Generator designated from time to time by Generator to receive such notice. Upon receipt of notice directing disconnection, Generator shall carry out the required action. Where circumstances do not permit such advance notice to Generator or Generator's employees, Alabama Power may disconnect the Facility from the Alabama Power Electric System without such notice in accordance with Good Utility Practices. Alabama Power shall reconnect the Facility as soon as reasonably practicable following the cessation or remedy of the event that led to the temporary disconnection. The Parties agree to cooperate and coordinate with each other to the extent necessary in order to restore the Facility, Interconnection Facilities, and the Alabama Power Electric System to their normal operating state.
3.4.3 Generator shall bear any direct cost incurred by Alabama Power as a result of any disconnection or reconnection caused by Generator's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Generator. Alabama Power shall bear any direct cost incurred by Generator as a result of any disconnection or reconnection caused by Alabama Power's negligence, intentional wrongdoing, or breach of this Agreement, whether by affirmative act or omission of Alabama Power.
3.4.4 Generator reserves the right, in its sole discretion, to isolate or disconnect its Facility from the Alabama Power Electric System.
3.5 Survival of Rights. Upon termination or expiration of this Agreement, the Parties shall be relieved of their obligations under this Agreement except for the following obligations which shall survive termination or expiration: (i) the obligation to pay each other all amounts then owed and not paid under this Agreement; (ii) obligations arising from action or inaction during the period the Agreement was in effect under the indemnities provided for in this Agreement; and (iii) any other obligations which the Agreement specifically indicates shall survive termination or expiration.
SECTION 4: OPERATION AND MAINTENANCE OF GENERATOR'S FACILITY
4.1 General Standards. During the Term, Generator shall have the sole responsibility to, and at its sole expense shall manage, control, operate and maintain the Facility in accordance with Good Utility Practices and the requirements set forth in this Agreement. Generator shall operate its generating equipment in parallel with the Alabama Power Electric System in accordance with the operating procedures in Appendix A to this Agreement and those established by the Operating Committee in accordance with Section 15 and in accordance with the requirements of the NERC-recognized control area in which the Facility operates. All wiring, apparatus and other equipment necessary to receive or deliver electric energy on Generator's side of the Interconnection Point shall be supplied, maintained and operated by and at the expense of Generator.
4.2 Maintenance and Operation. Generator shall maintain and operate the Facility in accordance with Good Utility Practices. Generator shall not, without Alabama Power's prior written approval (which shall not be unreasonably withheld or delayed), make any change to its Facility which might adversely affect the operation of the Alabama Power Electric System.
SECTION 5: INTERCONNECTION FACILITIES
5.1.1 Alabama Power shall design, procure, install, and own the Interconnection Facilities needed for Alabama Power to provide Interconnection Service to Generator. Alabama Power shall be responsible for acquiring all necessary real property rights, easements, licenses, and rights of way and for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement. All Interconnection Facilities shall be and remain the property of Alabama Power. Alabama Power's obligations hereunder are dependent upon its securing and retaining the necessary rights, easements, privileges, franchises, permits and equipment for meeting such obligations; provided, however, that Alabama Power shall exercise reasonable efforts to secure and retain for the Term of this Agreement those rights, easements, privileges, franchises, permits and equipment.
5.1.2 Following commencement of commercial operation of the Facility and throughout the Term, Alabama Power shall be responsible for determining the need for, and the design, construction, installation, operation, maintenance and testing of any equipment that may be required for Interconnection Service in a manner consistent with Good Utility Practices, the Interconnection Procedures and the requirements set forth in this Agreement.
5.2 Costs of Interconnection Facilities. To the extent consistent with FERC policy, Generator shall be responsible for, and shall reimburse Alabama Power for, all costs and expenses reasonably incurred by or on behalf of Alabama Power in connection with the planning, design, construction, installation, testing, inspection, ownership, operation and maintenance of all or any part of the Interconnection Facilities during the Term of this Agreement.
5.3 Additional Interconnectors. In the instance where an entity other than Generator seeks to be the first additional Person to interconnect to the Alabama Power Electric System through the Interconnection Facilities that have been paid for by Generator (such other Person is referred to as the "Additional Interconnector") and where the Additional Interconnector seeks to interconnect for any purpose other than for Alabama Power to make a network upgrade, then Alabama Power agrees that the Additional Interconnector shall be charged a pro rata share of the cost of its interconnection, as defined hereafter. For purposes of this subparagraph, the Additional Interconnector's pro rata share of its cost of interconnection shall be the sum of the incremental cost of
physically interconnecting the Additional Interconnector to the Interconnection Facilities and the original cost of the Interconnection Facilities paid by Generator, including the price of the land provided by Generator (the sum of the incremental cost and the original cost hereafter referred to as "Combined Cost of Interconnection") and then dividing the Combined Cost of Interconnection by two (2) in order to determine both Generator's and the Additional Interconnector's "Pro Rata Share of the Combined Cost of Interconnection." Alabama Power shall then pay to Generator, or have the Additional Interconnector pay to Generator, the difference between the original cost of the Interconnection Facilities paid by Generator and Generator's Pro Rata Share of the Combined Cost of Interconnection; provided, however, that no such payment shall be required if it would result in the Generator bearing less than its Pro Rata Share of the Combined Cost of Interconnection. In the event that Persons additional and subsequent to the Additional Interconnector seek to interconnect to the Alabama Power Electric System through the Interconnection Facilities that have been paid for by Generator (such additional interconnectors referred to as "Subsequent Additional Interconnectors") and where the Subsequent Additional Interconnectors seek to interconnect for any purpose other than for Alabama Power to make a network upgrade, then Alabama Power agrees that the Subsequent Additional Interconnectors shall be charged a pro rata share of the cost of their respective interconnection, such cost to be determined in accordance with the methodology described above, and Alabama Power agrees further that in such event it shall pay, or have such Subsequent Additional Interconnectors pay to Generator and Additional Interconnector, reimbursement calculated based on the method described above, taking into account Generator's Pro Rata Share of the Combined Cost of Interconnection. Except in accordance with the cost sharing methodology set forth herein, Generator shall not be responsible for the costs of any modifications of the Interconnection Facilities that are not caused by the Generator. In no event shall Generator be obligated to pay any increased amount as a result of any Additional Interconnector or Subsequent Additional Interconnector. To the extent that all interconnectors do not have comparable interconnection points, the Combined Cost of Interconnection shall be adjusted appropriately.
5.4 Payment of Cost of On-Going Maintenance and Operation of the Interconnection Facilities
5.4.1 Alabama Power shall operate and maintain the Interconnection Facilities in accordance with Good Utility Practices and in a non-discriminatory manner.
5.4.2 Alabama Power shall develop an estimate of all costs and expenses to be paid by Generator for the operation and maintenance of the Interconnection Facilities on an annual basis and provide the annual estimate to Generator at least eight (8) weeks before December 31 of each year. In the case of Additional Interconnectors or Subsequent Additional Interconnectors, Generator shall be responsible for up to its pro rata share, calculated in accordance with Section 5.3, of the costs of operation and maintenance of the Interconnection Facilities. Generator shall pay one-twelfth (1/12) of such estimated costs each Month in accordance with Section 10. In addition, Generator shall pay its pro rata share of all costs reasonably incurred by Alabama Power (excluding any such costs reimbursed to Alabama Power through insurance proceeds) to repair and restore the Interconnection Facilities caused by any Force Majeure Event upon receipt of an invoice in accordance with Section 10.
5.4.3 Alabama Power shall true-up this estimate to Alabama
Power's actual costs and expenses within a reasonable period of time after such
actual costs and expenses are known but not less often than annually. In the
event that the actual costs and expenses to be paid by Generator under this
Section 5.4 are more or less than Alabama Power's initial estimate, the
difference (either a credit or an additional charge) shall be reflected on a
subsequent invoice.
5.5 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect the Interconnection Facilities located on Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to the Interconnection Facilities arising from the failure of Generator to properly protect those Interconnection Facilities in accordance with Good Utility Practices.
5.6.1 Generator shall pay Alabama Power in advance for the costs incurred related to the installation and construction of the Interconnection Facilities. Alabama Power shall develop a quarterly payment schedule that shall be based upon (i) the estimated costs to be incurred by Alabama Power in the installation and construction of the Interconnection Facilities, and (ii) the time periods that Alabama Power estimates that such costs will be incurred by Alabama Power ("Quarterly Estimated Construction Costs"). A current estimate of the Quarterly Estimated Construction Costs and the projected payment schedule are attached as Appendix C. Alabama Power may revise the schedule from time to time to more accurately reflect more current estimates of costs and/or to incorporate any needed true-up of estimated costs to actual costs. Alabama Power shall obtain authorization to proceed prior to proceeding with planning, construction, installation or testing of the Interconnection Facilities. Generator shall pay such estimated costs as specified in the payment schedule in accordance with Section 10. Generator shall have the right to approve any deviation in the scope of the work if such deviation would result in an estimated increase of ten percent (10%) or more over the estimated costs. In no event shall Alabama Power collect from Generator any estimated payment for any costs unless Alabama Power reasonably expects to actually incur such costs during the forthcoming Quarter.
5.6.2 During the construction of the Interconnection Facilities, Alabama Power shall true-up the estimated payments to Alabama Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator are more or less than Alabama Power's estimate, the difference (either a credit or additional charge) shall be reflected on a subsequent invoice. Alabama Power shall issue a final cost report within one hundred twenty (120) Days of the Facility's commercial operation date. The final report shall set forth in reasonable detail the actual costs of the Interconnection Facilities and shall true-up the estimated payments to actual costs. To the extent that the final, actual costs that are Generator's cost responsibility under this Agreement exceed the estimated costs already paid by Generator, Alabama Power shall invoice Generator in accordance with Section 10.1. To the extent that the estimated costs already paid by Generator exceed the final, actual costs that are Generator's cost responsibility under this Agreement, Alabama Power shall refund to Generator an amount equal to the difference within twenty (20) Days of the issuance of the final cost report.
5.6.3 Alabama Power shall inform Generator on a monthly basis, and at such other times as Generator reasonably requests, of the status of the construction and installation of the Interconnection Facilities, including, but not limited to, the following information: progress to date; a description of scheduled activities for the next period; the delivery status of all equipment ordered; and the identification of any event which Alabama Power reasonably expects may delay construction of, or increase the cost of, the Interconnection Facilities.
5.6.4 Generator reserves the right, upon written notice to Alabama Power, to suspend at any time all work by Alabama Power associated with the construction and installation of the Interconnection Facilities. In such event, Generator shall be responsible for the costs which Alabama Power (i) has incurred prior to the suspension to the extent such costs previously were authorized by Generator and (ii) reasonably incurs in suspending such work, including without limitation, the costs incurred to ensure the safety of persons and property and the integrity of the Alabama Power Electric System and the costs incurred in connection with the cancellation of material and labor contracts, provided such cancellation has been authorized by Generator. Alabama Power will invoice Generator pursuant to Section 10.1 and agrees to use reasonable efforts to minimize its costs. If, after such suspension, Generator does not provide Alabama Power with written notice to proceed within three hundred sixty-five (365) Days after the notice of suspension, this Agreement shall be deemed terminated. If this Agreement is deemed terminated, Generator shall be responsible for costs reasonably incurred in winding up such work and the costs incurred in connection with the cancellation of material and labor contracts, to the extent to which Generator has not already reimbursed Alabama Power for such costs. Any non-returnable equipment that has not already been installed by Alabama Power shall become the property of Generator "as is" upon payment of Alabama Power's costs.
SECTION 6: LIABILITY AND INDEMNIFICATION
6.1 Remedies for Breach. Subject to Section 6.2, either Party shall be liable to the other for any loss resulting directly from any breach of this Agreement and which at the time of the breach was a reasonable foreseeable consequence of such breach.
6.2 Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT, NEITHER PARTY NOR ITS PERSONS INDEMNIFIED SHALL BE LIABLE TO THE
OTHER PARTY OR ITS PERSONS INDEMNIFIED FOR ANY CLAIMS, SUITS, ACTIONS OR CAUSES
OF ACTION FOR INCIDENTAL, PUNITIVE, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, DAMAGES IN THE CHARACTER OF LOSS OF PROFITS OR
REVENUES, DAMAGES SUFFERED BY GENERATOR'S OR ALABAMA POWER'S CUSTOMERS DUE TO
SERVICE INTERRUPTIONS, OR COST OF CAPITAL) CONNECTED WITH, RELATING TO, OR
ARISING OUT OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY SUCH DAMAGES
WHICH ARE BASED UPON CAUSES OF ACTION FOR BREACH OF CONTRACT, TORT (INCLUDING
NEGLIGENCE AND MISREPRESENTATION), BREACH OF WARRANTY, STRICT LIABILITY OR
OTHERWISE. THE PROVISIONS OF THIS SECTION 6.2 SHALL APPLY REGARDLESS OF FAULT
AND SHALL SURVIVE TERMINATION, CANCELLATION, SUSPENSION, COMPLETION, OR
EXPIRATION OF THIS AGREEMENT.
6.3 No Liability for Other Party's Responsibilities. Neither Party nor its Persons Indemnified assumes any obligation or responsibility of any kind with respect to the other Party's equipment, including, without limitation, obligation or responsibility with respect to the condition or operation of said equipment, except for Generator's obligations and responsibilities hereunder for the Interconnection Facilities. Neither Party nor its Persons Indemnified shall be responsible for the transmission, distribution or control of electrical energy on the other Party's side of the Interconnection Point.
6.4 Responsibility for Property. Each Party shall be responsible for all physical damage to or destruction of, or any personal injury or death associated with, the property, equipment and/or facilities owned by it and located on its premises, regardless of who brings the claim and regardless of who caused the damage, and shall not seek recovery or reimbursement from the other Party or its Persons Indemnified for such damage, except in cases of breach of this Agreement or the sole negligence or intentional wrongdoing by the other Party or its Persons Indemnified. Without limiting the generality of the foregoing, neither Party nor its Persons Indemnified shall be liable for damages or injury arising out of or resulting from the simple failure (i.e., failure of a device not caused by breach of contract, negligence or intentional wrongful act) of protective devices (e.g., circuit breakers). For purposes of this Section, a breach of this Agreement by Alabama Power shall be limited to a failure by it to comply with its obligations under this Agreement regarding the installation, operation and maintenance of the Interconnection Facilities.
6.5.1 Generator shall at all times indemnify, defend, and hold harmless Alabama Power and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) the Generator's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction of Alabama Power's property properly located, pursuant to this Agreement, on premises owned, leased or controlled by Generator, except in cases of sole negligence or intentional wrongdoing by Alabama Power or its Persons Indemnified, or (iii) activities on Generator's property, except, in each case, in the case of sole negligence or intentional wrongdoing by Alabama Power or its Persons Indemnified.
6.5.2 Alabama Power shall at all times indemnify, defend, and hold harmless Generator and its Persons Indemnified from and against any and all damages, losses, claims, including claims and actions involving injury to or death of any person or damage to property, demands, suits, recoveries, costs and expenses, court cost, attorney fees, and all other obligations, arising out of or resulting from (i) Alabama Power's breach of its obligations under this Agreement or intentional wrongful act, or (ii) misuse, damage to or destruction
of Generator's property properly located, pursuant to this Agreement, on premises owned, leased, or controlled by Alabama Power, except in cases of sole negligence or intentional wrongdoing by the Generator or its Persons Indemnified, or (iii) activities on Alabama Power's property relating to the installation, operation and maintenance of the Interconnection Facilities, except in each case, in the case of sole negligence or intentional wrongdoing by Generator or its Persons Indemnified.
SECTION 7: METERING, DATA ACQUISITION, AND RELATED PROTECTION EQUIPMENT
7.1.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all metering equipment necessary to provide information regarding power flow and voltage conditions at the Interconnection Point; provided, however, that Alabama Power shall operate, maintain, repair and replace any meters located on the Interconnection Facilities, the costs of such activities to be paid by Generator consistent with its payment of expenses under Section 5.4. All metering equipment of Generator shall conform to Good Utility Practices. Prior to its installation, Alabama Power and Generator shall review the metering equipment to ensure conformance with Good Utility Practices and Generator shall maintain the metering equipment in conformance with Good Utility Practices throughout the Term. The metering equipment described herein does not include station service metering equipment.
7.1.2 Electric capacity and energy received by the Alabama Power Electric System from Generator shall be measured by meters installed at the Interconnection Point. If and to the extent Generator's meters are not physically located at the Interconnection Point, the metered amount of energy shall be adjusted for losses as mutually agreed from the point of metering to the Interconnection Point in accordance with Good Utility Practices. Any Party performing such a study to determine the loss adjustment shall provide a copy to the other Party.
7.1.3 Generator shall provide, as required by Good Utility Practices and requested by Alabama Power, real-time telemetered load signals of its energy delivered to the Interconnection Point. Generator shall also read the meters owned by it and shall furnish to Alabama Power all meter readings and other information reasonably required for operations and for billing purposes under this Agreement. Such information shall remain available to Alabama Power for one (1) year or such longer period as may be required by any Legal Requirement.
7.1.4 The Parties agree that the meter readings provided by the Generator to Alabama Power, under normal circumstances, shall be used as the official measurement between the Parties of the amount of capacity and energy delivered from the Facility to the Interconnection Point.
7.1.5 Any time during the Term and after initial acceptance of the accuracy of Generator's telemetered information, if telemetered information is unavailable to Alabama Power, for any reason, the Generator shall provide integrated hourly meter readings to Alabama Power each hour until telemetry is returned to service in conformance with Good Utility Practices and Section 7.1.2.
7.2.1 Generator shall be responsible for the purchase, installation, operation, maintenance, repair and replacement of all data acquisition equipment, protection equipment, and any other associated equipment and software, which may be reasonably required at any time during the Term by either Party for Generator to operate its facilities in parallel with Alabama Power. Such equipment shall conform to Good Utility Practices. Prior to its installation, Alabama Power and Generator shall review the equipment and software required by this Section 7 to ensure conformance with Good Utility Practices.
7.2.2 The selection of real time telemetry and data to be received by Alabama Power and Generator shall be at the reasonable discretion of Alabama Power, as deemed by Alabama Power necessary for reliability, security, revenue metering, and/or monitoring of the Facility's operations in conformance with Good Utility Practices. This telemetry includes, but is not limited to, voltages, generator output (MW, MVAR, and MWh) at the Interconnection Point and breaker status. Alabama Power shall provide to Generator real time telemetry of Alabama Power's breaker status. To the extent telemetry is required, Generator shall, at its own expense, install any telemetering equipment, data acquisition equipment, or other equipment and software necessary at the Facility for the telemetry of information to Alabama Power.
7.2.3 Generator shall be responsible for the reasonable cost that Alabama Power incurs in making any computer modifications or changes to Alabama Power's facilities or equipment necessary to implement this Section 7.
7.3 Payment of Cost of Metering, Data Acquisition, and Related Protection Equipment.
7.3.1 Prior to the commencement of Interconnection Service under this Agreement, Alabama Power shall develop and provide Generator an estimate of all costs and expenses that may be incurred by Alabama Power in connection with the installation of equipment and software under Sections 7.1 and 7.2. Alabama Power shall obtain Generator's consent thereto prior to proceeding with activities in connection with Sections 7.1 and 7.2. Generator shall pay such estimated costs in accordance with Section 10.
7.3.2 Alabama Power shall true-up this estimate to Alabama Power's actual costs and expenses within a reasonable period of time after such actual costs and expenses are known but not less often than annually. In the event that the actual costs and expenses to be paid by Generator to Alabama Power under Section 7.1 and 7.2 are more or less than Alabama Power's initial estimate, the difference (either a credit or an additional charge) shall be reflected on a subsequent invoice.
7.4 Care of Equipment. Generator shall exercise care in accordance with Good Utility Practices to protect all equipment of Alabama Power located on Generator's premises, and agrees to pay the cost of repairs or replacement in the event of loss or damage to such equipment arising from the failure of Generator to properly protect such equipment in accordance with Good Utility Practices.
7.5.1 Meters, data acquisition, and related protection equipment at Generator's Interconnection Point shall be tested at least biennially by Generator in accordance with the provisions for meter testing as established in American National Standard Institute Code for Electricity Metering (ANSI) Standard C12.16 for Solid State Electricity Meters, as the same may be updated from time to time. Representatives of each Party shall be afforded an opportunity to witness such tests.
7.5.2 Generator shall, upon the reasonable request of Alabama Power, test its meters and data acquisition equipment at the Interconnection Point used for determining the receipt or delivery of capacity and energy by Alabama Power. In the event a test shows such equipment to be inaccurate, Generator shall make any necessary adjustments, repairs or replacements thereon.
7.6 Inaccuracies. If the metering fails to register, or if the measurement made by a metering device is found upon testing to vary by more than one percent (1.0%) from the measurement made by the standard meter used in the test, an adjustment shall be made correcting all measurements of energy made by the metering during (i) the actual period when inaccurate measurements were made by the metering, if that period can be determined to the mutual satisfaction of the Parties, or (ii) if the actual period cannot be determined to the mutual satisfaction of the Parties, one-half of the period from the date of the last test of the metering to the date such failure is discovered or such test is made (such period herein the "Adjustment Period"). If the Parties are unable to agree on the amount of the adjustment to be applied to the Adjustment Period, the amount of the adjustment shall be determined (a) by correcting the error if the percentage of error is ascertainable by calibration, tests or mathematical calculation, or (b) if not so ascertainable, by estimating on the basis of deliveries under similar conditions during the period since the last test. In the event Generator's metering equipment is found to be insufficiently reliable and/or inaccurate during any consecutive three (3) Month period, Alabama Power shall have the right to install suitable metering equipment at the Interconnection Point for the purpose of checking the meters installed by Generator, and Generator shall pay all costs related to such metering equipment.
SECTION 8: INITIAL SYNCHRONIZATION AND FACILITY TESTING
8.1 Facility Evaluation Based on Actual Equipment Data. Generator agrees to provide updated application data ("actual equipment data") to Alabama Power that reflects information provided by equipment manufacturers for the actual equipment purchased by Generator for this Facility, as soon as it is available, but not later than ninety (90) Days prior to Initial Synchronization Date. Alabama Power agrees to review the actual equipment data to identify any adverse impacts to Alabama Power's Electric System caused by any material change
in the Facility's operation and performance specifications that were not reasonably identifiable in studies performed using Generator's application data as initially provided. In the event any such adverse impacts are identified, Generator is responsible for modifying its equipment to eliminate such identified adverse impacts.
8.2 Implementation of Control and Operating Procedures. At least forty-five (45) Days prior to the Initial Synchronization Date, Generator and Alabama Power will: (a) jointly review the Control and Operating Procedures as developed by the Operating Committee, under Section 15 of this Agreement; (b) develop a training schedule for Facility and Alabama Power personnel under the Control and Operating Procedures; and (c) install and verify that communication links are complete for: (i) data telemetry, (ii) voice communications between Generator's Facility and Alabama Power's Transmission System control centers, and (iii) the transmittal of Facility and transmission system information on the Southern Company Generator Information Network.
8.3 Facility Inspection. Consistent with Good Utility Practices and unless otherwise agreed to by the Parties, all Interconnection Facilities shall be complete prior to the initial synchronization of the Facility with the Alabama Power Electric System. Within fifteen (15) Days after written notice is given to Alabama Power by Generator, an inspection shall be performed by Alabama Power to insure the proper installation and operation of the interconnection protective devices. The inspection shall include, without limitation, verification: (a) that the installation of Generator's equipment at the Facility is in accordance with the interconnection study; and (b) of proper voltage and phase rotation.
8.4 Initial Synchronization. Upon completion of the actions and reviews required under Sections 8.1, 8.2, and 8.3, Generator may request approval for initial synchronization of the Facility with the Alabama Power Electric System. Such request for approval shall be made no less than seven (7) Calendar Days in advance of the date which the Generator proposes for the Initial Synchronization Date. Initial synchronization shall not occur without the prior documented approval of Alabama Power, and such approval shall not be unreasonably withheld. Representatives of Alabama Power shall have the right to be present during the initial synchronization and facility testing. The activities under this Section 8, including without limitation, facility inspection, evaluation of actual equipment data, personnel training, use of Southern Company Generator Information Network, or the granting of approval to Generator for operation of the Facility in parallel with the Alabama Power Electric System shall not serve to relieve Generator of liability for injury, death or damage attributable to the negligence of Generator, and Alabama Power shall not be responsible as a result of such activities.
8.5 Review of Synchronization Tests. No less than forty-five (45) Days prior to the commercial operation date of the Facility, Generator shall provide Alabama Power copies of all applicable excitation system field test results (including chart recordings and actual data points in electronic form) and field settings, including (if applicable) Power System Stabilizer test results and settings in a format that conforms to the models previously submitted with the original application data. These tests include but are not limited to excitation system open circuit step in voltage tests, and (if applicable) Power System Stabilizer gain margin and phase compensation tests. Excitation system open
circuit step in voltage test response chart recordings shall be provided showing generator terminal voltage, field voltage, and field current (exciter field voltage and current for brushless excitation systems) with sufficient resolution such that the change in voltages and currents are clearly distinguishable. The excitation system open circuit step in voltage test data points corresponding to the chart recordings should also be submitted in electronic form. Alabama Power may require that Generator perform more detailed tests if there are significant differences between the excitation system open circuit step in voltage test response and the step response predicted through dynamic simulation of model data. Any problems identified as a result of changes from application data to actual field settings of the excitation system including (if applicable) Power System Stabilizers must be addressed and resolved as soon as practicable by the Generator in order for the Generator to continue to deliver power to the Interconnection Point.
SECTION 9: ADMINISTRATION CHARGE
Generator shall pay Alabama Power a Monthly Administration Charge of $5,000 per Month for all costs and expenses incurred by Alabama Power during such Month in connection with: (i) Alabama Power's administration of this Agreement; (ii) any taxes, assessments or other impositions for which Alabama Power may be liable as a result of any activity undertaken pursuant to this Agreement; (iii) reading meters; and (iv) accounting for capacity and energy flowing into or out of Generator's Facility. Alabama Power may revise the amount of the Monthly Administration Charge on an annual basis by making a filing in accordance with Section 12.3.
SECTION 10: PAYMENT PROCEDURE
10.1 Billing. Bills shall be issued to Generator in accordance with the following procedures:
10.1.1 Alabama Power shall issue a Quarterly invoice to Generator for the Quarterly Estimated Construction Costs.
10.1.2 Alabama Power shall issue a Monthly invoice to Generator for the estimated operation and maintenance charge, administrative charge, and other charges/credits determined pursuant to this Agreement as soon as practicable following the close of each Month.
10.1.3 All amounts owing to Alabama Power from Generator shall be due and payable in immediately available funds through wire transfer of funds or other means acceptable to Alabama Power within twenty (20) Calendar Days after the date of Alabama Power's invoice.
10.2 Failure to Timely Pay. If Generator fails to pay the amount billed
by Alabama Power within twenty (20) Calendar Days after the date of Alabama
Power's invoice (and such amount is not disputed in accordance with Section
10.6), Alabama Power may, at any time thereafter upon five (5) Business Days
written notice, draw upon the letter of credit (or other form of security) of
Generator to obtain payment for such invoice, as well as reasonable costs
incurred to exercise its rights under this Section. In addition, Alabama Power
may, at its option, treat such non-payment as a Default of this Agreement under
Section 3.2 hereof.
10.3 Interest. Any amount due and payable from Generator to Alabama Power pursuant to this Agreement that is not received by the due date shall accrue interest from the due date at the Interest Rate.
10.4 Creditworthiness. Generator shall provide and maintain in effect during the Term of this Agreement an unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Alabama Power, including an appropriate parent security) as security to meet its responsibilities and obligations under this Agreement. The unconditional and irrevocable letter of credit (or other form of security reasonably acceptable to Alabama Power) shall be in the amount of $4,200,000 in immediately available funds through wire transfer of funds or other means acceptable to Alabama Power for activities arising prior to commercial operation of the Facility and in the amount of $175,000 for activities arising from the date of commercial operation of the Facility. Alabama Power shall be entitled to draw upon such letter of credit for amounts due it under this Agreement if not paid when due in accordance with Section 10.1 and not disputed in accordance with Section 10.6.
10.5 Audit Rights. Either Party shall have the right, during normal business hours, and upon prior reasonable notice to the other Party to audit each other's accounts and records pertaining to either Party's performance and/or satisfaction of obligations arising under this Agreement within one (1) year from the date of such performance or satisfaction of such obligation, including specifically, but not limited to, delivery of the final cost report as provided in Section 5.6.2. Said audit shall be performed at the offices where such accounts and records are maintained and shall be limited to those portions of such accounts and records that specifically relate to obligations under this Agreement. To the extent such accounts and records contain confidential information, the Parties agree to maintain the confidentiality of such information consistent with Section 17.19 hereof. In the event an audit reveals an improper assignment or allocation of costs or an error in billing, the Parties will make appropriate adjustments (either refunds or additional payments), with interest, within thirty (30) Days.
10.6 Disputed Bills. In the event of a billing dispute between Generator and Alabama Power, Alabama Power shall not terminate this Agreement, draw on the letter of credit for any disputed amounts, nor disconnect the Facility for failure to pay the disputed amount if Generator (i) continues to make all payments not in dispute and (ii), if requested by Alabama Power, pays into an independent escrow account the portion of the invoice in dispute.
10.7 No Waiver. Payment of any cost or invoice by Generator will not constitute a waiver of any rights or claims that Generator may have under or relating to this Agreement.
SECTION 11: REPRESENTATIONS, WARRANTIES AND COVENANTS
11.1 Generator Representations, Warranties and Covenants. Generator makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.1.1 Generator is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, that it is qualified to do business in the State of Alabama and that it has the power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.1.2 The execution, delivery and performance by Generator of this Agreement has been duly authorized by all necessary company action, and does not and shall not require any consent or approval of Generator's Board of Directors or members, other than those which have been obtained.
11.1.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and shall not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirement, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Generator is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
11.1.4 This Agreement is the legal, valid and binding obligation of the Generator and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.1.5 There is no pending or, to the knowledge of Generator, threatened action or proceeding affecting Generator before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2 Alabama Power Representations, Warranties and Covenants. Alabama Power makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement:
11.2.1 Alabama Power is a corporation duly organized, validly existing and in good standing under the laws of the State of Alabama that it is qualified to do business in the State of Alabama and that it has the corporate power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
11.2.2 The execution, delivery and performance by Alabama Power of this Agreement has been duly authorized by all necessary corporate action, and does not and shall not require any consent or approval of Alabama Power's Board of Directors or shareholders, other than those which have been obtained.
11.2.3 This Agreement is the legal, valid and binding obligation of Alabama Power and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
11.2.4 There is no pending or, to the knowledge of Alabama Power, threatened action or proceeding affecting Alabama Power before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
11.2.5 Alabama Power covenants to Generator that it will file this Agreement, and any amendments and/or modifications thereto, with FERC in accordance with all Legal Requirements.
11.3 Survival of Representations, Warranties and Covenants. The representations, warranties and covenants made by Generator and by Alabama Power (as the case may be) in Sections 11.1.1, 11.1.3, 11.1.4, 11.2.1, 11.2.3, and 11.2.5 shall survive the execution and delivery of this Agreement and any action taken pursuant hereto. The representations, warranties and covenants made by Generator and Alabama Power (as the case may be) in Sections 11.1.2, 11.1.5, 11.2.2 and 11.2.4 shall be true and accurate as of the date of execution of this Agreement.
SECTION 12: COMPLIANCE WITH LAWS
12.1 Compliance. Generator represents, warrants and covenants that as
of the Initial Synchronization Date and for the Term, Generator shall (i) be in
compliance with all Legal Requirements with respect to the ownership, operation
and maintenance of Generator's Interconnection Equipment, including without
limitation, all requirements to seek, obtain, maintain, comply with and, as
necessary, renew and modify from time to time, any and all applicable
certificates, licenses, permits and government approvals and all applicable
environmental certificates, licenses, permits and approvals, environmental
impact analysis, and if applicable, the mitigation of environmental impacts, and
(ii) pay all costs, expenses, charges and fees in connection with Section
12.1(i).
12.2 Change of Law. In the event that after the Effective Date there are changes to Legal Requirements, including, without limitation, changes to laws or regulations regulating or imposing a tax, fee or other charge, which
cause Alabama Power to incur additional costs in providing Interconnection Service under this Agreement, Generator agrees to pay, to the extent consistent with FERC policy, such reasonable incremental costs incurred by Alabama Power in complying with such changes to Legal Requirements; provided, however, Generator shall be entitled to take reasonable action to mitigate, reduce or otherwise avoid the imposition of any such charges or costs.
12.3 Regulatory Filings. This Agreement is subject to approval by any
Governmental Authority having jurisdiction over the matters provided herein.
Nothing contained in this Agreement shall be construed as affecting in any way
(i) the right of Alabama Power to unilaterally make application to any and all
Governmental Authorities (including FERC) that may have jurisdiction over this
Agreement for a change in terms and conditions, charges, classification of
service, or for termination of this Agreement pursuant to applicable statutes
(including Sections 205 and 206 of the Federal Power Act) and those Governmental
Authorities' rules and regulations or (ii) the ability of Alabama Power to
exercise its rights under the rules and regulations of any Governmental
Authority having jurisdiction over this Agreement. Nothing contained in this
Agreement shall be construed as affecting in any way (i) the right of Generator
to unilaterally make application to any and all Governmental Authorities
(including FERC) that may have jurisdiction over this Agreement for a change in
terms and conditions, charges, classification of service or for termination of
this Agreement pursuant to applicable statutes (including Sections 205 and 206
of the Federal Power Act) and those Governmental Authorities' rules and
regulations or (ii) the ability of Generator to exercise its rights under the
rules and regulations of any Governmental Authority having jurisdiction over
this Agreement. At least thirty (30) Days prior to any such unilateral filing,
the Party intending to make the filing shall notify the other of such intent.
The Parties agree to reasonably cooperate with each other with respect to such
filings and to provide any information reasonably required by the requesting
Party to comply with applicable filing requirements. This Agreement shall be
modified or amended as necessary to reflect binding determinations with respect
to such filings.
12.4.1 Generator shall not be required to pay taxes associated with reimbursement of construction costs or transfer of the Interconnection Facilities constructed by Generator unless Alabama Power is required to pay such tax. With respect to the payment by Generator of taxes associated with reimbursement of construction costs or transfer of the Interconnection Facilities, Alabama Power commits that in the event that any taxing authority, including but not limited to the Internal Revenue Service, taxes or attempts to tax the reimbursement or transfer, Alabama Power shall (i) exercise reasonable efforts to contest and defeat the taxation or attempted taxation of the reimbursement or transfer; (ii) promptly notify Generator in writing of that event in the manner provided in Paragraph 17.9 of this Agreement; and (iii) exercise reasonable efforts to cooperate with Generator in contesting any such taxation including, for example, allowing Generator to prepare at its own expense a private letter ruling request or other submission to the Internal Revenue Service or other taxing authority.
12.4.2 Generator shall at all times during the Term pay all charges, taxes, assessments and fees which may be assessed upon or against the Facility or upon or against Generator through Alabama Power by a Governmental Authority in accordance with Legal Requirements by reason of the sale or purchase of electricity by Generator or from Generator's Facility.
SECTION 13: INSURANCE
13.1 Generator's Insurance. If Generator is no longer an Affiliate of Alabama Power, Generator, at its expense, shall procure and maintain in effect during the Term, policies of insurance with insurance companies authorized to transact insurance in the State of Alabama or adequate self-insurance, reasonably acceptable to Alabama Power, providing, at a minimum, the coverage and limits specified and complying with the requirements stated below:
13.1.1 Worker's Compensation in statutory amounts and Employer's Liability with a minimum limit of $1,000,000 per person.
13.1.2 Commercial General Liability Insurance on an occurrence basis or AEGIS "claims made" form, with the following coverage and limits:
General Aggregate $1,000,000 Products-Completed Operations-Aggregate $1,000,000 Personal & Advertising Injury $1,000,000 Each Occurrence $1,000,000 Fire Damage (any one fire) $50,000 Medical Expense (any one person) $5,000 |
13.1.3 Business Automobile Liability covering autos of Generator, including owned, hired and non-owned autos, for Bodily Injury and Property Damage with a combined single limit of $1,000,000 each occurrence.
13.1.4 Excess Liability in Umbrella Form with a limit of $4,000,000 each occurrence, $4,000,000 Aggregate.
13.1.5 By signing this Agreement, Generator thereby waives all rights of subrogation against Alabama Power and its Persons Indemnified with respect to any claim or loss payable or paid under each of the policies set forth in 13.1.1, 13.1.2, 13.1.3, and 13.1.4 above and under any property insurance policy for the Facility that Generator has or acquires.
13.1.6 Generator shall cause its insurer(s) to add Alabama Power and its Persons Indemnified as an Additional Insured on the policies set forth in 13.1.2, 13.1.3, and 13.1.4 above with respect to liability of Alabama Power and its Persons Indemnified (a) arising out of the performance of operations, maintenance, work or services under this Agreement, and (b) arising out of the conduct contemplated in the ownership, maintenance or use of Generator's autos, but only to the extent of Generator's indemnity obligations under this Agreement and the coverages and limits specified in Sections 13.1.2, 13.1.3, and 13.1.4.
13.1.7 Subject to the limitations in Section 13.1.6, Generator's insurance shall be primary insurance with respect to the installation, operations, maintenance, work, or services contemplated under this Agreement and insurance of Alabama Power and its Persons Indemnified shall be excess of the Generator's insurance and shall not contribute with it.
13.1.8 To the extent that Generator utilizes deductibles or self-insurance in connection with the insurance coverage required herein, all such deductible and self-insured amounts shall be for the account and expense of Generator and shall not be considered as costs or fees provided for in this Agreement.
13.1.9 If the Generator uses contractors and/or subcontractors to perform any of the work contemplated under this Agreement, Generator shall require such contractors and/or subcontractors to maintain in effect insurance meeting these minimum limits and incorporating the contractual requirements prescribed by this Section 13.
13.2 Notice and Certification. Each of the above required policies shall contain a provision whereby the insurance carrier shall notify Alabama Power at least thirty (30) Days prior to the effective date of cancellation, non-renewal or material change in any of said policies. Generator shall submit to Alabama Power a Certificate, signed by an authorized representative of the insurance carrier, listing the policies, coverage and limits and certifying that the said policies shall be in effect for the time periods stated in the Certificate. The obligations for Generator to procure and maintain insurance shall not be construed to waive or restrict other obligations.
SECTION 14: FORCE MAJEURE
14.1 Definition of Force Majeure Event. For the purposes of this
Agreement, a "Force Majeure Event" as to a Party means any occurrence,
nonoccurrence or set of circumstances that is beyond the reasonable control of
such Party and is not caused by such Party's fault, negligence or lack of due
diligence, including, without limitation, flood, ice, lightning, earthquake,
windstorm or eruption; fire; explosion; invasion, war, civil disturbance,
commotion or insurrection; sabotage or vandalism; military or usurped power; or
act of God or of a public enemy; provided, however, in no event shall (i) the
inability to meet a Legal Requirement or the change in a Legal Requirement; or
(ii) a site specific strike, walkout, lockout or other labor dispute constitute
a Force Majeure Event.
14.2 No Breach or Liability. Each Party shall be excused from performing its respective obligations under this Agreement and shall not be liable in damages or otherwise if and to the extent that it is unable to so perform or is prevented from performing by a Force Majeure Event, provided that the non-performing Party shall:
14.2.1 Give the other Party notice thereof, followed by written notice if the first notice is not written, both notices to be given as promptly as possible after the non-performing Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
14.2.2 Use its reasonable best efforts to remedy its inability to perform as soon as practicable; provided, however, that this Section 14.2.2 shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest; provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of the Party having the difficulty; and
14.2.3 Resume performance of its obligations under this Agreement and give the other Party written notice to that effect, as soon as reasonably practicable following cessation of the Force Majeure Event.
14.3 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
SECTION 15: OPERATING COMMITTEE
15.1 Establishment of Committee. At least six (6) months prior to the estimated Initial Synchronization Date, Generator and Alabama Power shall each appoint one representative and one alternate to the Alabama Power - Generator Operating Committee ("Committee"). Each Party shall notify the other party of its appointment in writing. Such appointments may be changed at any time by similar notice. The Committee shall meet as necessary, but not less than once each calendar year, to carry out the duties set forth herein. The Committee shall hold a meeting at the request of either Party, at a time and place agreed upon by the representatives. Each representative and alternate shall be a responsible person working in the day-to-day operations of their respective electrical facilities. The Committee shall represent the Parties in all matters arising under this Agreement which may be delegated to it by mutual agreement of the Parties.
15.2 Duties. The duties of the Committee shall include, but are not limited to, the following:
15.2.1 Establish and maintain control and operating procedures, including those pertaining to information transfers between the Facility and Alabama Power consistent with the provisions of this Agreement.
15.2.2 Establish data requirements and operating record requirements in accordance with the terms and conditions of this Agreement.
15.2.3 Review the requirements, standards, and procedures data acquisition equipment, protective equipment, and any other equipment or software.
15.2.4 Annually review ten (10) year forecast of maintenance and availability schedules of Alabama Power's and Generator's facilities at the Interconnection Point and coordinate the scheduling of outages of and maintenance on the Interconnection Facilities, the Facility and any other facilities that impact the normal operation of the Interconnection Facilities.
15.2.5 Ensure that information is being provided by each Party regarding equipment availability.
15.2.6 Perform such other duties as may be conferred upon it by mutual agreement of the Parties.
15.2.7 Each Party shall cooperate in providing to the Committee all information required in the performance of the Committee's duties. All decisions and agreements, if any, made by the Committee shall be evidenced in writing. The Committee shall have no power to amend or alter the provisions of this Agreement.
SECTION 16: ASSIGNMENT
16.1.1 EXCEPT AS EXPRESSLY PERMITTED BELOW OR OTHERWISE AGREED TO BY THE PARTIES, GENERATOR SHALL NOT ASSIGN, TRANSFER, DELEGATE OR ENCUMBER THIS AGREEMENT AND/OR ANY OR ALL OF ITS RIGHTS, INTERESTS OR OBLIGATIONS UNDER THIS AGREEMENT AND ANY ASSIGNMENT, TRANSFER, DELEGATION OR ENCUMBERING BY GENERATOR (EXCEPT AS PERMITTED BELOW) SHALL BE NULL AND VOID. Notwithstanding the foregoing, so long as Generator is not in default under or breach of this Agreement, upon prior written notice to Alabama Power, Generator may collaterally assign its rights, interests and obligations under this Agreement to its lender or an agent for the benefit of its lenders providing financing or refinancing for the design, construction or operation of Generator's Facility in Autauga County, Alabama (a "Permitted Financing Assignee"); provided, however, that GENERATOR'S RIGHTS AND OBLIGATIONS (FINANCIAL OR OTHERWISE) UNDER THIS AGREEMENT SHALL CONTINUE IN THEIR ENTIRETY IN FULL FORCE AND EFFECT AS THE RIGHTS AND OBLIGATIONS OF A PRINCIPAL AND NOT AS A SURETY. Generator may collaterally assign its rights, interests and obligations hereunder to multiple Permitted Financing Assignees, but only if those Permitted Financing Assignees designate one agent to act for them collectively under this Agreement.
16.1.2 Alabama Power shall, upon serving Generator any notice of Default or the termination of this Agreement, also serve a copy of such notice upon the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. No notice of Default purporting to terminate this Agreement shall be deemed to have been given unless and until a copy thereof shall have been given to the Permitted Financing Assignee or the agent for multiple Permitted Financing Assignees. A Permitted Financing Assignee shall be entitled to cure any Default during any cure period provided herein.
16.1.3 The Permitted Financing Assignee shall not be entitled to assign or transfer this Agreement to any purchaser in foreclosure, purchaser in lieu of foreclosure or similar purchaser or transferee ("Purchaser in Foreclosure") unless and until such Purchaser in Foreclosure has (i) executed and delivered to Alabama Power and is in compliance with an agreement in form and substance acceptable to Alabama Power whereby such Purchaser in Foreclosure assumes and agrees to pay and perform all then outstanding and thereafter arising obligations of Generator under this Agreement and (ii) established to Alabama Power's reasonable satisfaction that such Purchaser in Foreclosure has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Notwithstanding the foregoing, all obligations of Generator to Alabama Power under this Agreement incurred prior to the time the Purchaser in Foreclosure fully assumes this Agreement shall also be and remain enforceable by Alabama Power against Generator. Any assignment to a Purchaser in Foreclosure shall be subject to Alabama Power's rights hereunder.
16.1.4 So long as Generator is not in Default under or breach of this Agreement, upon prior written notice to Alabama Power, Generator may absolutely assign all, but not less than all, of its rights, interests and obligations under this Agreement to another generator ("Outright Assignee") provided however, that Generator's obligations under this Agreement shall continue and Alabama Power shall have no obligations to such Outright Assignee unless and until such Outright Assignee has (i) executed and delivered to Alabama Power and is in compliance with an agreement in form and substance reasonably acceptable to Alabama Power whereby such Outright Assignee assumes and agrees to pay and perform all thereafter arising obligations of Generator under this Agreement and (ii) established to Alabama Power's reasonable satisfaction that such Outright Assignee has all licenses, permits and approvals and financial and technical wherewithal as may be required to execute, deliver and perform such agreement. Any assignment to an Outright Assignee shall be subject to Alabama Power's rights hereunder.
16.1.5 Generator shall indemnify, defend and hold harmless
Alabama Power and its Persons Indemnified from and against any and all losses,
liabilities, obligations, claims, demands, damages, penalties, judgments, costs
and expenses, including, without limitation, reasonable attorneys' fees and
expenses, howsoever and by whomsoever asserted, arising out of or in any way
connected with any collateral, outright or other assignment by Generator or any
foreclosure or other exercise of remedies by the Permitted Financing Assignee of
this Agreement or Generator's or the Permitted Financing Assignee's rights or
interests under this Agreement. Notwithstanding any other provision of this
Section 16.1, Generator shall not be obligated to indemnify and hold harmless
Alabama Power from and against any loss, liability, obligation, claim, demand,
damage, penalty, judgment, cost or expense to the extent caused by the sole
negligence or willful misconduct Alabama Power or its Persons Indemnified.
16.1.6 No agreement between the Parties modifying, amending, canceling or surrendering this Agreement shall be effective without the prior written consent of the Permitted Financing Assignee or, in the case of multiple Permitted Financing Assignees, the agent of those Permitted Financing Assignees. Subject to any cure periods provided to the Permitted Financing Assignee in this Agreement or in any consents to assignment, no such prior written consent is required for Alabama Power to take unilateral action under this Agreement, including (without limitation) Sections 3.2, 3.3, 3.4, 10.2, 12.2 and 12.3.
16.1.7 Alabama Power agrees to reasonably cooperate with Generator and any Permitted Financing Assignee in connection with the collateral assignment of this Agreement; provided, however, that Alabama Power shall not be obligated to take any action that could, in its judgment, result in an expansion of its obligations, risks or liabilities or a violation of any law, regulation or order of a Governmental Authority.
16.2 Assignment by Alabama Power. So long as Alabama Power is not in breach of this Agreement, Alabama Power may, at any time, without notice to, or the consent of, Generator or any other Person, including, without limitation, any Permitted Financing Assignee, Purchaser in Foreclosure or Outright Assignee, sell, assign, delegate, encumber or transfer to any Indenture Trustee, Affiliate, any successor by merger or otherwise of Alabama Power or any Qualified Person, and/or create or permit to exist Permitted Liens against, all or any part of this Agreement and/or Alabama Power's rights, obligations, title or interest in, to and under this Agreement. Provided, however, Generator reserves its right to oppose any such assignment before any Governmental Authority having jurisdiction.
SECTION 17: MISCELLANEOUS
17.1 Alabama Power's Agent. Wherever this Agreement requires Generator to provide information, schedules, notice or the like to, or to take direction from, Alabama Power, Generator shall provide information, schedules, notice or the like to, or receive from, Alabama Power or such agent of Alabama Power as Alabama Power may direct from time to time.
17.2 No Partnership. Generator and Alabama Power do not intend for this Agreement to, and this Agreement shall not, create any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit.
17.3 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon any respective successors and assigns of Generator and Alabama Power.
17.4 No Third Party Benefit. Nothing in this Agreement shall be construed to create any duty, obligation or liability of a Party to any person or entity not a Party to this Agreement.
17.5 No Affiliate Liability. Notwithstanding any other provision of this Agreement, no Affiliate of either Party (including without limitation any Affiliate acting as either Party's agent where said agent is given certain authorities pursuant hereto) shall have any liability whatsoever for either Party's performance, nonperformance or delay in performance under this Agreement.
17.6 Time of Essence. Time is of the essence of this Agreement.
17.7 No Waiver. Neither Alabama Power's nor Generator's failure to enforce any provision or provisions of this Agreement shall in any way be
construed as a waiver of any such provision or provisions as to any future violation thereof, nor prevent it from enforcing each and every other provision of this Agreement at such time or at any time thereafter. The waiver by either Alabama Power or Generator of any right or remedy shall not constitute a waiver of its right to assert said right or remedy, at any time thereafter, or any other rights or remedies available to it at the time of or any time after such waiver.
17.8 Amendments. Except as provided in Section 12.3, this Agreement may be amended by and only by a written instrument duly executed by each of Generator and Alabama Power, which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
17.9 Notice. Any notice, request, consent or other communication
permitted or required by this Agreement shall be in writing and shall be deemed
given on the Day hand-delivered to the representative identified below, on the
Day of facsimile transmission to the facsimile number stated below, or the third
(3rd) Day after the same is deposited in the United States Mail, first class
postage prepaid, and if given to Alabama Power shall be addressed to:
Alabama Power Company
Attn: Senior Vice President, Power Delivery
600 North 18th Street
Birmingham, Al 35203
Facsimile: (205) 257-1818
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Transmission Services
600 North 18th Street
Birmingham, Alabama 35203
Facsimile: (205) 257-6663
and if given to Generator, it shall be addressed to:
Southern Power Company
Attn: Vice President, Generation, Planning and Development
600 North 18th Street
Bin 15N-8181
Birmingham, Alabama 35203
Facsimile: (205) 257-5703
with a copy to:
Southern Company Services, Inc.
Attn: Manager, Generation Development
600 North 18th Street
Bin 15N-8186
Birmingham, Alabama 35203
Facsimile: (205) 257-6336
unless Alabama Power or Generator shall have designated a different representative or address for itself by written notice to the other. Generator shall comply with reasonable requirements of Alabama Power regarding communications with Alabama Power relative to the performance of this Agreement.
17.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
17.11 Cross-References. All cross-references contained in this Agreement to Sections, are to the Sections of this Agreement, unless otherwise expressly noted.
17.12 Section Headings. The descriptive headings of the various Sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof.
17.13 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.
17.14 Governing Law. The validity, interpretation and performance of this Agreement, and each of its provisions, are subject to and shall be governed by applicable federal law, and where not preempted by federal law, by the laws of the State of Alabama, without giving effect to conflict of laws principles.
17.15 Merger. This Agreement represents the entire agreement between the Parties and all previous communications, representations and agreements between the Parties regarding the subject matter of this Agreement, whether oral or written, are hereby superseded.
17.16 NERC. To the extent not inconsistent herewith, Generator shall comply with any operational specifications and requirements specified by Alabama Power and all planning standards and operating guidelines of the North American Electric Reliability Council or its successor.
17.17 Good Utility Practices. Each Party shal discharge its respective obligations under this Agreement in accordance with Good Utility Practices.
17.18 Safety. Each Party shall comply with the applicable provisions of the National Fire Protection Association Code, the American National Electrical Code, the National Electrical Safety Code and other applicable code requirements. Each Party shall furnish and maintain, at its own expense, proper and adequate facilities, equipment, machinery, tools and supplies necessary to maintain its facilities and premises as a safe workplace and have available at all times for use by its employees, agents, independent contractors, suppliers, vendors and borrowed employees and all safety equipment needed for the protection of that Party's employees, agents, independent contractors,
suppliers, vendors and borrowed employees against injuries. Each Party shall be solely responsible for providing for the safety of its facilities and premises and of its employees, agents, independent contractors, suppliers, vendors and borrowed employees.
17.19 Confidential Information. Confidential Information shall mean any confidential and/or proprietary information provided by Alabama Power or Generator ("Disclosing Party") to the other party ("Receiving Party") and which is clearly marked or otherwise designated as "CONFIDENTIAL." For purposes of this Agreement, all design, operating specifications and metering data provided by Generator shall be deemed confidential regardless of whether it is clearly marked or otherwise designated as such. Except as otherwise provided herein, each Party shall hold in confidence and shall not disclose Confidential Information to any person (except employees, officers, representatives and agents that agree to be bound by this Section 17 or FERC's Standards of Conduct). Confidential Information shall not include information that the Receiving Party can demonstrate: (a) is generally available to the public other than as a result of a disclosure by the Receiving Party; (b) was in the lawful possession of the Receiving Party on a non-confidential basis before receiving it from the Disclosing Party; (c) was supplied to the Receiving Party without restriction by a third party, who, to the knowledge of the Receiving Party, was under no obligation to the Disclosing Party to keep such information confidential; (d) was independently developed by the Receiving Party without reference to Confidential Information of the Disclosing Party; or (e) was disclosed with the prior written approval of the Disclosing Party. Alabama Power, or its agent acting as Transmission Provider under the Tariff, may release or disclose certain Confidential Information of the Disclosing Party to other Transmission Providers, SERC, or NERC if necessary or appropriate in connection with its role as Transmission Provider. If a court, government agency or entity with the right, power, and authority to do so, requests or requires either Party, by subpoena, oral deposition, interrogatories, requests for production of documents, administrative order, or otherwise, to disclose Confidential Information, that Party shall provide the other Party with prompt notice of such request(s) or requirement(s) so that the other Party may seek an appropriate protective order or waive compliance with the terms of this Agreement. In the absence of a protective order or waiver the Party shall disclose such Confidential Information which, in the opinion of its counsel, the Party is legally compelled to disclose. Each Party will use reasonable efforts to obtain reliable assurance that confidential treatment will be accorded any Confidential Information so furnished.
17.20 Cooperation. Each Party to this Agreement shall reasonably cooperate with the other as to all aspects relating to the performance of its respective obligations under this Agreement; provided, however, this agreement of cooperation shall not constitute a waiver or relinquishment of either Party's rights under this Agreement in law or equity.
17.21 Negotiated Agreement. The Parties agree that this Agreement is the result of mutual compromise and shall not be construed as having been drafted by either Party. The Parties agree to support the acceptance of the Agreement in its entirety by FERC.
17.22 Subcontractors. Nothing in this Agreement shall be construed as preventing either Party from utilizing the services of subcontractors as it deems appropriate; provided, however, that all such contractors comply with the applicable terms and conditions of this Agreement. The creation of any subcontract relationship shall not relieve the retaining Party of any of its obligations under this Agreement.
17.23 EWG Status. Nothing in this Agreement shall require Generator to take any action that could result in its inability to obtain, or its loss of, status as an Exempt Wholesale Generator within the meaning of the Public Utility Holding Company Act of 1935, as amended.
[THE FOLLOWING PAGE IS THE SIGNATURE PAGE]
IN WITNESS WHEREOF, Generator and Alabama Power have caused this Agreement to be executed by their duly authorized representatives on the Day and year first above written.
SOUTHERN POWER COMPANY
"Generator"
By: _________________________
Title: ______________________
Date:_________________________
ALABAMA POWER COMPANY
"Alabama Power"
By: _________________________
Title: _______________________
Date:_________________________
APPENDIX A
INTERCONNECTION PROCEDURES
The following requirements apply to Generator's Facility when operated in parallel with the Alabama Power Electric System.
In order to minimize objectionable and adverse operating conditions on the electric service provided to other customers by Alabama Power, the Facility shall meet the following operating criteria:
When Generator is delivering power to the Alabama Power Electric System, Generator shall operate its generation to meet the voltage schedule, as measured at the transmission bus serving the Facility, communicated by Alabama Power. The current voltage schedules for the Interconnection Point to the Facility is attached to this Appendix A. If the Generator cannot hold the voltage schedule but is producing or absorbing its maximum amount of MVARs for the level of MW output that it is then operating at, then that is acceptable performance provided that each unit of the Generator that is then generating is producing no less than 0.33 MVAR/MW x the unit's Continuous Rated MW Output or absorbing no less than 0.23 MVAR/MW x the unit's Continuous Rated MW Output. For purposes of this paragraph, the "Continuous Rated MW Output" for each of the Generator's units comprising the Facility shall be two (2) CT's and one (1) ST with a total output of 630 MW.
The Facility shall maintain a nominal operating frequency of 60 hertz. Generator may be required to assist in supporting system frequency if requested by Alabama Power.
The Facility shall be capable of providing an immediate and sustained response to abnormal frequency excursions within the machine design parameters. The governors shall be properly maintained and shall provide droop characteristics consistent with the requirements of NERC, SERC and the Alabama Power Electric System. At a minimum, governors shall be fully responsive to frequency deviations consistent with the requirements of NERC, SERC and the Alabama Power Electric System during normal operating conditions only, as defined by Good Utility Practices. In no event shall the governors be blocked by Generator without the express written permission of Alabama Power.
a. Reactive Power Production. At continuous rated output, simulations must show that Generator's Facility shall have the capability of dynamically supplying at least 0.33 MVARs at the 500 kV Interconnection Point for each MW supplied when the Facility is tested at 1.02% of nominal voltage.
b. Reactive Power Absorption. The Facility shall also be capable of dynamically absorbing 0.23 MVARs from the transmission system for each MW supplied at the 500 kV Interconnection Point during simulations when the Facility is tested at 1.05% of nominal voltage,. Simple Cycle combustion turbines used as peaking generation may be exempted from the MVAR absorption requirements.
The Facility shall not introduce excessive distortion to the Alabama Power Electric System's voltage and current waveforms. The harmonic distortion measurements shall be made at the transmission facility serving the Facility and be within the limits specified in the tables below.
MAXIMUM ALLOWABLE HARMONIC CONTENT (CURRENT)
(in percent of total current)
Harmonic Order Number (h)
h 11 11 h 17 17 h 23 23 h 35 35 h
- - - -
ODD 2.0 1.0 0.75 0.30 0.15
EVEN 0.50 0.25 0.19 0.075 0.04
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Total current harmonic distortion may not exceed 2.5%
MAXIMUM ALLOWABLE HARMONIC CONTENT (VOLTAGE)
(in percent)
For nominal voltage at interconnection point of 69 kV to 115 kV Maximum Individual Harmonic: 1.50 Maximum Total Harmonic Distortion: 2.50
For nominal voltage at interconnection point of 161 kV and above Maximum Individual Harmonic: 1.00 Maximum Total Harmonic Distortion: 1.50
To minimize possible adverse effects on other Alabama Power customers, a power transformer is required between the Facility and the Alabama Power Electric System. This transformer's windings shall be connected according to the requirements of Alabama Power.
Generator shall not energize, or de-energize, Alabama Power equipment. The necessary control devices shall be installed by Generator on the Facility to prevent the energization of de-energized Alabama Power equipment by Generator's Facility.
Generator is responsible for the synchronization of the Facility to the Alabama Power Electric System. Alabama Power shall have bus differential relaying at the Interconnection Point and Generator must insure that its Facility is disconnected from Alabama Power whenever the bus is de-energized. Alabama Power may re-energize the bus by remote control and Alabama Power shall not be responsible for damage to Facility due to an out of phase condition during re-energization.
Alabama Power shall provide the data protocol, and Generator shall install as part of the Interconnection Facilities any equipment necessary to deliver telemetered signals to Alabama Power specifying the voltage and watts, vars, and watthours delivered to the Alabama Power Electric System at the Interconnection Point.
VOLTAGE SCHEDULES
AT THE INTERCONNECTION POINT
FOR
SOUTHERN POWER AUTAUGAVILLE COMBINED CYCLE UNIT 2
Commencing with the effective date of the Interconnection Agreement, Generator shall maintain the following voltage schedules as communicated by Alabama Power from time to time:
Operating Time Autaugaville CC2 500 kV
-----------------------------------------------------------------------------
0000 - 0700 520
0700 - 2100 524
2100 - 2400 520
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Schedule #2 - Southern Control Area Maximum Load for the day Between 28,000 and 33,000MW
Operating Time Autaugaville CC2 500 kV 0000 - 0700 517 0700 - 2100 524 2100 - 2400 520 |
Schedule #3 - Southern Control Area Maximum Load for the day Between 23,000 and 28,000MW
Operating Time Autaugaville CC2 500 kV 0000 - 0800 517 0800 - 2100 522 2100 - 2400 520 |
Schedule #4 - Southern Control Area Maximum Load for the day Below 23,000MW
Operating Time Autaugaville CC2 500 kV 0000 - 0600 515 0600 - 2100 520 2100 - 2400 515 |
Alabama Power's determination of whether Schedule 1, 2, 3, or 4 should be used for a given period shall be based on expectations of system requirements and conditions. The voltage schedule to be used, for the upcoming week, shall be communicated to Generator each Friday and at such other times as changing system requirements and conditions may require.
APPENDIX B
SPECIFICATIONS
TO
INTERCONNECTION AGREEMENT
BETWEEN
SOUTHERN POWER (AUTAUGAVILLE CC UNIT 2)
AND
ALABAMA POWER COMPANY
1. Location of Interconnection Point:
The location of the Interconnection Point will be in Autauga County, Alabama, near Montgomery, Alabama.
2. Projected Dates Generator's Facilities will connect to Alabama Power:
Station Service Date: July 1, 2002
Initial Synchronization Date: September 1, 2002
Commercial Operation Date: May 1, 2003
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3. Description of Interconnection Point:
The point at which Generator's one (1) 500 kV circuit connects to Alabama Power's motor operated disconnect switch in the new Alabama Power Autaugaville 500 kv Switching Station, as such is indicated on the single line diagram below.
Autaugaville CC #2 500kV Interconnection Layout
[OBJECT OMITTED]
4. Description of Generator's Facility
The Generator's Facility under this Agreement is a 630 MW Combined Cycle (CC) facility located in Autauga County, AL, which is more fully described in the Interconnection Application made by Southern Power Autaugaville to Southern Company on August 07, 2000.
5. Description of Station Service Connections:
Should Generator require station service in addition to that which Generator can self-provide, separate arrangements will be made by Generator.
6. Interconnection Facility Requirements:
The Interconnection Facilities are sufficient to accommodate approximately 630 MW Summer rating upon completion.
7. Description of Alabama Power's Interconnection Facilities:
Interconnection Facilities under this Agreement include the following: Responsible Party/Estimated
--------------------------------------------------------------------- ----------------------------
Cost
1. Loop the Tenaska - Snowdoun 500 kV TL into the 500 kV Autaugaville Design & Construction By
SS (1 mile total) Alabama Power
($ 1,800,000)
2. 3 PCB Ring Bus at Autaugaville 500 kV SS (includes 2-500 kV line Design & Construction By
terminals, 1-500 kV generator terminal and space for 2 additional 500 Alabama Power
kV line terminals) ($ 6,000,000)
8. Description of Generator's Interconnection Equipment:
Generator's Interconnection Equipment under this Agreement includes the Estimated Cost
------------------------------------------------------------------------ --------------
following:
----------
1. 3 PCB Collector Bus at the 500 kV Autaugaville SS Design & Construction by
Generator
2. 500 kV Transmission Line between SS and Collector Bus, (0.5 mile Design & Construction by
total) Generator
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The specifications for all such equipment in Items 7 and 8, above, will be determined in accordance with this Agreement, the results of the Interconnection Study dated March 5, 2001, Alabama Power specifications provided to the Generator in writing and Good Utility Practices.
APPENDIX C
Quarterly Estimated Construction Costs
The Quarterly Estimated Construction Costs are based on the Generator's cost for the Autaugaville 500 kV Switching Station with accommodations to loop in the Tenaska - Snowdoun 500 kV line. Generator's estimated total construction cost responsibility for the Interconnection Facilities, not including the 500 kV collector bus and the line between the Collector Bus and SS, is $ 7,800,000.
2001 2002 2003
-------------------- -------------------------------- ---------------------------
Project Activity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
----------------
Loop-in the 500 kVTL to the 500 kV Autaugaville Switching Station
3 PCB Ring Bus at the 500 kV Autaugaville Switching Station
Payment Schedule
$375,000 1,100,000 625,000 1,300,000 2,100,000 200,000
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Exhibit 10.14
PUBLIC RELEASE VERSION
PURCHASED POWER AGREEMENT
BETWEEN
GEORGIA POWER COMPANY
AND
DYNEGY POWER MARKETING, INC.
Dated as of March 2, 2000
TABLE OF CONTENTS
Page No.
ARTICLE 1 DEFINITIONS.............................................................................................2
1.1 CERTAIN DEFINITIONS...................................................................................2
1.2 INTERPRETATION.......................................................................................14
ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................................15
2.1 REPRESENTATIONS AND WARRANTIES.......................................................................15
2.2 REPRESENTATIONS AND WARRANTIES OF GEORGIA POWER......................................................16
ARTICLE 3 TERM OF AGREEMENT......................................................................................18
3.1 TERM.................................................................................................18
3.2 CONTRACT COMMENCEMENT DATE...........................................................................18
ARTICLE 4 SALE OF CAPACITY AND ENERGY............................................................................21
4.1 CONTRACT CAPACITY....................................................................................21
4.2 DELIVERED ENERGY.....................................................................................22
ARTICLE 5 PAYMENTS...............................................................................................22
5.1 MONTHLY PAYMENTS.....................................................................................22
5.2 CAPACITY PAYMENTS....................................................................................22
5.3 ENERGY PAYMENT.......................................................................................23
5.4 MONTHLY DISPATCH PAYMENTS............................................................................24
ARTICLE 6........................................................................................................24
6.1 FUEL FOR OPERATIONS; DELIVERY AND ACCEPTANCE.........................................................24
6.3 MEASUREMENT AND QUALITY OF FUEL......................................................................25
6.4 FAILURE TO DELIVER FUEL; IMBALANCE...................................................................26
ARTICLE 7 AVAILABILITY...........................................................................................26
7.1 CURTAILMENTS AND EXCUSE..............................................................................27
7.2 GEORGIA POWER ELECTIONS; [REDACTED]..................................................................28
7.3 USE OF EQUIVALENT EXCUSED NON-DELIVERY HOURS.........................................................30
7.4 [redacted]...........................................................................................31
7.5 REMEDY...............................................................................................31
ARTICLE 8 SCHEDULING.............................................................................................32
8.1 SCHEDULING...........................................................................................32
8.2 TITLE AND RISK OF LOSS...............................................................................33
ARTICLE 9 BILLING AND PAYMENT....................................................................................33
9.1 CAPACITY, ENERGY AND DISPATCH BILLING AND PAYMENT....................................................33
9.2 BILLING DISPUTES AND FINAL ACCOUNTING................................................................35
9.3 INTEREST.............................................................................................36
9.4 BILLING AND PAYMENT RECORDS..........................................................................36
ARTICLE 10 OPERATIONS............................................................................................37
10.1 CONTRACT CAPACITY AND CONTRACT HEAT RATE.............................................................37
10.2 TRANSMISSION.........................................................................................37
10.3 MAINTENANCE..........................................................................................38
10.4 OPERATING PROCEDURES.................................................................................40
ARTICLE 11 CHANGE IN LAW, MODIFICATION OF AGREEMENT..............................................................41
11.1 CHANGE IN LAW........................................................................................41
11.2 MODIFICATION OF AGREEMENT............................................................................42
ARTICLE 12 FORCE MAJEURE.........................................................................................43
12.1 DEFINITION OF FORCE MAJEURE..........................................................................43
12.2 NO BREACH OR LIABILITY...............................................................................43
12.3 CAPACITY AND ENERGY PAYMENTS.........................................................................44
12.4 MITIGATION...........................................................................................44
12.5 SUSPENSION OF PERFORMANCE............................................................................45
ARTICLE 13 CREDIT................................................................................................45
13.1 GUARANTY.............................................................................................45
ARTICLE 14 EVENTS OF DEFAULT AND DAMAGES FOR NON-PERFORMANCE.....................................................45
14.1 EVENTS OF DEFAULT....................................................................................45
14.2 RIGHTS UNDER AGREEMENT...............................................................................49
14.3 REMEDIES.............................................................................................50
ARTICLE 15 INDEMNIFICATION AND LIMITATION OF LIABILITY...........................................................51
15.1 INDEMNITY............................................................................................51
15.2 NO LIABILITY TO THIRD PARTY..........................................................................51
15.3 NO CONSEQUENTIAL DAMAGES.............................................................................51
15.4 NO WARRANTIES........................................................................................52
ARTICLE 16 ASSIGNMENT............................................................................................52
16.1 ASSIGNMENT AND ASSUMPTION OF OBLIGATIONS.............................................................52
16.2 ASSIGNMENT TO LENDERS................................................................................52
ARTICLE 17 MISCELLANEOUS PROVISIONS..............................................................................54
17.1 AMENDMENTS...........................................................................................54
17.2 BINDING EFFECT.......................................................................................54
17.3 COUNTERPARTS.........................................................................................54
17.4 NOTICES..............................................................................................54
17.5 ENTIRE AGREEMENT.....................................................................................55
17.6 GOVERNING LAW........................................................................................56
17.7 WAIVER...............................................................................................56
17.8 NO DEDICATION OF SYSTEM..............................................................................56
17.9 HEADINGS.............................................................................................57
17.10 THIRD PARTIES........................................................................................57
17.11 AGENCY...............................................................................................57
17.12 SEVERABILITY.........................................................................................57
17.13 CONFIDENTIALITY......................................................................................58
17.14 REPLACEMENT INDEX....................................................................................59
17.15 PUBLIC ANNOUNCEMENT..................................................................................59
17.16 LIQUIDATED DAMAGES...................................................................................59
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EXHIBITS
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
PURCHASED POWER AGREEMENT
THIS PURCHASED POWER AGREEMENT ("Agreement"), dated as of March 2, 2000, is entered into by and between GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia with its principal address at 241 Ralph McGill Boulevard, Atlanta, Georgia 30308 ("Georgia Power") and DYNEGY POWER MARKETING, INC., a corporation organized and existing under the laws of the State of Texas, having its principal place of business at 1000 Louisiana Street, Suite 5800, Houston, Texas 77002 ("Dynegy").
W I T N E S E T H:
WHEREAS, Georgia Power is authorized by its Certificate of Incorporation and by the State of Georgia to engage in the generation, transmission, sale and distribution of electricity for heat, light and power to the public;
WHEREAS, Georgia Power represents that it is constructing and intends to own and operate three new General Electric Frame 7EA natural gas and oil-fired combustion turbine electric generating units with approximate capacity of 75 MW each located adjacent to the Georgia Integrated Transmission System, commonly known as Units 8, 9 and 10 of the Dahlberg Generating Plant located in Jackson County, Georgia (the "Units"); and
WHEREAS, Georgia Power has agreed to sell to Dynegy and Dynegy has agreed to purchase from Georgia Power capacity and energy which may or may not, at Georgia Power's sole option, be generated at the Units; all in accordance with the provisions of this Agreement;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual promises and agreements set forth herein and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, Georgia Power and Dynegy each intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
.........
1.1 Certain Definitions. In addition to the initially capitalized terms
and phrases defined in the preamble of this Agreement, the following initially
capitalized terms and phrases as and when used in this Agreement shall have the
respective meanings set forth below:
......... 1.1.1...."Affiliate" of any specified entity means any other existing or future 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 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 "controlled" have meanings correlative to the foregoing.
1.1.2 "Alternate Resources" means all resources other than Blocks 1, 2, and 3 (whether such other resources are owned, purchased or otherwise controlled by Georgia Power) from which Georgia Power may provide Contract Capacity and Delivered Energy.
1.1.3...."Annual Hours" means hours in which the Units are unavailable for Scheduling for reasons relating to the maintenance or administration of the Units or as may otherwise be necessary to operate the Units in accordance with Prudent Utility Practices, as such hours are designated and scheduled in accordance with Section 10.3. In any Contract Year, Annual Hours shall not exceed [redacted] per Block (as such number may be amended from time to time in accordance with the second sentence of Section 10.3.3).
1.1.4...."Block" means each block of Contract Capacity specified in Section 4.1.2 and in the amounts (expressed in MW) attributable to each block of Contract Capacity also set forth in Section 4.1.2. References to "Block 1," "Block 2" and/or "Block 3" shall refer to the respective Blocks of Contract Capacity designated for each of the Blocks also described in Section 4.1.2.
1.1.5...."Business Day" means any day on which the Federal Reserve Bank of New York is open for business.
1.1.6...."Commercially Reasonable" or "Commercially Reasonable Efforts" means, with respect to any purchase or sale or other action required to be made, attempted or taken by a Party under this Agreement, such efforts as a reasonably prudent business would undertake for the protection of its own interest under the conditions affecting such purchase or sale or other action, including without limitation, the amount of notice of the need to take such action, the duration and type of the purchase or sale or other action, the competitive environment in which such purchase or sale or other action occurs.
1.1.7...."Contract Capacity" shall have the meaning specified in Section 4.1.2.
1.1.8 "Contract Commencement Date" shall have the meaning as specified in Section 3.2.1.
1.1.9 "Contract Heat Rate" shall have the meaning specified in
Section 10.1.
1.1.10..."Contract Year" means a year beginning on June 1 and ending on May 31 of the succeeding calendar year.
1.1.11..."CPT" or "Central Prevailing Time" means the local time in effect during a particular hour in Birmingham, Alabama whether such time is Central Standard Time or Central Daylight Time as applicable.
1.1.12 "Day" means the twenty-four (24) hour period beginning and ending at 12:00 A.M. midnight (Central Prevailing Time).
1.1.13..."Defaulting Party" shall have the meaning specified
in Section 14.1.
1.1.14..."Delivered Energy" means, either individually or in
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combination, the energy in megawatt hours (MWh) attributable to a particular Block (i) generated by the Units and delivered to the Delivery Point, or (ii) generated by Alternate Resources, and delivered to the Delivery Point, based on a Schedule submitted by Dynegy as described in Article 8.
1.1.15..."Delivery Point" means the point of physical interconnection of the Units to the Georgia Integrated Transmission System where Georgia Power shall deliver the energy Scheduled under this Agreement.
1.1.16..."Delayed Service Commencement Date" shall have the meaning specified in Section 3.2.3.
1.1.17..."Determination Period" shall have the meaning
specified in Section 7.1.3.
1.1.18..."Dispatch" means whenever a Schedule calls for the
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output of a Block to change from zero to its Contract Capacity.
1.1.19 .."Dispatch Center" means the control and dispatching center designated by Georgia Power from time to time in writing as being the primary control point for dispatch instructions to Georgia Power.
1.1.20..."Dynegy" shall have the meaning specified in the first paragraph of this Agreement, and its permitted successors and assigns.
1.1.21..."Election Period" shall have the meaning specified
in Section 7.2.1.
1.1.22 "Eligible Collateral" shall have the meaning
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specified in Section 14.1.7.2.
1.1.23..."ENDH Allowance" means the maximum number of Equivalent ENDH Georgia Power may claim as specified in Exhibit B. ENDH is determined as [redacted].
1.1.24 "Energy Price" shall have the meaning specified in
Section 5.3.1.
1.1.25 "Equivalent Excused Non-Delivery Hour (Equivalent ENDH)" shall have the meaning specified in Section 7.3.
1.1.26 "Event of Default" shall have the meaning specified in Section 14.1.
1.1.27 "Excused Non-Delivery Hour (ENDH)" means an hour (or portion of an hour) in which an Unavailability Event has occurred and for which Georgia Power has elected, at its sole discretion, to use ENDH pursuant to Article 7.
1.1.28 "Extended Outage Period" shall have the meaning specified in Section 7.1.3.
1.1.29 "FERC" means the Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers and functions thereof under the Federal Power Act.
1.1.30 "Force Majeure Event" has the meaning set forth in
Section 12.1.
1.1.31 [redacted]. 1.1.32..."Fuel" means natural gas. 1.1.33 "Fuel Costs" shall have the meaning specified in |
Section 5.3.
1.1.34 "Fuel Metering Points" means the location of meters at or near the interconnection of the Lateral Pipeline and the Interstate Pipeline.
1.1.35 "Georgia Integrated Transmission System" means the integrated transmission system, as modified or expanded from time-to-time, as defined in the Revised and Restated Integrated Transmission System Agreement, dated as of December 7, 1990, between Georgia Power and Municipal Electric Authority of Georgia, the Revised and Restated Integrated Transmission System Agreement, dated as of December 7, 1990, between Georgia Power and City of Dalton, and the Revised and Restated Integrated Transmission System Agreement, dated as of November 12, 1990, between Georgia Power and Oglethorpe Power Corporation.
1.1.36 "Georgia Power" shall have the meaning specified in the first paragraph of this Agreement, and its permitted successors and assigns.
1.1.37 "Governmental Approval" means any authorization, consent, approval, license, ruling, permit, exemption, variance, order, judgment, decree, guidance, policies, declarations of or regulation by any Government Authority relating to the acquisition, development, ownership, occupation, construction, start-up, testing, operation or maintenance of the Units and common facilities of the Units or to the execution, delivery or performance of this Agreement.
1.1.38 "Governmental Authority" means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department or other such entity, but excluding any such agency, court, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee.
1.1.39 "Guaranty" shall have the meaning specified in
Section 13.1.
1.1.40 "HE" means hour ending.
1.1.41 "Interstate Pipeline" means the Transcontinental Gas
Pipeline.
1.1.42 "Interest Rate" means [redacted].
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1.1.43 "Lateral Pipeline" means the natural gas pipeline, together with necessary taps and headers connecting the Units with the Interstate Pipeline.
1.1.44 "Legal Requirement" means any law, code, statute, regulation, rule, ordinance, judgment, injunction, order or other requirement of a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question (i) at the time of the execution of this Agreement, as amended from time to time or (ii) anytime thereafter during the Term.
1.1.45 [redacted].
1.1.46 "Material Adverse Change" shall have the meaning specified in Section 14.1.7.1.
1.1.47 "Month" means a calendar month, commencing at the beginning of the first Day of such calendar month. "Monthly" has a meaning correlative to that of Month.
1.1.48 "Monthly Capacity Payment" for a particular Month of the Term, means the Monthly amount to be paid by Dynegy to Georgia Power for Dynegy's purchase of the Contract Capacity, as the same is set forth in Section 5.2.
1.1.49 "Monthly Energy Payment" for a particular Month of the
Term, means the Monthly amount to be paid by Dynegy to Georgia Power for
Dynegy's purchase of Delivered Energy, as the same is calculated as provided in
Section 5.3.
1.1.50 "Monthly Dispatch Payment" shall have the meaning specified in Section 5.4.
1.1.51 "Monthly Weighting Factor" means, for any Month, the weighting factor set forth opposite such Month in the table below:
Month Weighting Factor
January [redacted]
February [redacted]
March [redacted]
April [redacted]
May [redacted]
June [redacted]
July [redacted]
August [redacted]
September [redacted]
October [redacted]
November [redacted]
December [redacted]
1.1.52 "MW" means, in the singular context, one
megawatt, and in the plural context,
megawatts.
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1.1.53 "MWh" means, in the singular context, one megawatt hour, and in the plural context means, megawatt hours.
1.1.54 "NERC" means the North American Electric Reliability Council, or any successor to its functions.
1.1.55 "Non-Conforming Fuel" means Fuel that does not meet the specifications for Fuel delivered from the relevant Interstate Pipeline, in accordance with Section 6.3.2.
1.1.56 "Non-Defaulting Party" shall have the meaning
specified in Section 14.1.
1.1.57 "Non-Summer Months" means the Months of October,
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November, December, January, February, March, April and May.
1.1.58 "Party" or "Parties" means either Georgia Power or Dynegy, or both.
1.1.59 "Peak Hour" means any Hour Ending [redacted] through and including any Hour Ending [redacted].
1.1.60 "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization, Governmental Authority or other entity.
1.1.61 "Proprietary Information" of a Party shall mean information rightfully in the possession of such Party, which information derives economic value from not being generally known to and not being readily ascertainable by proper means by another person who can obtain economic value from its disclosure and use, and which is the subject of reasonable efforts to maintain its secrecy.
1.1.62 "Prudent Utility Practices" means, 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 the exercise of reasonable judgment 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 Practices 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and Legal Requirements and the requirements of this Agreement.
1.1.63 [redacted].
1.1.64 "Schedule" as used as a noun, means an energy schedule submitted by Dynegy in accordance with the provisions of Article 8 of this Agreement, and, as a verb, means the act of submitting a Schedule in accordance with the provisions of Article 8. Any form of the term Schedule (e.g., "Scheduled" or "Scheduling") shall refer to the exercise of such right by Dynegy.
1.1.65 "Service Commencement Date" means the date Georgia Power declares that a Block is available for Scheduling by Dynegy.
1.1.66 "Summer Months" means the Months of June, July,
August and September.
1.1.67 "Term" shall have the meaning specified in
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Section 3.1.
1.1.68 "Unavailability Event" means a condition during which the Units are physically incapable of delivering all or a portion of the Scheduled energy for reasons other than a Force Majeure Event.
1.1.69 "Units" shall have the meaning specified on page 1 of
this Agreement.
1.1.70 "Variable O&M (VOM) Amount" shall have the meaning
specified in Section 5.3.1.
1.1.71 "Year" means a calendar year.
1.2 Interpretation. In this Agreement, unless the context
otherwise requires:
1.2.1 words generally importing the singular shall include
the plural and vice versa;
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1.2.2 references to "entity" include, without limitation, corporations, partnerships, associations and governmental authorities.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 Representations and Warranties. Dynegy hereby makes the following representations and warranties to Georgia Power:
2.1.1 Dynegy is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas, and, has the legal power to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
2.1.2 Dynegy Inc. ("Guarantor") is a corporation duly organized and existing under the laws of the State of Delaware and is authorized to perform the obligations required of Guarantor under the Guaranty.
2.1.3 The execution, delivery and performance by Dynegy of this Agreement and the guarantee by Guarantor have been duly authorized by all necessary action, and do not and will not require any consent or approval of Dynegy's Affiliates, other than that which has been obtained.
2.1.4 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Dynegy or Guarantor is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
2.1.5 This Agreement constitutes the legal, valid and binding obligation of Dynegy enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
2.1.6 There is no pending, or to the knowledge of Dynegy, threatened action or proceeding affecting Dynegy before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
2.2 Representations and Warranties of Georgia Power. Georgia
Power hereby makes the following representations and warranties to Dynegy:
2.2.1 Georgia Power is a corporation duly organized, validly
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existing and in good standing under the laws of the State of Georgia, is qualified to do business in the State of Georgia and has the legal power and authority to own or lease its properties, to conduct its business and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
2.2.2 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Georgia Power is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
2.2.3 This Agreement constitutes the legal, valid and binding obligations of Georgia Power enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
2.2.4 There is no pending, or to the knowledge of Georgia Power, threatened action or proceeding affecting Georgia Power before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement.
ARTICLE 3
TERM OF AGREEMENT
3.1 Term.
3.1.1 This Agreement shall be effective when executed and delivered by both Georgia Power and Dynegy and shall remain in full force and effect until May 31, 2005.
3.1.2 Applicable provisions of this Agreement shall continue in effect (i) after termination to the extent necessary to provide for final billings and adjustments, and (ii) as provided herein. Provisions that expressly survive the termination of this Agreement after the Term shall similarly survive the early termination of this Agreement for any of the reasons giving rise to early termination as provided herein.
3.2 Contract Commencement Date.
3.2.1 With regard to Block 1, the Contract Commencement Date
shall mean either June 1, 2000, or July 1, 2000. Georgia Power shall select the
Contract Commencement Date for Block 1 no later than May 1, 2000, by delivering
to Dynegy written notice containing the date on which the Contract Commencement
Date for Block 1 shall occur. Once designated, Georgia Power may not thereafter
change or redesignate the Contract Commencement Date for Block 1. If Georgia
Power originally designates July 1, 2000, as the Contract Commencement Date for
Block 1, but later determines that Block 1 will be available June 1, 2000,
Dynegy will have [redacted] after receipt of notice of such early availability
within which to elect to accept the Contract Capacity and the right to commence
Scheduling Block 1 on June 1, 2000, on the terms and at the rates set forth in
this Agreement. If Dynegy elects not to exercise the option described in the
preceding sentence, then Georgia Power shall have until July 1, 2000, before
making the Contract Capacity for Block 1 available to Dynegy. With regard to
Block 2 and Block 3, the Contract Commencement Date for both Blocks shall be
June 1, 2001. The Contract Commencement Date for Blocks 2 and 3 may not be
re-designated at any time except as provided in Section 3.2.2.
3.2.2 Georgia Power shall make available on the applicable Contract Commencement Date for each Block, the Contract Capacity for such Block together with the right of Dynegy to Schedule energy from the Contract Capacity. However, if for Blocks 2 and 3, Georgia Power gives notice that the Service Commencement Date shall be earlier than the Contract Commencement Date, the Parties shall engage in negotiations, to be completed within [redacted] following such notice, concerning the terms upon which the Contract Capacity for Blocks 2 and 3 would be made available to Dynegy prior to the Contract Commencement Date. If the Parties are unable to negotiate the terms of such early commencement, then Georgia Power shall have until the Contract Commencement Date before making the Contract Capacity for Blocks 2 and 3 available to Dynegy.
3.2.3 If, as of the Contract Commencement Date for any Block, Georgia Power elects to delay the Service Commencement Date solely as a result of the failure of any one or any combination of the Units to have reached a state of construction completion so that such Unit is capable of delivering a quantity of energy continuously over a period of hours and at the level that may be Scheduled by Dynegy, then Georgia Power may elect to delay the Service Commencement Date for a particular Block. If Georgia Power elects to delay the foregoing Service Commencement Date for the reasons set forth in this Section 3.2.3, Georgia Power shall provide notice to Dynegy establishing a date on which the Service Commencement Date will occur (the "Delayed Service Commencement Date"). For the period from the Contract Commencement Date to the Delayed Service Commencement Date, Georgia Power shall provide Dynegy with capacity and energy equal to the Contract Capacity and associated energy attributable to the Block for which the Delayed Service Commencement Date is applicable. Dynegy shall be permitted to schedule such capacity and energy as Delivered Energy under this Agreement to the same extent that Dynegy would have been able to Schedule the Contract Capacity attributable to the Block subject to the Delayed Service Commencement Date had the Contract Commencement Date occurred on the appropriate date for such Block provided in Section 3.2.1. If during the period from the Contract Commencement Date specified in Section 3.2.1 for the Block subject to the Delayed Service Commencement Date Georgia Power is unable to deliver Scheduled energy to Dynegy, then Georgia Power shall be [redacted]. Notwithstanding the Delayed Service Commencement Date, for a particular Block, Dynegy shall nevertheless commence paying the Capacity Payment attributable to and appropriate for such Block beginning on the Contract Commencement Date for such Block specified in Section 3.2.1
ARTICLE 4
SALE OF CAPACITY AND ENERGY
4.1 Contract Capacity.
4.1.1 Unless excused as set forth in Article 12, Georgia Power agrees to sell to Dynegy and Dynegy agrees to purchase from Georgia Power the Contract Capacity as set forth below and continuing for the remainder of the Term.
4.1.2 Contract Capacity shall consist of (i) 75 MW (Block 1) commencing on the date specified as the Contract Commencement Date for Block 1 in Article 3, and (ii) an additional 150 MW composed of two 75 MW Blocks (Blocks 2 and 3) commencing on the date specified as the Contract Commencement Date for Blocks 2 and 3 in Article 3, for a total of 225 MW. While various performance, timing and Scheduling provisions of this Agreement are determined by reference to the Blocks, the Delivered Energy sold hereunder may be supplied by Georgia Power from any generation resources it may choose at its sole option. Without regard to whether Delivered Energy supplied under this Agreement is sourced from the Units or from Alternate Resources, Georgia Power shall under all circumstances be required to deliver energy properly Scheduled by Dynegy to the Delivery Point.
4.2 Delivered Energy.
4.2.1 Beginning on the earlier of the Service Commencement Date or the Contract Commencement Date for each Block, Dynegy shall have rights to Schedule energy in accordance with the provisions of this Agreement. For each Year, the total number of hours which Dynegy shall have rights to Schedule and receive energy at the Energy Price from each Block shall not exceed [redacted].
4.2.2 Georgia Power, at its sole discretion, shall supply Delivered Energy (i) from the Units; or (ii) from the Alternate Resources to the Delivery Point.
ARTICLE 5
PAYMENTS
5.1 Monthly Payments. Dynegy shall pay Georgia Power for each Month of the Term, a Monthly Capacity Payment, a Monthly Energy Payment and Monthly Dispatch Payments in accordance with this Article, and if applicable, the Force Majeure Fixed Payment in lieu of the Monthly Capacity Payment.
5.2 Capacity Payments. For each Month beginning with the Contract Commencement Date and continuing hrough the remaining Term, Dynegy shall make a Monthly Capacity Payment to Georgia Power in the amounts set forth on Exhibit A. [redacted].
5.3 Energy Payment.
5.3.1 Each Month, Dynegy shall make a Monthly Energy Payment to Georgia Power. For each Dispatch during the Month, the energy payment shall equal the MWh of Delivered Energy multiplied by the Energy Price. The Energy Price equals the Fuel Costs as determined below plus the Variable O & M Amount for the applicable period as set forth in Exhibit A. The Monthly Energy Payment shall equal the sum of the energy payments per Dispatch.
5.3.2 Dynegy shall provide its own Fuel supply to the Units unless Georgia Power, in its sole discretion, elects to provide energy from Alternate Resources. The circumstances under which Georgia Power may elect to provide Scheduled energy from Alternate Resources is addressed in Section 8.1.3. To the extent Dynegy supplies Fuel to the Units or alternate Fuel delivery points pursuant to Section 5.3.3, the Energy Price shall not include any Fuel Costs.
5.3.3 When Georgia Power elects to supply energy from
Alternate Resources, [redacted], Dynegy shall offer a delivered Fuel price.
Georgia Power shall then elect to (i) accept delivery of Fuel at Plant Dahlberg,
(ii) accept delivery of Fuel at alternate Fuel delivery points such that
[redacted], or (iii) accept Dynegy's Fuel price for purposes of determining a
Fuel Cost, which shall equal the Contract Heat Rate multiplied by Dynegy's Fuel
price.
5.4 Monthly Dispatch Payments. Dynegy shall make Dispatch
Payments for each Dispatch of the Contract Capacity in the amount of
[redacted] as set forth in Exhibit A.
ARTICLE 6
FUEL MANAGEMENT
6.1 Fuel for Operations; Delivery and Acceptance.
6.1.1 With respect to agreements for the supply of Fuel with the Interstate Pipeline, Dynegy shall exercise Commercially Reasonable Efforts to negotiate such agreements to contain the following provisions: (i) require the quality of Fuel supplied or transported to conform to the natural gas quality specification applicable in the performance warranty obtained from the manufacturer of the natural gas turbines included in each of the Units, (ii) the right to reject Non-Conforming Fuel, and (iii) supply Fuel to the Fuel Metering Points at a pressure not less than the minimum requirements of the Units. To the extent the tariff or Dynegy's agreements with the Interstate Pipeline provides for recovery or indemnification for damages the shipper suffers as a result of the Interstate Pipeline's delivery of Non-Conforming Fuel, Dynegy will collect and distribute to Georgia Power any recovery due from the Interstate Pipeline to the extent a Unit is damaged by the delivery of Non-Conforming Fuel; provided that, to the extent such recovery is allocable to transportation transactions unrelated to the Units, such recovery may be equitably allocated among all such affected transactions.
6.1.2 To the extent Georgia Power has indicated pursuant to
Section 8.1 that Scheduled Energy will be provided from one or more of the
Units, Dynegy shall at all times arrange, procure, supply, nominate, balance,
transport, pay for and deliver to the Fuel Metering Points, the amount of Fuel
necessary to generate the Scheduled energy based on the Contract Heat Rate for
the period of the Schedule. All Fuel required to be delivered under this
Agreement shall be delivered by Dynegy at the Fuel Metering Points. As long as
the Units are available for Scheduling and are not subject to a Force Majeure
Event, an Unavailability Event or supply from an Alternate Resource, Georgia
Power shall accept all Fuel, other than Non-Conforming Fuel, required by such
Unit delivered by Dynegy at the Fuel Metering Points pursuant to the terms of
this Agreement.
6.3 Measurement and Quality of Fuel.
6.3.1 All Fuel to be supplied by Dynegy pursuant to the terms of this Agreement shall be measured at the Fuel Metering Points and shall meet the specification for gas delivered to the Interstate Pipeline.
6.3.2 Georgia Power shall notify Dynegy if any Fuel made available by Dynegy to Georgia Power under this Agreement is Non-Conforming Fuel. Georgia Power may refuse to accept delivery of such Non-Conforming Fuel and such Non-Conforming Fuel shall, for purposes of this Agreement, be deemed not to have been provided by Dynegy under this Agreement.
6.4 Failure to Deliver Fuel; Imbalance.
6.4.1 Whenever Georgia Power has indicated pursuant to Section 8.1 that Scheduled energy will be provided from one or more of the Units, if Dynegy fails to deliver Fuel of proper quality in the proper amounts at the times necessary to operate such Unit(s), then Georgia Power shall be excused from any energy delivery obligation under this Agreement.
6.4.2 The Parties shall exercise Commercially
Reasonable Efforts to minimize any imbalances or other penalties or charges
from transporters resulting from the provisions of Fuel by Dynegy. In general,
the Parties agree that the Party whose action or inaction causes any imbalance
or other penalties or charges will bear the financial responsibility for said
imbalance or other penalties or charges.
[redacted]
ARTICLE 7
AVAILABILITY
7.1 Curtailments and Excuse.
7.1.1 Georgia Power's obligation to deliver Contract Capacity
and energy pursuant to this Agreement, and Dynegy's right to Schedule pursuant
to this Agreement, will be curtailed if and to the extent that an Unavailability
Event or a Force Majeure Event occurs and continues during any portion of the
Term; provided, that Georgia Power's obligation and Dynegy's right shall be
curtailed only for the actual duration of such Unavailability Event or Force
Majeure Event and for no longer period. Upon notice from Georgia Power to Dynegy
that an Unavailability Event or Force Majeure Event, as applicable, has ended
and that a particular Block or Blocks are once again available for Scheduling,
any Unavailability Event or Force Majeure Event then in effect shall end, and
Scheduling may resume.
7.1.2 Georgia Power and Dynegy agree that Georgia Power shall not be permitted to use ENDH unless the Units are experiencing an Unavailability Event.
7.1.3 Georgia Power shall promptly notify Dynegy of the occurrence of an Unavailability Event or after discovering any circumstance that could reasonably be expected to lead to an Unavailability Event. In the event of an Unavailability Event, the period after commencement of such Unavailability Event shall be divided into two distinct, contiguous periods: (i) the period beginning at the time of the occurrence of the Unavailability Event until the earlier of the removal of the Unavailability Event or 12:00 midnight (Central Prevailing Time) of the Day in which such occurrence happens (the "Determination Period") and (ii) the period from the end of the Determination Period until the removal of the Unavailability Event (the "Extended Outage Period").
7.1.4 After the commencement of the Extended Outage Period, as soon as practicable Georgia Power shall notify Dynegy of: (i) the cause (or if not known, Georgia Power's best estimate of the cause) of the Unavailability Event resulting therefrom; (ii) the proposed corrective action that can be taken by Georgia Power relative to the Units and (iii) Georgia Power's best estimate of the expected duration of the Extended Outage Period.
7.1.5 Georgia Power's estimate of the duration of the Unavailability Event shall be based on the best information then available to Georgia Power and Georgia Power shall promptly notify Dynegy of any expected changes in such period.
7.1.6 Consistent with Prudent Utility Practices, Georgia Power shall use Commercially Reasonable Efforts to avoid an Unavailability Event and to minimize the duration of any Unavailability Event.
7.2 Georgia Power Elections; [redacted].
7.2.1 Georgia Power shall, within [redacted] of the occurrence
of the event causing such Unavailability Event (the "Election Period"), provide
telephonic notice (which shall be confirmed in writing as soon as practicable)
to Dynegy indicating whether Georgia Power will elect to provide energy from
Alternate Resources equivalent to the quantity of energy Scheduled by Dynegy,
use ENDH or pay [redacted]. Such notice shall be provided prior to [redacted]
after any hour during the Election Period. The Election Period shall be deemed
to have ended at the end of said hour. Such notice shall indicate Georgia
Power's election for the remainder of the Determination Period and, if
applicable, will indicate whether Georgia Power will elect to provide energy
from Alternate Resources for the first Day of the Extended Outage Period.
Georgia Power's elections for the Determination Period and the first day of the
Extended Outage Period may be different. If Georgia Power fails to deliver such
notice during the Election Period, it shall be conclusively presumed that
[redacted]. During the Election Period, [redacted].
7.2.2 On each Day of the Extended Outage Period, with respect
to any Unavailability Event, Georgia Power shall, within [redacted] of receipt
of Dynegy's Dispatch Schedule, but no earlier than 8:30 a.m. CPT, provide
telephonic notice (which shall be confirmed in writing as soon as practicable)
to Dynegy indicating whether Georgia Power will elect to cover any energy
Scheduled by Dynegy during the Extended Outage Period that as a result of the
Extended Outage Period cannot be delivered by Georgia Power, by providing energy
from Alternate Resources. Such notice shall indicate Georgia Power's election
for Dispatches Scheduled during the Day immediately following the Day on which
such notice is given. Such notice shall specify the portion of the resultant
energy Scheduled by Dynegy to be covered by delivery of energy from Alternate
Resources. On each Day of the Extended Outage Period for which Georgia Power has
elected not to provide energy from Alternate Resources, Georgia Power shall,
within [redacted] of receipt of Dynegy's Schedule, but no earlier than 8:30
a.m., CPT, notify Dynegy of its choice to use ENDH or [redacted] to cover
Dynegy's Schedule for that Day.
7.2.3 In the Determination Period or Extended Outage Period:
(i) if Georgia Power elects to use ENDH for any particular Dispatch during the
Unavailability Event, Georgia Power must use ENDH [redacted]; (ii) [redacted];
and (iii) if Georgia Power elects to deliver energy from Alternate Resources in
replacement of energy Scheduled by Dynegy that would otherwise be undelivered
due to an Unavailability Event, Georgia Power must do so [redacted].
7.2.4 During any Determination Period or Extended Outage Period, Georgia Power may elect to [redacted]. [redacted]. If the ENDH limits described in Exhibit B are depleted in any Contract Year, Georgia Power shall thereafter for the remainder of such Contract Year during any period in which Dynegy has Scheduled energy for delivery and there exists an Unavailability Event, either provide energy from Alternate Resources equal to the amount of energy Scheduled by Dynegy, or elect not to provide energy from Alternate Resources and [redacted].
7.2.5 In any circumstance where Georgia Power has the option to use ENDH, if the ENDH is exhausted during any Schedule, Georgia Power shall be required to [redacted].
7.3 Use of Equivalent Excused Non-Delivery Hours.
7.3.1 Where Georgia Power has elected to use Excused Non-Delivery Hours as provided above in lieu of providing energy from Alternate Resources, the Excused Non-Delivery Hour shall be converted to an Equivalent Excused Non-Delivery Hour equal to the product of (i) the hour or fraction of the hour in which Scheduled energy was not delivered due to the Unavailability Event, and (ii) the appropriate [redacted].
7.3.2 Use of Equivalent ENDH for Peak Hours during the Summer Months shall be equal to the sum of Equivalent ENDH which have occurred during Peak Hours during the Summer Months of the Year. Use of Equivalent ENDH for Peak Hours during the Non-Summer Months shall be equal to the sum of Equivalent ENDH which have occurred during Peak Hours during the Non-Summer Months of the Year.
7.3.3 For each respective period, the sum of Equivalent ENDH shall not exceed the ENDH Allowance limits as set forth in Exhibit B. If the ENDH Allowance is depleted, and Georgia Power does not provide energy from Alternate Resources, then [redacted].
7.4 [redacted].
7.4.1 [redacted]
7.4.2 [redacted].
7.5 Remedy. Dynegy's sole and exclusive remedy for energy not delivered from Alternate Resources during Peak Hours where the ENDH Allowance may be exceeded as set forth in this Article is [redacted] Georgia Power shall incur no liability and shall not use ENDH [redacted] in respect of an Unavailability Event during non-Peak Hours.
ARTICLE 8
SCHEDULING
8.1 Scheduling.
8.1.1 Prior to the first Day of each Month, Dynegy shall
provide to Georgia Power non-binding, good faith projections of the amounts of
energy to be scheduled by Dynegy for each hour of such Month. The Monthly
schedules shall in no way limit the flexibility of Scheduling available to
Dynegy as described in Article 8.
8.1.2 Dynegy shall inform Georgia Power on each Business Day before 9:30 a.m. (CPT) of the projected Schedule of the Blocks for each hour for the following Business Day and any non-Business Days which will occur before the next Business Day.
8.1.3 Within [redacted] of receiving Dynegy's projected Schedule as specified in Section 8.1.2, but no earlier than 8:30 a.m. (CPT), Georgia Power shall inform Dynegy by telephone whether Georgia Power will respond to such Schedule (and any related Schedule order) with one or more of the Units or with Alternate Resources.
8.2 Title and Risk of Loss. As between the Parties, Georgia Power shall be deemed to be in exclusive control (and responsible for any property damages or injuries to Persons caused thereby) of the Contract Capacity and Scheduled energy at and prior to the Delivery Point and Dynegy shall be deemed to be in exclusive control (and responsible for any property damages or injuries to Persons caused thereby) of the Contract Capacity and Scheduled energy from and after the Delivery Point. Custody, title and risk of loss related to the Contract Capacity and Scheduled energy shall transfer from Georgia Power to Dynegy at the Delivery Point.
ARTICLE 9
BILLING AND PAYMENT
9.1 Capacity, Energy and Dispatch Billing and Payment.
9.1.1 Georgia Power shall send Dynegy an invoice as soon as practicable after the end of each Month during the Term stating the Monthly Capacity Payment, [redacted], Monthly Energy Payment and Monthly Dispatch Payment for the immediately previous Month. If circumstances require that the invoice be an estimated bill, Georgia Power may render an estimated bill and any adjustments required shall be made in ensuing invoices. Each Monthly invoice shall contain a statement explaining in reasonable detail how the invoice was calculated.
9.1.2 All such invoices shall be due when rendered and payable by Dynegy on or before the later of the [redacted] following the day on which the invoice is actually received by Dynegy, or the [redacted] of the Month in which the invoice is delivered to Dynegy. Georgia Power may render invoices by means of facsimile, and receipt shall be deemed to have occurred upon transmission if confirmed in writing (by manually or machine-generated confirmation notice). Subject to the provisions of Section 9.2, Dynegy shall make payment to Georgia Power in accordance with such invoices and all other amounts payable to Georgia Power hereunder on or before the date due in immediately available funds, through wire transfer of funds to an account designated by Georgia Power, or other means reasonably acceptable to Georgia Power.
9.1.3 If Georgia Power owes Dynegy for [redacted] or any other
amounts hereunder, then Dynegy will deliver to Georgia Power a statement showing
such amounts and explaining in reasonable detail how such amounts were
calculated. Subject to Section 9.2, such amounts, if less than or equal to the
next invoice amount will be credited against such invoice. To the extent such
[redacted].
9.2.1 If either Party after receiving a statement or bill
reasonably questions or contests the amount or propriety of any payment or
amount claimed by the billing Party to be due pursuant to this Agreement, the
billed Party shall provide the billing Party with written notice of the disputed
amount.
[redacted]
9.2.2 In the event that the billed Party questions or contests the correctness of any such charge or credit, the billing Party shall promptly review the questioned charge or credit and shall notify the billed Party of any error in its determination of amounts owed and the amount of any payment that the billed Party is required to make in respect of such redetermination. Not later than the [redacted] after receipt by Dynegy of any such notice from Georgia Power as to the amount of any Monthly Capacity Payments, Monthly Energy Payments, Force Majeure Fixed Payment or Dispatch Payments that Dynegy is required to make, Dynegy shall make payment as provided in Section 9.2.1 to Georgia Power in immediately available funds. Not later than the [redacted] after receipt by Georgia Power of any such notice from Dynegy as to the amount of any payment or [redacted] that Georgia Power is required to make, Georgia Power shall make payment or credit as appropriate, to Dynegy in immediately available funds. If the billed Party disagrees with the billing Party's resolution of a question or contest, then the dissatisfied billed Party may seek settlement through further negotiations or legal action, subject to the provisions of Section 9.3. Adjustments shall be made or credited at the time of resolution together with interest at the Interest Rate from the date the original payment was due until the date such payment or credit together with interest at the Interest Rate is actually made. The billed Party shall have until the end of [redacted] after its receipt of any invoice or statement to question or contest the correctness of any charge or credit on such invoice or statement.
9.3 Interest. If a Party does not make a payment required by this Agreement when due then interest shall be added to the overdue payment from the date such overdue payment was due until such overdue payment together with interest at the Interest Rate is paid. If a Party makes a payment required by the Agreement and it is later determined that such payment was not due, then such amount shall be refunded or credited with interest at the Interest Rate accruing from the date that the returned payment was originally made.
9.4 Billing and Payment Records. Until the end of [redacted] after its receipt of any invoice, each Party will make available to the other Party upon written request, and each Party may audit, such books and records of the other Party (or other information to which such Party has access) as are reasonably necessary for such Party to calculate and determine the Monthly Energy Payments or Force Majeure Fixed Payment shown on such invoice and thereby to verify the accuracy and appropriateness of the amounts billed to Dynegy and the information provided by Dynegy to Georgia Power. The Parties shall maintain their respective books and records in accordance with generally accepted accounting principles applicable from time to time.
ARTICLE 10
OPERATIONS
10.1.1 While the Parties acknowledge that Georgia Power may construct the Units, energy actually delivered under this Agreement may be provided from any generation resource available to Georgia Power at Georgia Power's sole discretion, and except where specifically noted, operation of the Units may not necessarily be tied directly to Scheduling of energy in Blocks by Dynegy. Regardless of the source of energy to be delivered to Dynegy under this Agreement, Georgia Power shall at all times deliver such energy to the Delivery Point.
10.1.2 The Contract Heat Rate for each Block shall be
[redacted].
10.1.3 Georgia Power intends to operate its system in accordance with Prudent Utility Practices, and otherwise in accordance with this Agreement.
10.2 Transmission.
10.2.1 Georgia Power shall be responsible for making all arrangements for transmission service, including ancillary services, for delivery of Contract Capacity and energy to the Delivery Point. Georgia Power shall be responsible for all costs, losses, and any liability associated with such transmission.
10.2.2 Dynegy shall be responsible for making all arrangements for transmission service, including ancillary services, for delivery of Contract Capacity and energy from the Delivery Point. Dynegy shall be responsible for all costs, losses and any liability associated with such transmission.
10.3.1 Except as provided for in Section 10.3.4, Georgia Power shall not be permitted to use Annual Hours during any Summer Month.
10.3.2 At least [redacted] before June 1 of each Contract Year and at least [redacted] prior to the applicable Contract Commencement Date, Dynegy shall provide to Georgia Power a non-binding proposed Schedule of MWhs Dispatches of Blocks 1, 2, and 3 for the Contract Capacity for each Month of the ensuing Contract Year. Within [redacted] of receiving Dynegy's proposed schedule, Georgia Power shall submit to Dynegy a proposed schedule of Annual Hours for the period covered by the proposed Dispatch and Schedule provided by Dynegy. The proposed schedule of Annual Hours shall give due consideration to, and shall take into account, the proposed Schedule submitted by Dynegy; provided, however, that in no event shall [redacted]. Within [redacted] after receiving Georgia Power's proposed schedule of Annual Hours, Dynegy may request, in writing, that Georgia Power reschedule any such Annual Hours. Georgia Power shall make reasonable efforts to accommodate such request in the scheduling of Annual Hours. In scheduling maintenance for its generating facilities Georgia Power shall make no adverse distinction against the Units.
10.3.3 Contract Years in which Annual Hours include a combustion inspection, a hot gas inspection or a major inspection with respect to any generation equipment from which the Contract Capacity attributable to Blocks 1, 2, and 3 may be sourced, the duration of the Annual Hours shall be determined in accordance with the equipment manufacturers' then current recommendations; provided that for purposes of this Section 10, the manufacturers' recommendations shall be determined in accordance with the formulae provided by the relevant equipment manufacturers and shall be consistent with the formulae provided by such equipment manufacturers that is typical for similar equipment, which formulae may be revised from time to time by such manufacturers. If such recommendations or formulae are revised by such manufacturers to decrease the intervals at which a combustion inspection, a hot gas inspection and/or a major inspection is recommended to occur with respect to a Unit, then the number of Annual Hours shall be amended to reflect the increased hours effected by such decreased intervals, with the intent that Georgia Power will be able to include all hours included in the decreased intervals in the Annual Hours. Notwithstanding the foregoing or any provision herein, Georgia Power shall use Prudent Utility Practices to complete and minimize the duration of Annual Hours. To the extent that hours which are, or which would otherwise be considered, Annual Hours exceed the total Annual Hours available to Georgia Power in any Contract Year, then to the extent that Georgia Power incurs Unavailability as a result of such exceedance, Georgia Power shall have the right to make the elections specified in Article 7 with regard to such Unavailability.
10.3.4 In addition to the Annual Hours provided for in Sections 10.3.2 and 10.3.3, Georgia Power shall be entitled to perform additional maintenance during the [redacted] Months during non-Peak Hours. If maintenance is to be scheduled on a Saturday, Sunday or a NERC holiday, Georgia Power shall provide telephonic notice (confirmed in writing) as soon as practicable prior to the Day on which the additional maintenance is projected to commence. Dynegy shall have the right to request that Georgia Power perform said maintenance during other mutually agreeable periods and Georgia Power shall make Commercially Reasonable Efforts, consistent with Prudent Utility Practices, to accommodate Dynegy's requests.
10.3.5 With respect to the Annual Hours, Georgia Power and
Dynegy agree that, in addition to the other provisions of this Section 10.3,
Annual Hours are intended to encompass periods during which the generating units
comprising the Units and encompassing the Blocks are unavailable for dispatch by
any party. Therefore, Georgia Power shall not be permitted to designate Annual
Hours and simultaneously operate the Units. The limitation specified in this
Section 10.3.5 shall apply in every instance in which Annual Hours are
designated or used.
10.4 Operating Procedures. Dynegy and Georgia Power shall develop written operating procedures before synchronization of the Units with the Georgia Integrated Transmission System. The operating procedures shall establish the protocol under which the Parties shall perform their respective responsibilities under this Agreement and shall include, but shall not necessarily be limited to, method of Day-to-Day communications, key personnel lists for Georgia Power and Dynegy, ENDH and Annual Hour reporting, daily capacity level and energy reports, coordinating Fuel arrangements and the operating procedures for Fuel supply, the resolution of disputes and the allocation of Fuel delivered to the Units.
ARTICLE 11
CHANGE IN LAW, MODIFICATION OF AGREEMENT
11.1 Change in Law.
11.1.1 The Parties acknowledge that a change of a law or
regulation or a change in interpretation of a law or regulation ("Change in
Law"), including but not limited to environmental laws and regulations may
significantly change Georgia Power's costs in providing service under this
Agreement. In the event of such a Change in Law, Georgia Power may give notice
to Dynegy that Georgia Power's costs of providing service under this Agreement
have changed significantly. In such case, Georgia Power shall submit to Dynegy a
certificate setting forth in reasonable detail the basis of, and the calculation
for, the increased costs, and the Parties shall enter into negotiations in an
effort to arrive at a mutually agreeable amendment to this Agreement that would
accommodate the impact of the Change in Law. If after a period of [redacted]
following the commencement of the negotiations, the Parties have not reached
agreement, then Georgia Power shall have the option, in its sole discretion, (i)
to continue this Agreement unamended; or (ii) to terminate this Agreement as of
the next [redacted] first to occur and which is at least [redacted] after the
end of the [redacted] negotiation period; provided, however, that during any
[redacted] Month this Agreement remains in effect after a Change in Law has
resulted in increased costs to Georgia Power, Dynegy will make increased
payments as reasonably calculated by Georgia Power in good faith to take account
of such increased costs.
11.1.2 For purposes of this Article, Changes In Law include, but are not limited to, changes in environmental laws or regulations and energy taxes on wholesale power sales. Applicable environmental laws and regulations may seek either to decrease current limits (e.g., NOx), or to establish limits for currently uncontrolled substances (e.g., CO2), on any plant emission. Covered costs include, but are not limited to changes in chemicals, consumables, O&M, emission allowance purchases, carrying costs and efficiency impacts.
11.2 Modification of Agreement. In the event the FERC or any other Governmental Authority modifies this Agreement, the Parties agree to make all changes necessary to preserve as nearly as possible the bargain contained in this Agreement, including but not limited to, the total amounts of capacity and energy delivered to Dynegy and the total amount of revenues to be received by Georgia Power.
ARTICLE 12
FORCE MAJEURE
12.1 Definition of Force Majeure. For the purposes of this Agreement, a
"Force Majeure Event" as to a Party means any occurrence, nonoccurrence or set
of circumstances, whether or not foreseeable, that is beyond the reasonable
control of such Party and is not caused by such Party's negligence, including,
without limitation: any strike, stoppage in labor, failure of contractors or
suppliers of materials or services caused by Force Majeure as defined in the
applicable contract: flood, ice, earthquake, windstorm or eruption; fire;
explosion; invasion, riot, war, commotion or insurrection; sabotage, terrorism
or vandalism; military or usurped power; order of any Governmental Authority; or
act of God or of a public enemy. The term Force Majeure Event shall not include
(i) [redacted], (ii) [redacted], (iii) the failure to timely apply for or to
obtain any applicable governmental approvals for the construction or operation
of the Units from any Governmental Authority, (iv) changes in market conditions
that affect the cost of fuel, capacity or energy; or (v) difficulty or inability
to make payments.
12.2 No Breach or Liability. Either Party shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder (other than the obligation to pay money) for so long as failure to perform such obligation shall be due to a Force Majeure Event.
12.3 Capacity and Energy Payments. During the suspension of
performance due to or resulting from a Force Majeure Event declared by
Georgia Power, Dynegy shall continue to make Monthly Capacity Payments;
[redacted]
12.4.1 give the other Party notice thereof, followed by written notice if the first notice is not written, as promptly as practicable after such Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
12.4.2 use its reasonable best efforts consistent with Prudent Utility Practices to remedy its inability to perform as soon as practicable; provided, however, that this Section 12.4.2 shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which in the sole judgment of the party involved in the dispute, are contrary to its interest; provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of the Party having the difficulty; and
12.4.3 when it is able to resume performance of its obligations under this Agreement, give the other Party written notice to that effect.
12.5 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
ARTICLE 13
CREDIT
13.1 Guaranty. Simultaneously with the execution of this Agreement, Dynegy shall cause Dynegy Inc. to execute and deliver a Guaranty Agreement in the form of that attached hereto as Exhibit C (Guaranty).
ARTICLE 14
EVENTS OF DEFAULT AND DAMAGES FOR NON-PERFORMANCE
14.1 Events of Default. "Event of Default" means the occurrence of any of the following events with respect to a Party (the Defaulting Party, the other Party being the Non-Defaulting Party), Defaulting Party in the case of Dynegy including Dynegy Inc.
14.1.1 The Defaulting Party fails to make any payment which it is obligated to make pursuant to this Agreement and such failure to make payment continues for a period of [redacted] after the date on which written notice thereof shall have been given to the Defaulting Party.
14.1.2 Any representation or warranty of the Defaulting Party pursuant to this Agreement or the Guaranty shall prove to have been false or misleading in any material respect when made or deemed made; unless (i) the fact, circumstance or condition that is the subject of such representation or warranty is made true within [redacted] after notice thereof has been given to the Defaulting Party and (ii) such cure removes any adverse effect on the Non-Defaulting Party of such fact, circumstance or condition being otherwise than as first represented, or unless such fact, circumstance or condition being otherwise than as first represented does not materially adversely affect Non-Defaulting Party.
14.1.3 A court having jurisdiction shall enter (i) a decree or order for relief in respect of Defaulting Party in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Defaulting Party bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Defaulting Party under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Defaulting Party or of any substantial part of its affairs; or
14.1.4 Defaulting Party shall (i) commence a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated as bankrupt or insolvent, or (ii) consent to the entry of a decree or order for relief in respect of Defaulting Party in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or (iii) file any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law, or (iv) consent to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official or (v) make an assignment for the benefit of creditors, or (vi) be unable, or admit in writing its inability, to pay its debts as they become due, or (vii) take any action in furtherance of any of the foregoing.
14.1.5 Defaulting Party shall fail to pay when due (subject to any applicable grace or cure period), whether by acceleration or otherwise, any principal or interest on indebtedness aggregating in excess of [redacted] in principal amount; or any indebtedness aggregating in excess of [redacted] shall be declared due and payable or be required to be prepaid (other than by a regularly scheduled payment) prior to the stated maturity of such indebtedness.
14.1.6 Dynegy Inc. shall fail to perform any covenant set forth in the Guaranty, or the Guaranty shall expire and shall not be replaced with comparable assurance to Georgia Power, with Georgia Power's consent, which consent shall not be unreasonably withheld. Notwithstanding anything to the contrary contained in this Agreement, if the Guaranty shall expire or if Dynegy Inc. shall fail to perform any of its obligations under the Guaranty, Dynegy shall have the right to replace the Guaranty with a replacement guaranty agreement issued by Dynegy Holdings Inc., which replacement guaranty shall be in form and substance similar to the Guaranty. In such event, and provided that at the time of replacement, Dynegy Holdings Inc. is not experiencing a Material Adverse Change of the type described in Section 14.1.7.1, Georgia Power shall be deemed to have consented to the delivery of the replacement guaranty.
14.1.7 Dynegy Inc. shall experience a Material Adverse Change; provided, however, such Material Adverse Change shall not be considered an Event of Default if Dynegy Inc., or Dynegy delivers or causes to be delivered to Georgia Power: (a) a guaranty agreement issued by Dynegy Holdings Inc. (or any other third party guarantor) in form and substance comparable to the Guaranty, and guaranteeing the obligations of Dynegy for the remainder of the Term, provided that for such replacement guaranty to be sufficient to remove an Event of Default arising under this Section 14.1.7, Dynegy Holdings Inc. (or such third party guarantor) must not, at the time of replacement, be experiencing a Material Adverse Change of the type described in Section 14.1.7.1; or (b) Eligible Collateral in an amount equal to the next [redacted]. Eligible Collateral will be adjusted on the last day of each Month during the Material Adverse Change Event as dictated by changes in [redacted].
14.1.7.1 As used in this Section 14.1.7, a Material Adverse Change shall
occur when Dynegy Inc.'s senior securities are rated below [redacted]. In the
event one of the ratings of Dynegy Inc. falls below either [redacted], Dynegy
will propose a substitute guarantor from an entity with ratings greater than or
equal to [redacted], which substitute guarantor is acceptable to Georgia Power.
A Material Adverse Change shall occur if no such substitute guarantor is
available. If long-term ratings are not available from [redacted] will be used
instead of the [redacted] to determine a Material Adverse Change. In the case of
[redacted] are not available, [redacted] will be used instead of the [redacted]
to determine a Material Adverse Change. If Dynegy Inc. ceases to have a long-or
short-term rating from either [redacted], then a Material Adverse Change shall
have occurred.
14.1.7.2 As used in this Section 14.1.7, Eligible Collateral shall consist of an irrevocable Letter of Credit or surety bond from [redacted] (and in a form reasonably acceptable to Georgia Power), or cash.
14.1.8 The Defaulting Party materially breaches any obligation
under this Agreement (other than the obligation to pay money when due which
shall be governed exclusively by Section 14.1.1) or the Guaranty, and such
breach shall continue for a period of [redacted] after the date on which written
notice thereof shall have been given to the Defaulting Party; except that if it
shall be impracticable or impossible to remedy any such breach within such
[redacted] period, such period shall be extended as reasonably necessary to
remedy such breach.
14.2 Rights Under Agreement. Except as otherwise provided herein, each Party reserves to itself all rights, counterclaims, and other defenses which it is or may be entitled to arising from or out of this Agreement.
14.3.2 In addition to the remedies provided in Section 14.3.1, the Non-Defaulting Party may, for so long as the Event of Default is continuing, by written notice to the Defaulting Party, establish a date on which this Agreement shall be terminated, which date shall be at least [redacted] and no more than [redacted] after the date of such written notice. [redacted].
14.3.3 In the case in which an Event of Default in which Dynegy is the Defaulting Party has occurred and is continuing, Georgia Power shall have the right to sell all Contract Capacity and energy under this Agreement to any party. Georgia Power shall use its reasonable best efforts to sell such Contract Capacity and energy at prices equal to or greater than those Dynegy would have paid under this Agreement; provided, that if such prices are less than those Dynegy would have paid under this Agreement, Dynegy shall be liable to pay Georgia Power the difference. By way of clarification of the foregoing only, an Event of Default shall not be deemed to have occurred unless and until all applicable grace and/or cure periods have expired.
ARTICLE 15
INDEMNIFICATION AND LIMITATION OF LIABILITY
15.1 Indemnity. Subject to Section 15.3 below, each Party expressly agrees to indemnify, hold harmless and defend the other Party against all claims, liability, costs or expense for loss, damage or injury to persons or property in any manner directly or indirectly connected with or growing out of, the generation, transmission or distribution of Delivered Energy on its own side of the Delivery Point, unless such loss, damage or injury is the result of gross negligence or willful misconduct of the Party seeking indemnification.
15.2 No Liability to Third Party. Nothing herein shall create, or be interpreted as creating, any standard of care with reference to, or any duty or liability to any person not a Party hereto.
15.3 No Consequential Damages. To the fullest extent permitted by law, neither Party shall be liable to the other for punitive, indirect, exemplary, consequential, or incidental damages including, without limitation, claims of customers of the indemnified Party arising in connection with this Agreement.
15.4 No Warranties. There are no warranties under this Agreement except
to the extent specifically set forth in the text hereof. The Parties hereby
specifically disclaim and exclude all implied warranties, including the implied
warranties of merchant ability and of fitness for a particular purpose.
ARTICLE 16
ASSIGNMENT
16.1 Assignment and Assumption of Obligations. Neither Party shall assign this Agreement or any portion thereof without the prior written consent of the other Party which such consent shall not be unreasonably withheld; provided, however, (i) any assignee shall expressly assume assignor's obligations hereunder and (ii) unless expressly approved by the other Party to this Agreement, no assignment, whether or not consented to, shall relieve the assignor, and any guarantor, of their obligations hereunder in the event its assignee fails to perform and (iii) either Party may assign this Agreement to an Affiliate without consent, and, upon approval of the creditworthiness of such assignee by the non-assigning Party (which approval shall not be unreasonably withheld), the assignor (but not any guarantor) shall be released from its obligations under this Agreement. The transfer of any interest in the ultimate parent of a Party to this Agreement shall not constitute an assignment under this Section requiring the consent of the other Party.
16.2 Assignment to Lenders.
16.2.1 Notwithstanding Section 16.1, Georgia Power may, without the consent of Dynegy, assign this Agreement to a lender for collateral security purposes in connection with the financing or refinancing of the Units. Upon any such assignment however, Georgia Power shall provide notice to Dynegy of the lender assignee, together with appropriate contact information with respect to a business representative of such assignee.
16.2.2 Georgia Power has represented to Dynegy that Georgia Power may procure permanent and/or construction financing for the purchase and installation of the Units. In order to facilitate the obtaining of financing of the Units, Dynegy shall execute such consents, agreements or similar documents with respect to a collateral assignment of this Agreement to a lender as lender may reasonably request in connection with the documentation of the financing or refinancing for the Units, provided, that any such consents, agreements or similar documents will be on terms and conditions acceptable to Dynegy. Under no circumstances in connection with the foregoing, shall Dynegy be required to deliver consents, agreements or similar documents that would have the effect of enhancing the overall liability or obligations of Dynegy under this Agreement or that would in any way dilute the benefits accruing to Dynegy under this Agreement if such consents, agreements or similar documents had not been required.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Amendments. This Agreement may be amended only by a written instrument duly executed by each of Georgia Power and Dynegy, which has received all approval of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
17.2 Binding Effect. This Agreement and any extension shall inure to the benefit of and shall be binding upon the Parties and their respective permitted successors and assigns.
17.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
17.4 Notices. Where written notice is required by this Agreement, such notice shall be in writing and shall be deemed given (i) when mailed by United States registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
To: Dynegy: 1000 Louisiana Street
Suite 5800
Houston, Texas 77002
Attn: Vice President - Power Marketing
With Copies To: 125 Town Park Drive
Suite 175
Kennesaw, Georgia 30144
Attn: Vice President
1000 Louisiana Street
Suite 5800
Houston, Texas 77002
Attn: General Counsel - Dynegy Power Marketing
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To: Georgia Power Company Southern Wholesale Energy c/o Southern Company Services, Inc.
270 Peachtree Street
Atlanta, Georgia 30308
Attn: Vice President - Southern Wholesale Energy
With Copy To: Troutman Sanders LLP
5200 Bank of America Plaza
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Robert H. Forry
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or to such other address as may be designated by the Parties; or (ii) when sent by facsimile, provided such facsimile is confirmed by mailing a hard copy confirmation, as provided in clause (i) above, within one (1) Business Day after the sending of the facsimile or (iii) when sent by overnight courier to the addresses provided above or to such other address as may be designated by the Parties.
17.5 Entire Agreement. This Agreement constitutes the entire understanding between the Parties and supersedes any previous agreements between the Parties. The Parties have entered into this Agreement in reliance upon the representations and mutual undertakings contained herein and not in reliance upon any oral or written representations or information provided by one Party to the other Party not contained or incorporated herein.
17.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia.
17.7 Waiver. The failure of either Party to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other Party of any of the provisions hereof, shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof, or the right of such Party hereafter to enforce every such provision. No modification or waiver of all or any part of this Agreement shall be valid unless it is reduced to a writing, which expressly states that the Parties hereby agree to a waiver or modification as applicable, and is signed by both Parties.
17.8 No Dedication of System. Nothing contained in this Agreement shall require Georgia Power to construct any particular facilities. Any undertaking by Georgia Power under any provisions of this Agreement shall not be construed to constitute the dedication of Georgia Power's system, or the system of any Affiliate of Georgia Power, or any portion thereof, to the public or to Dynegy; provided, however, the Parties acknowledge that Georgia Power may construct the Units with respect to service provided under this Agreement. Georgia Power's provision of Contract Capacity and Delivered Energy under this Agreement does not constitute a sale, lease, rental, transfer or conveyance of any ownership interest or entitlement in or to any facilities of any kind. All obligations of the Parties shall cease upon termination of this Agreement, except as otherwise expressly provided herein, and Dynegy shall not attempt to Schedule any energy under this Agreement after its termination.
17.9 Headings. The headings contained in this Agreement are used solely for convenience and do not constitute a part of the Agreement between the Parties hereto, nor should they be used to aid in any manner in the construction of this Agreement.
17.10 Third Parties. This Agreement is intended solely for the benefit of the Parties hereto. Except as otherwise expressly provided herein, nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement.
17.11 Agency. This Agreement shall not be interpreted or construed to create an association, joint venture, or partnership between the Parties to impose any partnership obligation or liability upon either Party. Neither Party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or to act as or be an agent or representative of, or to otherwise bind, the other Party.
17.12 Severability. If any term or provision of this Agreement or the application thereof to any person, entity, or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provisions to person, entities or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
17.13.1 The Parties acknowledge that this Agreement contains Proprietary Information and each Party agrees that for a period of five (5) years from the date of termination of the Agreement it will not, without the written consent of the other or as otherwise provided herein, disclose to any third party (other than to Affiliates of the disclosing party or consultants and advisors to such Affiliates and the disclosing Party who need to know such information in connection with the performance of their duties or services for such Affiliates or the disclosing Party or Lenders to such Affiliates of the disclosing party), the Proprietary Information except to the extent that disclosure is required by law, or by a Governmental Authority having jurisdiction over the party from which disclosure is sought.
17.13.2 The Parties agree to seek confidential treatment of the Proprietary Information in this Agreement from FERC but acknowledge that certain Proprietary Information may need to be disclosed in Georgia Power's filings with FERC which may be publicly available.
17.14 Replacement Index. Whenever any published index or tariff is referenced herein, the Parties intend to track those costs as faithfully as commercially practical. Should any such index or tariff be discontinued or no longer published, the Parties will cooperate in establishing substitute benchmarks through reference to equivalent indices or tariffs.
17.15 Public Announcement. The Parties agree that no public or other announcement concerning the transactions contemplated hereby shall be made except after mutual consultation and consent, provided, however, that consent will not be required if either Party determines that disclosure to the public or to governmental agencies are reasonably necessary to comply with applicable laws or Legal Requirements.
17.16 Liquidated Damages. To the extent that any damages required to be paid under this Agreement are liquidated, the Parties acknowledge that the damages are difficult or impossible to determine, otherwise obtaining an adequate remedy is inconvenient, and the liquidated damages constitute approximation of the expected actual harm or loss.
IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement effective as of the date first above written.
GEORGIA POWER COMPANY
"Georgia Power"
DYNEGY POWER MARKETING, INC.
"Dynegy"
EXHIBIT "A"
PRICE ESCALATION
--------------------------------------------------------------------------------------------------------
Dispatch Cost Monthly Capacity Payment* VOM
[redacted] ($) ($/MWh)
--------------------------------------------------------------------------------------------------------
Either:
June 1, 2000 - May 31, 2001, [redacted] [redacted] [redacted]
or July 1, 2000 - May 31, 2001
June 1, 2001 - May 31, 2002 [redacted] [redacted] [redacted]
June 1, 2002 - May 31, 2003 [redacted] [redacted] [redacted]
June 1, 2003 - May 31, 2004 [redacted] [redacted] [redacted]
June 1, 2004 - May 31, 2005 [redacted] [redacted] [redacted]
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* The Monthly Capacity Payment shall be adjusted on a Monthly basis by multiplying the payment schedules set forth above times the Weighting Factors attributable to the applicable calendar Month for which such adjustment is made.
EXHIBIT "B"
ENDH Allowance
Period ENDH Allowance
Summer July 1, 2000 - September 30, 2000 [redacted]
June 1, 2002 - September 30, 2002 [redacted]
June 1, 2003 - September 30, 2003 [redacted]
June 1, 2004 - September 30, 2004 [redacted]
Non-Summer October 1, 2000 - December 31, 2000 [redacted]
January 1, 2001 - May 31, 2001; October 1, 2001
[redacted] - December 31, 2001
January 1, 2002 - May 31, 2002; October 1, 2002
[redacted] - December 31, 2002
January 1, 2003 - May 31, 2003; October 1, 2003
[redacted] - December 31, 2003
January 1, 2004 - May 31, 2004; October 1, 2004
[redacted] - December 31, 2004
January 1, 2005 - May 31, 2005 [redacted]
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Sample Calculation:
[redacted]
EXHIBIT "C"
GUARANTY AGREEMENT
[redacted]
Exhibit D
[redacted]
Exhibit 10.15
PUBLIC RELEASE VERSION
PURCHASED POWER AGREEMENT
BETWEEN
GEORGIA POWER COMPANY
AND
LG&E ENERGY MARKETING INC.
Dated as of November 24, 1998
PURCHASED POWER AGREEMENT
THIS PURCHASED POWER AGREEMENT ("Agreement"), dated as of November 24, 1998, is entered into by and between GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia with its principal address at 241 Ralph McGill Boulevard, Atlanta, Georgia 30308 ("Georgia Power") and LG&E ENERGY MARKETING INC., a corporation organized and existing under the laws of the State of Oklahoma, having its principal place of business at 220 West Main Street, Louisville, Kentucky 40202 ("LEM").
W I T N E S E T H:
WHEREAS, Georgia Power is authorized by its Certificate of Incorporation and by the State of Georgia to engage in the generation, transmission, sale and distribution of electricity for heat, light and power to the public;
WHEREAS, Georgia Power intends to construct, own and operate five new General Electric Frame 7EA natural gas-and-oil-fired combustion turbine electric generating units with approximate capacity of 82.5 MW each located adjacent to the Georgia Integrated Transmission System, (the "Units"); and
WHEREAS, Georgia Power has agreed to sell to LEM and LEM has agreed to purchase from Georgia Power capacity and energy which may or may not, at Georgia Power's sole option, be generated at the Units; all in accordance with the provisions of this Agreement;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual promises and agreements set forth herein and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, Georgia Power and LEM each intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. In addition to the initially capitalized terms and phrases defined in the preamble of this Agreement, the following initially capitalized terms and phrases as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "Affiliate" - of any specified entity means 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 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 "controlled" have meanings correlative to the foregoing.
1.1.2 "Availability Status" - shall have the meaning specified in Section 7.1.4 of this Agreement.
1.1.3 "Block" - means the MW associated with the Operating Rating of a Unit which LEM may schedule in an hour.
1.1.4 "Contract Capacity"- shall have the meaning specified in
Section 4.1.2 of this Agreement.
1.1.5 "Contract Service Commencement Dates" - shall have the meaning specified in Section 3.3.1 of this Agreement.
1.1.6 "Contract Year"- means a year beginning on June 1 and ending on May 31 and "Year" means a calendar year.
1.1.7 "Costs" - shall have the meaning specified in Section 13.3.2.2 of this Agreement.
1.1.8 "CPT" - means Central Prevailing Time.
1.1.9 "Day" - means a calendar day.
1.1.10 "Defaulting Party" - shall have the meaning specified in Section 13.1 of this Agreement.
1.1.11 "Delivered Energy" - means, either individually or in combination, the energy in megawatt hours (MWh) by Block (i) generated by the Units and delivered to the Delivery Points, or (ii) supplied by resources other than the Units and delivered to the Delivery Points, based on a Schedule submitted by LEM as described in Article 7 of this Agreement.
1.1.12 "Delivery Points" - means the points anywhere on the Georgia Integrated Transmission System where Georgia Power shall deliver the power supplied under this Agreement.
1.1.13 "Dispatch Center" - means the control and dispatching center designated by Georgia Power from time to time in writing as being the primary control point for dispatch instructions to Georgia Power.
1.1.14 "Early Termination Date" - shall have the meaning specified in Section 13.3.2 of this Agreement.
1.1.15 "Eligible Collateral" - shall have the meaning specified in Section 13.1.8.2 of this Agreement.
1.1.16 "Energy Price" - shall have the meaning specified in
Section 5.4.1 of this Agreement.
1.1.17 "Event of Default" - shall have the meaning specified in Section 13.1 of this Agreement.
1.1.18 "FERC" - means the Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers and functions thereof under the Federal Power Act.
1.1.19 "Fuel Costs" - shall have the meaning specified in
Section 5.4.2 of this Agreement.
1.1.20 "Gains" - shall have the meaning specified in Section 13.3.2.3 of this Agreement.
1.1.21 "Georgia Integrated Transmission System" - means the integrated transmission system, as modified or expanded from time-to-time, as defined in the Revised and Restated Integrated Transmission System Agreement, dated as of December 7, 1990, between Georgia Power and Municipal Electric Authority of Georgia, the Revised and Restated Integrated Transmission System Agreement, dated as of December 7, 1990, between Georgia Power and City of Dalton, and the Revised and Restated Integrated Transmission System Agreement, dated as of November 12, 1990, between Georgia Power and Oglethorpe Power Corporation.
1.1.22 "Georgia Power"- shall have the meaning specified in the first paragraph of this Agreement, and its permitted successors and assigns.
1.1.23 [redacted].
1.1.24 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department or other such entity, but excluding any such agency, court, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee.
1.1.25 "Guaranty" - shall have the meaning specified in
Section 12.1 of this Agreement.
1.1.26 "HE"- means hour ending.
1.1.27 "Initial Term" - shall have the meaning specified in
Section 3.1.1 of this Agreement.
1.1.28 "Interest Rate" - [redacted].
1.1.29 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, judgment, injunction, order or other requirement of a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question (i) at the time of the execution of the Agreement, as amended from time to time or (ii) anytime thereafter during the Term.
1.1.30 "LEM" - shall have the meaning specified in the first paragraph of this Agreement, and its permitted successors and assigns.
1.1.31 "Losses" - shall have the meaning specified in Section 13.3.2.1 of this Agreement.
1.1.32 "Material Adverse Change" - shall have the meaning specified in Section 13.1.8.1 of this Agreement.
1.1.33 "Month" - means a calendar month, commencing at the beginning of the first Day of such calendar month. "Monthly" - has a meaning correlative to that of Month.
1.1.34 "Monthly Capacity Payment" - for a particular Month of the Term, means the Monthly amount to be paid by LEM to Georgia Power for LEM's purchase of the Contract Capacity, as the same is set forth on Exhibit A.
1.1.35 "Monthly Energy Payment" - for a particular Month of the Term, means the Monthly amount to be paid by LEM to Georgia Power for LEM's purchase of Delivered Energy, as the same is calculated as provided in Section 5.4 of this Agreement.
1.1.36 "MW" - means megawatts.
1.1.37 "MWh" - means megawatt - hours.
1.1.38 "Non-Defaulting Party" - shall have the meaning
specified in Section 13.1 of this Agreement.
1.1.39 "Non-Winter Months" - means the months of April
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through November.
1.1.40 "Operating Heat Rate"- shall have the meaning specified in Section 9.1 of this Agreement.
1.1.41 "Operating Rating" - shall have the meaning specified in Section 9.1 of this Agreement.
1.1.42 "Other Indebtedness" - shall have the meaning specified in Section 13.1.5 of this Agreement.
1.1.43 "Party" or "Parties" - means either Georgia Power or LEM, or both.
1.1.44 "Peak Hours" - shall have the meaning specified in
Section 6.8 of this Agreement.
1.1.45 [redacted].
1.1.46 "Proprietary Information" - of a Party shall mean information rightfully in the possession of such Party, which information derives economic value from not being generally known to and not being readily ascertainable by proper means by another person who can obtain economic value from its disclosure and use, and which is the subject of reasonable efforts to maintain its secrecy.
1.1.47 "Prudent Utility Practices" - means, 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 the exercise of reasonable judgment 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 Practices 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirement of this Agreement.
1.1.48 "Renewal Term" - shall have the meaning specified in
Section 3.1.2 of this Agreement.
1.1.49 [redacted].
1.1.50 "Schedule" - as used as a noun, means an energy schedule submitted by LEM in accordance with the provisions of Article 7 of this Agreement, and, as a verb, means the act of submitting a Schedule in accordance with the provisions of Article 7 of this Agreement.
1.1.51 "Service Commencement Date" means the date Georgia Power declares that a Block is available for scheduling by LEM.
1.1.52 "Southern Dispatch" - means the ability of Southern Company Services, Inc. (or other Affiliate of Georgia Power) to schedule and control, directly or indirectly, manually or automatically, the output of a generation facility in the Southern control area in order to increase or decrease the electricity delivered from such generation facility into the electricity system with which it is interconnected.
1.1.53 "Start-Stop Schedule" - means a Schedule of a Block by LEM delivered by Georgia Power over consecutive hours where the amount of energy from the Block in the hour prior to the start of the Schedule is zero, the Block is loaded to its Operating Rating during the hours of the Schedule, and the energy in the hour after the Schedule is zero.
1.1.54 "Start-Up Payments" - shall mean the meaning specified in Section 5.5 of this Agreement.
1.1.55 "Support Agreement" - shall have the meaning specified in 12.2 of this Agreement.
1.1.56 "Term" - means the Initial Term and any Renewal Term or Terms.
1.1.57 "Termination Payment" - shall have the meaning specified in Section 13.3.2 of this Agreement.
1.1.58 "Undelivered Energy" - shall have the meaning specified in Section 6.1 of the Agreement.
1.1.59 "Unit" shall have the meaning specified on page 1 of this Agreement.
1.1.60 "Variable O&M Amount" - shall have the meaning specified in Section 5.4.1 of this Agreement.
1.1.61 "Winter Months" - means the months of December through March.
1.2 Interpretation. In this Agreement, unless the context otherwise requires:
1.2.1 words generally importing the singular shall include the plural and vice versa;
1.2.2 references to "entity" include, without limitation, corporations, partnerships, associations and governmental authorities.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 Representations and Warranties. LEM hereby makes the following representations and warranties to Georgia Power:
2.1.1 LEM is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma, and, has the legal power to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
2.1.2 [redacted].
2.1.3 The execution, delivery and performance by LEM of this Agreement and the guarantee by Guarantor have been duly authorized by all necessary action, and do not and will not require any consent or approval of LEM's Affiliates, other than that which has been obtained.
2.1.4 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which LEM or Guarantor is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
2.1.5 This Agreement constitutes the legal, valid and binding obligation of LEM enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
2.1.6 There is no pending, or to the knowledge of LEM, threatened action or proceeding affecting LEM before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
2.2 Representations and Warranties of Georgia Power. Georgia
Power hereby makes the following representations and warranties to LEM:
2.2.1 Georgia Power is a corporation duly organized, validly
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existing and in good standing under the laws of the State of Georgia, is qualified to do business in the State of Georgia and has the legal power and authority to own or lease its properties, to conduct its business and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
2.2.2 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Georgia Power is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
2.2.3 This Agreement constitutes the legal, valid and binding obligations of Georgia Power enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
2.2.4 There is no pending, or to the knowledge of Georgia Power, threatened action or proceeding affecting Georgia Power before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement.
ARTICLE 3
TERM OF AGREEMENT
3.1 Term.
3.1.1 This Agreement shall be effective when executed and delivered by both Georgia Power and LEM and shall remain in full force and effect until December 31, 2004 ("Initial Term").
3.1.2 LEM may extend the term of this Agreement for an additional one to five twelve-month periods ("Renewal Term"), beginning January 1, 2005, upon giving at least twenty-four (24) months notice in advance of the beginning of each such twelve-month period.
3.1.3 If LEM elects not to exercise any annual option to extend the Term of this Agreement as set forth in Section 3.1.2, LEM shall have no further option(s) to extend the Term. In any event, this Agreement shall terminate no later than December 31, 2009. LEM agrees not to schedule any purchases after any termination date.
3.1.4 If, prior to the date on which LEM may extend the Term under Section 3.1.2, LEM wishes to enter into a Replacement Contract in lieu of extending the Term, then LEM first shall give notice to Georgia Power that LEM wishes to enter into a Replacement Contract. Such notice shall state the term, amount of capacity in MW, capacity and energy price, and delivery point under the Replacement Contract, but shall not identify the potential replacement supplier. Within [redacted] after LEM has given such notice, Georgia Power may, at its option, give notice to LEM that Georgia Power wishes to provide the amount of capacity to be purchased under this Agreement under the same terms and conditions as the Replacement Contract (except for amount of capacity). If Georgia Power so notifies LEM within [redacted], then the Parties shall enter into an agreement under such terms and conditions. If Georgia Power fails to so notify LEM within [redacted], then LEM shall be free to enter into such Replacement Contract without further obligation to Georgia Power. "Replacement Contract" means a contract under which LEM will have the right to buy capacity and associated energy which has the following terms: (a) a delivery point is on the Georgia Integrated Transmission System, the quantity of capacity is approximately the total of the Blocks' Operating Ratings at the time of the Replacement Contract, and the term begins no later than June 1 of the Year immediately succeeding the last Year of the Term and ends no earlier than September 30 of the Year immediately succeeding the last Year of the Term.
3.1.5 During any extension of the Term of this Agreement after the Initial Term, the Monthly Capacity Payment shall be in accordance with Exhibit A, Monthly Energy Payment shall be calculated in accordance with Section 5.4, Start-Up Payments shall be calculated in accordance with Section 5.5, and the Operating Ratings and Operating Heat Rates shall be calculated in accordance with the provisions of Section 9.1.
3.1.6 Applicable provisions of this Agreement shall continue in effect (i) after termination to the extent necessary to provide for final billings and adjustments, and (ii) as provided herein.
3.2 Environmental Permitting.
3.2.1 Commencing no later than January 1, 1999, Georgia Power shall take all steps reasonably necessary to obtain all environmental permits necessary to construct and operate the Units adjacent to the Georgia Integrated Transmission System for at least the number of hours, at the rate of output and for the Term contemplated by this Agreement ("Required Environmental Permits"). Georgia Power shall pursue such permitting efforts diligently. At any time on or before March 1, 1999, Georgia Power may terminate this Agreement upon giving notice to LEM and providing to LEM written evidence from duly authorized representatives of a Governing Authority that (i) it will impose requirements more restrictive than [redacted] while operating on natural gas or (ii) it likely will deny the issuance of a Required Environmental Permit. Such written evidence shall be interpreted in the context of similar written evidence or correspondence produced by duly authorized representatives of Georgia Power. In the event Georgia Power gives such notice and provides such evidence on or before March 1, 1999, Georgia Power shall have the right to terminate this Agreement on or before March 1, 1999, upon payment to LEM of [redacted]. Upon payment of any such liquidated damages, Georgia Power shall have no further obligation or liability under this Agreement.
3.2.2 If Georgia Power does not terminate this Agreement under the provisions of this Section 3.2, Georgia Power shall be obligated to supply the Contract Capacity and Delivered Energy in the guaranteed amounts on the guaranteed dates regardless of whether all Required Environmental Permits are issued. In the event Georgia Power fails to obtain a Required Environmental Permit and is not permitted to construct the Units, Georgia Power shall nonetheless be obligated to supply the Contract Capacity and Delivered Energy as set forth in this Agreement from other generating resources.
3.3 Service Commencement Dates.
3.3.1 The "Contract Service Commencement Dates" shall mean June 1, 2000, for three (3) of the Blocks and July 1, 2000, for two (2) of the Blocks.
3.3.2 If, for any Block, the Service Commencement Date is later than the Contract Service Commencement Date, then, for such Block,
(a) LEM shall make the Monthly Capacity Payment beginning on the Contract Service Commencement Date;
(b) Georgia Power shall not be required to deliver energy from the Block
until the Service Commencement Date. However, during the period between the
Contract Service Commencement Date and the Service Commencement Date, if Georgia
Power does elect to generate any energy from the Unit, Georgia Power shall give
to LEM notice and an opportunity to purchase such energy as follows. By 9:00
a.m. CPT the Day before such energy is to be generated, Georgia Power shall give
to LEM a schedule of the expected energy output for the following Day. By 10:00
a.m. CPT, LEM shall give to Georgia Power notice of whether or not LEM elects to
take any of such energy and, if so, what quantities and which hours LEM elects
to take it. The price of any such energy delivered shall be the Energy Price.
Georgia Power shall have no liability for failure to generate and deliver the
energy for any reason and such energy shall not be considered Undelivered Energy
under Article 6, except that Georgia Power shall not have the right to generate
and sell such energy to a third party without first giving LEM notice as set
forth hereinabove.
(c) Georgia Power shall pay to LEM liquidated damages in the amount of
[redacted] for each Day that elapses between the Contract Service Commencement
Date and the Service Commencement Date;
(d) during the period between the Contract Service Commencement Date and the Service Commencement Date, LEM may Schedule an amount of energy equivalent to a Block, and Georgia Power will deliver such energy unless such deliveries cause Georgia Power to interrupt deliveries under Georgia Power's tariff-based interruptible sales. [redacted] Failure by Georgia Power to deliver energy pursuant to this Subsection 3.3.2(d) shall not constitute Undelivered Energy.
ARTICLE 4
SALE OF CAPACITY AND ENERGY
4.1 Contract Capacity.
4.1.1 Unless excused as set forth in Article 11, Georgia Power agrees to sell to LEM and LEM agrees to purchase the Contract Capacity as set forth below and continuing for the remainder of the Term.
4.1.2 Contract Capacity shall consist of (i) 248 MW commencing June 1, 2000, and (ii) 165 MW commencing July 1, 2000, for a total of 413 MW. While various performance, timing and entitlement provisions of this Agreement are determined by reference to the Units, the Delivered Energy sold hereunder shall be supplied by Georgia Power from any generation resources it may choose at its sole option.
4.2 Delivered Energy.
4.2.1 Beginning on the Service Commencement Date for each Block, LEM shall be entitled to, but shall not be obligated to, schedule and purchase, and unless otherwise excused by a Force Majeure Event, Georgia Power shall sell and deliver energy in one, two, three, four, or five Blocks, at LEM's option and on an hourly basis, as scheduled by LEM in accordance with the provisions of Article 7 hereof. For each Year, the total number of hours which LEM shall be entitled to schedule and receive energy at the Energy Price from all Blocks after the Service Commencement Date shall not exceed [redacted].
4.2.2 Georgia Power, at its sole discretion, shall supply Delivered Energy (i) from the Units; or (ii) from sources other than the Units at the Delivery Points.
4.2.3 Title to electricity and risk of loss shall pass from Georgia Power to LEM at the Delivery Points.
ARTICLE 5
PAYMENTS
5.1 General. LEM shall pay Georgia Power a Power Prepayment Fee and, for each Month of the Term, a Monthly Capacity Payment, Monthly Energy Payment and Start-Up Payments in accordance with this Article.
5.2 redacted].
5.3 Capacity Payments. For each month beginning with the Contract Service Commencement Date and continuing through the remaining Term, unless excused by an Excused Force Majeure Event, LEM shall make a Monthly Capacity Payment to Georgia Power in the amounts set forth on Exhibit A.
5.4 Energy Payments.
5.4.1 Each month, LEM shall make a Monthly Energy Payment to Georgia Power equal to MWh of Delivered Energy during the applicable month multiplied by the Energy Price. "Energy Price" equals Fuel Costs as determined below plus the Variable O&M Amount for the applicable month as set forth on Exhibit A.
5.4.2 "Fuel Costs" equal the applicable Operating Heat Rate multiplied by the sum of (i) the appropriate gas or fuel oil index as set forth below, plus (ii) fuel transportation costs as set forth below, and (iii) all federal, state and local taxes on natural gas or fuel oil deemed to be used hereunder. For Non-Winter Months, the applicable Operating Heat Rate shall be the Operating Heat Rate for natural gas. For Winter Months, the applicable Operating Heat Rate shall be the Operating Heat Rate for fuel oil unless LEM elects to purchase firm gas transportation under Section 5.4.4 in which case the applicable Operating Heat Rate shall be the Operating Heat Rate for natural gas.
5.4.3 For Non-Winter Months, the appropriate index shall be
[redacted]. Gas transportation costs shall be determined by application of the
Transco IT tariff rate including, but not limited to, all commodity and
surcharges such as GRI, ACA, and Great Plains Surcharge for receipt at
[redacted] and delivery to [redacted] as including the State of Georgia.
However, in lieu of applying such tariff rate, LEM has the option to purchase
firm gas transportation, designating Georgia Power as its agent for fuel
delivery and notifying Georgia Power of such designation. To the extent LEM
purchases such transportation, Fuel Costs shall not include any fuel
transportation costs.
5.4.4 For Winter Months, the appropriate index shall be
[redacted]. LEM shall pay actual fuel oil transportation [redacted]. However, in
lieu of applying the Winter fuel index, LEM has the option to purchase firm gas
transportation, designating Georgia Power as its agent for fuel delivery and
notifying Georgia Power of such designation. To the extent LEM purchases such
transportation, Fuel Costs shall not include any fuel transportation costs, the
applicable fuel index shall be the Non-Winter fuel index, and the applicable
Operating Heat Rate shall be the Operating Heat Rate for natural gas.
5.5 Start-Up Payments. [redacted]. LEM shall make Start-Up Payments for each Start-Stop Schedule [redacted] at the rates set forth in Exhibit A.
ARTICLE 6
AVAILABILITY
6.1 Undelivered Energy. After the Service Commencement Date, if LEM
schedules energy in accordance with the provisions of Article 7 hereof during
any Peak Hours on any Day, and Georgia Power fails to deliver such energy due to
an Unexcused Force Majeure Event, then the quantity of such energy in MWhs shall
be referred to herein as "Undelivered Energy." Energy which Georgia Power fails
to deliver due to an Excused Force Majeure Event shall not be Undelivered Energy
(except as specifically provided in Section 11.2.4), but shall be governed by
Section 11.2. Energy which Georgia Power fails to deliver in the absence of any
Force Majeure Event shall not be Undelivered Energy but shall be governed by
Section 13.4.
6.2 [redacted] . If there is Undelivered Energy of more than the
product of [redacted] and the average Operating Rating of the Blocks for the
applicable Month [redacted] in any rolling period of [redacted], then Georgia
Power shall pay [redacted] after such [redacted] is reached and until there are
[redacted].
6.3 Monthly Maximum. If the Undelivered Energy in any Month exceeds the product of [redacted] and average Operating Rating of the Blocks for the applicable Month (the "Maximum Monthly Undelivered Energy"), [redacted].
6.4 Annual Maximum. If the Undelivered Energy in any Year exceeds the product of [redacted] hours and the average Operating Rating of the Blocks for the applicable Year multiplied by five (5) (the "Maximum Annual Undelivered Energy"), [redacted].
6.5 Summer Maximum. If the Undelivered Energy during the period of June
1 through September 30 (the "Summer") of any Year exceeds the product of
[redacted] and the average Operating Rating of the Blocks for the applicable
months (the "Summer Maximum Undelivered Energy"), [redacted] for each whole
multiple by which the Undelivered Energy exceeds the Summer Maximum Undelivered
Energy. [redacted]. However, during the Summer of such subsequent Year, if
Undelivered Energy is reduced by any MWh amount below the Summer Maximum
Undelivered Energy (or any multiple of the Summer Maximum Undelivered Energy),
LEM shall [redacted]. If, during the Summer of the Year following the Year in
which the Summer Maximum Undelivered Energy shall have been exceeded, for each
whole multiple of Summer Maximum Undelivered Energy that is again exceeded, LEM
shall [redacted]
6.6 Remedy. LEM's sole and exclusive monetary remedy for Undelivered
Energy exceeding the maximum levels set forth in Sections 6.2, 6.3, 6.4 and 6.5,
respectively, are cumulative with respect to each other but collectively set
forth LEM's exclusive remedies for Undelivered Energy. Such remedies are in
addition to LEM's remedies for any Georgia Power failure to deliver energy in
breach of this Agreement. However, for any single MWh of Undelivered Energy,
Georgia Power's liability hereunder will not exceed [redacted]. The remedy set
forth in this Section 6.6 is in addition to any rights LEM may have under
Article 13.
6.7 [redacted]
6.7.1 [redacted].
6.7.2 [redacted].
6.8 Peak Hours. This Article 6 shall not apply to failure to deliver
energy during any hours which are not Peak Hours. For the purpose of applying
all of the provisions of Article 6, hours which are not Peak Hours shall be
excluded from all calculations. "Peak Hours" shall mean the hours between
[redacted] inclusive during the Non-Winter Months and the hours between
[redacted] inclusive during the Winter Months. However, LEM shall have the right
to change the Peak Hours for the Winter Months by giving notice to Georgia Power
at least [redacted] before the beginning of the applicable Winter Months;
provided that the total number of Peak Hours for a Day shall not exceed
[redacted] and such change is subject to Georgia Power's consent which shall not
be unreasonably withheld.
6.9 Availability Bonus.
6.9.1 For the Summer of each Year, LEM shall pay to Georgia Power a lump
sum bonus for achieving Availability according to the following schedule:
[redacted]
6.9.2 If the Service Commencement Date is later than the Contract Service Commencement Date for any Block, then, for all Peak Hours between the Contract Service Commencement Date and the Service Commencement Date, there shall be considered to be Undelivered Energy for such Block for the purpose only of calculating Availability for the applicable Summer under this Section 6.9.
6.9.3 If Georgia Power declares an Excused Force Majeure Event for any Unit during the Summer, then, for all Peak Hours during the suspension due to the Excused Force Majeure Event, there shall be considered to be Undelivered Energy for the Block associated with such Unit for the purpose only of calculating Availability for the applicable Summer under this Section 6.9.
ARTICLE 7
SCHEDULING AND PSEUDO GAS BALANCING
7.1 Energy Scheduling.
7.1.1 There shall be five Blocks known as Block 1, Block 2, Block, 3, Block 4, and Block 5, respectively.
7.1.2 Each business Day LEM will provide by 9:30 a.m. CPT to
Georgia Power a forecast of the number of Blocks which LEM expects to Schedule
by hour for the succeeding Day or Days through the next business Day.
[redacted].
7.1.3 LEM will submit hourly a Schedule for each Block for each Day. For each Day, Blocks shall be Scheduled in ascending order and such Schedules shall be ended in ascending order. For example, if LEM wishes to Schedule two Blocks for a given hour, then Block 1 and Block 2 shall be Scheduled for such hour. During a later hour, if LEM wishes to schedule three blocks, then Block 1, Block 2, and Block 3 shall be scheduled. If, during a later hour, LEM wishes to schedule only two Blocks, then the schedule for Block 1 will be ended for such hour.
7.1.4 Georgia Power immediately will give notice to LEM of any change in Availability Status. The Availability Status of a Unit is either (a) available and on-line, (b) available and not on-line, or (c) unavailable. When the Availability Status of a Unit changes to unavailable, Georgia Power will give to LEM any information relating to the cause of the unavailability, Georgia Power's estimate of when the Unit may become available, and an indication of Georgia's Power's willingness to supply Blocks from resources other than the Units during the period of unavailability. The information given by Georgia Power set forth in the immediately preceding sentence will not be binding in any way on Georgia Power and will not limit any rights Georgia Power may have under this Agreement.
7.1.5 If LEM has received notice from Georgia Power that a Block is available for the applicable hour, LEM may Schedule the Block for delivery or continuing delivery, as applicable, [redacted]. Once Georgia Power accepts a Schedule, such Schedule [redacted] in the event of Unit unavailability. All Schedules will take effect at the top of the hour. Schedules shall extend for a minimum of [redacted].
7.1.6 If LEM has received notice that a Block is unavailable
[redacted]. If Georgia Power rejects a Schedule for an hour due to an Unexcused
Force Majeure Event, the applicable Block will be Undelivered Energy for such
hour.
7.1.7 In the event LEM first receives notice of unavailability of a Block [redacted]. If Georgia Power rejects a Schedule for an hour due to an Unexcused Force Majeure Event, the applicable Block will be Undelivered Energy for such hour.
7.1.8 If a Unit fails during a Schedule, [redacted].
7.1.9 If Georgia Power rejects a Schedule for an hour,
[redacted].
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7.1.10 In the event a Schedule is rejected due to Unit unavailability due to an Unexcused Force Majeure Event, a Block will be considered Undelivered Energy until such time as a Schedule for an available Block is ended by LEM.
7.1.11 If Georgia Power accepts a Schedule for an hour for which Georgia Power knows that a Unit is unavailable, then the price paid for such energy shall be the Energy Price.
7.2 Pseudo Gas Balancing.
7.2.1 Each business Day during the Non-Winter Months (and during Winter months when LEM purchases firm gas transportation for use in this Agreement), LEM will submit by 9:30 a.m. CPT to Georgia Power its request for gas for the succeeding Day or Days through the next business Day in MMBtus based on the quantity of gas which LEM would purchase if the Units were operated to produce the quantity of energy to be Scheduled for delivery hereunder.
7.2.2 At the end of each Month, LEM's fuel requests will be balanced. [redacted]. LEM shall have no responsibility or claims to Transco or to Georgia Power for actual fuel imbalances.
7.2.3 In the event that Transco issues an Operational Flow Order ("OFO") for the succeeding Day, Georgia Power shall immediately notify LEM of said event. If LEM elects to Schedule energy during the period covered by the OFO, then LEM must submit to Georgia Power a forecast of the daily volume of MWh that LEM will be obligated to take. LEM shall provide such forecast of daily volume of MWh no later than [redacted]. LEM shall Schedule and Georgia Power shall deliver such energy in accordance with this Article 7. LEM shall not be liable for any imbalance charges or penalties provided that it has submitted Schedules that equal the daily volume of MWh submitted in its forecast subject to the OFO, and it has received timely notice of the issuance of said OFO from Georgia Power.
ARTICLE 8
BILLING AND PAYMENT
8.1 Capacity, Energy and Start-Up Billing and Payment.
8.1.1 Georgia Power shall send LEM an invoice as soon as practicable after the end of each Month during the Term stating the Monthly Capacity Payment, Monthly Energy Payment and Monthly Start-Up Payment for the immediately previous Month. If circumstances require that the invoice be an estimated bill, Georgia Power may render an estimated bill and any adjustments required shall be made in ensuing invoices. Each Monthly invoice shall contain a statement explaining in reasonable detail how the invoice was calculated.
8.1.2 All such invoices shall be due and payable by LEM on or before the [redacted] of the Month that the invoice is rendered or the date which is [redacted] after the invoice is rendered, whichever is later. Georgia Power may render invoices by means of facsimile, and receipt shall be deemed to have occurred upon transmission if confirmed in writing (by manually-or-machine-generated confirmation notice within one Day after facsimile transmission). Subject to the provisions of Section 8.2, LEM shall make payment to Georgia Power in accordance with such invoices and all other amounts payable to Georgia Power hereunder on or before the date due in immediately available funds, through wire transfer of funds to an account designated by Georgia Power, or other means acceptable to Georgia Power.
8.1.3 If Georgia Power owes LEM for Replacement Costs or any other amounts hereunder, then LEM will deliver to Georgia Power a statement showing such amounts with reasonable detail showing how such amounts were calculated. Subject to Section 8.2, such amounts will be credited against any invoices.
8.2 Billing Disputes and Final Accounting.
8.2.1 If either Party after receiving a statement or bill reasonably questions or contests the amount or propriety of any payment or amount claimed by the billing Party to be due pursuant to this Agreement, the billed Party shall provide the billing Party with written notice of the disputed amount. [redacted].
8.2.2 In the event that the billed Party questions or contests the correctness of any such charge or credit, the billing Party shall promptly review the questioned charge or credit and shall notify the billed Party of any error in its determination of amounts owed and the amount of any payment that the billed Party is required to make in respect of such redetermination. Not later than the [redacted] after receipt by LEM of any such notice from Georgia Power as to the amount of any Monthly Capacity Payments, Monthly Energy Payments or Start-Up Payments that LEM is required to make, LEM shall make payment to Georgia Power in immediately available funds. Not later than [redacted] after receipt by Georgia Power of any such notice from LEM as to the amount of any payment [redacted] that Georgia Power is required to make, Georgia Power shall make payment or credit as appropriate, to LEM in immediately available funds. If the billed Party disagrees with the billing Party's resolution of a question or contest, then the dissatisfied billed Party may seek settlement through further negotiations or legal action, subject to the provisions of Section 8.3. Payments made by a Party under this Section 8.2.2 shall include interest at the Interest Rate from the date the original payment was due until the date such payment together with interest at the Interest Rate is made. The billed Party shall have until the end of [redacted] after its receipt of any invoice or statement to question or contest the correctness of any charge or credit on such invoice or statement.
8.3 Interest. If a Party does not make a payment required by this Agreement when due, then interest shall be added to the overdue payment from the date such overdue payment was due until such overdue payment together with interest at the Interest Rate is paid. If a Party makes a payment required by the Agreement and it is later determined that such payment was not due, then such amount shall be refunded or credited with interest at the Interest Rate.
8.4 Billing and Payment Records. Each Party will until the end of
[redacted] make available to the other Party upon written request, and each
Party may audit, such books and records of the other Party (or other information
to which such Party has access) as are reasonably necessary for such Party to
calculate and determine the Monthly Energy Payments shown on such invoice and
thereby to verify the accuracy and appropriateness of the amounts billed to LEM
and the information provided by LEM to Georgia Power. The Parties shall maintain
their respective books and records in accordance with generally accepted
accounting principles applicable from time to time.
ARTICLE 9
OPERATIONS
9.1.1 While the Parties acknowledge that Georgia Power may construct the Units, energy actually delivered under this Agreement may be provided from any generation resource available to Georgia Power in Georgia Power's sole discretion, and except where specifically noted, operation of the Units may not necessarily be tied directly to scheduling of power in Blocks by LEM.
9.1.2 (i) Prior to manufacturer's testing, or (ii) if Georgia Power gives notice under Section 9.5, the Operating Heat Rate and Operating Rating shall be as follows:
Operating Heat Rate Operating Rating
Winter:
Natural Gas [redacted] [redacted]
Fuel Oil [redacted] [redacted]
Non-Winter:
Natural Gas [redacted] [redacted]
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If Georgia Power constructs the Units, the Operating Rating and Operating Heat Rate are subject to modification based on final manufacturer's testing.
9.1.3 Final manufacturer's testing will occur no later than the [redacted] of Unit operation. Test results shall be measured at the terminals of each of the Units. [redacted]. The results of such test shall be known as the "Test Operating Heat Rate" and "Test Operating Rating." Georgia Power shall give notice to LEM of the dates and times that the final manufacturer's test of the Units will occur. At LEM's discretion, an LEM representative may observe the final manufacturer's test. [redacted]
9.1.4 For Non-Winter Months, after testing, the Operating Rating of each Unit shall be equal to [redacted]. The Operating Rating associated with each Block shall be the sum of the Operating Ratings of the Units divided by the number of Units. To the extent that such calculation produces partial MW ratings, the Operating Ratings of Block 2 through Block 5 shall be set at the next lowest whole MW amount, the sum of the remaining partial MW shall be added to the Operating Rating of Block 1, and the Block 1 Operating Rating shall then be set at the next lowest whole MW amount.
9.1.5 For Winter Months, after testing, the Operating Rating
shall be [redacted]. If LEM elects to purchase firm gas transportation under
Section 5.4.4, then the Operating Rating for Winter Months shall be based on
burning fuel oil and shall be [redacted]. Partial MW ratings shall be applied as
set forth in Section 9.1.4.
9.1.6 For Non-Winter Months, after testing, the Operating Heat Rate of each Unit shall be equal [redacted]. The Operating Heat Rate of each Block shall be the sum of the Operating Heat Rates of the Units divided by the number of Units and rounded to the nearest whole number of Btu/kWh.
9.1.7 For Winter Months, after testing, the Operating Heat Rate of each Unit shall be [redacted]. The Operating Heat Rate of each Block shall be the sum of the Operating Heat Rates of the Units divided by the number of Units and rounded to the nearest whole number of Btu/kWh. If LEM purchases firm gas transportation pursuant to Section 5.4.4, then the Operating Heat Rate for Winter Months shall be [redacted].
9.1.8 Prior to the beginning of each Month, the cumulative hours of delivery of energy to LEM shall be determined and the degradations from Exhibit B shall be applied to modify the Operating Ratings and Operating Heat Rates for the next Month.
9.2 Transmission.
9.2.1 Georgia Power shall be responsible for making all arrangements for transmission service, including ancillary services, for delivery of capacity and energy to the Delivery Points. Georgia Power shall be responsible for all costs, loses, and any liability associated with such transmission.
9.2.2 LEM shall be responsible for making all arrangements for transmission service, including ancillary services, for delivery of capacity and energy from the Delivery Points. LEM shall be responsible for all costs, losses and any liability associated with such transmission.
9.3 Maintenance. Georgia Power shall not schedule normal planned outages of the Units during [redacted]. Georgia Power shall provide LEM a one year ahead schedule for planned outages of the Units and within [redacted] of receipt of such a schedule by LEM, LEM may request schedule adjustments. Georgia Power shall make reasonable accommodations to such schedule adjustments requested by LEM. [redacted].
9.4 Inventory. Georgia Power shall maintain sufficient [redacted] fuel oil inventory on the site of the Units to sustain LEM's Scheduled energy deliveries for a minimum of [redacted]. Further, Georgia Power shall demonstrate to LEM's reasonable satisfaction that its fuel oil transportation plan will sustain all deliveries of energy which LEM may Schedule hereunder.
9.5 Existing Units. In lieu of constructing the Units, Georgia Power may notify LEM prior to [redacted], of the need for LEM to select one or more of the units from the list in Section 9.5.2 ("Existing Units").
9.5.1 Georgia Power warrants that the units listed in Section 9.5.2 meet the following criteria as of the date of this Agreement:
9.5.1.1 The units are combustion turbine units.
9.5.1.2 The Equivalent Availability Factor, as defined in the Generation Availability Data System as maintained by the North American Electric Reliability Council, [redacted].
9.5.1.3 The commercial operation dates of the units were January 1, 1990 or later.
9.5.2 The units from which LEM may select Existing Units are listed as follows:
[redacted]
9.5.3 In the event that Georgia Power gives the notice described in Section 9.5, then LEM shall have the right to review and inspect the units and relevant information relating to the units. Within [redacted] after receipt of Georgia Power's notification, LEM shall give to Georgia Power notice of the Existing Units selected. Upon such notice being given by LEM, the selected units will be treated as the "Units" for all purposes under this Agreement.
9.6 Site Visits. LEM shall have the right to visit the site of the Units with a Georgia Power escort to observe the status or operation of the Units after giving reasonable notice to the person identified in Section 16.4.
ARTICLE 10
CHANGE IN LAW, MODIFICATION OF AGREEMENT
10.1 Change in Law.
10.1.1 "Change in Law" means a new law or regulation, or a change in or change in interpretation of a law or regulation, including, but not limited to, environmental laws and regulations and energy taxes applicable to wholesale sales, [redacted].
10.1.2 "Material Change in Law" means a Change in Law (a) enacted after the date this Agreement is fully executed and delivered and (b) which increases or decreases Georgia Power's costs of owning or operating the Units by at [redacted]. The annual cost of capital expenditures required by a Change in Law shall be calculated on a reasonable basis taking into account the useful life of the equipment or improvements required to be procured which may extend beyond the Term.
10.1.3 If there is a Material Change in Law [redacted], Georgia Power will give notice to LEM which identifies the Material Change in Law [redacted] with documentation of such costs and which requests negotiation of an amendment to this Agreement in accordance with Section 10.1.4. If LEM reasonably believes that a Material Change in Law has occurred, LEM may request information from Georgia Power which will show whether or not a Material Change in Law has occurred. Georgia Power will provide such information subject to reasonable confidentiality restrictions.
10.1.4 If there has been a Material Change in Law and notice
has been given, the Parties promptly will negotiate and agree upon an amendment
to this Agreement which will have the effect of passing through to LEM
[redacted] costs resulting from Georgia Power's actions taken or proposed
actions to be taken in accordance with Prudent Utility Practices, to address or
comply with such Change in Law. Such amendment will be agreed upon as soon as
possible, but no later than [redacted] after the notice referenced in Article
10.1.3 is given. Such amendment will be effective on the effective date of the
Material Change in Law and will be retroactive, if necessary.
10.1.5 In the event the Parties have not reached agreement on an amendment to this Agreement during the [redacted] period set forth in Section 10.1.4, (i) Georgia Power shall make a good faith calculation of the effect on costs of the Material Change in Law and corresponding price adjustments hereunder; (ii) Georgia Power shall adjust all billings accordingly, effective as of the effective date of the Material Change in Law, subject to the provisions of Sections 8.2 and 8.3, provided that in applying Section 8.2, the Party seeking the adjustment shall be treated as the Party rendering the invoice or statement.
10.1.6 Any dispute arising out of or relating to the provisions in this Section 10.1 shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. However, neither Party may initiate arbitration until after the expiration of the [redacted] negotiation period referenced in Section 10.1.4.
10.2 Modification of Agreement. In the event the FERC or any other Governmental Authority modifies this Agreement, the Parties agree to make all changes necessary to preserve as nearly as possible the bargain contained in this Agreement, including but not limited to, the total amounts of capacity and energy delivered to LEM and the total amount of revenues to be received by Georgia Power.
ARTICLE 11
FORCE MAJEURE
11.1 Definition of Force Majeure. "Force Majeure Event" means an Excused Force Majeure Event or an Unexcused Force Majeure Event.
11.2.1 An "Excused Force Majeure Event" means with respect to a Unit, a flood in excess of the applicable one hundred year flood plain, earthquake, volcanic eruption, forest fire, military invasion, civil war, civil insurrection, tornado, hurricane in excess of 130 miles per hour, military or usurped power, or failure of contractors or suppliers of materials or fuel when caused by such events, which renders Georgia Power unable to deliver energy from a Unit or the Units at the Delivery Points or LEM unable to take delivery of energy at the Delivery Points or transmit energy from the Delivery Points. Excused Force Majeure Events shall not include (i) changes in market conditions that affect the cost or price of energy or cost of the Unit's primary or secondary fuel; (ii) loss of load or disruption of electricity markets; or (iii) difficulty or inability to make payments.
11.2.2 Either Party shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder (other than the obligation to pay money) for so long as failure to perform such obligation shall be due to an Excused Force Majeure Event. An Excused Force Majeure Event affecting any one Unit shall excuse Georgia Power's performance with respect to only one (1) Block.
11.2.3 During the suspension of performance due to or
resulting from an Excused Force Majeure Event declared by Georgia Power,
[redacted].
11.2.4 [redacted]. Any continued failure to deliver energy hereunder thereafter shall be treated for all purposes as if it were due to an Unexcused Force Majeure Event under the provisions of Section 11.3. Georgia Power may declare the termination of the suspension due to the Excused Force Majeure Event even if the applicable Unit(s) is not operational. However, Georgia Power may not thereafter reinstate the suspension due to the Excused Force Majeure Event for the same Excused Force Majeure Event.
11.3 Unexcused Force Majeure.
11.3.1 An "Unexcused Force Majeure Event" as to a Party means any occurrence, nonoccurrence or set of circumstances, whether or not foreseeable, that is beyond the reasonable control of such Party and is not caused by such Party's negligence or lack of due diligence, and that has not been properly declared by Georgia Power to be an Excused Force Majeure Event, including, without limitation: unplanned Unit outages not caused by Georgia Power's failure to adhere to Prudent Utility Practices, any strike, stoppage in labor, failure of contractors or suppliers of materials caused by force majeure as defined in the applicable contract; ice, windstorm, fire; explosion; equipment failure; sabotage or vandalism; order of any Governmental Authority; or act of God or of a public enemy which renders Georgia Power unable to deliver energy from one or more of the Units at the Delivery Points or LEM unable to take delivery of energy at the Delivery Points or transmit energy from the Delivery Points. The term Unexcused Force Majeure Event shall not include (i) changes in market conditions that affect the cost or price of energy or cost of the Units' primary or secondary fuel; (ii) loss of load or disruption in electricity markets; or (iii) difficulty or inability to make payments.
11.3.2 Either Party shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder (other than the obligation to pay money) for so long as failure to perform such obligation shall be due to an Unexcused Force Majeure Event. An Unexcused Force Majeure Event affecting any one Unit shall excuse Georgia Power's performance with respect to only one (1) Block.
11.3.3 During the suspension of performance due to or resulting from an Unexcused Force Majeure Event, LEM shall continue to make Monthly Capacity Payments. During such suspension period, LEM may submit Schedules in accordance with the provisions of Article 7, and Georgia Power may supply such Schedules from other generating resources.
11.3.4 Georgia Power's failure to deliver energy due to an Unexcused Force Majeure further shall have the consequences set forth in Article 6.
11.4 Mitigation. Following the occurrence of a Force Majeure Event, the affected Party shall:
11.4.1 give the other Party notice thereof, followed by written notice if the first notice is not written, as promptly as possible after such Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
11.4.2 use its best efforts to remedy its inability to perform as soon as practicable; provided, however, that this Section 11.4.2 shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which in the sole judgment of the Party involved in the dispute, are contrary to its interest; provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of the Party having the difficulty; and
11.4.3 when it is able to resume performance of its obligations under this Agreement, give the other Party written notice to that effect.
11.5 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
11.6 Limitation on Force Majeure. Notwithstanding any other provision of this Article 11, if a Unit is under construction and Georgia Power declares the Service Commencement Date for any Unit prior to the declared commercial operation date for such Unit, or, if after the declared commercial operation date for such Unit Georgia Power accepts a Schedule for an hour for which Georgia Power knows that a Unit is unavailable, then a "Force Majeure Event" shall be [redacted].
ARTICLE 12
CREDIT
12.1 Guaranty. Simultaneously with the execution of this Agreement, LEM shall cause [redacted] to execute and deliver a Guaranty Agreement in the form of that attached hereto as Exhibit C ("Guaranty").
12.2 Designation Letter. Simultaneously with the execution of this Agreement, LEM shall cause [redacted] to execute and deliver a Designation Letter in the form of that attached hereto as Exhibit D. LEM covenants that it shall cause to remain in effect during the Term (i) the Support Agreement, dated as of September 5, 1997, by and between [redacted]. (the "Support Agreement") and (ii) the Designation Letter described in this Section 12.2; provided, however, that these documents may be replaced with other documents providing comparable assurance to Georgia Power with Georgia Power's consent, which consent shall not be unreasonably withheld.
ARTICLE 13
EVENTS OF DEFAULT AND DAMAGES FOR NON-PERFORMANCE
13.1 Events of Default. "Event of Default" means the occurrence of any of the following events with respect to a Party (the "Defaulting Party", the other Party being the "Non-Defaulting Party"), Defaulting Party in the case of LEM including [redacted].
13.1.1 The Defaulting Party fails to make any payment which it is obligated to make pursuant to this Agreement to the Non-Defaulting Party which nonpayment continues for [redacted] after written notice of such default is given by the other Party;
13.1.2 Any representation or warranty of the Defaulting Party pursuant to this Agreement or the Guaranty shall prove to have been false or misleading in any material respect when made or deemed made; unless (i) the fact, circumstance or condition that is the subject of such representation or warranty is made true within [redacted] after notice thereof has been given to the Defaulting Party and (ii) such cure removes any adverse effect on the Non-Defaulting Party of such fact, circumstance or condition being otherwise than as first represented, or unless such fact, circumstance or condition being otherwise than as first represented does not materially adversely affect Non-Defaulting Party.
13.1.3 A court having jurisdiction shall enter (i) a decree or order for relief in respect of Defaulting Party in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Defaulting Party bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Defaulting Party under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Defaulting Party or of any substantial part of its affairs; or
13.1.4 Defaulting Party shall (i) commence a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent, or (ii) consent to the entry of a decree or order for relief in respect of Defaulting Party in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or (iii) file any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law, or (iv) consent to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official or (v) make an assignment for the benefit of creditors, or (vi) be unable, or admit in writing its inability, to pay its debts as they become due, or (vii) take any action in furtherance of any of the foregoing.
13.1.5 Defaulting Party shall default on (i) obligations under
one or more agreements or instruments in respect of borrowed money or (ii)
obligations to a Lender, as defined in the Support Agreement ("Other
Indebtedness"), and such default continues after the applicable grace period, if
any, specified in such agreement or instrument if the principal amount exceeds
[redacted], and default results in such Other Indebtedness becoming, or becoming
capable at such time of being declared, due and payable prior to its stated
maturity, whether or not such Other Indebtedness is in fact declared due and
payable.
13.1.6 The Support Agreement shall cease to be in full force and effect, and shall not be replaced with comparable assurance to Georgia Power, with Georgia Power's consent, which consent shall not be unreasonably withheld.
13.1.7 [redacted] shall fail to perform any covenant set forth in the Guaranty, or the Guaranty shall expire and shall not be replaced with comparable assurance to Georgia Power, with Georgia Power's consent, which consent shall not be unreasonably withheld.
13.1.8 A Party shall experience a Material Adverse Change; provided, however, such Material Adverse Change shall not be considered an Event of Default if the Defaulting Party delivers to the Non-Defaulting Party, Eligible Collateral in an amount equal to [redacted].
13.1.8.1 As used in this Section 13.1.8, a Material Adverse Change shall occur when a Party's senior securities are rated below [redacted].
13.1.8.2 As used in this Section 13.1.8, Eligible Collateral shall consist of an unconditional Letter of Credit from [redacted] (and in a form reasonably acceptable to Beneficiary), cash or a guaranty from an entity with ratings equal to or greater than [redacted].
13.1.9 The Defaulting Party materially breaches any obligation under this Agreement or the Guaranty, and such breach shall continue for a period of [redacted] after the date on which written notice thereof shall have been given to the Defaulting Party; except that if it shall be impracticable or impossible to remedy any such breach within such [redacted] period, such period shall be extended for an additional period reasonably necessary to remedy such breach, if during such additional period, the Defaulting Party shall be diligently pursuing a cure for such breach.
13.2 Rights Under Agreement. Except as otherwise provided herein, each Party reserves to itself all rights, counterclaims, and other defenses which it is or may be entitled to arising from or out of this Agreement.
13.3.1 Upon the occurrence of an Event of Default pursuant to this Article 13, the Non-Defaulting Party may at its discretion, take either or both of the following actions: (i) proceed by appropriate proceedings, judicial, administrative or otherwise at law, in equity or otherwise at law, in equity or otherwise, to protect and enforce its rights, to recover any damages to which it may be entitled, and to enforce performance by the Defaulting Party, including specific performance of Defaulting Party's obligations hereunder; and (ii) terminate this Agreement by giving written notice thereof to the Defaulting Party.
13.3.2 In addition to the remedies provided in Section 13.3.1,
the Non-Defaulting Party may, for so long as the Event of Default is continuing,
(i) establish a date (which date shall be between five and ten (5 and 10)
business Days after the Non-Defaulting Party delivers notice) (the "Early
Termination Date") on which this Agreement shall terminate and (ii) [redacted]
13.3.2.1 [redacted]
13.3.2.2 [redacted]
13.3.2.3 [redacted]
[redacted]. At the time for payment of any amount due under this Section, each Party shall pay to the other Party all additional amounts payable by it pursuant to this Agreement, but all such amounts shall be netted and aggregated with any Termination Payment payable hereunder.
13.4 Damages for Non-Performance. If Georgia Power fails to deliver
energy requested for Scheduling hereunder, and such failure is not excused by a
Force Majeure Event, then, as LEM's sole and exclusive remedy for such failure,
but not to the exclusion of the other remedies provided in this Agreement,
[redacted].
ARTICLE 14
INDEMNIFICATION AND LIMITATION OF LIABILITY
14.1 Indemnity. Subject to Section 14.3 below, each Party expressly agrees to indemnify, hold harmless and defend the other Party against all claims, liability, costs or expense for loss, damage or injury to persons or property in any manner directly or indirectly connected with or growing out of, the generation, transmission or distribution of Delivered Energy on its own side of the Delivery Points, unless such loss, damage or injury is the result of gross negligence or willful misconduct of the Party seeking indemnification.
14.2 No Liability to Third Party. Nothing herein shall create, or be interpreted as creating, any standard of care with reference to, or any duty or liability to any person not a Party hereto.
14.3 No Consequential Damages. To the fullest extent permitted by law, neither Party shall be liable to the other for punitive, indirect, consequential, or incidental damages including, without limitation, claims of customers of the indemnified Party arising in connection with this Agreement.
ARTICLE 15
ASSIGNMENT
15.1 Assignment and Assumption of Obligations. Neither Party shall assign this Agreement or any portion thereof without the prior written consent of the other Party which such consent shall not be unreasonably withheld; provided, however, (i) any assignee shall expressly assume assignor's obligations hereunder and (ii) unless expressly approved by the other Party to this Agreement, no assignment, whether or not consented to, shall relieve the assignor, and any guarantor, of their obligations hereunder in the event its assignee fails to perform and (iii) either Party may assign this Agreement to an Affiliate without consent.
15.2 Assignment to Lenders.
15.2.1 Notwithstanding Section 15.1, Georgia Power may, without the consent of LEM, assign this Agreement to a lender for collateral security purposes in connection with the financing or refinancing of the Units.
15.2.2 In order to facilitate the obtaining of financing of the Units, LEM shall execute such consents, agreements or similar documents with respect to a collateral assignment hereof to a lender as lender may reasonably request in connection with the documentation of the financing or refinancing for the Units, provided, that any such consents, agreements or similar documents will be on terms and conditions acceptable to LEM.
ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1 Amendments. This Agreement may be amended by and only by a written instrument duly executed by each of Georgia Power and LEM, which has received all approval of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
16.2 Binding Effect. This Agreement and any extension shall inure to the benefit of and shall be binding upon the Parties and their respective permitted successors and assigns.
16.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
16.4 Notices. Where written notice is required by this Agreement, such notice shall be in writing and shall be deemed given (i) when mailed by United States registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
To: LEM: LG&E Energy Marketing Inc.
220 West Main Street
Louisville, Kentucky 40202
Attn: Vice President
With Copy To: LG&E Energy Corp.
220 West Main Street
Louisville, Kentucky 40202
Attn: General Counsel
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To: Georgia Power Company Southern Wholesale Energy c/o Southern Company Services, Inc.
P. O. Box 2641
Birmingham, Alabama 35291-8252
Attn: Ed Day
With Copy To: Troutman Sanders LLP
5200 NationsBank Plaza
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Robert H. Forry, Esq.
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or to such other address as may be designated by the Parties; or (ii) when sent by facsimile, provided such facsimile is confirmed by mailing a hard copy confirmation, as provided in clause (i) above, within one (1) business Day after the sending of the facsimile.
16.5 Entire Agreement. This Agreement constitutes the entire understanding between the Parties and supersedes any previous agreements between the Parties. The Parties have entered into this Agreement in reliance upon the representations and mutual undertakings contained herein and not in reliance upon any oral or written representations or information provided by one Party to the other Party not contained or incorporated herein.
16.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia.
16.7 Waiver. The failure of either Party to enforce at any time any of the provisions of this Agreement, or to acquire at any time performance by the other Party of any of the provisions hereof, shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any Party hereof, or the right of such Party hereafter to enforce every such provision. No modification or waiver of all or any part of all or any part of this Agreement shall be valid unless it is reduced to a writing, which expressly states that the Parties hereby agree to a waiver or modification as applicable, and is signed by both Parties.
16.8 No Dedication of System. Nothing contained in this Agreement shall require Georgia Power to construct any particular facilities. Any undertaking by Georgia Power under any provisions of this Agreement shall not be construed to constitute the dedication of Georgia Power's system, or the system of any Affiliate of Georgia Power, or any portion thereof, to the public or to LEM; provided, however, the Parties acknowledge that Georgia Power may construct the Units with respect to service provided under this Agreement. Georgia Power's provision of Contract Capacity and Delivered Energy under this Agreement does not constitute a sale, lease, rental, transfer or conveyance of any ownership interest or entitlement in or to any facilities of any kind. All obligations of the Parties shall cease upon termination of this Agreement, except as otherwise expressly provided herein, and LEM shall not attempt to schedule any energy under this Agreement after its termination.
16.9 Headings. The headings contained in this Agreement are used solely for convenience and do not constitute a part of the Agreement between the Parties hereto, nor should they be used to aid in any manner in the construction of this Agreement.
16.10 Third Parties. This Agreement is intended solely for the benefit of the Parties hereto. Except as otherwise expressly provided herein, nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement.
16.11 Agency. This Agreement shall not be interpreted or construed to create an association, joint venture, or partnership between the Parties to impose any partnership obligation or liability upon either Party. Neither Party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or to act as or be an agent or representative of, or to otherwise bind, the other Party.
16.12 Severability. If any term or provision of this Agreement or the application thereof to any person, entity, or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provisions to person, entities or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
16.13.1 The Parties acknowledge that this Agreement contains Proprietary Information and each Party agrees that for a period of five (5) years from the date of termination of the Agreement it will not, without the written consent of the other or as otherwise provided herein, disclose to any third party (other than to Affiliates of the disclosing party or consultants and advisors to such Affiliates and the disclosing Party who need to know such information in connection with the performance of their duties or services for such Affiliates or the disclosing Party or Lenders to such Affiliates or the disclosing party), the Proprietary Information except to the extent that disclosure is required by law, or by a court or by an administrative agency having jurisdiction over the disclosing party.
16.13.2 The Parties agree to seek confidential treatment of the Proprietary Information in this Agreement from FERC but acknowledge that certain Proprietary Information may need to be disclosed in Georgia Power's filings with FERC which may be publicly available.
16.14 Replacement Index . Whenever any published index or tariff is referenced herein, the Parties intend to track those costs as faithfully as commercially practical. Should any such index or tariff be discontinued or no longer published, the Parties will cooperate in establishing substitute benchmarks through reference to equivalent indexes or tariffs.
16.15 Public Announcement. The Parties agree that no public or other announcement concerning the transactions contemplated hereby shall be made except after mutual consultation and consent, provided, however, that consent will not be required if either Party determines that disclosure to the public or to governmental agencies are reasonably necessary to comply with applicable laws.
16.16 Liquidated Damages. To the extent that any damages required to be paid under this Agreement are liquidated, the Parties acknowledge that the damages are difficult or impossible to determine, otherwise obtaining an adequate remedy is inconvenient, and the liquidated damages constitute approximation of the expected actual harm or loss.
IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement under seal in Georgia as of the date first above written.
GEORGIA POWER COMPANY
"Georgia Power"
LG&E ENERGY MARKETING INC.
"LEM"
Attest:
Title:
IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement under seal in Kentucky as of the date first above written.
GEORGIA POWER COMPANY
"Georgia Power"
LG&E ENERGY MARKETING INC.
"LEM"
EXHIBIT "A"
PRICE ESCALATION
Start-Stop Cost Monthly Capacity
[redacted] Payment VOM
$ ($/MWh)
June 1, 2000 [redacted] [redacted] [redacted] July 1, 2000 - May 31, 2001 [redacted] [redacted] [redacted] June 1, 2001 - May 31, 2002 [redacted] [redacted] [redacted] June 1, 2002 - May 31, 2003 [redacted] [redacted] [redacted] June 1, 2003 - May 31, 2004 [redacted] [redacted] [redacted] June 1, 2004 - May 31 2005 [redacted] [redacted] [redacted] June 1, 2005 - May 31, 2006 [redacted] [redacted] [redacted] June 1, 2006 - May 31, 2007 [redacted] [redacted] [redacted] June 1, 2007 - May 31, 2008 [redacted] [redacted] [redacted] June 1, 2008 - May 31, 2009 [redacted] [redacted] [redacted] June 1, 2009 - Dec 31, 2009 [redacted] [redacted] [redacted] |
EXHIBIT "B"
PERFORMANCE DEGRADATION
Application:
1. Operating Heat Rate as established in Sections 9.1.6 and 9.1.7 times (1
plus table value for applicable hours of Delivered Energy).
2. Operating Rating as established in Sections 9.1.4 and 9.1.5 times (1 minus table value for applicable hours of Delivered Energy).
------------------------------------------------------------------------------
Cumulative Operating Heat Rate Operating Rating
Delivered Hours Degradation Degradation
0 1,000 [redacted] [redacted]
1,001 2,000 [redacted] [redacted]
2,001 3,000 [redacted] [redacted]
3,001 4,000 [redacted] [redacted]
4,001 5,000 [redacted] [redacted]
5,001 6,000 [redacted] [redacted]
6,001 7,000 [redacted] [redacted]
7,001 8,000 [redacted] [redacted]
8,001 9,000 [redacted] [redacted]
9,001 10,000 [redacted] [redacted]
10,001 11,000 [redacted] [redacted]
11,001 12,000 [redacted] [redacted]
12,001 13,000 [redacted] [redacted]
13,001 14,000 [redacted] [redacted]
14,001 15,000 [redacted] [redacted]
15,001 16,000 [redacted] [redacted]
16,001 17,000 [redacted] [redacted]
17,001 18,000 [redacted] [redacted]
18,001 19,000 [redacted] [redacted]
19,001 20,000 [redacted] [redacted]
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EXHIBIT "C"
GUARANTY AGREEMENT
[redacted]
EXHIBIT "D"
[redacted]
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.............................................................................................2
1.1 Certain Definitions........................................................................................2
1.2 Interpretation............................................................................................11
ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................................12
2.1 Representations and Warranties............................................................................12
2.2 Representations and Warranties of Georgia Power...........................................................13
ARTICLE 3 TERM OF AGREEMENT......................................................................................15
3.1 Term......................................................................................................15
3.2 Environmental Permitting..................................................................................17
3.3 Service Commencement Dates................................................................................18
ARTICLE 4 SALE OF CAPACITY AND ENERGY............................................................................19
4.1 Contract Capacity.........................................................................................19
4.2 Delivered Energy..........................................................................................20
ARTICLE 5 PAYMENTS...............................................................................................21
5.1 General...................................................................................................21
5.2 [redacted]......................................................................Error! Bookmark not defined.
5.3 Capacity Payments.........................................................................................21
5.4 Energy Payments...........................................................................................21
5.5 Start-Up Payments.........................................................................................23
ARTICLE 6 AVAILABILITY...........................................................................................23
6.1 Undelivered Energy........................................................................................23
6.2 [redacted]................................................................................................23
6.3 Monthly Maximum...........................................................................................24
6.4 Annual Maximum............................................................................................24
6.5 Summer Maximum............................................................................................24
6.6 Remedy....................................................................................................24
6.7 [redacted]......................................................................Error! Bookmark not defined.
6.8 Peak Hours................................................................................................25
6.9 Availability Bonus........................................................................................25
ARTICLE 7 SCHEDULING AND PSEUDO GAS BALANCING....................................................................26
7.1 Energy Scheduling.........................................................................................26
7.2 Pseudo Gas Balancing......................................................................................29
ARTICLE 8 BILLING AND PAYMENT....................................................................................30
8.1 Capacity, Energy and Start-Up Billing and Payment.........................................................30
8.2 Billing Disputes and Final Accounting.....................................................................31
8.3 Interest..................................................................................................32
8.4 Billing and Payment Records...............................................................................32
ARTICLE 9 OPERATIONS.............................................................................................33
9.1 Operating Rating and Operating Heat Rate..................................................................33
9.2 Transmission..............................................................................................36
9.3 Maintenance...............................................................................................36
9.4 Inventory.................................................................................................36
9.5 Existing Units............................................................................................37
9.6 Site Visits...............................................................................................38
ARTICLE 10 CHANGE IN LAW, MODIFICATION OF AGREEMENT..............................................................39
10.1 Change in Law............................................................................................39
10.2 Modification of Agreement................................................................................41
ARTICLE 11 FORCE MAJEURE.........................................................................................41
11.1 Definition of Force Majeure..............................................................................41
11.2 Excused Force Majeure....................................................................................41
11.3 Unexcused Force Majeure..................................................................................42
11.4 Mitigation...............................................................................................44
11.5 Suspension of Performance................................................................................44
11.6 Limitation on Force Majeure..............................................................................45
ARTICLE 12 CREDIT................................................................................................45
12.1 Guaranty.................................................................................................45
12.2 Designation Letter.......................................................................................45
ARTICLE 13 EVENTS OF DEFAULT AND DAMAGES FOR NON-PERFORMANCE.....................................................46
13.1 Events of Default........................................................................................46
13.2 Rights Under Agreement...................................................................................49
13.3 Remedies.................................................................................................49
13.4 Damages for Non-Performance..............................................................................50
ARTICLE 14 INDEMNIFICATION AND LIMITATION OF LIABILITY...........................................................51
14.1 Indemnity................................................................................................51
14.2 No Liability to Third Party..............................................................................51
14.3 No Consequential Damages.................................................................................51
ARTICLE 15 ASSIGNMENT............................................................................................51
15.1 Assignment and Assumption of Obligations.................................................................52
15.2 Assignment to Lenders....................................................................................52
ARTICLE 16 MISCELLANEOUS PROVISIONS..............................................................................52
16.1 Amendments...............................................................................................53
16.2 Binding Effect...........................................................................................53
16.3 Counterparts.............................................................................................53
16.4 Notices..................................................................................................53
16.5 Entire Agreement.........................................................................................54
16.6 Governing Law............................................................................................54
16.7 Waiver...................................................................................................54
16.8 No Dedication of System..................................................................................55
16.9 Headings.................................................................................................55
16.10 Third Parties...........................................................................................55
16.11 Agency..................................................................................................55
16.12 Severability............................................................................................56
16.13 Confidentiality.........................................................................................56
16.14 Replacement Index......................................................................................57
16.15 Public Announcement.....................................................................................57
16.16 Liquidated Damages......................................................................................57
EXHIBIT "A" PRICE ESCALATION......................................................................................1
EXHIBIT "B" PERFORMANCE DEGRADATION...............................................................................1
EXHIBIT "C" GUARANTY AGREEMENT...................................................................................1
EXHIBIT "D".......................................................................................................1
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Exhibit 10.16
PUBLIC RELEASE VERSION
1999
PURCHASED POWER AGREEMENT
BETWEEN
GEORGIA POWER COMPANY
AND
LG&E ENERGY MARKETING INC.
Dated as of October 6, 1999
1999
PURCHASED POWER AGREEMENT
THIS 1999 PURCHASED POWER AGREEMENT ("Agreement"), dated as of October 6, 1999, is entered into by and between GEORGIA POWER COMPANY, a corporation organized and existing under the laws of the State of Georgia with its principal address at 241 Ralph McGill Boulevard, Atlanta, Georgia 30308 ("Georgia Power") and LG&E ENERGY MARKETING INC., a corporation organized and existing under the laws of the State of Oklahoma, having its principal place of business at 220 West Main Street, Louisville, Kentucky 40202 ("LEM").
W I T N E S E T H:
WHEREAS, Georgia Power is authorized by its Certificate of Incorporation and by the State of Georgia to engage in the generation, transmission, sale and distribution of electricity for heat, light and power to the public;
WHEREAS, Georgia Power intends to construct, own and operate two new General Electric Frame 7EA natural gas- and oil-fired combustion turbine electric generating units with approximate capacity of 82.5 MW each located adjacent to the Georgia Integrated Transmission System, (the "Units"); and
WHEREAS, Georgia Power has agreed to sell to LEM and LEM has agreed to purchase from Georgia Power capacity and energy which may or may not, at Georgia Power's sole option, be generated at the Units; all in accordance with the provisions of this Agreement;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual promises and agreements set forth herein and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, Georgia Power and LEM each intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. In addition to the initially capitalized terms and phrases defined in the preamble of this Agreement, the following initially capitalized terms and phrases as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "Affiliate" - of any specified entity means 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 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 "controlled" have meanings correlative to the foregoing.
1.1.2 "Availability Status" - shall have the meaning specified in Section 7.1.4 of this Agreement.
1.1.3 "Block" - means the MW associated with the Operating Rating of a Unit which LEM may schedule in an hour.
1.1.4 "Contract Capacity"- shall have the meaning specified in
Section 4.1.2 of this Agreement.
1.1.5 "Contract Service Commencement Dates" - shall have the meaning specified in Section 3.2.1 of this Agreement.
1.1.6 "Contract Year"- means a year beginning on June 1 and ending on May 31 and "Year" means a calendar year.
1.1.7 "Costs" - shall have the meaning specified in Section 13.3.2.2 of this Agreement.
1.1.8 "CPT" - means Central Prevailing Time.
1.1.9 "Day" - means a calendar day.
1.1.10 "Defaulting Party" - shall have the meaning specified in Section 13.1 of this Agreement.
1.1.11 "Delivered Energy" - means, either individually or in combination, the energy in megawatt hours (MWh) by Block (i) generated by the Units and delivered to the Delivery Points, or (ii) supplied by resources other than the Units and delivered to the Delivery Points, based on a Schedule submitted by LEM as described in Article 7 of this Agreement.
1.1.12 "Delivery Points" - means the points anywhere on the Georgia Integrated Transmission System where Georgia Power shall deliver the power supplied under this Agreement.
1.1.13 "Dispatch Center" - means the control and dispatching center designated by Georgia Power from time to time in writing as being the primary control point for dispatch instructions to Georgia Power.
1.1.14 "Early Termination Date" - shall have the meaning specified in
Section 13.3.2 of this Agreement.
1.1.15 "Eligible Collateral" - shall have the meaning specified in Section 13.1.8.2 of this Agreement.
1.1.16 "Energy Price" - shall have the meaning specified in
Section 5.3.1 of this Agreement.
1.1.17 "Event of Default" - shall have the meaning specified in Section 13.1 of this Agreement.
1.1.18 "FERC" - means the Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers and functions thereof under the Federal Power Act.
1.1.19 "Fuel Costs" - shall have the meaning specified in
Section 5.3.2 of this Agreement.
1.1.20 "Gains" - shall have the meaning specified in Section 13.3.2.3 of this Agreement.
1.1.21 "Georgia Integrated Transmission System" - means the integrated transmission system, as modified or expanded from time-to-time, as defined in the Revised and Restated Integrated Transmission System Agreement, dated as of December 7, 1990, between Georgia Power and Municipal Electric Authority of Georgia, the Revised and Restated Integrated Transmission System Agreement, dated as of December 7, 1990, between Georgia Power and City of Dalton, and the Revised and Restated Integrated Transmission System Agreement, dated as of November 12, 1990, between Georgia Power and Oglethorpe Power Corporation.
1.1.22 "Georgia Power"- shall have the meaning specified in the first paragraph of this Agreement, and its permitted successors and assigns.
1.1.23 [redacted].
1.1.24 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department or other such entity, but excluding any such agency, court, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee.
1.1.25 "Guaranty" - shall have the meaning specified in Section 12.1 of this Agreement.
1.1.26 "HE"- means hour ending.
1.1.27 "Initial Term" - shall have the meaning specified in
Section 3.1.1 of this Agreement.
1.1.28 "Interest Rate" - means [redacted] for the applicable time period.
1.1.29 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, judgment, injunction, order or other requirement of a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question (i) at the time of the execution of the Agreement, as amended from time to time or (ii) anytime thereafter during the Term.
1.1.30 "LEM" - shall have the meaning specified in the first paragraph of this Agreement, and its permitted successors and assigns.
1.1.31 "Losses" - shall have the meaning specified in Section 13.3.2.1 of this Agreement.
1.1.32 "Material Adverse Change" - shall have the meaning specified in
Section 13.1.8.1 of this Agreement.
1.1.33 "Month" - means a calendar month, commencing at the beginning of the first Day of such calendar month. "Monthly" - has a meaning correlative to that of Month.
1.1.34 "Monthly Capacity Payment" - for a particular Month of the Term, means the Monthly amount to be paid by LEM to Georgia Power for LEM's purchase of the Contract Capacity, as the same is set forth on Exhibit A.
1.1.35 "Monthly Energy Payment" - for a particular Month of the Term, means the Monthly amount to be paid by LEM to Georgia Power for LEM's purchase of Delivered Energy, as the same is calculated as provided in Section 5.3 of this Agreement.
1.1.36 "MW" - means megawatts.
1.1.37 "MWh" - means megawatt - hours.
1.1.38 "Non-Defaulting Party" - shall have the meaning specified in Section 13.1 of this Agreement.
1.1.39 "Non-Winter Months" - means the months of April through November.
1.1.40 "Operating Heat Rate"- shall have the meaning specified in Section 9.1 of this Agreement.
1.1.41 "Operating Rating" - shall have the meaning specified in Section 9.1 of this Agreement.
1.1.42 "Other Indebtedness" - shall have the meaning specified in Section 13.1.5 of this Agreement.
1.1.43 "Party" or "Parties" - means either Georgia Power or LEM, or both.
1.1.44 "Peak Hours" - shall have the meaning specified in Section 6.8 of this Agreement.
1.1.45 "Proprietary Information" - of a Party shall mean information rightfully in the possession of such Party, which information derives economic value from not being generally known to and not being readily ascertainable by proper means by another person who can obtain economic value from its disclosure and use, and which is the subject of reasonable efforts to maintain its secrecy.
1.1.46 "Prudent Utility Practices" - means, 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 the exercise of reasonable judgment 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 Practices 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirement of this Agreement.
1.1.47 "Renewal Term" - shall have the meaning specified in
Section 3.1.2 of this Agreement.
1.1.48 [redacted].
1.1.49 "Schedule" - as used as a noun, means an energy schedule submitted by LEM in accordance with the provisions of Article 7 of this Agreement, and, as a verb, means the act of submitting a Schedule in accordance with the provisions of Article 7 of this Agreement.
1.1.50 "Service Commencement Date" means the date Georgia Power declares that a Block is available for scheduling by LEM.
1.1.51 "Southern Dispatch" - means the ability of Southern Company Services, Inc. (or other Affiliate of Georgia Power) to schedule and control, directly or indirectly, manually or automatically, the output of a generation facility in the Southern control area in order to increase or decrease the electricity delivered from such generation facility into the electricity system with which it is interconnected.
1.1.52 "Start-Stop Schedule" - means a Schedule of a Block by LEM delivered by Georgia Power over consecutive hours where the amount of energy from the Block in the hour prior to the start of the Schedule is zero, the Block is loaded to its Operating Rating during the hours of the Schedule, and the energy in the hour after the Schedule is zero.
1.1.53 "Start-Up Payments" - shall mean the meaning specified in Section 5.4 of this Agreement.
1.1.54 "Support Agreement" - shall have the meaning specified in 12.2 of this Agreement.
1.1.55 "Term" - means the Initial Term and any Renewal Term or Terms.
1.1.56 "Termination Payment" - shall have the meaning specified in Section
13.3.2 of this Agreement.
1.1.57 "Undelivered Energy" - shall have the meaning specified in Section
6.1 of the Agreement.
1.1.58 "Unit" shall have the meaning specified on page 1 of
this Agreement.
1.1.59 "Variable O&M Amount" - shall have the meaning specified in Section
5.3.1 of this Agreement.
1.1.60 "Winter Months" - means the months of December
through March.
1.2 Interpretation. In this Agreement, unless the context
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otherwise requires:
1.2.1 words generally importing the singular shall include the plural and vice versa;
1.2.2 references to "entity" include, without limitation, corporations, partnerships, associations and governmental authorities.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 Representations and Warranties. LEM hereby makes the following representations and warranties to Georgia Power:
2.1.1 LEM is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma, and, has the legal power to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
2.1.2 [redacted].
2.1.3 The execution, delivery and performance by LEM of this Agreement and the guarantee by Guarantor have been duly authorized by all necessary action, and do not and will not require any consent or approval of LEM's Affiliates, other than that which has been obtained.
2.1.4 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which LEM or Guarantor is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
2.1.5 This Agreement constitutes the legal, valid and binding obligation of LEM enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
2.1.6 There is no pending, or to the knowledge of LEM, threatened action or proceeding affecting LEM before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement as in effect on the date hereof.
2.2 Representations and Warranties of Georgia Power. Georgia Power hereby makes the following representations and warranties to LEM:
2.2.1 Georgia Power is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia, is qualified to do business in the State of Georgia and has the legal power and authority to own or lease its properties, to conduct its business and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
2.2.2 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Georgia Power is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
2.2.3 This Agreement constitutes the legal, valid and binding obligations of Georgia Power enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
2.2.4 There is no pending, or to the knowledge of Georgia Power, threatened action or proceeding affecting Georgia Power before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement.
ARTICLE 3
TERM OF AGREEMENT
3.1 Term.
3.1.1 This Agreement shall be effective when executed and delivered by both Georgia Power and LEM and shall remain in full force and effect until December 31, 2004 ("Initial Term").
3.1.2 LEM may extend the term of this Agreement for an additional one to five twelve-month periods ("Renewal Term"), beginning January 1, 2005, upon giving at least twenty-four (24) months notice in advance of the beginning of each such twelve-month period.
3.1.3 If LEM elects not to exercise any annual option to extend the Term of this Agreement as set forth in Section 3.1.2, LEM shall have no further option(s) to extend the Term. In any event, this Agreement shall terminate no later than December 31, 2009. LEM agrees not to schedule any purchases after any termination date.
3.1.4 If, prior to the date on which LEM may extend the Term under Section 3.1.2, LEM wishes to enter into a Replacement Contract in lieu of extending the Term, then LEM first shall give notice to Georgia Power that LEM wishes to enter into a Replacement Contract. Such notice shall state the term, amount of capacity in MW, capacity and energy price, and delivery point under the Replacement Contract, but shall not identify the potential replacement supplier. Within [redacted] after LEM has given such notice, Georgia Power may, at its option, give notice to LEM that Georgia Power wishes to provide the amount of capacity to be purchased under this Agreement under the same terms and conditions as the Replacement Contract (except for amount of capacity). If Georgia Power so notifies LEM within such [redacted], then the Parties shall enter into an agreement under such terms and conditions. If Georgia Power fails to so notify LEM within such [redacted], then LEM shall be free to enter into such Replacement Contract without further obligation to Georgia Power. "Replacement Contract" means a contract under which LEM will have the right to buy capacity and associated energy which has the following terms: (a) a delivery point is on the Georgia Integrated Transmission System, the quantity of capacity is approximately the total of the Blocks' Operating Ratings at the time of the Replacement Contract, and the term begins no later than June 1 of the Year immediately succeeding the last Year of the Term and ends no earlier than September 30 of the Year immediately succeeding the last Year of the Term.
3.1.5 During any extension of the Term of this Agreement after the Initial Term, the Monthly Capacity Payment shall be in accordance with Exhibit A, Monthly Energy Payment shall be calculated in accordance with Section 5.3, Start-Up Payments shall be calculated in accordance with Section 5.4, and the Operating Ratings and Operating Heat Rates shall be calculated in accordance with the provisions of Section 9.1.
3.1.6 Applicable provisions of this Agreement shall continue in effect (i) after termination to the extent necessary to provide for final billings and adjustments, and (ii) as provided herein.
3.2 Service Commencement Dates.
3.2.1 The "Contract Service Commencement Dates" shall mean
June 1, 2000, for one (1) of the Blocks ("Block 6") and June 15, 2000, for one
(1) of the Blocks ("Block 7").
3.2.2 If, for any Block, the Service Commencement Date is later than the Contract Service Commencement Date, then, for such Block,
(a) LEM shall make the Monthly Capacity Payment beginning on the Contract Service Commencement Date;
(b) Georgia Power shall not be required to deliver energy from the Block
until the Service Commencement Date. However, during the period between the
Contract Service Commencement Date and the Service Commencement Date, if Georgia
Power does elect to generate any energy from the Unit, Georgia Power shall give
to LEM notice and an opportunity to purchase such energy as follows. By 9:00
a.m. CPT the Day before such energy is to be generated, Georgia Power shall give
to LEM a schedule of the expected energy output for the following Day. By 10:00
a.m. CPT, LEM shall give to Georgia Power notice of whether or not LEM elects to
take any of such energy and, if so, what quantities and which hours LEM elects
to take it. The price of any such energy delivered shall be the Energy Price.
Georgia Power shall have no liability for failure to generate and deliver the
energy for any reason and such energy shall not be considered Undelivered Energy
under Article 6, except that Georgia Power shall not have the right to generate
and sell such energy to a third party without first giving LEM notice as set
forth hereinabove.
(c) Georgia Power shall pay to LEM liquidated damages in the amount of
[redacted] for each Day that elapses between the Contract Service Commencement
Date and the Service Commencement Date;
(d) during the period between the Contract Service Commencement Date and the Service Commencement Date, LEM may Schedule an amount of energy equivalent to a Block, and Georgia Power will deliver such energy unless such deliveries cause Georgia Power to interrupt deliveries under Georgia Power's tariff-based interruptible sales. [redacted]. Failure by Georgia Power to deliver energy pursuant to this Subsection 3.2.2(d) shall not constitute Undelivered Energy.
3.2.3 Georgia Power may change the Contract Service
Commencement Date for Block 7 to a date no earlier than June 1, 2000, and no
later than June 14, 2000, by delivering to LEM written notice at least
[redacted] days prior to the new Contract Service Commencement Date. If Georgia
Power does change the Contract Service Commencement Date for Block 7, all the
provisions of this Agreement shall apply as currently written, except that the
Contract Service Commencement Date shall be as set forth in Georgia Power's
notice [redacted].
3.3.3 Georgia Power shall not be required to deliver energy from Block 7 until the Service Commencement Date. However, for Block 7, for any day during the period of June 1, 2000, through June 14, 2000, which is prior to the Service Commencement Date the following will apply:
(a) Each Business Day LEM may call by 9:00 a.m. CPT to request the estimated day ahead hourly prices for Georgia Power's incremental cost. Each Day LEM may provide by 9:30 a.m. CPT to Georgia Power an energy schedule equivalent to a Block by hour for the succeeding Day or Days. The schedule shall be for a minimum duration of eight hours and shall be for continuous hours. The hourly estimates and corresponding schedules for Saturday, Sunday and Monday shall be determined on the preceding Friday. Georgia Power will deliver such energy unless such deliveries cause Georgia Power to interrupt tariff-based interruptible sales. [redacted]. Failure by Georgia Power to deliver energy pursuant to this Subsection 3.3.3 (a) shall not constitute Undelivered Energy. Start-up Payments under Section 5.4 will not apply to this subsection 3.3.3.
(b) If Georgia Power elects to generate any energy from the unit associated with Block 7, Georgia Power shall give to LEM notice and an opportunity to purchase such energy as follows. By 9:00 a.m. CPT the Day before such energy is to be generated, Georgia Power shall give to LEM a schedule of the expected energy output for the following Day. By 10:00 a.m. CPT, LEM shall give Georgia Power notice of whether or not LEM elects to take any such energy and, if so, what quantities and which hours LEM elects to take it. The price of any such energy delivered shall be the Energy Price. Georgia Power shall have no liability for failure to generate and deliver the energy for any reason and such energy shall not be considered Undelivered Energy under Article 6, except that Georgia Power shall not have the right to generate and sell such energy to a third party without first giving LEM notice as set forth hereinabove.
ARTICLE 4
SALE OF CAPACITY AND ENERGY
4.1 Contract Capacity.
4.1.1 Unless excused as set forth in Article 11, Georgia Power agrees to sell to LEM and LEM agrees to purchase the Contract Capacity as set forth below and continuing for the remainder of the Term.
4.1.2 Contract Capacity shall consist of (i) 83 MW commencing June 1, 2000, and (ii) 82 MW commencing June 15, 2000, for a total of 165 MW. While various performance, timing and entitlement provisions of this Agreement are determined by reference to the Units, the Delivered Energy sold hereunder shall be supplied by Georgia Power from any generation resources it may choose at its sole option.
4.2 Delivered Energy.
4.2.1 Beginning on the Service Commencement Date for each Block, LEM shall be entitled to, but shall not be obligated to, schedule and purchase, and unless otherwise excused by a Force Majeure Event, Georgia Power shall sell and deliver energy in one or two Blocks, at LEM's option and on an hourly basis, as scheduled by LEM in accordance with the provisions of Article 7 hereof. For each Year, the total number of hours which LEM shall be entitled to schedule and receive energy at the Energy Price from Blocks 6 and 7 after the Service Commencement Date shall not exceed [redacted].
4.2.2 Georgia Power, at its sole discretion, shall supply Delivered Energy (i) from the Units; or (ii) from sources other than the Units at the Delivery Points.
4.2.3 Title to electricity and risk of loss shall pass from Georgia Power to LEM at the Delivery Points.
ARTICLE 5
PAYMENTS
5.1 General. LEM shall pay Georgia Power for each Month of the Term a Monthly Capacity Payment, Monthly Energy Payment and Start-Up Payments in accordance with this Article.
5.2 Capacity Payments. For each month beginning with the Contract Service Commencement Date and continuing through the remaining Term, unless excused by an Excused Force Majeure Event, LEM shall make a Monthly Capacity Payment to Georgia Power in the amounts set forth on Exhibit A.
5.3 Energy Payments.
5.3.1 Each month, LEM shall make a Monthly Energy Payment to Georgia Power equal to MWh of Delivered Energy during the applicable month multiplied by the Energy Price. "Energy Price" equals Fuel Costs as determined below plus the Variable O&M Amount for the applicable month as set forth on Exhibit A.
5.3.2 "Fuel Costs" equal the applicable Operating Heat Rate multiplied by the sum of (i) the appropriate gas or fuel oil index as set forth below, plus (ii) fuel transportation costs as set forth below, and (iii) all federal, state and local taxes on natural gas or fuel oil deemed to be used hereunder. For Non-Winter Months, the applicable Operating Heat Rate shall be the Operating Heat Rate for natural gas. For Winter Months, the applicable Operating Heat Rate shall be the Operating Heat Rate for fuel oil unless LEM elects to purchase firm gas transportation under Section 5.3.4 in which case the applicable Operating Heat Rate shall be the Operating Heat Rate for natural gas.
5.3.3 For Non-Winter Months, the appropriate index shall be
[redacted]. Gas transportation costs shall be determined by application of the
Transco IT tariff rate including, but not limited to, all commodity and
surcharges such as GRI, ACA, and Great Plains Surcharge for receipt at
[redacted] and delivery to [redacted] or such [redacted] as including the State
of Georgia. However, in lieu of applying such tariff rate, LEM has the option to
purchase firm gas transportation, designating Georgia Power as its agent for
fuel delivery and notifying Georgia Power of such designation. To the extent LEM
purchases such transportation, Fuel Costs shall not include any fuel
transportation costs.
5.3.4 For Winter Months, the appropriate index shall be
[redacted]. LEM shall pay actual fuel oil transportation capped at [redacted].
However, in lieu of applying the Winter fuel index, LEM has the option to
purchase firm gas transportation, designating Georgia Power as its agent for
fuel delivery and notifying Georgia Power of such designation. To the extent LEM
purchases such transportation, Fuel Costs shall not include any fuel
transportation costs, the applicable fuel index shall be the Non-Winter fuel
index, and the applicable Operating Heat Rate shall be the Operating Heat Rate
for natural gas.
5.4 Start-Up Payments. LEM shall make Start-Up Payments for each Start-Stop Schedule [redacted] at the rates set forth in Exhibit A.
ARTICLE 6
AVAILABILITY
6.1 Undelivered Energy. After the Service Commencement Date, if LEM
schedules energy in accordance with the provisions of Article 7 hereof during
any Peak Hours on any Day, and Georgia Power fails to deliver such energy due to
an Unexcused Force Majeure Event, then the quantity of such energy in MWhs shall
be referred to herein as "Undelivered Energy." Energy which Georgia Power fails
to deliver due to an Excused Force Majeure Event shall not be Undelivered Energy
(except as specifically provided in Section 11.2.4), but shall be governed by
Section 11.2. Energy which Georgia Power fails to deliver in the absence of any
Force Majeure Event shall not be Undelivered Energy but shall be governed by
Section 13.4.
6.2 [redacted]. If there is Undelivered Energy of more than the product of [redacted] and the average Operating Rating of the Blocks for the applicable Month [redacted] in any rolling period of [redacted], then Georgia Power shall pay [redacted] after such [redacted] is reached and until there are [redacted].
6.3 Monthly Maximum. If the Undelivered Energy in any Month exceeds the product of [redacted] and average Operating Rating of the Blocks for the applicable Month (the "Maximum Monthly Undelivered Energy"), then [redacted].
6.4 Annual Maximum. If the Undelivered Energy in any Year exceeds the
product of [redacted] and the average Operating Rating of the Blocks for the
applicable Year multiplied by two (2) (the "Maximum Annual Undelivered Energy"),
[redacted].
6.5 Summer Maximum. If the Undelivered Energy during the period of June
1 through September 30 (the "Summer") of any Year exceeds the product of
[redacted] and the average Operating Rating of the Blocks for the applicable
months (the "Summer Maximum Undelivered Energy"), the [redacted] for each whole
multiple by which the Undelivered Energy exceeds the Summer Maximum Undelivered
Energy. [redacted]. However, during the Summer of such subsequent Year, if
Undelivered Energy is reduced by any MWh amount below the Summer Maximum
Undelivered Energy (or any multiple of the Summer Maximum Undelivered Energy),
LEM shall [redacted]. If, during the Summer of the Year following the Year in
which the Summer Maximum Undelivered Energy shall have been exceeded, for each
whole multiple of Summer Maximum Undelivered Energy that is again exceeded, LEM
shall [redacted].
6.6 Remedy. LEM's sole and exclusive monetary remedy for Undelivered
Energy exceeding the maximum levels set forth in Sections 6.2, 6.3, 6.4 and 6.5,
respectively, are cumulative with respect to each other but collectively set
forth LEM's exclusive remedies for Undelivered Energy. Such remedies are in
addition to LEM's remedies for any Georgia Power failure to deliver energy in
breach of this Agreement. However, for any single MWh of Undelivered Energy,
Georgia Power's liability hereunder will not exceed [redacted]. The remedy set
forth in this Section 6.6 is in addition to any rights LEM may have under
Article 13.
6.7 [redacted].
6.7.1 [redacted].
6.7.2 [redacted].
6.8 Peak Hours. This Article 6 shall not apply to failure to deliver
energy during any hours which are not Peak Hours. For the purpose of applying
all of the provisions of Article 6, hours which are not Peak Hours shall be
excluded from all calculations. "Peak Hours" shall mean the hours between
[redacted] inclusive during the Non-Winter Months and the hours between
[redacted] inclusive and between [redacted] inclusive during the Winter Months.
However, LEM shall have the right to change the Peak Hours for the Winter Months
by giving notice to Georgia Power at least [redacted] before the beginning of
the applicable Winter Months; provided that the total number of Peak Hours for a
Day shall not exceed[redacted] and such change is subject to Georgia Power's
consent which shall not be unreasonably withheld.
6.9 Availability Bonus.
6.9.1 For the Summer of each Year, LEM shall pay to Georgia Power a lump sum bonus of [redacted].
6.9.2 If the Service Commencement Date is later than the
Contract Service Commencement Date for any Block, then, for all Peak Hours
between the Contract Service Commencement Date and the Service Commencement
Date, there shall be considered to be Undelivered Energy for such Block for the
purpose only of calculating Availability for the applicable Summer under this
Section 6.9.
6.9.3 If Georgia Power declares an Excused Force Majeure Event
for any Unit during the Summer, then, for all Peak Hours during the suspension
due to the Excused Force Majeure Event, there shall be considered to be
Undelivered Energy for the Block associated with such Unit for the purpose only
of calculating Availability for the applicable Summer under this Section 6.9.
ARTICLE 7
SCHEDULING AND PSEUDO GAS BALANCING
7.1 Energy Scheduling.
7.1.1 There shall be two Blocks known as Block 6 and Block 7, respectively.
7.1.2 Each business Day LEM will provide by 9:30 a.m. CPT to Georgia Power a forecast of the number of Blocks which LEM expects to Schedule by hour for the succeeding Day or Days through the next business Day. [redacted]
7.1.3 LEM will submit hourly a Schedule for each Block for each Day. For each Day, Blocks shall be Scheduled in ascending order and such Schedules shall be ended in ascending order. For example, if LEM wishes to Schedule one Block for a given hour, then Block 6 shall be Scheduled for such hour. During a later hour, if LEM wishes to schedule two blocks, then Block 6 and Block 7 shall be scheduled. If, during a later hour, LEM wishes to schedule only one Block, then the schedule for Block 6 will be ended for such hour.
7.1.4 Georgia Power immediately will give notice to LEM of any change in Availability Status. The Availability Status of a Unit is either (a) available and on-line, (b) available and not on-line, or (c) unavailable. When the Availability Status of a Unit changes to unavailable, Georgia Power will give to LEM any information relating to the cause of the unavailability, Georgia Power's estimate of when the Unit may become available, and an indication of Georgia's Power's willingness to supply Blocks from resources other than the Units during the period of unavailability. The information given by Georgia Power set forth in the immediately preceding sentence will not be binding in any way on Georgia Power and will not limit any rights Georgia Power may have under this Agreement.
7.1.5 If LEM has received notice from Georgia Power that a
Block is available for the applicable hour, LEM may Schedule the Block for
delivery or continuing delivery, as applicable, no later than [redacted] before
the beginning of such hour. Once Georgia Power accepts a Schedule, such Schedule
[redacted]. All Schedules will take effect at the top of the hour. Schedules
shall extend for a minimum of [redacted].
7.1.6 If LEM has received notice that a Block is unavailable
[redacted]. If Georgia Power rejects a Schedule for an hour due to an Unexcused
Force Majeure Event, the applicable Block will be Undelivered Energy for such
hour.
7.1.7 In the event LEM first receives notice of unavailability of a Block [redacted]. If Georgia Power rejects a Schedule for an hour due to an Unexcused Force Majeure Event, the applicable Block will be Undelivered Energy for such hour.
7.1.8 If a Unit fails during a Schedule, [redacted].
7.1.9 If Georgia Power rejects a Schedule for an hour,
[redacted].
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7.1.10 In the event a Schedule is rejected due to Unit unavailability due to an Unexcused Force Majeure Event, a Block will be considered Undelivered Energy until such time as a Schedule for an available Block is ended by LEM.
7.1.11 If Georgia Power accepts a Schedule for an hour for which Georgia Power knows that a Unit is unavailable, then the price paid for such energy shall be the Energy Price.
7.2 Pseudo Gas Balancing.
7.2.1 Each business Day during the Non-Winter Months (and during Winter months when LEM purchases firm gas transportation for use in this Agreement), LEM will submit by 9:30 a.m. CPT to Georgia Power its request for gas for the succeeding Day or Days through the next business Day in MMBtus based on the quantity of gas which LEM would purchase if the Units were operated to produce the quantity of energy to be Scheduled for delivery hereunder.
7.2.2 At the end of each Month, LEM's fuel requests will be balanced.
[redacted]. LEM shall have no responsibility or claims to Transco or to Georgia
Power for actual fuel imbalances.
7.2.3 In the event that Transco issues an Operational Flow Order ("OFO") for the succeeding Day, Georgia Power shall immediately notify LEM of said event. If LEM elects to Schedule energy during the period covered by the OFO, then LEM must submit to Georgia Power a forecast of the daily volume of MWh that LEM will be obligated to take. LEM shall provide such forecast of daily volume of MWh no later than [redacted]. LEM shall Schedule and Georgia Power shall deliver such energy in accordance with this Article 7. LEM shall not be liable for any imbalance charges or penalties provided that it has submitted Schedules that equal the daily volume of MWh submitted in its forecast subject to the OFO, and it has received timely notice of the issuance of said OFO from Georgia Power.
ARTICLE 8
BILLING AND PAYMENT
8.1 Capacity, Energy and Start-Up Billing and Payment.
8.1.1 Georgia Power shall send LEM an invoice as soon as practicable after the end of each Month during the Term stating the Monthly Capacity Payment, Monthly Energy Payment and Monthly Start-Up Payment for the immediately previous Month. If circumstances require that the invoice be an estimated bill, Georgia Power may render an estimated bill and any adjustments required shall be made in ensuing invoices. Each Monthly invoice shall contain a statement explaining in reasonable detail how the invoice was calculated.
8.1.2 All such invoices shall be due and payable by LEM on or before the [redacted] of the Month that the invoice is rendered or the date which is [redacted] after the invoice is rendered, whichever is later. Georgia Power may render invoices by means of facsimile, and receipt shall be deemed to have occurred upon transmission if confirmed in writing (by manually-or-machine-generated confirmation notice within one Day after facsimile transmission). Subject to the provisions of Section 8.2, LEM shall make payment to Georgia Power in accordance with such invoices and all other amounts payable to Georgia Power hereunder on or before the date due in immediately available funds, through wire transfer of funds to an account designated by Georgia Power, or other means acceptable to Georgia Power.
8.1.3 If Georgia Power owes LEM for Replacement Costs or any other amounts hereunder, then LEM will deliver to Georgia Power a statement showing such amounts with reasonable detail showing how such amounts were calculated. Subject to Section 8.2, such amounts will be credited against any invoices.
8.2 Billing Disputes and Final Accounting.
8.2.1 If either Party after receiving a statement or bill reasonably questions or contests the amount or propriety of any payment or amount claimed by the billing Party to be due pursuant to this Agreement, the billed Party shall provide the billing Party with written notice of the disputed amount. [redacted].
8.2.2 In the event that the billed Party questions or contests
the correctness of any such charge or credit, the billing Party shall promptly
review the questioned charge or credit and shall notify the billed Party of any
error in its determination of amounts owed and the amount of any payment that
the billed Party is required to make in respect of such redetermination. Not
later than the [redacted] after receipt by LEM of any such notice from Georgia
Power as to the amount of any Monthly Capacity Payments, Monthly Energy Payments
or Start-Up Payments that LEM is required to make, LEM shall make payment to
Georgia Power in immediately available funds. Not later than the [redacted]
after receipt by Georgia Power of any such notice from LEM as to the amount of
any payment [redacted] that Georgia Power is required to make, Georgia Power
shall make payment or credit as appropriate, to LEM in immediately available
funds. If the billed Party disagrees with the billing Party's resolution of a
question or contest, then the dissatisfied billed Party may seek settlement
through further negotiations or legal action, subject to the provisions of
Section 8.3. Payments made by a Party under this Section 8.2.2 shall include
interest at the Interest Rate from the date the original payment was due until
the date such payment together with interest at the Interest Rate is made. The
billed Party shall have until the end of [redacted] after its receipt of any
invoice or statement to question or contest the correctness of any charge or
credit on such invoice or statement.
8.3 Interest. If a Party does not make a payment required by this Agreement when due, then interest shall be added to the overdue payment from the date such overdue payment was due until such overdue payment together with interest at the Interest Rate is paid. If a Party makes a payment required by the Agreement and it is later determined that such payment was not due, then such amount shall be refunded or credited with interest at the Interest Rate.
8.4 Billing and Payment Records. Each Party will until the end of
[redacted] after its receipt of any invoice make available to the other Party
upon written request, and each Party may audit, such books and records of the
other Party (or other information to which such Party has access) as are
reasonably necessary for such Party to calculate and determine the Monthly
Energy Payments shown on such invoice and thereby to verify the accuracy and
appropriateness of the amounts billed to LEM and the information provided by LEM
to Georgia Power. The Parties shall maintain their respective books and records
in accordance with generally accepted accounting principles applicable from time
to time.
ARTICLE 9
OPERATIONS
9.1.1 While the Parties acknowledge that Georgia Power may construct the Units, energy actually delivered under this Agreement may be provided from any generation resource available to Georgia Power in Georgia Power's sole discretion, and except where specifically noted, operation of the Units may not necessarily be tied directly to scheduling of power in Blocks by LEM.
9.1.2 (i) Prior to manufacturer's testing, or (ii) if Georgia Power gives notice under Section 9.5, the Operating Heat Rate and Operating Rating shall be as follows:
Operating Heat Rate Operating Rating
Winter:
Natural Gas [redacted] [redacted]
Fuel Oil [redacted] [redacted]
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Non-Winter:
Natural Gas [redacted] [redacted] If Georgia Power constructs the
Units, the Operating Rating and Operating Heat Rate are subject to modification
based on final manufacturer's testing.
9.1.3 Final manufacturer's testing will occur no later than the [redacted] of Unit operation. Test results shall be measured at the terminals of each of the Units. [redacted]. The results of such test shall be known as the "Test Operating Heat Rate" and "Test Operating Rating." Georgia Power shall give notice to LEM of the dates and times that the final manufacturer's test of the Units will occur. At LEM's discretion, an LEM representative may observe the final manufacturer's test. [redacted].
9.1.4 For Non-Winter Months, after testing, the Operating Rating of each Unit shall be equal to [redacted]. The Operating Rating associated with each Block shall be the sum of the Operating Ratings of the Units divided by the number of Units. To the extent that such calculation produces partial MW ratings, the Operating Rating of Block 7 shall be set at the next lowest whole MW amount, the remaining partial MW shall be added to the Operating Rating of Block 6, and the Block 6 Operating Rating shall then be set at the next lowest whole MW amount.
9.1.5 For Winter Months, after testing, the Operating Rating
shall be [redacted]. If LEM elects to purchase firm gas transportation under
Section 5.4.4, then the Operating Rating for Winter Months shall be based on
burning fuel oil and shall be [redacted]. Partial MW ratings shall be applied as
set forth in Section 9.1.4.
9.1.6 For Non-Winter Months, after testing, the Operating Heat Rate of each Unit shall be [redacted]. The Operating Heat Rate of each Block shall be the sum of the Operating Heat Rates of the Units divided by the number of Units and rounded to the nearest whole number of Btu/kWh.
9.1.7 For Winter Months, after testing, the Operating Heat Rate of each Unit shall be [redacted]. The Operating Heat Rate of each Block shall be the sum of the Operating Heat Rates of the Units divided by the number of Units and rounded to the nearest whole number of Btu/kWh. If LEM purchases firm gas transportation pursuant to Section 5.3.4, then the Operating Heat Rate for Winter Months shall be [redacted].
9.1.8 Prior to the beginning of each Month, the cumulative hours of delivery of energy to LEM shall be determined and the degradations from Exhibit B shall be applied to modify the Operating Ratings and Operating Heat Rates for the next Month.
9.2 Transmission.
9.2.1 Georgia Power shall be responsible for making all arrangements for transmission service, including ancillary services, for delivery of capacity and energy to the Delivery Points. Georgia Power shall be responsible for all costs, loses, and any liability associated with such transmission.
9.2.2 LEM shall be responsible for making all arrangements for transmission service, including ancillary services, for delivery of capacity and energy from the Delivery Points. LEM shall be responsible for all costs, losses and any liability associated with such transmission.
9.3 Maintenance. Georgia Power shall not schedule normal planned outages of the Units during January, February, May through September and December. Georgia Power shall provide LEM a one year ahead schedule for planned outages of the Units and within [redacted] of receipt of such a schedule by LEM, LEM may request schedule adjustments. Georgia Power shall make reasonable accommodations to such schedule adjustments requested by LEM. [redacted].
9.4 Inventory. Georgia Power shall maintain sufficient [redacted] fuel oil inventory on the site of the Units to sustain LEM's Scheduled energy deliveries for a minimum of [redacted]. Further, Georgia Power shall demonstrate to LEM's reasonable satisfaction that its fuel oil transportation plan will sustain all deliveries of energy which LEM may Schedule hereunder.
9.5 Existing Units. In lieu of constructing the Units, Georgia Power may notify LEM prior to [redacted], of the need for LEM to select one or more of the units from the list in Section 9.5.2 ("Existing Units").
9.5.1 Georgia Power warrants that the units listed in Section 9.5.2 meet the following criteria as of the date of this Agreement:
9.5.1.1 The units are combustion turbine units.
9.5.1.2 The Equivalent Availability Factor, as defined in the Generation Availability Data System as maintained by the North American Electric Reliability Council [redacted].
9.5.1.3 The commercial operation dates of the units were January 1, 1990 or later.
9.5.2 The units from which LEM may select Existing Units are listed as follows:
[redacted]
9.5.3 In the event that Georgia Power gives the notice described in Section 9.5, then LEM shall have the right to review and inspect the units and relevant information relating to the units. Within [redacted] after receipt of Georgia Power's notification, LEM shall give to Georgia Power notice of the Existing Units selected. Upon such notice being given by LEM, the selected units will be treated as the "Units" for all purposes under this Agreement.
9.6 Site Visits. LEM shall have the right to visit the site of the Units with a Georgia Power escort to observe the status or operation of the Units after giving reasonable notice to the person identified in Section 16.4.
ARTICLE 10
CHANGE IN LAW, MODIFICATION OF AGREEMENT
10.1 Change in Law.
10.1.1 "Change in Law" means a new law or regulation, or a change in or change in interpretation of a law or regulation, including, but not limited to, environmental laws and regulations and energy taxes applicable to wholesale sales, [redacted].
10.1.2 "Material Change in Law" means a Change in Law (a) enacted after the date this Agreement is fully executed and delivered and (b) which increases or decreases Georgia Power's costs of owning or operating the Units by [redacted]. The annual cost of capital expenditures required by a Change in Law shall be calculated on a reasonable basis taking into account the useful life of the equipment or improvements required to be procured which may extend beyond the Term.
10.1.3 If there is a Material Change in Law [redacted], Georgia Power will give notice to LEM which identifies the Material Change in Law [redacted] with documentation of such costs and which requests negotiation of an amendment to this Agreement in accordance with Section 10.1.4. If LEM reasonably believes that a Material Change in Law has occurred, LEM may request information from Georgia Power which will show whether or not a Material Change in Law has occurred. Georgia Power will provide such information subject to reasonable confidentiality restrictions.
10.1.4 If there has been a Material Change in Law and notice
has been given, the Parties promptly will negotiate and agree upon an amendment
to this Agreement which will have the effect of passing through to LEM
[redacted] costs resulting from Georgia Power's actions taken or proposed
actions to be taken in accordance with Prudent Utility Practices, to address or
comply with such Change in Law. Such amendment will be agreed upon as soon as
possible, but no later than [redacted] after the notice referenced in Article
10.1.3 is given. Such amendment will be effective on the effective date of the
Material Change in Law and will be retroactive, if necessary.
10.1.5 In the event the Parties have not reached agreement on an amendment to this Agreement during the [redacted] period set forth in Section 10.1.4, (i) Georgia Power shall make a good faith calculation of the effect on costs of the Material Change in Law and corresponding price adjustments hereunder; (ii) Georgia Power shall adjust all billings accordingly, effective as of the effective date of the Material Change in Law, subject to the provisions of Sections 8.2 and 8.3, provided that in applying Section 8.2, the Party seeking the adjustment shall be treated as the Party rendering the invoice or statement.
10.1.6 Any dispute arising out of or relating to the provisions in this Section 10.1 shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. However, neither Party may initiate arbitration until after the expiration of the [redacted] negotiation period referenced in Section 10.1.4.
10.2 Modification of Agreement. In the event the FERC or any other Governmental Authority modifies this Agreement, the Parties agree to make all changes necessary to preserve as nearly as possible the bargain contained in this Agreement, including but not limited to, the total amounts of capacity and energy delivered to LEM and the total amount of revenues to be received by Georgia Power.
ARTICLE 11
FORCE MAJEURE
11.1 Definition of Force Majeure. "Force Majeure Event" means an Excused Force Majeure Event or an Unexcused Force Majeure Event.
11.2.1 An "Excused Force Majeure Event" means with respect to a Unit, a flood in excess of the applicable one hundred year flood plain, earthquake, volcanic eruption, forest fire, military invasion, civil war, civil insurrection, tornado, hurricane in excess of 130 miles per hour, military or usurped power, or failure of contractors or suppliers of materials or fuel when caused by such events, which renders Georgia Power unable to deliver energy from a Unit or the Units at the Delivery Points or LEM unable to take delivery of energy at the Delivery Points or transmit energy from the Delivery Points. Excused Force Majeure Events shall not include (i) changes in market conditions that affect the cost or price of energy or cost of the Unit's primary or secondary fuel; (ii) loss of load or disruption of electricity markets; or (iii) difficulty or inability to make payments.
11.2.2 Either Party shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder (other than the obligation to pay money) for so long as failure to perform such obligation shall be due to an Excused Force Majeure Event. An Excused Force Majeure Event affecting any one Unit shall excuse Georgia Power's performance with respect to only one (1) Block.
11.2.3 During the suspension of performance due to or
resulting from an Excused Force Majeure Event declared by Georgia Power,
[redacted].
11.2.4 [redacted]. Any continued failure to deliver energy hereunder thereafter shall be treated for all purposes as if it were due to an Unexcused Force Majeure Event under the provisions of Section 11.3. Georgia Power may declare the termination of the suspension due to the Excused Force Majeure Event even if the applicable Unit(s) is not operational. However, Georgia Power may not thereafter reinstate the suspension due to the Excused Force Majeure Event for the same Excused Force Majeure Event.
11.3 Unexcused Force Majeure.
11.3.1 An "Unexcused Force Majeure Event" as to a Party means any occurrence, nonoccurrence or set of circumstances, whether or not foreseeable, that is beyond the reasonable control of such Party and is not caused by such Party's negligence or lack of due diligence, and that has not been properly declared by Georgia Power to be an Excused Force Majeure Event, including, without limitation: unplanned Unit outages not caused by Georgia Power's failure to adhere to Prudent Utility Practices, any strike, stoppage in labor, failure of contractors or suppliers of materials caused by force majeure as defined in the applicable contract; ice, windstorm, fire; explosion; equipment failure; sabotage or vandalism; order of any Governmental Authority; or act of God or of a public enemy which renders Georgia Power unable to deliver energy from one or more of the Units at the Delivery Points or LEM unable to take delivery of energy at the Delivery Points or transmit energy from the Delivery Points. The term Unexcused Force Majeure Event shall not include (i) changes in market conditions that affect the cost or price of energy or cost of the Units' primary or secondary fuel; (ii) loss of load or disruption in electricity markets; or (iii) difficulty or inability to make payments.
11.3.2 Either Party shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder (other than the obligation to pay money) for so long as failure to perform such obligation shall be due to an Unexcused Force Majeure Event. An Unexcused Force Majeure Event affecting any one Unit shall excuse Georgia Power's performance with respect to only one (1) Block.
11.3.3 During the suspension of performance due to or resulting from an Unexcused Force Majeure Event, LEM shall continue to make Monthly Capacity Payments. During such suspension period, LEM may submit Schedules in accordance with the provisions of Article 7, and Georgia Power may supply such Schedules from other generating resources.
11.3.4 Georgia Power's failure to deliver energy due to an Unexcused Force Majeure further shall have the consequences set forth in Article 6.
11.4 Mitigation. Following the occurrence of a Force Majeure Event, the affected Party shall:
11.4.1 give the other Party notice thereof, followed by written notice if the first notice is not written, as promptly as possible after such Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
11.4.2 use its best efforts to remedy its inability to perform as soon as practicable; provided, however, that this Section 11.4.2 shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which in the sole judgment of the Party involved in the dispute, are contrary to its interest; provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of the Party having the difficulty; and
11.4.3 when it is able to resume performance of its obligations under this Agreement, give the other Party written notice to that effect.
11.5 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
11.6 Limitation on Force Majeure. Notwithstanding any other provision of this Article 11, if a Unit is under construction and Georgia Power declares the Service Commencement Date for any Unit prior to the declared commercial operation date for such Unit, or, if after the declared commercial operation date for such Unit Georgia Power accepts a Schedule for an hour for which Georgia Power knows that a Unit is unavailable, then a "Force Majeure Event" shall be [redacted].
ARTICLE 12
CREDIT
12.1 Guaranty. Simultaneously with the execution of this Agreement, LEM shall cause [redacted] to execute and deliver a Guaranty Agreement in the form of that attached hereto as Exhibit C ("Guaranty").
12.2 Designation Letter. Simultaneously with the execution of this
Agreement, LEM shall cause [redacted] to execute and deliver a Designation
Letter in the form of that attached hereto as Exhibit D. LEM covenants that it
shall cause to remain in effect during the Term (i) the Support Agreement, dated
as of September 5, 1997, by and between [redacted] (the "Support Agreement") and
(ii) the Designation Letter described in this Section 12.2; provided, however,
that these documents may be replaced with other documents providing comparable
assurance to Georgia Power with Georgia Power's consent, which consent shall not
be unreasonably withheld.
ARTICLE 13
EVENTS OF DEFAULT AND DAMAGES FOR NON-PERFORMANCE
13.1 Events of Default. "Event of Default" means the occurrence of any of the following events with respect to a Party (the "Defaulting Party", the other Party being the "Non-Defaulting Party"), Defaulting Party in the case of LEM including [redacted].
13.1.1 The Defaulting Party fails to make any payment which it is obligated to make pursuant to this Agreement to the Non-Defaulting Party which nonpayment continues for [redacted] after written notice of such default is given by the other Party;
13.1.2 Any representation or warranty of the Defaulting Party pursuant to this Agreement or the Guaranty shall prove to have been false or misleading in any material respect when made or deemed made; unless (i) the fact, circumstance or condition that is the subject of such representation or warranty is made true within [redacted] after notice thereof has been given to the Defaulting Party and (ii) such cure removes any adverse effect on the Non-Defaulting Party of such fact, circumstance or condition being otherwise than as first represented, or unless such fact, circumstance or condition being otherwise than as first represented does not materially adversely affect Non-Defaulting Party.
13.1.3 A court having jurisdiction shall enter (i) a decree or order for relief in respect of Defaulting Party in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Defaulting Party bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Defaulting Party under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Defaulting Party or of any substantial part of its affairs; or
13.1.4 Defaulting Party shall (i) commence a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent, or (ii) consent to the entry of a decree or order for relief in respect of Defaulting Party in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or (iii) file any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law, or (iv) consent to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official or (v) make an assignment for the benefit of creditors, or (vi) be unable, or admit in writing its inability, to pay its debts as they become due, or (vii) take any action in furtherance of any of the foregoing.
13.1.5 Defaulting Party shall default on (i) obligations under
one or more agreements or instruments in respect of borrowed money or (ii)
obligations to a Lender, as defined in the Support Agreement ("Other
Indebtedness"), and such default continues after the applicable grace period, if
any, specified in such agreement or instrument if the principal amount exceeds
[redacted], and default results in such Other Indebtedness becoming, or becoming
capable at such time of being declared, due and payable prior to its stated
maturity, whether or not such Other Indebtedness is in fact declared due and
payable.
13.1.6 The Support Agreement shall cease to be in full force and effect, and shall not be replaced with comparable assurance to Georgia Power, with Georgia Power's consent, which consent shall not be unreasonably withheld.
13.1.7 [redacted] shall fail to perform any covenant set forth in the Guaranty, or the Guaranty shall expire and shall not be replaced with comparable assurance to Georgia Power, with Georgia Power's consent, which consent shall not be unreasonably withheld.
13.1.8 A Party shall experience a Material Adverse Change; provided, however, such Material Adverse Change shall not be considered an Event of Default if the Defaulting Party delivers to the Non-Defaulting Party, Eligible Collateral in an amount equal to [redacted].
13.1.8.1 As used in this Section 13.1.8, a Material Adverse Change shall occur when a Party's senior securities are rated below [redacted].
13.1.8.2 As used in this Section 13.1.8, Eligible Collateral shall consist of an unconditional Letter of Credit from [redacted] (and in a form reasonably acceptable to Beneficiary), cash or a guaranty from an entity with ratings equal to or greater than [redacted].
13.1.9 The Defaulting Party materially breaches any obligation under this Agreement or the Guaranty, and such breach shall continue for a period of [redacted] after the date on which written notice thereof shall have been given to the Defaulting Party; except that if it shall be impracticable or impossible to remedy any such breach within such [redacted] period, such period shall be extended for an additional period reasonably necessary to remedy such breach, if during such additional period, the Defaulting Party shall be diligently pursuing a cure for such breach.
13.2 Rights Under Agreement. Except as otherwise provided herein, each Party reserves to itself all rights, counterclaims, and other defenses which it is or may be entitled to arising from or out of this Agreement.
13.3.1 Upon the occurrence of an Event of Default pursuant to this Article 13, the Non-Defaulting Party may at its discretion, take either or both of the following actions: (i) proceed by appropriate proceedings, judicial, administrative or otherwise at law, in equity or otherwise at law, in equity or otherwise, to protect and enforce its rights, to recover any damages to which it may be entitled, and to enforce performance by the Defaulting Party, including specific performance of Defaulting Party's obligations hereunder; and (ii) terminate this Agreement by giving written notice thereof to the Defaulting Party.
13.3.2 In addition to the remedies provided in Section 13.3.1,
the Non-Defaulting Party may, for so long as the Event of Default is continuing,
(i) establish a date [redacted] after the Non-Defaulting Party delivers notice)
(the "Early Termination Date") on which this Agreement shall terminate and
[redacted]
13.3.2.1 [redacted]
13.3.2.2 [redacted]
13.3.2.3 [redacted]
[redacted]. At the time for payment of any amount due under this Section, each Party shall pay to the other Party all additional amounts payable by it pursuant to this Agreement. [redacted]
13.4 Damages for Non-Performance. If Georgia Power fails to deliver
energy requested for Scheduling hereunder, and such failure is not excused by a
Force Majeure Event, then, as LEM's sole and exclusive remedy for such failure,
but not to the exclusion of the other remedies provided in this Agreement,
[redacted].
ARTICLE 14
INDEMNIFICATION AND LIMITATION OF LIABILITY
14.1 Indemnity. Subject to Section 14.3 below, each Party expressly agrees to indemnify, hold harmless and defend the other Party against all claims, liability, costs or expense for loss, damage or injury to persons or property in any manner directly or indirectly connected with or growing out of, the generation, transmission or distribution of Delivered Energy on its own side of the Delivery Points, unless such loss, damage or injury is the result of gross negligence or willful misconduct of the Party seeking indemnification.
14.2 No Liability to Third Party. Nothing herein shall create, or be interpreted as creating, any standard of care with reference to, or any duty or liability to any person not a Party hereto.
14.3 No Consequential Damages. To the fullest extent permitted by law, neither Party shall be liable to the other for punitive, indirect, consequential, or incidental damages including, without limitation, claims of customers of the indemnified Party arising in connection with this Agreement.
ARTICLE 15
ASSIGNMENT
15.1 Assignment and Assumption of Obligations. Neither Party shall assign this Agreement or any portion thereof without the prior written consent of the other Party which such consent shall not be unreasonably withheld; provided, however, (i) any assignee shall expressly assume assignor's obligations hereunder and (ii) unless expressly approved by the other Party to this Agreement, no assignment, whether or not consented to, shall relieve the assignor, and any guarantor, of their obligations hereunder in the event its assignee fails to perform and (iii) either Party may assign this Agreement to an Affiliate without consent.
15.2 Assignment to Lenders.
15.2.1 Notwithstanding Section 15.1, Georgia Power may, without the consent of LEM, assign this Agreement to a lender for collateral security purposes in connection with the financing or refinancing of the Units.
15.2.2 In order to facilitate the obtaining of financing of the Units, LEM shall execute such consents, agreements or similar documents with respect to a collateral assignment hereof to a lender as lender may reasonably request in connection with the documentation of the financing or refinancing for the Units, provided, that any such consents, agreements or similar documents will be on terms and conditions acceptable to LEM.
ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1 Amendments. This Agreement may be amended by and only by a written instrument duly executed by each of Georgia Power and LEM, which has received all approval of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
16.2 Binding Effect. This Agreement and any extension shall inure to the benefit of and shall be binding upon the Parties and their respective permitted successors and assigns.
16.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
16.4 Notices. Where written notice is required by this Agreement, such notice shall be in writing and shall be deemed given (i) when mailed by United States registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
To: LEM: LG&E Energy Marketing Inc.
220 West Main Street
Louisville, Kentucky 40202
Attn: Vice President
With Copy To: LG&E Energy Corp.
220 West Main Street
Louisville, Kentucky 40202
Attn: General Counsel
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To: Georgia Power Company Southern Wholesale Energy c/o Southern Company Services, Inc.
270 Peachtree Street
Atlanta, Georgia 30303
Attn: Ed Day
With Copy To: Troutman Sanders LLP
5200 NationsBank Plaza
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attn: Robert H. Forry, Esq.
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or to such other address as may be designated by the Parties; or (ii) when sent by facsimile, provided such facsimile is confirmed by mailing a hard copy confirmation, as provided in clause (i) above, within one (1) business Day after the sending of the facsimile.
16.5 Entire Agreement. This Agreement constitutes the entire understanding between the Parties and supersedes any previous agreements between the Parties. The Parties have entered into this Agreement in reliance upon the representations and mutual undertakings contained herein and not in reliance upon any oral or written representations or information provided by one Party to the other Party not contained or incorporated herein.
16.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia.
16.7 Waiver. The failure of either Party to enforce at any time any of the provisions of this Agreement, or to acquire at any time performance by the other Party of any of the provisions hereof, shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any Party hereof, or the right of such Party hereafter to enforce every such provision. No modification or waiver of all or any part of all or any part of this Agreement shall be valid unless it is reduced to a writing, which expressly states that the Parties hereby agree to a waiver or modification as applicable, and is signed by both Parties.
16.8 No Dedication of System. Nothing contained in this Agreement shall require Georgia Power to construct any particular facilities. Any undertaking by Georgia Power under any provisions of this Agreement shall not be construed to constitute the dedication of Georgia Power's system, or the system of any Affiliate of Georgia Power, or any portion thereof, to the public or to LEM; provided, however, the Parties acknowledge that Georgia Power may construct the Units with respect to service provided under this Agreement. Georgia Power's provision of Contract Capacity and Delivered Energy under this Agreement does not constitute a sale, lease, rental, transfer or conveyance of any ownership interest or entitlement in or to any facilities of any kind. All obligations of the Parties shall cease upon termination of this Agreement, except as otherwise expressly provided herein, and LEM shall not attempt to schedule any energy under this Agreement after its termination.
16.9 Headings. The headings contained in this Agreement are used solely for convenience and do not constitute a part of the Agreement between the Parties hereto, nor should they be used to aid in any manner in the construction of this Agreement.
16.10 Third Parties. This Agreement is intended solely for the benefit of the Parties hereto. Except as otherwise expressly provided herein, nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement.
16.11 Agency. This Agreement shall not be interpreted or construed to create an association, joint venture, or partnership between the Parties to impose any partnership obligation or liability upon either Party. Neither Party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or to act as or be an agent or representative of, or to otherwise bind, the other Party.
16.12 Severability. If any term or provision of this Agreement or the application thereof to any person, entity, or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provisions to person, entities or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
16.13.1 The Parties acknowledge that this Agreement contains Proprietary Information and each Party agrees that for a period of five (5) years from the date of termination of the Agreement it will not, without the written consent of the other or as otherwise provided herein, disclose to any third party (other than to Affiliates of the disclosing party or consultants and advisors to such Affiliates and the disclosing Party who need to know such information in connection with the performance of their duties or services for such Affiliates or the disclosing Party or Lenders to such Affiliates or the disclosing party), the Proprietary Information except to the extent that disclosure is required by law, or by a court or by an administrative agency having jurisdiction over the disclosing party.
16.13.2 The Parties agree to seek confidential treatment of the Proprietary Information in this Agreement from FERC but acknowledge that certain Proprietary Information may need to be disclosed in Georgia Power's filings with FERC which may be publicly available.
16.14 Replacement Index . Whenever any published index or tariff is referenced herein, the Parties intend to track those costs as faithfully as commercially practical. Should any such index or tariff be discontinued or no longer published, the Parties will cooperate in establishing substitute benchmarks through reference to equivalent indexes or tariffs.
16.15 Public Announcement. The Parties agree that no public or other announcement concerning the transactions contemplated hereby shall be made except after mutual consultation and consent, provided, however, that consent will not be required if either Party determines that disclosure to the public or to governmental agencies are reasonably necessary to comply with applicable laws.
16.16 Liquidated Damages. To the extent that any damages required to be paid under this Agreement are liquidated, the Parties acknowledge that the damages are difficult or impossible to determine, otherwise obtaining an adequate remedy is inconvenient, and the liquidated damages constitute approximation of the expected actual harm or loss.
IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement under seal in Georgia as of the date first above written.
GEORGIA POWER COMPANY
"Georgia Power"
LG&E ENERGY MARKETING INC.
"LEM"
IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement under seal in Kentucky as of the date first above written.
GEORGIA POWER COMPANY
"Georgia Power"
LG&E ENERGY MARKETING INC.
"LEM"
Attest:
Title:
EXHIBIT "A"
PRICE ESCALATION
Payment VOM
$ ($/MWh)
$/MW - Start
June 1, 2000 [redacted] [redacted] [redacted] June 15, 2000 [redacted] [redacted] [redacted] July 1, 2000 - May 31, 2001 [redacted] [redacted] [redacted] June 1, 2001 - May 31, 2002 [redacted] [redacted] [redacted] June 1, 2002 - May 31, 2003 [redacted] [redacted] [redacted] June 1, 2003 - May 31, 2004 [redacted] [redacted] [redacted] June 1, 2004 - May 31, 2005 [redacted] [redacted] [redacted] June 1, 2005 - May 31, 2006 [redacted] [redacted] [redacted] June 1, 2006 - May 31, 2007 [redacted] [redacted] [redacted] June 1, 2007 - May 31, 2008 [redacted] [redacted] [redacted] June 1, 2008 - May 31, 2009 [redacted] [redacted] [redacted] June 1, 2009 - Dec. 31, 2009 [redacted] [redacted] [redacted] |
EXHIBIT "B"
PERFORMANCE DEGRADATION
Application:
1. Operating Heat Rate as established in Sections 9.1.6 and 9.1.7 times (1
plus table value for applicable hours of Delivered Energy per Block).
2. Operating Rating as established in Sections 9.1.4 and 9.1.5 times (1 minus table value for applicable hours of Delivered Energy per Block).
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Cumulative Operating Heat Rate Operating Rating
Delivered Hours Degradation Degradation
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0 1,000 [redacted] [redacted]
1,001 2,000 [redacted] [redacted]
2,001 3,000 [redacted] [redacted]
3,001 4,000 [redacted] [redacted]
4,001 5,000 [redacted] [redacted]
5,001 6,000 [redacted] [redacted]
6,001 7,000 [redacted] [redacted]
7,001 8,000 [redacted] [redacted]
8,001 9,000 [redacted] [redacted]
9,001 10,000 [redacted] [redacted]
10,001 11,000 [redacted] [redacted]
11,001 12,000 [redacted] [redacted]
12,001 13,000 [redacted] [redacted]
13,001 14,000 [redacted] [redacted]
14,001 15,000 [redacted] [redacted]
15,001 16,000 [redacted] [redacted]
16,001 17,000 [redacted] [redacted]
17,001 18,000 [redacted] [redacted]
18,001 19,000 [redacted] [redacted]
19,001 20,000 [redacted] [redacted]
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EXHIBIT "C"
GUARANTY AGREEMENT
[redacted]
EXHIBIT "D"
[redacted]
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.............................................................................................2
1.1 Certain Definitions........................................................................................2
1.2 Interpretation............................................................................................11
ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................................12
2.1 Representations and Warranties............................................................................12
2.2 Representations and Warranties of Georgia Power...........................................................13
ARTICLE 3 TERM OF AGREEMENT......................................................................................14
3.1 Term......................................................................................................14
3.2 Service Commencement Dates................................................................................16
ARTICLE 4 SALE OF CAPACITY AND ENERGY............................................................................20
4.1 Contract Capacity.........................................................................................20
4.2 Delivered Energy..........................................................................................20
ARTICLE 5 PAYMENTS...............................................................................................21
5.1 General...................................................................................................21
5.2 Capacity Payments.........................................................................................21
5.3 Energy Payments...........................................................................................22
5.4 Start-Up Payments.........................................................................................23
ARTICLE 6 AVAILABILITY...........................................................................................23
6.1 Undelivered Energy........................................................................................23
6.2 [redacted]................................................................................................24
6.3 Monthly Maximum...........................................................................................24
6.4 Annual Maximum............................................................................................24
6.5 Summer Maximum............................................................................................24
6.6 Remedy....................................................................................................25
6.7 [redacted]................................................................................................25
6.8 Peak Hours................................................................................................25
6.9 Availability Bonus........................................................................................26
ARTICLE 7 SCHEDULING AND PSEUDO GAS BALANCING....................................................................26
7.1 Energy Scheduling.........................................................................................27
7.2 Pseudo Gas Balancing......................................................................................29
ARTICLE 8 BILLING AND PAYMENT....................................................................................30
8.1 Capacity, Energy and Start-Up Billing and Payment.........................................................30
8.2 Billing Disputes and Final Accounting.....................................................................31
8.3 Interest..................................................................................................32
8.4 Billing and Payment Records...............................................................................32
ARTICLE 9 OPERATIONS.............................................................................................33
9.1 Operating Rating and Operating Heat Rate..................................................................33
9.2 Transmission..............................................................................................36
9.3 Maintenance...............................................................................................36
9.4 Inventory.................................................................................................36
9.5 Existing Units............................................................................................37
9.6 Site Visits...............................................................................................38
ARTICLE 10 CHANGE IN LAW, MODIFICATION OF AGREEMENT..............................................................38
10.1 Change in Law............................................................................................38
10.2 Modification of Agreement................................................................................40
ARTICLE 11 FORCE MAJEURE.........................................................................................41
11.1 Definition of Force Majeure..............................................................................41
11.2 Excused Force Majeure....................................................................................41
11.3 Unexcused Force Majeure..................................................................................42
11.4 Mitigation...............................................................................................43
11.5 Suspension of Performance................................................................................44
11.6 Limitation on Force Majeure..............................................................................44
ARTICLE 12 CREDIT................................................................................................45
12.1 Guaranty.................................................................................................45
12.2 Designation Letter.......................................................................................45
ARTICLE 13 EVENTS OF DEFAULT AND DAMAGES FOR NON-PERFORMANCE.....................................................45
13.1 Events of Default........................................................................................46
13.2 Rights Under Agreement...................................................................................49
13.3 Remedies.................................................................................................50
13.4 Damages for Non-Performance..............................................................................51
ARTICLE 14 INDEMNIFICATION AND LIMITATION OF LIABILITY...........................................................51
14.1 Indemnity................................................................................................51
14.2 No Liability to Third Party..............................................................................51
14.3 No Consequential Damages.................................................................................51
ARTICLE 15 ASSIGNMENT............................................................................................53
15.1 Assignment and Assumption of Obligations.................................................................53
15.2 Assignment to Lenders....................................................................................53
ARTICLE 16 MISCELLANEOUS PROVISIONS..............................................................................54
16.1 Amendments...............................................................................................54
16.2 Binding Effect...........................................................................................54
16.3 Counterparts.............................................................................................54
16.4 Notices..................................................................................................54
16.5 Entire Agreement.........................................................................................55
16.6 Governing Law............................................................................................55
16.7 Waiver...................................................................................................55
16.8 No Dedication of System..................................................................................56
16.9 Headings.................................................................................................56
16.10 Third Parties...........................................................................................56
16.11 Agency..................................................................................................57
16.12 Severability............................................................................................57
16.13 Confidentiality.........................................................................................57
16.14 Replacement Index......................................................................................58
16.15 Public Announcement.....................................................................................58
16.16 Liquidated Damages......................................................................................58
EXHIBIT "A" PRICE ESCALATION......................................................................................1
EXHIBIT "B" PERFORMANCE DEGRADATION...............................................................................1
EXHIBIT "C" GUARANTY AGREEMENT...................................................................................i
EXHIBIT "D"......................................................................................................ii
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Exhibit 10.17
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Agreement") is dated as of the 31st day of July, 2001 by and between GEORGIA POWER COMPANY, a Georgia corporation ("Assignor"), and SOUTHERN POWER COMPANY, a Delaware corporation ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor and Assignee are parties to that certain Asset Purchase and Sale Agreement dated as of July 31, 2001 (the "Purchase Agreement"), providing for, among other things the sale of Assignor's interest in Plant Dahlberg from Assignor to Assignee, the assignment by Assignor to Assignee of the Seller's Agreements, the Operating Permits and the Environmental Permits along with all other general intangibles associated with Plant Dahlberg and the assumption of the Assumed Liabilities by Assignee;
WHEREAS, Assignor and Assignee now desire to carry out the intent and purposes of the Purchase Agreement by the execution and delivery of this instrument.
NOW, THEREFORE, for and in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Assignor does hereby sell, transfer, convey, assign and deliver to Assignee all of the right, title and interest of Assignor in, to and under the Seller's Agreements, including, without limitation, those Seller's Agreements listed on Schedule 1, along with all claims, warranties, rights and guarantees in, and all claims for damages arising under such Seller's Agreements and the right to compel performance of the terms of such Seller's Agreements, as well as all other general intangibles associated with Plant Dahlberg.
2. Assignor does hereby sell, transfer, convey, assign and deliver to Assignee all of the right, title and interest of Assignor in, to and under the Operating Permits and Environmental Permits to the extent the same are not retained by Assignor as operator of the Assets pursuant to the Operating Agreement and to the extent that the same may lawfully be transferred by this Agreement.
3. Assignee does hereby accept all of the right, title and interest of Assignor in, to and under the Seller's Agreements, Operating Permits and Environmental Permits assigned by Assignor above, and does hereby assume and agree to pay, perform and discharge promptly and fully when and as required all of the Assumed Liabilities.
4. The parties hereto agree to do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further acts, instruments, assignments, transfers, and assurance as may be required in order to carry out the intent of this Agreement.
5. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.
6. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
7. Capitalized terms not defined herein shall have the respective meanings assigned to such terms in the Purchase Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the day and year first above written.
"Assignor"
GEORGIA POWER COMPANY
"Assignee"
SOUTHERN POWER COMPANY
Schedule 1
Seller's Agreements
1 Purchased Power Agreement between Georgia Power Company and LG&E Energy Marketing, Inc., dated as of November 24, 1998, as amended by letter dated May 10, 1999.
2 Purchased Power Agreement between Georgia Power Company and LG&E Energy Marketing, Inc., dated as of September 23, 1999.
3 Purchased Power Agreement between Georgia Power Company and Dynegy Power Marketing, Inc., dated as of March 2, 2000.
4 Agreement for the Design, Supply and Construction of Power Generation Facility at Jackson County, Georgia (Units 1-8) between Georgia Power Company and General Electric Company, dated January 8, 1999.
5 Agreement for Purchase and Sale of Simple Cycle Gas Turbines for Plant Dahlberg Units 9 and 10 between Georgia Power Company and General Electric Company, dated September 16, 1999.
6 Equipment Purchase Orders (see attached list)
7 Water Supply Agreement dated as of March 17, 1999 by and between Georgia Power Company and the Jackson County Water and Sewerage Authority, as amended by Amendment to Water Supply Agreement, dated as of October 5, 1999.
8 Transcontinental Gas Pipe Line Corporation Interconnect Reimbursement and Operating Agreement by and between Transcontinental Gas Pipe Line Corporation and Georgia Power Company, dated as of July 22, 1999.
9 Pipeline Operating Agreement by and between Georgia Power Company and Atlanta Gas Light Company, entered into as of August 11, 2000, as amended by Amendment No.1 to Pipeline Operating Agreement, dated as of March 1, 2001.
10 Transcontinental Gas Pipe Line Corporation Precedent Agreement between Transcontinental Gas Pipe Line Corporation and Georgia Power Company, dated February 9, 1999, as amended by letter dated February 3, 2000.
11 Rate Agreement for Firm Transportation Service between Transcontinental Gas Pipe Line Corporation and Southern Company Services, Inc. as agent for Georgia Power Company, Alabama Power Company, Mississippi Power Company, Gulf Power Company and Savannah Electric and Power Company, dated February 3, 2000, as amended by letter dated May 26, 2000.
12 Service Agreement between Transcontinental Gas Pipe Line Corporation and Southern Company Services, Inc., as agent for Georgia Power Company, Alabama Power Company, Mississippi Power Company, Gulf Power Company and Savannah Electric and Power Company, dated May 23, 2000.
13 Contract for Combustion Turbine Project for Units 9 & 10 at Plant Dahlberg of Georgia Power Company between TIC - The Industrial Company and Georgia Power Company, dated July 17, 2000
14 Long Term Service Agreement for Units 1-10 at Plant Dahlberg between General Electric International, Inc. and Georgia Power Company, dated December, 2000.
Exhibit 10.18 Public Release Version
POWER PURCHASE AGREEMENT
BETWEEN
ALABAMA POWER COMPANY
AND
SOUTHERN POWER COMPANY
June 1, 2001
Original Sheet No. 76
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS..............................................................................................6
1.1 Certain Definitions..................................................................6
ARTICLE 2
TERM OF AGREEMENT.......................................................................................16
2.1 Term................................................................................16
2.2 Survival............................................................................16
2.3 Early Termination...................................................................16
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS...............................................................18
3.1 Mutual Representations, Warranties and Covenants....................................18
3.2 Covenants of the Seller.............................................................19
3.3 Taxes...............................................................................20
ARTICLE 4
REGULATORY APPROVALS....................................................................................21
4.1 APSC................................................................................21
4.2 FERC................................................................................21
4.3 ADEM................................................................................21
4.4 Other Approvals.....................................................................21
ARTICLE 5
DELIVERY OF CAPACITY AND ENERGY.........................................................................22
5.1 Agreement to Provide Capacity and Energy............................................22
5.2 Calculation of Monthly Capacity Payments............................................22
5.3 Calculation of Monthly Energy Payments..............................................22
ARTICLE 6
BILLING AND COLLECTION..................................................................................22
6.1 Capacity and Energy Billing and Payment.............................................22
6.2 Billing Disputes and Final Accounting...............................................23
6.3 Interest............................................................................24
6.4 Billing and Payment Records.........................................................25
ARTICLE 7
FACILITY IMPLEMENTATION AND CONSTRUCTION................................................................25
7.1 Project Implementation..............................................................25
7.2 Failure to Achieve Required Threshold Date..........................................26
7.3 Cover Period Energy.................................................................27
7.4 Failure to Meet Required Commercial Operation Date..................................29
ARTICLE 8
INTERCONNECTION AND METERING............................................................................29
8.1 Interconnection.....................................................................29
8.2 Delay in Interconnection............................................................29
8.3 Protective Devices..................................................................30
8.4 Meters..............................................................................30
ARTICLE 9
COMMERCIAL OPERATION, TESTING AND DESIGNATION OF CAPACITY...............................................32
9.1 Initial Synchronization.............................................................32
9.2 Commercial Operation Test...........................................................32
9.3 Capacity Examination................................................................33
9.4 Disputes Concerning Capacity Tests..................................................34
ARTICLE 10
OPERATION AND MAINTENANCE...............................................................................35
10.1 Operation and Maintenance...........................................................35
10.2 Scheduled and Maintenance Outages...................................................35
10.3 Access to the Site and the Facility.................................................37
10.4 Availability of Records.............................................................37
10.5 Disclaimer..........................................................................38
10.6 Air Permits.........................................................................38
ARTICLE 11
FUEL SUPPLY.............................................................................................38
11.1 Overview............................................................................38
11.2 Transportation Capacity.............................................................40
ARTICLE 12
DISPATCH, SCHEDULING, AND TRANSMISSION..................................................................43
12.1 Scheduling..........................................................................44
12.2 Scheduling Alternate Resources......................................................44
12.3 Transmission........................................................................44
12.4 Emergencies.........................................................................44
12.5 Disconnection.......................................................................45
ARTICLE 13
FORCE MAJEURE...........................................................................................46
13.1 Definition of Force Majeure Event...................................................46
13.2 No Breach or Liability..............................................................46
13.3 Capacity and Energy Payments........................................................46
13.4 Mitigation..........................................................................46
13.5 Suspension of Performance...........................................................47
13.6 Extended Force Majeure Events.......................................................47
ARTICLE 14
FAILURE OF PERFORMANCE AND REMEDIES.....................................................................48
14.1 Notice of Failure of Performance....................................................48
14.2 Failure of Performance by Seller....................................................49
14.3 Failure of Performance by Buyer.....................................................52
14.4 Remedies............................................................................54
14.5 Discharge of Obligations Upon Termination...........................................55
14.6 Suspension of Performance...........................................................55
14.7 No Consequential Damages............................................................55
14.8 No Interruption.....................................................................55
14.9 No Warranties.......................................................................56
14.10 Liquidated Damages..................................................................56
ARTICLE 15
COMPLIANCE WITH LAWS, RULES AND REGULATION..............................................................56
15.1 Compliance..........................................................................56
15.2 Change of Law.......................................................................57
15.3 NOx Emissions.......................................................................59
ARTICLE 16
ASSIGNMENT AND TRANSFERS OF INTERESTS...................................................................59
16.1 Assignment and Assumption of Obligations............................................59
16.2 Assignment to Lenders...............................................................59
ARTICLE 17
INDEMNIFICATION.........................................................................................59
17.1 Indemnity...........................................................................60
17.2 Notice of Proceedings...............................................................60
ARTICLE 18
MISCELLANEOUS PROVISIONS................................................................................61
18.1 Amendments..........................................................................61
18.2 Access to Facility Documents........................................................61
18.3 Binding Effect......................................................................61
18.4 Counterparts........................................................................61
18.5 Notices.............................................................................61
18.6 Entire Agreement....................................................................62
18.7 Governing Law.......................................................................63
18.8 Non-Waiver..........................................................................63
18.9 Headings Not Affecting Meaning......................................................63
18.10 Third Parties.......................................................................63
18.11 Severability........................................................................63
18.12 Cooperation.........................................................................64
18.13 Confidentiality.....................................................................64
18.14 Replacement Index...................................................................64
APPENDIX A
CAPACITY PAYMENT CALCULATION............................................................................66
APPENDIX B
ENERGY PAYMENT CALCULATION..............................................................................67
APPENDIX C
DESIGN PARAMETERS AND SCHEDULING PROCEDURES.............................................................68
APPENDIX D
PERFORMANCE TESTING PROCEDURES AND DISPATCH.............................................................69
APPENDIX E
DETERMINATION OF CERTAIN LIQUIDATED DAMAGES.............................................................70
APPENDIX F
DAILY DAMAGE FOR FAILURE TO MEET THE REQUIRED COMMERCIAL OPERATION DATE.................................71
APPENDIX G
HIGHER HEATING VALUE GUARANTEED HEAT RATE CURVES For Normal Mode........................................73
APPENDIX H
SCOPE OF INTERCONNECTION FACILITIES.....................................................................73
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CONTRACT FOR THE PURCHASE
OF FIRM CAPACITY AND ENERGY
THIS POWER PURCHASE AGREEMENT ("Agreement"), dated as of June 1, 2001, is made by and between Alabama Power Company, a corporation organized and existing under the laws of the State of Alabama ("Buyer") with its principal place of business in Birmingham, Alabama, and Southern Power Company, a corporation organized and existing under the laws of the State of Delaware ("Seller") with its principal place of business in Birmingham, Alabama (individually a "Party" or collectively the "Parties").
W I T N E S S E T H:
WHEREAS, Buyer is engaged in the distribution and sale of electricity for heat, light and power to the public in the State of Alabama;
WHEREAS, Seller is authorized to, among other things, own and operate electric generating facilities and sell electric capacity and associated energy from such facilities; and
WHEREAS, Buyer has agreed to purchase from Seller and Seller has agreed to sell to Buyer electric capacity and associated energy all in accordance with the provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller each intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1......Certain Definitions. The following capitalized terms and phrases, in addition to those defined above, as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "ADEM" - means the Alabama Department of Environmental Management or any Governmental Authority succeeding to the powers and functions thereof.
1.1.2 "Adjustment Period" - shall have the meaning set
forth in Section 8.4.3.
1.1.3 "Affiliate" - means any other entity directly or
indirectly controlling or controlled
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by or under direct or indirect common control of a specified entity. For purposes of this definition, "control" 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. The terms "controlling" and "controlled" have meanings correlative to the foregoing.
1.1.4 "After-Tax Basis" - means, with respect to any payment received or deemed to have been received by any Person, the amount of such payment (the base payment) supplemented by a further payment (the additional payment) to that Person so that the sum of the base payment plus the additional payment shall, after deduction of the amount of all Taxes required to be paid by such Person in respect of the receipt or accrual of the base payment and the additional payment (taking into account any credits or deductions arising from the underlying loss, the base payment and the additional payment and the timing thereof), be equal to the amount required to be received. Such calculations shall be made on the basis of the assumption that the recipient is subject to U.S. federal income taxation at the highest applicable statutory rate applicable to corporations for the relevant period or periods, and is subject to state and local income taxation at the highest applicable statutory rates applicable to corporations in the taxing jurisdiction of Autauga County, Alabama for the relevant period or periods.
1.1.5 "Air Permits" - shall have the meaning as set forth in Section 10.6.
1.1.6 "Annual Period" - means any one of a succession of twelve
(12) month periods, the first of which shall begin on June 1, 2003 and end on
May 31, 2004.
1.1.7 "APSC" - means the Alabama Public Service Commission or any Governmental Authority succeeding to the powers and functions thereof.
1.1.8 "Business Day" - means any calendar day excluding Saturdays, Sundays and NERC-defined holidays.
1.1.9 "Capacity Availability Performance Adjustment" or "CAPA" - means the adjustment to the capacity payments performed pursuant to Section 5.2 and the calculation set forth in Section C of Appendix A.
1.1.10 "Change of Law" - shall have the meaning as set forth in Section 15.2.
1.1.11 "Commercial Operation Date" - means the date on which the Unit achieves commercial operation, which shall be deemed to have occurred when: (i) start-up and testing of such Unit has been completed in accordance with Section 9.2 and Appendix D; and (ii) the Unit is capable of producing energy and delivering same to the Transmission System through the Interconnection Point on a reliable basis.
1.1.12 "Confidential Information" - means business or technical information rightfully in the possession of either Party, which information derives actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure and use, and which information is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Confidential Information consists of information designated as confidential and furnished or disclosed to the other Party in connection with this Agreement.
1.1.13 "Consent" - means any permit, approval, consent, authorization or other requirement that is required from any Governmental Authority in connection with Seller's performance of its obligations under this Agreement, including, without limitation all applicable environmental certificates, licenses, permits and approvals.
1.1.14 "Consumer Price Index" or "CPI" - means the measure of the average change in prices paid by urban consumers for a fixed market basket of goods and services approved by the Bureau of Labor Statistics or any Governmental Authority succeeding to the powers and functions thereof.
1.1.15 "Contract Capacity" - means the capacity range of the Unit (in MW) at Rated Conditions being made available to Buyer pursuant to this Agreement, as specified in Section A.1 of Appendix A.
1.1.16 "Cover Amount" - means [redacted] for delivery in any hour during the applicable Summer Seasonal Performance Period.
1.1.17 "Delivery Point" - means the point on the Transmission System at which Seller shall deliver the energy and shall be as follows: (i) if from the Unit, the Delivery Point shall be the Interconnection Point, and (ii) if from an alternate resource, the Delivery Point shall be any point on the Transmission System designated by Seller at the time of delivery.
1.1.18 "Demonstrated Capability" - means demonstrated capacity of the Unit at [redacted], as adjusted to Rated Conditions, resulting from a test under Article 9.
1.1.19 "Designated Capacity" - means the amount of capacity (in MW) nominated by Seller at Rated Conditions. Designated Capacity shall be nominated by Seller for each Annual Period by [redacted] prior to the beginning of each such Annual Period, and may not exceed the Demonstrated Capability.
1.1.20 "Dispatch Center" - means the control and dispatching center designated by Seller from time to time in writing as being the primary control point for Scheduling instructions to Seller.
1.1.21 "Emergency" - means a condition or situation that, in the sole reasonable judgment of Buyer, based on information available to Buyer at the time, (i) may impair the safety of or cause damage or injury to Buyer's employees, agents or property or (ii) adversely affects or is likely to adversely affect Buyer's ability to maintain safe, adequate, and continuous electric service to its customers and/or the customers of any member of the Transmission System.
1.1.22 "Environmental Termination Notice" - means a written notice from Seller to Buyer stating that Seller has discovered a condition on, in or below the surface of the Site or any adjacent property which in the commercially reasonable opinion of Seller would have a material adverse effect on the time to develop, cost of developing, cost of operations or the value of the Facility.
1.1.23 "Facility" - means the land, rights-of-way, Unit and related equipment and facilities of the electric generating plant to be or being constructed by Seller on the Site in connection with the Unit. The Facility shall include, without limitation, the Unit and all auxiliary equipment and facilities installed at the Site necessary or used for the production, control, delivery or monitoring of electricity produced on the Site by such Unit. All equipment and facilities installed on Seller's side of the Interconnection Point in connection with the Unit are considered to be part of the Facility except those that constitute Interconnection Facilities.
1.1.24 "Failure of Performance" - shall have the meaning as set forth in
Section 14.1.
1.1.25 "FERC" - means the Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers and functions thereof under the Federal Power Act.
1.1.26 "Force Majeure Event" - shall have the meaning as set forth in
Section 13.1.
1.1.27 "Fuel" - means natural gas referenced to a higher heating value basis.
1.1.28 "Governmental Authority" - means any local, state, regional or federal administrative,
legal, judicial or executive agency, court, commission, department or other such entity, but excluding any such agency, court, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee.
1.1.29 "Guaranteed Heat Rate" - shall have the meaning set forth in Appendix G referenced to a higher heating value basis.
1.1.30 "Incremental Replacement Cost" - means the positive difference, if any, between the Replacement Cost and the amount calculated under Section 7.3.2.2.
1.1.31 "Interconnection Facilities" - means those facilities that Buyer, in its reasonable judgment, determines must be installed or modified in order to electrically connect the Unit to the Transmission System.
1.1.32 "Interconnection Point" - means the point of connection between electrical facilities owned by Seller and Buyer's 230 kV Interconnection Facilities.
1.1.33 "Interest Rate" - [redacted].
1.1.34 "Invoice" - shall have the meaning as set forth in Section 6.1.1.
1.1.35 "kW" - means kilowatt(s).
1.1.36 "Legal Requirement" - means any law, code, status regulation rule, ordinance judgment, injunction, order or other requirement of a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question at the time of the execution of the Agreement or any time thereafter during the Term.
1.1.37 "Maintenance Outage" - means a planned interruption of a portion or all of the Unit's generation capability that: (i) has been coordinated in advance with Buyer with a mutually agreed start date, time and duration or to which Buyer has consented pursuant to Section 10.2.2; and (ii) is for the purpose of performing work on specific components of the Unit that would limit the power output of the Unit but should not, in the reasonable judgment of Seller, be postponed until the next Scheduled Outage.
1.1.38 "Metering System" - means all meters, metering devices and related instruments used to measure and record electric capacity and energy and to determine the amount of such electric capacity and energy that is being made available or delivered to Buyer at the Interconnection Point.
1.1.39 "Monthly Capacity Payment" - means the monthly amount to be paid by Buyer to Seller for Buyer's purchase of Designated Capacity from Seller, as calculated in accordance with Appendix A.
1.1.40 "Monthly Energy Payment" - means the monthly amount to be paid by Buyer to Seller for the purchase of energy delivered during such month from Seller, as calculated in accordance with Appendix B.
1.1.41 "MW"- means megawatt(s).
1.1.42 "MWh"- means megawatt-hour(s).
1.1.43 "NERC" - means the North American Electric Reliability Council including any successor thereto and subdivisions thereof.
1.1.44 "Operating Representative(s)" - means the individual or individuals designated by each of the Parties who shall be authorized to act on each Parties' respective behalf regarding day to day matters arising hereunder which are the functions and responsibilities of the Operating Representatives. At least sixty (60) days prior to the commencement of service under this Agreement, each Party shall give written notice to the other Party of its Operating Representative(s) designation and shall therein identify the functions and responsibilities of such Operating Representative(s). Each Party shall promptly notify the other Party of any subsequent changes in such designation. The Operating Representative(s) shall have no authority to modify any of the provisions of this Agreement.
1.1.45 "Payment Due Date" - shall have the meaning as set forth in Section 6.1.2.
1.1.46 "Primary Gas Delivery Point" - means the primary delivery point for Fuel located at the point of interconnection between Southern Natural Gas Company's (SNG) pipeline system and the pipeline lateral serving the Facility.
1.1.47 "Project" - means the design, engineering, financing, construction, testing and commissioning of the Facility and the ownership, operation, management and maintenance of the Facility, all of which being reasonably expected to enable Seller to fulfill its obligations under this Agreement.
1.1.48 "Prudent Utility Practices" - means, at a particular time, any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry in the United States prior to such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired results at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practices 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirements of this Agreement.
1.1.49 "PSD Permit" - means the "Prevention of Significant Deterioration (PSD) Permit" for air emissions issued by ADEM and the Environmental Protection Agency as a precondition to commencement of construction and initial operation of the Facility.
1.1.50 "Rated Conditions" - means the conditions for performance testing, as set forth in Appendix D.
1.1.51 "Replacement Cost" - means: (i) the cost at which Buyer, acting in a commercially reasonable manner, produces or purchases the Shortfall Amount, plus transactional costs reasonably incurred by Buyer in purchasing the Shortfall Amount and additional transmission charges, if any, reasonably incurred by Buyer to deliver such Shortfall Amount to the Transmission System; or (ii) at Buyer's option, the market price at which Buyer could have acquired an amount of energy equal to the Shortfall Amount for delivery to the Transmission System, as determined by Buyer in a commercially reasonable manner. In no event shall Replacement Cost include any penalties, ratcheted demand or similar charges, nor shall Buyer be required to utilize or change its utilization of its owned or controlled assets or market positions to minimize Seller's liability.
.........1.1.52 "Required Commercial Operation Date" - means June 1, 2003; provided, however, that such date may be extended due to a Force Majeure Event for a term equal to the period of the delay caused by said Force Majeure Event or as adjusted pursuant to Section 8.2.1.
.........1.1.53 "Required Threshold Date" - means October 1, 2001.
.........1.1.54 "Schedule" - when used as a noun, means an energy schedule, including: (i) economic dispatch of the Unit using automatic generation control; or (ii) submission of a manual or electronic schedule of energy to the Dispatch Center for delivery of energy from the Unit or alternate resources, as submitted by Buyer in accordance with the provisions of Article 12 and Appendix C of this Agreement. When used as a verb, "Schedule" means the act of submitting a Schedule in accordance with the provisions of Article 12 and Appendix C of this Agreement.
.........1.1.55 "Scheduled Outage" - means a planned interruption of a portion or all of the generation capability of the Unit that has been coordinated in advance with Buyer with a mutually agreed start date, time and duration or to which Buyer has consented pursuant to Section 10.2.1.
.........1.1.56 "Seasonal Performance Period" - means one of the following periods during the Annual Period: [redacted].
.........1.1.57 "SERC" - means the Southeastern Electric Reliability Council, including any successor thereto and subdivisions thereof.
.........1.1.58 "Site" - means the land in Autauga County, Alabama, on which the Facility is to be located.
.........1.1.59 "Shortfall Amount" - means the excess of (rounded to the nearest whole MWh) (i) the amount of energy (up to [redacted]) Scheduled by Buyer in any hour during a Cover Period, over (ii) the amount of energy that Seller causes to be delivered to the Transmission System in such hour in response to such Schedule.
.........1.1.60 "Station Service" - means energy produced by the Unit that is used to serve the electrical requirements of the Facility.
.........1.1.61 "Taxes" - means all taxes, fees, levies, licenses or charges imposed by any Governmental Authority, together with any interest and penalties thereon.
.........1.1.62 "Technical Limits - means the Design Parameters set forth
in Appendix C.
.........1.1.63 "Term" - means the duration of this Agreement as specified
in Article 2.
.........1.1.64 "Threshold Date" - means the date on which Seller obtains
the PSD Permit.
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.........1.1.65 "Transmission System" - means the high voltage electric transmission system of Alabama
Power Company, either singularly or as part of the integrated transmission systems of the electric utility operating companies of Southern Company (currently Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company), as modified or expanded from time-to-time, as well as any successor in function.
.........1.1.66 "Unit" - means the first natural-gas fired combined cycle generating unit at the Facility to achieve the Commercial Operation Date. The Unit will be comprised of two combustion turbines with two heat recovery steam generators and a common steam turbine generator.
ARTICLE 2
TERM OF AGREEMENT
2.1......Term. Subject to the termination and survival provisions herein, this Agreement shall be effective and remain in full force and effect from the date first written above until the end of the Unit Operating Term ("Term"). The Parties agree to be bound by this Agreement until its termination according to the terms of this Agreement. Seller's obligation to deliver and Buyer's obligation to accept capacity and associated energy from the Unit shall extend from the later of (i) June 1, 2003; or (ii) the Commercial Operation Date, through May 31, 2010 ("Unit Operating Term").
2.2......Survival. All provisions of this Agreement that expressly or by implication come into or continue in force and effect following the expiration or termination of this Agreement shall remain in effect and be enforceable following such expiration or termination.
2.3......Early Termination. Without limiting the operation of other provisions of this Agreement respecting termination, this Agreement is subject to termination under the following circumstances.
.........2.3.1 On or before October 2, 2000, Seller may terminate this Agreement by providing the Environmental Termination Notice to Buyer. Notice under this provision shall be deemed effective upon actual receipt by Buyer. In the event of termination by Seller under this Section 2.3.1, neither Party shall have any further liability to the other under this Agreement.
.........2.3.2 If, by July 2, 2001, the APSC has not approved this Agreement through the granting of a Certificate of Public Convenience and Necessity in a form suitable to Buyer in its sole discretion ("APSC Certificate"), then either Party may terminate this Agreement at any time thereafter upon written notice to the other Party; provided, however, that upon receipt of such written notice of termination by Seller, Buyer may elect to waive this condition by providing written notice to Seller within fifteen (15) Business Days of Seller's notice, in which case the Agreement shall not terminate and the Parties' obligations shall continue in effect as if the condition had been satisfied. In the event of termination by either Party under this Section 2.3.2, neither Party shall have any further liability to the other under this Agreement. This right of termination, if unexercised, shall expire upon the issuance of the APSC Certificate.
.........2.3.3 If this Agreement is not accepted for filing by FERC, without suspension, hearing or modification ("FERC Order"), then either Party may terminate this Agreement at any time thereafter upon written notice to the other Party. Notice under this provision shall be deemed effective upon actual receipt by the other Party. In the event of termination by either Party under this Section 2.3.3, neither Party shall have any further liability to the other under this Agreement. This right of termination, if unexercised, shall expire upon the issuance of the FERC Order.
.........2.3.4 If, despite diligent efforts, Seller has been unable to obtain the PSD Permit as of July 2, 2001, and, as of that date, Seller reasonably determines that, despite best efforts, it will not be able to obtain such PSD Permit by October 1, 2001, then Seller may elect to terminate this Agreement by providing written notice to Buyer. This notice must actually be received by Buyer no later than July 8, 2001. In the event Seller elects to terminate under this Section 2.3.4, Seller shall immediately pay to Buyer an amount equal to [redacted] and neither Party shall have any further liability to the other under this Agreement. This right of termination, if unexercised, shall expire upon the issuance of the PSD Permit.
.........2.3.5 Unless, by December 31, 2001, FERC has issued and SNG has accepted a Certificate of Public Convenience and Necessity authorizing the construction, ownership and operation of the facilities necessary to effectuate the Buyer's executed firm transportation agreement(s) to deliver Fuel to the Facility ("FERC Certificate"), then Buyer may terminate this Agreement by providing written notice to Seller. Notice under this provision shall be deemed effective upon actual receipt by Seller. In the event of termination by Buyer under this Section 2.3.5, neither Party shall have any further liability to the other under this Agreement. This right of termination, if unexercised, shall expire upon SNG's receipt and acceptance of the FERC Certificate.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Mutual Representations, Warranties and Covenants. Each Party represents, warrants, and covenants to the other Party that:
(a) it is and will be duly organized, and validly existing under the laws of the state of its formation;
(b) it has all requisite corporate power to own, operate and lease its properties, carry on its business as now conducted, enter into this Agreement, carry out the transactions contemplated hereby, and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement;
(c) it shall use diligent efforts to obtain and maintain all regulatory authorizations, including any required authorization, from the APSC and the FERC necessary for it to legally perform its obligations under this Agreement;
(d) the execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate action, does not and will not require any further consents or approvals of the Seller's or Buyer's Boards of Directors or shareholders other than that which has been obtained, and does not and will not violate any of the terms or conditions of any contract or other agreement to which it is a party or any Legal Requirements applicable to it;
(e) this Agreement constitutes each Party's legally valid and binding obligation enforceable against it in accordance with the terms thereof, subject to any equitable defenses;
(f) there are no bankruptcy proceedings pending or being contemplated by it or, to its knowledge, threatened against it;
(g) to its knowledge, there are no pending or threatened actions or proceedings affecting it before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement or would be reasonably likely to materially adversely affect its ability to perform this Agreement; and
(h) the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which it is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
3.2.2 Seller shall obtain and maintain at all times during the Term all Consents as and when required by applicable Legal Requirements for the construction, operation and maintenance of the Facility as contemplated pursuant to this Agreement except for any such Consents that are required or necessary to be possessed by Buyer in connection with the supply of Fuel to the Primary Gas Delivery Point.
3.2.3 Seller shall at all times during the Term of this Agreement construct, operate and maintain the Facility in accordance with Prudent Utility Practices.
3.3.1 Seller shall pay, or cause to be paid, all Taxes on or with respect to the production and delivery of energy pursuant to this Agreement arising prior to delivery to the Interconnection Point (including Taxes related to the ownership and/or operation of the Facility and income derived therefrom). Buyer shall pay, or cause to be paid, all Taxes on or with respect to energy delivered pursuant to this Agreement at and from the Interconnection Point (including all sales, use, excise or other similar Taxes on the sale to Buyer and purchase from Seller of capacity and energy pursuant to this Agreement). Buyer shall also be responsible for all sales, use, excise or other similar Taxes directly related to the purchase, ownership or use of the Fuel used to deliver energy to Buyer at the Interconnection Point.
3.3.2 Each Party shall use diligent efforts to implement and administer the provisions of this Agreement in accordance with the intent of the Parties to minimize Taxes so long as neither Party is materially adversely affected by such efforts.
3.3.3 In the event Seller is required by law or regulation to remit or pay Taxes that are Buyer's responsibility hereunder, Seller may include such Taxes in the next monthly Invoice and Buyer shall remit payment thereof in accordance with Article 6. Conversely, if Buyer is required by law or regulation to remit or pay Taxes that are Seller's responsibility hereunder, Buyer may deduct the amount of any such Taxes from the sums otherwise due to Seller under this Agreement. Any refunds associated with such Taxes will be handled in the same manner. Nothing herein shall obligate or cause a Party to pay or be liable to pay any Taxes from which it is exempt under applicable Legal Requirements.
ARTICLE 4
REGULATORY APPROVALS
4.1 APSC. Buyer shall use its diligent efforts to obtain the APSC Certificate in accordance with Section 2.3.2. Seller agrees to assist and support Buyer, in a timely manner and to the extent reasonably requested by Buyer, in obtaining the APSC Certificate.
4.2 FERC. Seller shall use its diligent efforts to obtain the FERC Order. Buyer agrees to assist and support Seller, in a timely manner and to the extent reasonably requested by Seller, in obtaining the FERC Order.
4.3 ADEM. Seller shall use its diligent efforts to obtain the PSD Permit in accordance with Section 2.3.4. Buyer agrees to assist and support Seller, in a timely manner and to the extent reasonably requested by Seller, in obtaining the PSD Permit.
4.4 Other Approvals. Seller shall diligently pursue any and all other Consents required to be possessed by Seller under this Agreement in a manner that is reasonably expected to enable Seller to perform its obligations under this Agreement. Buyer agrees to assist and support Seller, in a timely manner and to the extent reasonably requested by Seller, in obtaining such Consents.
ARTICLE 5
5.1.2 Seller shall deliver to Buyer, and Buyer shall accept
from Seller, at the Delivery Point, the energy Scheduled by Buyer pursuant to
this Agreement: (i) from the Unit; or (ii) when the Unit is unavailable, from an
alternate resource other than the Unit; or (iii) any combination of (i) and
(ii).
5.1.3 To the extent that the Unit is capable of producing
energy in excess of the Designated Capacity, Buyer shall be entitled to Schedule
such energy during the Unit Operating Term.
5.2 Calculation of Monthly Capacity Payments. Except as otherwise provided herein, Seller shall receive the Monthly Capacity Payment calculated in accordance with Appendix A. In addition, following [redacted] (as shown in Table A-1 of Appendix A), a Capacity Availability Performance Adjustment shall be calculated in accordance with Section C of Appendix A.
5.3 Calculation of Monthly Energy Payments. Except as otherwise provided herein, Seller shall receive the Monthly Energy Payment calculated in accordance with Appendix B.
ARTICLE 6
BILLING AND COLLECTION
6.1.1 Subject to the provisions of Section 6.2, by the tenth
(10th) Business Day of each month during the Unit Operating Term, Seller shall
send Buyer an invoice ("Invoice") stating the Monthly Capacity Payment and the
Monthly Energy Payment for the immediately previous month. In addition by the
[redacted] (as shown in Table A-1 of Appendix A), Seller shall invoice or credit
Buyer, as the case may be, for the Capacity Availability Performance Adjustment
described in Appendix A. The provisions of this Section 6.1.1 shall not limit
either Party's right to invoice the other Party for amounts due under other
provisions of this Agreement.
6.1.2 All Invoices shall be due and payable by the receiving Party on or before the tenth (10th) Business Day after such Party's receipt of such Invoice ( "Payment Due Date"). If any such Payment Due Date is not a Business Day, then the Payment Due Date shall be the next succeeding Business Day. Seller may render Invoices by means of facsimile or electronic mail, and receipt shall be deemed to have occurred upon transmission if confirmed in writing (by manual or machine-generated confirmation notice). Subject to the provisions of Section 6.2, the Party receiving an Invoice shall make payment to the other Party in accordance with such Invoice on or before the Payment Due Date in immediately available funds, through wire transfer of funds to an account designated by the other Party, or other means acceptable to the other Party. Each Invoice shall contain a statement explaining in reasonable detail how the Invoice payment amounts were calculated.
6.2.2 In the event a Party questions or contests the correctness of any charge or credit, such Party shall provide the other Party with written notice of such amount and the basis for the question or contest. The other Party shall promptly review the questioned charge or credit and shall notify the questioning or contesting Party of any error in the determination of amounts owed and issue an amended invoice in the amount of any payment that the questioning or contesting Party is required to make in respect of such redetermination. If the questioning or contesting Party disputes in good faith the amended invoice amount, then if agreed by the Parties, such Party may submit the matter for dispute resolution. To the extent a Party disagrees with the other Party's basis for questioning the original invoice, it shall provide a written explanation of its position.
6.2.3 Each Party shall have until the end of one (1) year after the delivery of an invoice to correct or dispute the invoice. If a Party has made payment under an invoice and thereafter questions or contests the correctness thereof, the other Party shall not be required to refund any payment received until such time as it is finally determined that the invoice was in error.
6.3 Interest. If either Party does not make a payment required by this Agreement on or before the Payment Due Date, the amount owed and not paid shall bear interest (compounded monthly) at the Interest Rate from the Payment Due Date until such payment, together with interest, is paid. If either Party makes a payment that is not required by this Agreement, the over payment amount shall bear interest (compounded monthly) at the Interest Rate from the date the over payment was received until such over payment, together with interest, is refunded. If payment by mail is acceptable to the invoicing Party under Section 6.1.2, payment will be accepted without interest if such payment is postmarked on or before the Payment Due Date. If the Payment Due Date falls on a day other than a Business Day, the next succeeding Business Day shall be the last day on which payment can be made or postmarked without interest charges being incurred pursuant to this Section 6.3.
6.4 Billing and Payment Records. Until the end of one (1) year after its receipt of any Invoice, each Party shall make available to the other Party, and each Party may audit, such books and records of the other Party as are reasonably necessary for such Party to calculate the Monthly Capacity Payments, the Monthly Energy Payments or other amounts shown on such Invoice and thereby to verify the accuracy of the amounts billed. The Parties shall maintain such respective books and records in accordance with generally accepted accounting principles applicable from time-to-time.
ARTICLE 7
FACILITY IMPLEMENTATION AND CONSTRUCTION
7.1 Project Implementation. Seller shall: (i) arrange for the
acquisition of or use of the Site for the Term; (ii) apply for, and use diligent
efforts to obtain and maintain, all Consents (including renewals thereof) and
any other approvals of Governmental Authorities that are required in connection
with the Project, including the transactions contemplated under this Agreement;
(iii) comply with Prudent Utility Practices in all aspects of the Project; and
(iv) use diligent efforts to meet the Required Commercial Operation Date and to
otherwise carry out the transactions contemplated under this Agreement.
7.2.1 If the Threshold Date is not achieved on or before the Required Threshold Date and Seller did not file all required initial applications for the PSD Permit prior to 90 days after the date of this Agreement ("PSD Permit Application Deadline") or did not diligently seek to obtain the PSD Permit through the Required Threshold Date, then, in addition to Buyer pursuing other remedies available under this Agreement, Seller shall pay to Buyer [redacted] and neither Party shall have any further obligations to the other under this Agreement.
7.2.2 If the Threshold Date will not occur on or before the
Required Threshold Date and Seller filed all required initial applications for
the PSD Permit by the PSD Permit Application Deadline and diligently sought to
obtain the PSD Permit through the Required Threshold Date, then Seller shall
elect, upon written notice to Buyer on or before the Required Threshold Date
(but no more than ten (10) Business Days prior to the Required Threshold Date)
either: (i) to continue to perform in accordance with the Agreement
("Performance Election"); or (ii) to perform under the provisions of Section 7.3
("Cover Election"). In the event Seller elects the Cover Election, Buyer shall
have thirty (30) days from receipt of Seller's notice in which to accept or
reject such election. In the event that Buyer does not accept Seller's Cover
Election, then this Agreement shall immediately terminate and neither Party
shall have any further liability to the other under this Agreement. The Parties
shall proceed under Section 7.2.3 if the Seller has made the Performance
Election or under Section 7.2.4 if the Seller has made (and Buyer has accepted)
the Cover Election.
7.2.3 If Seller elects the Performance Election, then the
Required Threshold Date shall be extended to April 2, 2002 and Seller shall
continue to diligently attempt to obtain the PSD Permit. In the event that the
Threshold Date is not achieved by the extended Required Threshold Date, then
Seller shall promptly pay to Buyer [redacted], and Buyer may pursue any other
remedies under Section 14.4.1 of this Agreement (other than the payment of
further liquidated damages). At any time prior to the extended Required
Threshold Date, Seller may provide written notice that it cannot achieve the
Threshold Date by the extended Required Threshold Date. If Seller provides such
notice, Seller shall promptly pay to Buyer [redacted], and Buyer may pursue any
other remedies under Section 14.4.1 of this Agreement (other than the payment of
further liquidated damages). Upon payment of liquidated damages under this
Section 7.2.3, this Agreement shall immediately terminate and neither Party
shall have any further obligations to the other under this Agreement.
7.2.4 If Seller elects the Cover Election and Buyer accepts such election, then Buyer shall notify Seller in its notice of acceptance to Seller whether Seller shall be required to provide energy in an amount not to exceed the Cover Amount to Buyer for: [redacted] ("Cover Period"). If Buyer has accepted Seller's Cover Election, then Seller will provide energy in an amount not to exceed the Cover Amount to Buyer in accordance with Section 7.3 for the Cover Period selected by Buyer under this Section.
7.3.1 If Seller becomes obligated pursuant to Section 7.2 to provide energy during the Cover Period, Seller shall (i) on the first Business Day of the Cover Period, take such action necessary to assume all of Buyer's obligations after the Cover Period, if any, related to the firm transportation agreement(s) executed by Buyer in order to deliver Fuel to the Facility, including any and all payment obligations; and (ii) promptly reimburse Buyer for expenditures that are not otherwise recovered by Buyer (including those related to improvements to the Transmission System) to the extent such expenditures are reasonably made by Buyer in preparation for the receipt and transmission of energy from the Unit.
7.3.2 During any Cover Period, Buyer and Seller agree as follows:
7.3.2.1 Buyer shall issue Schedules in accordance with the provisions of
this
Agreement (but not in excess of the Cover Amount), and Seller shall, at its
expense, deliver or cause to be delivered all energy so Scheduled to any points
on the Transmission System (including interfaces) that are capable of receiving
such energy pursuant to Southern Companies' Open Access Transmission Tariff (or
its successor in function). Buyer shall make Monthly Capacity Payments in
accordance with Appendix A; provided, however, that for purposes of the Capacity
Availability Performance Adjustment calculation during the Cover Period: (i)
Designated Capacity shall equal [redacted]; and (ii) if Seller achieves an
Actual Demand Availability of at least [redacted] for a Cover Period based on
Seller's deliveries in response to Buyer's Schedule, the Capacity Adjustment
Factor for the applicable Cover Period shall be [redacted]. If such Actual
Demand Availability is less than [redacted], the Capacity Adjustment Factor for
the applicable Cover Period shall be [redacted].
7.3.2.2 Buyer will pay Seller in accordance with Appendix B for the Scheduled energy delivered during the Cover Period.
7.3.2.3 If Seller fails to deliver any Scheduled energy, Seller shall pay to Buyer,
within ten (10) Business Days of receipt of an invoice therefor, an amount equal to Buyer's Incremental Replacement Costs. Buyer will submit such invoices on a monthly basis unless the accrued amount of unpaid Incremental Replacement Costs exceeds [redacted], in which case Buyer may invoice Seller in its discretion.
7.3.2.4 At the end of the Cover Period, this Agreement shall terminate and neither Party shall have any further liability to the other under this Agreement.
7.4.1 Unless Buyer has accepted Seller's Cover Election pursuant to Section 7.2.2, if the Unit does not achieve the Commercial Operation Date on or before the Required Commercial Operation Date, Seller shall pay liquidated damages to Buyer in the amount of the daily damage for each day of the delay in achieving the Commercial Operation Date determined pursuant to Appendix F.
7.4.2 Buyer shall be entitled to daily damage amounts pursuant
to Section 7.4.1 and Appendix F until the earlier of : (i) the date Buyer
receives written notice from Seller that the Unit cannot achieve a Commercial
Operation Date within [redacted] of the Required Commercial Operation Date; (ii)
the Commercial Operation Date of the Unit; or (iii) [redacted] the Required
Commercial Operation Date. Under the circumstances described in (i) or (iii)
above, Seller shall pay Buyer [redacted] and the Agreement shall terminate
immediately.
ARTICLE 8
INTERCONNECTION AND METERING
8.1 Interconnection. Buyer shall construct the Interconnection Facilities in order to electrically connect the Unit to the Transmission System at the Interconnection Point. Seller shall be responsible, and shall reimburse Buyer, for actual costs incurred by Buyer in constructing the Interconnection Facilities, so long as the Interconnection Facilities that are actually constructed do not materially deviate from those described in the attached Appendix H. Buyer shall have ownership of the Interconnection Facilities at all times.
8.2 Delay in Interconnection
8.2.1 If for any reason by September 2, 2002: (i) Buyer fails to complete the Interconnection Facilities necessary to interconnect the Unit to the Transmission System; or (ii) the Transmission System is not capable of providing or receiving energy to accommodate Seller's start up and testing activities for the Unit, the Required Commercial Operation Date shall, subject to Section 8.2.2, be changed to a date that is [redacted] after the date such conditions are satisfied. If the Required Commercial Operation Date is so changed, the Monthly Capacity Payments shall commence [redacted] as if such change had not occurred. The receipt of such capacity payments shall be Seller's sole and exclusive remedy for Buyer's failure to complete the Interconnection Facilities by the stated deadline.
8.2.2 The Required Commercial Operation Date shall change pursuant to Section 8.2.1 only to the extent that Seller, despite due diligence, is rendered unable to meet the original Required Commercial Operation Date as a consequence of Buyer's delay in the completion of the Interconnection Facilities.
8.3 Protective Devices. Seller shall, at its own cost, provide, install and maintain internal breakers, relays, switches, synchronizing equipment and other associated protective control equipment necessary to maintain the reliability, quality and safety of the electric power production of the Facility in accordance with Prudent Utility Practices.
8.4.1 Seller shall design, locate, construct, install, own, operate and maintain the Metering System in accordance with Prudent Utility Practices in order to measure and record the amount of energy and capacity delivered from the Unit to Buyer at the Interconnection Point. The meters shall be of a mutually acceptable accuracy range and type. The methods for adjusting for all applicable transformer losses and station service loads shall be mutually acceptable. Buyer may, at its own cost, install additional meters or other such facilities, equipment or devices on Buyer's side of the Interconnection Point as Buyer deems necessary or appropriate to monitor the measurements of the Metering System. The Parties shall mutually agree on the telemetering equipment that is appropriate to coordinate the Facility with the Dispatch Center and Seller shall, at its sole cost, install such telemetering equipment. The telemetered data shall be delivered by Seller to the electrical switchyard of the Facility.
8.4.2 Seller shall inspect and test all meters at such times as will conform to Prudent Utility Practices, but not less often than once every year. Seller shall be responsible for all costs and expenses incurred in connection with such inspections or tests.
8.4.3 If the Metering System fails to register, or if the
measurement made by a metering device is found upon testing to vary by more than
[redacted] from the measurement made by the standard meter used in the test, an
adjustment shall be made correcting all measurements of energy made by the
Metering System during: (i) the actual period when inaccurate measurements were
made by the Metering System, if that period can be determined to the mutual
satisfaction of the Parties; or (ii) if such actual period cannot be determined
to the mutual satisfaction of the Parties, the later half of the period from the
date of the last test of the Metering System to the date such failure is
discovered or such test is made ("Adjustment Period"). If the Parties are unable
to agree on the amount of the adjustment to be applied to the Adjustment Period,
the amount of the adjustment shall be determined: (i) by correcting the error if
the percentage of error is ascertainable by calibration, tests or mathematical
calculation; or (ii) if not so ascertainable, by estimating on the basis of
deliveries under similar conditions during the period since the last test.
Within thirty (30) days after the determination of the amount of any adjustment,
Buyer shall pay Seller any additional amounts then due for energy or Designated
Capacity during the Adjustment Period or Buyer shall be entitled to a credit
against any subsequent payments for energy or Designated Capacity, as the case
may be.
8.4.4 Buyer and its representatives shall be entitled to be present at any test, inspection, maintenance and replacement of any part of the Metering System performed by Seller relating to obligations under this Agreement.
ARTICLE 9
COMMERCIAL OPERATION, TESTING AND DESIGNATION OF CAPACITY
9.1 Initial Synchronization. Seller shall not operate the Unit in parallel with the Transmission System without the prior written acknowledgment of Buyer that the Unit meets Buyer's requirements for parallel operation. Such acknowledgment pursuant to this Agreement shall not be unreasonably withheld or delayed. Seller shall notify Buyer of the initial synchronization of the Unit to the Transmission System at least forty-five (45) days prior to the proposed date of such initial synchronization or such shorter period as the Parties may agree.
9.2.1 The initial Demonstrated Capability of the Unit shall be established in accordance with the performance testing procedures set forth in Appendix D. Seller shall nominate the initial Designated Capacity following such performance testing, but not later than the day before the Commercial Operation Date. Such nomination may not exceed the Demonstrated Capability.
9.2.2 Seller may, at its option, perform additional capacity tests prior to ninety (90) days after the later of the Required Commercial Operation Date and the Commercial Operation Date. If such additional tests result in a Demonstrated Capability greater than the Designated Capacity, Seller may re-nominate the Designated Capacity at such Demonstrated Capability. If the additional capacity tests (or the initial capacity test when no additional tests are performed) of the Unit indicate that the Demonstrated Capability is less than the lower end of the total Commercial Operation Test Capacity Range set forth in Table D-1 of Appendix D ("Commercial Operation Test Range"), Seller shall submit, within 15 Business Days after the capacity test, a cure plan to Buyer in order to raise such Demonstrated Capability to at least the lower end of such range. If Seller fails to timely submit such cure plan or implement the cure plan (including implementing such actions as Buyer may reasonably request), or if the Demonstrated Capability of the Unit remains below the lower end of the Commercial Operation Test Range [redacted] after the Required Commercial Operation Date ("Cure Period"), then: (i) Seller shall pay Buyer as liquidated damages an amount determined under Section 1 of Appendix E for the difference between the Demonstrated Capability and the lower end of the Commercial Operation Test Range; and (ii) the lower end of the Contract Capacity shall be set at a level equal to the lesser of: (a) 10 MW below the most recent Demonstrated Capability; or (b) the lower end of the current Contract Capacity. Seller shall make the above-described payment within five (5) Business Days of Buyer's request for payment.
9.3.2 Any reduction in the Demonstrated Capability of the Unit through a capacity examination will result in a reduction of the Designated Capacity of the Unit to the Demonstrated Capability and a corresponding reduction in capacity payments in accordance with the Monthly Capacity Payment calculation set forth in Appendix A.
9.3.3 Subject to Section 14.2.8 of this Agreement, the payment
of liquidated damages pursuant to this Article 9 shall be Buyer's sole and
exclusive remedy for a reduction in the lower end of the Contract Capacity.
9.4 Disputes Concerning Capacity Tests. In the event the Parties
disagree with the performance test results of any capacity test, representatives
from both Parties shall meet to resolve the dispute. If the dispute cannot be
resolved between the Parties, an independent third party expert shall be chosen
that is acceptable to both Parties to make a determination concerning the test
results. If such dispute is not resolved by May 31, the Designated Capacity for
the upcoming Annual Period may not exceed the Demonstrated Capability of the
Unit based on the most recent undisputed capacity examination, subject to the
outcome of this dispute resolution process. The independent third party expert's
determination shall be applied to establish the Demonstrated Capability as if no
dispute had arisen and all capacity billing under Section 5.2 shall (if
necessary) be adjusted retroactively to reflect Designated Capacity equal to
such determination. Seller may, however, nominate a different amount of
Designated Capacity for prospective application consistent with other provisions
of this Agreement.
ARTICLE 10
OPERATION AND MAINTENANCE
10.1 Operation and Maintenance. Seller shall manage, control, operate and maintain all parts of the Facility in a manner consistent with Prudent Utility Practices, taking into account Buyer's right to Schedule the Unit. Seller shall also operate the Facility in accordance with applicable reliability criteria and guides of the SERC and NERC.
10.2.1 Commencing in 2002 and each year thereafter, Seller shall submit to Buyer, before September 1, maintenance schedules and outage plans ("Scheduled Outages Plans") for the remaining Term or the next four Annual Periods, whichever is less. Seller shall not schedule maintenance of the Unit during the months of June through September of any year that would decrease the capacity output of the Unit below the Designated Capacity without the prior written consent of Buyer. Buyer shall have thirty (30) days to review the proposed Scheduled Outage Plans and may approve or reject the Scheduled Outage Plans in whole or in part. The Scheduled Outage Plans are subject to the approval of Buyer, which approval shall not be unreasonably withheld or delayed. Seller shall resubmit revised Scheduled Outage Plans to Buyer within thirty (30) days of Buyer's rejection and Buyer and Seller agree to use best efforts to promptly develop Scheduled Outage Plans that are mutually acceptable to the Parties.
10.2.2 In addition to Scheduled Outages, Seller may request an unlimited number of Maintenance Outages during any Annual Period. Seller shall submit a written request to the Buyer for each Maintenance Outage at least twenty-four (24) hours in advance. Such request shall identify the equipment and capacity that will not be available for Scheduling and the proposed start time and duration for the Maintenance Outage. Buyer shall respond to Seller's request as soon as reasonably practicable. Seller shall not take a Maintenance Outage without Buyer's prior written consent, and such consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that the Parties acknowledge that it shall be reasonable for Buyer to deny any request for a Maintenance Outage if Buyer reasonably believes that it may Schedule the Unit to a level that would require the availability of the equipment that is proposed to be unavailable during the Maintenance Outage. Buyer shall have the right to revoke its consent to a Maintenance Outage if changed conditions require Scheduling of the capacity scheduled to be unavailable during such Maintenance Outage; provided, however, that Buyer may only revoke its consent if it provides Seller with notice of revocation prior to the scheduled start of the Maintenance Outage and agrees to cover the reasonable cost (if any) of revocation. In addition, if Buyer reasonably requests Seller to return all or part of that portion of the Unit that is affected by the Maintenance Outage to full availability status, Seller shall comply as soon as reasonably practical.
10.2.3 If Seller has a Scheduled Outage or Maintenance Outage, and such Scheduled Outage or Maintenance Outage occurs or would occur coincident with an Emergency, Buyer shall notify Seller of the Emergency. Buyer may request Seller to reschedule the outage or, if the outage has begun, to expedite the completion thereof, and Seller shall make all good faith efforts to comply with such request.
10.3 Access to the Site and the Facility Seller grants Buyer and its designated employees and agents the right to enter the plant Site with such prior notice to Seller as is reasonable to: (i) install, operate, maintain, replace and/or remove the Interconnection Facilities; (ii) inspect, maintain, and test meters and other Buyer equipment; (iii) interconnect, interrupt, monitor, or measure energy generated by the Facility in accordance with the terms of this Agreement; (iv) monitor performance tests; (v) inspect the Facility; and (vi) take such action as may be reasonably necessary to exercise Buyer's rights under this Agreement.
10.4 Availability of Records. Seller shall keep accurate records and all other data necessary for the purposes of proper administration of this Agreement in accordance with the following guidelines:
10.4.1 All such records shall be maintained for a minimum of four (4) years after the creation of such record or data and for any additional period of time required by regulatory agencies with jurisdiction over Seller.
10.4.2 Seller shall maintain an accurate and up-to-date operating log at the Facility with records of: (i) real and reactive power production for each clock hour; (ii) changes in operating status; (iii) Scheduled Outages, Maintenance Outages, and forced outages; (iv) any unusual conditions found during inspections; and (v) any significant events related to the operation of the Facility.
10.4.3 Buyer shall have the right from time to time, upon reasonable notice to Seller, to examine the records and data of Seller relating to this Agreement.
10.5 Disclaimer. Seller understands and agrees that Buyer's receipt and review of any material related to the Project or any physical inspection of the Facility conducted by Buyer under any of the provisions of this Agreement is solely for its own information. By conducting such reviews or inspections, Buyer makes no endorsement of the design or representation or warranty of the safety, durability or reliability of the Facility, all of which are the sole responsibility of Seller in accordance with the terms of this Agreement and Buyer shall not be deemed to have accepted any condition of the Facility which is not in full compliance with the requirements of this Agreement. Seller shall in no way represent to any third party that, as a result of the Buyer's receipt and review of any material or any inspections, Buyer is in any way responsible for the engineering or construction soundness of the Facility.
10.6 Air Permits. Seller shall be obligated to file for, obtain and
maintain, for the periods required by Legal Requirements during the Term, the
PSD Permit, the Title V Permit and all other Consents pertaining to air
emissions necessary for the performance of Seller's obligations under this
Agreement ("Air Permits"). The Air Permits shall authorize the operation of the
Unit for a minimum of [redacted] per year during the Unit Operating Term
("Minimum Level"). The Minimum Level shall be exclusively dedicated to Buyer's
use in accordance with its Schedule. If at any time during the Unit Operating
Term Seller is not authorized to operate the Unit at the Minimum Level, the
Parties shall mutually agree on an arrangement whereby Seller shall provide
additional energy to Buyer in order to compensate Buyer for the inability to
operate the Unit at the Minimum Level. So long as Seller complies with such
agreement, Seller shall be deemed to have satisfied the requirement under this
Section 10.6 with respect to the Air Permits.
ARTICLE 11
11.1.2 Buyer shall pay, in accordance with Appendix B, for all Fuel used to generate energy that is delivered to Buyer pursuant to Buyer's Scheduling instructions, including energy received during periods of ramp up and ramp down. Seller shall pay for Fuel used at the Facility for all other purposes, including (but not limited to) Station Service, initial start-up, testing and synchronization of the Unit, Unit start-up, capacity examinations and sales to third parties. Seller shall be responsible for the cost of Fuel for start-up of the Unit through the operation of the Monthly Fuel Cost Adjustment under Section E of Appendix B.
11.1.3 The Parties acknowledge the possibility that, through future discussions, they may be able to agree upon a mutually beneficial arrangement whereby Seller would assume all of the Fuel (and related transportation) management responsibilities under this Agreement. In such event, the Parties shall negotiate any necessary modifications to this Agreement to effectuate this transfer of responsibilities. It is expressly understood, however, that nothing in this Section 11.1.3 imposes any obligation on either Party to enter into discussions or agreements with respect to any modifications to this Agreement.
11.2.2 Buyer may cause to be acquired, constructed, owned, operated and maintained, at Seller's expense, all facilities, infrastructures and property interests that are necessary for Seller to receive, measure and use Fuel delivered at the Primary Gas Delivery Point on behalf of Buyer so as to enable the Unit to produce energy as committed to Buyer under this Agreement.
11.2.3 Buyer shall be responsible for making the necessary
arrangements, including the scheduling of the Transportation Quantity and,
during such time as Buyer is designated the downstream operator pursuant to
Section 11.2.8, the confirmation of the Transportation Quantity, to cause the
delivery of the Transportation Quantity to the Primary Gas Delivery Point and
shall promptly communicate to Seller the details of such scheduling
arrangements. Seller shall be responsible for transporting or arranging for the
transportation of the Transportation Quantity from the Primary Gas Delivery
Point to the Unit.
11.2.4 Seller agrees to accept at the Primary Gas Delivery Point any Transportation Quantity meeting the minimum quality requirements for delivered Fuel under SNG's FERC Gas Tariff and the applicable transportation agreement(s).
11.2.5 The Parties shall exercise diligent efforts to minimize any imbalances or other penalties or charges from transporters of Fuel delivered to the Facility ("Imbalance Charges"). If Buyer or Seller receives an invoice from a transporter for Imbalance Charges, the Parties shall determine the cause for such charges. If the Imbalance Charges were incurred as a result of Buyer's actions or inaction (which shall include (without limitation) Buyer's failure to schedule or make available to transporter the Transportation Quantity), then Buyer shall pay such Imbalance Charges. If the Imbalance Charges were incurred as a result of Seller's actions or inaction (which shall include, without limitation, Seller's failure to accept the Transportation Quantity or its acceptance of quantities of Fuel in excess of the Transportation Quantity unless such excess was rescheduled by Buyer), then Seller shall pay such Imbalance Charges. Imbalance Charges that are not due to the action or inaction of Buyer or Seller or whose cause cannot be determined, including (but not limited) to Force Majeure Events or forced outage events, shall be shared equally by Buyer and Seller. In the event any entity other than Buyer causes the delivery of Fuel to or utilizes Fuel delivered at the Primary Gas Delivery Point, the Parties agree that the following principles shall apply: (i) to the extent Buyer has scheduled deliveries of Fuel, Buyer's scheduled deliveries of Fuel shall be deemed to be the first through the meter and shall be used exclusively to generate energy in accordance with Buyer's Scheduling instructions; (ii) any Imbalance Charges incurred by Buyer as a result of deliveries of Fuel at the Primary Gas Delivery Point in excess of the Transportation Quantity (unless such excess was scheduled by Buyer) shall be borne exclusively by Seller; (iii) in the event Seller uses any Fuel scheduled by Buyer for delivery for its account for any purpose other than the generation of energy on behalf of Buyer pursuant to Buyer's Scheduling instructions (including ramp up and ramp down associated with such Scheduling instructions), Seller shall pay Buyer for each quantity of Fuel so used by Seller an amount calculated in accordance with Section E of Appendix B; and (iv) Seller shall otherwise indemnify and hold Buyer harmless from any and all losses, costs, damages and expenses incurred by Buyer as a result of the use of the Primary Gas Delivery Point by Seller or any other entity to deliver Fuel for the generation of energy for any entity other than Buyer.
11.2.6 Buyer has or will secure the right for it (or its designee), to install, own and operate telephone line(s), monitoring equipment, necessary appurtenances, and right(s) of way at or near the Primary Gas Delivery Point and to install, own, maintain and operate facilities to remotely monitor and record the Fuel flows through the SNG meter station recording the delivery of Fuel to the Primary Gas Delivery Point. 11.2.7 All Fuel supplied by Buyer pursuant to this Agreement shall be measured at the Primary Gas Delivery Point. Risk of loss of Fuel supplied by Buyer pursuant to this Agreement shall transfer from Buyer to Seller at the Primary Gas Delivery Point.
11.2.8 Until the earlier of: (i) the expiration or termination of this Agreement; or (ii) such time as additional gas fired electric generating units at the Site achieve commercial operation, Seller agrees to delegate to Buyer its rights and obligations under SNG's FERC Gas Tariff as the "downstream operator" at the Primary Gas Delivery Point in order that Buyer may administer the transportation of Fuel through such point. Except as otherwise provided herein, Buyer shall indemnify and hold Seller harmless from any and all losses, costs, damages and expenses incurred by Seller as a result of actions or omissions of Buyer as the "downstream operator". As the designated downstream operator, Buyer shall be responsible for confirming all Fuel flow through the Primary Gas Delivery Point, serving as the point of contact with SNG with respect to operation of such point and allocating all Fuel flow through such point. The implementation of this Section 11.2.8 shall be subject to such further procedures as the Parties may develop through the Operating Representatives. Following the date on which additional electric generating units at the Site achieve commercial operation, Buyer and Seller will negotiate whether there should be any change in the designation of the downstream operator.
ARTICLE 12
DISPATCH, SCHEDULING AND TRANSMISSION
12.1 Scheduling. Seller shall ordinarily permit Buyer to place the Unit
under Buyer's automatic generation control in normal mode operation and call
upon Seller's operation of the Unit in economic dispatch; however, Buyer or
Seller reserves the right to require Buyer to Schedule the dispatch of the Unit
in accordance with the procedures set forth in Appendix C.
12.2 Scheduling Alternate Resources. In the event that alternate resources are utilized by Seller to supply energy, Buyer shall follow the procedures established by the Operating Representatives.
12.3.2 Seller shall bear all costs and losses and shall be responsible for making all arrangements for transmission service, including tagging and any required ancillary services, with respect to delivery of capacity and energy from an alternate resource to the Delivery Point. To the extent the Delivery Point is not the Interconnection Point; Seller: (i) assumes all risk associated with the availability and scheduling of the transmission capability required for delivery beyond the Delivery Point; and (ii) shall compensate Buyer for any losses on the Transmission System beyond those that would have occurred had the Delivery Point been the Interconnection Point. In no event shall Buyer be required to provide compensation to Seller for a reduction in losses occasioned by such deliveries from alternate resources.
12.4.1 The Parties recognize that Buyer is a member of NERC and that, to ensure continuous and reliable electric service, Buyer operates its system in accordance with the operating criteria and guidelines of NERC. If an Emergency is declared, the Dispatch Center will notify Seller's personnel and, if requested, Seller's personnel shall immediately place the energy of the Unit within the exclusive control of the Dispatch Center for the duration of such Emergency. Without limiting the generality of the foregoing, the Dispatch Center may require Seller's personnel to raise or lower production of energy generated by the Unit to maintain safe and reliable load levels and voltages on the Transmission System.
12.4.2 Seller shall cooperate with Buyer in establishing Emergency plans, including (without limitation) recovery from a local or widespread electrical blackout, voltage reduction in order to effect load curtailment, and other such plans that may be necessary or appropriate under the circumstances.
12.5.1 Seller shall control and operate the Unit consistent with Buyer's Schedule; provided, however, that, Buyer may direct that the Unit be immediately disconnected from the Transmission System during an Emergency or if, in Buyer's sole discretion, it is necessary to construct, install, maintain, repair, replace, remove, investigate, inspect or test any part of the Interconnection Facilities or the Transmission System. Upon receipt of notice directing disconnection, Seller shall carry out the required action without undue delay. Buyer shall not Schedule energy during a disconnection.
12.5.2 For any disconnection or reconnection caused by Seller's negligence or willful misconduct, Seller shall bear any reasonable cost incurred by Buyer as a result thereof, and the Unit shall be deemed to be in an Unplanned (Forced) Outage during the time any such disconnection is in effect for purposes of the Actual Demand Availability calculation in Appendix A.
12.5.3 Buyer shall bear any reasonable cost incurred by Seller as a result of any disconnection or reconnection caused by Buyer's negligence or willful misconduct.
ARTICLE 13
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FORCE MAJEURE
13.1 Definition of Force Majeure Event. For the purposes of this Agreement, a "Force Majeure Event" as to a Party means any occurrence, nonoccurrence or set of circumstances that is beyond the reasonable control of such Party and is not caused by such Party's negligence or lack of due diligence, which prevents the Party from being able to perform its obligations hereunder, including, without limitation, strike or stoppage of labor; flood, ice, earthquake, windstorm or eruption; fire; explosion; invasion, riot or civil war, commotion or insurrection; sabotage, terrorism or vandalism; military or usurped power; or act of God or of a public enemy. The term Force Majeure Event shall not include: [redacted].
13.2 No Breach or Liability. Either Party shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder for so long as failure to perform such obligation shall be due to a Force Majeure Event.
13.3 Capacity and Energy Payments. Buyer shall have no obligation to make Monthly Capacity Payments and Monthly Energy Payments during the suspension of performance due to or resulting from a Force Majeure Event; [redacted].
13.4 Mitigation. Following the occurrence of a Force Majeure Event, the affected Party shall:
(i) give the other Party notice thereof, followed by written notice if the first notice is not written, as promptly as possible after such Party becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
(ii) use diligent efforts to remedy its inability to perform as soon as practicable; provided, however, that this Section 13.4 shall not require the settlement of any non site-specific strike, walkout, lockout or other general labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest; and
(iii) when it is able to resume performance of its obligations under this Agreement, give the other Party written notice to that effect.
13.5 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its Term.
13.6.2 While a Force Majeure Remedy Plan is in effect, upon request the Party prevented from performing its obligations due to the Force Majeure Event shall provide a single or periodic status report(s) to the other Party notifying the other Party of the steps which have been taken to remedy the Force Majeure Event and the expected remaining duration of the Party's inability to perform its obligations.
13.6.3 The Party not prevented from performing its obligations
due to the Force Majeure Event may at any time terminate this Agreement upon ten
(10) Business Days prior written notice if: (i) the affected Party fails to
provide a Force Majeure Remedy Plan as provided for in this Section 13.6; (ii)
the affected Party fails to carry out the Force Majeure Remedy Plan in a method
reasonably designed to cause that Party to be able to perform its obligations
hereunder; or (iii) the affected Party remains unable to perform its obligations
hereunder nine (9) months following the submission of the Force Majeure Remedy
Plan.
13.6.4 Upon termination of this Agreement as provided in
Section 13.6.3, the Parties shall have no further liability or obligation to
each other except for any obligation arising prior to the date of such
termination.
ARTICLE 14
FAILURE OF PERFORMANCE AND REMEDIES
14.1 Notice of Failure of Performance. If a Party becomes aware of a Failure of Performance by the other Party, it may give the other Party written notice of the Failure of Performance.
14.2 Failure of Performance by Seller. A "Failure of Performance" by Seller shall be deemed to have occurred as described in the following subsections, except to the extent caused by a Force Majeure Event:
14.2.1 Seller fails to make any payment due to Buyer hereunder for any undisputed amount or fails to comply with Section 6.2 hereof with respect to any disputed amount within ten (10) Business Days of receiving a written demand from Buyer, which demand shall be received no earlier than the Business Day following the Payment Due Date.
14.2.2 A court having jurisdiction shall enter: (i) a decree or order for relief in respect of Seller in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Seller bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Seller under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Seller or of any substantial part of its affairs.
14.2.3 Seller: (i) commences or files a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent; (ii) consents to the entry of a decree or order for relief in respect of Seller in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it; (iii) files any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law; (iv) consents to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Seller or of any substantial part of its property; (v) makes an assignment for the benefit of creditors; (vi) is unable, or admits in writing its inability, to generally pay its debts as they become due; or (vii) takes any action in furtherance of any of the foregoing.
14.2.4 Seller assigns this Agreement or any of Seller's rights
or obligations under this Agreement in violation of Article 16 or Seller assigns
or transfers any interest in the Facility in violation of Article 16; provided,
however, that Seller shall not be in default if Seller cures, or Buyer consents
to, an unauthorized transfer of such interest within thirty (30) days of such
transfer.
14.2.5 Any representation or warranty made by Seller herein
shall prove to be incorrect in any material respect, unless Seller promptly
commences and diligently pursues action to cause such representation or warranty
to become true and does so within sixty (60) days after notice thereof has been
given to Seller by Buyer and such cure removes any material adverse effect on
Buyer of such representation or warranty having been incorrect.
14.2.6 Seller fails both: (i) to perform or observe any of its material obligations under this Agreement due to its failure to comply with a Legal Requirement; and (ii) to promptly commence and diligently pursue action to cure and cures such failure to perform within sixty (60) days unless such cure is not capable of being effected within such sixty (60) day period, in which case Seller shall have an additional sixty (60) day period in which to perform such cure. Seller agrees to give Buyer notice as promptly as practicable after Seller becomes aware that a Legal Requirement will prohibit Seller from performing. Seller shall submit a plan for curing such inability or failure as soon as reasonably practicable, but in no event more than thirty (30) days after Seller's failure first arose. If Seller fails to deliver such cure plan within such thirty (30) day period or implement such cure plan (including implementing such actions as Buyer may reasonably request), Buyer shall have the right to declare a Failure of Performance.
14.2.7 The Actual Demand Availability as calculated in
Appendix A [redacted]. In that event, Seller may, within fifteen (15) Business
Days after the end of such Seasonal Performance Period, submit a cure plan that
is reasonably expected to resolve the cause of the unsatisfactory Actual Demand
Availability as soon as practicable, but in no event [redacted] from the end of
such Seasonal Performance Period. If Seller fails to submit such a cure plan in
a timely manner or fails to diligently pursue implementation of the cure plan,
or if the unsatisfactory Actual Demand Availability is not, in fact, cured
[redacted], then Buyer shall have the right to declare a Failure of Performance.
The cause of the unsatisfactory Actual Demand Availability shall be deemed cured
if the Actual Demand Availability, determined prospectively on a monthly and
next full seasonal basis, is at least [redacted].
14.2.8 The Demonstrated Capability of the Unit, at any time after the Commercial Operation Date, is [redacted] of the lower end of the original Contract Capacity, and Seller fails to promptly commence and diligently pursue action to cure and cures such inadequate Demonstrated Capability within sixty (60) days (unless such cure is not capable of being effected within such sixty (60) day period, in which case Seller shall have an additional sixty (60) day period, or such additional period as mutually agreed by the Operating Representatives, in which to perform such cure). Seller shall submit a plan for curing such inadequate Demonstrated Capability as soon as reasonably practicable, but in no event more than fifteen (15) Business Days after the performance test revealing such inadequate Demonstrated Capability. If Seller fails to deliver the cure plan within such fifteen (15) Business Day period or implement the cure plan (including implementing such actions as Buyer may reasonably request), Buyer shall have the right to declare a Failure of Performance.
14.2.9 Seller fails to perform or observe any material obligation of Seller under this Agreement, other than those obligations specifically addressed in this Section 14.2, which failure materially and adversely affects ability of Seller or Buyer to perform their respective obligations under this Agreement and continues for a period of thirty (30) days after written notice thereof from Buyer unless such cure is not capable of being effected within such thirty (30) day period, which case Seller shall have an additional thirty (30) day period in which to perform such cure.
14.3 Failure of Performance by Buyer. The occurrence of any of the following events shall constitute a "Failure of Performance" by Buyer:
14.3.1 Buyer fails to make any payment due to Seller hereunder for any undisputed amount or fails to comply with Section 6.2 hereof with respect to any disputed amount within ten (10) Business Days of receiving a written demand from Seller, which demand shall be received no earlier than the Business Day following the Payment Due Date.
14.3.2 A court having jurisdiction shall enter: (i) a decree or order for relief in respect of Buyer in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Buyer bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Buyer under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Buyer or of any substantial part of its affairs.
14.3.3 Buyer: (i) commences or files a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent; (ii) consents to the entry of a decree or order for relief in respect of Buyer in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it; (iii) files any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law; (iv) consents to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Buyer or of any substantial part of its property; (v) makes an assignment for the benefit of creditors; (vi) is unable, or admits in writing its inability, to generally pay its debts as they become due; or (vii) takes any action in furtherance of any of the foregoing.
14.3.4 Buyer assigns this Agreement or any of Buyer's rights or obligations under this Agreement in violation of Article 16; provided, however, that Buyer shall not be in default if Seller thereafter consents to such assignment.
14.3.5 Any representation or warranty made by Buyer herein shall prove to be incorrect in any material respect, unless Buyer promptly commences and diligently pursues action to cause such representation or warranty to become true and does so within sixty (60) days after notice thereof has been given to Buyer by Seller and such cure removes any material adverse effect on Seller of such representation or warranty having been incorrect.
14.3.6 Buyer fails to perform or observe any material obligation of Buyer under this Agreement, other than those obligations specifically addressed in this Section 14.3, which failure materially and adversely affects the ability of Seller or Buyer to perform their respective obligations under this Agreement and continues for a period of thirty (30) days after written notice thereof from Seller unless such cure is not capable of being effected within such thirty (30) day period, in which case Seller shall have an additional thirty (30) day period in which to perform such cure.
14.4.1 Remedies of Buyer. If a Failure of Performance by Seller has occurred, then, Buyer may, in its discretion, take either or both of the following actions: (i) terminate this Agreement by giving written notice thereof to Seller; and/or (ii) proceed by appropriate proceedings (judicial, administrative, or otherwise) at law, in equity or otherwise, to protect and enforce its right, to recover any damages to which it may be entitled and/or to enforce performance by Seller, including specific performance of Seller's obligations under this Agreement. In the event that Buyer terminates the Agreement pursuant to (i) above, Seller shall promptly pay the applicable amount set forth in Section 2 of Appendix E to Buyer as liquidated damages. If Buyer seeks to recover damages pursuant to (ii) above with respect to a Failure of Performance for which Seller has paid liquidated damages pursuant to any provision of this agreement, then: (a) Buyer shall be required to demonstrate Seller's gross negligence, wantonness, or intentional misconduct in order to recover damages under (ii) above; and (b) the liquidated damages paid by Seller shall be credited against any amount so recovered under (ii) above; provided, however, that in no event shall any portion of the liquidated damages be returned to Seller.
14.4.2 Remedies of Seller. If a Failure of Performance by Buyer has occurred, then Seller may, at its discretion, take either or both of the following actions: (i) proceed by appropriate proceedings (judicial, administrative or otherwise) at law, in equity or otherwise, to protect and enforce its rights, to recover any damages to which it may be entitled hereunder, and to enforce performance by Buyer, including specific performance of Buyer's obligations hereunder; and/or (ii) terminate this Agreement by giving written notice thereof to Buyer.
14.5 Discharge of Obligations Upon Termination. Except as otherwise provided herein, in the event of termination of this Agreement, the Parties shall be released and discharged from any further obligation arising or accruing hereunder from and after the date of termination; provided, however, that termination shall not discharge or relieve either Party from any obligations or liabilities for any act or failure to act which may have accrued prior to such termination.
14.6 Suspension of Performance. In addition to the remedies set forth above, whenever any Failure of Performance shall have occurred and is continuing, the performing Party, to the extent permitted by law and to the extent of such Failure of Performance, shall be entitled to suspend immediately its performance under this Agreement until such Failure of Performance is cured.
14.7 No Consequential Damages. Notwithstanding any other provision of this Agreement, except for the obligations in Section 17, in no event shall Buyer or Seller or their Affiliates, contractors or consultants, or the officers, directors, shareholders, employees or consultants of any of them be liable for punitive, special, indirect, incidental or consequential damages under, arising out of, due to or in connection with the performance or non-performance of this Agreement or any of the obligations herein, whether based on contract, tort (including without limitation negligence), strict liability, warranty, indemnity or otherwise.
14.8 No Interruption. Except as otherwise provided in this Agreement, unless and until this Agreement has been terminated, neither Party shall, as a result of any breach or alleged breach by the other Party, refuse to deliver, or suspend or delay any delivery of, capacity or associated energy to be provided under this Agreement; refuse to take energy to the extent required under this Agreement; suspend, delay or refuse to make, any of the payments required under this Agreement.
14.9 NO WARRANTIES. THERE ARE NO WARRANTIES UNDER THIS AGREEMENT EXCEPT TO THE EXTENT SPECIFICALLY SET FORTH IN THE TEXT HEREOF. THE PARTIES HEREBY SPECIFICALLY DISCLAIM AND EXCLUDE ALL IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE.
14.10 Liquidated Damages. The Parties acknowledge and agree that Buyer is relying on the availability of the Contract Capacity and associated energy for the Unit Operating Term and that in the event of termination of this Agreement due to a Failure of Performance by Seller, Buyer will be damaged and the amount of such damages are not susceptible to an accurate determination. The Parties further acknowledge and agree that the liquidated damages set forth in this Agreement as compensation to Buyer upon the occurrence of such events are not intended as a penalty and represent a fair and reasonable approximation of the damages Buyer may incur in each particular case.
ARTICLE 15
COMPLIANCE WITH LAWS, RULES AND REGULATION
15.1 Compliance. Seller covenants that for the Term, Seller shall be in compliance with all Legal Requirements with respect to the Project.
15.2.1 A "Change of Law" means a change in Legal Requirement constituting a new environmental or tax law, or regulation or a new interpretation of such law or regulation, which change is enacted after the execution date of this Agreement that generally affects the cost of electrical generation. The provisions of Sections 15.2.3 and 15.2.4 shall not apply to a Change of Law that has been reflected in Buyer's capacity and/or energy payments through the previous operation of those sections.
15.2.2 The Parties acknowledge that, except as provided in Sections 15.2.3 and 15.2.4, the capacity and energy payments made by Buyer shall not be altered as a result of a Change in Law that causes either Party to incur additional costs or realize savings in carrying out its obligations under this Agreement.
15.2.3 If a Change of Law [redacted], then Seller may notify Buyer of the Change of Law and the Seller's proposed increase in capacity or energy payments under this Agreement. [redacted]. This calculation will represent the total cost associated with the identified addition or modification, including depreciation, carrying costs, and any other cost or expense item related to capital investments. Upon receipt of such notice, Buyer will within thirty (30) Days make a good faith determination whether Seller's proposed price increase results from a Change of Law as specified in this Agreement. In the event Buyer concurs that the proposed price increase results from a Change in Law, the proposed increased rates will take effect consistent with the timing of the additional cost incurrance (but in no event earlier than the end of the thirty (30) day period). If Buyer determines that the Change of Law is not applicable to some or all of the proposed price increase, Seller's sole remedy will be to present the issue to an independent third party expert that is acceptable to both Parties who shall make the determination as to whether a Change of Law (or cumulative Changes of Law) has occurred causing Seller to incur an increase in costs and whether there should be an associated increase in capacity or energy payments by Buyer to Seller. The independent third party expert's determination shall be retroactively applied (with interest at the Interest Rate) to reflect any such increase in Seller's costs. If the independent third party expert adopts the position of one of the Parties, then the other Party shall pay the reasonable fees and expenses of such expert. Otherwise, these fees and expenses will be shared equally by the Parties.
15.2.4 If a Change of Law [redacted], then Buyer may notify Seller of the Change of Law and Buyer's proposed decrease in capacity or energy payments under this Agreement. Upon receipt of such notice, Seller will within thirty (30) days make a good faith determination whether Buyer's proposed price decrease results from a Change of Law as specified in this Agreement. In the event that Seller concurs that the proposed price decrease results from a Change in Law, the proposed decreased rates will take effect consistent with the timing of the additional cost reduction (but in no event earlier than the end of the thirty (30) day period). If Seller determines that the Change of Law is not applicable to some or all of the proposed price decrease, Buyer's sole remedy will be to present the issue to an independent third party expert that is acceptable to both Parties who shall make the determination as to whether a Change of Law (or cumulative Changes of Law) has occurred causing Seller to incur a reduction in costs and whether there should be an associated reduction in capacity or energy payments by Buyer to Seller. The independent third party expert's determination shall be retroactively applied (with interest at the Interest Rate) to reflect any such reduction in Seller's costs. If the independent third party expert adopts the position of one of the Parties, then the other Party shall pay the reasonable fees and expenses of such expert. Otherwise, these fees and expenses will be shared equally by the Parties.
ARTICLE 16
ASSIGNMENT AND TRANSFERS OF INTERESTS
16.1 Assignment and Assumption of Obligations. Seller may not assign its obligations under this Agreement or any portion thereof to any entity other than a creditworthy Affiliate without the written permission of Buyer; provided, however, (i) any assignee shall expressly assume assignor's obligations hereunder, and (ii) unless otherwise expressly approved by the APSC, no assignment, whether or not consented to, shall relieve the assignor of its obligations hereunder in the event its assignee fails to perform.
16.2 Assignment to Lenders. Notwithstanding Section 16.1, Seller may, without the consent of Buyer, assign this Agreement to a Lender for collateral security purposes in connection with any financing or the refinancing of the Facility.
ARTICLE 17
INDEMNIFICATION
17.1 Indemnity. Each Party (the "Indemnifying Party") expressly agrees
to indemnify, hold harmless and defend the other Party and its Affiliates,
trustees, agents, officers, directors, employees and permitted assigns (the
"Indemnified Party") against all claims, liabilities, costs or expenses (on an
After Tax Basis) for loss, damage or injury to the person or property of third
parties in any manner directly or indirectly related to activities on its
respective side of (i) the Delivery Point (in the case of such loss, damage or
injury related to the generation, transmission or distribution of energy); or
(ii) the Primary Gas Delivery Point (in the case of such loss, damage or injury
related to the transportation or distribution of Fuel), unless such loss, damage
or injury is the result of the gross negligence or willful misconduct of the
Party seeking indemnification.
17.2 Notice of Proceedings. An Indemnified Party which becomes entitled to indemnification under the Agreement shall promptly notify the other Party of any claim or proceeding in respect of which it is to be indemnified. Such notice shall be given as soon as reasonably practicable after the Indemnified Party obligated to give such notice becomes aware of such claim or proceeding. The Indemnifying Party shall assume the defense thereof with counsel designated by the Indemnifying Party; provided, however, that if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party reasonably concludes that there may be legal defenses available to it that are different from or additional to, or inconsistent with, those available to the Indemnifying Party, the Indemnified Party shall have the right to select and be represented by separate counsel. The Indemnified Party shall be responsible for the expenses associated with such separate counsel, unless a liability insurer will pay the expenses of such separate counsel. If the Indemnifying Party fails to assume the defense of a claim, the indemnification of which is required under this Agreement, the Indemnified Party may, at the expense of the Indemnifying Party, contest, settle, or pay such claim; provided, however, that settlement or full payment of any such claim may be made only with the Indemnifying Party's consent or, absent such consent, written opinion of the Indemnified Party's counsel that such claim is meritorious or warrants settlement.
ARTICLE 18
MISCELLANEOUS PROVISIONS
18.1 Amendments. This Agreement may be amended by and only by a written instrument duly executed by each of Buyer and Seller, which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
18.2 Access to Facility Documents. Each Party shall provide the other Party reasonable access to any material documents concerning the Project with respect to such matters as affect the rights and obligations of the Parties hereunder.
18.3 Binding Effect. This Agreement and any extension shall inure to the benefit of and shall be binding upon the Parties and their respective permitted successors and assigns.
18.4 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
18.5 Notices. Where written notice is required by this Agreement, such notice shall be in writing and shall be deemed given (i) when delivered by United States registered or certified mail, postage prepaid, return receipt requested, or delivered by recognized courier addressed as follows:
To Seller: Vice President
Energy Marketing
270 Peachtree Street
Atlanta, Georgia 30303
Telephone: 404-506-0357
Fax: 404-506-0368
with a copy to: Contract Administrator & Financial Services Director
Southern Company Services, Inc.
270 Peachtree Street
Atlanta, Georgia 30303
Telephone: 404-506-5100
Fax: 404-506-0304
To Buyer: Executive Vice President and Chief Financial Officer
Alabama Power Company
600 North 18th Street
Birmingham, Alabama 35203
Telephone: 205-257-2905
Fax: 205-257-2176
with a copy to: Manager, Resource Planning
Southern Company Services, Inc.
600 North 18th Street
Birmingham, Alabama 35203
Telephone: 205-257-2905
Fax: 205-257-6746
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or to such other address as may be designated by the Parties; or (ii) when sent by facsimile transmission or electronic mail, provided receipt of such facsimile transmission or electronic mail is confirmed by facsimile transmission, electronic mail, or otherwise in writing at the time of transmission.
18.6 Entire Agreement. This Agreement (including Appendices A through H, inclusive) constitutes the entire understanding between the Parties concerning the subject matter hereof and supersedes any previous agreements concerning the subject matter hereof between the Parties. The Parties have entered into this Agreement in reliance upon the representations and mutual undertakings contained herein and not in reliance upon any oral or written representations or information provided by one Party to the other Party not contained or incorporated herein.
18.7 Governing Law. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Alabama, without giving effect to conflict of laws principles, which may direct the application of the laws of another jurisdiction.
18.8 Non-Waiver. No provision of this Agreement shall be deemed waived and no breach shall be deemed excused unless such waiver or consent is in writing and signed by a duly authorized representative of the Party waiving such provision or excusing such breach. No such consent to, or waiver of a breach hereof, whether express or implied shall constitute a consent to, waiver of, or excuse for any subsequent or different breach.
18.9 Headings Not Affecting Meaning. The descriptive headings of the various Sections and Articles of the Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions hereof. References to "Articles", "Sections" and "Appendices" in this Agreement shall mean the Articles, Sections and Appendices of this Agreement unless otherwise expressly noted.
18.10 Third Parties. This Agreement is intended solely for the benefit of the Parties hereto. The provisions of this Agreement shall not impart rights enforceable by any person or entity not a Party or not a permitted successor or permitted assignee of a Party bound by this Agreement.
18.11 Severability. All provisions of this Agreement are severable. In the event any provision of this Agreement, or a portion thereof, is ruled void, invalid, unenforceable or contrary to public policy by a court of competent jurisdiction, then any remaining portion of such provision and all other provisions of this Agreement shall survive and be applied and any invalid and unenforceable portion shall be construed or performed to preserve as much of the original words, terms, purpose and intent to the fullest extent permitted by law.
18.12 Cooperation. Upon the execution of this Agreement and thereafter, each Party to this Agreement agrees to do such things as may be reasonably requested by the other Party in order more effectively to consummate or document the transactions contemplated by this Agreement.
18.13.2 Seller intends to seek confidential treatment of the Confidential Information in this Agreement from FERC, and Buyer will provide reasonable cooperation in connection with such request. Notwithstanding the foregoing, the parties acknowledge that certain Confidential Information may need to be disclosed in Seller's filings with FERC which may become publicly available.
18.14 Replacement Index. Whenever any published index or tariff is referenced herein, the Parties intend to track those costs as faithfully as commercially practicable. Should any such index or tariff be discontinued or no longer published, the Parties will cooperate in establishing substitute benchmarks through reference to equivalent indices or tariffs.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized officers as of the date first written above.
FOR ALABAMA POWER COMPANY
FOR SOUTHERN POWER COMPANY
APPENDIX A
CAPACITY PAYMENT CALCULATION
[redacted]
APPENDIX B
ENERGY PAYMENT CALCULATION
[redacted]
APPENDIX C
DESIGN PARAMETERS AND SCHEDULING PROCEDURES
[redacted]
APPENDIX D
PERFORMANCE TESTING PROCEDURES AND DISPATCH
[redacted]
APPENDIX E
DETERMINATION OF CERTAIN LIQUIDATED DAMAGES
[redacted]
APPENDIX F
DAILY DAMAGE FOR FAILURE TO MEET THE
REQUIRED COMMERCIAL OPERATION DATE
[redacted]
Appendix G - Page 76 of 1
APPENDIX G
HIGHER HEATING VALUE
GUARANTEED HEAT RATE CURVES
For Normal Mode
[redacted]
APPENDIX H
SCOPE OF INTERCONNECTION
FACILITIES
[redacted]
Exhibit 10.19
PUBLIC RELEASE VERSION
AMENDED AND RESTATED
POWER PURCHASE AGREEMENT
BETWEEN
GEORGIA POWER COMPANY
AND
SOUTHERN POWER COMPANY
AT
PLANT AUTAUGAVILLE
August 6, 2001
TABLE OF CONTENTS
ARTICLE 1.........................................................................................................2
DEFINITIONS..............................................................................................2
1.1 Certain Definitions....................................................................2
ARTICLE 2........................................................................................................12
CONDITIONS PRECEDENT....................................................................................12
2.1. Regulatory Approvals and Transfer of Assets...........................................12
ARTICLE 3........................................................................................................13
TERM OF THE AGREEMENT...................................................................................13
3.1. Term..................................................................................13
ARTICLE 4........................................................................................................13
REPRESENTATIONS, WARRANTIES AND COVENANTS...............................................................13
4.1 Mutual Representations, Warranties and Covenants......................................14
4.2 Covenants of Seller...................................................................15
ARTICLE 5........................................................................................................16
DELIVERY OF RETAIL CAPACITY AND ENERGY..................................................................16
5.1 Agreement to Provide Capacity and Energy for Retail Service...........................16
5.2 Calculation of Monthly Capacity Payments..............................................16
5.3 Calculation of Monthly Energy Payments................................................16
ARTICLE 6........................................................................................................17
BILLING AND COLLECTION..................................................................................17
6.1 Capacity and Energy Billing and Payment...............................................17
ARTICLE 7........................................................................................................17
FACILITY IMPLEMENTATION AND CONSTRUCTION................................................................17
7.1 Project Implementation................................................................17
7.2 Failure to Achieve Required Threshold Date............................................18
7.3 Cover Period Energy...................................................................18
7.4 Failure to Meet Required Commercial Operation Date....................................19
7.5. Right to Advance Required Commercial Operation Date...................................19
ARTICLE 8........................................................................................................19
INTERCONNECTION AND METERING............................................................................19
8.2 Protective Devices....................................................................20
8.3 Meters................................................................................20
ARTICLE 9........................................................................................................21
COMMERCIAL OPERATION, TESTING AND DESIGNATION OF CAPACITY...............................................21
9.1 Commercial Operation Test.............................................................21
9.2 Capacity Examination..................................................................21
ARTICLE 10.......................................................................................................22
OPERATION, MAINTENANCE AND DISPATCH.....................................................................22
10.1 Operation, Maintenance and Dispatch...................................................22
10.2 Maintenance Scheduling................................................................22
10.3 Air Permits...........................................................................22
ARTICLE 11.......................................................................................................23
FUEL SUPPLY.............................................................................................23
11.1 Fuel Supply Plan......................................................................23
11.2 Fuel Transportation Capacity..........................................................23
ARTICLE 12.......................................................................................................24
FORCE MAJEURE...........................................................................................24
12.1 Definition of Force Majeure Event.....................................................24
12.2 No Breach or Liability................................................................24
12.3 Capacity and Energy Payments..........................................................25
12.4 Mitigation............................................................................25
12.5 Suspension of Performance.............................................................25
ARTICLE 13.......................................................................................................25
FAILURE OF PERFORMANCE AND REMEDIES.....................................................................25
13.1 Notice of Failure of Performance......................................................25
13.2 Failure of Performance by Seller......................................................25
13.3 Failure of Performance by Buyer.......................................................27
13.4 Remedies..............................................................................29
13.5 Discharge of Obligations Upon Termination.............................................29
13.6 No Consequential Damages..............................................................30
13.7 No Warranties.........................................................................30
ARTICLE 14.......................................................................................................30
COMPLIANCE WITH LAWS, RULES AND REGULATION..............................................................30
14.1 Compliance............................................................................30
14.2 Change of Law.........................................................................30
14.3 NOx Emissions.........................................................................31
14.4 Taxes.................................................................................31
ARTICLE 15.......................................................................................................31
ASSIGNMENT AND TRANSFERS OF INTERESTS...................................................................31
15.1 Assignment and Assumption of Obligations..............................................31
15.2 Assignment to Lenders.................................................................31
ARTICLE 16.......................................................................................................32
INDEMNIFICATION.........................................................................................32
16.1 Indemnity.............................................................................32
16.2 Notice of Proceedings.................................................................32
ARTICLE 17.......................................................................................................33
MISCELLANEOUS PROVISIONS................................................................................33
17.1 Amendments............................................................................33
17.2 Binding Effect........................................................................33
17.3 Counterparts..........................................................................34
17.4 Notices...............................................................................34
17.5 Entire Agreement......................................................................35
17.6 Governing Law.........................................................................35
17.7 Non-Waiver............................................................................35
17.8 Headings Not Affecting Meaning........................................................35
17.9 Third Parties.........................................................................36
17.10 Severability..........................................................................36
17.11 Cooperation...........................................................................36
17.12 Relationship..........................................................................36
17.13 Confidentiality.......................................................................36
17.14 Replacement Index.....................................................................37
APPENDIX A........................................................................................................1
CAPACITY PAYMENT CALCULATION.............................................................................1
APPENDIX B........................................................................................................1
ENERGY PAYMENT CALCULATION...............................................................................1
APPENDIX C........................................................................................................1
DESIGN PARAMETERS AND SCHEDULING PROCEDURES..............................................................1
APPENDIX D........................................................................................................1
PERFORMANCE TESTING PROCEDURES AND DISPATCH..............................................................1
APPENDIX E........................................................................................................1
DAILY DAMAGE FOR FAILURE TO MEET THE REQUIRED COMMERCIAL OPERATION DATE..................................1
APPENDIX F........................................................................................................1
HIGHER HEATING VALUE GUARANTEED HEAT RATE CURVES.........................................................1
APPENDIX G........................................................................................................1
TRANSMISSION INTERCONNECTION COST ADJUSTMENT.............................................................1
APPENDIX H........................................................................................................1
BILLING PROCEDURES.......................................................................................1
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AMENDED AND RESTATED
POWER PURCHASE AGREEMENT
BETWEEN
GEORGIA POWER COMPANY
AND
SOUTHERN POWER COMPANY
THIS AMENDED AND RESTATED POWER PURCHASE AGREEMENT ("Agreement"), dated as of August 6, 2001, is made by and between Georgia Power Company ("Buyer"), a corporation organized and existing under the laws of the State of Georgia with its principal address at 241 Ralph McGill Boulevard, N.E., Atlanta, Georgia, 30308, and the Southern Power Company ("Seller"), a corporation organized and existing under the laws of the State of Delaware with its principal address at 270 Peachtree Street, N.E., Atlanta, Georgia 30303, (individually a "Party" or collectively the "Parties").
W I T N E S S E T H:
WHEREAS, Buyer is engaged in the distribution and sale of electricity for heat, light and power to the public in the State of Georgia;
WHEREAS, Seller is authorized to, among other things, own and operate electric generating facilities and sell electric capacity and associated energy from such facilities;
WHEREAS, Buyer has agreed to purchase from Seller and Seller has agreed to sell to Buyer electric capacity and associated energy all in accordance with the provisions of this Agreement;
WHEREAS, the Georgia Public Service Commission issued a Supplemental Order in Docket No. 12499-U on August 2, 2001, (the "Supplemental Order") modifying certain terms and conditions of that certain Power Purchase Agreement Between Georgia Power Company and Southern Power Company at Plant Autaugaville, dated as of March 30, 2001 (the "Original PPA"); and,
WHEREAS, the Parties desire to amend and restate the Original PPA to incorporate the modifications ordered by the Georgia Public Service Commission in its Supplemental Order.
NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller each intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. The following capitalized terms and phrases, in addition to those defined above, as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "Affiliate" - means any other entity directly or indirectly controlling or controlled by or under direct or indirect common control of a specified entity. For purposes of this definition, "control" 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. The terms "controlling" and "controlled" have meanings correlative to the foregoing.
1.1.2 "Air Permits" - shall have the meaning as set forth in Section 10.3.
1.1.3 "Annual Period" - means any one of a succession of twelve (12) month periods, the first of which shall begin on June 1, 2004, and end on May 31, 2005.
1.1.4 "Block" - means the natural gas-fired combined cycle generating unit having a nominal capability of producing approximately 610 MW to be constructed at the Facility. The Block will comprise two combustion turbines with two heat recovery steam generators, a common steam turbine generator, and associated equipment, systems, and structures as necessary for the operation of the Block.
1.1.5 "Business Day" - means any calendar day excluding Saturdays, Sundays and NERC-defined holidays.
1.1.6 "Capacity Availability Performance Adjustment" or "CAPA" - means the adjustment to the capacity pursuant to Section 5.2 and the calculation set forth in Section C of Appendix A.
1.1.7 "Change of Law" - shall have the meaning as set forth in Section 14.2.
1.1.8 "Commercial Operation Date" - means for the Block, the date on which the
Block achieves commercial operation, which shall be deemed to have occurred when
(i) start-up and testing of the Block has been completed in accordance with
Section 9.2 and Appendix D and (ii) the Block is capable of producing energy and
delivering same to the Transmission System through the Interconnection Point on
a reliable basis.
1.1.9 "Confidential Information" - means business or technical information rightfully in the possession of either Party, which information derives actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure and use, and which information is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Confidential Information consists of information designated as confidential and furnished or disclosed to the other Party in connection with this Agreement.
1.1.10 "Consents" - means any permit, approval, consent, authorization or other requirement that is required from any Governmental Authority in connection with Seller's performance of its obligations under this Agreement, including, without limitation all applicable environmental certificates, licenses, permits and approvals.
1.1.11 "Consumer Price Index" or "CPI" - means the measure of the average change in prices paid by urban consumers for a fixed market basket of goods and services approved by the Bureau of Labor Statistics or any Governmental Authority succeeding to the powers and functions thereof.
1.1.12 "Contract Capacity" - means the capacity of the Block at Rated Conditions new and clean, as specified in Section A.1 of Appendix A.
1.1.13 "Cover Amount" - means, [redacted] for delivery in any hour during the applicable Summer Seasonal Performance Period.
1.1.14 "Cover Period" - shall have the meaning as set forth in Section 7.3.
1.1.15 "Delivered Energy" - means, either individually or in combination, the
energy in megawatt hours (MWh): (i) generated by the Block net of Station
Service and net of energy being delivered to third parties in accordance with
Section 5.1, measured by the Metering System and corrected for any gains or
losses between the metering point and the Interconnection Point; or (ii)
supplied by resources other than the Block and delivered to the Delivery Point.
1.1.16 "Delivery Point" - means the point on the Transmission System at which Seller shall deliver the energy and shall be as follows: (i) if from the Block, the Delivery Point shall be the Interconnection Point, and (ii) if from an alternate resource, the Delivery Point shall be any point on the Transmission System designated at the time of delivery.
1.1.17 "Demonstrated Capability" - means demonstrated capacity of the Block at
[redacted], as adjusted to Rated Conditions, resulting from a test under Article
9.
1.1.18 "Designated Capacity" - means the amount of capacity (in MW) for the Block nominated by Seller at Rated Conditions. Designated Capacity shall be nominated for each Annual Period by [redacted] prior to the beginning of each such Annual Period and may not exceed the Demonstrated Capability of the Block.
1.1.19 "Facility" - means the land, rights-of-way, Block and related equipment and facilities of the electric generating plant to be or being constructed on the Site in connection with the Block. The Facility shall include (without limitation) the Block and all associated auxiliary equipment and facilities installed at the Site necessary or used for the production, control, delivery or monitoring of electricity produced on the Site by the Block. All equipment and facilities installed on the generator's side of the Interconnection Point in connection with the Block are considered to be part of the Facility except those that constitute Interconnection Facilities.
1.1.20 "Failure of Performance" - shall have the meaning as set forth in Sections 13.2 and 13.3.
1.1.21 "FERC" - means the Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers and functions thereof under the Federal Power Act.
1.1.22 "FERC Approval" - means the consent and permission of FERC necessary to satisfy all applicable federal regulations and rules that are administered by and under the jurisdiction of FERC.
1.1.23 "Firm Fuel Capacity" - shall have the meaning as set forth in Article 11.
1.1.24 "Fixed Charge Rate" - means [redacted].
1.1.25 "Force Majeure Event" - shall have the meaning as set forth in Section 12.1.
1.1.26 "Fuel" - means natural gas, the quantity of which shall be determined based on its higher heating value basis.
1.1.27 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department or other such entity, but excluding any such agency, court, commission, department or other such entity acting in its capacity as purchaser, lender, guarantor or mortgagee.
1.1.28 "GPSC" - means the Georgia Public Service Commission or any Governmental Authority succeeding to the powers and functions thereof.
1.1.29 "GPSC Approval" - means the granting of a certificate approving this Agreement as a long-term power purchase capacity resource pursuant to O.C.G.A ss. ss. 46-3A-5 and 46-3A-8.
1.1.30 "Guaranteed Heat Rate" - shall have the meaning set forth in Appendices D and F and shall be determined based on the higher heating value basis.
1.1.31 "Incremental Replacement Cost" - means the positive difference, if any, between the Replacement Cost for Scheduled energy not delivered by Seller under this Agreement and the amount that Seller would otherwise have been entitled to receive under Appendix B for such Scheduled energy.
1.1.32 "Interconnection Agreement" - means an agreement between Alabama Power Company and Seller allowing Seller to interconnect the Facility to the Transmission System and operate the Facility in parallel with the Transmission System.
1.1.33 "Interconnection Cost Adjustment" or "ICA" - shall have the meaning as set forth in Appendix G.
1.1.34 "Interconnection Facilities" - means those facilities that Alabama Power, in its reasonable judgment, determines must be installed or modified in order to electrically connect the Block to the Transmission System at 500 kV.
1.1.35 "Interconnection Point" - means the point of electrical connection between the Block's collector bus and the 500 kV Interconnection Facilities.
1.1.36 "Interest Rate" - means [redacted].
1.1.37 "kW" - means kilowatt(s).
1.1.38 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, judgment, injunction, order or other requirement of a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question at the time of the execution of the Agreement or anytime thereafter during the Term.
1.1.39 "Metering System" - means all meters, metering devices and related instruments used to measure and record electric capacity and energy and used to determine the amount of such electric capacity and energy that is being made available or delivered at the Interconnection Point.
1.1.40 "Monthly Capacity Payment" - means the monthly amount to be paid by Buyer to Seller for the supply of Designated Capacity, as calculated in accordance with Appendix A.
1.1.41 "Monthly Energy Payment" - means the monthly amount to be paid by Buyer to Seller for the purchase of energy delivered during such month, as calculated in accordance with Appendix B.
1.1.42 "MW" - means megawatt(s), or one thousand (1,000) kilowatts.
1.1.43 "MWh" - means megawatt hour(s).
1.1.44 "NERC" - means the North American Electric Reliability Council including any successor thereto and subdivisions thereof.
1.1.45 "Primary Gas Delivery Point" - means the primary delivery point for Fuel located at the point of interconnection between Southern Natural Gas Company's ("SNG") pipeline system and the Seller's pipeline lateral serving the Facility.
1.1.46 "Project" - means the design, engineering, financing, construction, testing and commissioning of the Facility and the ownership, operation, management and maintenance of the Facility, all of which being reasonably expected to enable Seller to fulfill its obligations under this Agreement.
1.1.47 "Prudent Utility Practices" - means, at a particular time, any of the practices, methods and acts engaged in or approved by a significant portion of the United States electric utility industry prior to such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired results at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practices 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirements of this Agreement.
1.1.48 "Rated Conditions" - means the conditions as set forth in Appendix D.
1.1.49 "Replacement Cost" - means: (i) the cost incurred in a commercially reasonable manner to produce or purchase the Shortfall Amount, plus transactional costs reasonably incurred in purchasing the Shortfall Amount and additional transmission charges, if any, reasonably incurred to deliver such Shortfall Amount to the Transmission System; or (ii) the market price at which an amount of energy equal to the Shortfall Amount could have been acquired for delivery to the Transmission System, as determined in a commercially reasonable manner. In no event shall Replacement Cost include any penalties, ratcheted demand or similar charges, nor shall there be any requirement to utilize or change utilization of owned or controlled assets or market positions to minimize such cost.
1.1.50 "Required Commercial Operation Date" - means June 1, 2004, for the Block, or as such date(s) may be extended or adjusted pursuant to the terms of this Agreement.
1.1.51 "Required Threshold Date" - means October 1, 2002.
1.1.52 "Schedule" - when used as a noun, means an energy schedule, including:
(i) economic dispatch of the Block using automatic generation control or (ii)
submission of a manual or electronic schedule of energy to the dispatch center
for delivery of energy from the Block or alternate resources, as submitted in
accordance with the provisions of Article 11 and Appendix C of this Agreement.
When used as a verb, "Schedule" means the act of submitting a Schedule in
accordance with the provisions of Article 11 and Appendix C of this Agreement.
1.1.53 "Scheduled Outage" - means a planned interruption of a portion or all of the generation capability of the Block that has been coordinated with a mutually agreed start date, time and duration.
1.1.54 "Seasonal Availability Factor" or "SAF" - shall have the meaning as set forth in Appendix A.
1.1.55 "Seasonal Performance Period" - means one of the following periods during the Annual Period: [redacted].
1.1.56 "SERC" - means the Southeastern Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.57 "Shortfall Amount" - means the positive difference (rounded to the nearest whole MWh) of (i) the Cover Amount in any hour during a Cover Period, less (ii) the amount of energy that Seller causes to be delivered to the Transmission System in such hour in response to such Schedule.
1.1.58 "Site" - means the land in Autauga County, Alabama, on which the Facility is to be located.
1.1.59 "Station Service" - means energy produced by the Block that is used to serve the electrical requirements of the Block.
1.1.60 "Taxes" - means all taxes, fees, levies, licenses or similar charges imposed by any Governmental Authority, together with any interest and penalties thereon.
1.1.61 "Term" - means the term of this Agreement as specified in Article 3.
1.1.62 "Threshold Date" - means the date on which Seller obtains the necessary Air Permits for the Block.
1.1.63 "Transmission System" - means the high voltage electric transmission system of Alabama Power Company, either singularly or as a part of the integrated transmission systems of the electric utility operating companies of Southern Company (currently, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) including transmission systems that are co-owned by one or more of such entities and one or more third parties, such as, but not limited to MEAG and Georgia Transmission Corporation, as modified or expanded from time-to-time, as well as any successor in function.
1.1.64 "Transportation Quantity" - means the quantity of Fuel that is equal to the sum of (i) the product of the Guaranteed Heat Rate times the number of kilowatt-hours Scheduled by Buyer, plus (ii) the quantity of Fuel necessary for start-up, ramp up and ramp down.
ARTICLE 2
CONDITIONS PRECEDENT
2.1 Regulatory Approvals and Transfer of Assets.
2.1.1 The obligations of the Parties are conditioned on the following: (i) GPSC Approval of this Agreement and GPSC authorization for the Buyer to recover from its customers all payments required or contemplated to be made to Seller pursuant to Article 5 and Section 14.2 of this Agreement; (ii) approval by FERC of this Agreement without modification; and (iii) the closing of the expected transfer of the Autaugaville Combined Cycle Unit Two Facility assets to Seller necessary to perform this Agreement and of Seller's financing of such transfer.
2.1.2 The Parties shall use reasonable best efforts to obtain the GPSC acceptance and FERC Approval in a timely manner without material modification to the terms and conditions of this Agreement.
ARTICLE 3
TERM OF THE AGREEMENT
3.1 Term. Subject to the termination and survival provisions herein, this Agreement shall be effective and remain in full force and effect from the date it is executed and delivered by both Buyer and Seller. Buyer and Seller agree to be bound by this Agreement until its termination according to the terms hereof. Seller's obligation to deliver and Buyer's obligation to accept capacity and associated energy from the Block shall be from its Required Commercial Operation Date, through May 31, 2019 (the "Operating Term").
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Mutual Representations, Warranties and Covenants. Each Party represents, warrants, and covenants to the other Party that: 4.1.1 it is a corporation duly organized, validly existing, and in good standing under the respective laws of the state of its formation; 4.1.2 it has all requisite corporate power to own, operate and lease its properties, carry on its business as now conducted, enter into this Agreement, carry out the transactions contemplated hereby, and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement; 4.1.3 the execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate action, do not and will not require any further consents or approvals of its Board of Directors or shareholders other than that which has been obtained, and do not and will not violate any of the terms or conditions of any contract or other agreement to which it is a party or any Legal Requirements applicable to it; 4.1.4 this Agreement constitutes each Party's legally valid and binding obligation enforceable against it in accordance with the terms thereof, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity; 4.1.5 there are no bankruptcy proceedings pending or being contemplated by it or, to its knowledge, threatened against it; 4.1.6 to its knowledge, there are no pending or threatened actions or proceedings affecting it before any Governmental Authority which purport to affect the legality, validity or enforceability of this Agreement or would be reasonably likely to materially adversely affect its ability to perform this Agreement; and 4.1.7 the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which it is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing. 4.2 Covenants of Seller. 4.2.1 Seller shall: (i) construct or cause to be constructed; (ii) own, lease, or control the entire electrical output of; and (iii) operate and maintain the Facility, all in accordance with this Agreement. 4.2.2 Seller shall obtain and maintain at all times during the Term all Consents as and when required by applicable Legal Requirements for the construction, operation and maintenance of the Facility as contemplated pursuant to this Agreement. 4.2.3 Seller shall at all times during the Term of this Agreement construct, operate and maintain the Facility in accordance with Prudent Utility Practices.
ARTICLE 5
DELIVERY OF CAPACITY AND ENERGY
5.1.1 During the Operating Term, Seller shall make available to Buyer the entire electrical output of the Block, net of Station Service, except during periods of Scheduled Outages and Force Majeure Events.
5.1.2 Seller shall deliver to Buyer, and Buyer shall accept from Seller, at the Delivery Point, the energy Scheduled by Buyer pursuant to this Agreement from: (i) the Block or (ii) an alternate resource other than the Block or (iii) any combination of (i) and (ii).
5.2 Calculation of Monthly Capacity Payments. Except as otherwise provided herein, Buyer shall pay to the Seller, for each month of the Operating Term, the Monthly Capacity Payment calculated in accordance with Appendix A. In addition, following [redacted] (as shown in Table A-1 of Appendix A), a Capacity Availability Performance Adjustment ("CAPA") shall be calculated in accordance with Section C of Appendix A and paid in accordance with Section A of Appendix H.
5.3 Calculation of Monthly Energy Payments. Except as otherwise provided herein, Buyer shall pay to Seller, for each month of the Operating Term, the Monthly Energy Payment calculated in accordance with Appendix B.
ARTICLE 6
BILLING AND COLLECTION
6.1 Capacity and Energy Billing and Payment. Seller and Buyer shall agree to the billing and payment process as set forth in Appendix H. However, the Parties shall maintain the right to amend the billing and payment process as appropriate from time-to-time.
ARTICLE 7
FACILITY IMPLEMENTATION AND CONSTRUCTION
7.1 Project Implementation. Seller shall: (i) arrange for the
acquisition of or use of the Site for the Term; (ii) apply for, and use diligent
efforts to obtain and maintain, all Consents (including renewals thereof) and
any other approvals of Governmental Authorities that are required in connection
with the Project, including the transactions contemplated under this Agreement;
(iii) act consistent with Prudent Utility Practices in all aspects of the
Project; and (iv) use diligent efforts to meet the Required Commercial Operation
Date and to otherwise carry out the transactions contemplated under this
Agreement.
7.2.1 If the Threshold Date will not occur on or before the Required Threshold Date, then Seller may choose either: (i) to continue to perform in accordance with the provisions of Section 7.2.2 (the "Performance Election"); or (ii) to perform in accordance with the provisions of Section 7.2.3 (the "Cover Election").
7.2.2 If Seller chooses the Performance Election, then the Required Threshold
Date shall be extended to April 2, 2003, and Seller shall continue diligently to
obtain the necessary Air Permits. In the event that the Threshold Date is not
achieved by the extended Required Threshold Date, the Seller shall pay
[redacted] to Buyer. If at any time prior to the extended Required Threshold
Date, the Seller determines that it cannot obtain the Air Permits, it may elect
to terminate the Agreement in which case the same remedy shall apply.
7.2.3 [redacted].
7.3 Cover Period Energy.
-------------------
7.3.1 [redacted].
7.3.2 Appendix B will govern payments for the Scheduled energy delivered
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during the Cover Period.
7.3.3 If Seller fails to deliver any Scheduled energy during the Cover Period, Seller shall pay to Buyer an [redacted].
7.3.4 At the end of the Cover Period, this Agreement shall terminate and the Parties shall have no further obligations hereunder.
7.4.1 If Seller fails to obtain commercial operation of the Block on or before the Required Commercial Operation Date for the Block for any reason other than failure to obtain the Air Permits, [redacted].
7.4.2 [redacted].
7.5. Right to Advance Required Commercial Operation Date. Upon mutual agreement of the Parties, Buyer and Seller may advance the Required Commercial Operation Date. In the event that the Parties advance the Required Commercial Operation Date, the Parties shall also advance accordingly the commencement and due dates of their respective payment and performance obligations.
ARTICLE 8
INTERCONNECTION AND METERING
8.1 Interconnection. Georgia Power shall construct or cause to be constructed the Interconnection Facilities in order to electrically connect the Block to the Transmission System at the Interconnection Point. Seller shall reimburse Buyer for actual costs incurred in constructing the Interconnection Facilities in accordance with Appendix G.
8.2 Protective Devices. Seller shall provide, install and maintain internal breakers, relays, switches, synchronizing equipment and other associated protective control equipment necessary to maintain the reliability, quality and safety of the electric power production of the Facility in accordance with Prudent Utility Practices.
8.3.1 Seller shall ensure that the Metering System is designed, located, constructed, installed, operated and maintained in accordance with Prudent Utility Practices in order to measure and record the amount of energy and capacity delivered from the Block.
8.3.2 Seller shall ensure that all meters are inspected and tested at such times as will conform to Prudent Utility Practices, but not less often than once every two (2) years. 8.3.3 If the Metering System fails to register, or if the measurement made by a metering device is found upon testing to vary by more than one half percent (0.5%) from the measurement made by the standard meter used in the test, an adjustment shall be made correcting all measurements of energy made by the Metering System during: (a) the actual period when inaccurate measurements were made by the Metering System, if that period can be determined; or (b) if such actual period cannot be determined, the latter half of the period from the date of the last test of the Metering System to the date such failure is discovered or such test is made. The amount of the adjustment may be determined: (i) by correcting the error if the percentage of error is ascertainable by calibration, tests or mathematical calculation; or (ii) if not so ascertainable, by estimating on the basis of deliveries under similar conditions during the period since the last test.
9.1.2 Seller may at its option, perform additional capacity tests prior to [redacted] after the later of (i) the Required Commercial Operation Date and (ii) the Commercial Operation Date. [redacted].
ARTICLE 10
OPERATION, MAINTENANCE AND DISPATCH
10.1 Operation, Maintenance and Dispatch. Seller shall manage, control, operate and maintain all parts of the Facility in a manner consistent with Prudent Utility Practices. Seller shall also operate the Facility in accordance with applicable reliability criteria and guides of the SERC and NERC. The Parties intend to operate the Block in economic dispatch. However, upon mutual agreement of the Parties, Seller and Buyer may Schedule the Block in accordance with the procedures set forth in Appendix C. In the event that alternate resources are utilized by Seller to supply energy, in order to Schedule delivery of such energy Buyer shall follow the procedures set forth in Appendix C.
10.2 Maintenance Scheduling. The Parties intend for maintenance of the Blocks to be Scheduled to minimize the impact on the availability of the Block, but such scheduled and approved unscheduled maintenance hours shall not be a factor in the calculation of the SAF as set forth in Appendix A.
10.3 Air Permits. Seller shall be obligated to maintain, for the period required by Legal Requirements during the Operating Term, all Consents pertaining to air emissions necessary for the performance of Seller's obligations under this Agreement ("Air Permits"). The Air Permits shall authorize the operation of the Block for a [redacted].
ARTICLE 11
FUEL SUPPLY
11.1.1 At all times during the Operating Term, the Block shall be capable of utilizing Fuel as Scheduled by Buyer in order to produce the energy committed to Buyer under this Agreement. Buyer shall have the responsibility for procuring at its sole cost and making available at the Primary Gas Delivery Point the quantities of Fuel at the rates of delivery required to accommodate Buyer's Scheduling instructions. To determine the quantities of Fuel to be Scheduled by Buyer for transportation to the Primary Gas Delivery Point in order to satisfy Buyer's Scheduling instructions, Buyer shall calculate the Transportation Quantity. 11.1.2 Buyer shall pay, in accordance with Appendix B, for all Fuel used to generate energy that is delivered to Buyer pursuant to the Buyer's Scheduling instructions, including energy received during periods of ramp up and ramp down. Seller shall pay for Fuel used at the Facility for all other purposes, including (but not limited to) Station Service, initial start-up, testing and synchronization of the Block, Block start-up capacity examinations and sales to third parties. Seller shall be responsible for the cost of Fuel for start-up of the Block through the operation of the Monthly Fuel Cost Adjustment under Section E of Appendix B.
11.2.3 Seller agrees to accept at the Primary Gas Delivery
Point any Transportation Quantity meeting the minimum quality requirements for
delivered Fuel under SNG's FERC Gas Tariff and the applicable transportation
agreement(s).
11.2.4 The Parties shall exercise best efforts to minimize any
imbalances or other penalties or charges from transporters of Fuel delivered to
the Facility ("Imbalance Charges"). If Buyer or Seller receives an invoice from
a transporter for Imbalance Charges, the Parties shall determine the cause for
such charges. [redacted]
11.2.5 All Fuel supplied by the Buyer pursuant to this Agreement shall be measured at the Primary Gas Delivery Point. [redacted].
ARTICLE 12
FORCE MAJEURE
12.1 Definition of Force Majeure Event. For the purposes of this
Agreement, a "Force Majeure Event" as to a Party means any occurrence,
nonoccurrence or set of circumstances that is beyond the reasonable control of
such Party and is not caused by such Party's negligence or lack of due
diligence, which prevents the Party from being able to perform its obligations
hereunder, including, without limitation, strike or stoppage of labor; flood,
ice, earthquake, windstorm or eruption; fire; explosion; invasion, riot or civil
war, commotion or insurrection; sabotage, terrorism or vandalism; military or
usurped power; or act of God or of a public enemy.
[redacted]
12.2 No Breach or Liability. Both Parties shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder for so long as failure to perform such obligation shall be due to a Force Majeure Event.
12.4 Mitigation. Following the occurrence of a Force Majeure Event, the directly affected Party shall use diligent efforts to remedy its inability to perform as soon as practicable; however, the directly affected Party is not required to settle any non Site-specific strike, walkout, lockout or other general labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest.
12.5 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond the Operating Term.
ARTICLE 13
FAILURE OF PERFORMANCE AND REMEDIES
13.1 Notice of Failure of Performance. If a Party becomes aware of a Failure of Performance by the breaching Party, it may give the breaching Party written notice of the Failure of Performance.
13.2 Failure of Performance by Seller. The occurrence of any of the following events shall constitute a "Failure of Performance" by Seller, except to the extent caused by a Force Majeure Event:
13.2.1 Except as specifically permitted hereunder, Seller abandons the development or construction of the Facility prior to the Commercial Operation Date.
13.2.2 Seller fails to make any payment due to Buyer hereunder for any undisputed amount or fails to comply with Appendix H with respect to any disputed amount within [redacted] of receiving a written demand from Buyer, which demand shall be received no earlier than the Business Day following the Payment Due Date.
13.2.3 A court having jurisdiction shall enter: (i) a decree or order for relief in respect of Seller in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Seller bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Seller under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Seller or of any substantial part of its affairs.
13.2.4 Seller: (i) commences or files a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated bankrupt or insolvent; (ii) consents to the entry of a decree or order for relief in respect of Seller in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it; (iii) files any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law; (iv) consents to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Seller or of any substantial part of its property; (v) makes an assignment for the benefit of creditors; (vi) is unable, or admits in writing its inability, to generally pay its debts as they become due; or (vii) takes any action in furtherance of any of the foregoing.
13.2.5 Seller assigns this Agreement or any of its rights or obligations under this Agreement in violation of Article 15.
13.2.6 Any representation or warranty made by Seller herein shall prove to be incorrect in any material respect when made, unless Seller promptly commences and diligently pursues action to cause such representation or warranty to become true and removes any material adverse effect on Buyer of such representation or warranty having been incorrect.
13.2.7 Seller fails both: (i) to perform or observe any of its material obligations under this Agreement due to its failure to comply with a Legal Requirement; and (ii) to promptly commence and diligently pursue action to cure and cures such failure to perform within [redacted] unless such cure is not capable of being effected within such [redacted] period, in which case Seller shall have an additional [redacted] period in which to perform such cure.
13.2.8 [redacted]
13.3 Failure of Performance by Buyer. The occurrence of any of the following events shall constitute a "Failure of Performance" by Buyer:
13.3.1 Buyer fails to make any payment due to Seller hereunder for any undisputed amount or fails to comply with Appendix H with respect to any disputed amount within [redacted] of receiving a written demand from Seller, which demand shall be received no earlier than the Business Day following the Payment Due Date.
13.3.2 A court having jurisdiction shall enter: (i) a decree or order for relief in respect of Buyer in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Buyer bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Buyer under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Buyer or of any substantial part of its affairs.
13.3.3 Buyer: (i) commences or files a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent; (ii) consents to the entry of a decree or order for relief in respect of Buyer in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it; (iii) files any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law; (iv) consents to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Buyer or of any substantial part of its property; (v) makes an assignment for the benefit of creditors; (vi) is unable, or admits in writing its inability, to generally pay its debts as they become due; or (vii) takes any action in furtherance of any of the foregoing.
13.3.4 Any representation or warranty made by Buyer herein shall prove to be incorrect in any material respect when made, unless Buyer promptly commences and diligently pursues action to cause such representation or warranty to become true and removes any material adverse effect on Seller of such representation or warranty having been incorrect.
13.3.5 Buyer fails both: (i) to perform or observe any of its material obligations under this Agreement due to its failure to comply with a Legal Requirement; and (ii) to promptly commence and diligently pursue action to cure and cures such failure to perform within [redacted] unless such cure is not capable of being effected within such [redacted] period, in which case Buyer shall have an additional [redacted] period in which to perform such cure.
13.4 Remedies. If a Failure of Performance by either Party has
occurred, then the non-breaching Party may terminate this Agreement by giving
[redacted] prior written notice thereof to the breaching Party, which
termination shall be effective upon the [redacted] day following the date of
such notice. In such event Seller will not be entitled to recover Monthly
Capacity Payments and Monthly Energy Payments prospectively from the effective
date of such termination.
13.5 Discharge of Obligations Upon Termination. In the event of termination of this Agreement, the Parties shall be released and discharged from any further obligation arising or accruing hereunder from and after the date of termination; provided, however, that termination shall not discharge or relieve either Party from any obligations or liabilities for any act or failure to act which may have accrued prior to such termination.
13.6 No Consequential Damages. In no event shall either Party or their affiliates, contractors or consultants, or the officers, directors, shareholders, employees or consultants of any of them be liable for punitive, special, indirect, incidental or consequential damages under, arising out of, due to or in connection with the performance or non-performance of this Agreement or any of the obligations herein, whether based on contract, tort (including without limitation negligence), strict liability, warranty, indemnity or otherwise.
13.7 No Warranties. There are no warranties under this Agreement except to the extent specifically set forth in Article 4. The Parties hereby specifically disclaim and exclude all implied warranties, including the implied warranties of merchantability and of fitness for a particular purpose.
ARTICLE 14
COMPLIANCE WITH LAWS, RULES AND REGULATION
14.1 Compliance. Seller shall be in compliance with all Legal
Requirements with respect to the construction, ownership, operation and
maintenance of the Facility.
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14.2.1 A "Change of Law" means a change in Legal Requirement constituting a new environmental or tax law, or regulation or a new interpretation of such law or regulation, which is enacted or promulgated after December 15, 2000, and which generally affects the cost of electrical generation.
14.2.2 [redacted]. 14.2.3 [redacted]. 14.2.4 [redacted]. |
ASSIGNMENT AND TRANSFERS OF INTERESTS
15.1 Assignment and Assumption of Obligations. Seller may not assign its obligations under this Agreement or any portion thereof to any entity other than a creditworthy affiliate without the written permission of Buyer; provided, however, (i) any assignee shall expressly assume assignor's obligations hereunder, and (ii) unless otherwise expressly approved by the Buyer and the GPSC, no assignment, whether or not consented to, shall relieve the assignor of its obligations hereunder in the event its assignee fails to perform.
15.2 Assignment to Lenders. Notwithstanding Section 15.1, Seller may, without the consent of Buyer or the GPSC, assign this Agreement to a Lender for collateral security purposes in connection with any financing or the refinancing of the Facility.
ARTICLE 16
INDEMNIFICATION
16.1 Indemnity. Subject to Section 13.7, each Party (the "Indemnifying Party") expressly agrees to indemnify, hold harmless and defend the other Party and its affiliates, trustees, agents, officers, directors, employees and permitted assigns (the "Indemnified Party") against all claims, liabilities, costs or expenses for loss, damage or injury to persons or property in any manner directly or indirectly connected with or growing out of, the generation, transmission or distribution of energy on its respective side of the Delivery Point, unless such loss, damage or injury is the result of the gross negligence or willful misconduct of the Party seeking indemnification.
16.2 Notice of Proceedings. An Indemnified Party which becomes entitled to indemnification under the Agreement shall promptly notify the other Party of any claim or proceeding in respect of which it is to be indemnified. Such notice shall be given as soon as reasonably practicable after the Indemnified Party obligated to give such notice becomes aware of such claim or proceeding. The Indemnifying Party shall assume the defense thereof with counsel designated by the Indemnifying Party; provided, however, that if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party reasonably concludes that there may be legal defenses available to it that are different from or additional to, or inconsistent with, those available to the Indemnifying Party, the Indemnified Party shall have the right to select and be represented by separate counsel. The Indemnified Party shall be responsible for the expenses associated with such separate counsel, unless a liability insurer will pay the expenses of such separate counsel. If the Indemnifying Party fails to assume the defense of a claim, the indemnification of which is required under this Agreement, the Indemnified Party may, at the expense of the Indemnifying Party, contest, settle, or pay such claim; provided, however, that settlement or full payment of any such claim may be made only with the Indemnifying Party's consent or, absent such consent, written opinion of the Indemnified Party's counsel that such claim is meritorious or warrants settlement.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Amendments. This Agreement may be amended by and only by a written instrument duly executed by both Buyer and Seller which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
17.2 Binding Effect. This Agreement and any extension shall inure to the benefit of and shall be binding upon the Parties and their respective successors and permitted assigns.
17.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
17.4 Notices. Where written notice is required by this Agreement, such notice shall be in writing and shall be deemed given (i) when delivered by United States registered or certified mail, postage prepaid, return receipt requested, or delivered by recognized courier addressed as follows:
To Seller: Douglas E. Jones Vice President, Southern Company Generation and Energy Marketing
BIN 935
270 Peachtree Street, N.E.
Atlanta, Georgia 30303
with a copy to: Thomas L. Penland, Jr., Esq.
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
To Buyer: Garey C. Rozier
Resource Planning Manager,
Southern Company Services, Inc.
BIN 15N-8182
600 North 18th Street
Birmingham, Alabama 35203
with a copy to: Kevin C. Greene, Esq.
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
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or to such other address as may be designated by the Parties; or (ii) when sent by facsimile transmission or electronic mail, provided receipt of such facsimile transmission or electronic mail is confirmed by facsimile transmission, electronic mail, or otherwise in writing at the time of transmission.
17.5 Entire Agreement. This Agreement constitutes the entire understanding between the Parties. The Parties have entered into this Agreement in reliance upon the representations and mutual undertakings contained herein and not in reliance upon any oral or written representations or information provided by one Party to the other Party not contained or incorporated herein.
17.6 Governing Law. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Georgia, without giving effect to conflict of laws principles, which may direct the application of the laws of another jurisdiction.
17.7 Non-Waiver. No provision of this Agreement shall be deemed waived and no breach shall be deemed excused unless such waiver or consent is in writing and signed by a duly authorized representative of the Party waiving such provision or excusing such breach. No such consent to, or waiver of a breach hereof, whether express or implied shall constitute a consent to, waiver of, or excuse for any subsequent or different breach.
17.8 Headings Not Affecting Meaning. The descriptive headings of the various Sections and Articles of the Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions hereof.
17.9 Third Parties. This Agreement is intended solely for the benefit of the Parties hereto. Except as otherwise expressly provided herein, nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement.
17.10 Severability. All provisions of this Agreement are severable. In the event any provision of this Agreement, or a portion thereof, is ruled void, invalid, unenforceable or contrary to public policy by a court of competent jurisdiction, then any remaining portion of such provision and all other provisions of this Agreement shall survive and be applied and any invalid and unenforceable portion shall be construed or performed to preserve as much of the original words, terms, purpose and intent to the fullest extent permitted by law.
17.11 Cooperation. Upon the execution of this Agreement and thereafter, each Party to this Agreement agrees to do such things as may be reasonably requested by the other Party in order more effectively to consummate or document the transactions contemplated by this Agreement.
17.12 Relationship. This Agreement shall not be interpreted or construed to create an association, joint venture, or partnership between the Parties, or to impose any partnership obligation or liability upon either Party.
17.13.1 Each Party agrees that for a period of five (5) years from the date of termination of the Agreement it will not, without the written consent of the other Party or as otherwise provided herein, disclose Confidential Information to any third party (other than, when permitted by all applicable Legal Requirements, to affiliates or to consultants, advisors and lenders who need to know such information in connection with the performance of their duties or services for the disclosing Party or its affiliates), except to the extent that disclosure is required by law, or by a court or by an administrative agency having jurisdiction over the disclosing Party.
17.13.2 Seller intends to seek confidential treatment of the Confidential Information in this Agreement from FERC, and Buyer will provide reasonable cooperation in connection with such request. Notwithstanding the foregoing, the Parties acknowledge that certain Confidential Information may need to be disclosed in Seller's filings with FERC which may become publicly available.
17.14 Replacement Index. Whenever any published index or tariff is referenced herein, the Parties intend to track those costs as faithfully as commercially practicable. Should any such index or tariff be discontinued or no longer published, the Parties will cooperate in establishing substitute benchmarks through reference to equivalent indices or tariffs.
IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement as of the date first written above.
FOR GEORGIA POWER COMPANY
By:
--------------------------------------------
Name: Fred D. Williams
Title: Senior Vice President
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FOR SOUTHERN POWER COMPANY
By:
--------------------------------------------
Name: Douglas E. Jones
Title: Vice President
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Appendix A - Page 2 of 3
APPENDIX A
CAPACITY PAYMENT CALCULATION
[redacted]
Appendix B - Page 1 of 5
APPENDIX B
ENERGY PAYMENT CALCULATION
[redacted]
Appendix C - Page 1 of 3
APPENDIX C
DESIGN PARAMETERS AND SCHEDULING PROCEDURES
[redacted]
Appendix D - Page 1 of 3
APPENDIX D
PERFORMANCE TESTING PROCEDURES AND DISPATCH
[redacted]
Appendix E - Page 1 of 1
APPENDIX E
DAILY DAMAGE FOR FAILURE TO MEET THE
REQUIRED COMMERCIAL OPERATION DATE
[redacted]
Appendix F - Page 1 of 2
Appendix F - Page 2 of 2
APPENDIX F
HIGHER HEATING VALUE
GUARANTEED HEAT RATE CURVES
For Normal Mode
[redacted]
HIGHER HEATING VALUE
GUARANTEED HEAT RATE CURVES
[redacted]
Appendix G - Page 1 of 1
APPENDIX G
TRANSMISSION INTERCONNECTION
COST ADJUSTMENT
[redacted]
Appendix H - Page 1 of 2
APPENDIX H
BILLING PROCEDURES
[redacted]
Exhibit 10.20
CONTRACT FOR THE
PURCHASE OF FIRM CAPACITY AND ENERGY
BETWEEN
SOUTHERN POWER COMPANY
AND
SAVANNAH ELECTRIC AND POWER COMPANY
July 26, 2001
Table of Contents
Page
ARTICLE 1 DEFINITIONS....................................................................................2
---------------------
1.1 Certain Definitions..........................................................................2
--- -------------------
1.2 Interpretation...............................................................................3
--- --------------
ARTICLE 2 GPSC AND FERC APPROVALS........................................................................4
---------------------------------
2.1 Initial GPSC Approval........................................................................4
--- ---------------------
2.2 Recovery of Payments from Customers..........................................................4
--- -----------------------------------
2.3 Consequences of Termination..................................................................7
--- ---------------------------
ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS......................................................7
---------------------------------------------------
3.1 Representations and Warranties of Seller.....................................................7
--- ----------------------------------------
3.2 Representations and Warranties of Buyer......................................................8
--- ---------------------------------------
3.3 Covenants....................................................................................9
--- ---------
ARTICLE 4 THE PROJECT AND TERM OF AGREEMENT.............................................................10
-------------------------------------------
4.1 The Project.................................................................................10
--- -----------
4.2 Term........................................................................................10
--- ----
ARTICLE 5 SALE OF CAPACITY AND ENERGY...................................................................11
-------------------------------------
5.1 Agreement to Sell and Purchase..............................................................11
--- ------------------------------
5.2 Calculation of Monthly Capacity Payments....................................................11
--- ----------------------------------------
ARTICLE 6 BILLING AND COLLECTIONS.......................................................................14
---------------------------------
6.1 Capacity and Energy Billing and Payment.....................................................14
--- ---------------------------------------
ARTICLE 7 PROJECT IMPLEMENTATION AND CONSTRUCTION.......................................................15
-------------------------------------------------
7.1 Project Implementation......................................................................15
--- ----------------------
7.2 Design and Construction of the Facility.....................................................15
--- ----------------------------------------
7.3 Failure to Meet Required Commercial Operation Date..........................................15
--- --------------------------------------------------
7.4 Right to Advance Commercial Operation.......................................................16
--- -------------------------------------
ARTICLE 8 INTERCONNECTION AND METERING..................................................................16
--------------------------------------
8.1 Interconnection Facilities..................................................................16
--- --------------------------
8.2 Protective Devices..........................................................................17
--- ------------------
8.3 Meters......................................................................................17
--- ------
ARTICLE 9 COMMERCIAL OPERATION, TESTING AND DESIGNATION OF CAPACITY.....................................18
-------------------------------------------------------------------
9.1 Commercial Operation Test...................................................................18
--- -------------------------
9.2 Monthly Capacity Increments.................................................................19
--- ---------------------------
ARTICLE 10 OPERATION AND MAINTENANCE....................................................................19
------------------------------------
10.1 Operation and Maintenance...................................................................19
---- -------------------------
10.2 Maintenance Scheduling......................................................................19
---- ----------------------
10.3 Fuel Supply.................................................................................20
---- -----------
ARTICLE 11 DELIVERY OF CAPACITY AND ENERGY..............................................................20
------------------------------------------
11.1 Coordination, Scheduling and Dispatch.......................................................20
---- -------------------------------------
ARTICLE 12 FORCE MAJEURE................................................................................20
------------------------
12.1 Definition of Force Majeure Event...........................................................21
---- ---------------------------------
12.2 No Breach or Liability......................................................................21
---- ----------------------
12.3 Capacity and Energy Payments................................................................21
---- ----------------------------
12.4 Mitigation..................................................................................21
---- ----------
12.5 Suspension of Performance...................................................................22
---- -------------------------
12.6 Extended Force Majeure Events...............................................................22
---- -----------------------------
ARTICLE 13 DEFAULT AND REMEDIES.........................................................................22
-------------------------------
13.1 Failure of Performance by Seller............................................................22
---- --------------------------------
13.2 Remedies....................................................................................24
---- --------
ARTICLE 14 COMPLIANCE WITH LAWS, RULES AND REGULATIONS..................................................24
------------------------------------------------------
14.1 Compliance..................................................................................24
---- ----------
14.2 Change of Law...............................................................................24
---- -------------
14.3 NOx Allowances..............................................................................26
---- --------------
ARTICLE 15 ASSIGNMENT AND TRANSFERS OF ITNERESTS........................................................26
------------------------------------------------
15.1 Assignment and Assumption of Obligations....................................................26
---- ----------------------------------------
ARTICLE 16 MISCELLANEOUS PROVISIONS.....................................................................26
-----------------------------------
16.1 Amendments..................................................................................26
---- ----------
16.2 Binding Effect..............................................................................27
---- --------------
16.3 Counterparts................................................................................27
---- ------------
16.4 Entire Agreement............................................................................27
---- ----------------
16.5 Governing Law...............................................................................27
---- -------------
16.6 Waiver......................................................................................27
---- ------
16.7 Headings....................................................................................28
---- --------
16.8 Third Parties...............................................................................28
---- -------------
16.9 Severability................................................................................28
---- ------------
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APPENDIX A: Heat Rate and Input / Output Curves
CONTRACT FOR THE PURCHASE
OF FIRM CAPACITY AND ENERGY
THIS POWER PURCHASE AGREEMENT ("Agreement"), dated as of July 26, 2001 between Southern Power Company, a corporation organized and existing under the laws of the State of Delaware, having its principal place of business in Atlanta, Georgia (the "Seller "), and Savannah Electric and Power Company, a corporation organized and existing under the laws of the State of Georgia, having its principal place of business in Savannah, Georgia ("Buyer").
W I T N E S S E T H:
WHEREAS, Buyer is authorized by its Certificate of Incorporation and by the State of Georgia to engage in the purchase, generation, transmission, sale and distribution of electricity for heat, light and power to the public;
WHEREAS, Seller intends to own and operate an electric power plant, generating electricity primarily with natural gas, located at Seller's existing Plant Wansley site located in Heard and Carroll counties, Georgia ("the "Facility"); and
WHEREAS, Buyer has agreed to purchase from Seller and Seller has agreed to sell to Buyer capacity and associated energy generated by certain portions of the Facility all in accordance with the provisions of this Agreement;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual promises and agreements set forth herein and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, Buyer and Seller each intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. In addition to the terms and phrases defined
in the preamble or body of this Agreement, the following initially capitalized
terms and phrases when used in this Agreement shall have the meanings set forth
below:
1.1.1 "Affiliate" - means any other existing or future
entity directly or indirectly controlled by or under direct or indirect common
control of Southern Company.
1.1.2 "Commercial Operation Date" - means, with respect to a Unit, the date on which such Unit achieves commercial operation, which shall be deemed to have occurred when start-up and testing of such Unit has been completed in accordance with Article 9 and the Unit is capable of and available for producing energy and delivering same to the Southern Electric Transmission System on a reliable basis.
1.1.3 "Facility" - means the two 566 MW gas-fired combined cycle units (referred to individually as a "Unit" and collectively as the "Facility") which Seller proposes to build at Plant Wansley that will be used by Seller to fulfill its obligations under this Agreement.
1.1.4 "FERC" - means the Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers and functions thereof under the Federal Power Act.
1.1.5 "Georgia ITS" - means the Georgia Integrated Transmission System, the high voltage electricity transmission system owned by Georgia Power Company, Georgia Transmission Corporation, the Municipal Electric Authority of Georgia, and the City of Dalton, Georgia, and operated in an integrated fashion by the Georgia ITS participants, as modified or expanded from time-to-time.
1.1.6 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department or other such entity, but excluding any such agency, court, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee.
1.1.7 "GPSC" - means the Georgia Public Service Commission or any Governmental Authority succeeding to the powers and functions thereof.
1.1.8 "Required Commercial Operation Date" - means June 1,
2002; provided, however, that such date may be extended due to a Force Majeure
Event for a term equal to the period of the delay caused by said Force Majeure
Event.
1.1.9 "Southern Electric Transmission System" - means the
high voltage electricity transmission systems of the Southern Company or any of
its affiliates or subsidiaries, including without limitation the Georgia ITS, as
modified or expanded from time-to-time.
1.1.10 "Term" - means the term of this Agreement.
1.2 Interpretation. In this Agreement and the Appendices hereto, unless the context otherwise requires:
1.2.1 words generally importing the singular shall include the plural and vice versa; 1.2.2....references to "entity" include, without limitation, corporations, partnerships, associations and governmental authorities.
1.2.3 Appendix A attached hereto is incorporated by
reference herein.
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ARTICLE 2
GPSC AND FERC APPROVALS
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2.1.2. Buyer shall use its reasonable best efforts to obtain the GPSC Approval in a timely manner without material modification to the terms and conditions of this Agreement. Seller agrees to assist and support Buyer, in a timely manner, in obtaining the GPSC Approval. Buyer and Seller agree to comply with any lawful request for information of the GPSC pertaining to the issuance of the GPSC Approval.
2.1.3. Notwithstanding Sections 2.1.1 and 2.1.2, if within twelve (12) months of the filing of an Application for Certification of this Agreement with the GPSC, the GPSC has not issued the GPSC Approval, then either Party may terminate this Agreement upon written notice to the other Party. Upon such termination under this subsection 2.1.3, neither Party shall have any further liability to the other hereunder.
2.2.3. If, at any time, Buyer receives notice that the GPSC, the FERC or any other Governmental Authority seeks or will seek to prevent full recovery by Buyer from its customers of any and all payments already made or required to be made to Seller under this Agreement, then Buyer shall, as soon as reasonably practical after Buyer's receipt of such notice, give written notice thereof to Seller. Buyer shall use its reasonable best efforts to defend and uphold the validity of this Agreement and its right to recover from its customers all payments required to be made by Buyer hereunder, and will cooperate in any effort by Seller to intervene in any proceeding challenging the validity of this Agreement and the right of Buyer to recover from its customers all payments to be made by it hereunder.
2.2.4. In the event that pursuant to Section 2.2.1, Buyer adjusts the payments to be made by Buyer to Seller pursuant to this Agreement due to a Payment Adjustment Event, Seller may, at its sole option and pursuant to the provisions of this Section 2.2.4, terminate this Agreement and, except as otherwise provided herein, the Parties shall have no further liability or obligation to the other Party.
2.2.4.1 Buyer agrees to provide Seller prior written notice of its intent to adjust the payments to be made hereunder. Such notice shall specify the effective date of the Payment Adjustment Event. Within [redacted] of Seller's receipt of such notice, Seller shall inform Buyer if it intends to terminate this Agreement or continue to supply the contracted capacity and energy to Buyer for the remainder of the Term at the adjusted rates in accordance with Section 2.2.4.3 of this Agreement.
2.2.4.2 In the event Seller determines to terminate this Agreement, Seller
may do so no earlier than the date which is [redacted] after the otherwise
effective date of the Payment Adjustment Event. During such period, Buyer shall
pay Seller the unadjusted rates as set forth herein. Notwithstanding the
foregoing, Buyer shall have the right to terminate this Agreement at the end of
such [redacted] period upon [redacted] written notice to Seller during such
[redacted] period.
2.2.4.3 In the event Seller determines to continue to supply the contracted capacity and energy to Buyer for the remainder of the Term, Buyer agrees to pay Seller the unadjusted rates set forth herein for a period of [redacted] from the effective date of the Payment Adjustment Event, but may adjust the payments thereafter to the new rates.
2.3 Consequences of Termination. In the event of a termination of this Agreement pursuant to Section 2.1 or 2.2, the Parties shall have no further obligation to each other under this Agreement following termination, except that such termination shall not affect the liability of either Party for obligations arising prior to termination or for damages, if any, resulting from any breach of this Agreement.
ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS 3.1 Representations and Warranties of Seller. Seller hereby makes the following representations and warranties to Buyer:
3.1.1 Seller is a corporation that is duly organized, validly existing and in good standing under the laws of the State of Delaware, that is qualified to do business in the State of Georgia and that has the legal power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement. 3.1.2 The execution, delivery and performance by Seller of this Agreement have been duly authorized by all necessary corporate action, and do not and will not require any consent or approval, other than that which has been obtained.
3.1.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Seller is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
3.1.4 This Agreement constitutes the legal, valid and binding obligation of Seller enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
3.1.5....There is no pending, or to the knowledge of Seller, threatened action or proceeding affecting Seller before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement.
3.2 Representations and Warranties of Buyer Buyer hereby makes the following representations and warranties to Seller:
3.2.1 Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia, that is qualified to do business in the State of Georgia and that has the legal power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
3.2.2 The execution, delivery and performance by Buyer of
this Agreement have been duly authorized by all necessary corporate action, and
do not and will not require any consent or approval other than that which has
been obtained.
3.2.3 The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the fulfillment of and
compliance with the provisions of this Agreement do not and will not conflict
with or constitute a breach of or a default under, any of the terms, conditions
or provisions of any Legal Requirements, or any partnership agreement, deed of
trust, mortgage, loan agreement, other evidence of indebtedness or any other
agreement or instrument to which Buyer is a party or by which it or any of its
property is bound, or result in a breach of or a default under any of the
foregoing.
3.2.4 This Agreement constitutes the legal, valid and
binding obligation of Buyer enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws relating to or affecting the enforcement of creditors' rights
generally or by general equitable principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
3.2.5....There is no pending or, to the knowledge of Buyer, threatened action or proceeding affecting Buyer before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement.
3.3.1 Seller shall construct or cause to be constructed; own or lease; and operate and maintain the Facility in accordance with this Agreement for the Term.
3.3.2 Seller shall at all times during the Term pay or cause to be paid all charges, taxes, assessments and fees which may be assessed by a Governmental Authority (i) upon or against the Facility or (ii) upon or against Seller by reason of the sale or purchase of electricity hereunder. Notwithstanding the above covenant in this Section 3.3.2, Seller shall have the right to contest, in good faith, such charges, taxes, assessments and fees.
3.3.3 Seller shall obtain and maintain at all times during the Term all environmental approvals, permits and plans required by all Governmental Authorities for construction, operation and maintenance of the Facility as contemplated pursuant to this Agreement.
3.3.4 Prior to GPSC approval of this Agreement, Seller
shall not market or otherwise offer to sell to any party the first call rights
to capacity and energy from the Facility covered by the Agreement for the period
commencing with the Required Commercial Operation Date and ending with the
conclusion of the Term.
ARTICLE 4
THE PROJECT AND TERM OF AGREEMENT
4.1 The Project. The Project comprises the design, engineering,
financing, construction, testing and commissioning of the Facility and the
ownership, operation, management and maintenance of the Facility in accordance
with and pursuant to the terms of this Agreement.
4.2 Term. This Agreement shall become effective when executed and delivered by both Buyer and Seller and Seller's obligations to sell and Buyer's obligations to purchase capacity and energy from the Facility pursuant to the terms of this Agreement shall commence on the Required Commercial Operation Date of the Facility and remain in full force and effect through December 31, 2009, subject to termination as provided herein. Applicable provisions of this Agreement shall continue in effect after termination or expiration of this Agreement as set forth herein and to the extent necessary to provide for final billings and adjustments.
5.1.1 Seller shall at all times following the later of (i) the Required Commercial Operation Date, and (ii) the first Commercial Operation Date for the Facility, subject to scheduled outages, forced outages, and the provisions of Article 12, make available to Buyer 200 MW of capacity and energy as provided in Article 5.1.2, as adjusted by Article 9.1 ("Buyer's Contract Capacity"). Buyer agrees to pay for the Buyer's Contract Capacity and the associated energy delivered as provided in Sections 5.2 and 8.1.2.
5.1.2 At any time, Seller may deliver the energy obligated under this Agreement to the Southern Electric Transmission System from (i) the Facility or (ii) an alternative resource other than the Facility or (iii) any combination of (i) and (ii).
5.1.3 Seller shall deliver the Energy to Buyer at the Southern Electric System Transmission System.
5.2 Calculation of Monthly Capacity Payments. Beginning June 1, 2002 and ending December 31, 2009,
Buyer shall pay Seller a Monthly Capacity and Energy Payment calculated as follows:
5.2.1 Capacity Price ($/kW-mo.): [redacted] applied to the
Contract Capacity Rating (as defined in Article 9.1) for the months of
[redacted] and [redacted] applied to the Contract Capacity Rating for
[redacted];
5.2.2 FO&M ($/kW-yr.): [redacted] applied to the Contract
Capacity Rating (as defined in Article 9.1) payable in equal monthly amounts.
5.2.3 Start-up Cost: [redacted] per Unit per normal start applied after the first [redacted] starts beginning [redacted] of each year. A normal start is defined as any hour in which the Unit output is changed from zero (0) megawatts to anything greater than zero (0) megawatts.
5.2.4 Fixed Fuel Transportation: As provided in Article
10.3.2.
5.2.5 Energy Charge: Each month, the energy charge shall
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be the sum across the month of the [redacted]
Where:
VO&M ($/MWh) = [redacted]
Hourly Energy Cost = [redacted]
Actual Average Fuel Cost of the Units = [redacted]
The Hourly Commodity Price shall be determined by adding all the costs of the
gas commodity (including applicable taxes) each hour and dividing by the hourly
volume of gas necessary to meet the hourly operation. For gas consumed in any
hour, the Commodity price may be any combination of the following: [redacted] In
the event the energy is delivered from an alternative resource, the Hourly
Commodity Price shall be equal to the [redacted].
The Variable Transportation Costs shall be the effective [redacted].
Delivered MWH includes ramp-up and ramp-down energy.
5.2.6 Contract Availability: For each season, the Seasonal Availability Factor ("SAF") shall not be less than [redacted]%. [redacted] for variations in SAF above and below [redacted] will be calculated as set forth in Article 5.2.8.
5.2.7 [redacted] for non-delivery of capacity and energy shall be limited to the reductions in capacity payments set forth in Article 5.2.9.
5.2.8 Seasonal Availability [redacted] will be calculated as soon as practical after each season based on the SAF for the season as follows:
Seasonal Availability Factor = [redacted]
Where:
FOH = Unplanned (Forced) Outage Hours
EFDH = Equivalent Unplanned (Forced) Derated Hours
ARDH = Alternative Resource Delivery Hours which are the hours
[redacted] in which delivery is made from an alternative resource.
PH = Period Hours.
5.2.8.1 The Summer Season shall be comprised of the months of [redacted]. The Non-Summer Season shall be comprised of [redacted].
5.2.8.2 Scheduled maintenance hours shall be excluded from the calculation of SAF.
5.2.9 [redacted]
5.2.10 The Contract Heat Rate for each Unit shall be based on the Delivered MW for each Unit in each hour as follows:
5.2.10.1 For Normal Operation : If the MW are
between the month's Minimum Normal Capability and the month's Maximum Normal
Capability, then the summer and winter heat rates are calculated according to
the curves supplied in Appendix A. (In all instances described in this Article
5.2.10 and its sub-parts, summer heat rate curves will be applicable for the
months [redacted], and winter heat rate curves will be used for the months of
[redacted].)
5.2.10.2 If the MW exceed the month's Maximum Normal Capability and is less than or equal to the month's Over Pressure Mode Capability, then the Unit output shall be calculated assuming a [redacted] block at a heat rate of [redacted], plus the remaining Unit output calculated using the appropriate summer or winter heat rate calculation.
5.2.10.3 If the MW exceed the month's Over
Pressure Mode Capability and is less than or equal to the month's Capability in
Over Pressure Mode with Power Augmentation, then the Unit output shall be
calculated assuming a [redacted]block at a heat rate of [redacted] plus the
[redacted] block of over pressure output at [redacted] plus the remaining Unit
output calculated using the appropriate summer or winter heat rate calculation.
Power augmentation is not available at temperatures below [redacted] and is
limited to [redacted].
5.2.10.4 If energy is delivered from an alternative resource, [redacted].
6.1.1....The Buyer and Seller shall agree to a mutually acceptable billing and payment process prior to the Required Commercial Operation Date.
ARTICLE 7 PROJECT IMPLEMENTATION AND CONSTRUCTION
7.1 Project Implementation. Seller shall:
----------------------
7.1.1 arrange for the acquisition of or use of the
Facility for the Term;
7.1.2 apply for, and use diligent efforts to obtain, all
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Consents, all renewals thereof, and any other approvals of Government Authorities that are required in connection with Seller's obligations.
7.2.1 Seller shall provide to the GPSC Seller's preliminary start-up and test schedule for the Facility at least ninety (90) days prior to start-up and testing of the Facility.
7.2.2 Seller shall provide to the GPSC a Milestone Schedule which shall set forth the Required Commercial Operation Date as well as the scheduled Initial Synchronization Date of the Facility to the Georgia Integrated Transmission System. Seller shall notify the GPSC of any changes in the Milestone Schedule as they may occur from time to time; provided, however, that such notification shall not relieve Seller from any of its obligations set forth elsewhere herein.
7.3 Failure to Meet Required Commercial Operation Date. Seller is responsible for meeting the Required Commercial Operation Date of June 1, 2002. If the Seller is unable to meet the Required Commercial Operation Date it may supply the capacity and energy from an alternative resource as allowed in Article 5.1.2. If delivery is made from an alternative resource, [redacted]. If the Seller is unable to meet the Required Commercial Operation Date and it fails to, or elects not to, supply the capacity and energy from an alternative resource as allowed in Article 5.1.2, [redacted]
7.4 Right to Advance Commercial Operation. Seller may notify Buyer of
advancement of the Commercial Operation Date. Notification must be given by
[redacted] and at least [redacted] in advance of the modified Commercial
Operation Date. Once notification is given, the Seller will be accountable to
meet the advanced Commercial Operation Date [redacted]. In the event that the
Commercial Operation Date is advanced, payments and guarantees will be advanced
accordingly.
8.1.1 Seller shall enter into an interconnection agreement with Georgia Power Company that will cause the completion of the design, financing, construction, installation, maintenance and testing of the interconnection facilities in a manner consistent with Prudent Utility Practices and as necessary to allow the flow of energy from the Facility. For purposes of this Agreement, whenever it is used, "Prudent Utility Practices" means, 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 the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired results at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practices 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirements of this Agreement.
8.1.2 Seller shall be responsible for all reasonable costs and expenses (including overheads) incurred in connection with the design, construction, and installation of all or part of the interconnection facilities and Buyer shall pay to Seller for the Term of the Agreement [redacted] per kW-mo. (applied to the Buyer's Contract Capacity Rating) for interconnection costs.
8.1.3 Seller shall obtain any and all necessary rights of way and easements, including adequate and continuing access rights on and across the Facility to install, operate, maintain, replace and/or remove the interconnection facilities located at the Facility.
8.2 Protective Devices. Seller shall, at its own cost, provide, install and maintain internal breakers, relays, switches, synchronizing equipment and other associated protective control equipment necessary to maintain the reliability, quality and safety of the electric power production of the Facility.
8.3.2 Seller shall inspect and test all meters at such
times as will conform to Prudent Utility Practices, but not less often than once
every two (2) years. 8.3.3 If any seal securing the Metering System is found
broken, if the Metering System fails to register, or if the measurement made by
a metering device is found upon testing to vary by more than one half percent
(0.5%) from the measurement made by the standard meter used in the test, an
adjustment shall be made correcting all measurements of energy made by the
Metering System during (i) the actual period when inaccurate measurements were
made by the Metering System, if that period can be determined, or (ii) if such
actual period cannot be determined, the later half of the period from the date
of the last test of the Metering System to the date such failure is discovered
or such test is made (such period herein the "Adjustment Period"). The amount of
the adjustment shall be determined (i) by correcting the error if the percentage
of error is ascertainable by calibration, tests or mathematical calculation, or
(ii) if not so ascertainable, by estimating on the basis of deliveries under
similar conditions during the period since the last test.
ARTICLE 9
COMMERCIAL OPERATION, TESTING AND DESIGNATION OF CAPACITY
9.1 Commercial Operation Test. The nominal capacity of the Facility is expected to be 1132 MW (566 MW per Unit). The Contract Capacity Rating for the first year following Commercial Operation shall be based on actual demonstrated capability following performance testing with over pressure and power augmentation as corrected to [redacted] and [redacted] relative humidity. Seller will have the right to re-demonstrate within [redacted] of the initial demonstration. Thereafter, the annual Contract Capacity Rating will be declared prior to June 1 for each year of the term of the Agreement. All capacity-dependent payments or calculations will utilize the figure determined in this manner for each twelve (12) month period beginning June 1 of each year. For the term of the Agreement, [redacted]. The capacity dedicated to and obligated to Buyer under this agreement shall be 200/1132 times the annual Contract Capacity Rating (Buyer's "Contract Capacity Rating").
9.2 Monthly Capacity Increments. Each year, at the time of
demonstration or declaration of the Contract Capacity Rating, the following
additional capacity increments shall be declared for each month of the twelve
(12) month period beginning June 1: Minimum Normal Capability, Maximum Normal
Capability, Over Pressure Mode Capability, and Capability in Over Pressure Mode
with Power Augmentation. For the months of June through September, the
Capability in Over Pressure Mode with Power Augmentation shall not be less than
the Contract Capacity Rating for the year.
ARTICLE 10
OPERATION AND MAINTENANCE
10.1 Operation and Maintenance
10.1.1 Seller shall manage, control, operate and maintain the Facility in a manner consistent with Prudent Utility Practices. Seller shall also operate the Facility in accordance with applicable reliability criteria and guides of the SERC and NERC.
10.1.2 Seller shall employ at the Facility all safety
devices and safety practices required by Prudent Utility Practices.
10.2 Maintenance Scheduling Maintenance schedules will be determined
based on the manufacturer's recommendations and Prudent Utility Practices. All
scheduled maintenance will be coordinated to minimize the impact of scheduled
maintenance on the availability of the Units, but such scheduled maintenance
hours shall not count in the calculation of the SAF as set forth in Articles
5.2.8 and 5.2.9.
10.3.2 Buyer shall pay to Seller as an additional payment
[redacted] associated with Buyer's Contract Capacity Rating. Actual charges are
anticipated to be the effective fixed portion of the [redacted] for gas
transported from [redacted] to Plant Wansley multiplied by the pipeline capacity
sufficient to meet the peak hourly gas requirements plus allocated storage
charges necessary to maintain [redacted] of firm gas storage deliverability
connected to Transco, plus all applicable taxes. [redacted] will be included in
the Energy Charge and will not be recovered separately.
ARTICLE 11
DELIVERY OF CAPACITY AND ENERGY
11.1 Coordination, Scheduling and Dispatch. The Seller intends to operate the Facility in the Southern electric system economic dispatch. However, the Seller and Buyer reserve the right to schedule the dispatch of the Units under an appropriate non-discriminatory scheduling procedure.
ARTICLE 12
FORCE MAJEURE
12.1 Definition of Force Majeure Event.. For the purposes of this Agreement, a "Force Majeure Event" means any occurrence, nonoccurrence or set of circumstances that is beyond the reasonable control of Seller and is not caused by Seller's negligence or lack of due diligence, including, without limitation, flood, ice, earthquake, windstorm or eruption; fire; explosion; invasion, civil war, commotion or insurrection; sabotage or vandalism; military or usurped power; or act of God or of a public enemy. The term Force Majeure Event shall not include (i) the inability to meet a Legal Requirement or the change in a Legal Requirement; (ii) a site specific strike, walkout, lockout or other labor dispute; (iii) equipment failure, unless such equipment failure results directly from the Force Majeure Event, or (iv) changes in market conditions that affect the cost or availability of the Facility's primary or secondary fuel supply or the cost of power from resources other than the Facility.
12.2 No Breach or Liability. Seller shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder for so long as failure to perform such obligation shall be due to a Force Majeure Event.
12.4.1 give the GPSC and Buyer notice thereof, followed by written notice if the first notice is not written, as promptly as possible after Seller becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
12.4.2...use its reasonable best efforts to remedy its inability to perform as soon as practicable; provided, however, that this Article shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of Seller, are contrary to its interest: and provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of Seller; and
12.4.3...when it is able to resume performance of its obligations under this Agreement, give the GPSC and Buyer written notice to that effect.
12.5 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
12.6 Extended Force Majeure Events. Seller may terminate this Agreement upon [redacted] prior written notice if a Force Majeure Event prevents it from substantially performing its obligations hereunder for a period of [redacted]. Upon termination of this Agreement pursuant to this Article, Seller shall no longer be entitled to recover Monthly Capacity and Energy Payments.
ARTICLE 13
DEFAULT AND REMEDIES
13.1 Failure of Performance by Seller. The occurrence of any of the following events shall constitute a "Failure of Performance" by Seller:
13.1.1 Seller fails to cause the Facility to achieve the Commercial Operation Date on or before that date which is twelve (12) months after June 1, 2002;
13.1.2 Seller fails both (i) to perform or observe any of
its material obligations under this Agreement due to its inability or failure to
comply with a Legal Requirement and (ii) to promptly commence and diligently
pursue action to cure and cures such inability or failure to perform within
[redacted]. Seller agrees to give Buyer, so Buyer may give to the GPSC, notice
as promptly as practicable after Seller becomes aware that a Legal Requirement
will prohibit Seller from performing. If Seller reasonably believes that its
inability or failure to perform or observe any of its material obligations under
this Agreement will extend beyond [redacted], Seller shall submit a plan for
curing such inability or failure (the "Cure Plan") as soon as reasonably
practicable but in no event more than [redacted] after Seller's inability or
failure first arose;
13.1.3 A court having jurisdiction shall enter (i) a decree or order for relief in respect of Seller in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Seller bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Seller under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Seller (collectively, "Trustee") or of any substantial part of its affairs;
13.1.4 Seller shall (i) commence a voluntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or any other case or proceeding to be
adjudicated a bankrupt or insolvent, or (ii) consent to the entry of a decree or
order for relief in respect of Seller in any involuntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or (iii) file any petition, answer or consent seeking
reorganization or relief under any applicable Federal or state law, or (iv)
consent to the filing of any petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or similar official of Seller (collectively, a "Receiver") or of any substantial
part of its property or (v) make an assignment for the benefit of creditors, or
(vi) be unable, or admit in writing its inability, to generally pay its debts as
they become due, or (vii) take any action in furtherance of any of the
foregoing
13.2 Remedies. If a Failure of Performance by Seller has occurred, then Buyer may terminate this Agreement by giving [redacted] written notice thereof to Seller and in that event Seller will not be entitled to recover Monthly Capacity and Energy Payments.
ARTICLE 14
COMPLIANCE WITH LAWS, RULES AND REGULATION
14.1 Compliance. Seller covenants that as of the Commercial Operation Date and for the Term, Seller shall be in compliance with all legal requirements with respect to the ownership, operation and maintenance of the Facility.
14.2.1...A "Change of Law" means a change in legal
requirements which constitutes a new environmental or tax law or regulation or a
new interpretation of such law or regulation, which is enacted after September
17, 1999, and which generally affects the cost of natural gas fired electrical
generation.
14.2.2...Except as provided in Articles 14.2.3 and 14.2.4,
Buyer's capacity and energy payments allowed under this Agreement shall not be
altered as a result of a Change in Law which cause Seller to incur additional
costs or realize savings in carrying out its obligations under this Agreement.
14.2.3...If after September 17, 1999, there is a Change of Law
which causes Seller to incur additional costs which are projected to increase
Seller's annual costs of carrying out its obligations under this Agreement by
[redacted], then Seller may notify Buyer of such increase in annual costs. Upon
receiving such notice, Buyer shall apply to the GPSC to increase the amount of
allowed capacity and energy expenses to recover the increased costs resulting
from the Change of Law, and if that increase is allowed, then Buyer shall
increase its payments to Seller, on a pro-rata basis, and shall be allowed to
recover these increased payments from its rate payers. If the GPSC either
refuses to allow an increase in the authorized expenses or fails to act within
twelve (12) months of the request to increase having been filed, Seller may
terminate its obligations under this Agreement by providing the GPSC and Buyer
thirty (30) days written notice of its intent to terminate the Agreement
effective between the next October 1 and December 31. If Seller fails to
terminate this Agreement or until the effective date of any termination, Buyer
shall continue to pay the capacity and energy charges as allowed by this
Agreement, as it may have been amended by the Commission after it was initially
approved.
14.2.4...If after September 17, 1999, there is a Change of Law
which causes Seller to incur a reduction in costs which are projected to
decrease Seller's annual costs of carrying out its obligations under this
Agreement by [redacted], then Buyer shall reduce its capacity and energy
payments to reflect its pro-rata share of those savings.
14.3 NOx Allowances The costs incurred to purchase or create or
otherwise obtain NOx and VOC allowances and NOx and VOC set-asides are not
included in the proposed Capacity and Energy Payments described in this
Agreement, but will be recovered separately. [redacted].
ARTICLE 15
ASSIGNMENT AND TRANSFERS OF INTERESTS
15.1 Assignment and Assumption of Obligations. Seller may assign its obligations under this Agreement or any portion thereof to an affiliate with equal or greater creditworthiness characteristics; provided, however, (i) any assignee shall expressly assume assignor's obligations hereunder and (ii) unless expressly approved by the GPSC, no assignment, whether or not consented to, shall relieve the assignor of its obligations hereunder in the event its assignee fails to perform.
15.2 Assignment to Lenders15.2 Assignment to Lenders. Notwithstanding Article 15.1, Seller may, without the consent of the GPSC, assign this Agreement to a Lender for collateral security purposes in connection with any financing or the refinancing of the Company's assets which includes in whole or in part the Facility.
ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1 Amendments This Agreement may be amended by and only by a written instrument duly executed by each of Buyer and Seller, which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
16.2 Binding Effect. This Agreement and any extension shall inure to the benefit of and shall be binding upon the Parties and their respective permitted successors and assigns.
16.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be
an original and all of which shall constitute but one and the same instrument.
16.4 Entire Agreement. This Agreement constitutes the entire understanding between the Parties and supersedes any previous agreements between the Parties. The Parties have entered into this Agreement in reliance upon the representations and mutual undertakings contained herein and not in reliance upon any oral or written representations or information provided by one Party to the other Party not contained or incorporated herein.
16.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, without giving effect to conflict of laws principles.
16.6 Waiver. The failure of either Party to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other Party of any of the provisions hereof, shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof, or the right of such Party hereafter to enforce every such provision. No modification or waiver of all or any part of this Agreement shall be valid unless it is reduced to a writing, which expressly states that the Parties hereby agree to a waiver or modification as applicable, and is signed by both Parties.
16.7 Headings. The headings contained in this Agreement are used solely for convenience and do not constitute a part of the Agreement between the Parties hereto, nor should they be used to aid in any manner in the construction of this Agreement.
16.8 Third Parties. This Agreement is intended solely for the benefit of the Parties hereto. Except as otherwise expressly provided herein, nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement.
16.9 Severability. If any term or provision of this Agreement or the application thereof to any person, entity, or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons, entities or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement under seal in Atlanta, Georgia as of the date first above written.
SOUTHERN POWER COMPANY("Seller")By:
Name: Douglas E. Jones Title: Vice President
Attest: Title:
[SEAL] SAVANNAH ELECTRIC AND POWER COMPANY ("Buyer")By:
Name: _________________Title: ______________________________ Attest:
Title:
[SEAL]
Appendix A
Heat Rate and Input / Output Curves
[redacted]
Exhibit 10.21
PUBLIC RELEASE VERSION
CONTRACT FOR THE
PURCHASE OF FIRM CAPACITY AND ENERGY
BETWEEN
GEORGIA POWER COMPANY
AND
SOUTHERN POWER COMPANY
AT
PLANT WANSLEY
July 26, 2001
Table of Contents
ARTICLE 1 DEFINITIONS....................................................................................2
---------------------
1.1 Certain Definitions..........................................................................2
--- -------------------
1.2 Interpretation...............................................................................4
--- --------------
ARTICLE 2 CONDITIONS PRECEDENT...........................................................................5
------------------------------
2.1 Regulatory Approvals and Transfer of Assets..................................................5
--- -------------------------------------------
2.2 Recovery of Payments from Customers..........................................................5
--- -----------------------------------
2.3 Consequences of Termination..................................................................7
--- ---------------------------
ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS......................................................8
---------------------------------------------------
3.1 Representations and Warranties of Seller.....................................................8
--- ----------------------------------------
3.2 Representations and Warranties of Buyer......................................................9
--- ---------------------------------------
3.3 Covenants...................................................................................10
--- ---------
ARTICLE 4 THE PROJECT AND TERM OF AGREEMENT.............................................................11
-------------------------------------------
4.1 The Project.................................................................................11
--- -----------
4.2 Term........................................................................................11
--- ----
ARTICLE 5 SALE OF CAPACITY AND ENERGY...................................................................11
-------------------------------------
5.1 Agreement to Sell and Purchase..............................................................11
--- ------------------------------
5.2 Calculation of Monthly Payments.............................................................12
--- -------------------------------
ARTICLE 6 BILLING AND COLLECTIONS.......................................................................15
---------------------------------
6.1 Capacity and Energy Billing and Payment.....................................................15
--- ---------------------------------------
ARTICLE 7 PROJECT IMPLEMENTATION AND CONSTRUCTION.......................................................15
-------------------------------------------------
7.1 Project Implementation......................................................................15
--- ----------------------
7.2 Design and Construction of the Facility.....................................................15
--- ---------------------------------------
7.3 Failure to Meet Required Commercial Operation Date..........................................16
--- --------------------------------------------------
7.4 Right to Advance Commercial Operation.......................................................16
--- -------------------------------------
ARTICLE 8 INTERCONNECTION AND METERING..................................................................17
--------------------------------------
8.1 Interconnection Facilities..................................................................17
--- --------------------------
8.2 Protective Devices..........................................................................18
--- ------------------
8.3 Meters......................................................................................18
--- ------
ARTICLE 9 COMMERCIAL OPERATION, TESTING AND DESIGNATION OF CAPACITY.....................................19
-------------------------------------------------------------------
9.1 Commercial Operation Test...................................................................19
--- -------------------------
9.2 Monthly Capacity Increments.................................................................19
--- ---------------------------
ARTICLE 10 OPERATION AND MAINTENANCE....................................................................20
------------------------------------
10.1 Operation and Maintenance...................................................................20
---- -------------------------
10.2 Maintenance Scheduling......................................................................20
---- ----------------------
10.3 Fuel Supply.................................................................................20
---- -----------
ARTICLE 11 DELIVERY OF CAPACITY AND ENERGY..............................................................21
------------------------------------------
11.1 Coordination, Scheduling and Dispatch.......................................................21
---- -------------------------------------
ARTICLE 12 FORCE MAJEURE................................................................................21
------------------------
12.1 Definition of Force Majeure Event...........................................................21
---- ---------------------------------
12.2 No Breach or Liability......................................................................22
---- ----------------------
12.3 Capacity and Energy Payments................................................................22
---- ----------------------------
12.4 Mitigation..................................................................................22
---- ----------
12.5 Suspension of Performance...................................................................22
---- -------------------------
12.6 Extended Force Majeure Events...............................................................23
---- -----------------------------
ARTICLE 13 DEFAULT AND REMEDIES.........................................................................23
-------------------------------
13.1 Failure of Performance by Seller............................................................23
---- --------------------------------
13.2 Remedies....................................................................................25
---- --------
ARTICLE 14 COMPLIANCE WITH LAWS, RULES AND REGULATIONS..................................................25
------------------------------------------------------
14.1 Compliance..................................................................................25
---- ----------
14.2 Change of Law...............................................................................25
---- -------------
14.3 NOx Allowances..............................................................................26
---- --------------
ARTICLE 15 ASSIGNMENT AND TRANSFER OF INTERESTS.........................................................26
-----------------------------------------------
15.1 Assignment and Assumption of Obligations....................................................26
---- ----------------------------------------
15.2 Assignment to Lenders.......................................................................27
---- ---------------------
ARTICLE 16 MISCELLANEOUS PROVISIONS.....................................................................27
-----------------------------------
16.1 Amendments..................................................................................27
---- ----------
16.2 Binding Effect..............................................................................27
---- --------------
16.3 Counterparts................................................................................27
---- ------------
16.4 Entire Agreement............................................................................27
---- ----------------
16.5 Governing Law...............................................................................28
---- -------------
16.6 Waiver......................................................................................28
---- ------
16.7 Headings....................................................................................28
---- --------
16.8 Third Parties...............................................................................28
---- -------------
16.9 Severability................................................................................28
---- ------------
|
CONTRACT FOR THE PURCHASE
OF FIRM CAPACITY AND ENERGY
THIS POWER PURCHASE AGREEMENT ("Agreement"), dated as of July 26, 2001, between Georgia Power Company, a corporation organized and existing under the laws of the State of Georgia, having its principal place of business in Atlanta, Georgia ("Buyer"), and Southern Power Company, a corporation organized and existing under the laws of the State of Delaware, having its principal place of business in Atlanta, Georgia ("Seller") (Buyer and Seller collectively referred to as the "Parties").
W I T N E S S E T H:
WHEREAS, Buyer is authorized by its Certificate of Incorporation and by the State of Georgia to engage in the purchase, generation, transmission, sale and distribution of electricity for heat, light and power to the public;
WHEREAS, Buyer is presently certified by the Georgia Public Service Commission to provide certain capacity and energy from the Facility (as hereinafter defined) to its retail customers pursuant to that certain Essential Terms and Conditions of Georgia Power Company's Proposal to Build Two Combined Cycle Units at Plant Wansley, which were approved by the Commission in GPSC Docket No. 11086-U, on March 30, 2000 (the "Essential Terms and Conditions").
WHEREAS, Buyer is currently developing the Facility at its Plant Wansley site;
WHEREAS, Buyer wishes to transfer the Facility to Seller pursuant a separate asset transfer agreement; WHEREAS, Seller agrees to provide the capacity and associated energy from the Facility to Buyer on the same terms and conditions as the Essential Terms and Conditions approved by the Georgia Public Service Commission so that Buyer's retail customers are not adversely affected;
WHEREAS, Seller intends to own and operate the Facility;
WHEREAS, Buyer has agreed to purchase from Seller and Seller has agreed to sell to Buyer capacity and associated energy generated by the Facility all in accordance with the provisions of this Agreement;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises and agreements set forth herein and other good and valuable
consideration, the receipt, sufficiency and adequacy of which are hereby
acknowledged, Buyer and Seller each intending to be legally bound, hereby agree
as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. In addition to the terms and phrases defined
in the preamble or body of this Agreement, the following initially capitalized
terms and phrases when used in this Agreement shall have the meanings set forth
below:
1.1.1 "Affiliate" - means any other existing or future
entity directly or indirectly controlled by or under direct or indirect common
control of Southern Company.
1.1.2 "Commercial Operation Date" - means, with respect to a Unit, the date on which such Unit achieves commercial operation, which shall be deemed to have occurred when start-up and testing of such Unit has been completed in accordance with Article 9 and the Unit is capable of and available for producing energy and delivering same to the Southern Electric Transmission System on a reliable basis.
1.1.3 "Contract Capacity Ratio" - means 932/1132.
1.1.4 "Facility" - means the two 566 MW gas fired combined cycle units (referred to individually as a "Unit" and collectively as the "Facility") located at the Plant Wansley site, which Seller proposes to own, operate and use to fulfill its obligations under this Agreement.
1.1.5 "FERC" - means the Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers and functions thereof under the Federal Power Act.
1.1.6 "Georgia ITS" - means the Georgia Integrated Transmission System, the high voltage electricity transmission system owned by Buyer, Georgia Transmission Corporation, the Municipal Electric Authority of Georgia, and the City of Dalton, Georgia, and operated in an integrated fashion by the Georgia ITS participants, as modified or expanded from time-to-time.
1.1.7 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department or other such entity, but excluding any such agency, court, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee.
1.1.8 "GPSC" - means the Georgia Public Service Commission
or any Governmental Authority succeeding to the powers and functions thereof.
1.1.9...."Required Commercial Operation Date" - means June 1,
2002; provided, however, that such date may be extended due to a Force Majeure
Event for a term equal to the period of the delay caused by said Force Majeure
Event.
1.1.10 "Southern Electric Transmission System" - means the
high voltage electricity transmission system of Buyer, either singularly or as a
part of the integrated transmission systems of the electric utility operating
companies of Southern Company (currently Alabama Power Company, Georgia Power
Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric
and Power Company), including without limitation, the Georgia ITS, as modified
or expanded from time-to-time, as well as any successor in function.
1.1.11 "Term" - means the term of this Agreement.
1.1.12 "Unit" - means the natural gas-fired combined cycle generating unit having a nominal capability of producing approximately 566 MW to be constructed at the Facility. The Unit will be comprised of two combustion turbines with two heat recovery steam generators, a common steam turbine generator, and associated equipment, systems, and structures as necessary for the operation of the Unit.
1.1.13 "Wansley CC Facility Assets" - means the Facility and associated support system assets and associated real property and rights transferred from Buyer to Seller pursuant to the definitive Wansley CC Facility asset transfer agreement(s).
1.2 Interpretation. In this Agreement and the Appendices hereto, unless the context otherwise requires:
1.2.1 words generally importing the singular shall include the plural and vice versa; 1.2.2....references to "entity" include, without limitation, corporations, partnerships, associations and governmental authorities.
1.2.3 Appendix A attached hereto is incorporated by
reference herein.
ARTICLE 2
CONDITIONS PRECEDENT
|
2.1 Regulatory Approvals and Transfer of Assets
2.1.1....The obligations of the Parties are conditioned on the
following: (i) acceptance by the GPSC of this Agreement as a substitute for the
Essential Terms and Conditions which was certified in GPSC Docket No. 11086-U;
(ii) approval by FERC of this Agreement without modification; and (iii) the
closing of the expected transfer of the Wansley CC Facility Assets to Seller
necessary to perform this Agreement and of Seller's financing of such transfer.
2.1.2....The Parties shall use its reasonable best efforts to obtain the GPSC acceptance and FERC approval in a timely manner without material modification to the terms and conditions of this Agreement.
2.2 Recovery of Payments from Customers.
2.2.1....Notwithstanding any other provision of this
Agreement, if Buyer, at any time after the GPSC Approval is issued, is denied
authorization of (i) the GPSC to recover from its customers any or all of the
payments to be made thereafter to Seller pursuant to this Agreement, (ii) the
FERC to make payments to Seller as specified herein or to recover from its
partial requirements or full requirements customers any or all of the payments
to be made thereafter to Seller pursuant to this Agreement, or (iii) any other
Governmental Authority which now has, or in the future may have, jurisdiction
over Buyer's retail rates or wholesale partial requirements or full requirements
rates, to recover from its customers any or all of the payments to be made
thereafter to Seller pursuant to this Agreement; subject to the provisions of
Section 2.2.4, then Buyer may, at its sole option, adjust the payments made
under this Agreement to the amount(s) which Buyer is authorized by such
Governmental Authority to recover from Buyer's customers ("Payment Adjustment
Event").
2.2.2....For purposes of the recovery of the payments made to Seller under this Agreement, Buyer shall not take any action which would distinguish this Agreement from other resources available to Buyer in its allocation of capacity and associated energy from the Facility between retail and wholesale customers, if or, to the extent that so distinguishing this Agreement would adversely affect Seller.
2.2.3....If, at any time, Buyer receives notice that the GPSC, FERC or any other Governmental Authority seeks or will seek to prevent full recovery by Buyer from its customers of any and all payments already made or required to be made to Seller under this Agreement, then Buyer shall, as soon as reasonably practical after Buyer's receipt of such notice, give written notice thereof to Seller. Buyer shall use its reasonable best efforts to defend and uphold the validity of this Agreement and its right to recover from its customers all payments required to be made by Buyer to Seller hereunder, and will cooperate in any effort by Seller to intervene in any proceeding challenging the validity of this Agreement and the right of Buyer to recover from its customers all payments to be made by it hereunder.
2.2.4....In the event that pursuant to Section 2.2.1, Buyer adjusts the payments to be made by Buyer to Seller pursuant to this Agreement due to a Payment Adjustment Event, Seller may, at its sole option and pursuant to the provisions of this Section 2.2.4, terminate this Agreement and, except as otherwise provided herein, the Parties shall have no further liability or obligation to the other Party.
.........2.2.4.1 Buyer agrees to provide Seller prior written notice of its intent to adjust the payments to be made hereunder. Such notice shall specify the effective date of the Payment Adjustment Event. Within [redacted] of Seller's receipt of such notice, Seller shall inform Buyer if it intends to terminate this Agreement or continue to supply the contracted capacity and energy to Buyer for the remainder of the Term at the adjusted rates in accordance with Section 2.2.4.3 of this Agreement.
.........2.2.4.2 In the event Seller determines to terminate this Agreement, Seller may do so no earlier than the date which is [redacted] after the otherwise effective date of the Payment Adjustment Event. During such period, Buyer shall pay Seller the unadjusted rates as set forth herein. Notwithstanding the foregoing, Buyer shall have the right to terminate this Agreement at the end of such [redacted] period upon [redacted] written notice to Seller during such [redacted] period.
.........2.2.4.3 In the event Seller determines to continue to
supply the contracted capacity and energy to Buyer for the remainder of the
Term, Buyer agrees to pay Seller the unadjusted rates set forth herein for a
period of [redacted] from the effective date of the Payment Adjustment Event,
but may adjust the payments thereafter to the new rates.
2.3 Consequences of Termination. In the event of a termination of this
Agreement pursuant to Section 2.1 or 2.2, the Parties shall have no further
obligation to each other under this Agreement following termination, except that
such termination shall not affect the liability of either Party for obligations
arising prior to termination or for damages, if any, resulting from any breach
of this Agreement.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 Representations and Warranties of Seller. Seller hereby
makes the following representations and warranties to Buyer:
3.1.1....Seller is a corporation that is duly organized, validly existing and in good standing under the laws of the State of Delaware, that is qualified to do business in the State of Georgia and that has the legal power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
3.1.2....The execution, delivery and performance by Seller of this Agreement have been duly authorized by all necessary corporate action, and do not and will not require any consent or approval, other than that which has been obtained.
3.1.3....The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Seller is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
3.1.4....This Agreement constitutes the legal, valid and binding obligation of Seller enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
3.1.5....There is no pending, or to the knowledge of Seller, threatened action or proceeding affecting Seller before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement.
3.2 Representations and Warranties of Buyer Buyer hereby makes the following representations and warranties to Seller:
3.2.1....Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia, that is qualified to do business in the State of Georgia and that has the legal power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.
3.2.2....The execution, delivery and performance by Buyer of this Agreement have been duly authorized by all necessary corporate action, and do not and will not require any consent or approval other than that which has been obtained.
3.2.3....The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Buyer is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.
3.2.4....This Agreement constitutes the legal, valid and binding obligation of Buyer enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.
3.2.5....There is no pending or, to the knowledge of Buyer, threatened action or proceeding affecting Buyer before any Governmental Authority which purports to affect the legality, validity or enforceability of this Agreement.
3.3 Covenants. 3.3.1....Seller shall complete construction of the Facility or cause construction of the Facility to be completed; and (i) own, lease or control the entire electrical output of; and (ii) operate and maintain the Facility in accordance with this Agreement for the Term.
3.3.2....Seller shall at all times during the Term pay or cause to be paid all charges, taxes, assessments and fees which may be assessed by a Governmental Authority (i) upon or against the Facility or (ii) upon or against Seller by reason of the sale or purchase of electricity hereunder. Notwithstanding the above covenant in this Section 3.3.2, Seller shall have the right to contest, in good faith, such charges, taxes, assessments and fees.
3.3.3....Seller shall obtain and maintain at all times during the Term all environmental approvals, permits and plans required by all Governmental Authorities for construction, operation and maintenance of the Facility as contemplated pursuant to this Agreement.
ARTICLE 4
THE PROJECT AND TERM OF AGREEMENT
4.1 The Project. The Project comprises the design, engineering, financing, construction, testing and commissioning of the Facility and the ownership, operation, management and maintenance of the Facility in accordance with and pursuant to the terms of this Agreement.
4.2 Term. This Agreement shall become effective when executed and delivered by both Buyer and Seller and Seller's obligations to sell and Buyer's obligations to purchase capacity and energy from the Facility pursuant to the terms of this Agreement shall commence on the Required Commercial Operation Date of the Facility and remain in full force and effect through December 31, 2009, subject to termination as provided herein. Applicable provisions of this Agreement shall continue in effect after termination or expiration of this Agreement as set forth herein and to the extent necessary to provide for final billings and adjustments.
ARTICLE 5
SALE OF CAPACITY AND ENERGY
5.1 Agreement to Sell and Purchase.
5.1.1....Seller shall at all times during the Term of the
Agreement following the later of (i) the Required Commercial Operation Date, and
(ii) the first Commercial Operation Date for the Facility, subject to scheduled
outages, forced outages, and the provisions of Article 12, make available to
Buyer up to the Buyer's Contract Capacity Ratio of entire electrical output of
the Facility, net of station service under this Agreement, except during periods
of scheduled maintenance. Buyer agrees to pay for Buyer's Contract Capacity
Rating and the associated energy delivered as provided in Sections 5.2 and
8.1.2.
5.1.2....At any time, Seller may deliver the energy obligated under this Agreement to the Southern Electric Transmission System from (i) the Facility or (ii) an alternative resource other than the Facility or (iii) any combination of (i) and (ii).
5.1.3....Seller shall deliver the energy to Buyer at the Southern Electric Transmission System. 5.2 Calculation of Monthly Payments. Beginning June 1, 2002, and ending December 31, 2009, Buyer shall pay Seller a Monthly Capacity and Energy Payment calculated as follows:
5.2.1....Capacity Price ($/kW-mo.): [redacted] applied to the
Contract Capacity Rating (as defined in Article 9.1) for the months of
[redacted] and [redacted] applied to the Contract Capacity Rating for
[redacted];
5.2.2....FO&M ($/kW-yr.): [redacted] applied to the Contract Capacity Rating (as defined in Article 9.1) payable in equal monthly amounts.
5.2.3 Start-up Cost [redacted] per Unit per normal start applied after the first [redacted] beginning [redacted] of each year. A normal start is defined as any hour in which the Unit output is changed from zero (0) megawatts to anything greater than zero (0) megawatts.
5.2.4 Fixed Fuel Transportation As provided in Article 10.3.2.
5.2.5 Energy Charge Each month, the energy charge shall be the
sum across the month of the
[redacted].
Where:
VO&M ($/MWh) = [redacted] Hourly Energy Cost = [redacted].
Actual Average Fuel Cost of the Units = [redacted]
The Hourly Commodity Price shall be determined by adding all the costs of the gas commodity (including applicable taxes) each hour and dividing by the hourly volume of gas necessary to meet the hourly operation. For gas consumed in any hour, the Commodity price may be any combination of the following: [redacted]. In the event the energy is delivered [redacted], the Hourly Commodity Price shall be equal to [redacted].
The Variable Transportation Costs shall be the effective [redacted] Delivered MWH shall be [redacted], including ramp-up and ramp-down energy, or energy delivered from an alternative resource.
5.2.6 Contract Availability: For each season, the Seasonal Availability Factor ("SAF") shall not be less than [redacted]. [redacted] for variations in SAF above and below [redacted] will be calculated as set forth in Article 5.2.8.
5.2.7 [redacted] for non-delivery of capacity and energy shall be limited to the reductions in capacity payments set forth in Article 5.2.9.
5.2.8 Seasonal Availability [redacted] will be calculated as soon as practical after each season based on the SAF for the season as follows:
Seasonal Availability Factor = [redacted]
Where:
FOH = Unplanned (Forced) Outage Hours
EFDH = Equivalent Unplanned (Forced) Derated Hours
ARDH = Alternative Resource Delivery Hours which are the hours
[redacted] in which delivery is made from an alternative resource.
PH = Period Hours.
5.2.8.1 The Summer Season shall be comprised of the months of [redacted]. The Non-Summer Season shall be comprised of [redacted].
5.2.8.2 Scheduled maintenance hours shall be excluded from the calculation of
SAF.
5.2.9 [redacted]
5.2.10 The Contract Heat Rate for each Unit shall be based on the
Delivered MW for each Unit in each hour as follows:
5.2.10.1 For Normal Operation : If the MW are between the month's Minimum Normal Capability and the month's Maximum Normal Capability, then the summer and winter heat rates are calculated according to the curves supplied in Appendix A. (In all instances described in this Article 5.2.10 and its sub-parts, summer heat rate curves will be applicable for the months [redacted], and winter heat rate curves will be used for the months of [redacted].)
5.2.10.2 If the MW exceed the month's Maximum Normal Capability and is less than or equal to the month's Over Pressure Mode Capability, then the Unit output shall be calculated assuming a [redacted] block at a heat rate of [redacted], plus the remaining Unit output calculated using appropriate summer or winter heat rate calculation.
5.2.10.3 If the MW exceed the month's Over Pressure Mode Capability and is less than or equal to the month's Capability in Over Pressure Mode with Power Augmentation, then the Unit output shall be calculated assuming a [redacted] block at a heat rate of [redacted] plus the [redacted] block of over pressure output at [redacted] plus the remaining Unit output calculated using the appropriate summer or winter heat rate calculation. Power augmentation is not available at temperatures below [redacted] and is limited to [redacted]
5.2.10.4 If energy is delivered from an alternative resource, [redacted].
ARTICLE 6
BILLING AND COLLECTIONS
6.1 Capacity and Energy Billing and Payment.
6.1.1 The Buyer and Seller shall agree to a mutually
acceptable billing and payment process prior to the Required Commercial
Operation Date.
ARTICLE 7
PROJECT IMPLEMENTATION AND CONSTRUCTION
7.1 Project Implementation Seller shall:
7.1.1....complete construction of the Facility and thereafter
(i) own, lease or control the entire output of, and (ii) operate and maintain
the Facility for the Term;
7.1.2....apply for, and use diligent efforts to obtain, all Consents, all renewals thereof, and any other approvals of Government Authorities that are required in connection with Seller's obligations.
7.2 Design and Construction of the Facility.
7.2.1....Seller shall provide to Buyer, so that Buyer may provide to the GPSC, Seller's preliminary start-up and test schedule for the Facility at least ninety (90) days prior to start-up and testing of the Facility.
7.2.2....Seller shall provide to Buyer, so that Buyer may provide to the GPSC, a Milestone Schedule which shall set forth the Required Commercial Operation Date as well as the scheduled Initial Synchronization Date of the Facility to the Georgia ITS. Seller shall notify Buyer, so that Buyer may notify the GPSC, of any changes in the Milestone Schedule as they may occur from time to time; provided, however, that such notification shall not relieve Seller from any of its obligations set forth elsewhere herein.
7.3 Failure to Meet Required Commercial Operation Date. Seller is
responsible for meeting the Required Commercial Operation Date of June 1, 2002.
If the Seller is unable to meet the Required Commercial Operation Date, it may
supply the capacity and energy from an alternative resource as allowed in
Article 5.1.2. If delivery is made from an alternative resource, [redacted]. If
the Seller is unable to meet the Required Commercial Operation Date and it fails
to, or elects not to, supply the capacity and energy from an alternative
resource as allowed in Article 5.1.2, [redacted] not to exceed one-half of one
(1) year's annual capacity payment for the Unit.
7.4 Right to Advance Commercial Operation. Seller may notify Buyer of
advancement of the Commercial Operation Date. Notification must be given by
[redacted], and at least [redacted] in advance of the modified Commercial
Operation Date. Once notification is given, the Seller will be accountable to
meet the advanced Commercial Operation Date and [redacted]. In the event that
the Commercial Operation Date is advanced, payments and guarantees will be
advanced accordingly.
ARTICLE 8
INTERCONNECTION AND METERING
8.1 Interconnection Facilities.
8.1.1....Buyer shall complete, or cause the completion of, the design, financing, construction, installation, maintenance and testing of the interconnection facilities in a manner consistent with Prudent Utility Practices and as necessary to allow the flow of energy from the Facility. For purposes of this Agreement, whenever it is used, "Prudent Utility Practices" means, 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 the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired results at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practices 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirements of this Agreement.
8.1.2 Seller shall be responsible for all reasonable costs and expenses (including overheads) incurred in connection with the design, construction, and installation of all or part of the interconnection facilities and Buyer shall pay to Seller for the Term of the Agreement per [redacted] kW-mo. (applied to Buyer's Contract Capacity Rating) for interconnection costs.
8.1.3 Buyer shall obtain any and all necessary rights of way and easements, including adequate and continuing access rights on and across the Facility to install, operate, maintain, replace and/or remove the interconnection facilities located at the Facility.
8.2 Protective Devices. Seller shall, at its own cost, provide, install and maintain internal breakers, relays, switches, synchronizing equipment and other associated protective control equipment necessary to maintain the reliability, quality and safety of the electric power production of the Facility.
8.3 Meters.
8.3.1 Seller shall design, locate, construct, install, own,
operate and maintain the Metering System in accordance with Prudent Utility
Practices in order to measure and record the amount of energy and capacity
delivered from the Facility.
8.3.2 Seller shall inspect and test all meters at such
times as will conform to Prudent Utility Practices, but not less often than once
every two (2) years. 8.3.3 If any seal securing the Metering System is found
broken, if the Metering System fails to register, or if the measurement made by
a metering device is found upon testing to vary by more than one half percent
(0.5%) from the measurement made by the standard meter used in the test, an
adjustment shall be made correcting all measurements of energy made by the
Metering System during (i) the actual period when inaccurate measurements were
made by the Metering System, if that period can be determined, or (ii) if such
actual period cannot be determined, the later half of the period from the date
of the last test of the Metering System to the date such failure is discovered
or such test is made (such period herein the "Adjustment Period"). The amount of
the adjustment shall be determined (i) by correcting the error if the percentage
of error is ascertainable by calibration, tests or mathematical calculation, or
(ii) if not so ascertainable, by estimating on the basis of deliveries under
similar conditions during the period since the last test.
ARTICLE 9
COMMERCIAL OPERATION, TESTING AND DESIGNATION OF CAPACITY
9.1 Commercial Operation Test. The nominal capacity of the Facility is expected to be 1132 MW (566 MW per Unit).. The Contract Capacity Rating for the first year following Commercial Operation shall be based on actual demonstrated capability following performance testing with over pressure and power augmentation as corrected to [redacted] and [redacted] relative humidity. Seller will have the right to re-demonstrate within [redacted] of the initial demonstration. Thereafter, the annual Contract Capacity Rating will be declared prior to June 1 for each year of the term of the Agreement. All capacity-dependent payments or calculations will utilize the figure determined in this manner for each twelve-month period beginning June 1 of each year. For the term of the Agreement, [redacted]. The capacity dedicated to and obligated to Buyer under this Agreement shall be the Contract Capacity Ratio times the annual Contract Capacity Rating (Buyer's "Contract Capacity Rating").
9.2 Monthly Capacity Increments. Each year, at the time of demonstration or declaration of the Contract Capacity Rating, the following additional capacity increments shall be declared for each month of the twelve-month period beginning June 1: Minimum Normal Capability, Maximum Normal Capability, Over Pressure Mode Capability, and Capability in Over Pressure Mode with Power Augmentation. For the months of June through September, the Capability in Over Pressure Mode with Power Augmentation shall not be less than the Contract Capacity Rating for the year.
ARTICLE 10
OPERATION AND MAINTENANCE
10.1 Operation and Maintenance.
10.1.1 Seller shall manage, control, operate and maintain the Facility in a manner consistent with Prudent Utility Practices. Seller shall also operate the Facility in accordance with applicable reliability criteria and guides of the SERC and NERC.
10.1.2 Seller shall employ at the Facility all safety devices and safety practices required by Prudent Utility Practices.
10.2 Maintenance Scheduling. Maintenance schedules will be determined based on the manufacturer's recommendations and Prudent Utility Practices. All scheduled maintenance will be coordinated to minimize the impact of scheduled maintenance on the availability of the Units, but such scheduled maintenance hours shall not count in the calculation of the SAF as set forth in Articles 5.2.8 and 5.2.9.
10.3 Fuel Supply.
10.3.1 The Parties intend to optimize the commodity price by
[redacted]. In addition, the Parties intend to manage the [redacted] to keep
these costs at a minimum necessary to maintain reliable gas service. The actual
cost of the commodity will be used in calculating the energy charges as
described in Article 5.2.
10.3.2 Buyer shall pay to Seller as an additional payment
[redacted] associated with Buyer's Contract Capacity Rating. Actual charges are
anticipated to be the effective fixed portion of the [redacted] for gas
transported from [redacted] to Plant Wansley multiplied by the pipeline capacity
sufficient to meet the peak hourly gas requirements plus allocated storage
charges necessary to maintain [redacted]of firm gas storage deliverability
connected to Transco, plus all applicable taxes. [redacted] will be included in
the Energy Charge and will not be recovered separately.
ARTICLE 11
DELIVERY OF CAPACITY AND ENERGY
11.1 Coordination, Scheduling and Dispatch. The Seller intends to operate the Facility in the Southern electric system economic dispatch. However, the Seller and Buyer reserve the right to schedule the dispatch of the Units under an appropriate non-discriminatory scheduling procedure.
ARTICLE 12
FORCE MAJEURE
12.1 Definition of Force Majeure Event. For the purposes of this Agreement, a "Force Majeure Event" means any occurrence, nonoccurrence or set of circumstances that is beyond the reasonable control of Seller and is not caused by Seller's negligence or lack of due diligence, including, without limitation, flood, ice, earthquake, windstorm or eruption; fire; explosion; invasion, civil war, commotion or insurrection; sabotage or vandalism; military or usurped power; or act of God or of a public enemy. The term Force Majeure Event shall not include (i) the inability to meet a Legal Requirement or the change in a Legal Requirement; (ii) a site-specific strike, walkout, lockout or other labor dispute; (iii) equipment failure, unless such equipment failure results directly from the Force Majeure Event, or (iv) changes in market conditions that affect the cost or availability of the Facility's primary or secondary fuel supply or the cost of power from resources other than the Facility.
12.2 No Breach or Liability. Seller shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder for so long as failure to perform such obligation shall be due to a Force Majeure Event.
12.3 Capacity and Energy Payments. [redacted].
12.4 Mitigation. Following the occurrence of a Force Majeure Event, Seller shall:
12.4.1...give to Buyer, so Buyer can give to the GPSC, notice thereof, followed by written notice if the first notice is not written, as promptly as possible after Seller becomes aware of such Force Majeure Event, describing the particulars of such Force Majeure Event;
12.4.2...use its reasonable best efforts to remedy its inability to perform as soon as practicable; provided, however, that this Article shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of Seller, are contrary to its interest, and provided further, that the settlement of strikes, lockouts or other labor disputes shall be entirely within the discretion of Seller; and
12.4.3...when it is able to resume performance of its obligations under this Agreement, give the GPSC and Buyer written notice to that effect.
12.5 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond its stated Term.
12.6 Extended Force Majeure Events. Seller may terminate this Agreement upon [redacted] prior written notice if a Force Majeure Event prevents it from substantially performing its obligations hereunder for a period of [redacted]. Upon termination of this Agreement pursuant to this Article, Seller shall no longer be entitled to recover Monthly Capacity and Energy Payments.
ARTICLE 13
DEFAULT AND REMEDIESDEFAULT AND REMEDIESDEFAULT AND REMEDIES
13.1 Failure of Performance by Seller. The occurrence of any of the following events shall constitute a "Failure of Performance" by Seller:
13.1.1...Seller fails to cause the Facility to achieve the
Commercial Operation Date on or before that date which is twelve (12) months
after June 1, 2002;
13.1.2...Seller fails both (i) to perform or observe any of
its material obligations under this Agreement due to its inability or failure to
comply with a Legal Requirement and (ii) to promptly commence and diligently
pursue action to cure and cures such inability or failure to perform within
[redacted]. Seller agrees to give Buyer, so Buyer may give to the GPSC, notice
as promptly as practicable after Seller becomes aware that a Legal Requirement
will prohibit Seller from performing. If Seller reasonably believes that its
inability or failure to perform or observe any of its material obligations under
this Agreement will extend beyond [redacted], Seller shall submit a plan for
curing such inability or failure (the "Cure Plan") as soon as reasonably
practicable but in no event more than [redacted] after Seller's inability or
failure first arose;
13.1.3...A court having jurisdiction shall enter (i) a decree or order for relief in respect of Seller in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Seller bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Seller under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Seller (collectively, "Trustee") or of any substantial part of its affairs;
13.1.4...Seller shall (i) commence a voluntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or any other case or proceeding to be
adjudicated a bankrupt or insolvent, or (ii) consent to the entry of a decree or
order for relief in respect of Seller in any involuntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or (iii) file any petition, answer or consent seeking
reorganization or relief under any applicable Federal or state law, or (iv)
consent to the filing of any petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or similar official of Seller (collectively, a "Receiver") or of any substantial
part of its property or (v) make an assignment for the benefit of creditors, or
(vi) be unable, or admit in writing its inability, to generally pay its debts as
they become due, or (vii) take any action in furtherance of any of the
foregoing;
13.2 Remedies If a Failure of Performance by Seller has occurred, then Buyer may terminate this Agreement by giving [redacted] written notice thereof to Seller and in that event Seller will not be entitled to recover Monthly Capacity and Energy Payments.
ARTICLE 14
COMPLIANCE WITH LAWS, RULES AND REGULATION
14.1 Compliance. Seller covenants that as of the Commercial Operation Date and for the Term, Seller shall be in compliance with all legal requirements with respect to the ownership, operation and maintenance of the Facility.
14.2 Change of Law.
14.2.1...A "Change of Law" means a change in legal requirements which constitutes a new environmental or tax law or regulation or a new interpretation of such law or regulation, which is enacted after September 17, 1999, and which generally affects the cost of natural gas-fired electrical generation.
14.2.2...Except as provided in Articles 14.2.3 and 14.2.4, Buyer's capacity and energy payments allowed under this Agreement shall not be altered as a result of a Change in Law which cause Seller to incur additional costs or realize savings in carrying out its obligations under this Agreement.
14.2.3...If after September 17, 1999, there is a Change of Law
which causes Seller to incur additional costs which are projected to increase
Seller's annual costs of carrying out its obligations under this Agreement by
[redacted], then Seller may notify Buyer of such increase in annual costs. Upon
receiving such notice, Buyer shall apply to the GPSC to increase the amount of
allowed capacity and energy expenses to recover the increased costs resulting
from the Change of Law, and if that increase is allowed, then Buyer shall
increase its payments to Seller, on a pro-rata basis, and shall be allowed to
recover these increased payments from its rate payers. If the GPSC either
refuses to allow an increase in the authorized expenses or fails to act within
twelve (12) months of the request to increase having been filed, Seller may
terminate its obligations under this Agreement by providing the Buyer thirty
(30) days written notice of its intent to terminate the Agreement effective
between the next October 1 and December 31. If Seller fails to terminate this
Agreement or until the effective date of any termination, Buyer shall continue
to pay the capacity and energy charges as allowed by this Agreement, as it may
have been amended by the GPSC after it was initially approved.
14.2.4... If after September 17, 1999, there is a Change of Law which causes Seller to incur a reduction in costs which are projected to decrease Seller's annual costs of carrying out its obligations under this Agreement by [redacted], then Seller shall reduce its capacity and energy payments to reflect its pro-rata share of those savings.
14.3 NOx Allowances The costs incurred to purchase or create or otherwise obtain NOx and VOC allowances and NOx and VOC set-asides are not included in the proposed Capacity and Energy Payments described in this Agreement, but will be recovered separately. [redacted].
ARTICLE 15
ASSIGNMENT AND TRANSFERS OF INTERESTS
15.1 Assignment and Assumption of Obligations. Seller may assign its obligations under this Agreement or any portion thereof to an affiliate with equal or greater creditworthiness characteristics; provided, however, (i) any assignee shall expressly assume Seller's obligations hereunder and (ii) unless expressly approved by the GPSC, no assignment, whether or not consented to, shall relieve the Seller of its obligations hereunder in the event its assignee fails to perform.
15.2 Assignment to Lenders. Notwithstanding Article 15.1, Seller may, without the consent of the Buyer, assign this Agreement to a Lender for collateral security purposes in connection with any financing or the refinancing of the Company's assets which includes in whole or in part the Facility.
ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1 Amendments. This Agreement may be amended by and only by a written instrument duly executed by each of Buyer and Seller, which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
16.2 Binding Effect. This Agreement and any extension shall inure to the benefit of and shall be binding upon the Parties and their respective permitted successors and assigns.
16.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
16.4 Entire Agreement. This Agreement constitutes the entire understanding between the Parties and supersedes any previous agreements between the Parties. The Parties have entered into this Agreement in reliance upon the representations and mutual undertakings contained herein and not in reliance upon any oral or written representations or information provided by one Party to the other Party not contained or incorporated herein.
16.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, without giving effect to conflict of laws principles.
16.6 Waiver The failure of either Party to enforce at any time any of the provisions of this Agreement, or to require at any time performance by the other Party of any of the provisions hereof, shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof, or the right of such Party hereafter to enforce every such provision. No modification or waiver of all or any part of this Agreement shall be valid unless it is reduced to a writing, which expressly states that the Parties hereby agree to a waiver or modification as applicable, and is signed by both Parties.
16.7 Headings. The headings contained in this Agreement are used solely for convenience and do not constitute a part of the Agreement between the Parties hereto, nor should they be used to aid in any manner in the construction of this Agreement.
16.8 Third Parties This Agreement is intended solely for the benefit of the Parties hereto. Except as otherwise expressly provided herein, nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement.
16.9 Severability. If any term or provision of this Agreement or the application thereof to any person, entity, or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons, entities or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement under seal in Atlanta, Georgia as of the date first above written.
GEORGIA POWER COMPANY("Buyer")
By: .........
Name: Fred D. Williams
Title: Senior Vice President
Attest: .........
Title: .........
[SEAL]
SOUTHERN POWER COMPANY ("Seller")
By: .........
Name: Douglas E. Jones
Title: Vice President
Attest: .........
Title: .........
[SEAL]
|
Appendix A
Heat Rate and Input / Output Curves
[redacted]
Exhibit 10.22
PUBLIC RELEASE VERSION
POWER PURCHASE AGREEMENT
BETWEEN
GEORGIA POWER COMPANY
AND
SOUTHERN POWER COMPANY
AT
PLANT GOAT ROCK
March 30, 2001
TABLE OF CONTENTS
ARTICLE 1.........................................................................................................2
DEFINITIONS..............................................................................................2
1.1 Certain Definitions....................................................................2
ARTICLE 2........................................................................................................13
CONDITIONS PRECEDENT....................................................................................13
2.1. Regulatory Approvals and Transfer of Assets...........................................13
ARTICLE 3........................................................................................................13
TERM OF THE AGREEMENT...................................................................................14
3.1. Term..................................................................................14
3.2. Early Termination.....................................................................14
ARTICLE 4........................................................................................................14
REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................................14
4.1 Mutual Representations, Warranties and Covenants......................................14
4.2 Covenants of Seller...................................................................16
ARTICLE 5........................................................................................................16
DELIVERY OF RETAIL CAPACITY AND ENERGY..................................................................16
5.1 Agreement to Provide Capacity and Energy..............................................16
----------------------------------------
5.2 Calculation of Monthly Capacity Payments..............................................17
5.3 Calculation of Monthly Energy Payments................................................17
ARTICLE 6........................................................................................................18
BILLING AND COLLECTION..................................................................................18
6.1 Capacity and Energy Billing and Payment...............................................18
ARTICLE 7........................................................................................................18
FACILITY IMPLEMENTATION AND CONSTRUCTION................................................................18
7.1 Project Implementation................................................................18
7.2 Failure to Achieve Required Threshold Date............................................19
7.3 Cover Period Energy...................................................................19
7.4 Failure to Meet Required Commercial Operation Date....................................20
7.5 Right to Advance Required Commercial Operation Date...................................20
ARTICLE 8........................................................................................................20
INTERCONNECTION AND METERING............................................................................20
8.1 Interconnection.......................................................................20
---------------
8.2 Protective Devices....................................................................21
8.3 Meters................................................................................21
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ARTICLE 9........................................................................................................21
COMMERCIAL OPERATION, TESTING AND DESIGNATION OF CAPACITY...............................................22
9.1 Commercial Operation Test.............................................................22
9.2 Annual Nomination.....................................................................22
ARTICLE 10.......................................................................................................22
OPERATION, MAINTENANCE AND DISPATCH.....................................................................23
10.1 Operation, Maintenance and Dispatch...................................................23
10.2 Maintenance Scheduling................................................................23
10.3 Air Permits..........................................................................23
ARTICLE 11.......................................................................................................24
FUEL SUPPLY.............................................................................................24
11.1 Fuel Supply Plan......................................................................24
11.2 Fuel Transportation Capacity..........................................................24
ARTICLE 12.......................................................................................................26
12.1 Definition of Force Majeure Event.....................................................26
12.2 No Breach or Liability................................................................26
12.3 Capacity and Energy Payments..........................................................26
12.4 Mitigation............................................................................26
12.5 Suspension of Performance.............................................................27
ARTICLE 13.......................................................................................................27
FAILURE OF PERFORMANCE AND REMEDIES.....................................................................27
13.1 Notice of Failure of Performance......................................................27
13.2 Failure of Performance by Seller......................................................27
13.3 Failure of Performance by Buyer.......................................................29
13.4 Remedies..............................................................................31
13.5 Discharge of Obligations Upon Termination.............................................31
13.6 No Consequential Damages..............................................................31
13.7 No Warranties.........................................................................31
ARTICLE 14.......................................................................................................32
COMPLIANCE WITH LAWS, RULES AND REGULATION..............................................................32
14.1 Compliance............................................................................32
14.3 NOx Emissions.........................................................................32
14.4 Taxes.................................................................................32
ARTICLE 15.......................................................................................................32
ASSIGNMENT AND TRANSFERS OF INTERESTS...................................................................32
15.1 Assignment and Assumption of Obligations..............................................32
15.2 Assignment to Lenders.................................................................33
ARTICLE 16.......................................................................................................33
16.1 Indemnity.............................................................................33
16.2 Notice of Proceedings.................................................................33
ARTICLE 17.......................................................................................................34
17.1 Amendments............................................................................34
17.2 Binding Effect........................................................................34
17.3 Counterparts..........................................................................35
17.4 Notices...............................................................................35
17.5 Entire Agreement......................................................................36
17.6 Governing Law.........................................................................36
17.7 Non-Waiver............................................................................36
17.8 Headings Not Affecting Meaning.......................................................36
17.9 Third Parties.........................................................................36
17.10 Severability..........................................................................37
17.11 Cooperation...........................................................................37
17.12 Relationship..........................................................................37
17.13 Confidentiality.......................................................................37
17.14 Replacement Index.....................................................................38
APPENDIX A........................................................................................................1
CAPACITY PAYMENT CALCULATION.............................................................................1
APPENDIX B........................................................................................................1
ENERGY PAYMENT CALCULATION...............................................................................1
APPENDIX C........................................................................................................1
DESIGN PARAMETERS AND SCHEDULING PROCEDURES..............................................................1
APPENDIX D........................................................................................................2
PERFORMANCE TESTING PROCEDURES AND DISPATCH..............................................................2
APPENDIX E........................................................................................................1
DAILY DAMAGE FOR FAILURE TO MEET THE REQUIRED COMMERCIAL OPERATION DATE..................................1
APPENDIX F........................................................................................................1
HIGHER HEATING VALUE GUARANTEED HEAT RATE CURVES.........................................................1
APPENDIX G........................................................................................................1
TRANSMISSION INTERCONNECTION COST ADJUSTMENT.............................................................1
APPENDIX H........................................................................................................1
BILLING PROCEDURES.......................................................................................1
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POWER PURCHASE AGREEMENT
BETWEEN
GEORGIA POWER COMPANY
AND
SOUTHERN POWER COMPANY
THIS POWER PURCHASE AGREEMENT ("Agreement"), dated as of March 30, 2001, is made by and between Georgia Power Company ("Buyer"), a corporation organized and existing under the laws of the State of Georgia with its principal address at 241 Ralph McGill Boulevard, N.E., Atlanta, Georgia 30308, and Southern Power Company ("Seller"), a corporation organized and existing under the laws of the State of Delaware with its principal address at 270 Peachtree Street, N.E., Atlanta, Georgia 30303 (individually a "Party" or collectively the "Parties").
W I T N E S S E T H:
WHEREAS, Buyer is engaged in the distribution and sale of electricity for heat, light and power to the public in the State of Georgia;
WHEREAS, Seller is authorized to, among other things, own and operate electric generating facilities and sell electric capacity and associated energy from such facilities; and
WHEREAS, Buyer has agreed to purchase from Seller and Seller has agreed to sell to Buyer electric capacity and associated energy all in accordance with the provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller each intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. The following capitalized terms and phrases, in addition to those defined above, as and when used in this Agreement shall have the respective meanings set forth below:
1.1.1 "Affiliate" - of a specified entity means any other entity directly or indirectly controlling or controlled by or under direct or indirect common control of or with such specified entity. For purposes of this definition, "control" of an 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. The terms "controlling" and "controlled" have meanings correlative to the foregoing.
1.1.2 "Air Permits" - shall have the meaning as set forth in Section 10.3.
1.1.3 "Annual Period" - means any one of a succession of twelve (12) month periods, the first of which shall begin on June 1, 2002, and end on May 31, 2003.
1.1.4 "Block" - means either Block One or Block Two, when being referred to individually.
1.1.5 "Block One" - means the natural gas-fired combined cycle generating unit having a nominal capability of producing approximately 570 MW to be constructed at the Facility. Block One will comprise two combustion turbines with two heat recovery steam generators, a common steam turbine generator, and associated equipment, systems, and structures as necessary for the operation of the Block.
1.1.6 "Block One Firm Fuel Capacity" - shall mean the amount of firm gas transportation required in connection with the operation of Block One.
1.1.7 "Block Two" - means the natural gas-fired combined cycle generating unit having a nominal capability of producing approximately 610 MW to be constructed at the Facility. Block Two will comprise two combustion turbines with two heat recovery steam generators, a common steam turbine generator, and associated equipment, systems, and structures as necessary for the operation of the Block.
1.1.8 "Block Two Firm Fuel Capacity" - shall mean the amount of firm gas transportation required in connection with the operation of Block Two.
1.1.9 "Blocks" - means both Block One and Block Two, when being referred to collectively.
1.1.10 "Business Day" - means any calendar day excluding Saturdays, Sundays and NERC-defined holidays.
1.1.11 "Capacity Availability Performance Adjustment" or "CAPA" - means the adjustment to the capacity pursuant to Section 5.2 and the calculation set forth in Section C of Appendix A.
1.1.12 "Change of Law" - shall have the meaning as set forth in Section 14.2.
1.1.13 "Commercial Operation Date" - means for each of the respective Blocks, the date on which such Block achieves commercial operation, which shall be deemed to have occurred when (i) start-up and testing of such Block has been completed in accordance with Section 9.1 and Appendix D and (ii) such Block is capable of producing energy and delivering energy to the Transmission System through the Interconnection Point on a reliable basis.
1.1.14 "Confidential Information" - means business or technical information of rightfully in the possession of either Party, which information derives actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure and use, and which information is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Confidential Information consists of information designated as confidential and furnished or disclosed to the other Party in connection with this Agreement.
1.1.15 "Consents" - means any permit, approval, consent, authorization or other requirement that is required from any Governmental Authority in connection with Seller's performance of its obligations under this Agreement, including, without limitation all applicable environmental certificates, licenses, permits and approvals.
1.1.16 "Consumer Price Index" or "CPI" - means the measure of the average change in prices paid by urban consumers for a fixed market basket of goods and services approved by the Bureau of Labor Statistics or any Governmental Authority succeeding to the powers and functions thereof.
1.1.17 "Contract Capacity" - means the capacity of each of the Blocks (in MW) at Rated Conditions new and clean, as specified in Section A.1 of Appendix A.
1.1.18 "Cover Amount" - means, [redacted] delivery in any hour during the
[redacted] Summer Seasonal Performance Periods.
1.1.19 "Cover Period" - shall have the meaning as set forth in Section 7.2.3.
1.1.20 "Delivered Energy" - means, either individually or in combination, the
energy in megawatt hours ("MWh"): (i) generated by the Blocks net of Station
Service and net of energy being delivered to third parties in accordance with
Section 5.1, measured by the Metering System and corrected for any gains or
losses between the metering point and the Interconnection Point; or (ii)
supplied by resources other than one of the Blocks and delivered to the Delivery
Point.
1.1.21 "Delivery Point" - means the point on the Transmission System at which Seller shall deliver the energy and shall be as follows: (i) if from the Blocks, the Delivery Point shall be the Interconnection Point, and (ii) if from an alternate resource, the Delivery Point shall be any point on the Transmission System designated at the time of delivery.
1.1.22 "Demonstrated Capability" - means the demonstrated capacity of such Block at [redacted], as adjusted to Rated Conditions, resulting from a test under Article 9.
1.1.23 "Designated Capacity" - means the amount of capacity (in MW) for each Block nominated by Seller at Rated Conditions. Designated Capacity shall be nominated for each Annual Period by [redacted] prior to the beginning of each such Annual Period and may not exceed the Demonstrated Capability of such Block.
1.1.24 "Facility" - means the land, rights-of-way, Blocks and related equipment and facilities of the electric generating plant to be or being constructed on the Site in connection with each Block. The Facility shall include (without limitation) the Blocks and all associated auxiliary equipment and facilities installed at the Site necessary or used for the production, control, delivery or monitoring of electricity produced on the Site by the Blocks. All equipment and facilities installed on the generator's side of the Interconnection Point in connection with the Blocks are considered to be part of the Facility except those that constitute Interconnection Facilities.
1.1.25 "Failure of Performance" - shall have the meaning as set forth in Sections 13.2 and 13.3.
1.1.26 "FERC" - means the Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers and functions thereof under the Federal Power Act.
1.1.27 "FERC Approval" - means the consent and permission of FERC necessary to satisfy all applicable federal regulations and rules that are administered by and under the jurisdiction of FERC.
1.1.28 "Fixed Charge Rate" - means [redacted].
1.1.29 "Force Majeure Event" - shall have the meaning as set forth in Section 12.1.
1.1.30 "Fuel" - means natural gas, the quantity of which shall be determined based on its higher heating value basis.
1.1.31 "Governmental Authority" - means any local, state, regional or federal administrative, legal, judicial or executive agency, court, commission, department or other such entity, but excluding any such agency, court, commission, department or other such entity acting in its capacity as purchaser, lender, guarantor or mortgagee.
1.1.32 "GPSC" - means the Georgia Public Service Commission or any Governmental Authority succeeding to the powers and functions thereof.
1.1.33 "GPSC Approval" - means the granting of a certificate approving this Agreement as a long term power purchase capacity resource pursuant to O.C.G.A ss. ss. 46-3A-5 and 46-3A-8.
1.1.34 "Guaranteed Heat Rate" - shall have the meaning set forth in Appendices D and F and shall be determined based on the higher heating value basis.
1.1.35 "Incremental Replacement Cost" - means the positive difference, if any, between the Replacement Cost for Scheduled energy not delivered by Seller under this Agreement and the amount that Seller would otherwise have been entitled to receive under Appendix B for such Scheduled energy, if Seller had delivered such Scheduled energy.
1.1.36 "Interconnection Agreement" - means an agreement between Georgia Power and Seller allowing Seller to interconnect the Facility to the Transmission System and operate the Facility in parallel with the Transmission System.
1.1.37 "Interconnection Cost Adjustment" or "ICA" - shall have the meaning as set forth in Appendix G.
1.1.38 "Interconnection Facilities" - means those facilities that Buyer, in its reasonable judgment, determines must be installed or modified in order to electrically connect the Blocks to the Transmission System at 230 kV.
1.1.39 "Interconnection Point" - means the point of electrical connection between the Blocks' collector bus and the 230 kV Interconnection Facilities.
1.1.40 "Interest Rate" - means [redacted].
1.1.41 "kW" - means kilowatt(s).
1.1.42 "Legal Requirement" - means any law, code, statute, regulation, rule, ordinance, judgment, injunction, order or other requirement of a Governmental Authority having jurisdiction over the matter in question, which is valid and applicable to the matter in question at the time of the execution of the Agreement or anytime thereafter during the Term.
1.1.43 "Metering System" - means all meters, metering devices and related instruments used to measure and record electric capacity and energy and used to determine the amount of such electric capacity and energy that is being made available or delivered at the Interconnection Point.
1.1.44 "MMBtu" - means million British thermal units.
1.1.45 "Monthly Capacity Payment" - means the monthly amount to be paid by Buyer to Seller for the supply of Designated Capacity, as calculated in accordance with Appendix A.
1.1.46 "Monthly Energy Payment" - means the monthly amount to be paid by Buyer to Seller for the purchase of energy delivered during such month, as calculated in accordance with Appendix B. 1.1.47 "MW"- means megawatt(s), or one thousand (1,000) kilowatts.
1.1.48 "MWh" - means megawatt hour(s).
1.1.49 "NERC" - means the North American Electric Reliability Council including any successor thereto and subdivisions thereof.
1.1.50 "Primary Gas Delivery Point" - means the primary delivery point for Fuel located at the point of interconnection between Southern Natural Gas Company's ("SNG") pipeline system and Seller's pipeline lateral serving the Facility.
1.1.51 "Project"- means the design, engineering, financing, construction, testing and commissioning of the Facility and the ownership, operation, management and maintenance of the Facility, all of which being reasonably expected to enable Seller to fulfill its obligations under this Agreement.
1.1.52 "Prudent Utility Practices" - means, at a particular time, any of the practices, methods and acts engaged in or approved by a significant portion of the United States electric utility industry prior to such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired results at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practices 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 expected to accomplish the desired results, having due regard for, among other things, manufacturers' warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirements of this Agreement.
1.1.53 "Rated Conditions" - means the conditions as set forth in Appendix D.
1.1.54 "Replacement Cost" - means: (i) the cost incurred in a commercially reasonable manner to produce or purchase the Shortfall Amount, plus transactional costs reasonably incurred in purchasing the Shortfall Amount and additional transmission charges, if any, reasonably incurred to deliver such Shortfall Amount to the Transmission System; or (ii) the market price at which an amount of energy equal to the Shortfall Amount could have been acquired for delivery to the Transmission System, as determined in a commercially reasonable manner. In no event shall Replacement Cost include any penalties, ratcheted demand or similar charges, nor shall there be any requirement to utilize or change utilization of owned or controlled assets or market positions to minimize such cost.
1.1.55 "Required Commercial Operation Date" - means June 1, 2002, for Block One and June 1, 2003, for Block Two, or as such date(s) may be extended or adjusted pursuant to the terms of this Agreement.
1.1.56 "Required Threshold Date" - means October 1, 2002.
1.1.57 "Schedule" - when used as a noun, means an energy schedule, including:
(i) economic dispatch of the Blocks using automatic generation control; or (ii)
submission of a manual or electronic schedule of energy to the dispatch center
for delivery of energy from the Blocks or alternate resources, as submitted in
accordance with the provisions of Section 10.1 and Appendix C of this Agreement.
When used as a verb, "Schedule" means the act of submitting a Schedule in
accordance with the provisions of Section 10.1 and Appendix C of this Agreement.
1.1.58 "Scheduled Outage" - means a planned interruption of a portion or all of the generation capability of the Blocks that has been coordinated with a mutually agreed start date, time and duration.
1.1.59 "Seasonal Availability Factor" or "SAF" - shall have the meaning as set forth in Appendix A.
1.1.60 "Seasonal Performance Period" - means one of the following periods during the Annual Period: [redacted].
1.1.61 "SERC" - means the Southeastern Electric Reliability Council, including any successor thereto and subdivisions thereof.
1.1.62 "Shortfall Amount" - means the positive difference (rounded to the nearest whole MWh) of (i) the Cover Amount in any hour during a Cover Period, less (ii) the amount of energy that Seller causes to be delivered to the Transmission System in such hour in response to such Schedule.
1.1.63 "Site" - means the land in Lee County, Alabama, on which the Facility s to be located.
1.1.64 "Station Service" - means energy produced by the Blocks that is used to serve the electrical requirements of the Blocks.
1.1.65 "Taxes" - means all taxes, fees, levies, licenses, or similar charges imposed by any Governmental Authority, together with any interest and penalties thereon.
1.1.66 "Term" - means the term of this Agreement as specified in Article 3.
1.1.67 "Threshold Date" - means the date on which Seller obtains the necessary Air Permits for Block Two.
1.1.68 "Transmission System" - means the high voltage electric transmission system of Buyer, either singularly or as a part of the integrated transmission systems of the electric utility operating companies of Southern Company (currently Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, and Savannah Electric and Power Company) including transmission systems that are co-owned by one or more of such entities and one or more third parties, such as, but not limited to, MEAG and Georgia Transmission Corporation, as modified or expanded from time-to-time, as well as any successor in function.
1.1.69 "Transportation Quantity" - means the quantity of Fuel that is equal to the sum of (i) the product of the Guaranteed Heat Rate times the number of kilowatt-hours Scheduled by Buyer, plus (ii) the quantity of Fuel necessary for start-up, ramp up and ramp down.
ARTICLE 2
CONDITIONS PRECEDENT
2.1 Regulatory Approvals and Transfer of Assets.
2.1.1 The obligations of the Parties are conditioned on the following: (i) GPSC Approval of this Agreement, and GPSC authorization for the Buyer to recover from its customers all payments required or contemplated to be made to Seller pursuant to Article 5 and Section 14.2 of this Agreement; (ii) approval by FERC of this Agreement without modification; and (iii) the closing of the expected transfer of the Goat Rock Combined Cycle Units One and Two Facility assets to Seller necessary to perform this Agreement and of Seller's financing of such transfer.
2.1.2 The Parties shall use reasonable best efforts to obtain the GPSC acceptance and FERC Approval in a timely manner without material modification to the terms and conditions of this Agreement.
ARTICLE 3
TERM OF THE AGREEMENT
3.1. Term. Subject to the termination and survival provisions herein, this Agreement shall be effective and remain in full force and effect from the date it is executed and delivered by both Buyer and Seller. Seller's obligation to deliver and Buyer's obligation to accept capacity and associated energy from Block One shall be in effect from the Block One Required Commercial Operation Date, through May 31, 2010 (the "Block One Operating Term"). Seller's obligation to deliver and Buyer's obligation to accept capacity and associated energy from Block Two shall be in effect from the Block Two Required Commercial Operation Date, through May 31, 2011 (the "Block Two Operating Term").
3.2 Early Termination. ...Without limiting the operation of other provisions respecting termination, this Agreement is subject to termination under the following circumstances: if, despite diligent efforts, Seller has been unable to obtain the necessary Air Permits for Block Two as of July 1, 2002, and, as of that date, Seller reasonably determines that, despite best efforts it will not be able to obtain such Air Permits by the Required Threshold Date, then Seller may elect to terminate this Agreement with respect to Block Two by no later than July 8, 2002. [redacted].
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Mutual Representations, Warranties and Covenants. Each Party represents, warrants, and covenants to the other Party that: 4.1.1 it is a corporation duly organized, validly existing and in good standing under the respective laws of the state of its formation; 4.1.2 it has all requisite corporate power to own, operate and lease its properties, carry on its business as now conducted, enter into this Agreement, carry out the transactions contemplated hereby, and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement; 4.1.3 the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action, do not and will not require any further consents or approvals of its Board of Directors or shareholders other than that which has been obtained, and do not and will not violate any of the terms or conditions of any contract or other agreement to which it is a party or any Legal Requirements applicable to it; 4.1.4 this Agreement constitutes each Party's legally valid and binding obligation enforceable against it in accordance with the terms thereof, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity; 4.1.5 there are no bankruptcy proceedings pending or being contemplated by it or, to its knowledge, threatened against it; 4.1.6 to its knowledge, there are no pending or threatened actions or proceedings affecting it before any Governmental Authority which purport to affect the legality, validity or enforceability of this Agreement or would be reasonably likely to materially adversely affect its ability to perform this Agreement; and 4.1.7 the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any Legal Requirements, or any partnership agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which it is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing. 4.2 Covenants of Seller. 4.2.1 Seller shall: (i) construct or cause to be constructed; (ii) own, lease, or control the entire electrical output of; and (iii) operate and maintain the Facility, all in accordance with this Agreement. 4.2.2 Seller shall obtain and maintain at all times during the Term all Consents as and when required by applicable Legal Requirements for the construction, operation and maintenance of the Facility as contemplated pursuant to this Agreement. 4.2.3 Seller shall at all times during the Term of this Agreement construct, operate and maintain the Facility in accordance with Prudent Utility Practices.
ARTICLE 5
DELIVERY OF CAPACITY AND ENERGY
5.1 Agreement to Provide Capacity and Energy
5.1.1 During the first year of the Block One Operating Term
(June 1, 2002 through May 31, 2003), Seller shall deliver to Buyer up to an
amount equal to the product of (i) the ratio 370/570 times (ii) the Designated
Capacity, except during periods of Scheduled Outages and Force Majeure Events.
During the first year of the Block Two Operating Term (June 1, 2003 through May
31, 2004), Seller shall deliver to Buyer up to an amount equal to the product of
(i) the ratio 400/610 times (ii) the Designated Capacity, except during periods
of Scheduled Outages and Force Majeure Events. If Seller has failed to obtain
Air Permits by October 1, 2001, then Seller may re-designate the Required
Commercial Operation Date as June 1, 2004, for Block Two.
5.1.2 Beginning on June 1 following the first year of the respective Block One Operating Term or Block Two Operating Term and until the end of the respective Block One Operating Term or Block Two Operating Term, Seller shall sell to Buyer and Buyer shall purchase from Seller up to the entire electrical output of the Block(s), net of Station Service, except during periods of Scheduled Outages and Force Majeure Events.
5.1.3 Seller shall deliver to Buyer, and Buyer shall accept from Seller, at the Delivery Point, the energy Scheduled by Buyer pursuant to this Agreement from: (i) the Blocks or (ii) an alternate resource other than the unavailable Block or (iii) any combination of (i) and (ii).
5.2 Calculation of Monthly Capacity Payments. Except as otherwise
provided herein, Buyer shall pay to Seller for each month of the respective
Block One Operating Term and Block Two Operating Term, the Monthly Capacity
Payment calculated in accordance with Appendix A. In addition, following each
[redacted] (as shown in Table A-1 of Appendix A), a Capacity Availability
Performance Adjustment ("CAPA") shall be calculated in accordance with Section C
of Appendix A and paid in accordance with Section A of Appendix H.
5.3 Calculation of Monthly Energy Payments. Except as otherwise provided herein, Buyer shall pay to Seller, for each month of the respective Block One Operating Term and Block Two Operating Term, the Monthly Energy Payment calculated in accordance with Appendix B.
ARTICLE 6
BILLING AND COLLECTION
6.1 Capacity and Energy Billing and Payment. Seller and Buyer shall agree to the billing and payment process as set forth in Appendix H. However, the Parties shall maintain the right to amend the billing and payment process as appropriate from time-to-time.
ARTICLE 7
FACILITY IMPLEMENTATION AND CONSTRUCTION
7.1 Project Implementation. Seller shall: (i) arrange for the
acquisition of or use of the Site for the Term; (ii) apply for, and use diligent
efforts to obtain and maintain, all Consents (including renewals thereof) and
any other approvals of Governmental Authorities that are required in connection
with the Project, including the transactions contemplated under this Agreement;
(iii) act consistent with Prudent Utility Practices in all aspects of the
Project; and (iv) use diligent efforts to meet the Required Commercial Operation
Dates and to otherwise carry out the transactions contemplated under this
Agreement.
7.2.1 If Seller fails to secure the Air Permits for Block Two by the Required
Threshold Date of October 1, 2002, then Seller may choose either: (i) to
continue to perform in accordance with the provisions of Section 7.2.2 (the
"Performance Election"); or (ii) to perform in accordance with the provisions of
Section 7.2.3 (the "Cover Election").
7.2.2 If Seller chooses the Performance Election, then the Required Threshold
Date shall be extended to April 2, 2003, and Seller shall continue diligently to
obtain the necessary Air Permits for Block Two. In the event that the Threshold
Date is not achieved by the extended Required Threshold Date, Seller shall pay
[redacted] to Buyer. If at any time prior to the extended Required Threshold
Date, Seller determines that it cannot obtain the Air Permits, it may elect to
terminate the Agreement with respect to Block Two in which case the same remedy
shall apply. In either case, the Parties will have no further obligations with
respect to Block Two under this Agreement.
7.2.3 [redacted].
7.3 Cover Period Energy.
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7.3.1 [redacted].
7.3.2 Appendix B will govern payments for the Scheduled energy delivered
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during the Cover Period.
7.3.3 If Seller fails to deliver any Scheduled energy during the Cover Period, Seller shall pay to Buyer [redacted].
7.3.4 At the end of the Cover Period, this Agreement shall terminate with respect to Block Two and the Parties shall have no further obligations hereunder.
7.4.1 If Seller fails to obtain commercial operation of the respective Block on or before the Required Commercial Operation Date for Block One for any reason, or the Required Commercial Operation Date for Block Two for any reason other than failure to obtain the Air Permits, [redacted].
7.4.2 [redacted].
7.5 Right to Advance Required Commercial Operation Date. Upon mutual agreement of the Parties, Seller and Buyer may advance the Required Commercial Operation Date of either Block. In the event that the Parties advance the Required Commercial Operation Date, the Parties shall also advance accordingly the commencement and due dates of their respective payment and performance obligations.
ARTICLE 8
INTERCONNECTION AND METERING
8.1 Interconnection. Georgia Power shall construct or cause to be constructed the Interconnection Facilities in order to electrically connect the Blocks to the Transmission System at the Interconnection Point. Seller shall reimburse Buyer for the actual costs incurred in constructing the Interconnection Facilities in accordance with Appendix G.
8.2 Protective Devices. Seller shall provide, install and maintain
internal breakers, relays, switches, synchronizing equipment and other
associated protective control equipment necessary to maintain the reliability,
quality and safety of the electric power production of the Facility in
accordance with Prudent Utility Practices.
8.3 Meters
8.3.1 Seller shall design, locate, construct, install, own,
operate and maintain the Metering System in accordance with Prudent Utility
Practices in order to measure and record the amount of energy and capacity
delivered from the Blocks.
8.3.2 Seller shall inspect and test all meters at such times
as will conform to Prudent Utility Practices, but not less often than once every
two (2) years.
8.3.3 If the Metering System fails to register, or if the
measurement made by a metering device is found upon testing to vary by more than
one half percent (0.5%) from the measurement made by the standard meter used in
the test, an adjustment shall be made correcting all measurements of energy made
by the Metering System during: (a) the actual period when inaccurate
measurements were made by the Metering System, if that period can be determined;
or (b) if such actual period cannot be determined, the latter half of the period
from the date of the last test of the Metering System to the date such failure
is discovered or such test is made. The amount of the adjustment may be
determined: (i) by correcting the error if the percentage of error is
ascertainable by calibration, tests or mathematical calculation; or (ii) if not
so ascertainable, by estimating on the basis of deliveries under similar
conditions during the period since the last test.
ARTICLE 9
COMMERCIAL OPERATION, TESTING AND DESIGNATION OF CAPACITY
ARTICLE 10
OPERATION, MAINTENANCE AND DISPATCH
10.1 Operation, Maintenance and Dispatch. Seller shall manage, control, operate and maintain all parts of the Facility in a manner consistent with Prudent Utility Practices. Seller shall also operate the Facility in accordance with applicable reliability criteria and guides of the SERC and NERC. The Parties intend for Buyer to operate each of the Blocks in economic dispatch. However, upon mutual agreement of the Parties, Seller and Buyer may Schedule each of the Blocks in accordance with the procedures set forth in Appendix C. In the event that Seller supplies energy from alternate resources, Buyer shall follow the procedures set forth in Appendix C to Schedule delivery of such energy.
10.2 Maintenance Scheduling. The Parties intend for maintenance of the Blocks to be Scheduled to minimize the impact on the availability of the Blocks, but such scheduled and approved unscheduled maintenance hours shall not be a factor in the calculation of the SAF as set forth in Appendix A.
10.3 Air Permits. Seller shall be obligated to file for, obtain and maintain, for the period required by Legal Requirements during the respective Block One Operating Term and Block Two Operating Term, all Consents pertaining to air emissions necessary for the performance of Seller's obligations under this Agreement ("Air Permits"). The Air Permits shall authorize the operation of each of the Blocks for [redacted].
ARTICLE 11
FUEL SUPPLY
11.1.1 Buyer shall have the responsibility for procuring the quantities of Fuel
at the rates of delivery required to accommodate Buyer's Schedules for each of
the Blocks. To determine the quantities of Fuel to be scheduled by Buyer for
transportation to the Primary Gas Delivery Point in order to satisfy Buyer's
Schedules, Buyer shall calculate the Transportation Quantity based upon the
operating characteristics of each of the Blocks; however, a monthly Fuel
adjustment will be made pursuant to Appendix B to reconcile differences between
the actual and the Guaranteed Heat Rate.
11.1.2 In accordance with Appendix B, Buyer shall pay for all Fuel used to
generate energy that is delivered to Buyer pursuant to Buyer's Schedules,
including energy received during periods of ramp up and ramp down.
11.2 Fuel Transportation Capacity.
----------------------------
11.2.1 [redacted].
11.2.2 [redacted].
11.2.3 [redacted].
11.2.4 [redacted].
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11.2.5 Seller agrees to accept at the Primary Gas Delivery Point any Transportation Quantity meeting the minimum quality requirements for delivered Fuel under SNG's FERC Gas Tariff and the applicable transportation agreement(s).
11.2.6 The Parties shall exercise best efforts to minimize any imbalances or other penalties or charges from transporters of Fuel delivered to the Facility ("Imbalance Charges"). If Buyer or Seller receives an invoice from a transporter for Imbalance Charges, the Parties shall determine the cause for such charges. [redacted]
11.2.7 All Fuel supplied by Buyer pursuant to this Agreement shall be measured at the Primary Gas Delivery Point. [redacted].
ARTICLE 12
FORCE MAJEURE
12.1 Definition of Force Majeure Event. For the purposes of this Agreement, a "Force Majeure Event" as to a Party means any occurrence, nonoccurrence or set of circumstances that is beyond the reasonable control of such Party and is not caused by such Party's negligence or lack of due diligence, which prevents the Party from being able to perform its obligations hereunder, including, without limitation, strike or stoppage of labor; flood, ice, earthquake, windstorm or eruption; fire; explosion; invasion, riot or civil war, commotion or insurrection; sabotage, terrorism or vandalism; military or usurped power; or act of God or of a public enemy. [redacted].
12.2 No Breach or Liability. Both Parties shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder for so long as failure to perform such obligation shall be due to a Force Majeure Event.
12.4 Mitigation. Following the occurrence of a Force Majeure Event, the directly affected Party shall use diligent efforts to remedy its inability to perform as soon as practicable; however, the directly affected Party is not required to settle any non Site-specific strike, walkout, lockout or other general labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest.
12.5 Suspension of Performance. The suspension of performance due to a Force Majeure Event shall be of no greater scope and of no longer duration than is required by such Force Majeure Event. No Force Majeure Event shall extend this Agreement beyond the respective Block One Operating Term or Block Two Operating Term.
ARTICLE 13
FAILURE OF PERFORMANCE AND REMEDIES
13.1 Notice of Failure of Performance. If a Party becomes aware of a Failure of Performance by the breaching Party, it may give the breaching Party written notice of the Failure of Performance.
13.2 Failure of Performance by Seller. The occurrence of any of the following events shall constitute a "Failure of Performance" by Seller, except to the extent caused by a Force Majeure Event:
13.2.1 Except as specifically permitted hereunder, Seller abandons the development or construction of the Facility prior to the Commercial Operation Date.
13.2.2 Seller fails to make any payment due to Buyer hereunder for any undisputed amount or fails to comply with Appendix H with respect to any disputed amount within [redacted] of receiving a written demand from Buyer, which demand shall be received no earlier than the Business Day following the Payment Due Date.
13.2.3 A court having jurisdiction shall enter: (i) a decree or order for relief in respect of Seller in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Seller bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Buyer under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Seller or of any substantial part of its affairs.
13.2.4 Seller: (i) commences or files a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated bankrupt or insolvent; (ii) consents to the entry of a decree or order for relief in respect of Seller in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it; (iii) files any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law; (iv) consents to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Seller of any substantial part of its property; (v) makes an assignment for the benefit of creditors; (vi) is unable, or admits in writing its inability, to generally pay its debts as they become due; or (vii) takes any action in furtherance of any of the foregoing.
13.2.5 Seller assigns this Agreement or any of its rights or obligations under this Agreement in violation of Article 15.
13.2.6 Any representation or warranty made by Seller herein shall prove to be incorrect in any material respect when made, unless Seller promptly commences and diligently pursues action to cause such representation or warranty to become true and removes any material adverse effect on Buyer of such representation or warranty having been incorrect.
13.2.7 Seller fails both: (i) to perform or observe any of its material obligations under this Agreement due to its failure to comply with a Legal Requirement; and (ii) to promptly commence and diligently pursue action to cure and cures such failure to perform within [redacted] unless such cure is not capable of being effected within such [redacted] period, in which case Seller shall have an additional [redacted] period in which to perform such cure.
13.2.8 [redacted].
13.3 Failure of Performance by Buyer. The occurrence of any of the following events shall constitute a "Failure of Performance" by Buyer:
13.3.1 Buyer fails to make any payment due to Seller hereunder for any undisputed amount or fails to comply with Appendix H with respect to any disputed amount within ten (10) Business Days of receiving a written demand from Seller, which demand shall be received no earlier than the Business Day following the Payment Due Date.
13.3.2 A court having jurisdiction shall enter: (i) a decree or order for relief in respect of Buyer in an involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or (ii) a decree or order adjudicating Buyer bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Buyer under any applicable Federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Buyer or of any substantial part of its affairs.
13.3.3 Buyer: (i) commences or files a voluntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent; (ii) consents to the entry of a decree or order for relief in respect of Buyer in any involuntary case or proceeding under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it; (iii) files any petition, answer or consent seeking reorganization or relief under any applicable Federal or state law; (iv) consents to the filing of any petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Buyer or of any substantial part of its property; (v) makes an assignment for the benefit of creditors; (vi) is unable, or admits in writing its inability, to generally pay its debts as they become due; or (vii) takes any action in furtherance of any of the foregoing.
13.3.4 Any representation or warranty made by Buyer herein shall prove to be incorrect in any material respect when made, unless Buyer promptly commences and diligently pursues action to cause such representation or warranty to become true and removes any material adverse effect on Seller of such representation or warranty having been incorrect.
13.3.5 Buyer fails both: (i) to perform or observe any of its material obligations under this Agreement due to its failure to comply with a Legal Requirement; and (ii) to promptly commence and diligently pursue action to cure and cures such failure to perform within [redacted] unless such cure is not capable of being effected within such [redacted] period, in which case it shall have an additional [redacted] period in which to perform such cure.
13.4 Remedies. If a Failure of Performance by either Party has
occurred, then the non-breaching Party may terminate this Agreement by giving
[redacted] prior written notice thereof to the breaching Party, which
termination shall be effective upon the [redacted] following the date of such
notice. In such event Seller will not be entitled to recover Monthly Capacity
Payments and Monthly Energy Payments prospectively from the effective date of
such termination.
13.5 Discharge of Obligations Upon Termination. In the event of termination of this Agreement, the Parties shall be released and discharged from any further obligation arising or accruing hereunder from and after the date of termination; provided, however, that termination shall not discharge or relieve either Party from any obligations or liabilities for any act or failure to act which may have accrued prior to such termination.
13.6 No Consequential Damages. In no event shall either Party or their affiliates, contractors or consultants, or the officers, directors, shareholders, employees or consultants of any of them be liable for punitive, special, indirect, incidental or consequential damages under, arising out of, due to or in connection with the performance or non-performance of this Agreement or any of the obligations herein, whether based on contract, tort (including without limitation negligence), strict liability, warranty, indemnity or otherwise.
13.7 No Warranties. There are no warranties given by either Party to the other Party under this Agreement except to the extent specifically set forth in Article 4. The Parties hereby specifically disclaim and exclude all implied warranties, including the implied warranties of merchantability and of fitness for a particular purpose.
ARTICLE 14
COMPLIANCE WITH LAWS, RULES AND REGULATION
14.1 Compliance. Seller shall be in compliance with all Legal Requirements with respect to the construction, ownership, operation and maintenance of the Facility.
14.2.1 A "Change of Law" means a change in Legal Requirements constituting a new environmental or tax law or regulation or a new interpretation of such law or regulation, which change is enacted or promulgated after December 15, 2000, and which generally affects the cost of electrical generation.
14.2.2 [redacted].
ASSIGNMENT AND TRANSFERS OF INTERESTS
15.1 Assignment and Assumption of Obligations. Seller may not assign its obligations under this Agreement or any portion thereof to any entity other than a creditworthy affiliate without the written permission of Buyer; provided, however, (i) any assignee shall expressly assume assignor's obligations hereunder, and (ii) unless otherwise expressly approved by the Buyer and the GPSC, no assignment, whether or not consented to, shall relieve the assignor of its obligations hereunder in the event its assignee fails to perform.
15.2 Assignment to Lenders. Notwithstanding Section 15.1, Seller may, without the consent of the Buyer or the GPSC, assign this Agreement to a Lender for collateral security purposes in connection with any financing or the refinancing of the Facility.
ARTICLE 16
INDEMNIFICATION
16.1 Indemnity. Subject to Section 13.7, each Party (the "Indemnifying Party") expressly agrees to indemnify, hold harmless and defend the other Party and its affiliates, trustees, agents, officers, directors, employees and permitted assigns (the "Indemnified Party") against all claims, liabilities, costs or expenses for loss, damage or injury to persons or property in any manner directly or indirectly connected with or growing out of, the generation, transmission or distribution of energy on its respective side of the Delivery Point, unless such loss, damage or injury is the result of the gross negligence or willful misconduct of the Party seeking indemnification.
16.2 Notice of Proceedings. An Indemnified Party which becomes entitled to indemnification under the Agreement shall promptly notify the other Party of any claim or proceeding in respect of which it is to be indemnified. Such notice shall be given as soon as reasonably practicable after the Indemnified Party obligated to give such notice becomes aware of such claim or proceeding. The Indemnifying Party shall assume the defense thereof with counsel designated by the Indemnifying Party; provided, however, that if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party reasonably concludes that there may be legal defenses available to it that are different from or additional to, or inconsistent with, those available to the Indemnifying Party, the Indemnified Party shall have the right to select and be represented by separate counsel. The Indemnified Party shall be responsible for the expenses associated with such separate counsel, unless a liability insurer will pay the expenses of such separate counsel. If the Indemnifying Party fails to assume the defense of a claim, the indemnification of which is required under this Agreement, the Indemnified Party may, at the expense of the Indemnifying Party, contest, settle, or pay such claim; provided, however, that settlement or full payment of any such claim may be made only with the Indemnifying Party's consent or, absent such consent, written opinion of the Indemnified Party's counsel that such claim is meritorious or warrants settlement.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 Amendments. This Agreement may be amended only by a written instrument duly executed by both Buyer and Seller which has received all approvals of Governmental Authorities of competent jurisdiction necessary for the effectiveness thereof.
17.2 Binding Effect. This Agreement and any extension shall inure to the benefit of and shall be binding upon the Parties and their respective successors and permitted assigns.
17.3 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
17.4 Notices. Where written notice is required by this Agreement, such notice shall be in writing and shall be deemed given (i) when delivered by United States registered or certified mail, postage prepaid, return receipt requested, or delivered by recognized courier addressed as follows:
To Seller: Douglas E. Jones Vice President, Southern Company Generation and Energy Marketing
BIN 935
270 Peachtree Street, N.E.
Atlanta, Georgia 30303
with a copy to: Thomas L. Penland, Jr., Esq.
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
To Buyer: Garey C. Rozier
Resource Planning Manager,
Southern Company Services, Inc.
BIN 15N-8182
600 North 18th Street
Birmingham, Alabama 35203
with a copy to: Kevin C. Greene
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
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or to such other address as may be designated by the Parties; or (ii) when sent by facsimile transmission or electronic mail, provided receipt of such facsimile transmission or electronic mail is confirmed by facsimile transmission, electronic mail, or otherwise in writing at the time of transmission.
17.5 Entire Agreement. This Agreement constitutes the entire understanding between the Parties. The Parties have entered into this Agreement in reliance upon the representations and mutual undertakings contained herein and not in reliance upon any oral or written representations or information provided by one Party to the other Party not contained or incorporated herein.
17.6 Governing Law. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Georgia, without giving effect to conflict of laws principles, which may direct the application of the laws of another jurisdiction.
17.7 Non-Waiver. No provision of this Agreement shall be deemed waived and no breach shall be deemed excused unless such waiver or consent is in writing and signed by a duly authorized representative of the Party waiving such provision or excusing such breach. No such consent to, or waiver of a breach hereof, whether express or implied shall constitute a consent to, waiver of, or excuse for any subsequent or different breach.
17.8 Headings Not Affecting Meaning. The descriptive headings of the various Sections and Articles of the Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions hereof.
17.9 Third Parties. This Agreement is intended solely for the benefit of the Parties hereto. Except as otherwise expressly provided herein, nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement.
17.10 Severability. All provisions of this Agreement are severable. In the event any provision of this Agreement, or a portion thereof, is ruled void, invalid, unenforceable or contrary to public policy by a court of competent jurisdiction, then any remaining portion of such provision and all other provisions of this Agreement shall survive and be applied and any invalid and unenforceable portion shall be construed or performed to preserve as much of the original words, terms, purpose and intent to the fullest extent permitted by law.
17.11 Cooperation. Upon the execution of this Agreement and thereafter, each Party to this Agreement agrees to do such things as may be reasonably requested by the other Party in order more effectively to consummate or document the transactions contemplated by this Agreement.
17.12 Relationship. This Agreement shall not be interpreted or construed to create an association, joint venture, or partnership between the Parties, or to impose any partnership obligation or liability upon either Party.
17.13.2 Seller intends to seek confidential treatment of the Confidential Information in this Agreement from FERC, and Buyer will provide reasonable cooperation in connection with such request. Notwithstanding the foregoing, the Parties acknowledge that certain Confidential Information may need to be disclosed in Seller's filings with FERC which may become publicly available.
17.14 Replacement Index. Whenever any published index or tariff is referenced herein, the Parties intend to track those costs as faithfully as commercially practicable. Should any such index or tariff be discontinued or no longer published, the Parties will cooperate in establishing substitute benchmarks through reference to equivalent indices or tariffs.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned Parties hereto have duly executed this Agreement as of the date first written above.
FOR GEORGIA POWER COMPANY
By:
--------------------------------------------
Name: Fred D. Williams
Title: Senior Vice President
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FOR SOUTHERN POWER COMPANY
By:
---------------------------------------
Name: Douglas E. Jones
Title: Vice President
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Appendix A-Page 3 of 3
Appendix A - Page 2 of 3
APPENDIX A
CAPACITY PAYMENT CALCULATION
[redacted]
Appendix B - Page 1 of 5
APPENDIX B
ENERGY PAYMENT CALCULATION
[redacted]
Appendix C - Page 1 of 3
APPENDIX C
DESIGN PARAMETERS AND SCHEDULING PROCEDURES
[redacted]
Appendix D - Page 3 of 3
APPENDIX D
PERFORMANCE TESTING PROCEDURES AND DISPATCH
[redacted]
Appendix E - Page 1 of 1
APPENDIX E
DAILY DAMAGE FOR FAILURE TO MEET THE
REQUIRED COMMERCIAL OPERATION DATE
[redacted]
Appendix F - Page 3 of 4
Appendix F - Page 1 of 4
APPENDIX F
HIGHER HEATING VALUE
GUARANTEED HEAT RATE CURVES
For Normal Mode
[redacted]
HIGHER HEATING VALUE
GUARANTEED HEAT RATE CURVES
[redacted]
Appendix G - Page 1 of 1
APPENDIX G
TRANSMISSION INTERCONNECTION
COST ADJUSTMENT
[redacted]
Appendix H - Page 1 of 2
APPENDIX H
BILLING PROCEDURES
[redacted]
Exhibit 10.23
EXECUTION COPY
PUBLIC RELEASE VERSION
POWER PURCHASE AGREEMENT
BETWEEN
KISSIMMEE UTILITY AUTHORITY
AND
SOUTHERN COMPANY - FLORIDA LLC
Dated as of March 19, 2001
TABLE OF CONTENTS
Section Page SECTION 1 DEFINITIONS AND EXPLANATION OF TERMS 2 SECTION 2 TERM OF AGREEMENT 13 SECTION 3 CONDITIONS PRECEDENT 14 SECTION 4 SALE AND PURCHASE 14 SECTION 5 SCHEDULE FOR DELIVERY OF CAPACITY AND ENERGY 28 SECTION 6 REQUESTS FOR ENERGY; OPERATION AND MAINTENANCE 30 SECTION 7 INTERCONNECTION AND TRANSMISSION 32 SECTION 8 RISK OF LOSS; METERING 33 SECTION 9 METHOD OF PAYMENT 34 ARTICLE 10 CHANGE IN LAW; MODIFICATION OF AGREEMENT 35 SECTION 11 FORCE MAJEURE 36 SECTION 12 EVENTS OF DEFAULT; TERMINATION 37 SECTION 13 WAIVER 41 SECTION 14 REPRESENTATIONS AND WARRANTIES 41 SECTION 15 PERFORMANCE ASSURANCE 44 SECTION 16 LIABILITY OF PARTIES 46 SECTION 17 ASSIGNMENT 50 SECTION 18 DISPUTE RESOLUTION 51 SECTION 19 AMENDMENT 52 SECTION 20 NOTICES 52 SECTION 21 APPLICABLE LAW 53 SECTION 22 SEVERABILITY 53 SECTION 23 ENTIRE AGREEMENT 54 SECTION 24 NO THIRD PARTY BENEFICIARIES 54 SECTION 25 COUNTERPARTS 54 SECTION 26 INFORMATION AND CONFIDENTIALITY 54 SECTION 27 PUBLIC STATEMENTS 55 SECTION 28 INSURANCE 56 SECTION 29 TAXES 56 |
APPENDIX A TECHNICAL LIMITS APPENDIX B REQUESTS FOR ENERGY APPENDIX C CAPACITY TESTING PROCEDURE APPENDIX D EXAMPLE CALCULATIONS APPENDIX E AFFILIATE GUARANTEE |
POWER PURCHASE AGREEMENT
This Power Purchase Agreement (this "Agreement") is made and entered into as of the 19th day of March, 2001, by and between Kissimmee Utility Authority, a statutory legal authority existing under the laws of the State of Florida ("Purchaser"), and Southern Company - Florida LLC, a limited liability company organized and existing under the laws of the State of Delaware ("Seller"). Purchaser and Seller are hereinafter each referred to individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, in addition and supplemental to their other powers, OUC, KUA and FMPA (the "Public Agencies"), pursuant to the Florida Interlocal Cooperation Act of 1969, Chapter 163, Part I, Florida Statutes, (the "Interlocal Act") are authorized and empowered to cooperate with each other on a basis of mutual advantage and thereby to provide services and facilities in a manner and pursuant to forms of government organizations that will best accord with geographic, economic, electrical generation requirements and other factors; and
WHEREAS, the Ownership Agreement was entered into by the Public Agencies as an interlocal agreement, to invoke all of the powers of the Interlocal Act, for the purpose of providing a structure for the Public Agencies, in participation with Seller, a foreign public utility, to operate, maintain, repair, improve, extend, or otherwise participate jointly in a nominal six hundred thirty-three (633) megawatt combined cycle electric generating facility (the "Facility"), which is proposed, and which is to be constructed, owned, and located within the State of Florida by Seller and the Public Agencies; and
WHEREAS, Seller intends to sell to Purchaser, and Purchaser intends to purchase from Seller, a portion of Seller's share of the Capacity and Energy generated by the Facility in accordance with the terms and conditions of this Agreement and in full compliance with the Interlocal Act; and
WHEREAS, Seller and Purchaser acknowledge that this Agreement is one of three substantially similar contracts through which Seller will sell and the three Purchasers will individually purchase their respective designated shares of Seller's share of the Capacity and Energy generated by the Facility; and
WHEREAS, this Agreement and the two substantially similar contracts are entered into to invoke all of the powers of the Interlocal Act for the purpose of obligating Customers, pursuant to such Interlocal Act, to purchase Seller's share of the Capacity of and Energy generated by the Facility in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, for the purpose of exercising all of the powers enumerated in the Interlocal Act and the Florida Joint Power Act, Part II of Chapter 361, Florida Statutes, (the "Joint Power Act") (collectively, the "Acts"), Purchaser, hereby designates this Agreement as an interlocal agreement within the meaning and intent of the Interlocal Act, and invokes all powers contained therein with full powers to perform all of the provisions herein authorized to be performed by the Parties; and
FURTHER, NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound hereby agree as follows:
SECTION 1 DEFINITIONS AND EXPLANATION OF TERMS
1.1 Definitions. When used in this Agreement, the following capitalized terms shall have the meanings set forth below:
1.1.1 "Actual Availability" has the meaning given such term in Section 4.3.3 or 4.3.4, as applicable.
1.1.2 "Actual Capability" means the amount of Capacity the Facility is capable of producing in any given hour.
1.1.3 "AGC" means automatic generation control, which is the capability to make automatic adjustments to load change by generation through the use of a digital computer. This control is based on such factors as frequency, cost and tie line flows.
1.1.4 "Agreement" means this Power Purchase Agreement, including all appendices attached hereto and all amendments hereto that may be made from time to time.
1.1.5 "Alternate Resources" has the meaning given such term in Section 4.4.
1.1.6 "Ancillary Services" means ancillary services customarily provided by an electric generating facility, including voltage/VAR control, load following, regulation and frequency response, spinning reserve and non-spinning reserve.
1.1.7 "Annual Capacity Charge" means (i) [redacted].
1.1.8 "Annual Purchaser's Capacity Nomination" of the Purchaser means, during the first five Contract Years, six and one half percent (6.5%) of the Demonstrated Capability, and thereafter, six and one half percent (6.5%) of the Demonstrated Capability reduced by those amounts, if any, that Purchaser elects to subtract from the Capacity available to Purchaser pursuant to the process provided in Section 4.1.4 for the Customers jointly to make such elections.
1.1.9 "Availability Guarantee" has the meaning given such term in Section 4.3.1.
1.1.10 "Availability Incentive Payment" has the meaning given such term in
Section 4.3.2.
1.1.11 "Bankruptcy" means, with respect to a Party, (i) an adjudication of
bankruptcy or insolvency, or the entry of an order for relief, under any
Bankruptcy Law with respect to such Party; (ii) the making by such Party of an
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assignment for the benefit of its creditors; (iii) the filing by such Party of a
petition in bankruptcy or for relief under any Bankruptcy Law; (iv) the filing
by such Party of an answer or pleading admitting or failing to contest the
material allegations of any such petition; (v) the filing against such Party of
any petition in bankruptcy or for relief under any Bankruptcy Law (unless such
petition is dismissed within ninety (90) days from the date of filing thereof);
(vi) the appointment of a trustee, conservator or receiver for such Party or for
all or substantially all of its assets (unless such appointment is vacated or
stayed within ninety (90) days of such appointment); or (vii) the taking by such
Party of any action for its winding up or liquidation, or the consent by such
Party to any of the actions described in clauses (i) through (vi) being taken
against it.
1.1.12 "Bankruptcy Law" means any applicable bankruptcy or insolvency statute.
1.1.13 "Bond Legislation" shall mean the Composite Resolution of Kissimmee Utility Authority, comprised of the Original Resolution No. 5-83, adopted January 20, 1983, as amended by (a) Resolution No. R91-9, adopted December 4, 1991; (b) Resolution No. R91-10, adopted on December 4, 1991; (c) Resolution No. 93-14, adopted December 15, 1993; and (d) Resolution No. 99-12, adopted September 22, 1999.
1.1.14 "BOP Capital Cost Range" has the meaning ascribed to the term in
Section 6.7.1 of the Ownership Agreement.
1.1.15 "Business Day" means any day other than Saturday or Sunday on which commercial banks are authorized to open for business in Orlando, Florida.
1.1.16 "Capacity" means electric capacity.
1.1.17 "Capacity Emergency" means, with respect to any hour, that any one or more of Purchaser's resources is unavailable due to a forced outage and the summation of such Purchaser's firm Capacity obligations exceeds the summation of such Purchaser's available resources.
1.1.18 "Capacity Payment" has the meaning given such term in Section 4.1.1.
1.1.19 "Change in Law" has the meaning given such term in Section 10.1.3.
1.1.20 "Collateral Documents" means, collectively, the Ownership Agreement, the Operating Agreement, the Interconnection Agreement, the Power Purchase Agreements of the other Customers, the long term lease of the Facility Site by OUC to and for the benefit of the Participants, the guarantee to be provided by an affiliate of Seller as contemplated in Section 16.3, and the agreement(s) pursuant to which Purchaser and/or the other Customers provide station service and other support services (including but not limited to demineralized water and cooling water supply) to Seller.
1.1.21 "Commencement Date" has the meaning given such term in Section 5.2.
1.1.22 "Commercial Operation Date" has the meaning ascribed to such term in
Section 1.1.13 of the Ownership Agreement.
1.1.23 "Confidential Information" has the meaning given such term in
Section 26.
1.1.24 "Contract Year" means (i) the period commencing on the Commencement
Date or, if Seller elects the option under Section 4.5(ii)(a), the later of the
Commencement Date or Scheduled Commencement Date, and ending on the last day of
the month in which the first anniversary date of the Commencement Date falls,
and (ii) each twelve (12)-month period thereafter, except that for the twelve
(12)-month period during which the expiration or termination date of this
Agreement occurs, Contract Year shall mean the period commencing on the first
day of such twelve (12)-month period and ending on such expiration or
termination date.
1.1.25 "Customers" means collectively all of OUC, Kissimmee Utility Authority and Florida Municipal Power Agency (All Requirements Power Supply Project), or their permitted assigns.
1.1.26 "Delivered Energy" means, in respect of a period of time, the amount of Energy from the Facility or from Alternate Resources delivered by Seller to Purchaser at the Delivery Point for sale to Purchaser pursuant to this Agreement.
1.1.27 "Delivery Point" means (a) with respect to Energy delivered from the Facility, the high side of generator step-up transformer, as further described in the Interconnection Agreement, and (b) with respect to Energy delivered from Alternate Resources, any unconstrained point on the Grid.
1.1.28 "Demonstrated Capability" means the net Capacity of the Facility, determined by a periodic Capacity test, adjusted to seventy degrees Fahrenheit (70(degree)F) and forty-five percent (45%) relative humidity.
1.1.29 "Dispute" has the meaning given such term in Section 18.
1.1.30 "Eastern Prevailing Time" or "EPT" means the time prevailing in the Eastern time zone of the United States of America.
1.1.31 "Effective Date" has the meaning given such term in Section 3.1.
1.1.32 "Eligible Collateral" has the meaning given such term in Section 15.1.1.
1.1.33 "Energy" means electric energy (expressed in megawatt-hours).
1.1.34 "Energy Payment" has the meaning given such term in Section 4.2.
1.1.35 "Equipment Breakdown" means a mechanical breakdown of equipment at the Facility that is not the result of a Force Majeure that is an act of God or public enemy; landslide; sinkhole; lightning; earthquake; fire (unless caused by Seller's willful misconduct or failure to follow Prudent Utility Practice); storm; ice; snow; hurricane; tornado; wind; flood; riot; civil disturbance; insurrection; war; sabotage; terrorism; failure of contractors or suppliers (including, in the case of Seller, OUC and other Customers providing services to Seller) to provide fuel, equipment, material or services, provided that such failure would qualify as a Force Majeure under Section 1.1.44 if such failure were directly experienced by the applicable Party.
1.1.36 "Equity Capacity" with respect to each Participant means that Participant's percentage share of the Capacity of the Facility corresponding to such Participant's ownership interest in the Facility.
1.1.37 "Event of Default" means any of the events listed in Sections 12.1 and 12.2.
1.1.38 "Facility" means the gas fired combined cycle electric generating unit to be located on the Facility Site and owned by the Participants, and its associated interconnection facilities, as defined in the Ownership Agreement by the terms "Facility" and "Interconnection Facilities."
1.1.39 "Facility Site" means the parcel of land in Orlando, Florida on which the Facility is to be located, as further described in Appendix A. 1.1.40 "FDEP" means the Florida Department of Environmental Protection or any successor Governmental Body exercising the same or equivalent jurisdiction.
1.1.41 "FERC" means the Federal Energy Regulatory Commission or any successor Governmental Body exercising the same or equivalent jurisdiction.
1.1.42 "Firm Transmission Service" means (a) electric transmission service
designated firm under the open access transmission tariff of a transmission
provider having an open access transmission tariff or (b) if purchased from a
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transmission provider that does not have an open access transmission tariff, electric transmission service sold by such transmission provider as firm transmission service and generally considered, pursuant to Prudent Utility Practice and FRCC requirements, to be substantially equivalent to the firm transmission service referenced in item (a) of this definition.
1.1.43 "Fixed Amount" has the meaning ascribed to such term in Section 6.7.1 of the Ownership Agreement.
1.1.44 "Force Majeure" as to a Party means each of the following events as
affects the Facility: act of God or public enemy; landslide; sinkhole;
lightning; earthquake; fire (unless caused by the applicable Party's willful
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misconduct or failure to follow Prudent Utility Practice); storm; ice; snow; hurricane; tornado; wind; flood; riot; civil disturbance; insurrection; war; sabotage; terrorism; shutdown of the Facility by a court order or Governmental Body not resulting from any action or inaction by the applicable Party; strike, lockout or labor difficulty affecting the SEC Site generally (excluding in the case of Seller any strike, lockout or labor difficulty that is limited only to employees of either Seller or its affiliates, and excluding in the case of Purchaser any strike, lockout or labor difficulty limited only to the employees of Purchaser); failure of contractors or suppliers (including, in the case of Seller, OUC and other Customers providing services to Seller) to provide fuel, equipment, material or services, provided that such failure would qualify as a Force Majeure under this provision if such failure were directly experienced by the applicable Party; or any other occurrence, nonoccurrence or set of circumstances, whether or not foreseeable, that is beyond the reasonable control of the applicable Party and is not caused or exacerbated by the applicable Party's failure to follow Prudent Utility Practices.
1.1.45 "FRCC" means the Florida Reliability Coordinating Council or any successor organization.
1.1.46 "Fuel Supply Agent" has the meaning given such term in the Operating Agreement.
1.1.47 "Further Extension" has the meaning given such term in Section 2.3.
1.1.48 "Gas Delivery Point" shall have the meaning assigned to it in the Operating Agreement.
1.1.49 "Governmental Body" shall mean, except as provided in the following
sentence, (i) any local, state, regional or federal administrative, legal,
judicial, or executive agency, court, commission, department or other entity
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having jurisdiction or binding authority over any element of the Project or the performance of the Parties under this Agreement or the Collateral Documents, but excluding any agency, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee and (ii) NERC, FRCC and any RTO. Except as expressly provided otherwise in this Agreement, the definition "Governmental Body" shall be deemed to not include OUC, KUA and FMPA for the purposes of this Agreement.
1.1.50 "Grid" means (i) OUC's electric transmission system, or (ii) if ownership or control of and jurisdiction over OUC's electric transmission system is succeeded to by an RTO or other entity, the portion of the electric transmission system of that RTO or other successor entity that most closely resembles the OUC electric transmission system as it existed on the effective date of this Agreement.
1.1.51 "Guaranteed Output" means in any given hour the amount of Capacity (in MWh per hour) determined by adjusting the Demonstrated Capability to the prevailing ambient conditions in such hour and adjusting for degradation.
[redacted]
1.1.52 "Indemnified Parties" has the meaning given such term in Section
16.1.1.
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1.1.53 "Indemnifying Party" has the meaning given such term in Section 16.1.1.
1.1.54 "Interconnection Agreement" means that certain Interconnection Agreement expected to be entered into among the Participants in 2001, the entry into of which is a condition precedent to the effectiveness of this Agreement.
1.1.55 "Interconnection Meters" has the meaning given such term in Section 8.2. 1.1.56 "Lender" has the meaning given such term in Section 12.3. |
1.1.57 "Law" shall mean all constitutions, charters, laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, regulations and requirements of every Governmental Authority (including OUC) having jurisdiction over the matter in question, whether federal, state or local, which may be applicable to any Party, as required by the context in which used, or to the Facility or OUC Interconnection Facilities, or to the use, manner of use, occupancy, possession, planning, licensing, design, procurement, construction, acquisition, testing, startup, operation, maintenance, management, control, addition, renewal modification, replacement or disposal of the Facility and the OUC Interconnection Facilities or any portion or portions thereof.
1.1.58 "Market Price" shall mean the price established by Seller, or negotiated and agreed upon by the Parties, as the case may be, upon Seller's election pursuant to Section 2.3 with respect to any Further Extension, which shall become the Annual Capacity Charge for Capacity to be delivered by Seller during such Further Extension consistent with all other terms and conditions of this Agreement.
1.1.59 "Meters" means the Interconnection Meters and/or Customers' check-meters, as applicable.
1.1.60 "Minor Maintenance" shall mean maintenance events lasting not greater than 72 hours per occurrence, which have been scheduled and for which Purchaser and the other Customers have given consent in accordance with Section 6.4.
1.1.61 "MMBtu" means one million British thermal units, where one British thermal unit is the amount of heat required to raise the temperature of one (1) pound of water one (1) degree Fahrenheit from sixty (60) degrees Fahrenheit.
1.1.62 "MW" means megawatt.
1.1.63 "MWh" means megawatt-hour.
1.1.64 "NERC" means the North American Electric Reliability Council or successor organization.
1.1.65 "Non-Performing Party" has the meaning given such term in Section 11.1.
1.1.66 "Notice of Intent to Terminate" has the meaning given such term in
Section 12.3.
1.1.67 "Off-Peak Period" means all the days of any given Contract Year other than the Peak Period days.
1.1.68 "Operating Agreement" means that certain Operating Agreement expected to be entered into among the Participants in 2001, the entry into of which is a condition precedent to the effectiveness of this Agreement.
1.1.69 "Operating Period" means the period from the beginning of the first Contract Year until the end of the last Contract Year.
1.1.70 "OUC" means Orlando Utilities Commission.
1.1.71 "OUC Interconnection Facilities" means the modifications to the Stanton Substation reasonably required for the receipt and delivery of Energy from the Facility onto the Grid consistent with Prudent Utility Practice.
1.1.72 "Ownership Agreement" means that certain Stanton Energy Center Combined Cycle Unit A Construction and Ownership Participation Agreement entered into among the Participants as of March 19, 2001.
1.1.73 "Participant" or "Participants" mean individually or collectively Orlando Utilities Commission, Kissimmee Utility Authority, Florida Municipal Power Agency (All Requirements Power Supply Project) and Seller.
1.1.74 "Parties" has the meaning given such term in the first paragraph of this Agreement.
1.1.75 "Peak Period" means for any given Contract Year the periods that include the days from January 1 through March 15, inclusive, May 15 through September 15, inclusive, and December 15 through December 31, inclusive.
1.1.76 "Permit" means any permit, license, approval, consent, waiver, authorization or other requirement in connection with the Project required from any Governmental Body under applicable Law.
1.1.77 "Person" means any individual, partnership, corporation, limited liability company, association, business, trust, Governmental Body or other entity.
1.1.78 "Planned Major Maintenance" means the Gas Turbine (GT) Combustor Inspection, the GT Hot Gas Path Inspection, and the GT Major Inspection, as these inspections are defined in the maintenance agreement with the GT vendor.
1.1.79 "Power Purchase Agreements" means this Agreement and those certain similar power purchase agreements between Seller and the other Customers respecting the delivery of Capacity and Energy from Seller's ownership share of the Capacity and Energy of the Facility.
1.1.80 "Prime Rate" means the prime rate of interest as published from time to time in the Wall Street Journal or such other comparable successor publication as the Participants may agree upon. The Prime Rate shall be calculated on the basis of a 365-day year for the actual number of days that a payment, reimbursement or adjustment, as the case may be, has not been made.
1.1.81 "Project" means the Facility, the Facility Site and all other appliances, parts, instruments, appurtenances, accessories and other property that may be incorporated or installed in, or otherwise become part of, any of the foregoing.
1.1.82 "Prudent Utility Practice" means any of the practices, methods and acts engaged in, or approved by, a significant portion of the electric utility industry in the United States (or, if more stringent, any of the practices, methods and acts engaged in, or approved by, a significant portion of the electric utility industry in the region covered by the FRCC) operating facilities of a size and technology similar to the Facility during the relevant time period or any of the practices, methods and acts, which, in the exercise of reasonable judgment in light of the facts known, or that reasonably should have been known, at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with applicable Laws, 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 acceptable practices, methods and acts generally accepted in the United States and having due regard for current editions of the National Electrical Safety Code, the National Electric Code and other applicable electrical, safety and maintenance codes and standards, manufacturers' warranties and applicable Laws.
1.1.83 "Request for Energy" or "Schedule" means a request for the delivery of Energy made by Purchaser and the other Customers in accordance with the process provided in Section 6 and Appendix B for the Customers jointly to Schedule Energy, and any adjustments thereto made in accordance with Appendix B.
1.1.84 "RTO" means a regional transmission organization.
1.1.85 "Scheduled Commencement Date" means the date that is twenty-four
(24) months after the receipt of the Site Certification and all other Permits to
be obtained by the Customers that are necessary for Seller to commence
construction, as such date may be extended under the provisions of Section 5.1,
but in no event earlier than October 1, 2003.
1.1.86 "Scheduled Maintenance" means the removal of the Facility or a component thereof from service (which removal reduces the capability of the Facility to operate) to perform maintenance, overhaul, inspection, testing or repair work, as contemplated in Section 6.4.
1.1.87 "SEC Site" means the parcel of land in Orlando, Florida on which the fossil fired generating stations Stanton Unit # 1 and Stanton Unit #2 are located, including the parcel of land on which the Facility is to be located.
1.1.88 "Seller" has the meaning given such term in the first paragraph of this Agreement.
1.1.89 "Site Certification" means (i) the final approval by the applicable Governmental Body of the initial need for power determination and site certification permit applications pursuant to the Florida Electrical Power Plant Siting Act, and (ii) the receipt of the air construction (Prevention of Significant Deterioration) permit by OUC issued by FDEP pursuant to the delegated authority of the United States Environmental Protection Agency under the Clean Air Act Amendments of 1977.
1.1.90 "Technical Limits" means the limits and constraints relating to the operation and maintenance of the Facility, as described in Appendix A.
1.1.91 "Termination Payment" means the payment to be paid by a Defaulting Party to the Non-Defaulting Party under in Section 12.5.1.
1.1.92 "Test Energy" means (i) Energy produced by the Facility during testing of the Facility prior to the Commencement Date; and (ii) Energy produced by the Facility during periodic tests of the Facility's Capacity output capability following the Commencement Date.
1.2 Rules of Construction. In this Agreement, unless the context otherwise requires, the singular shall include the plural, the masculine shall include the feminine and neuter, and vice versa. The terms "include," "includes" and "including" shall be deemed to be followed by the words "without limitation." The term "month" refers to a calendar month, and any period measured by a "month" from a reference date refers to the period beginning on such reference date and ending on the same date of the next succeeding calendar month or, if no such date exists in the next succeeding calendar month, the last day of such next succeeding calendar month. References to a Section, Table or Appendix shall be references to a Section of, Table of or Appendix to this Agreement unless specifically stated otherwise. A reference to a given agreement or instrument shall be a reference to that agreement or instrument as modified, amended, supplemented and restated through the date as of which such reference is made. The term "or" is not exclusive, the term "shall" is mandatory and the term "may" is permissive. In the event that any index or publication referenced in this Agreement ceases to be published, each such reference shall be deemed to be a reference to a successor or alternate index or publication reasonably agreed by the Parties. Both Parties acknowledge that each was actively involved in the negotiation and drafting of this Agreement and that no law or rule of construction shall be raised or used in which the provisions of this Agreement shall be construed in favor of or against either Party because one is deemed to be the author thereof.
1.3 Consents. Whenever the consent or approval of either Party is required under this Agreement, such consent or approval shall not be unreasonably withheld, unless this Agreement provides that such consent or approval is to be given by such Party at its sole or absolute discretion or is otherwise qualified.
SECTION 2 TERM OF AGREEMENT
2.1 Initial Term.
------------
2.1.1 This Agreement shall become effective as set forth in
Section 3.1, and shall remain in full force and
effect, subject to the early termination provisions
set forth herein, through the later of (i) the last
day of the month in which the tenth (10th)
anniversary of the Scheduled Commencement Date occurs
or (ii) the last day of the month in which the tenth
(10th) anniversary of the Commencement Date occurs
(the "Initial Term").
2.1.2 Notwithstanding the provisions of Section 2.1.1, the
Initial Term shall terminate on (a) November 30, 2013
if Section 2.1.1 yields an end date falling between
December 1, 2013 and April 30, 2014, inclusive, or
(b) November 30, 2014 if Section 2.1.1 yields an end
date that falls on or after May 1, 2014.
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2.2 Extension of Initial Term.The Initial Term shall be automatically extended an additional five (5) years from the end of the Initial Term ("Extended Term"); provided, however, that the Purchaser shall have the option to elect to terminate this Agreement effective on the last day of the Initial Term by providing written notice of such election to Seller no later than the date that is three (3) years prior to the end of the Initial Term.
2.3 Extensions of Extended Term. The Extended Term shall be automatically extended three (3) successive periods of five (5) years each from the end of the Extended Term (the "Further Extensions"); provided, however, that the Purchaser shall have the option to elect to terminate this Agreement effective on the last day of any of (i) the Extended Term, (ii) the first Further Extension, or (iii) the second Further Extension, by providing written notice of such election to Seller no later than the date that is, respectively, three (3) years prior to the end of the Extended Term, three (3) years prior to the end of the first Further Extension, or three (3) years prior to the end of the second Further Extension, as the case may be; provided, further, that with respect to each Further Extension, Seller shall have the right to establish the Annual Capacity Charge for such Further Extension based on Seller's then-current assessment of market conditions by providing Purchaser written notice of the new proposed Annual Capacity Charge no later than the date that is three and one-half (3 1/2) years prior to the date that such Further Extension period is scheduled to begin, subject to Purchaser's right to request that Seller negotiate in good faith to agree on any other price that Purchaser believes in good faith reflects current market conditions.
2.4 Survival. Applicable provisions of this Agreement shall continue in effect after termination to the extent necessary to satisfy the terms and conditions of this Agreement and, as applicable, to provide for: final billings and adjustments related to the period prior to termination, repayment of any money due and owing either Party pursuant to this Agreement, repayment of principal and interest associated with security funds, and the indemnifications specified in this Agreement.
SECTION 3 CONDITIONS PRECEDENT
3.1 Condition Precedent to Effectiveness. The Parties agree and acknowledge that this Agreement shall be effective only upon the date on or before which both of the following have occurred (such date, the "Effective Date"): (i) the execution and delivery of the Ownership Agreement and the Operating Agreement and all other Collateral Documents; and (ii) the acknowledgment of the Participants' satisfaction of the foregoing condition and the accuracy of the cross-references to the Collateral Documents contained in this Agreement.
3.2 Conditions Precedent to Obligations. Notwithstanding any provisions of this Agreement to the contrary, the obligations of the Parties to this Agreement shall be subject to the fulfillment of each of the conditions (or the waiver in writing of such conditions by the respective Party or Parties) set forth in Article 8 of the Ownership Agreement.
SECTION 4 SALE AND PURCHASE
4.1 Capacity Delivery and Payment. Subject to the terms and conditions of this Agreement, during the Operating Period, Seller agrees to deliver and sell to Purchaser and Purchaser agrees to receive and purchase from Seller up to six and one half percent (6.5%) of the Actual Capability of the Facility in accordance with the following provisions:
4.1.1 The Capacity payment (the "Capacity Payment" or "CP") in respect
of each month during the Operating Period shall be an amount equal to: the
product of the Annual Purchaser's Capacity Nomination (expressed in
kilowatts) multiplied by the Annual Capacity Charge. For any partial month
during the Operating Period, the Capacity Payment shall equal the amount
determined pursuant to the formula set forth in the preceding sentence
multiplied by a fraction, the numerator of which is the number of days of
such partial month within the Operating Period, and the denominator of
which is the total number of days in such month. If the Annual Purchaser's
Capacity Nomination changes during a month, then the Capacity Payment for
such month shall be equal to the product of the Annual Capacity Charge
multiplied by the sum of the two results obtained: (i) first by multiplying
the old Annual Purchaser's Capacity Nomination by the ratio of the number
of days in the month (including fractional days) prior to the time of the
change over the total number of days in the month; and (ii) second by
multiplying the new Annual Purchaser's Capacity Nomination by the ratio of
the number of days in the month (including fractional days) after the time
of the change over the total number of days in the month. The Capacity
Payment shall be paid by Purchaser to Seller in accordance with Section
9.1. Notwithstanding the above, if during the first three (3) months of the
Operating Period any Governmental Body shall prohibit the Facility from
operating because of Seller's failure to obtain, prior to the Commencement
Date any Permit required by Law for Seller to operate the Facility, then
Purchaser's obligation to make Capacity Payments shall be suspended until
the earlier of: (i) the lifting of such prohibition; or (ii) the date that
is three (3) months after the Commencement Date.
4.1.2 The initial Demonstrated Capability of the Facility shall be established in accordance with the Capacity testing procedure set forth in Appendix C. Following the first anniversary of the Commencement Date, Seller shall perform Capacity tests twice each Contract Year, pursuant to the testing procedures set forth in Appendix C, during the Summer and Winter periods as defined by FRCC; provided, however, that Seller shall be entitled to a fifty-eight (58)-hour period of maintenance that does not affect calculation of Actual Availability of the Facility (which period shall be prior to any such Capacity test from 9 p.m. Friday to 7 a.m. Monday, unless OUC, in its sole discretion, agrees otherwise). In addition, Seller may retest when a repair or modification of the Facility, or a corrected or improved operational or maintenance activity, results in an increase in the Capacity of the Facility (including adjustments made during initial shakedown), provided that the actual full load output (as adjusted to seventy degrees Fahrenheit (70(0)F) and forty-five percent (45%) relative humidity) is at least one hundred and one percent (101%) of the last Demonstrated Capability test amount. Should any test or retest conducted pursuant this Section 4.1.2 indicate that the actual full load output (as adjusted to seventy degrees Fahrenheit (70(0)F) and forty-five percent (45%) relative humidity) has changed by an amount equal to or greater than one percent (1%) of the last Demonstrated Capability test amount, the Demonstrated Capability shall be reset at such actual full load output for purposes of determining the Capacity Payment as of the time the test is completed; provided, however, that if the test is performed during a Force Majeure event and such Force Majeure event resulted in the reduction of the Demonstrated Capability, the Capacity Payment shall not be reduced thereby until the end of the forty-five (45) day period described in the last paragraph of Section 4.1 below.
4.1.3 Seller shall conduct additional tests as required by the FRCC or as requested by Purchaser pursuant to Purchaser's legal or contractual obligations with third parties; provided, however, such additional tests shall be for informational purposes and shall not be used to reset the Demonstrated Capability or otherwise determine the Capacity Payment under this Agreement.
4.1.4 Beginning with the sixth (6th) Contract Year and ending with the tenth (10th) Contract Year, the Customers shall have the irrevocable right to jointly reduce the total of their combined Annual Purchaser's Capacity Nominations, for the remainder of the Initial Term and any Extended Term or Further Extensions, by either twenty-five (25) MW or fifty (50) MW (as adjusted to seventy degrees Fahrenheit (70(0)F) and forty-five percent (45%) relative humidity) per year; provided, however, that such combined total of the Annual Purchaser's Capacity Nominations may not be reduced by more than 200 MW in the aggregate. Purchaser must give Seller notice of any such reduction elected by Purchaser not later than three (3) years prior to the commencement of the Contract Year in which such reduction shall occur; provided, however, that such notice shall be effective if and only if either it is made jointly with the other Customers or the other Customers give Seller a similar notice under their respective Power Purchase Agreements with all such notices together satisfying the above criteria; provided, further, that such notices shall specify any changes in the percentage of the Annual Purchaser's Capacity Nomination to be purchased by Purchaser under Section 4.1.1 and by the other Customers under the corresponding provisions of their respective Power Purchase Agreements.
Notwithstanding the foregoing provisions of this Section 4.1, if and to the extent that a Force Majeure event affects Seller's ability to deliver and sell to Purchaser the Capacity of the Facility or any portion thereof, Seller shall be excused from any delay in performing or failure to perform any or all of such obligations (and in this regard, the Parties shall follow the procedures contemplated in Section 11.1); provided, however, that notwithstanding such reduction or elimination of the Actual Capability of the Facility, Purchaser shall continue to pay Seller the full Capacity Payment attributable to the first forty-five (45) days following the date of Seller's notification to Purchaser of any such Force Majeure effect; provided, further, that if the effect of a Force Majeure event lasts for longer than forty-five (45) days, then Purchaser shall not be required to make Capacity Payments attributable to any continued period of Force Majeure declaration after the end of such forty-five (45) day period, but Purchaser must resume making Capacity Payments when Seller declares the Force Majeure period over and resumes its obligation for delivery of Energy under this Agreement; and provided, further, that the Capacity Payment relief contemplated in the immediately preceding clause shall not apply if the Force Majeure event affecting Seller resulted from a failure of Purchaser or another Customer to fulfill its obligations under this Agreement or any of the Collateral Documents; and provided, further, that a Force Majeure event that affects Purchaser's ability to receive Energy from the Facility shall not excuse Purchaser's obligation to make Capacity Payments, except solely to the extent provided for in Section 5.1.3 if and to the extent such provision is applicable.
4.2 Energy Delivery and Payment. Subject to the terms and conditions of this Agreement and, in particular, subject to the provisions of Section 6 and Appendix B, Seller shall sell and deliver, and Purchaser shall purchase and receive, during the Operating Period, Energy requested by Purchaser in a Request for Energy, as well as Energy generated by associated ramp up and ramp down of the Facility and Test Energy; provided, however, that Purchaser shall not be required to make any payments for Test Energy produced prior to the Commencement Date. The Customers shall pay for and supply all fuel associated with the Customers' Request for Energy in accordance with the provisions of Section 3.2 of the Operating Agreement. The Energy payment (the "Energy Payment" or "EP") in respect of each month shall be the sum of four (4) components: a variable O&M component for operation on natural gas, a variable O&M component for operation on fuel oil, a start-up component, and a fuel component for Energy delivered from Alternate Resources. The components of the Energy Payment shall be calculated as follows:
4.2.1 Variable O&M Component - Natural Gas. The variable O&M component for operation on natural gas shall be calculated as follows:
(SIGMA)i=Days in the month (SIGMA)j=Hours in the Day [(DENGij x VOMR)
+ HVOMij]
Where:
DENGij is Delivered Energy in MWh (other than Test Energy prior to the Commencement Date) from the Facility produced with natural gas during hour j of day i; provided, however, that if the Facility uses both natural gas and fuel oil in a given hour, then fifty percent (50%) of the Delivered Energy in such hour shall be deemed to be produced with natural gas; and
VOMR is the variable O&M rate (in $/MWh), which shall be
[redacted]; and
HVOM is the hourly variable O&M rate (in $ per hour) as determined from Table A and its accompanying Notes applicable for hour j of day i during which the Facility is operating on natural gas and which is applicable only when DENGij is > 0.
Table A
Hourly Variable O&M Charges for Operation on Natural Gas
Annual On-Line Factor Combined Hourly Variable O&M Rate (in $
--------------------- ---------------------------------------
per hour) for all Customers (see Notes
--------------------------------------
below)
------
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
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1) The Hourly Variable O&M Rate in Table A represents the rate applicable for the Annual Purchaser's Capacity Nominations of all Customers. The actual Hourly Variable O&M Rate for Purchaser for an hour in a particular Contract Year shall equal the product of the applicable rate from the table for such Contract Year multiplied by the ratio of Purchaser's portion of the Request for Energy for such hour over the total Request for Energy for such hour.
2) The Hourly Variable O&M Rate for a
Contract Year shall be interpolated between the
values shown in Table A when the Annual On-Line
Factor for the previous Contract Year falls between
the specific percentages shown on Table A. For
example, with respect to an Annual On-Line Factor of
[redacted].
3) The dollar amounts shown in Table A are expressed in January 1, 2003 dollars and shall be escalated based upon the U.S. Consumer Price Index on January 1 of each year.
4) The dollar amounts in Table A represent the charge for sixty-five percent (65%) of the Facility's Capacity being sold to Customers under the Power Purchase Agreements. If Purchaser and the other Customers elect to reduce their combined Annual Purchaser's Capacity Nominations pursuant to Section 4.1.4, then the dollar amounts in Table A shall be proportionately reduced commensurate with such Capacity reduction.
5) The Annual On-Line Factor shall be calculated for each Contract Year, as follows:
Annual On-Line Factor = SH/ (PH - OH)
Where:
SH is the number of hours that the
Customers Schedule and Seller delivers
Energy in a Contract Year; and
PH is the number of hours in a Contract
Year; and
OH is the number of hours in a Contract Year
during which (i) the Facility is unavailable
due to a forced outage or due to a
maintenance outage that Seller has scheduled
pursuant to Section 6.4 or, if applicable,
that is a permitted fifty-eight (58) hour
pre-testing maintenance under Section 4.1.2,
and (ii) Seller does not deliver from an
Alternate Resource.
6) For the first Contract Year, all monthly
Energy billings will be made assuming an Annual
On-Line Factor of [redacted]. The rate shall be
determined annually for each Contract Year based on
the Annual On-Line Factor for the previous Contract
Year. At the end of each Contract Year, the Annual
On-Line Factor for such Contract Year shall be
calculated and the Hourly Variable O&M charges for
such Contract Year shall be recalculated using such
Annual On-Line Factor for such Contract Year. A
true-up payment or refund shall be made to adjust the
amounts collected by Seller from Purchaser during
each Contract Year to the amount computed by Seller
using such Annual On-Line Factor for such Contract
Year. Any true-up payments shall be included on an
invoice as soon as reasonably practicable following
the end of the applicable Contract Year.
4.2.2 Variable O&M Component--Fuel Oil. The variable O&M
component for operation on fuel oil when firing the
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gas turbines shall be calculated as follows:
(SIGMA)i= Days in the Month (SIGMA)j= Hours in the Day [(DEFOij x VOMRFO) + HVOMFOij] Where:
DEFOij is Delivered Energy (other than Test
Energy prior to the Commencement Date)
produced with fuel oil during hour j of day
i; provided that if the Facility uses both
natural gas and fuel oil in a given hour,
then fifty percent (50%) of the Delivered
Energy in such hour shall be deemed to be
produced with fuel oil; and
VOMRFO is the variable O&M rate (in $/MWh)
for Energy produced with fuel oil,
[redacted], subject to adjustment up or down
based on the Participants' evaluation of
General Electric's reports on the effect of
burning fuel oil on variable O&M costs (as
mutually agreed by the Participants
following good faith negotiations); and
HVOMFO is the hourly variable O&M rate (in $
per hour) for hour j of day i during which
the Facility is Operated on fuel oil, which
rate shall be [redacted], subject to
adjustment up or down based on the
Participants' evaluation of General
Electric's reports on the effect of burning
fuel oil on variable O&M costs (as mutually
agreed by the Participants following good
faith negotiations), and which is applicable
only when DEFOij is > 0.
4.2.3 Start-up Component. The start-up component shall be
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calculated as follows:
GTS x SUR
Where:
GTS is the number of gas turbine starts
required to meet a Request for Energy (other
than for Test Energy prior to the
Commencement Date) where the amount of
Energy delivered from any single gas turbine
increases from zero to an amount greater
than zero; provided, however, that the
calculation of GTS shall not include: (i)
any starts required to resume delivery to
Purchaser due to an interruption caused by a
forced outage, or (ii) any starts initiated
by Seller in order to make third party sales
in any given hour where the Facility would
otherwise not have been started in such hour
to meet a Request for Energy.
SUR is the Start-up Rate (in $ per start)
for each gas turbine as determined from
Table B below and its accompanying Notes:
TABLE B
Start-Up Rates
---------------------------------------------------------------------------
Cumulative Number of Start-ups per Combined Start-up Rate per Start per
-----------------------------------------------------------------------
Gas Turbine per Contract Year Gas Turbine for all Customers (see
----------------------------- ----------------------------------
Notes)
------
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
---------------------------------------------------------------------------
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1) The SUR in Table B represents the rate
applicable to all Customers for each start-up during
a Contract Year. There shall be no charge for the
[redacted], and the combined rate among all Customers
participating in each subsequent start-up during such
Contract Year shall be as identified in the Table B.
The actual SUR for Purchaser (in $ per start) for any
such start-up shall equal the quotient of the
applicable rate from the Table B divided by the
number of Customers participating in the Request for
Energy that requires the start-up (and in which
Purchaser is one of those Customers); provided,
however, Purchaser will not have to pay for start-ups
in which it does not participate.
2) The SUR is expressed in January 1, 2003
dollars and shall be escalated based upon the U.S.
Consumer Price Index on January 1 of each year.
3) The dollar amounts in Table B represent
the charge for sixty-five percent (65%) of the
Facility's Capacity being sold to Participants under
the Power Purchase Agreements. If the Participants
elect to reduce their combined Annual Purchaser's
Capacity Nominations pursuant to Section 4.1.4, then
the dollar amounts in Table B shall be
proportionately reduced commensurate with such
Capacity reduction.
4.2.4 O&M Rate Adjustment. The rates in Sections 4.2.1,
4.2.2 and 4.2.3 shall be increased or decreased based
on good faith negotiation of the Parties (in
accordance with Section 18) to reflect and include
any actual increase or decrease in Seller's costs of
operating the Facility that is caused by any mutually
agreed-upon modification or design change or any
actual increase or decrease in Purchaser's or another
Customers' charges for providing any services to
Seller.
4.2.5 Energy Payment for Delivery from Alternate Resources.
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4.2.5.1 If Seller elects to deliver Energy from
Alternate Resources pursuant to Section 4.4,
then the variable O&M component and the
start-up component of the Energy Payment
shall be calculated in accordance with
Sections 4.2.1 and 4.2.3, respectively, for
such Alternate Resource Energy as if it were
delivered from the Facility. In addition,
the fuel component for the Energy delivered
from Alternate Resources shall be calculated
as follows:
(SIGMA)i=Days in the month (SIGMA)j=Hours in the Day (MDEij x HRij x FRPij)
Where:
MDEij = Scheduled Energy in MWhs delivered from an Alternate
Resource during hour j of day i;
when the Facility is unavailable, then HRij for an hour =
[redacted];
when the Facility is available, then HRij for an hour =
[redacted]; and
FRPij = the fuel rate proxy for an
hour calculated in dollars per
MMBtus in accordance with the
applicable provisions of either
Section 4.2.5.2 or 4.2.5.3.
4.2.5.2 If the Fuel Supply Agent has not already
scheduled the transportation of gas to the
Facility to meet the Customers' Schedules
for the hour during which Seller elects to
deliver the Scheduled Energy from Alternate
Resources, then following notification from
Seller of its election to deliver the
Scheduled Energy from Alternate Resources,
Seller shall be obligated to obtain the
necessary quantities of gas and necessary
gas transportation capacity to accommodate
any portion of the Schedule that Seller has
elected to satisfy from Alternate Resources.
During periods that Seller elects to deliver
Energy from Alternate Resources, the Fuel
Supply Agent shall make available
transportation capacity, within constraints
of the pipeline tariffs and operational
procedures in effect at the time and at no
additional cost to the Fuel Supply Agent, in
the amount determined by the quantity of
Energy supplied from Alternate Resources and
the applicable heat rate determined by the
rules for defining HR in the formula
provided in Section 4.2.5.1. An example of
the determination of the transportation
capacity is included in Appendix D. If
Seller has delivered Energy from Alternate
Resources under these circumstances, then
the FRP (in $ per MMBtus) shall be equal to
the sum of: (i) [redacted]; and (ii) the
applicable firm gas transportation variable
cost associated with deliveries to the
Facility under such Participant's firm
transportation agreement(s). All risks of
gas supply and transportation interruption
to accommodate deliveries of Energy from
Alternate Resources shall be borne by
Seller.
4.2.5.3 If the Fuel Supply Agent has already
scheduled the transportation of gas to the
Facility to meet the Customers' Schedules by
the time Seller notifies Purchaser of
Seller's election to deliver the Scheduled
Energy from Alternate Resources, then at
Seller's election:
(i) Seller shall direct Fuel Supply Agent to use commercially
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reasonable efforts to revise its scheduled transportation of gas to the Facility to provide for the delivery of the gas to Seller at any alternate delivery point designated by Seller that is available under the Customers' firm transportation agreement(s). The efforts of the Fuel Supply Agent shall be subject to the constraints of the pipeline tariffs and operational procedures in effect at the time, and the Fuel Supply Agent shall not be required to incur any additional cost as a result of the revision of the schedule of transportation of gas to the alternate delivery point. The amount of scheduled transportation of gas to be delivered to the alternate delivery point shall be determined by the quantity of Energy supplied from Alternate Resources and the applicable heat rate determined by the rules for defining HR in the formula provided in Section 4.2.5.1. An example of the determination of the transportation capacity is included in Appendix D. If Seller has delivered Energy from Alternate Resources under these circumstances, then the FRP (in $ per MMBtu) shall be [redacted]; or
(ii) Seller shall direct Fuel Supply Agent to use commercially
reasonable efforts to remarket to third parties the gas that has been
scheduled for delivery to the Facility on the best terms possible
under the circumstances. The efforts of the Fuel Supply Agent shall be
subject to the constraints of the pipeline tariffs and operational
procedures in effect at the time. The amount of scheduled
transportation of gas to be remarketed to third parties shall be
determined by the quantity of Energy supplied from Alternate Resources
and the applicable heat rate determined by the rules for defining HR
in the formula provided in from paragraph 4.2.5.1. An example of the
determination of the transportation capacity is included in Appendix
D. If Seller has directed the Fuel Supply Agent to remarket the gas
under these circumstances, the FRP (in $ per MMBtu) shall be
[redacted].
4.3.1 Seller guarantees that the Actual Availability of the Facility for each of the Peak and Off-Peak Periods of each Contract Year will equal or exceed [redacted] ("Availability Guarantee"); provided, however, that (i) the first three months of operation following the Commencement Date shall be excluded from the Availability Guarantee, (ii) if and to the extent that a Force Majeure event affects Seller's ability to achieve the Availability Guarantee, other than in the case of Equipment Breakdown, Seller shall be excused from the Availability Guarantee (and in this regard the Parties shall follow the procedures contemplated in Section 11), and (iii) to the extent that the Facility is fired with fuel oil in excess of forty-eight (48) hours per combustion turbine unit in any Contract Year in order to meet Purchaser's Request for Energy, then for every additional ten (10) hours that the Facility is fired using fuel oil, the lower end of the Availability Guarantee range, and the [redacted] in Sections 4.3.5.1 and 4.3.5.2, shall be reduced by [redacted], which reductions shall remain in effect until the next Planned Major Maintenance occurs. If either combustion turbine is not fired on oil during any Contract Year for the same number of hours as the other combustion turbine, then for purposes of calculating the adjustment to the Availability Guarantee, each combustion turbine will be deemed to have been fired on oil during such Contract Year for a number of hours that is equal to one half of the summation of the number of hours that each combustion turbine was actually fired on oil during such Contract Year.
4.3.2 In each Contract Year, or partial Contract Year in
the case of the first Contract Year (where the first
three months are excluded) or the last Contract Year,
Seller shall be entitled to an availability incentive
payment from Purchaser ("Availability Incentive
Payment") equal to [redacted].
4.3.3 The Actual Availability for the Peak Period of each
Contract Year, or partial Contract Year in the case
of the first Contract Year (where the first three
months are excluded) or the last Contract Year, shall
be calculated as follows and then rounded up or down
to the nearest tenth of a percentage point (based on
the method that the rounding is up if the succeeding
decimal is 5 or higher or otherwise the rounding is
down); provided, however, that such Actual
Availability shall not exceed one (1.00):
Actual Availability = (PH-OH -EDH+EMH+ARDH)/PH Where: "PH" (or
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"Period Hours") shall equal the hours in the Peak Period of such calendar year;
"OH" (or "Outage Hours") in the Peak Period of such Contract Year means all hours the Facility is unavailable for operation; provided, however, that OH shall not include hours in any day during which the Purchaser has not Scheduled any Energy from the Facility during the entirety of such day;
"EDH" (or "Equivalent Derated Hours") in the Peak Period of such Contract Year means the summation of EDH for each hour during the Peak Period; provided, however, that EDH shall not include hours in any day during which the Purchaser has not Scheduled any Energy from the Facility during the entirety of such day. In each hour for which the EDH of such hour must be calculated, EDH for the hour will equal (Guaranteed Output - Actual Capability)/Guaranteed Output;
"EMH" (or "Excused Maintenance Hours") shall equal hours that Seller has scheduled maintenance on the Facility in the Peak Period of such calendar year pursuant to Section 6.4 and, if applicable, the fifty-eight (58) hours of pre-testing maintenance allowed prior to a Capacity test under Section 4.1.2; provided, however, that in any hour EMH must be zero if there is no Outage Hour in such hour; and
"ARDH" (or "Alternate Resource Delivery Hours") shall equal the number of hours that Seller delivers Energy to Purchaser from Alternate Resources in the Peak Period of such Contract Year to fully or partially make up for shortfalls caused by Facility outages or derates. Seller will not receive any credit for ARDH in any entire day unless Seller is able to deliver at least partial Energy in each hour of such day that Purchaser Schedules Energy, in which case Seller will receive ARDH credit for each hour of the day based on the lowest ratio during any hour of such day of Delivered Energy to Scheduled Energy.
4.3.4 The Actual Availability for the Off-Peak Period of each Contract Year shall be calculated in a fashion similar to Section 4.3.3, substituting "Off-Peak Period" for "Peak Period" where it appears in Section 4.3.3.
4.3.5 In the event that the Actual Availability during the Peak Period or Off-Peak Period, or both, of any given Contract Year, or partial Contract Year in the case of the first Contract Year (where the first three months are excluded) or the last Contract Year, is less than the lower end of the Availability Guarantee range, then Purchaser shall be entitled to receive availability damages ("Availability Damages") from Seller as Purchaser's sole and exclusive remedy for Seller's failure to delivery Capacity and Energy from the Facility due to the unavailability of the Facility. 4.3.5.1 The Availability Damages for the Peak Period shall be calculated as follows (with any required adjustments as noted in Section 4.3.5.3):
Availability Damages for the Peak Period of any Contract Year =
[redacted]
4.3.5.2 The Availability Damages for the Off-Peak
Period shall be calculated as follows (with
any required adjustments as noted in Section
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4.3.5.3):
Availability Damages for the Off-Peak Period of any Contract Year = [redacted]
4.3.5.3 In both of Sections 4.3.5.1 and 4.3.5.2, the
factors [redacted] shall be adjusted for the
use of fuel oil pursuant to Section
4.3.1(iii), if applicable.
4.3.6 As soon as reasonably practicable after the first
month following the Commencement Date, and each month
thereafter, Seller shall submit to Purchaser a
statement setting forth in reasonable detail the
actual availability of the Facility during the prior
month, including the underlying availability data.
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4.3.7 As soon as reasonably practicable following each Contract Year, Seller shall submit to the Purchaser a statement setting forth the Actual Availability for the preceding Contract Year together with a calculation of the net amount of any Availability Incentive Payment due to Seller or Availability Damages due to the Purchaser for the preceding Contract Year based on the foregoing calculations, as applicable, with respect to the Peak Period and Off-Peak Period of such Contract Year. Within ten (10) Business Days of (a) receipt of such statement, Purchaser shall pay any Availability Incentive Payment due to Seller by wire transfer in immediately available funds, or (b) transmittal of such statement, Seller shall pay any Availability Damages due to Purchaser by wire transfer in immediately available funds.
4.4 Alternate Resources. In any hour in which the Facility is unavailable, Seller may continue to make deliveries of Energy in the full amount Scheduled by Purchaser from non-Facility sources (including, but not limited to, generating units on Seller's or its Affiliates' systems and Energy purchases available to Seller) ("Alternate Resources") to replace the Energy that would have been provided by the unavailable Facility. In any hour in which the Facility is available, Seller may choose to make deliveries of Energy in the full amount Scheduled by Purchaser, or any portion thereof, from Alternate Resources to replace the Energy that would have been provided by the available Facility; provided, however, that if the Facility is available, Seller must maintain the Facility on-line and committed at least at the Facility's minimum load, and Purchaser may Schedule spinning reserves from the Facility, all in accordance with Appendix B. Seller must deliver Energy from Alternate Resources to Purchaser at an unconstrained point on the Grid, and if Seller is making such delivery at a time when the Facility is unavailable, then Seller will purchase Firm Transmission Service for such delivery to the extent that such Firm Transmission Service is available for the Alternate Resource Energy from the point of its acquisition by Seller to the unconstrained point on the Grid. In utilizing Alternate Resources, Seller shall comply with the notice requirements of Section 3 of Appendix B.
4.5 Purchaser's Right to Capacity and Energy. During the Operating Period, Purchaser shall have the first call to purchase Seller's share of the Capacity and Energy generated by, and Ancillary Services associated with, the Facility (other than the reductions in Capacity elected jointly by the Customers pursuant to Section 4.1.4); provided, however, that (i) subject to Purchaser's right to Capacity and Energy under this Agreement and the Operating Agreement, Seller may make sales of any Capacity and Energy generated by, and Ancillary Services associated with, Seller's Equity Capacity when such Capacity and Energy is not Scheduled by Purchaser, and (ii) in the event that Seller determines that the Facility is capable of delivering Energy to the Grid prior to the Scheduled Commencement Date, Seller shall have the option of either (a) utilizing the Capacity and Energy generated by, and Ancillary Services associated with, its percentage ownership share of the Facility prior to the Scheduled Commencement Date for sales to third parties by delivering written notice of its election of this option thirty (30) days prior to the anticipated Commercial Operation Date, in which event Purchaser shall not make Capacity Payments until the later of the Scheduled Commencement Date or the Commencement Date, or (b) initiating delivery of Capacity and Energy to Purchaser under this Agreement on the Commencement Date. If Seller makes sales of either or both Capacity and Energy to third parties under Section 4.5(ii)(a) at a time when the Scheduled Commencement Date has passed but the Commencement Date has not yet occurred, then Seller will pay to Purchaser the portion, if any, of the proceeds of such sales that Seller actually receives.
SECTION 5 SCHEDULE FOR DELIVERY OF CAPACITY AND ENERGY
5.1.1 Seller anticipates that, the Facility will achieve the Commencement Date by the Scheduled Commencement Date and shall be fully capable of reliably producing the power and Energy to be provided under this Agreement to Purchaser at the Delivery Point; provided, however, that if and to the extent that a Force Majeure event affects Seller's ability to timely comply with the foregoing guarantee, the Scheduled Commencement Date shall be extended by the amount of time Seller reasonably needs to remedy the effects of the Force Majeure that prevented Seller's performance (and in this regard, the Parties shall follow the procedures contemplated in Section 11).
5.1.2 In the event that Seller fails to achieve the Commencement Date by the date that is two (2) years after the Scheduled Commencement Date, then either (i) Seller shall have the right to simultaneously terminate all of the Power Purchase Agreements by delivering written notice of such election to Purchaser and the other Customers ("Seller's Termination Notice"), or (ii) Purchaser may terminate this Agreement, if and only if each of the other Customers also terminates contemporaneously its respective Power Purchase Agreement for the same reason, by delivering written notice of such election to Seller (collectively, together with the other Customers' similar notices, "Purchasers' Termination Notices"). Within ten (10) Business Days of the date of Seller's Termination Notice, Seller shall pay Purchaser liquidated damages [redacted], this Agreement shall terminate effective as of the date of Seller's Termination Notice, and Seller shall have no further liability to Purchaser other than the liquidated damages paid under this Section 5.1.2. Within ten (10) Business Days of the date of Purchasers' Termination Notice, Seller shall pay Purchaser liquidated damages [redacted], this Agreement shall terminate effective as of the date of Purchasers' Termination Notice, and Seller shall have no further liability to Purchaser other than the liquidated damages paid under this Section 5.1.2.
5.1.3 In the event that Seller's failure to achieve the
Commencement Date by the Scheduled Commencement Date is attributable
to, in whole or in part, the failure of any Customer to meet any of
their respective obligations under this Agreement or their respective
Power Purchase Agreements or the Collateral Documents, then (a) the
Scheduled Commencement Date shall be extended for such period of
Purchaser's or such other Customer's failure, and (b) Purchaser shall
make Capacity Payments [redacted] beginning as of the initial
Scheduled Commencement Date (without any extension); provided,
however, that Purchaser shall not be required to make any Capacity
Payments under this Section 5.1.3 to the extent the delay in achieving
the Scheduled Commencement Date is attributable to the concurrent
failure of Purchaser or such other Customers and Seller (where such
concurrent failures are not co-extensive, such relief from Capacity
Payments shall apply only during the period of time that Seller's
failure to meet its obligations contributed to the delay); provided,
further, that in the event Purchaser's failure to meet its obligation
was the result solely of a Force Majeure event that prevented
Purchaser's timely completion of such obligation, then Purchaser will
be excused from having to make Capacity Payments as contemplated in
Section 5.1.3(b) for the first forty-five (45) days after the
Scheduled Commencement Date (without benefit of any extension thereof
allowed under this Agreement), but if the Commencement Date does not
occur within such forty-five (45) day period, then Purchaser shall
recommence making Capacity Payments starting at the beginning of the
forty-sixth (46th) day after the Scheduled Commencement Date and
thereafter continue making Capacity Payments as contemplated in
Section 5.1.3(b).
5.2 Conditions to Commencement. Seller will notify Purchaser of the
date when the Facility has achieved the following criteria (the "Commencement
Date"), which notice will be accompanied by reasonable documentation evidencing
satisfaction or occurrence of each of the following; provided, however, that
Seller shall not be precluded from making third-party sales, in accordance with
Section 4.5, of its percentage ownership share of Capacity and Energy from the
Facility notwithstanding whether any or all of the following criteria have been
met in whole or in part:
5.2.1 successful completion of required testing of the
Facility has occurred for purposes of financing,
project operation, air permitting, Purchaser's
planning and reporting, and manufacturers'
warranties, including establishment of the initial
Demonstrated Capability of the Facility as
contemplated in Section 4.1.2;
5.2.2 the Facility has completed four (4) successful
start-ups without experiencing any abnormal operating
conditions and has generated continuously for a
period of not less than sixteen (16) hours while
synchronized to the Grid at a net Capacity output of
at least ninety percent (90%) of the Demonstrated
Capability (adjusted for ambient conditions) without
experiencing any abnormal operating conditions;
5.2.3 the Facility is in compliance with the
Interconnection Agreement, either is capable of
operation in the AGC mode or is capable of responding
to manual load change instructions, has achieved
initial synchronization with the Grid, and has
demonstrated the reliability of its communications
systems and communications with the Florida Municipal
Power Pool Energy Control Center located in the OUC
Pershing Operations Building (or the replacement for
such control center if the Customers decide to have
their generation control performed at a different
location); and
5.2.4 certificates of insurance coverages and/or insurance
policies required of Seller have been obtained and
submitted to Purchaser as required by Section 28.
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5.3 Test Energy. Seller shall coordinate the production and delivery of Test Energy with Purchaser. Purchaser shall cooperate with Seller to facilitate Seller's testing of the Facility, provide the fuel necessary to conduct testing, and shall accept Test Energy delivered to Purchaser in accordance with the provisions of Section 4.2.
SECTION 6 REQUESTS FOR ENERGY; OPERATION AND MAINTENANCE
6.1 Communicating Requests for Energy. Purchaser shall have the right to request deliveries of Energy by providing a Request for Energy to Seller in accordance with this Section 6 and Appendix B; provided, however, that Purchaser and the other Customers shall coordinate their Scheduling requirements by jointly submitting a single Request for Energy that covers all of their respective requirements on any given day.
6.1.1 The Customer's joint Requests for Energy may request the full output of the Facility, reduced by those amounts, if any, that Customers jointly elect to subtract from the Capacity available to Customers pursuant to the process provided in Section 4.1.4 of this Agreement and the other Power Purchase Agreements. If the Customer's joint Request for Energy is for less than the full output of the facility, then the request shall be deemed to be a Request for Energy first from Purchaser's Equity Capacity and, if such Equity Capacity is not sufficient, then from Purchaser's purchased Energy under this Agreement.
6.1.2 The Parties hereby consent to the recording of all conversations on the telephone lines used for communicating Requests for Energy and related notices and instructions in accordance with customary industry practice. The contents of such recordings shall be definitive.
6.2 Limitations on Requests for Energy. Notwithstanding anything to the contrary in this Agreement, any Request for Energy, operation in the AGC mode or operation in response to a Capacity Emergency that would require the Facility to operate in a manner inconsistent with the Technical Limits, Prudent Utility Practice or applicable Law and Permit requirements shall be deemed not to comply with the requirements and limitations set forth in this Section 6. If and when a Customers' Request for Energy does not comply with the requirements and limitations of this Section 6 by reason of the previous sentence, Seller will notify Customers of such noncompliance promptly after Seller realizes that the Request for Energy is noncompliant and will modify Customer's Request for Energy to make it consistent with the Technical Limits, Prudent Utility Practice and all applicable Laws and Permits to the extent it is reasonably possible to do so consistent with such standards.
6.3 Operation of the Facility. Seller shall operate and maintain the Facility in accordance with this Agreement, Prudent Utility Practice, the Technical Limits and all applicable Laws and Permit requirements. Any emission allowances required for operation of the Facility as contemplated in this Agreement shall be provided in accordance with the applicable provisions of the Operating Agreement.
6.4 Scheduled Maintenance. Seller agrees to schedule Planned Major Maintenance during the Off-Peak Period, or to obtain Purchaser's consent to schedule such maintenance during the Peak Period. Seller will submit to Purchaser an annual maintenance projection and will make reasonable efforts to coordinate the scheduling of such Planned Major Maintenance with Purchaser, including estimated start dates and return to service dates. Seller must seek the consent of OUC, acting for itself and on behalf of the other Customers (which Purchaser hereby authorizes) in scheduling of any Minor Maintenance; provided, however, that Purchaser guarantees Seller will be afforded a minimum of four (4) such Minor Maintenance events distributed approximately evenly over the Off-Peak Period, with a maximum of six (6) such Minor Maintenance events during any year; provided, further, that requests for Minor Maintenance events during the period from May 15 through September 15 may be granted or withheld in OUC's sole discretion.
6.5 Transmission Operator. Coordination with an RTO regarding security and reliability of the Grid as it relates to the Facility, or any other entity, having control over the security and reliability of the Grid shall be the responsibility of Seller as the operator of the Facility. Coordination with an RTO, or other entity, having balancing authority or scheduling authority over the Facility should be handled by Purchaser for any schedules to Purchaser from the Facility and by Seller for any other schedules from the Facility. Any orders, directives or operating requirements that Seller is required to follow by Law imposed on Seller by an RTO, or any other entity, having control over the security and reliability of the Grid shall take precedence over this Agreement. To the extent the requirements of such order, directive or operating requirement necessarily prevent Seller from fulfilling its obligations under this Agreement, Seller shall be relieved of its obligations hereunder. To the extent the requirements of such order, directive or operating requirement conflict with Seller's fulfillment of its obligations hereunder, the rights and obligations of the Parties hereunder shall be adjusted as necessary to comply with such orders, directives or operating requirements.
SECTION 7 INTERCONNECTION AND TRANSMISSION
7.1 Interconnection Facilities. The Parties shall execute an Interconnection Agreement pursuant to applicable interconnection policies and procedures of OUC. The Interconnection Agreement shall contain terms and conditions governing the interconnection and parallel operation of the Facility with the Grid.
7.2 Delay in Interconnection. Purchaser shall cause OUC to complete the OUC Interconnection Facilities and ensure that the Grid is capable of providing and receiving Energy by the date that is eight (8) months prior to the anticipated Commercial Operation Date, but in no event earlier than January 15, 2003. By the date that Seller has completed the collector bus and the 230 kv line to the OUC Interconnection Facilities, but no earlier than the date that is eleven (11) months prior to the anticipated Commercial Operation Date, OUC shall provide service to the Facility for the purposes of engineering and testing the collector bus and other systems by either providing 230 kv service at the 230 kv Interconnection Point or by providing service to the 4160 kv SWGR bus. If for any reason, other than the fault of Seller, OUC fails to complete the OUC Interconnection Facilities and/or if the Grid is not capable of providing and receiving Energy (as determined by OUC and as supported by reasonable documentation) in accordance with the preceding sentence and, as a result, OUC cannot accommodate Seller's start-up and testing of the Facility (such a delay, an "IF/Grid Delay"), then the Scheduled Commencement Date shall be extended by that period of time equal to the IF/Grid Delay; provided, however, that Purchaser shall make the Capacity Payments as provided in Section 5.1.3(b); provided, further, that if Seller would not have been capable of delivering Energy from the Facility to the OUC Interconnection Facilities, even in the absence of an IF/Grid Delay, on the original anticipated Commercial Operating Date ("Seller's Delay"), then extension of the Scheduled Commencement Date and the date on which Purchaser is obligated to make Capacity Payments shall be adjusted by the period of time of Seller's Delay.
7.3 Transmission.
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7.3.1 Purchaser shall be responsible for all costs
associated with and for making all necessary
transmission arrangements for Delivered Energy,
including tagging and any required Ancillary
Services, with the transmission service provider for
delivery from and beyond the Delivery Point.
7.3.2 Seller shall bear all costs and losses and shall be
responsible for making all arrangements for
transmission service, including tagging and any
required ancillary services, with respect to delivery
of Capacity and Energy from an Alternate Resource to
an unconstrained point on the Grid.
SECTION 8
RISK OF LOSS; METERING
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8.1 Risk of Loss. Delivered Energy sold pursuant to this Agreement shall be made available to Purchaser at the Delivery Point. Risk of loss with respect to all such Energy shall pass to Purchaser when such Delivered Energy is made available to Purchaser at the Delivery Point. Risk of loss with respect to the natural gas supply utilized to deliver Energy pursuant to this Agreement shall pass to Seller when such natural gas supply is made available to Seller at the Gas Delivery Point. For purposes of this Agreement, and except to the extent expressly limited in this Agreement, Purchaser shall bear all risk of all occurrences of any nature (including Force Majeure or any other event beyond the reasonable control of either Party) affecting any interconnection facilities, substations, transmission lines and other facilities on Purchaser's side of the applicable Delivery Point and the Gas Delivery Point.
8.2 Place of Measurement. All Energy from the Facility shall be measured by the Facility's meters (such meters collectively, the "Interconnection Meters"), and the Energy delivered from the Facility shall be the Interconnection Meters' readings of the quantities of Energy, reduced by an amount equal to the applicable Energy quantity necessary to compensate for the loss, if any, between the Interconnection Meters and the Delivery Point.
8.3 Testing and Calibration of Interconnection Meters. Seller shall inspect and calibrate the Interconnection Meters at least once a year. Seller shall give Purchaser reasonable advance notice of any inspection, testing or calibration of the Interconnection Meters. Purchaser shall have the right to have a representative present at such inspection, testing or calibration of the Interconnection Meters. Purchaser shall have the right to require, at Purchaser's expense except as set forth in Section 8.4, a test of any of the Interconnection Meters not more often than once every twelve (12) months. If any Interconnection Meter is found to be inaccurate by one half of a percent (0.5%) or less, then any previous recordings of such Interconnection Meter shall be deemed accurate, but Seller shall use its reasonable efforts to adjust such Interconnection Meter immediately and accurately. In the event that any Interconnection Meter is found to be inaccurate by more than one half of a percent (0.5%), Energy delivered at the corresponding Delivery Point shall be measured by reference to Customers' check-meters, if installed and registering accurately, or the meter readings at the Delivery Point for the period of inaccuracy shall be adjusted as far as can be reasonably ascertained by Seller from the best available data from both Parties. If the period of the inaccuracy cannot be ascertained reasonably, any such adjustment shall be for a period equal to one half of the time elapsed since the preceding test. Customers' check meters, if installed, shall be subject to Seller's right to require, at Seller's expense except as set forth in Section 8.4, a test of any of the check-meters not more often than once every twelve (12) months. If any of Customers' check meters is found to be inaccurate by one half of a percent (0.5%) or less, then any previous recordings of such check meter shall be deemed accurate, but Customers shall use their reasonable efforts to adjust such check meter immediately and accurately.
8.4 Delivered Energy Adjustments. In the event that, due to correction
for inaccurate Interconnection Meters with an inaccuracy in excess of one half
of a percent (0.5%) (determined in accordance with Section 8.3), the amount of
Delivered Energy is increased or decreased, the revised quantity of Delivered
Energy shall be used for purposes of calculating the Energy Payment pursuant to
Section 4.2. If any Energy Payment has already been calculated using the
previous quantity of Delivered Energy, the Energy Payment shall be recalculated
using the revised quantity of Delivered Energy. If the recalculation (i)
increases the Energy Payment, Purchaser shall pay to Seller the amount of such
increase, or (ii) decreases the Energy Payment, Seller shall refund to Purchaser
the amount of such decrease. In any such case, the required payment shall be
included on the next invoice to be issued and shall be paid at the time payment
of such invoice is required pursuant to Section 9. Any payment required under
this Section 8.4 shall bear interest in accordance with Section 9.3 from the
original due date (or from the date paid in the case of a refund) until the date
paid (or until the date refunded in the case of a refund). In the case of
inaccurate Meters with an inaccuracy in excess of one half of a percent (0.5%),
the Party which owns such Meters shall promptly cause such Meters to be
corrected and, where such inaccuracy was determined pursuant to a test required
by the other Party, the Party which owns such Meters shall bear the expense of
any such test.
SECTION 9 METHOD OF PAYMENT
9.1 Invoicing and Payment. As soon as reasonably practicable after the
first day of each month commencing with the second month or portion thereof
during which Test Energy is delivered to Purchaser and continuing for each month
until the first month after the end of the Operating Period, Seller shall submit
to Purchaser an invoice as described in Section 9.2. If such invoice indicates a
net amount payable to Seller, Purchaser shall pay such invoice within ten (10)
Business Days of Purchaser's receipt of the invoice. Such payment shall be made
in U.S. dollars by wire transfer of immediately available funds prior to 3:00
p.m. Eastern Prevailing Time, on the date of payment in accordance with the
invoice instructions. Payments made after 3:00 p.m. Eastern Prevailing Time or
on a day that is not a Business Day shall be deemed to be made on the next
subsequent Business Day. If such invoice indicates a net amount payable to
Purchaser, Seller shall pay such amount within ten (10) Business Days of
Purchaser's receipt of the invoice.
9.2 Monthly Invoices. Each monthly invoice shall show the amount and
calculation of the following, as applicable: (i) the Capacity Payment and Energy
Payment payable by Purchaser to Seller for the preceding month net of any
amounts to be credited by Seller to Purchaser for such month; (ii) following
each Contract Year, the net amount payable by Purchaser or Seller pursuant to
Section 4.3 respecting the Availability Incentive Payment and Availability
Damages, as the case may be; and (iii) payments, refunds, credits and
reductions, if any, payable by either Party pursuant to Sections 9.3 or 9.4.
9.3 Late Payments. Any amount due from either Party hereunder not paid in full on or before the date such payment is due will incur a delayed payment charge on the unpaid amount from the original due date until the date paid at an annual rate equal to the then current Prime Rate plus six (6) percentage points (or such lesser annual rate as is the maximum rate permitted by applicable Law).
9.4 Billing Disputes. In the event of any dispute as to all or any
portion of any monthly invoice, Purchaser shall give notice of the dispute to
Seller but shall pay the full amount of the invoiced charges when due (or if
applicable, Seller shall give notice to Purchaser of Seller's dispute regarding
any information provided by Purchaser that was a factor in any calculation
supporting invoiced amounts). Such notice shall state the amount in dispute and
set forth a full statement of the grounds on which such dispute is based.
Purchaser and Seller shall give all due and prompt consideration to any such
dispute. Upon final determination (whether by agreement, dispute resolution
pursuant to Section 18 hereof, or otherwise) of the dispute, any amounts due to
Purchaser or Seller, together with interest from the date due until the date
paid at the rate specified in Section 9.3, shall be paid no later than thirty
(30) days following such final determination. Purchaser and Seller shall have
until the end of one hundred eighty (180) days after its receipt of any invoice,
statement or information supporting invoice calculations to question or contest
the correctness of any charge or credit on such invoice or statement.
9.5 Audit Rights. Until the end of one hundred eighty (180) days after Purchaser's receipt of any invoice, Seller and Purchaser will make available to the other upon written request, and the Purchaser or Seller may audit, such books and records of the other (or other information to which Purchaser or Seller has access) as are reasonably necessary for Purchaser or Seller to calculate and determine the amounts shown on such invoice and thereby to verify the accuracy and appropriateness of the amounts billed or credited to Purchaser or Seller hereunder; provided, however, that Purchaser shall coordinate its rights under this section with the other Customers in order to conduct joint, rather than individual, audits pursuant to this provision. The Parties shall maintain their respective books and records in accordance with generally accepted accounting principles applicable from time to time.
ARTICLE 10
CHANGE IN LAW; MODIFICATION OF AGREEMENT
10.1.1 The Parties acknowledge that a Change in Law may increase or decrease Seller's costs in providing service under this Agreement. In the event of such a Change in Law, Seller may give notice to Purchaser that Seller's costs of providing service under this Agreement have changed (which notice will include reasonably detailed information about such cost changes) and, in the event such notice is given, this Agreement shall be modified to reflect such changes in costs, subject to Section 18, provided, however, that in the event Seller provides notice of such an increase, then Purchaser may provide documentation to Seller of other Changes in Law that have decreased the cost of providing service under this Agreement and Seller shall set-off any such decrease in cost against the increase in cost identified in the Seller's notice.
10.1.2 Purchaser shall pay the adjusted amount calculated pursuant to Section 10.1.1 for the period commencing with the notice of changed cost through the date of termination of this Agreement. The Parties shall make such payments as are appropriate to adjust all prior billings or payments to reflect the adjustments described herein.
10.1.3 A "Change in Law" shall mean a change in Law which constitutes a new environmental or tax Law or a new interpretation of such Law (not including a change in tax Laws that assess taxes only on Seller's net income) or a change in the provisions contained in the Site Certification permits and which generally affects the cost of, or restricts, operation of the Facility.
10.2 Modification of Agreement. In the event the FERC modifies this Agreement, the Parties agree to make all changes necessary to preserve as nearly as possible the bargain contained in this Agreement, including but not limited to, the total amounts of Capacity and Energy delivered to Purchaser and the total amount of revenues to be received by Seller hereunder; provided, however, that Seller shall have the right to terminate this Agreement without further obligation to Purchaser in the event that modifications to this Agreement by FERC cause a material adverse effect on the economic value of this Agreement to Seller; provided, further, that Purchaser shall have the right to terminate this Agreement without further obligation to Seller in the event that modifications to this Agreement by FERC cause a material adverse effect on the economic value of this Agreement to Purchaser; and provided, further, that in the event Seller elects to terminate this Agreement pursuant to this Section 10.2, then Purchaser and Seller agree to expeditiously proceed with a sale at net book value of Seller's entire ownership interest in the Facility to Purchaser and the other Customers in accordance with the provisions of the Ownership Agreement. Seller agrees to use good faith efforts, consistent with Prudent Utility Practice, to resist any changes to this Agreement proposed by the FERC or any other Governmental Body or their respective staffs, and Purchaser agrees not to seek, request, promote or support any changes to this Agreement before the FERC or any other Governmental Body.
SECTION 11 FORCE MAJEURE
11.1 Force Majeure Notice and Obligations. With respect to those obligations of the Parties set forth in this Agreement that expressly excuse performance in the event of a Force Majeure, the existence of Force Majeure that causes a Party (the "Non-Performing Party") to delay performance or fail to perform such obligations shall excuse the Non-Performing Party's delay in performing, or failure to perform, such obligations, subject to any express limitations on such excuse provided or referenced in the Section invoking the excuse. In the event of Force Majeure that causes the Non-Performing Party to delay performance or fail to perform its obligations under this Agreement and that excuses such delay or failure:
11.1.1 the Non-Performing Party shall give the other Party
written notice and full details as soon as
practicable after learning of the Force Majeure;
11.1.2 the Non-Performing Party shall use reasonable
dispatch to remedy its inability to perform (except
that this provision shall not impose a requirement on
either Party to deliver or receive Energy at a
delivery point other than a Delivery Point), and, if
Seller is the Non-Performing Party, Seller shall use
reasonable efforts to provide Energy from the
Facility at a Delivery Point; and
11.1.3 when the Non-Performing Party is able to resume
performance of its obligations under this Agreement,
that Party shall give the other Party written notice
to that effect.
SECTION 12
EVENTS OF DEFAULT; TERMINATION
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12.1 Events of Default of Seller. Except when excused due to a Force Majeure event pursuant to the provisions of Section 11 hereof, an Event of Default shall be deemed to have occurred with respect to Seller upon the occurrence and during the continuance of any of the following events:
12.1.1 The Bankruptcy of Seller;
12.1.2 Seller fails to pay any invoiced amount or undisputed non-invoiced amount when due under this Agreement within five (5) Business Days after receiving notice of such failure;
12.1.3 Seller fails to perform or observe any of its material
obligations or covenants hereunder or otherwise is in material breach
of this Agreement (other than obligations addressed in Section 12.1.2)
and such failure or breach continues unremedied for a period of thirty
(30) days following notice from Purchaser demanding cure of such
failure or breach (or within such longer period of time as is
reasonably necessary to accomplish such cure, if it cannot be
reasonably accomplished within such 30-day period and Seller
diligently commences such cure in such period and continues such cure
to completion); or
12.1.4 Any representation or warranty made by Seller herein, in the Ownership Agreement or in any document or certificate furnished by Seller hereunder shall have been false when made and such false representation or warranty has a material and adverse effect on Purchaser and, if capable of being cured, such false representation or warranty is not cured within thirty (30) days after notice thereof from Purchaser.
12.2 Events of Default of Purchaser. An Event of Default shall be deemed to have occurred with respect to Purchaser upon the occurrence and during the continuance of any of the following events:
12.2.1 The Bankruptcy of Purchaser;
12.2.2 Purchaser fails: (i) to pay any invoiced amount or any undisputed non-invoiced amount when due under this Agreement within ten (10) Business Days after receiving notice of such failure; or (ii) to make any payment of principal or interest under the Bond Legislation or any other bond resolution, indenture or similar secured instrument of the Purchaser when due (at maturity, upon redemption or otherwise), which failure is not cured within ten (10) Business Days;
12.2.3 Purchaser fails to perform or observe any of its material obligations or covenants hereunder or otherwise is in material breach of this Agreement (other than payment obligations, which are addressed in Section 12.2.2) and such failure or breach continues unremedied for a period of thirty (30) days following notice from Seller demanding cure of such failure or breach (or within such longer period of time as is reasonably necessary to accomplish such cure, if it cannot reasonably be accomplished within such 30-day period and Purchaser diligently commences such cure in such period and continues such cure to completion);
12.2.4 Any representation or warranty made by Purchaser herein, in the Ownership Agreement or in any document or certificate furnished by Purchaser shall have been false when made and such false representation or warranty has a material and adverse effect on Seller and, if capable of being cured, such false representation or warranty is not cured within thirty (30) days after notice thereof from Seller; or
12.2.5 Purchaser fails to comply with any of the requirements of
Section 15 within thirty (30) days of receipt of Seller's written
notice of such failure.
12.3 Remedies; Notice of Intent to Terminate. Subject to the provisions
of this Agreement providing for limitations on damages and for exclusive
remedies under certain circumstances, upon the occurrence and during the
continuation of any Event of Default, the Party not in default (the
"Non-Defaulting Party") shall have the right to pursue all remedies available at
law or in equity, suspend its performance under this Agreement to the extent of
the Event of Default and/or to deliver a notice of intent to terminate ("Notice
of Intent to Terminate") this Agreement to the Party in default ("Defaulting
Party"). Any Notice of Intent to Terminate shall specify the Event of Default
giving rise to such Notice of Intent to Terminate. Following the giving of a
Notice of Intent to Terminate, the Parties shall negotiate pursuant to the
provisions of Section 18 hereof, following which, unless the Parties shall have
otherwise mutually agreed on a remedy or the Defaulting Party or any lender or
financing party ("Lender") to the Defaulting Party or its affiliate, or agent on
behalf of a Lender, shall have cured such default or is diligently pursuing a
remedy to cure the Event of Default, the Non-Defaulting Party having given the
Notice of Intent to Terminate may terminate this Agreement by giving written
notice thereof to the Defaulting Party, whereupon this Agreement shall
immediately terminate; provided, however, that upon a default under Section
12.2.2, the Non-Defaulting Party may serve a notice of termination of this
Agreement without having first to deliver a Notice of Intent to Terminate and to
negotiate under Section 18, whereupon this Agreement shall terminate immediately
upon delivery of such notice of termination, unless such default shall have been
cured prior to the delivery of such notice of termination. Except as provided in
Sections 2.2, 2.3, 5.1.2, 10.2, 12.4, and 12.5 or in this Section 12.3, or in
Section 4.3. of the Ownership Agreement, neither Party shall have any right to
terminate this Agreement.
12.4 Notice to Lenders. Any and all notices given by Purchaser to Seller under this Section 12 shall also be given at the same time by Purchaser to any Lender for which Seller provides written notice to Purchaser of the need to provide such notice and the address to which such notice must be sent. No termination of this Agreement by Purchaser will be effective until and unless Purchaser shall have given Seller's Lenders notice of Seller's Event of Default and an opportunity to cure such Event of Default, which notice and cure period shall be as set forth in any consent executed by Purchaser with Seller's Lenders but in any event such notice and cure period shall be at least concurrent with that provided to Seller under this Agreement.
12.5.1 Except in the case of an Event of Default under Section
12.2.2 under the circumstances that are described in Section 12.5.2
below or an Event of Default under Section 12.1.3 under the
circumstances that are described in Section 12.5.3 below, in the event
that a Non-Defaulting Party terminates this Agreement pursuant to
Section 12.3 and provided an Event of Default shall not have occurred
and be continuing as to such Non-Defaulting Party, the Defaulting
Party shall pay the Non-Defaulting Party the Termination Payment, as
defined below, within thirty (30) days of the effective date of the
termination. Except as so otherwise provided in Section 12.5.2 or
12.5.3, the Termination Payment (if applicable) shall be the
Defaulting Party's sole liability arising out of a termination of this
Agreement pursuant to Section 12.3, and neither Party shall have any
other liability or obligation to the other Party arising out of a
termination of this Agreement pursuant to Section 12.3. The Defaulting
Party's Termination Payment (if applicable) to the Non-Defaulting
Party resulting from an Event of Default under this Agreement shall be
calculated as follows:
Termination Payment = TPR * APCN
Where:
TPR = a termination payment rate in dollar
per kilowatt, which is equal to: (i)
[redacted] is given between the date of this
Agreement's execution and the end of the
twelfth (12th) month after the date Purchaser
gives notice under Section 2.2 or 2.3 that it
has elected to terminate this Agreement; (ii)
[redacted] if the Notice of Intent to
Terminate is given between the end of such
twelfth (12th) month and the end of the
twenty-fourth (24th) month after the date
Purchaser gives such notice; or (iii)
[redacted] if the Notice of Intent to
Terminate is given between the end of such
twenty-fourth (24th) month and the expected
termination of this Agreement twelve (12)
months later; and
APCN = the Annual Purchaser's Capacity
Nomination, in kilowatts, that is in effect
on the date of the Notice of Intent to
Terminate.
Delivery of a Notice to Terminate or calculation or payment of the Termination Payment shall not relieve the Defaulting Party of its obligation to pay all other amounts that became or have become due and payable by the Defaulting Party hereunder prior to the effective date of termination.
12.5.2 In the case of an Event of Default under Section 12.2.2 by Purchaser at a time when Purchaser is able to pay its debts generally as they come due, Seller shall be entitled to recover its actual damages, which the Parties recognize may be greater than, or less than, the Termination Payment. In determining actual damages, any amounts actually recovered from Seller's reasonable efforts to mitigate such damages shall be taken into account.
12.5.3 In the case of an Event of Default by Seller under Section
12.1.3 that results from a failure by Seller to deliver Energy from
the Facility to Purchaser as required by this Agreement at a time when
(i) the Facility was capable of delivering such Energy to Seller as
required by this Agreement consistent with Prudent Utility Practice,
the Technical Limits and applicable Law and Permit requirements, and
(ii) Seller sold such Energy to a third party, then Purchaser shall be
entitled to recover the actual damages of Purchaser, which the Parties
recognize may be greater than, or less than, the Termination Payment.
In determining actual damages, the actual results of Purchaser's
reasonable efforts to mitigate such damages shall be taken into
account.
12.5.4 In receiving a Termination Payment or recovering actual damages, the Non-Defaulting Party shall also be entitled to recover its reasonable attorney fees in enforcing this provision.
SECTION 13 WAIVER
Failure by either Party to exercise any of its rights under this Agreement shall not constitute a waiver of such rights. Neither Party shall be deemed to have waived any right resulting from any failure to perform by the other Party unless it has made such waiver specifically in writing, and no such waiver shall operate as a waiver of any future failure to perform whether of a like or different character. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
SECTION 14 REPRESENTATIONS AND WARRANTIES
14.1 Representations and Warranties of Seller. Seller hereby represents and warrants to Purchaser as follows:
14.1.1 Organization and Existence. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, is qualified to transact business in Florida, and has sufficient power and authority to execute and deliver this Agreement and the Collateral Documents and to perform its obligations hereunder and thereunder. Seller has full power and authority to carry on its business as it is now being conducted and as it is contemplated hereunder and under the Collateral Documents to be conducted in the future.
14.1.2 Due Authorization. The execution, delivery and performance of this Agreement and the Collateral Documents by Seller has been duly and effectively authorized by all requisite action on the part of Seller. This Agreement and the Collateral Documents constitute the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity.
14.1.3 Litigation. There is no action, suit, claim, proceeding or investigation pending or, to Seller's knowledge, threatened against Seller or The Southern Company by or before any Governmental Body having jurisdiction over Seller or The Southern Company which, if adversely determined, would have a material adverse effect upon Seller's ability to enter into and perform its obligations and consummate the transactions contemplated by this Agreement and the Collateral Documents or the material rights of Purchaser under this Agreement or the Collateral Documents. Neither Seller nor The Southern Company is subject to any material outstanding judgment, order, writ, injunction or decree of any Governmental Body having jurisdiction over Seller or The Southern Company which would materially and adversely affect its ability to enter into and perform its obligations under this Agreement and the Collateral Documents or the material rights of Purchaser under this Agreement or the Collateral Documents.
14.1.4 No Violation or Conflict. The execution, delivery and performance by Seller of this Agreement and the Collateral Documents do not violate or conflict with Seller's operating agreement, any existing Law applicable to Seller, or any note, bond, indenture, agreement or instrument to which Seller is a party or by which it is bound.
14.1.5 Approvals. Other than the approvals by the Governmental Bodies described in Attachment A of the Ownership Agreement, there are no approvals or consents, the absence of which would materially impair Seller's ability to consummate the transactions described in, or to perform its obligations under, this Agreement and the Collateral Documents.
14.2 Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller as follows:
14.2.1 Organization and Existence. Purchaser is a statutory utility authority duly organized, validly existing and in good standing under the laws of the State of Florida and has sufficient statutory power and authority to execute and deliver this Agreement and the Collateral Documents and to perform its obligations hereunder and thereunder. Purchaser has full statutory power and authority to carry on its business as it is now being conducted and as it is contemplated hereunder and under the Collateral Documents to be conducted in the future.
14.2.2 Due Authorization. The execution, delivery and performance of this Agreement and the Collateral Documents by Purchaser has been duly and effectively authorized by all requisite action on the part of Purchaser's governing board. This Agreement and the Collateral Documents constitute the legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity.
14.2.3 Litigation. There is no action, suit, claim, proceeding or investigation pending or, to Purchaser's knowledge, threatened against Purchaser by or before any Governmental Body having jurisdiction over Purchaser which, if adversely determined, would have a material adverse effect upon Purchaser's ability to enter into and perform its obligations and consummate the transactions contemplated by this Agreement and the Collateral Documents or the material rights of Seller under this Agreement or the Collateral Documents. Purchaser is not subject to any material outstanding judgment, order, writ, injunction or decree of any Governmental Body having jurisdiction over Purchaser which would materially and adversely affect its ability to enter into and perform its obligations under this Agreement and the Collateral Documents or the material rights of Seller under this Agreement or the Collateral Documents.
14.2.4 No Violation or Conflict. The execution, delivery and performance by Purchaser of this Agreement and the Collateral Documents do not violate or conflict with Purchaser's charter or bylaws, any existing Law applicable to Purchaser, or any note, bond, resolution, indenture, agreement or instrument to which Purchaser is a party or by which it is bound.
14.2.5 Approvals. Other than the approvals by the Governmental Bodies described in Attachment A of the Ownership Agreement, there are no approvals or consents, the absence of which would materially impair Purchaser's ability to consummate the transactions described in, or to perform its obligations under, this Agreement and the Collateral Documents.
14.2.6 No Immunity. With respect to its contractual obligations hereunder and performance thereof, Purchaser is not entitled to claim immunity on the grounds of sovereignty or similar grounds with respect to itself or its revenues or assets from: (a) suit; (b) jurisdiction of any Florida court; or (c) relief by way of injunction, order for specific performance or attachment of property that is subject to execution or levy under Florida Law (including the Eligible Collateral).
14.3 Warranties Regarding Energy, Capacity and Ancillary Services. Seller warrants that the Energy, Capacity and Ancillary Services provided under this Agreement (i) shall have been delivered in accordance with applicable Law, and (ii) meets the requirements set forth in this Agreement. THE FOREGOING IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, IN FACT OR BY LAW WITH RESPECT TO THE ENERGY, CAPACITY AND ANCILLARY SERVICES PROVIDED HEREUNDER. SELLER HEREBY DISCLAIMS ANY AND ALL OTHER WARRANTIES WHATSOEVER.
SECTION 15 PERFORMANCE ASSURANCE
15.1 In the event that Purchaser experiences a Material Adverse Change, as defined below, as security for Purchaser's payment obligations under this Agreement, Purchaser shall deliver to Seller within ten (10) Business Days of Seller's written request therefor, Eligible Collateral in an amount equal to the lesser of: (i) [redacted] of Capacity Payments, or (ii) [redacted] of the total of Capacity Payments for the remainder of the Operating Period.
15.1.1 As used in this Section 15.1: (i) a "Material Adverse
Change" shall occur (A) when Purchaser's credit rating on its senior
securities falls below the lower of (x) BBB- (Standard & Poors) or
Baa3 (Moody's) and (y) the lowest credit rating of Southern
Guarantor's senior securities under either Moody's or Standard &
Poors, (B) upon an Event of Default by Purchaser under Section 12.2.2,
(C) upon a failure by Purchaser to make any required deposit into any
sinking fund under the Bond Legislation or any other bond resolution,
indenture or similar secured instrument entered into in connection
with the issuance of additional debt (each a "Debt Instrument"), or
(D) upon a failure by Purchaser to maintain in any debt service
account under the Bond Legislation or any Debt Instrument at least
fifty percent (50%) of the amount required to be maintained in such
account requirement; and (ii) "Eligible Collateral" means cash
deposited into an operating reserve account from "Revenues", as that
term is defined in the Bond Legislation, or an unconditional letter of
credit from an "A" rated bank, as determined by Standard & Poors or
Moody's, in a form reasonably acceptable to Seller; provided, however,
that for purposes of Sections 15.1.1(i)(C) and 15.1.1(i)(D), Eligible
Collateral shall constitute an unconditional letter of credit from an
"A" rated bank, as determined by Standard & Poors or Moody's, in a
form reasonably acceptable to Seller. Costs of a letter of credit
shall be borne by Purchaser.
15.1.2 If at any time during the term of this Agreement neither Standard & Poors nor Moody's is in the business of providing credit ratings or willing to rate Purchaser, then Purchaser and Seller will negotiate in good faith to choose and implement an alternative mechanism for determining if and when a "Material Adverse Change" has occurred.
15.2 In the event that legislation is enacted in the State of Florida which contains provisions that will cause an Event of Default by Purchaser at any time during the term of this Agreement, Seller will have the right, from and after the date of enactment of such legislation, to provide Purchaser with written notice requesting Eligible Collateral, as defined above, in an amount equal to the lesser of: (i) [redacted] of Capacity Payments, or (ii) [redacted] of the total of Capacity Payments for the remainder of the Operating Period. Upon receipt of such notice, in addition to Purchaser's other payment obligations under this Agreement, Purchaser shall within thirty (30) days provide such Eligible Collateral.
15.3. To the extent Purchaser delivers Eligible Collateral in the form of cash to be held in an operating reserve account pursuant to Sections 15.5 or 15.6, Purchaser hereby grants to Seller a present and continuing security interest in, and lien on (and right of setoff against), and assignment of, such Eligible Collateral, and any and all proceeds resulting therefrom or from the liquidation thereof, and Purchaser agrees to take such action as Seller reasonably requires in order to perfect Seller's first-priority security interest in, and lien on (and right of setoff against), such Eligible Collateral and any and all proceeds resulting therefrom or from the liquidation thereof. This Agreement is intended to, and does, constitute a security agreement between Seller and Purchaser with regard to any cash which may constitute Eligible Collateral.
15.4. Upon or any time after the occurrence and during the continuation of an Event of Default of Purchaser, Seller may (i) exercise any of the rights and remedies of a secured party with respect to the Eligible Collateral, including any such rights and remedies under Law then in effect, such as but not limited to the Uniform Commercial Code, and (ii) liquidate and/or draw on any outstanding Eligible Collateral issued for its benefit (free from any claim or right of any nature whatsoever of Purchaser including any equity or right of purchase or redemption by Purchaser) with respect to Purchaser's obligations under this Agreement. In the event that Seller liquidates or draws on any of the Eligible Collateral, Purchaser shall within ten (10) Business Days of notice from Seller of such liquidation or draw, deliver additional cash or increase the amount of the letter of credit, as the case may be, in order to replenish the amount of the Eligible Collateral to the extent of the liquidation or draw.
15.5. If the trigger of a Material Adverse Change was occurrence of the circumstances in Sections 15.1.1(i)(A) or the circumstances described in Section 15.2 occur, then: (i) if the Eligible Collateral is in the form of cash, Seller will hold the Eligible Collateral in an interest-bearing operating reserve account, established by Seller, and the agent for which shall act pursuant to Seller's instructions and will return the balance of such account, including interest, at such time as the circumstances described in Sections 15.1.1(i)(A) and 15.2 no longer apply (provided that Purchaser shall be entitled to receive any funds in such operating reserve account at any time and to the extent that such funds exceed [redacted] of the total of Capacity Payments for the remainder of the Operating Period); or (ii) if the Eligible Collateral is in the form of a letter of credit, such letter of credit shall expire at such time as the circumstances described in Sections 15.1.1 and 15.2 no longer apply and Seller shall return such letter of credit to Purchaser (provided that Purchaser shall be entitled to reduce the amount available under the letter of credit at any time and to the extent that such amount exceeds [redacted] of the total of Capacity Payments for the remainder of the Operating Period).
15.6 If the trigger of a Material Adverse Change was occurrence of the
circumstances described in Section 15.1.1(i)(B), then (i) if the Eligible
Collateral is in the form of cash, Seller will hold the Eligible Collateral in
an interest-bearing operating reserve account, established by Seller, and the
agent for which shall act pursuant to Seller's instructions and will return the
balance of such account, including interest, at such time as Purchaser shall
have (A) cured the Event of Default under Section 12.2.2 that triggered the
Material Adverse Change and (B) thereafter avoided both any further Events of
Default under Section 12.2.2 and a Material Adverse Change as described in
Section 15.1.1(i)(A) or 15.2 for a period of sixty (60) continuous days
(provided that Purchaser shall be entitled to receive any funds in such
operating reserve account at any time and to the extent that such funds exceed
[redacted] of the total of Capacity Payments for the remainder of the Operating
Period); or (ii) if the Eligible Collateral is in the form of a letter of
credit, such letter of credit shall expire (and Seller shall return such letter
of credit) at such time as Purchaser shall have (C) cured the Events of Default
under Section 12.2.2 that triggered the Material Adverse Change and (D)
thereafter avoided both any further Events of Default under Section 12.2.2 and a
Material Adverse Change as described in Section 15.1.1(i)(A) or 15.2 for a
period of sixty (60) continuous days (provided that Purchaser shall be entitled
to reduce the amount available under the letter of credit at any time and to the
extent that such amount exceeds [redacted] of the total of Capacity Payments for
the remainder of the Operating Period).
15.7 In the event that the Purchaser exercises its right to elect an Extended Term or any Further Extension of this Agreement pursuant to Sections 2.2 and 2.3, and on any day of such Extended Term or Further Extensions the circumstances of either Sections 15.1.1 or 15.2 apply, then, Purchaser shall deliver to Seller within ten (10) Business Days of the date of such occurrence, Eligible Collateral, as defined above, in an amount equal to [redacted] of Capacity Payments, and the provisions of Sections 15.3, 15.4, 15.5 and 15.6 shall apply to such Eligible Collateral.
SECTION 16 LIABILITY OF PARTIES
16.1.1 TO THE EXTENT PERMITTED BY LAW, EACH PARTY (THE "INDEMNIFYING PARTY") SHALL FULLY INDEMNIFY AND DEFEND THE OTHER PARTY AND EACH OF THE OTHER PARTY'S SUBSIDIARIES AND AFFILIATES, AND THE PARTNERS, MEMBERS, PARTICIPANTS, PRINCIPALS, REPRESENTATIVES, SHAREHOLDERS, DIRECTORS, OFFICERS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF EACH OF THEM (THE "INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL LOSSES, COSTS, DAMAGES, INJURIES, LIABILITIES, CLAIMS, DEMANDS, PENALTIES AND INTEREST, INCLUDING REASONABLE ATTORNEYS' FEES, RESULTING FROM THIRD PARTY CLAIMS DIRECTLY OR INDIRECTLY RELATED TO THIS AGREEMENT, TO THE EXTENT CAUSED OR CONTRIBUTED TO BY THE FAULT, INTENTIONAL ACT, NEGLIGENCE OR STRICT LIABILITY OF THE INDEMNIFYING PARTY OR ITS SUBSIDIARIES, AFFILIATES, CONTRACTORS OR SUBCONTRACTORS OR ANY OF THE OFFICERS, PARTNERS, MEMBERS, PARTICIPANTS, SHAREHOLDERS, PRINCIPALS, DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES, SUCCESSORS OR ASSIGNS OF ANY OF THEM OR BY BREACH BY THE INDEMNIFYING PARTY OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT ANY LIABILITY TO THIRD PARTIES INCURRED BY SELLER IN PERFORMANCE OF ITS AGENCY FUNCTIONS PURSUANT TO THE OWNERSHIP AGREEMENT OR THE OPERATING AGREEMENT SHALL BE APPORTIONED IN ACCORDANCE WITH ARTICLE 9 OF THE OWNERSHIP AGREEMENT OR ARTICLE 7 OF THE OPERATING AGREEMENT.
16.1.2 IF ANY INDEMNIFIED PARTY INTENDS TO SEEK INDEMNIFICATION
UNDER THIS SECTION 16.1 FROM AN INDEMNIFYING PARTY WITH RESPECT TO ANY
ACTION OR CLAIM, THE INDEMNIFIED PARTY SHALL GIVE THE INDEMNIFYING
PARTY WRITTEN NOTICE OF SUCH CLAIM OR ACTION PROMPTLY FOLLOWING THE
RECEIPT OF ACTUAL KNOWLEDGE OR INFORMATION BY THE INDEMNIFIED PARTY OF
A POSSIBLE CLAIM OR OF THE COMMENCEMENT OF A CLAIM OR ACTION, WHICH
WRITTEN NOTICE SHALL IN NO EVENT BE DELIVERED LATER THAN THE FIRST TO
OCCUR OF (A) FIFTEEN (15) DAYS PRIOR TO THE LAST DAY FOR RESPONDING TO
SUCH CLAIM OR ACTION OR (B) THE EXPIRATION OF THE FIRST HALF OF THE
PERIOD ALLOWED FOR RESPONDING TO SUCH CLAIM OR ACTION. THE
INDEMNIFYING PARTY SHALL HAVE NO LIABILITY UNDER THIS SECTION FOR ANY
CLAIM OR ACTION FOR WHICH SUCH NOTICE IS NOT PROVIDED TO THE EXTENT
THAT THE FAILURE TO GIVE SUCH WRITTEN NOTICE MATERIALLY PREJUDICES THE
INDEMNIFYING PARTY. UPON ACKNOWLEDGMENT OF ITS OBLIGATIONS UNDER THIS
SECTION 16.1, THE INDEMNIFYING PARTY SHALL HAVE THE RIGHT TO ASSUME
THE DEFENSE OF ANY CLAIM OR ACTION, AT ITS SOLE COST AND EXPENSE, WITH
COUNSEL DESIGNATED BY THE INDEMNIFYING PARTY AND REASONABLY
SATISFACTORY TO THE INDEMNIFIED PARTY; PROVIDED, HOWEVER, THAT IF THE
DEFENDANTS IN ANY SUCH ACTION INCLUDE BOTH THE INDEMNIFIED PARTY AND
THE INDEMNIFYING PARTY, AND THE INDEMNIFIED PARTY SHALL HAVE
REASONABLY CONCLUDED THAT THERE MAY BE LEGAL DEFENSES AVAILABLE TO IT
WHICH ARE DIFFERENT FROM OR ADDITIONAL TO THOSE AVAILABLE TO THE
INDEMNIFYING PARTY, THE INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO
SELECT SEPARATE COUNSEL, AT THE INDEMNIFYING PARTY'S EXPENSE, TO
ASSERT SUCH LEGAL DEFENSES AND TO OTHERWISE PARTICIPATE IN THE DEFENSE
OF SUCH ACTION ON BEHALF OF SUCH INDEMNIFIED PARTY.
16.1.3 EXCEPT TO THE EXTENT EXPRESSLY PROVIDED HEREIN, NO INDEMNIFIED PARTY SHALL SETTLE ANY CLAIM OR ACTION WITH RESPECT TO WHICH IT HAS SOUGHT OR INTENDS TO SEEK INDEMNIFICATION PURSUANT TO THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFYING PARTY. SHOULD ANY INDEMNIFIED PARTY BE ENTITLED TO INDEMNIFICATION UNDER THIS SECTION 16.1 AS A RESULT OF A CLAIM OR ACTION BY A THIRD PARTY, AND SHOULD THE INDEMNIFYING PARTY FAIL TO ASSUME THE DEFENSE OF SUCH CLAIM OR ACTION, THE INDEMNIFIED PARTY MAY, AT THE EXPENSE OF THE INDEMNIFYING PARTY, CONTEST (OR, WITH OR WITHOUT THE PRIOR CONSENT OF THE INDEMNIFYING PARTY, SETTLE) SUCH CLAIM OR ACTION. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED HEREIN, NO INDEMNIFYING PARTY SHALL SETTLE ANY CLAIM OR ACTION WITH RESPECT TO WHICH IT MAY BE LIABLE TO PROVIDE INDEMNIFICATION PURSUANT TO THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFIED PARTY; PROVIDED, HOWEVER, THAT IF THE INDEMNIFYING PARTY HAS REACHED A BONA FIDE SETTLEMENT AGREEMENT WITH THE PLAINTIFF(S) IN ANY SUCH ACTION AND THE INDEMNIFIED PARTY DOES NOT CONSENT TO SUCH SETTLEMENT AGREEMENT, THEN THE AMOUNT SPECIFIED IN THE SETTLEMENT AGREEMENT, PLUS THE INDEMNIFIED PARTY'S REASONABLE ATTORNEY FEES INCURRED PRIOR TO THE DATE OF SUCH SETTLEMENT AGREEMENT, SHALL ACT AS AN ABSOLUTE MAXIMUM LIMIT ON THE INDEMNIFICATION OBLIGATION OF THE INDEMNIFYING PARTY WITH RESPECT TO THE CLAIM, OR PORTION THEREOF, THAT IS THE SUBJECT OF SUCH SETTLEMENT AGREEMENT TO THE EXTENT SUCH SETTLEMENT AGREEMENT FULLY RELEASES THE INDEMNIFIED PARTY AND DOES NOT REQUIRE ANY PAYMENT FROM, OR IMPOSE ANY RESTRICTION ON, THE INDEMNIFIED PARTY.
16.2 LIMITATION ON DAMAGES. NEITHER PARTY NOR ITS SUBSIDIARIES OR AFFILIATES NOR THE OFFICERS, AGENTS, EMPLOYEES, REPRESENTATIVES, PARTICIPANTS, PARTNERS, MEMBERS, SHAREHOLDERS, PRINCIPALS, DIRECTORS, SUCCESSORS OR ASSIGNS OF ANY OF THEM SHALL IN ANY EVENT BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATES OR THE OFFICERS, AGENTS, EMPLOYEES, REPRESENTATIVES, PARTICIPANTS, PARTNERS, MEMBERS, SHAREHOLDERS, PRINCIPALS OR DIRECTORS OF ANY OF THEM FOR CLAIMS FOR INCIDENTAL, PUNITIVE, CONSEQUENTIAL, EXEMPLARY OR INDIRECT DAMAGES OF ANY NATURE, ARISING AT ANY TIME, FROM ANY CAUSE WHATSOEVER, WHETHER ARISING IN TORT, CONTRACT, WARRANTY, STRICT LIABILITY, BY OPERATION OF LAW OR OTHERWISE, CONNECTED WITH OR RESULTING FROM PERFORMANCE OR NON-PERFORMANCE UNDER THIS AGREEMENT; PROVIDED, HOWEVER, THAT THIS SECTION 16.2 IS NOT INTENDED, NOR SHALL IT BE CONSTRUED, TO LIMIT OR ELIMINATE A PARTY'S OBLIGATION TO PAY LIQUIDATED DAMAGES OR TERMINATION PAYMENTS OR MAKE ANY OTHER PAYMENTS EXPRESSLY CONTEMPLATED HEREIN, OR IN ANY COLLATERAL DOCUMENT, EVEN IF IT MAY BE POSSIBLE TO CHARACTERIZE SUCH LIQUIDATED DAMAGES OR TERMINATION PAYMENTS OR OTHER PAYMENTS AS INCIDENTAL, PUNITIVE, CONSEQUENTIAL OR INDIRECT DAMAGES.
16.3 Seller Affiliate Guarantee. Seller shall at all times following the Effective Date of this Agreement cause an Affiliate of Seller to maintain in place a payment guarantee in the form attached to this Agreement as Appendix E. For purposes of the previous sentence, an "Affiliate" of Seller shall be any entity controlling, under common control with or controlled by Seller, which has a credit rating on its senior securities at or above BBB- (Standard & Poors) and Baa3 (Moody's). If at any time during the term of this Agreement neither Standard & Poors nor Moody's is in the business of providing credit ratings or willing to rate Seller's affiliates, then Purchaser and Seller will negotiate in good faith to choose and implement an alternative mechanism for determining if and when an entity controlling, under common control with or controlled by Seller has sufficient credit-worthiness to qualify as an "Affiliate."
16.4 No Penalty. The Parties agree that it would be extremely difficult to precisely determine the amount of actual damages that would be suffered by Purchaser due to Seller's failure to meet the Availability Guarantee or achieve the schedule provided under Section 5.1.1, that the Availability Damages set forth in Section 4.3 and the liquidated damages set forth in Section 5.1.2 are fair and reasonable determinations of the amount of actual damages which would be suffered by Purchaser or Seller, as the case may be, by reason of such failure, and that the Availability Damages and other liquidated damages do not constitute a penalty. Similarly, the Parties agree that it would be extremely difficult to precisely determine the amount of actual damages that would be suffered by either Party in case of an Event of Default and a termination of this Agreement by the Non-defaulting Party, that the Termination Payment set forth in Section 12.5.1 is a fair and reasonable determination of the amount of actual damages which would be suffered by the Non-defaulting Party in such event, and that the Termination Payment does not constitute a penalty.
SECTION 17 ASSIGNMENT
17.1 Agreement Binding. This Agreement shall be binding upon, and shall inure to the benefit of, the Parties and their successors and permitted assigns.
17.2 Permitted Assignment. This Agreement shall not be assignable by Seller without the prior written consent of Purchaser, except that this Agreement (a) may be assigned by Seller without the requirement for such consent (but with notice to Purchaser) (i) to any Lender from time to time providing financing to Seller or its affiliate with respect to all or any portion of the Project or (iii) to any Lender or its designee in connection with a foreclosure or other exercise of remedies, and (b) unless otherwise waived by Purchaser, shall be assigned in whole or in part by Seller without the requirement for such consent (but with notice to Purchaser) in the event of a sale by Seller of all or a portion of Seller's interest in the Facility, with the purchaser of Seller's interest in the Facility assuming Seller's obligations under this Agreement in the same percentage as the portion of Seller's interest being transferred bears to Seller's entire interest in the Facility. This Agreement shall not be assignable by Purchaser without the prior written consent of Seller, provided, however, that Purchaser may assign this Agreement to another Customer without the requirement for such consent (but with notice to Seller) so long as such Customer has not experienced a Material Adverse Change under its PPA. Any such transferee, assignee or purchaser (other than a Lender through collateral assignment in connection with a lease or other financing transaction permitted under Section 6.2.8 of the Ownership Agreement) shall confirm its willingness to accept all of the assigning Party's obligations under this Agreement by writing reasonably acceptable to the non-assigning Party. Any such assignee, transferee or purchaser (other than a Lender through collateral assignment in connection with a lease or other financing transaction permitted under Section 6.2.8 of the Ownership Agreement) must be sufficiently creditworthy and otherwise capable of performing all of the assigning Party's obligations under this Agreement. No assignment or transfer of this Agreement by a Party shall be permitted during any period in which an Event of Default of such Party shall have occurred and be continuing and not cured, unless the other Party shall agree. No assignment of this Agreement shall relieve the assigning Party of any of its obligations under this Agreement, except that the assignor shall be released from its obligations under this Agreement at such time as all future obligations of the assignor hereunder shall have been assumed by the assignee in a written agreement delivered to the other Party. Any assignment that does not comply with the provisions of this Section 17 shall be null and void.
SECTION 18 DISPUTE RESOLUTION
18.1 Good-Faith Negotiations. The Parties shall first negotiate in good faith to attempt to resolve any dispute, controversy or claim arising out of, under, or relating to this Agreement (a "Dispute"), unless otherwise mutually agreed to by the Parties. In the event that the Parties are unsuccessful in resolving a Dispute through such negotiations, either Party may proceed immediately to litigation concerning the Dispute.
18.1.1 The process of "good-faith negotiations" requires that each Party set out in writing to the other its reason(s) for adopting a specific conclusion or for selecting a particular course of action, together with the sequence of subordinate facts leading to the conclusion or course of action. The Parties shall attempt to agree on a mutually agreeable resolution of the Dispute. A Party shall not be required as part of these negotiations to provide any information which is confidential or proprietary in nature unless it is satisfied in its discretion that the other Party will maintain the confidentiality of and will not misuse such information or any information subject to attorney-client or other privilege under applicable Law regarding discovery and production of documents.
18.1.2 The negotiation process shall include at least two (2) meetings to discuss any Dispute. Unless otherwise mutually agreed, the first meeting shall take place within ten days after either Party has received notice from the other of the desire to commence formal negotiations concerning the Dispute. Unless otherwise mutually agreed, the second meeting shall take place no more than ten days later. In the event a Party refuses to attend a negotiation meeting, either Party may proceed immediately to litigation concerning the Dispute.
18.2 Confidentiality and Non-Admissibility of Statements Made in, and Evidence Specifically Prepared for, Good Faith Negotiations. Each Party hereby agrees that all statements made in the course of good faith negotiations, as contemplated in Section 18.1, shall be confidential and shall not be disclosed to or shared with any third parties (other than any person whose presence is necessary to facilitate the negotiation process). Each Party agrees and acknowledges that no statements made in or evidence specifically prepared for good faith negotiations under Section 18.1 shall be admissible for any purpose in any subsequent litigation.
SECTION 19 AMENDMENT
This Agreement cannot be amended, modified or supplemented except by written agreement making specific reference hereto executed by both Parties.
SECTION 20 NOTICES
Other than telephonic notices required or permitted under Section 6.1 or Appendix B, any notice required or permitted to be given hereunder shall be in writing and shall be: (i) personally delivered; (ii) transmitted by postage prepaid registered mail; (iii) transmitted by a recognized overnight courier service; or (iv) transmitted by facsimile to the receiving Party as follows, as elected by the Party giving such notice:
Orlando Utilities Commission 500 South Orange Avenue Orlando, Florida 32801 Attention: Vice-President of Power Resources Telephone: 407-244-8372 Facsimile: 407-275-4120
Kissimmee Utility Authority 1701 West Carroll Street Kissimmee, Florida 34741 Attention: Manager Bulk System Planning Telephone: 407-933-7777 ext. 1235 Facsimile: 407-847-0787
Southern Company Services, Inc. 270 Peachtree Street, Bin 935 Atlanta, Georgia 30303 Attention: Director of Contract Administration Telephone: 404-506-5100 Facsimile: 404-506-0304
Troutman Sanders LLP
Bank of America Plaza
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Attention: Robert H. Forry, Esq.
Telephone: 404-885-3142
Facsimile: 404-962-6559
All notices and other communications shall be deemed to have been duly given on
(i) the date of receipt if delivered personally, (ii) five (5) days after the
date of posting if transmitted by mail, (iii) the Business Day following
delivery to the courier if transmitted by overnight delivery service, or (iv)
the date of transmission with confirmation if transmitted by facsimile,
whichever shall first occur. Any Party may change its address for purposes
hereof by notice to the other Party.
SECTION 21 APPLICABLE LAW
This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida, exclusive of any conflict of laws provisions thereof that would apply the laws of another jurisdiction. The Parties hereby submit to the jurisdiction of, and agree that venue for actions hereunder shall be, the U.S. District Court for the Middle District of Florida, if the U.S. District Court has jurisdiction, or, if the U.S. District Court does not have jurisdiction, the Circuit Court of the State of Florida sitting in Orange County, Florida, and the Parties hereby waive any objection to venue in such courts and any objection to any action or proceeding on the basis of forum non conveniens.
SECTION 22 SEVERABILITY
The invalidity or unenforceability of any provision or portion of this Agreement will not affect the validity of the remainder of this Agreement. If any provision of this Agreement is determined to be invalid or unenforceable, the Parties will negotiate in good faith to agree upon substitute provisions to carry out the purpose and intent of the invalid or unenforceable provision. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any Party as a result thereof, the Parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the Parties.
SECTION 23 ENTIRE AGREEMENT
This Agreement and the Collateral Documents contain the complete agreement of the Parties hereto with respect to the matters contained herein and supersede all other agreements, understandings and negotiations, whether written or oral, with respect to the matters contained herein.
SECTION 24 NO THIRD PARTY BENEFICIARIES
This Agreement is intended to be solely for the benefit of Purchaser and Seller and their respective successors and permitted assigns and is not intended to and shall not confer any rights or benefits on any Person not a signatory hereto.
SECTION 25 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute only one legal instrument.
SECTION 26 INFORMATION AND CONFIDENTIALITY
Where a Party makes any calculation of costs or damages under this
Agreement, such Party shall provide, upon the reasonable request of the other
Party, documentation supporting such calculation. Neither Party shall disclose
or otherwise make available to any other party any information of a technical,
commercial or business nature regarding the Project or this Agreement that has
been marked or identified as confidential or proprietary ("Confidential
Information") without the prior written consent of the other Party, except that
(a) Seller or its affiliate may provide Confidential Information to its or any
such affiliate's prospective Lenders, underwriters, investors, affiliates,
advisors, employees, officers and directors to the extent reasonably required in
connection with the administration of this Agreement, the issuance of debt or
equity or other financing activities of Seller or its affiliate, or the
performance of any duties relating to this Agreement; (b) Purchaser may provide
Confidential Information to its advisors, employees, officers, directors and
Lenders to the extent reasonably required in connection with the administration
of this Agreement or the performance of any such Person's duties relating to
this Agreement; (c) any Party may disclose any such Confidential Information in
any litigation or proceeding to enforce or recover damages under this Agreement;
(d) any Party (or its affiliate) may disclose any such Confidential Information
as may be required by any applicable Law, regulation or governmental order; and
(e) any Party (or its affiliate) may disclose such Confidential Information to
any person or entity succeeding to all or substantially all the assets of such
Party (or its affiliate) or all or a substantial portion of its interest in the
Facility; provided, that in the case of (e), any such successor shall agree to
be bound by the provisions of this Section 26. Confidential Information shall
not include information that: (i) the receiving Party can demonstrate was known
to it prior to its disclosure by the other Party; (ii) is, or later becomes,
public knowledge without breach of this Agreement by the receiving Party; (iii)
was received by the receiving Party from a third party without obligation of
confidentiality; or (iv) is developed by the receiving Party independently from
Confidential Information received from the other Party, as evidenced by
appropriate documentation. In the event that disclosure is required by a valid
order of a court or Governmental Body, the Party subject to such requirement may
disclose Confidential Information to the extent so required, but shall promptly
notify the other Party and shall cooperate with the other Party's efforts to
obtain protective orders or similar restraints with respect to such disclosure.
The provisions of this Section 26 shall continue in effect until three years
after the end of the Operating Period.
The Parties understand that under the Florida Public Records Law (Section 119.10, Florida Statutes), any Party or all of them may be subject to statutory fines and penalties, including but not limited to a requesting Party's costs and attorney's fees for failure to make public records available for public inspection upon request (Chapter 119, Florida Statutes). In addition, each Party may be subject to its own costs and expenses of litigation. With this understanding in mind, the Parties agree that in the event Purchaser in an attempt to comply with this Agreement, refuses to honor a public records request under Chapter 119, Florida Statutes, for examination or inspection of a confidential document of Seller or any affiliate of Seller and is forced to defend its actions in a court of competent jurisdiction, Seller shall indemnify, defend, and hold Purchaser harmless from and against any fines, penalties, costs, attorney's fees and expenses, including, but not by way of limitation, attorney's fees, expert fees, court costs and other costs arising from or related to defending any lawsuit bought pursuant to Chapter 119, Florida Statutes; provided, however, Seller's consent with such refusal shall be obtained before Seller can be liable under this Section 26. In addition, the Parties shall cooperate to provide witnesses to support the Parties' declarations and certification that the Confidential Information is a valid trade secret under the above cited Florida law and meets all definitional requirements therein or is exempt from disclosure under other applicable Florida law.
SECTION 27 PUBLIC STATEMENTS
Seller and Purchaser shall consult with each other and neither of them shall issue a press release or make a statement intended for release to the general public with respect to the transactions contemplated hereby without the consent of the other Party, which consent shall not be unreasonably withheld, unless the Party desiring to make such statement or press release is advised by legal counsel that a statement or press release is required by applicable Law (including information provided pursuant to a request for public information under the Florida Public Records Law, Section 119.10, Florida Statutes); provided, however, that in this event the Party making the public statement or press release shall notify the other Party in advance of such statement or press release and allow the other Party reasonable time to comment on such statement or press release. Notwithstanding the immediately preceding sentence, the Parties acknowledge that certain meetings of the Orlando Utilities Commission and the City of Orlando are open to the public, and nothing in this Agreement shall be deemed to require that the proceedings of such meetings not be made public or to restrict the reporting by the media of such proceedings.
SECTION 28 INSURANCE
Seller and Purchaser, and all contractors and subcontractors performing any services in connection with the operation or maintenance of the Facility, shall obtain and maintain in force comprehensive general liability insurance, and property insurance for injury to persons and property, automobile liability insurance and workman's compensation insurance, all in amounts and under terms as required by the Operating Agreement.
SECTION 29 TAXES
Purchaser shall reimburse Seller for, or pay to Seller, all sales, use, personal property and other taxes of every kind paid or collected by Seller, if any, that are not currently levied and are hereafter levied on the purchase, sale or use of fuel consumed by the Facility to provide Energy or Ancillary Services in accordance with this Agreement or the purchase, sale or use of Capacity, Energy or Ancillary Services under this Agreement, but excluding any taxes levied on Seller's net income. Purchaser shall pay directly for all such sales, use, personal property and other taxes which it is legally obligated and empowered to pay. In the event Seller, on behalf of Purchaser, pays any taxes that are the responsibility of Purchaser to reimburse or pay, under the first two sentences of this Section 29, the amount so paid by Seller shall be added to a monthly invoice submitted by Seller to Purchaser under Section 9, and Purchaser shall pay such amount in accordance with Section 9. Upon the reasonable request of Purchaser, Seller agrees to (i) provide documents related to taxes or assessments to be reimbursed or paid by Purchaser under this Agreement and (ii) cooperate with Purchaser at Purchaser's expense should Purchaser seek to obtain from the entity to which taxes were paid a refund of any taxes paid by Seller and/or reimbursed or paid by Purchaser.
APPENDIX A
TECHNICAL LIMITS
Unit Operating Modes
The Facility will have several different operating modes.
o Mode 1: Normal Operation--both gas turbines (CTs) operating with no supplemental firing of the Heat Recovery Steam Generator (HRSG) and no gas turbine power augmentation.
o Mode 2: Supplemental Firing Operation--both gas turbines operating at full load with supplemental firing of the HRSG.
o Mode 3: Power Augmentation Operation--both gas turbines operating at full load with supplemental firing of the HRSG's (Mode 2 Supplemental Firing Operation) to produce both steam for full steam turbine-generator output with the maximum allowed continuous throttle flow at the maximum allowed continuous throttle pressure and steam for full gas turbine power augmentation (steam injection.)
o Mode 4: Part-load Operation--one or both gas turbines operating at less than full load.
The Facility will require "pipeline quality gas" meeting the requirements of GE fuel specification "GEI 41040E - Process Specification Fuel Gases for Combustion in Heavy Duty Gas Turbines".
Natural gas is to be delivered to the Facility by pipeline and the pipeline and gas must meet the following equipment characteristics and requirements:
o Nominal Maximum N.G. Flow (HHV) per Block (2x1) [redacted]
o Nominal N.G. Higher Heating Value [redacted]
o Minimum Fuel Supply Temperature (after PRV) [redacted]
o Fuel Pressure at Gas Control Valve** [redacted]
[redacted]
* Based on Winter Peaking (19(degree)F) Power during Full Pressure Operation.
** Reference GE Pub. GEI 41040E.
The Facility will require fuel oil that is in compliance with ASTM Standard Specification D-2880 (as revised) and "GE Gas Turbine Liquid Fuel Specifications" (document number GEI 41047H). This No. 2 GT Grade Gas Turbine Fuel Oil must be in compliance with the specifications and procedures for No. 2 Fuel Oil as defined in ASTM D396.
Note that environmental permitting may create conditions for sulfur, fuel bound nitrogen and other specifications which could affect or add minimum specifications, such as, but not limited to, those identified in the following table:
ASTM TEST
SPECIFICATIONS METHOD
------
Sulfur, % Wt., Max. 0.05 D - 1266
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Fuel Bound Nitrogen 0.050% Max.
o The Facility will be capable of operating with fuel oil. The Facility may fire oil in the gas turbines only and not in the HRSG duct burners. During these periods, the Facility shall operate in Mode 1 (Normal Operation) only.
o The Facility will require shutdown for a minimum of one hour prior to switching from natural gas to oil firing. The fuel oil forwarding system will not be operated during normal gas firing, but operation of the fuel forwarding system will be initiated upon proper notice of a requirement for fuel switching. The Facility will be capable of switching from oil to natural gas without shutdown; however, the Facility may be required to decrease to a minimum load and stabilize prior to ramping to full load.
o The Facility will be capable of being controlled via Automatic Generation Control (AGC) in Mode 1 (Normal Operation). The AGC load range and ramp rate will be set by the Facility's operator based on the actual capability of the CTs as determined through testing. With the duct burners firing (Mode 2 - Supplemental Firing Operation), the load range and ramp rate will be set and manually controlled by the Facility's operator based on the capabilities of the duct burners. No load following capability is available in Mode 3 (Power Augmentation Operation).
o The Facility will be allowed to operate in Mode 3 (Power Augmentation Operation) only at ambient temperatures of [redacted].
o The Facility will require [redacted] of de-mineralized water for Mode 1 (Normal Operation).
o The expected maximum allowable rate of load increase for the Facility will be [redacted]. Actual maximum load increase rate will be determined by actual testing and in light of final permit restrictions and emissions tests.
o The Facility will be expected to be capable of operating minimum load with one CT [redacted]. Actual minimum load will be determined in light of final NOx emissions and permit restrictions and testing.
o Required startup times for the Facility shall be as follows:
Mode 1 (Normal Operation): refer to Attachment 1 - Time to Dispatch Curve. Note: Actual Curve to be determined by testing.
Mode 2 (Supplemental Firing Operation): [redacted] Mode 1 (Normal Operation).
Mode 3 (Power Augmentation Operation): [redacted] Mode 1 (Normal Operation) or [redacted] Mode 2 (Supplemental Firing Operation).
o The Facility will be allowed to operate in Mode 3 (Power Augmentation Operation) a [redacted] /year based on the LTSA contract with GE.
o The Facility will not be allowed to operate in a traditional CT only mode (no simple cycle operation, i.e., no bypass stack). However, the CTs will be capable of operating independently of the steam turbine utilizing the steam bypass systems for a limited time. Most major plant equipment (such as HRSG BFP's, condenser, cooling tower and circulating water pumps) will be required during operation in this mode. The HRSG duct burners will not be available in this mode. The maximum generation capability of the Facility operating in this mode will be [redacted].
o The Facility's CT evaporative coolers should not be operated at ambient temperatures less than [redacted] to prevent freezing at the CT compressor inlet.
[redacted]
APPENDIX B
REQUESTS FOR ENERGY
1.1 Schedules for Requested Quantities of Energy. Purchaser and each other Customer shall provide Seller with a single Request for Energy in order to schedule requested quantities of each category of unit output as follows:
1.1.1 Day Ahead Daily Schedule. Customers shall communicate
the day ahead Request for Energy for each day to
Seller at or before [redacted] of the immediately
preceding day before delivery is to be made, or such
other earlier time that may be required by an RTO.
1.1.1.1 When AGC mode is available, during each hour
the unit is scheduled to be in AGC mode, the
Request for Energy shall specify the maximum
amount of Energy desired for each of the
twenty-four (24) hours. During each hour the
unit is in AGC mode, the Customers shall not
be permitted to reduce the Request for
Energy to an amount less than [redacted] of
the maximum Energy scheduled during that
hour in the Request for Energy from the
Customers' aggregate Equity Capacity and the
Customers' aggregate capacity available
under the Power Purchase Agreements
(Customers' "PPA Capacity"). If in any hour,
should the Customers reduce the Request for
Energy amount by more than [redacted], the
Customers shall pay Seller [redacted] for
the difference between the amount of the
Delivered Energy and [redacted] below the
Request for Energy amount.
1.1.1.2 During each hour the Facility is not
scheduled to be in AGC mode or the AGC mode
is unavailable, the Request for Energy shall
specify the amount of Energy from the
Customers' aggregate PPA Capacity and
aggregate Equity Capacity for each of the
twenty-four (24) hours. Requests for Energy
shall be submitted in [redacted] increments
in a total amount that falls between the
Facility's minimum capability and its
maximum capability as described in the
Technical Limits.
1.2. Hourly Changes to the Daily Schedule. The Customers
jointly shall be entitled to make changes to a
Request for Energy by communicating such changes to
Seller no later than [redacted] prior to the
beginning of the hour in which such changes are to
become effective. The Customers shall be responsible
for any costs associated with OASIS notifications and
NERC tagging requirements.
1.3. Capacity Emergency. During any periods in which the
Customers experience a Capacity Emergency, the
Customers shall be entitled to increase the Request
for Energy on shorter notice than that provided in
paragraph 1.2 above by an amount not to exceed the
Customers' unavailable resources that were the cause
of the Capacity Emergency and Seller shall endeavor
to comply with the request consistent with the
Technical Limits, Prudent Utility Practice,
applicable Law and Permit requirements.
1.4. Minimum Start-up Time. If the Customers have
scheduled a zero amount of Capacity in
any hour and the Facility is not on-line,
the Customers shall provide notice
consistent with the Technical Limits prior to
scheduling any Request for Energy.
1.5. Load Following Service. The Customers shall have the
ability to control the output of the Facility using
the AGC mode, if available, only to the extent that
the Facility has the ability to operate in the AGC
mode consistent with the Technical Limits, Prudent
Utility Practice, and applicable Law and Permit
requirements.
1.6 Electronic Scheduling. The Customers shall use
electronic scheduling for Requests for Energy under
this Agreement, if and to the extent that Seller's
electronic scheduling capability is operational. To
the extent it is not, the Parties will use other
mutually agreed-upon communication procedures (such
as fax).
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2.1.1 If the Facility is in load following service and OUC, acting for itself and on behalf of the other Customers, determines that the actual output of the Facility is not within [redacted] of the Request for Energy, OUC shall communicate to Seller the amount of error. Seller shall endeavor to adjust the actual output of the Facility to be equal to the Request for Energy within [redacted] of receipt of the notification. If the actual output of the Facility does not equal the Request for Energy within [redacted] of the notification, the Customers shall be entitled to reimbursement of their costs from Seller as follows:
2.1.1.1 If the actual output of the Facility is greater than the Request for Energy (an "Oversupply Condition"), the decremental cost associated with over-generation shall be documented by the Customers until the actual output of the Facility equals the Request for Energy. OUC, acting for itself and on behalf of the other Customers, shall coordinate with Seller during the period that the actual output of the Facility exceeds the Request for Energy. The Customers shall advise Seller of the total decremental costs associated with each instance of an Oversupply Condition. Seller shall compensate OUC, on its own behalf and as agent for KUA and FMPA, for any such Oversupply Condition.
2.1.1.2 If the actual output of the unit is less than the Request for Energy (an "Undersupply Condition"), the provisions of Section 4.3 will apply if applicable.
2.1.2 If the Facility is not in load following service and
OUC, acting for itself and on behalf of the other Customers,
determines that the actual output of the unit is not within
[redacted] of the schedule included in the Request for Energy
(plus any other scheduled output pursuant to Seller's right to
schedule Energy pursuant to Section 4.5 of this Agreement), then
OUC shall communicate to Seller the amount of the error. Seller
shall endeavor to adjust the actual output of the Facility to be
equal to the Request for Energy (plus any other scheduled output
pursuant to Seller's right to schedule Energy) within [redacted]
of receipt of the notification. If the actual output of the
Facility does not equal the schedule included in the Request for
Energy (plus any other scheduled output pursuant to Seller's
right to schedule Energy) within [redacted] of the notification,
the Customers shall be entitled to reimbursement of their costs
from Seller as follows:
2.1.2.1 If an Oversupply Condition exists, the
decremental cost associated with
over-generation shall be documented by the
Customers until the actual output of the
unit equals the Request for Energy (plus any
other scheduled output pursuant to Seller's
right to schedule Energy). The Customers
shall advise Seller of the total decremental
costs associated with each instance of an
Oversupply Condition.
2.1.2.2 If an Undersupply Condition exists, the
provisions of Section 4.3 will apply if
applicable.
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3.1 Notification Requirements for Delivery of Energy from Alternate Resources.
3.1.1 When the Facility is available and running at minimum
load and spinning reserves are available, Seller will notify OUC
if Seller has scheduled delivery of Energy from Alternate
Resources to meet all or a portion of Customers' Schedule at
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least [redacted] (or the amount of time in which an RTO has determined that the Physical Transmission Rights ("PTRs") may be recalled) prior to the scheduled commencement of delivery of such Energy. For purposes of paragraph 3.1, the phrase "has scheduled delivery" means that Seller has scheduled and arranged the OASIS, tagging, and any transmission rights required by an RTO. If an RTO is established in Florida, and under such condition the RTO determines that Physical Transmission Rights (PTRs) may be recalled if not utilized, then Seller will notify OUC if Seller has so scheduled delivery of Energy from Alternate Resources at least [redacted] (or the amount of time in which an RTO has determined that the PTRs may be recalled) and [redacted] prior to the scheduled commencement of delivery of such Energy. At the time Seller notifies OUC that Seller has so scheduled delivery of Energy from Alternate Resources, Seller will identify the source and quantity of such Energy and the path of its transmission to OUC.
3.1.2 When the Facility is unavailable and is not scheduled to return to service in time for Seller to serve the Customers' Schedule, Seller will notify OUC within [redacted] after Seller's receipt of Customers' Schedule if Seller has scheduled delivery of Energy from Alternate Resources to meet all or a portion of such Customers' Schedule. At the time Seller notifies OUC that Seller has so scheduled delivery of Energy from Alternate Resources, Seller will identify the source and quantity of such Energy and the path of its transmission to OUC.
3.1.3 When the Facility becomes unavailable while Seller is
serving Customers' Schedule, Seller will notify OUC within
[redacted] after the Facility is deemed unavailable if Seller has
scheduled delivery of Energy from Alternate Resources to meet all
or a portion of the remainder of Customers' Schedule. If Seller
notifies OUC that Seller has so scheduled delivery of Energy from
Alternate Resources, then Seller will schedule delivery of such
Energy to begin no later than the top of the next full hour
following the hour that Seller notified OUC of Seller's election.
(Example: The Facility becomes unavailable at [redacted] Seller
gives notice no later than [redacted] if Seller will arrange to
deliver Energy from Alternate Resources. Delivery from Alternate
Resources should begin no later than [redacted]) At the time
Seller notifies OUC that Seller has so scheduled delivery of
Energy from Alternate Resources, Seller will identify the source
and quantity of such Energy and the path of its transmission to
OUC.
3.1.4 When the Facility is expected to return from an outage, but does not, Seller will notify OUC within [redacted] of Seller's realization that the Facility will not be available as expected to meet the start of a Customer's Schedule. If the start of such Customer's Schedule is to begin within [redacted] or less from the time of such notice, Seller will notify OUC at the same time if Seller has scheduled delivery of Energy from Alternate Resources to meet all or a portion of such Customer's Schedule. Otherwise Seller will notify OUC if Seller has scheduled delivery of Energy from Alternate Resources to meet all or a portion of such Customer's Schedule at least [redacted] prior to the start of such Schedule and preferably at least [redacted] prior. If Seller notifies OUC that Seller has scheduled delivery of Energy from Alternate Resources, then Seller will schedule delivery of such Energy to begin no later than the top of the next full hour following the hour that Seller notified OUC of Seller's election (but not earlier than the original start of such Customers' Schedule). If an RTO develops in Florida, and under such condition the RTO determines that PTRs may be recalled if not utilized, then Seller will notify OUC if Seller has scheduled delivery of Energy from Alternate Resources at least [redacted] (or the amount of time in which an RTO has determined that the PTRs may be recalled) and [redacted] prior to the scheduled commencement of delivery of such Energy. At the time Seller notifies OUC that Seller has so scheduled delivery of Energy from Alternate Resources, Seller will identify the source and quantity of such Energy and the path of its transmission to OUC.
APPENDIX C
CAPACITY TESTING PROCEDURE
The capability of the Facility will be required to be demonstrated prior to the Commencement Date. The demonstration of the capability of the Facility following the Commencement Date shall be scheduled in accordance with the provisions of Section 4.1.2. As provided in Section 4.1.3, Participants may also request additional tests of the Facility which shall not be used as the basis for determining the Demonstrated Capability of the Facility. Purchaser shall have the right to monitor (either on-Site or otherwise) all performance tests.
All Capacity testing will be adjusted to the Rated Conditions using correction curves supplied by Seller. "Rated Conditions" means seventy (70) degrees Fahrenheit ((degree)F) and forty five percent (45%) relative humidity. The demonstrated net output of the Facility will be as measured by the Meters.
On the date of the Capacity test, Seller shall bring the Facility to maximum full load capability within the Technical Limits of the Facility for the ambient conditions for that day. The test shall be scheduled between the weekday hours of 11:00 a.m. and 7:00 p.m. (prevailing Eastern Time) and will be conducted over an eight consecutive hour period (or a lesser period if mutually agreed upon). Seller must notify Customers when the Facility is at maximum full load capability, at which time the Capacity test shall begin. The Demonstrated Capability will be the average net hourly output over the test period corrected to Rated Conditions.
exhibit 10.23.doc
APPENDIX D
Example Calculations of Quantities of Gas Transportation and/or Commodity Required for Delivery from Alternate Resources
Listed below are examples of the determination of the amount of gas transportation and/or commodity that the Fuel Supply Agent shall provide to Seller pursuant to Section 4.2.5.2 or 4.2.5.3 when Seller elects to deliver Energy from Alternate Resources.
Example 1
The facility is unavailable. The Customers have Scheduled 400 MWh of Energy in an hour. Seller notifies OUC that Seller will supply the 400 MWh of Energy for the subject hour from Alternate Resources.
In Example 1, the Fuel Supply Agent will provide [redacted]
Example 2
The facility is unavailable. The Customers have Scheduled 610 MWh of Energy in an hour. Seller notifies OUC that Seller will supply 550 MWh of Energy for the subject hour from Alternate Resources.
In Example 2, the Fuel Supply Agent will provide [redacted]
Example 3
The facility is available. The Customers have Scheduled 450 MWh of Energy in an hour. Seller notifies OUC that Seller will deliver 100 MWh of Energy for the subject hour from Alternate Resources and 350 MWh from the Facility.
In Example 3, the Fuel Supply Agent will provide [redacted]
Example 4
The facility is available. The Customers have Scheduled 600 MWh of Energy in an hour. Seller notifies OUC that Seller will deliver 200 MWh of Energy for the subject hour from Alternate Resources and 400 MWh from the Facility.
In Example 4, the Fuel Supply Agent will provide [redacted]
exhibit 10.23.doc
APPENDIX E
FORM OF PAYMENT GUARANTY
This Guaranty Agreement (the "Guaranty") is made by The Southern Company ("Guarantor"), a Delaware corporation, in favor of Kissimmee Utility Authority ("KUA"), a public body corporate organized and existing under the laws of the State of Florida.
WHEREAS, Southern Company - Florida LLC ("Principal Obligor"), a Delaware limited liability company, and KUA entered into that certain Power Purchase Agreement, dated as of March 19, 2001 (the "PPA");
WHEREAS, Guarantor has agreed to provide assurance for the payment of Principal Obligor's obligations in connection with the PPA as provided in this Guaranty; and
WHEREAS, the execution and delivery of this Guaranty by Guarantor is pursuant to the terms of the PPA in order to satisfy the requirement that Principal Obligor cause an Affiliate to maintain in place a guaranty of Principal Obligor's obligations under the PPA.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows:
1. Guaranty. Guarantor hereby irrevocably, unconditionally and absolutely
guarantees the punctual payment when due of Principal Obligor's payment
obligations arising under the PPA, as amended or modified from time to time,
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together with any interest thereon, including, without limitation, any interest amounts accruing under the PPA during the pendency of insolvency, bankruptcy, reorganization or other similar proceedings affecting Principal Obligor or its assets; provided, however, that the maximum liability of Guarantor under this Guaranty with respect to Principal Obligor's obligations under the PPA shall be limited to the amount that is equal to the then-current Termination Payment (as defined in the PPA), which shall not exceed in any event One Million Nine Hundred Forty-Six Thousand One Hundred Dollars ($1,946,100) (collectively, the "Guaranteed Obligations"); provided, further, that the cap on Guarantor's liability under this Guaranty established in the immediately preceding clause creates an absolute cap on Guarantor's liability to KUA in relation to the PPA and, if and when Guarantor's liability under this Guaranty has reached such cap, then from and after such time, Guarantor shall have no further liability under this Guaranty whatsoever to KUA and this Guaranty shall thereupon terminate; provided, further, that costs incurred by Guarantor under Section 4 hereof shall not be counted for purposes of determining whether Guarantor has reached such cap, unless and to the extent that Guarantor's costs under such Section 4, together with costs incurred by Guarantor under the corresponding provisions of Guarantor's other three Payment Guarantees of contemporaneous date to one or more of OUC, FMPA and KUA, exceed Three Million Dollars ($3,000,000) in the aggregate.
2. Guaranty Absolute. The liability of Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of or defect or deficiency in the PPA or any other documents executed in connection with the PPA;
(b) any assignment, transfer, modification, extension or waiver of any of the terms of the PPA;
(c) any change in the time, manner, terms of payment of or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from any agreement or instrument executed in connection therewith;
(d) any sale, exchange, release or non-perfection of any property standing as security for the liabilities hereby guaranteed or any liabilities incurred directly or indirectly hereunder or any set off against any of said liabilities, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations;
(e) applicable statutes of limitation, failure, omission, delay, waiver or refusal by KUA to exercise, in whole or in part, any right or remedy held by KUA with respect to the PPA or any transaction under the PPA; or
(f) any change in the existence, structure or ownership of Guarantor or Principal Obligor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting Principal Obligor or its assets.
The obligations of the Guarantor hereunder are several from the Principal Obligor or any other person, and are primary obligations concerning which the Guarantor is the principal obligor. There are no conditions precedent to the enforcement of this Guaranty, except as expressly contained herein.
This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations are annulled, set aside, invalidated, declared to be fraudulent or preferential, rescinded or must otherwise be returned, refunded or repaid by KUA upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Principal Obligor or any other guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, Principal Obligor or any other guarantor or any substantial part of its property or otherwise, all as though such payment or payments had not been made.
3. Waiver. This is a guaranty of payment and not of collection. Guarantor hereby waives:
(a) notice of acceptance of this Guaranty, of the creation or existence of any of the Guaranteed Obligations and of any action by KUA in reliance hereon or in connection herewith;
(b) except as expressly set forth herein, presentment, demand for payment, notice of dishonor or nonpayment, protest and notice of protest with respect to the Guaranteed Obligations; and
(c) any requirement that suit be brought against Principal Obligor or any other person as a condition to Guarantor's liability for the Guaranteed Obligations under this Guaranty or as a condition to the enforcement of this Guaranty against Guarantor.
Notwithstanding anything to the contrary set forth herein, Guarantor shall have the same defenses available to it as Principal Obligor may have with respect to any payment obligations arising under the PPA.
4. Expenses. Guarantor agrees to pay on demand any and all costs, including reasonable legal fees, and other expenses incurred by KUA in enforcing Guarantor's payment obligations under this Guaranty; provided that the Guarantor shall not be liable for any expenses of KUA if no payment under this Guaranty is due.
5. Subrogation. Guarantor shall be subrogated to all rights of KUA against Principal Obligor in respect of any amounts paid by Guarantor pursuant to the Guaranty, provided that Guarantor waives any rights it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all of the Guaranteed Obligations shall have been irrevocably paid to KUA in full. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all the Guaranteed Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of KUA and shall forthwith be paid to KUA to be applied to the Guaranteed Obligations. If (a) the Guarantor shall perform and shall make payment to KUA of all or any part of the Guaranteed Obligations and (b) all the Guaranteed Obligations shall have been paid in full, KUA shall, at the Guarantor's request, execute and deliver to the Guarantor appropriate documents necessary to evidence the transfer by subrogation to the Guarantor of any interest in the Guaranteed Obligations resulting from such payment by Guarantor.
6. Notices. All demands, notices and other communications provided for hereunder shall, unless otherwise specifically provided herein, (a) be in writing addressed to the party receiving the notice at the address set forth below or at such other address as may be designated by written notice, from time to time, to the other party, and (b) be effective upon delivery, when mailed by U.S. mail, registered or certified, return receipt requested, postage prepaid, or personally delivered. Notices shall be sent to the following addresses:
If to KUA:
Kissimmee Utility Authority
1701 West Carroll Street
Kissimmee, FL 34741
Attention: Director of Power Supply
Tel: 407-933-7777 ext. 1235
Fax: 407-847-0787
With a copy to:
Kissimmee Utility Authority
1701 West Carroll Street
Kissimmee, Florida 34742-3219
Attention: Manager Bulk System Planning
Telephone: 407-933-7777 ext. 1235
Facsimile: 407-847-0787
If to Guarantor:
The Southern Company
c/o Southern Company Services, Inc.
270 Peachtree Street NW
Suite 2000
Atlanta, GA 30303
Attention: Allen L. Leverett, Vice President and Treasurer
Tel: 404-506-0710
Fax: 404-506-0712
With a copy to:
Robert H. Forry, Esq.
Troutman Sanders LLP
Bank of America Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Tel: 404-885-3142
Fax: 404-962-6559
If to Principal Obligor:
Southern Company - Florida LLC
c/o Southern Company Services, Inc.
270 Peachtree Street NW
Suite 2000
Atlanta, GA 30303
Attention: Allen L. Leverett, Vice President and Treasurer
Tel: 404-506-0710
Fax: 404-506-0712
With a copy to:
Robert H. Forry, Esq.
Troutman Sanders LLP
Bank of America Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Tel: 404-885-3142
Fax: 404-962-6559
7. Demand and Payment. Any demand by KUA for payment hereunder shall be in writing, signed by a duly authorized officer of KUA and delivered to the Guarantor pursuant to Section 6 hereof, and shall (a) reference this Guaranty, (b) specifically identify the Principal Obligor, the Guaranteed Obligations to be paid and the amount of such Guaranteed Obligations and (c) set forth payment instructions. There are no other requirements of notice, presentment or demand. Guarantor shall pay, or cause to be paid, such Guaranteed Obligations within three (3) business days of receipt of such demand.
8. No Waiver; Remedies. Except as to applicable statutes of limitation, no failure on the part of KUA to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
9. Replacement of Guarantor and Termination.
(a) Guarantor may assign and delegate its rights and obligations under this Guarantee, in whole or in part, as follows: (i) without the consent of KUA, to Southern Power Company, a Delaware corporation and parent company of Principal Obligor, or other Affiliate of Principal Obligor, if Southern Power Company or such other Affiliate has achieved the following three characteristics: (1) a credit rating on its senior securities at or above BBB- (Standard & Poors) and Baa3 (Moody's), (2) Net Equity (as hereinafter defined) of at least Two Hundred Fifty Million Dollars ($250,000,000), as reflected on its most recent audited balance sheet, and (3) Gross Equity (as hereinafter defined) of at least Five Hundred Million Dollars ($500,000,000), provided, however, that the date on which Guarantor causes such a replacement of this Guaranty under this Section 9(a)(i) may not be earlier than the Commercial Operation Date (as defined in the Ownership Agreement); or (ii) with the consent of KUA, which consent may not be unreasonably withheld, to an assignee which has a credit rating on its senior securities at or above BBB- (Standard & Poors) and Baa3 (Moody's) and which meets other reasonable financial criteria similar to those identified in Section 9(a)(i), provided, however, that if Guarantor requests KUA's consent to such an assignment and delegation in connection with a permitted transfer or assignment of the PPA, then KUA may not withhold such consent if the assignee meets the financial criteria in Section 9(a)(ii). An assignment and delegation of Guarantor's rights and obligations under this Section 9 shall become effective when the replacement guarantor executes and delivers to KUA a replacement guaranty on terms and conditions substantially similar to this Guaranty.
(b) For purposes of this Guaranty, the following terms shall have the following meanings:
"Net Equity" shall mean the aggregate of the capital stock and other equity accounts (including retained earnings and paid-in capital) of Southern Power Company or other Affiliate of Principal Obligor, as the case may be.
"Gross Equity" shall mean Net Equity plus Guaranteed Debt plus loans to Southern Power Company from its parent corporation.
"Guaranteed Debt" shall mean any obligations of Southern Power Company or other Affiliate of Principal Obligor, as the case may be, for or in respect of (a) moneys borrowed or raised (whether or not for cash) by whatever means (including acceptances, deposits, discounting, letters of credit, factoring (other than on a non-recourse basis), finance leases, and any other form of financing which is recognized in Southern Power Company's or other Affiliate of Principal Obligor's, as the case may be, financial statements as being in the nature of a borrowing (excluding for the avoidance of doubt, share capital, share premium account and any capital prepayment reserve), which has been guaranteed by Guarantor, and (b) the deferred purchase price of assets or services (other than goods and services obtained on normal commercial terms in the ordinary course of business or operations), which has been guaranteed by Guarantor.
"Affiliate" of an Entity shall mean any other entity controlled by, controlling or under common control with such entity, where control of an entity means the ability to direct the policies of such entity through election of a majority of such entity's board of directors or other governing body or by contract or otherwise.
(c) This Guaranty shall terminate, and upon the effective date of
such termination Guarantor shall have no further liability hereunder,
on the earliest to occur of: (i) the satisfaction of all of the
Guaranteed Obligations, (ii) the termination or expiration of the PPA,
(iii) the date on which the liability cap is reached, as provided in
Section 1 hereof, or (iv) the date on which an assignment and
delegation by Guarantor of its rights and obligations hereunder
becomes effective under Section 9(a) hereof.
10. Assignment by KUA; Successors and Assigns. KUA may, upon notice to Guarantor, assign its rights hereunder only to a subsequent owner of all of KUA's interest in the Facility and the Interconnection Facilities (as defined in the PPA) without the consent of Guarantor. Subject to the foregoing, this Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, permitted assigns, and legal representatives.
11. Amendments, Etc. No amendment of this Guaranty shall be effective
unless in writing and signed by Guarantor and KUA. No waiver of any
provisions of this Guaranty or consent to any departure by Guarantor
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therefrom shall in any event be effective unless such waiver shall be in writing and signed by KUA. Any such waiver shall be effective only in the specific instance and for the specific purpose for which it was given.
12. Captions. The captions in this Guaranty have been inserted for convenience only and shall be given no substantive meaning or significance whatsoever in construing the terms and provisions of this Guaranty.
13. Representations and Warranties.
The Guarantor represents and warrants as follows:
(a) The Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full corporate power to execute, deliver and perform this Guaranty.
(b) The execution, delivery and performance of this Guaranty have been and remain duly authorized by all necessary corporate action and do not contravene the Guarantor's constitutional documents or any contractual restriction binding on the Guarantor or its assets.
(c) This Guaranty constitutes the legal, valid and binding obligation of the Guarantor enforceable against Guarantor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting KUA's rights and to general equity principles.
(d) The financial statements of Guarantor for the year ended December 31, 2000 (the "Financial Statements"), heretofore delivered to KUA or filed with the United States Securities Exchange Commission by Guarantor present fairly the financial condition and results of operations of Guarantor and its consolidated subsidiaries as of the dates and for the period specified therein in conformity with generally accepted accounting principles, and, except as otherwise expressly stated therein, consistently applied.
14. Limitation by Law. All rights, remedies and powers provided in this Guaranty may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Guaranty are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they will not render this Guaranty invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law.
15. Governing Law; Submission to Jurisdiction. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Georgia, exclusive of any conflict of laws provisions thereof that would apply the laws of another jurisdiction. The parties hereby submit to the jurisdiction of, and agree that venue for actions hereunder shall be, the U.S. District Court for the Northern District of Georgia, if the U.S. District Court has jurisdiction, or, if the U.S. District Court does not have jurisdiction, the Superior Court of the State of Georgia sitting in Fulton County, Georgia and the parties hereby waive any objection to venue in such courts and any objection to any action or proceeding on the basis of forum non conveniens.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its duly authorized officer effective as of this ___ day of __________, 2001.
"Guarantor"
THE SOUTHERN COMPANY
Exhibit 10.24
EXECUTION COPY
PUBLIC RELEASE VERSION
POWER PURCHASE AGREEMENT
BETWEEN
FLORIDA MUNICIPAL POWER AGENCY (ALL
REQUIREMENTS POWER SUPPLY PROJECT)
AND
SOUTHERN COMPANY - FLORIDA LLC
Dated as of March 19, 2001
TABLE OF CONTENTS
Section Page
SECTION 1 DEFINITIONS AND EXPLANATION OF TERMS 2
SECTION 2 TERM OF AGREEMENT 14
SECTION 3 CONDITIONS PRECEDENT 15
SECTION 5 SCHEDULE FOR DELIVERY OF CAPACITY AND ENERGY 30
SECTION 6 REQUESTS FOR ENERGY; OPERATION AND MAINTENANCE 32
SECTION 7 INTERCONNECTION AND TRANSMISSION 34
SECTION 8 RISK OF LOSS; METERING 35
SECTION 9 METHOD OF PAYMENT 37
ARTICLE 10 CHANGE IN LAW; MODIFICATION OF AGREEMENT 38
SECTION 11 FORCE MAJEURE 39
SECTION 12 EVENTS OF DEFAULT; TERMINATION 40
SECTION 13 WAIVER 44
SECTION 14 REPRESENTATIONS AND WARRANTIES 44
SECTION 15 PERFORMANCE ASSURANCE 47
SECTION 16 LIABILITY OF PARTIES 49
SECTION 17 ASSIGNMENT 53
SECTION 18 DISPUTE RESOLUTION 54
SECTION 19 AMENDMENT 55
SECTION 20 NOTICES 55
SECTION 21 APPLICABLE LAW 56
SECTION 22 SEVERABILITY 57
SECTION 23 ENTIRE AGREEMENT 57
SECTION 24 NO THIRD PARTY BENEFICIARIES 57
SECTION 25 COUNTERPARTS 57
SECTION 26 INFORMATION AND CONFIDENTIALITY 57
SECTION 27 PUBLIC STATEMENTS 59
SECTION 28 INSURANCE 59
SECTION 29 TAXES 59
APPENDIX A TECHNICAL LIMITS
APPENDIX B REQUESTS FOR ENERGY
APPENDIX C CAPACITY TESTING PROCEDURE
APPENDIX D EXAMPLE CALCULATIONS
APPENDIX E AFFILIATE GUARANTEE
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POWER PURCHASE AGREEMENT
This Power Purchase Agreement (this "Agreement") is made and entered into as of the 19th day of March, 2001, by and between Florida Municipal Power Agency (All Requirements Power Supply Project), a governmental legal entity existing under the laws of the State of Florida ("Purchaser"), and Southern Company - Florida LLC, a limited liability company organized and existing under the laws of the State of Delaware ("Seller"). Purchaser and Seller are hereinafter each referred to individually as a "Party" and collectively as the "Parties." Seller acknowledges that in executing and delivering this Agreement and performing its obligations hereunder Purchaser is acting on behalf of its All-Requirements Power Supply Project.
RECITALS
WHEREAS, in addition and supplemental to their other powers, OUC, KUA and FMPA (the "Public Agencies"), pursuant to the Florida Interlocal Cooperation Act of 1969, Chapter 163, Part I, Florida Statutes, (the "Interlocal Act") are authorized and empowered to cooperate with each other on a basis of mutual advantage and thereby to provide services and facilities in a manner and pursuant to forms of government organizations that will best accord with geographic, economic, electrical generation requirements and other factors; and
WHEREAS, the Ownership Agreement was entered into by the Public Agencies as an interlocal agreement, to invoke all of the powers of the Interlocal Act, for the purpose of providing a structure for the Public Agencies, in participation with Seller, a foreign public utility, to operate, maintain, repair, improve, extend, or otherwise participate jointly in a nominal six hundred thirty-three (633) megawatt combined cycle electric generating facility (the "Facility"), which is proposed, and which is to be constructed, owned, and located within the State of Florida by Seller and the Public Agencies; and
WHEREAS, Seller intends to sell to Purchaser, and Purchaser intends to purchase from Seller, a portion of Seller's share of the Capacity and Energy generated by the Facility in accordance with the terms and conditions of this Agreement and in full compliance with the Interlocal Act; and
WHEREAS, Seller and Purchaser acknowledge that this Agreement is one of three substantially similar contracts through which Seller will sell and the three Purchasers will individually purchase their respective designated shares of Seller's share of the Capacity and Energy generated by the Facility; and
WHEREAS, this Agreement and the two substantially similar contracts are entered into to invoke all of the powers of the Interlocal Act for the purpose of obligating Customers, pursuant to such Interlocal Act, to purchase Seller's share of the Capacity of the Energy generated by the Facility in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, for the purpose of exercising all of the powers enumerated in the Interlocal Act and the Florida Joint Power Act, Part II of Chapter 361, Florida Statutes, (the "Joint Power Act") (collectively, the "Acts"), Purchaser hereby designates this Agreement as an interlocal agreement within the meaning and intent of the Interlocal Act, and invokes all powers contained therein with full powers to perform all of the provisions herein authorized to be performed by the Parties; and
FURTHER, NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound hereby, agree as follows:
SECTION 1 DEFINITIONS AND EXPLANATION OF TERMS
1.1 Definitions. When used in this Agreement, the following capitalized terms shall have the meanings set forth below:
1.1.1 "Actual Availability" has the meaning given such term in Section 4.3.3 or 4.3.4, as applicable.
1.1.2 "Actual Capability" means the amount of Capacity the Facility is capable of producing in any given hour.
1.1.3 "AGC" means automatic generation control, which is the capability to make automatic adjustments to load change by generation through the use of a digital computer. This control is based on such factors as frequency, cost and tie line flows.
1.1.4 "Agreement" means this Power Purchase Agreement, including all appendices attached hereto and all amendments hereto that may be made from time to time.
1.1.5 "Alternate Resources" has the meaning given such term in Section 4.4.
1.1.6 "Ancillary Services" means ancillary services customarily provided by an electric generating facility, including voltage/VAR control, load following, regulation and frequency response, spinning reserve and non-spinning reserve.
1.1.7 "Annual Capacity Charge" means (i) [redacted].
1.1.8 "Annual Purchaser's Capacity Nomination" of the Purchaser means, during the first five Contract Years, six and one half percent (6.5%)of the Demonstrated Capability, and thereafter, six and one half percent (6.5%) of the Demonstrated Capability reduced by those amounts, if any, that Purchaser elects to subtract from the Capacity available to Purchaser pursuant to the process provided in Section 4.1.4 for the Customers jointly to make such elections.
1.1.9 "Availability Guarantee" has the meaning given such term in Section 4.3.1.
1.1.10 "Availability Incentive Payment" has the meaning given such term in
Section 4.3.2.
1.1.11 "Bankruptcy" means, with respect to a Party, (i) an adjudication of
bankruptcy or insolvency, or the entry of an order for relief, under any
Bankruptcy Law with respect to such Party; (ii) the making by such Party of an
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assignment for the benefit of its creditors; (iii) the filing by such Party of a
petition in bankruptcy or for relief under any Bankruptcy Law; (iv) the filing
by such Party of an answer or pleading admitting or failing to contest the
material allegations of any such petition; (v) the filing against such Party of
any petition in bankruptcy or for relief under any Bankruptcy Law (unless such
petition is dismissed within ninety (90) days from the date of filing thereof);
(vi) the appointment of a trustee, conservator or receiver for such Party or for
all or substantially all of its assets (unless such appointment is vacated or
stayed within ninety (90) days of such appointment); or (vii) the taking by such
Party of any action for its winding up or liquidation, or the consent by such
Party to any of the actions described in clauses (i) through (vi) being taken
against it.
1.1.12 "Bankruptcy Law" means any applicable bankruptcy or insolvency statute.
1.1.13 "Bond Legislation" shall mean the Florida Municipal Power Agency All-Requirements Power Supply Project Revenue Bond Resolution duly adopted March 22, 1985, as amended by All-Requirements Power Supply Project Subordinated Debt Resolution No. 1, adopted May 24, 1985; All-Requirements Power Supply Project Subordinated Debt Resolution No. 2, adopted June 15, 1988; All-Requirements Power Supply Project Subordinated Debt Resolution No. 3, adopted March 23, 1990; All-Requirements Power Supply Project Subordinated Debt Resolution No. 4, adopted July 18, 1996; All-Requirements Power Supply Project Subordinated Debt Resolution No. 5, adopted July 2, 1998; First Supplemental and Amendatory All-Requirements Power Supply Project Revenue Bond Resolution, adopted May 24, 1985; Second Supplemental and Amendatory All-Requirements Power Supply Project Revenue Bond Resolution, adopted June 19, 1985; Third Supplemental and Amendatory All-Requirements Power Supply Project Revenue Bond Resolution, adopted January 23, 1987; Fourth Supplemental and Amendatory All-Requirements Power Supply Project Revenue Bond Resolution, adopted March 23, 1990; Fifth Supplemental and Amendatory All-Requirements Power Supply Project Revenue Bond Resolution, adopted June 27, 1990; Sixth Supplemental and Amendatory All-Requirements Power Supply Project Revenue Bond Resolution, adopted September 20, 1991; Seventh Supplemental and Amendatory All-Requirements Power Supply Project Revenue Bond Resolution, adopted May 15, 1992; Series 1993 Supplemental All-Requirements Power Supply Project Revenue Bond Resolution, adopted October 22, 1993; Series 2000 Supplemental All-Requirements Power Supply Project Subordinated Debt Resolution, adopted May 5, 2000; Series 2000 Supplemental All-Requirements Power Supply Project Subordinated Debt Resolution, adopted May 5, 2000, as amended and supplemented pursuant to the Initial Bond Series Certificate dated June 21, 2000; and Series 2000-2 Supplemental All-Requirements Power Supply Project Subordinated Debt Resolution, adopted July 13, 2000.
1.1.14 "BOP Capital Cost Range" has the meaning ascribed to the term in
Section 6.7.1 of the Ownership Agreement.
1.1.15 "Business Day" means any day other than Saturday or Sunday on which commercial banks are authorized to open for business in Orlando, Florida.
1.1.16 "Capacity" means electric capacity.
1.1.17 "Capacity Emergency" means, with respect to any hour, that any one or more of Purchaser's resources is unavailable due to a forced outage and the summation of such Purchaser's firm Capacity obligations exceeds the summation of such Purchaser's available resources.
1.1.18 "Capacity Payment" has the meaning given such term in Section 4.1.1.
1.1.19 "Change in Law" has the meaning given such term in Section 10.1.3.
1.1.20 "Collateral Documents" means, collectively, the Ownership Agreement, the Operating Agreement, the Interconnection Agreement, the Power Purchase Agreements of the other Customers, the long term lease of the Facility Site by OUC to and for the benefit of the Participants, the guarantee to be provided by an affiliate of Seller as contemplated in Section 16.3, and the agreement(s) pursuant to which Purchaser and/or the other Customers provide station service and other support services (including but not limited to demineralized water and cooling water supply) to Seller.
1.1.21 "Commencement Date" has the meaning given such term in Section 5.2.
1.1.22 "Commercial Operation Date" has the meaning ascribed to such term in
Section 1.1.13 of the Ownership Agreement.
1.1.23 "Confidential Information" has the meaning given such term in
Section 26.
1.1.24 "Contract Year" means (i) the period commencing on the Commencement
Date or, if Seller elects the option under Section 4.5(ii)(a), the later of the
Commencement Date or Scheduled Commencement Date, and ending on the last day of
the month in which the first anniversary date of the Commencement Date falls,
and (ii) each twelve (12)-month period thereafter, except that for the twelve
(12)-month period during which the expiration or termination date of this
Agreement occurs, Contract Year shall mean the period commencing on the first
day of such twelve (12)-month period and ending on such expiration or
termination date.
1.1.25 "Customers" means collectively all of OUC, Kissimmee Utility Authority and Florida Municipal Power Agency (All Requirements Power Supply Project), or their permitted assigns.
1.1.26 "Delivered Energy" means, in respect of a period of time, the amount of Energy from the Facility or from Alternate Resources delivered by Seller to Purchaser at the Delivery Point for sale to Purchaser pursuant to this Agreement.
1.1.27 "Delivery Point" means (a) with respect to Energy delivered from the Facility, the high side of generator step-up transformer, as further described in the Interconnection Agreement, and (b) with respect to Energy delivered from Alternate Resources, any unconstrained point on the Grid.
1.1.28 "Demonstrated Capability" means the net Capacity of the Facility, determined by a periodic Capacity test, adjusted to seventy degrees Fahrenheit (70(degree)F) and forty-five percent (45%) relative humidity.
1.1.29 "Dispute" has the meaning given such term in Section 18.
1.1.30 "Eastern Prevailing Time" or "EPT" means the time prevailing in the Eastern time zone of the United States of America.
1.1.31 "Effective Date" has the meaning given such term in Section 3.1.
1.1.32 "Eligible Collateral" has the meaning given such term in Section 15.1.1.
1.1.33 "Energy" means electric energy (expressed in megawatt-hours).
1.1.34 "Energy Payment" has the meaning given such term in Section 4.2.
1.1.35 "Equipment Breakdown" means a mechanical breakdown of equipment at the Facility that is not the result of a Force Majeure that is an act of God or public enemy; landslide; sinkhole; lightning; earthquake; fire (unless caused by Seller's willful misconduct or failure to follow Prudent Utility Practice); storm; ice; snow; hurricane; tornado; wind; flood; riot; civil disturbance; insurrection; war; sabotage; terrorism; failure of contractors or suppliers (including, in the case of Seller, OUC and other Customers providing services to Seller) to provide fuel, equipment, material or services, provided that such failure would qualify as a Force Majeure under Section 1.1.44 if such failure were directly experienced by the applicable Party.
1.1.36 "Equity Capacity" with respect to each Participant means that Participant's percentage share of the Capacity of the Facility corresponding to such Participant's ownership interest in the Facility.
1.1.37 "Event of Default" means any of the events listed in Sections 12.1 and 12.2.
1.1.38 "Facility" means the gas fired combined cycle electric generating unit to be located on the Facility Site and owned by the Participants, and its associated interconnection facilities, as defined in the Ownership Agreement by the terms "Facility" and "Interconnection Facilities."
1.1.39 "Facility Site" means the parcel of land in Orlando, Florida on which the Facility is to be located, as further described in Appendix A.
1.1.40 "FDEP" means the Florida Department of Environmental Protection or any successor Governmental Body exercising the same or equivalent jurisdiction.
1.1.41 "FERC" means the Federal Energy Regulatory Commission or any successor Governmental Body exercising the same or equivalent jurisdiction.
1.1.42 "Firm Transmission Service" means (a) electric transmission service
designated firm under the open access transmission tariff of a transmission
provider having an open access transmission tariff or (b) if purchased from a
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transmission provider that does not have an open access transmission tariff, electric transmission service sold by such transmission provider as firm transmission service and generally considered, pursuant to Prudent Utility Practice and FRCC requirements, to be substantially equivalent to the firm transmission service referenced in item (a) of this definition.
1.1.43 "Fixed Amount" has the meaning ascribed to such term in Section 6.7.1 of the Ownership Agreement.
1.1.44 "Force Majeure" as to a Party means each of the following events as
affects the Facility: act of God or public enemy; landslide; sinkhole;
lightning; earthquake; fire (unless caused by the applicable Party's willful
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misconduct or failure to follow Prudent Utility Practice); storm; ice; snow; hurricane; tornado; wind; flood; riot; civil disturbance; insurrection; war; sabotage; terrorism; shutdown of the Facility by a court order or Governmental Body not resulting from any action or inaction by the applicable Party; strike, lockout or labor difficulty affecting the SEC Site generally (excluding in the case of Seller any strike, lockout or labor difficulty that is limited only to employees of either Seller or its affiliates, and excluding in the case of Purchaser any strike, lockout or labor difficulty limited only to the employees of Purchaser); failure of contractors or suppliers (including, in the case of Seller, OUC and other Customers providing services to Seller) to provide fuel, equipment, material or services, provided that such failure would qualify as a Force Majeure under this provision if such failure were directly experienced by the applicable Party; or any other occurrence, nonoccurrence or set of circumstances, whether or not foreseeable, that is beyond the reasonable control of the applicable Party and is not caused or exacerbated by the applicable Party's failure to follow Prudent Utility Practices.
1.1.45 "FRCC" means the Florida Reliability Coordinating Council or any successor organization.
1.1.46 "Fuel Supply Agent" has the meaning given such term in the Operating Agreement.
1.1.47 "Further Extension" has the meaning given such term in Section 2.3.
1.1.48 "Gas Delivery Point" shall have the meaning assigned to it in the Operating Agreement.
1.1.49 "Governmental Body" shall mean, except as provided in the following
sentence, (i) any local, state, regional or federal administrative, legal,
judicial, or executive agency, court, commission, department or other entity
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having jurisdiction or binding authority over any element of the Project or the performance of the Parties under this Agreement or the Collateral Documents, but excluding any agency, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee and (ii) NERC, FRCC and any RTO. Except as expressly provided otherwise in this Agreement, the definition "Governmental Body" shall be deemed to not include OUC, KUA and FMPA for the purposes of this Agreement.
1.1.50 "Grid" means (i) OUC's electric transmission system, or (ii) if ownership or control of and jurisdiction over OUC's electric transmission system is succeeded to by an RTO or other entity, the portion of the electric transmission system of that RTO or other successor entity that most closely resembles the OUC electric transmission system as it existed on the effective date of this Agreement.
1.1.51 "Guaranteed Output" means in any given hour the amount of Capacity
(in MWh per hour) determined by adjusting the Demonstrated Capability to the
prevailing ambient conditions in such hour and adjusting for degradation.
[redacted].
1.1.52 "Indemnified Parties" has the meaning given such term in Section
16.1.1.
1.1.53 "Indemnifying Party" has the meaning given such term in Section
16.1.1.
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1.1.54 "Interconnection Agreement" means that certain Interconnection Agreement expected to be entered into among the Participants in 2001, the entry into of which is a condition precedent to the effectiveness of this Agreement.
1.1.55 "Interconnection Meters" has the meaning given such term in Section 8.2.
1.1.56 "Law" shall mean all constitutions, charters, laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, regulations and requirements of every Governmental Body (including OUC) having jurisdiction over the matter in question, whether federal, state or local, which may be applicable to any Party, as required by the context in which used, or to the Facility or OUC Interconnection Facilities, or to the use, manner of use, occupancy, possession, planning, licensing, design, procurement, construction, acquisition, testing, startup, operation, maintenance, management, control, addition, renewal, modification, replacement or disposal of the Facility and the OUC Interconnection Facilities or any portion or portions thereof.
1.1.57 "Lender" has the meaning given such term in Section 12.3.
1.1.58 "Market Price" shall mean the price established by Seller, or negotiated and agreed upon by the Parties, as the case may be, upon Seller's election pursuant to Section 2.3 with respect to any Further Extension, which shall become the Annual Capacity Charge for Capacity to be delivered by Seller during such Further Extension consistent with all other terms and conditions of this Agreement.
1.1.59 "Meters" means the Interconnection Meters and/or Customers' check-meters, as applicable.
1.1.60 "Minor Maintenance" shall mean maintenance events lasting not greater than 72 hours per occurrence, which have been scheduled and for which Purchaser and the other Customers have given consent in accordance with Section 6.4.
1.1.61 "MMBtu" means one million British thermal units, where one British thermal unit is the amount of heat required to raise the temperature of one (1) pound of water one (1) degree Fahrenheit from sixty (60) degrees Fahrenheit.
1.1.62 "MW" means megawatt.
1.1.63 "MWh" means megawatt-hour.
1.1.64 "NERC" means the North American Electric Reliability Council or successor organization.
1.1.65 "Non-Performing Party" has the meaning given such term in Section 11.1.
1.1.66 "Notice of Intent to Terminate" has the meaning given such term in
Section 12.3.
1.1.67 "Off-Peak Period" means all the days of any given Contract Year other than the Peak Period days.
1.1.68 "Operating Agreement" means that certain Operating Agreement expected to be entered into among the Participants in 2001, the entry into of which is a condition precedent to the effectiveness of this Agreement.
1.1.69 "Operating Period" means the period from the beginning of the first Contract Year until the end of the last Contract Year.
1.1.70 "OUC" means Orlando Utilities Commission.
1.1.71 "OUC Interconnection Facilities" means the modifications to the Stanton Substation reasonably required for the receipt and delivery of Energy from the Facility onto the Grid consistent with Prudent Utility Practice.
1.1.72 "Ownership Agreement" means that certain Stanton Energy Center Combined Cycle Unit A Construction and Ownership Participation Agreement entered into among the Participants as of March 19, 2001.
1.1.73 "Participant" or "Participants" mean individually or collectively Orlando Utilities Commission, Kissimmee Utility Authority, Florida Municipal Power Agency (All Requirements Power Supply Project) and Seller.
1.1.74 "Parties" has the meaning given such term in the first paragraph of this Agreement.
1.1.75 "Peak Period" means for any given Contract Year the periods that include the days from January 1 through March 15, inclusive, May 15 through September 15, inclusive, and December 15 through December 31, inclusive.
1.1.76 "Permit" means any permit, license, approval, consent, waiver, authorization or other requirement in connection with the Project required from any Governmental Body under applicable Law.
1.1.77 "Person" means any individual, partnership, corporation, limited liability company, association, business, trust, Governmental Body or other entity.
1.1.78 "Planned Major Maintenance" means the Gas Turbine (GT) Combustor Inspection, the GT Hot Gas Path Inspection, and the GT Major Inspection, as these inspections are defined in the maintenance agreement with the GT vendor.
1.1.79 "Power Purchase Agreements" means this Agreement and those certain similar power purchase agreements between Seller and the other Customers respecting the delivery of Capacity and Energy from Seller's ownership share of the Capacity and Energy of the Facility.
1.1.80 "Prime Rate" means the prime rate of interest as published from time to time in the Wall Street Journal or such other comparable successor publication as the Participants may agree upon. The Prime Rate shall be calculated on the basis of a 365-day year for the actual number of days that a payment, reimbursement or adjustment, as the case may be, has not been made.
1.1.81 "Project" means the Facility, the Facility Site and all other appliances, parts, instruments, appurtenances, accessories and other property that may be incorporated or installed in, or otherwise become part of, any of the foregoing.
1.1.82 "Prudent Utility Practice" means any of the practices, methods and acts engaged in, or approved by, a significant portion of the electric utility industry in the United States (or, if more stringent, any of the practices, methods and acts engaged in, or approved by, a significant portion of the electric utility industry in the region covered by the FRCC) operating facilities of a size and technology similar to the Facility during the relevant time period or any of the practices, methods and acts, which, in the exercise of reasonable judgment in light of the facts known, or that reasonably should have been known, at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with applicable Laws, 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 acceptable practices, methods and acts generally accepted in the United States and having due regard for current editions of the National Electrical Safety Code, the National Electric Code and other applicable electrical, safety and maintenance codes and standards, manufacturers' warranties and applicable Laws.
1.1.83 "Request for Energy" or "Schedule" means a request for the delivery of Energy made by Purchaser and the other Customers in accordance with the process provided in Section 6 and Appendix B for the Customers jointly to Schedule Energy, and any adjustments thereto made in accordance with Appendix B.
1.1.84 "RTO" means a regional transmission organization.
1.1.85 "Scheduled Commencement Date" means the date that is twenty-four
(24) months after the receipt of the Site Certification and all other Permits to
be obtained by the Customers that are necessary for Seller to commence
construction, as such date may be extended under the provisions of Section 5.1,
but in no event earlier than October 1, 2003.
1.1.86 "Scheduled Maintenance" means the removal of the Facility or a component thereof from service (which removal reduces the capability of the Facility to operate) to perform maintenance, overhaul, inspection, testing or repair work, as contemplated in Section 6.4.
1.1.87 "SEC Site" means the parcel of land in Orlando, Florida on which the fossil fired generating stations Stanton Unit # 1 and Stanton Unit #2 are located, including the parcel of land on which the Facility is to be located.
1.1.88 "Seller" has the meaning given such term in the first paragraph of this Agreement.
1.1.89 "Site Certification" means (i) the final approval by the applicable Governmental Body of the initial need for power determination and site certification permit applications pursuant to the Florida Electrical Power Plant Siting Act, and (ii) the receipt of the air construction (Prevention of Significant Deterioration) permit by OUC issued by FDEP pursuant to the delegated authority of the United States Environmental Protection Agency under the Clean Air Act Amendments of 1977.
1.1.90 "Technical Limits" means the limits and constraints relating to the operation and maintenance of the Facility, as described in Appendix A.
1.1.91 "Termination Payment" means the payment to be paid by a Defaulting Party to the Non-Defaulting Party under in Section 12.5.1.
1.1.92 "Test Energy" means (i) Energy produced by the Facility during testing of the Facility prior to the Commencement Date; and (ii) Energy produced by the Facility during periodic tests of the Facility's Capacity output capability following the Commencement Date.
1.2 Rules of Construction. In this Agreement, unless the context otherwise requires, the singular shall include the plural, the masculine shall include the feminine and neuter, and vice versa. The terms "include," "includes" and "including" shall be deemed to be followed by the words "without limitation." The term "month" refers to a calendar month, and any period measured by a "month" from a reference date refers to the period beginning on such reference date and ending on the same date of the next succeeding calendar month or, if no such date exists in the next succeeding calendar month, the last day of such next succeeding calendar month. References to a Section, Table or Appendix shall be references to a Section of, Table of or Appendix to this Agreement unless specifically stated otherwise. A reference to a given agreement or instrument shall be a reference to that agreement or instrument as modified, amended, supplemented and restated through the date as of which such reference is made. The term "or" is not exclusive, the term "shall" is mandatory and the term "may" is permissive. In the event that any index or publication referenced in this Agreement ceases to be published, each such reference shall be deemed to be a reference to a successor or alternate index or publication reasonably agreed by the Parties. Both Parties acknowledge that each was actively involved in the negotiation and drafting of this Agreement and that no law or rule of construction shall be raised or used in which the provisions of this Agreement shall be construed in favor of or against either Party because one is deemed to be the author thereof.
1.3 Consents. Whenever the consent or approval of either Party is required under this Agreement, such consent or approval shall not be unreasonably withheld, unless this Agreement provides that such consent or approval is to be given by such Party at its sole or absolute discretion or is otherwise qualified.
SECTION 2 TERM OF AGREEMENT
2.1 Initial Term.
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2.1.1 This Agreement shall become effective as set forth in
Section 3.1, and shall remain in full force and
effect, subject to the early termination provisions
set forth herein, through the later of (i) the last
day of the month in which the tenth (10th)
anniversary of the Scheduled Commencement Date occurs
or (ii) the last day of the month in which the tenth
(10th) anniversary of the Commencement Date occurs
(the "Initial Term").
2.1.2 Notwithstanding the provisions of Section 2.1.1, the
Initial Term shall terminate on (a) November 30, 2013
if Section 2.1.1 yields an end date falling between
December 1, 2013 and April 30, 2014, inclusive, or
(b) November 30, 2014 if Section 2.1.1 yields an end
date that falls on or after May 1, 2014.
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2.2 Extension of Initial Term.The Initial Term shall be automatically extended an additional five (5) years from the end of the Initial Term ("Extended Term"); provided, however, that the Purchaser shall have the option to elect to terminate this Agreement effective on the last day of the Initial Term by providing written notice of such election to Seller no later than the date that is three (3) years prior to the end of the Initial Term.
2.3 Extensions of Extended Term. The Extended Term shall be automatically extended three (3) successive periods of five (5) years each from the end of the Extended Term (the "Further Extensions"); provided, however, that the Purchaser shall have the option to elect to terminate this Agreement effective on the last day of any of (i) the Extended Term, (ii) the first Further Extension, or (iii) the second Further Extension, by providing written notice of such election to Seller no later than the date that is, respectively, three (3) years prior to the end of the Extended Term, three (3) years prior to the end of the first Further Extension, or three (3) years prior to the end of the second Further Extension, as the case may be; provided, further, that with respect to each Further Extension, Seller shall have the right to establish the Annual Capacity Charge for such Further Extension based on Seller's then-current assessment of market conditions by providing Purchaser written notice of the new proposed Annual Capacity Charge no later than the date that is three and one-half (3 1/2) years prior to the date that such Further Extension period is scheduled to begin, subject to Purchaser's right to request that Seller negotiate in good faith to agree on any other price that Purchaser believes in good faith reflects current market conditions.
2.4 Survival. Applicable provisions of this Agreement shall continue in effect after termination to the extent necessary to satisfy the terms and conditions of this Agreement and, as applicable, to provide for: final billings and adjustments related to the period prior to termination, repayment of any money due and owing either Party pursuant to this Agreement, repayment of principal and interest associated with security funds, and the indemnifications specified in this Agreement.
SECTION 3 CONDITIONS PRECEDENT
3.1 Condition Precedent to Effectiveness. The Parties agree and acknowledge that this Agreement shall be effective only upon the date on or before which both of the following have occurred (such date, the "Effective Date"): (i) the execution and delivery of the Ownership Agreement and the Operating Agreement and all other Collateral Documents; and (ii) the acknowledgment of the Participants' satisfaction of the foregoing condition and the accuracy of the cross-references to the Collateral Documents contained in this Agreement.
3.2 Conditions Precedent to Obligations. Notwithstanding any provisions of this Agreement to the contrary, the obligations of the Parties to this Agreement shall be subject to the fulfillment of each of the conditions (or the waiver in writing of such conditions by the respective Party or Parties) set forth in Article 8 of the Ownership Agreement.
SECTION 4 SALAE AND PURCHASE
4.1 Capacity Delivery and Payment. Subject to the terms and conditions of this Agreement, during the Operating Period, Seller agrees to deliver and sell to Purchaser and Purchaser agrees to receive and purchase from Seller up to six and one half percent (6.5%) of the Actual Capability of the Facility in accordance with the following provisions:
4.1.1 The Capacity payment (the "Capacity Payment" or "CP") in respect
of each month during the Operating Period shall be an amount equal to: the
product of the Annual Purchaser's Capacity Nomination (expressed in
kilowatts) multiplied by the Annual Capacity Charge. For any partial month
during the Operating Period, the Capacity Payment shall equal the amount
determined pursuant to the formula set forth in the preceding sentence
multiplied by a fraction, the numerator of which is the number of days of
such partial month within the Operating Period, and the denominator of
which is the total number of days in such month. If the Annual Purchaser's
Capacity Nomination changes during a month, then the Capacity Payment for
such month shall be equal to the product of the Annual Capacity Charge
multiplied by the sum of the two results obtained: (i) first by multiplying
the old Annual Purchaser's Capacity Nomination by the ratio of the number
of days in the month (including fractional days) prior to the time of the
change over the total number of days in the month; and (ii) second by
multiplying the new Annual Purchaser's Capacity Nomination by the ratio of
the number of days in the month (including fractional days) after the time
of the change over the total number of days in the month. The Capacity
Payment shall be paid by Purchaser to Seller in accordance with Section
9.1. Notwithstanding the above, if during the first three (3) months of the
Operating Period any Governmental Body shall prohibit the Facility from
operating because of Seller's failure to obtain, prior to the Commencement
Date any Permit required by Law for Seller to operate the Facility, then
Purchaser's obligation to make Capacity Payments shall be suspended until
the earlier of: (i) the lifting of such prohibition; or (ii) the date that
is three (3) months after the Commencement Date.
4.1.2 The initial Demonstrated Capability of the Facility shall be established in accordance with the Capacity testing procedure set forth in Appendix C. Following the first anniversary of the Commencement Date, Seller shall perform Capacity tests twice each Contract Year, pursuant to the testing procedures set forth in Appendix C, during the Summer and Winter periods as defined by FRCC; provided, however, that Seller shall be entitled to a fifty-eight (58)-hour period of maintenance that does not affect calculation of Actual Availability of the Facility (which period shall be prior to any such Capacity test from 9 p.m. Friday to 7 a.m. Monday, unless OUC, in its sole discretion, agrees otherwise). In addition, Seller may retest when a repair or modification of the Facility, or a corrected or improved operational or maintenance activity, results in an increase in the Capacity of the Facility (including adjustments made during initial shakedown), provided that the actual full load output (as adjusted to seventy degrees Fahrenheit (70(0)F) and forty-five percent (45%) relative humidity) is at least one hundred and one percent (101%) of the last Demonstrated Capability test amount. Should any test or retest conducted pursuant this Section 4.1.2 indicate that the actual full load output (as adjusted to seventy degrees Fahrenheit (70(0)F) and forty-five percent (45%) relative humidity) has changed by an amount equal to or greater than one percent (1%) of the last Demonstrated Capability test amount, the Demonstrated Capability shall be reset at such actual full load output for purposes of determining the Capacity Payment as of the time the test is completed; provided, however, that if the test is performed during a Force Majeure event and such Force Majeure event resulted in the reduction of the Demonstrated Capability, the Capacity Payment shall not be reduced thereby until the end of the forty-five (45) day period described in the last paragraph of Section 4.1 below.
4.1.3 Seller shall conduct additional tests as required by the FRCC or as requested by Purchaser pursuant to Purchaser's legal or contractual obligations with third parties; provided, however, such additional tests shall be for informational purposes and shall not be used to reset the Demonstrated Capability or otherwise determine the Capacity Payment under this Agreement.
4.1.4 Beginning with the sixth (6th) Contract Year and ending with the tenth (10th) Contract Year, the Customers shall have the irrevocable right to jointly reduce the total of their combined Annual Purchaser's Capacity Nominations, for the remainder of the Initial Term and any Extended Term or Further Extensions, by either twenty-five (25) MW or fifty (50) MW (as adjusted to seventy degrees Fahrenheit (70(0)F) and forty-five percent (45%) relative humidity) per year; provided, however, that such combined total of the Annual Purchaser's Capacity Nominations may not be reduced by more than 200 MW in the aggregate. Purchaser must give Seller notice of any such reduction elected by Purchaser not later than three (3) years prior to the commencement of the Contract Year in which such reduction shall occur; provided, however, that such notice shall be effective if and only if either it is made jointly with the other Customers or the other Customers give Seller a similar notice under their respective Power Purchase Agreements with all such notices together satisfying the above criteria; provided, further, that such notices shall specify any changes in the percentage of the Annual Purchaser's Capacity Nomination to be purchased by Purchaser under Section 4.1.1 and by the other Customers under the corresponding provisions of their respective Power Purchase Agreements.
Notwithstanding the foregoing provisions of this Section 4.1, if and to the extent that a Force Majeure event affects Seller's ability to deliver and sell to Purchaser the Capacity of the Facility or any portion thereof, Seller shall be excused from any delay in performing or failure to perform any or all of such obligations (and in this regard, the Parties shall follow the procedures contemplated in Section 11.1); provided, however, that notwithstanding such reduction or elimination of the Actual Capability of the Facility, Purchaser shall continue to pay Seller the full Capacity Payment attributable to the first forty-five (45) days following the date of Seller's notification to Purchaser of any such Force Majeure effect; provided, further, that if the effect of a Force Majeure event lasts for longer than forty-five (45) days, then Purchaser shall not be required to make Capacity Payments attributable to any continued period of Force Majeure declaration after the end of such forty-five (45) day period, but Purchaser must resume making Capacity Payments when Seller declares the Force Majeure period over and resumes its obligation for delivery of Energy under this Agreement; and provided, further, that the Capacity Payment relief contemplated in the immediately preceding clause shall not apply if the Force Majeure event affecting Seller resulted from a failure of Purchaser or another Customer to fulfill its obligations under this Agreement or any of the Collateral Documents; and provided, further, that a Force Majeure event that affects Purchaser's ability to receive Energy from the Facility shall not excuse Purchaser's obligation to make Capacity Payments, except solely to the extent provided for in Section 5.1.3 if and to the extent such provision is applicable.
4.2 Energy Delivery and Payment. Subject to the terms and conditions of this Agreement and, in particular, subject to the provisions of Section 6 and Appendix B, Seller shall sell and deliver, and Purchaser shall purchase and receive, during the Operating Period, Energy requested by Purchaser in a Request for Energy, as well as Energy generated by associated ramp up and ramp down of the Facility and Test Energy; provided, however, that Purchaser shall not be required to make any payments for Test Energy produced prior to the Commencement Date. The Customers shall pay for and supply all fuel associated with the Customers' Request for Energy in accordance with the provisions of Section 3.2 of the Operating Agreement. The Energy payment (the "Energy Payment" or "EP") in respect of each month shall be the sum of four (4) components: a variable O&M component for operation on natural gas, a variable O&M component for operation on fuel oil, a start-up component, and a fuel component for Energy delivered from Alternate Resources. The components of the Energy Payment shall be calculated as follows:
4.2.1 Variable O&M Component--Natural Gas. The variable O&M component for operation on natural gas shall be calculated as follows:
(SIGMA)i=Days in the month (SIGMA)j=Hours in the Day [(DENGij x VOMR) + HVOMij]
Where:
DENGij is Delivered Energy in MWh (other
than Test Energy prior to the Commencement
Date) from the Facility produced with
natural gas during hour j of day i;
provided, however, that if the Facility uses
both natural gas and fuel oil in a given
hour, then fifty percent (50%) of the
Delivered Energy in such hour shall be
deemed to be produced with natural gas; and
VOMR is the variable O&M rate (in $/MWh)
, which shall be [redacted]; and
HVOM is the hourly variable O&M rate (in $
per hour) as determined from Table A and its
accompanying Notes applicable for hour j of
day i during which the Facility is operating
on natural gas and which is applicable only
when DENGij is > 0.
Table A
Hourly Variable O&M Charges for Operation on Natural Gas
-------------------------- -----------------------------------------
Annual On-Line Factor Combined Hourly Variable O&M Rate (in $
--------------------- ---------------------------------------
per hour) for all Customers (see Notes
--------------------------------------
below)
------
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
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1) The Hourly Variable O&M Rate in Table A represents the rate applicable for the Annual Purchaser's Capacity Nominations of all Customers. The actual Hourly Variable O&M Rate for Purchaser for an hour in a particular Contract Year shall equal the product of the applicable rate from the table for such Contract Year multiplied by the ratio of Purchaser's portion of the Request for Energy for such hour over the total Request for Energy for such hour.
2) The Hourly Variable O&M Rate for a
Contract Year shall be interpolated between the
values shown in Table A when the Annual On-Line
Factor for the previous Contract Year falls between
the specific percentages shown on Table A. For
example, with respect to an Annual On-Line Factor of
[redacted].
3) The dollar amounts shown in Table A are expressed in January 1, 2003 dollars and shall be escalated based upon the U.S. Consumer Price Index on January 1 of each year.
4) The dollar amounts in Table A represent the charge for sixty-five percent (65%) of the Facility's Capacity being sold to Customers under the Power Purchase Agreements. If Purchaser and the other Customers elect to reduce their combined Annual Purchaser's Capacity Nominations pursuant to Section 4.1.4, then the dollar amounts in Table A shall be proportionately reduced commensurate with such Capacity reduction.
5) The AnnualOn-Line Factor shall be calculated for each Contract Year, as follows:
Annual On-Line Factor = SH/ (PH - OH)
Where:
SH is the number of hours that the
Customers Schedule and Seller delivers
Energy in a Contract Year; and
PH is the number of hours in a Contract
Year; and
OH is the number of hours in a Contract Year
during which (i) the Facility is unavailable
due to a forced outage or due to a
maintenance outage that Seller has scheduled
pursuant to Section 6.4 or, if applicable,
that is a permitted fifty-eight (58) hour
pre-testing maintenance under Section 4.1.2,
and (ii) Seller does not deliver from an
Alternate Resource.
6) For the first Contract Year, all monthly
Energy billings will be made assuming an Annual
On-Line Factor of [redacted]. The rate shall be
determined annually for each Contract Year based on
the Annual On-Line Factor for the previous Contract
Year. At the end of each Contract Year, the Annual
On-Line Factor for such Contract Year shall be
calculated and the Hourly Variable O&M charges for
such Contract Year shall be recalculated using such
Annual On-Line Factor for such Contract Year. A
true-up payment or refund shall be made to adjust the
amounts collected by Seller from Purchaser during
each Contract Year to the amount computed by Seller
using such Annual On-Line Factor for such Contract
Year. Any true-up payments shall be included on an
invoice as soon as reasonably practicable following
the end of the applicable Contract Year.
4.2.2 Variable O&M Component--Fuel Oil. The variable O&M
component for operation on fuel oil when firing the
gas turbines shall be calculated as follows:
(SIGMA)i= Days in the Month (SIGMA)j= Hours
in the Day [(DEFOij x VOMRFO) +
HVOMFOij]
Where:
DEFOij is Delivered Energy (other than Test
Energy prior to the Commencement Date)
produced with fuel oil during hour j of day
i; provided that if the Facility uses both
natural gas and fuel oil in a given hour,
then fifty percent (50%) of the Delivered
Energy in such hour shall be deemed to be
produced with fuel oil; and
VOMRFO is the variable O&M rate (in $/MWh)
for Energy produced with fuel oil,
[redacted], subject to adjustment up or down
based on the Participants' evaluation of
General Electric's reports on the effect of
burning fuel oil on variable O&M costs (as
mutually agreed by the Participants
following good faith negotiations); and
HVOMFO is the hourly variable O&M rate (in $
per hour) for hour j of day i during which
the Facility is Operated on fuel oil, which
rate [redacted], subject to adjustment up or
down based on the Participants' evaluation
of General Electric's reports on the effect
of burning fuel oil on variable O&M costs
(as mutually agreed by the Participants
following good faith negotiations), and
which is applicable only when DEFOij is > 0.
4.2.3 Start-up Component. The start-up component shall be
calculated as follows:
GTS x SUR
Where:
GTS is the number of gas turbine starts
required to meet a Request for Energy (other
than for Test Energy prior to the
Commencement Date) where the amount of
Energy delivered from any single gas turbine
increases from zero to an amount greater
than zero; provided, however, that the
calculation of GTS shall not include: (i)
any starts required to resume delivery to
Purchaser due to an interruption caused by a
forced outage, or (ii) any starts initiated
by Seller in order to make third party sales
in any given hour where the Facility would
otherwise not have been started in such hour
to meet a Request for Energy.
SUR is the Start-up Rate (in $ per start)
for each gas turbine as determined from
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Table B below and its accompanying Notes:
TABLE B
Start-Up Rates
--------------------------------------------------------------------------
Cumulative Number of Start-ups per Combined Start-up Rate per Start per
----------------------------------- -------------------------------------
Gas Turbine per Contract Year Gas Turbine for all Customers (see
----------------------------- ----------------------------------
Notes)
------
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
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1) The SUR in Table B represents the rate
applicable to all Customers for each start-up during
a Contract Year. There shall be no charge for
[redacted], and the combined rate among all Customers
participating in each subsequent start-up during such
Contract Year shall be as identified in the Table B.
The actual SUR for Purchaser (in $ per start) for any
such start-up shall equal the quotient of the
applicable rate from the Table B divided by the
number of Customers participating in the Request for
Energy that requires the start-up (and in which
Purchaser is one of those Customers); provided,
however, Purchaser will not have to pay for start-ups
in which it does not participate.
2) The SUR is expressed in January 1, 2003
dollars and shall be escalated based upon the U.S.
Consumer Price Index on January 1 of each year.
3) The dollar amounts in Table B represent
the charge for sixty-five percent (65%) of the
Facility's Capacity being sold to Participants under
the Power Purchase Agreements. If the Participants
elect to reduce their combined Annual Purchaser's
Capacity Nominations pursuant to Section 4.1.4, then
the dollar amounts in Table B shall be
proportionately reduced commensurate with such
Capacity reduction.
4.2.4 O&M Rate Adjustment. The rates in Sections 4.2.1,
4.2.2 and 4.2.3 shall be increased or decreased based
on good faith negotiation of the Parties (in
accordance with Section 18) to reflect and include
any actual increase or decrease in Seller's costs of
operating the Facility that is caused by any mutually
agreed-upon modification or design change or any
actual increase or decrease in Purchaser's or another
Customers' charges for providing any services to
Seller.
4.2.5 Energy Payment for Delivery from Alternate Resources.
----------------------------------------------------
4.2.5.1 If Seller elects to deliver Energy from
Alternate Resources pursuant to Section 4.4,
then the variable O&M component and the
start-up component of the Energy Payment
shall be calculated in accordance with
Sections 4.2.1 and 4.2.3, respectively, for
such Alternate Resource Energy as if it were
delivered from the Facility. In addition,
the fuel component for the Energy delivered
from Alternate Resources shall be calculated
as follows:
(SIGMA)i=Days in the month (SIGMA)j=Hours
in the Day (MDEij x HRij x FRPij)
Where:
MDEij = Scheduled Energy in MWhs
delivered from an
Alternate Resource during hour j
of day i;
when the Facility is unavailable,
then HRij for an
hour = [redacted];
when the Facility is available,
then HRij for an
hour = [redacted]; and
FRPij = the fuel rate proxy for an
hour calculated in dollars per
MMBtus in accordance with the
applicable provisions of either
Section 4.2.5.2 or 4.2.5.3.
4.2.5.2 If the Fuel Supply Agent has not already
scheduled the transportation of gas to the
Facility to meet the Customers' Schedules
for the hour during which Seller elects to
deliver the Scheduled Energy from Alternate
Resources, then following notification from
Seller of its election to deliver the
Scheduled Energy from Alternate Resources,
Seller shall be obligated to obtain the
necessary quantities of gas and necessary
gas transportation capacity to accommodate
any portion of the Schedule that Seller has
elected to satisfy from Alternate Resources.
During periods that Seller elects to deliver
Energy from Alternate Resources, the Fuel
Supply Agent shall make available
transportation capacity, within constraints
of the pipeline tariffs and operational
procedures in effect at the time and at no
additional cost to the Fuel Supply Agent, in
the amount determined by the quantity of
Energy supplied from Alternate Resources and
the applicable heat rate determined by the
rules for defining HR in the formula
provided in Section 4.2.5.1. An example of
the determination of the transportation
capacity is included in Appendix D. If
Seller has delivered Energy from Alternate
Resources under these circumstances, then
the FRP (in $ per [redacted] to the sum of:
[redacted]; and (ii) the applicable firm gas
transportation variable cost associated with
deliveries to the Facility under such
Participant's firm transportation
agreement(s). All risks of gas supply and
transportation interruption to accommodate
deliveries of Energy from Alternate
Resources shall be borne by Seller.
4.2.5.3 If the Fuel Supply Agent has already
scheduled the transportation of gas to the
Facility to meet the Customers' Schedules by
the time Seller notifies Purchaser of
Seller's election to deliver the Scheduled
Energy from Alternate Resources, then at
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Seller's election:
(i) Seller shall direct Fuel Supply Agent to use
commercially reasonable efforts to revise its scheduled
transportation of gas to the Facility to provide for the delivery
of the gas to Seller at any alternate delivery point designated
by Seller that is available under the Customers' firm
transportation agreement(s). The efforts of the Fuel Supply Agent
shall be subject to the constraints of the pipeline tariffs and
operational procedures in effect at the time, and the Fuel Supply
Agent shall not be required to incur any additional cost as a
result of the revision of the schedule of transportation of gas
to the alternate delivery point. The amount of scheduled
transportation of gas to be delivered to the alternate delivery
point shall be determined by the quantity of Energy supplied from
Alternate Resources and the applicable heat rate determined by
the rules for defining HR in the formula provided in Section
4.2.5.1. An example of the determination of the transportation
capacity is included in Appendix D. If Seller has delivered
Energy from Alternate Resources under these circumstances, then
the FRP (in $ per MMBtu) shall be [redacted]; or
(ii) Seller shall direct Fuel Supply Agent to use commercially reasonable efforts to remarket to third parties the gas that has been scheduled for delivery to the Facility on the best terms possible under the circumstances. The efforts of the Fuel Supply Agent shall be subject to the constraints of the pipeline tariffs and operational procedures in effect at the time. The amount of scheduled transportation of gas to be remarketed to third parties shall be determined by the quantity of Energy supplied from Alternate Resources and the applicable heat rate determined by the rules for defining HR in the formula provided in from paragraph 4.2.5.1. An example of the determination of the transportation capacity is included in Appendix D. If Seller has directed the Fuel Supply Agent to remarket the gas under these circumstances, the FRP (in $ per MMBtu) shall be [redacted].
4.3.1 Seller guarantees that the Actual Availability of the
Facility for each of the Peak and Off-Peak Periods of each
Contract Year will equal or exceed [redacted] ("Availability
Guarantee"); provided, however, that (i) the first three months
of operation following the Commencement Date shall be excluded
from the Availability Guarantee, (ii) if and to the extent that a
Force Majeure event affects Seller's ability to achieve the
Availability Guarantee, other than in the case of Equipment
Breakdown, Seller shall be excused from the Availability
Guarantee (and in this regard the Parties shall follow the
procedures contemplated in Section 11), and (iii) to the extent
that the Facility is fired with fuel oil in excess of forty-eight
(48) hours per combustion turbine unit in any Contract Year in
order to meet Purchaser's Request for Energy, then for every
additional ten (10) hours that the Facility is fired using fuel
oil, the lower end of the Availability Guarantee range, and the
[redacted] in Sections 4.3.5.1 and 4.3.5.2, shall be reduced by
[redacted], which reductions shall remain in effect until the
next Planned Major Maintenance occurs. If either combustion
turbine is not fired on oil during any Contract Year for the same
number of hours as the other combustion turbine, then for
purposes of calculating the adjustment to the Availability
Guarantee, each combustion turbine will be deemed to have been
fired on oil during such Contract Year for a number of hours that
is equal to one half of the summation of the number of hours that
each combustion turbine was actually fired on oil during such
Contract Year.
4.3.2 In each Contract Year, or partial Contract Year in the case of the first Contract Year (where the first three months are excluded) or the last Contract Year, Seller shall be entitled to an availability incentive payment from Purchaser ("Availability Incentive Payment") equal to [redacted].
4.3.3 The Actual Availability for the Peak Period of each Contract Year, or partial Contract Year in the case of the first Contract Year (where the first three months are excluded) or the last Contract Year, shall be calculated as follows and then rounded up or down to the nearest tenth of a percentage point (based on the method that the rounding is up if the succeeding decimal is 5 or higher or otherwise the rounding is down); provided, however, that such Actual Availability shall not exceed one (1.00):
Actual Availability = (PH-OH -EDH+EMH+ARDH)/PH Where: "PH" (or "Period Hours") shall equal the hours in the Peak Period of such calendar year;
"OH" (or "Outage Hours") in the Peak Period of such Contract Year means all hours the Facility is unavailable for operation; provided, however, that OH shall not include hours in any day during which the Purchaser has not Scheduled any Energy from the Facility during the entirety of such day;
"EDH" (or "Equivalent Derated Hours") in the Peak Period of such Contract Year means the summation of EDH for each hour during the Peak Period; provided, however, that EDH shall not include hours in any day during which the Purchaser has not Scheduled any Energy from the Facility during the entirety of such day. In each hour for which the EDH of such hour must be calculated, EDH for the hour will equal (Guaranteed Output - Actual Capability)/Guaranteed Output;
"EMH" (or "Excused Maintenance Hours") shall equal hours that Seller has scheduled maintenance on the Facility in the Peak Period of such calendar year pursuant to Section 6.4 and, if applicable, the fifty-eight (58) hours of pre-testing maintenance allowed prior to a Capacity test under Section 4.1.2; provided, however, that in any hour EMH must be zero if there is no Outage Hour in such hour; and
"ARDH" (or "Alternate Resource Delivery Hours") shall equal the number of hours that Seller delivers Energy to Purchaser from Alternate Resources in the Peak Period of such Contract Year to fully or partially make up for shortfalls caused by Facility outages or derates. Seller will not receive any credit for ARDH in any entire day unless Seller is able to deliver at least partial Energy in each hour of such day that Purchaser Schedules Energy, in which case Seller will receive ARDH credit for each hour of the day based on the lowest ratio during any hour of such day of Delivered Energy to Scheduled Energy.
4.3.4 The Actual Availability for the Off-Peak Period of
each Contract Year shall be calculated in a fashion similar to
Section 4.3.3, substituting "Off-Peak Period" for "Peak Period"
where it appears in Section 4.3.3.
4.3.5 In the event that the Actual Availability during the Peak Period or Off-Peak Period, or both, of any given Contract Year, or partial Contract Year in the case of the first Contract Year (where the first three months are excluded) or the last Contract Year, is less than the lower end of the Availability Guarantee range, then Purchaser shall be entitled to receive availability damages ("Availability Damages") from Seller as Purchaser's sole and exclusive remedy for Seller's failure to delivery Capacity and Energy from the Facility due to the unavailability of the Facility. 4.3.5.1 The Availability Damages for the Peak Period shall be calculated as follows (with any required adjustments as noted in Section 4.3.5.3):
Availability Damages for the Peak Period of any Contract Year = [redacted]
4.3.5.2 The Availability Damages for the Off-Peak Period shall be calculated as follows (with any required adjustments as noted in Section 4.3.5.3):
Availability Damages for the Off-Peak Period of any Contract Year = [redacted]
4.3.5.3 In both of Sections 4.3.5.1 and 4.3.5.2, the factors
[redacted] shall be adjusted for the use of fuel oil pursuant to
Section 4.3.1(iii), if applicable.
4.3.6 As soon as reasonably practicable after the first month following the Commencement Date, and each month thereafter, Seller shall submit to Purchaser a statement setting forth in reasonable detail the actual availability of the Facility during the prior month, including the underlying availability data.
4.3.7 As soon as reasonably practicable following each Contract Year, Seller shall submit to the Purchaser a statement setting forth the Actual Availability for the preceding Contract Year together with a calculation of the net amount of any Availability Incentive Payment due to Seller or Availability Damages due to the Purchaser for the preceding Contract Year based on the foregoing calculations, as applicable, with respect to the Peak Period and Off-Peak Period of such Contract Year. Within ten (10) Business Days of (a) receipt of such statement, Purchaser shall pay any Availability Incentive Payment due to Seller by wire transfer in immediately available funds, or (b) transmittal of such statement, Seller shall pay any Availability Damages due to Purchaser by wire transfer in immediately available funds.
4.4 Alternate Resources. In any hour in which the Facility is unavailable, Seller may continue to make deliveries of Energy in the full amount Scheduled by Purchaser from non-Facility sources (including, but not limited to, generating units on Seller's or its Affiliates' systems and Energy purchases available to Seller) ("Alternate Resources") to replace the Energy that would have been provided by the unavailable Facility. In any hour in which the Facility is available, Seller may choose to make deliveries of Energy in the full amount Scheduled by Purchaser, or any portion thereof, from Alternate Resources to replace the Energy that would have been provided by the available Facility; provided, however, that if the Facility is available, Seller must maintain the Facility on-line and committed at least at the Facility's minimum load, and Purchaser may Schedule spinning reserves from the Facility, all in accordance with Appendix B. Seller must deliver Energy from Alternate Resources to Purchaser at an unconstrained point on the Grid, and if Seller is making such delivery at a time when the Facility is unavailable, then Seller will purchase Firm Transmission Service for such delivery to the extent that such Firm Transmission Service is available for the Alternate Resource Energy from the point of its acquisition by Seller to the unconstrained point on the Grid. In utilizing Alternate Resources, Seller shall comply with the notice requirements of Section 3 of Appendix B.
4.5 Purchaser's Right to Capacity and Energy. During the Operating Period, Purchaser shall have the first call to purchase Seller's share of the Capacity and Energy generated by, and Ancillary Services associated with, the Facility (other than the reductions in Capacity elected jointly by the Customers pursuant to Section 4.1.4); provided, however, that (i) subject to Purchaser's right to Capacity and Energy under this Agreement and the Operating Agreement, Seller may make sales of any Capacity and Energy generated by, and Ancillary Services associated with, Seller's Equity Capacity when such Capacity and Energy is not Scheduled by Purchaser, and (ii) in the event that Seller determines that the Facility is capable of delivering Energy to the Grid prior to the Scheduled Commencement Date, Seller shall have the option of either (a) utilizing the Capacity and Energy generated by, and Ancillary Services associated with, its percentage ownership share of the Facility prior to the Scheduled Commencement Date for sales to third parties by delivering written notice of its election of this option thirty (30) days prior to the anticipated Commercial Operation Date, in which event Purchaser shall not make Capacity Payments until the later of the Scheduled Commencement Date or the Commencement Date, or (b) initiating delivery of Capacity and Energy to Purchaser under this Agreement on the Commencement Date. If Seller makes sales of either or both Capacity and Energy to third parties under Section 4.5(ii)(a) at a time when the Scheduled Commencement Date has passed but the Commencement Date has not yet occurred, then Seller will pay to Purchaser the portion, if any, of the proceeds of such sales that Seller actually receives.
SECTION 5 SCHEDULE FOR DELIVERY OF CAPACITY AND ENERGY
5.1.1 Seller anticipates that, the Facility will achieve the Commencement Date by the Scheduled Commencement Date and shall be fully capable of reliably producing the power and Energy to be provided under this Agreement to Purchaser at the Delivery Point; provided, however, that if and to the extent that a Force Majeure event affects Seller's ability to timely comply with the foregoing guarantee, the Scheduled Commencement Date shall be extended by the amount of time Seller reasonably needs to remedy the effects of the Force Majeure that prevented Seller's performance (and in this regard, the Parties shall follow the procedures contemplated in Section 11).
5.1.2 In the event that Seller fails to achieve the Commencement Date by
the date that is two (2) years after the Scheduled Commencement Date, then
either (i) Seller shall have the right to simultaneously terminate all of the
Power Purchase Agreements by delivering written notice of such election to
Purchaser and the other Customers ("Seller's Termination Notice"), or (ii)
Purchaser may terminate this Agreement, if and only if each of the other
Customers also terminates contemporaneously its respective Power Purchase
Agreement for the same reason, by delivering written notice of such election to
Seller (collectively, together with the other Customers' similar notices,
"Purchasers' Termination Notices"). Within ten (10) Business Days of the date of
Seller's Termination Notice, Seller shall pay Purchaser liquidated damages
[redacted], this Agreement shall terminate effective as of the date of Seller's
Termination Notice, and Seller shall have no further liability to Purchaser
other than the liquidated damages paid under this Section 5.1.2. Within ten (10)
Business Days of the date of Purchasers' Termination Notice, Seller shall pay
Purchaser liquidated damages [redacted], this Agreement shall terminate
effective as of the date of Purchasers' Termination Notice, and Seller shall
have no further liability to Purchaser other than the liquidated damages paid
under this Section 5.1.2.
5.1.3 In the event that Seller's failure to achieve the Commencement Date by the Scheduled Commencement Date is attributable to, in whole or in part, the failure of any Customer to meet any of their respective obligations under this Agreement or their respective Power Purchase Agreements or the Collateral Documents, then (a) the Scheduled Commencement Date shall be extended for such period of Purchaser's or such other Customer's failure, and (b) Purchaser shall make Capacity Payments [redacted] beginning as of the initial Scheduled Commencement Date (without any extension); provided, however, that Purchaser shall not be required to make any Capacity Payments under this Section 5.1.3 to the extent the delay in achieving the Scheduled Commencement Date is attributable to the concurrent failure of Purchaser or such other Customers and Seller (where such concurrent failures are not co-extensive, such relief from Capacity Payments shall apply only during the period of time that Seller's failure to meet its obligations contributed to the delay); provided, further, that in the event Purchaser's failure to meet its obligation was the result solely of a Force Majeure event that prevented Purchaser's timely completion of such obligation, then Purchaser will be excused from having to make Capacity Payments as contemplated in Section 5.1.3(b) for the first forty-five (45) days after the Scheduled Commencement Date (without benefit of any extension thereof allowed under this Agreement), but if the Commencement Date does not occur within such forty-five (45) day period, then Purchaser shall recommence making Capacity Payments starting at the beginning of the forty-sixth (46th) day after the Scheduled Commencement Date and thereafter continue making Capacity Payments as contemplated in Section 5.1.3(b).
5.2 Conditions to Commencement. Seller will notify Purchaser of the
date when the Facility has achieved the following criteria (the "Commencement
Date"), which notice will be accompanied by reasonable documentation evidencing
satisfaction or occurrence of each of the following; provided, however, that
Seller shall not be precluded from making third-party sales, in accordance with
Section 4.5, of its percentage ownership share of Capacity and Energy from the
Facility notwithstanding whether any or all of the following criteria have been
met in whole or in part:
5.2.1 successful completion of required testing of the
Facility has occurred for purposes of financing,
project operation, air permitting, Purchaser's
planning and reporting, and manufacturers'
warranties, including establishment of the initial
Demonstrated Capability of the Facility as
contemplated in Section 4.1.2;
5.2.2 the Facility has completed four (4) successful
start-ups without experiencing any abnormal operating
conditions and has generated continuously for a
period of not less than sixteen (16) hours while
synchronized to the Grid at a net Capacity output of
at least ninety percent (90%) of the Demonstrated
Capability (adjusted for ambient conditions) without
experiencing any abnormal operating conditions;
5.2.3 the Facility is in compliance with the
Interconnection Agreement, either is capable of
operation in the AGC mode or is capable of responding
to manual load change instructions, has achieved
initial synchronization with the Grid, and has
demonstrated the reliability of its communications
systems and communications with the Florida Municipal
Power Pool Energy Control Center located in the OUC
Pershing Operations Building (or the replacement for
such control center if the Customers decide to have
their generation control performed at a different
location); and
5.2.4 certificates of insurance coverages and/or insurance
policies required of Seller have been obtained and
submitted to Purchaser as required by Section 28.
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5.3 Test Energy. Seller shall coordinate the production and delivery of Test Energy with Purchaser. Purchaser shall cooperate with Seller to facilitate Seller's testing of the Facility, provide the fuel necessary to conduct testing, and shall accept Test Energy delivered to Purchaser in accordance with the provisions of Section 4.2.
SECTION 6 REQUESTS FOR ENERGY; OPERATION AND MAINTENANCE
6.1 Communicating Requests for Energy. Purchaser shall have the right to request deliveries of Energy by providing a Request for Energy to Seller in accordance with this Section 6 and Appendix B; provided, however, that Purchaser and the other Customers shall coordinate their Scheduling requirements by jointly submitting a single Request for Energy that covers all of their respective requirements on any given day.
6.1.1 The Customer's joint Requests for Energy may request the full output of the Facility, reduced by those amounts, if any, that Customers jointly elect to subtract from the Capacity available to Customers pursuant to the process provided in Section 4.1.4 of this Agreement and the other Power Purchase Agreements. If the Customer's joint Request for Energy is for less than the full output of the facility, then the request shall be deemed to be a Request for Energy first from Purchaser's Equity Capacity and, if such Equity Capacity is not sufficient, then from Purchaser's purchased Energy under this Agreement.
6.1.2 The Parties hereby consent to the recording of all conversations on the telephone lines used for communicating Requests for Energy and related notices and instructions in accordance with customary industry practice. The contents of such recordings shall be definitive.
6.2 Limitations on Requests for Energy. Notwithstanding anything to the contrary in this Agreement, any Request for Energy, operation in the AGC mode or operation in response to a Capacity Emergency that would require the Facility to operate in a manner inconsistent with the Technical Limits, Prudent Utility Practice or applicable Law and Permit requirements shall be deemed not to comply with the requirements and limitations set forth in this Section 6. If and when a Customers' Request for Energy does not comply with the requirements and limitations of this Section 6 by reason of the previous sentence, Seller will notify Customers of such noncompliance promptly after Seller realizes that the Request for Energy is noncompliant and will modify Customer's Request for Energy to make it consistent with the Technical Limits, Prudent Utility Practice and all applicable Laws and Permits to the extent it is reasonably possible to do so consistent with such standards.
6.3 Operation of the Facility. Seller shall operate and maintain the Facility in accordance with this Agreement, Prudent Utility Practice, the Technical Limits and all applicable Laws and Permit requirements. Any emission allowances required for operation of the Facility as contemplated in this Agreement shall be provided in accordance with the applicable provisions of the Operating Agreement.
6.4 Scheduled Maintenance. Seller agrees to schedule Planned Major Maintenance during the Off-Peak Period, or to obtain Purchaser's consent to schedule such maintenance during the Peak Period. Seller will submit to Purchaser an annual maintenance projection and will make reasonable efforts to coordinate the scheduling of such Planned Major Maintenance with Purchaser, including estimated start dates and return to service dates. Seller must seek the consent of OUC, acting for itself and on behalf of the other Customers (which Purchaser hereby authorizes) in scheduling of any Minor Maintenance; provided, however, that Purchaser guarantees Seller will be afforded a minimum of four (4) such Minor Maintenance events distributed approximately evenly over the Off-Peak Period, with a maximum of six (6) such Minor Maintenance events during any year; provided, further, that requests for Minor Maintenance events during the period from May 15 through September 15 may be granted or withheld in OUC's sole discretion.
6.5 Transmission Operator. Coordination with an RTO regarding security and reliability of the Grid as it relates to the Facility, or any other entity, having control over the security and reliability of the Grid shall be the responsibility of Seller as the operator of the Facility. Coordination with an RTO, or other entity, having balancing authority or scheduling authority over the Facility should be handled by Purchaser for any schedules to Purchaser from the Facility and by Seller for any other schedules from the Facility. Any orders, directives or operating requirements that Seller is required to follow by Law imposed on Seller by an RTO, or any other entity, having control over the security and reliability of the Grid shall take precedence over this Agreement. To the extent the requirements of such order, directive or operating requirement necessarily prevent Seller from fulfilling its obligations under this Agreement, Seller shall be relieved of its obligations hereunder. To the extent the requirements of such order, directive or operating requirement conflict with Seller's fulfillment of its obligations hereunder, the rights and obligations of the Parties hereunder shall be adjusted as necessary to comply with such orders, directives or operating requirements.
SECTION 7 INTERCONNECTION AND TRANSMISSION
7.1 Interconnection Facilities. The Parties shall execute an Interconnection Agreement pursuant to applicable interconnection policies and procedures of OUC. The Interconnection Agreement shall contain terms and conditions governing the interconnection and parallel operation of the Facility with the Grid.
7.2 Delay in Interconnection. Purchaser shall cause OUC to complete the OUC Interconnection Facilities and ensure that the Grid is capable of providing and receiving Energy by the date that is eight (8) months prior to the anticipated Commercial Operation Date, but in no event earlier than January 15, 2003. By the date that Seller has completed the collector bus and the 230 kv line to the OUC Interconnection Facilities, but no earlier than the date that is eleven (11) months prior to the anticipated Commercial Operation Date, OUC shall provide service to the Facility for the purposes of engineering and testing the collector bus and other systems by either providing 230 kv service at the 230 kv Interconnection Point or by providing service to the 4160 kv SWGR bus. If for any reason, other than the fault of Seller, OUC fails to complete the OUC Interconnection Facilities and/or if the Grid is not capable of providing and receiving Energy (as determined by OUC and as supported by reasonable documentation) in accordance with the preceding sentence and, as a result, OUC cannot accommodate Seller's start-up and testing of the Facility (such a delay, an "IF/Grid Delay"), then the Scheduled Commencement Date shall be extended by that period of time equal to the IF/Grid Delay; provided, however, that Purchaser shall make the Capacity Payments as provided in Section 5.1.3(b); provided, further, that if Seller would not have been capable of delivering Energy from the Facility to the OUC Interconnection Facilities, even in the absence of an IF/Grid Delay, on the original anticipated Commercial Operating Date ("Seller's Delay"), then extension of the Scheduled Commencement Date and the date on which Purchaser is obligated to make Capacity Payments shall be adjusted by the period of time of Seller's Delay.
7.3 Transmission.
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7.3.1 Purchaser shall be responsible for all costs
associated with and for making all necessary
transmission arrangements for Delivered Energy,
including tagging and any required Ancillary
Services, with the transmission service provider for
delivery from and beyond the Delivery Point.
7.3.2 Seller shall bear all costs and losses and shall be
responsible for making all arrangements for
transmission service, including tagging and any
required ancillary services, with respect to delivery
of Capacity and Energy from an Alternate Resource to
an unconstrained point on the Grid.
SECTION 8
RISK OF LOSS; METERING
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8.1 Risk of Loss. Delivered Energy sold pursuant to this Agreement shall be made available to Purchaser at the Delivery Point. Risk of loss with respect to all such Energy shall pass to Purchaser when such Delivered Energy is made available to Purchaser at the Delivery Point. Risk of loss with respect to the natural gas supply utilized to deliver Energy pursuant to this Agreement shall pass to Seller when such natural gas supply is made available to Seller at the Gas Delivery Point. For purposes of this Agreement, and except to the extent expressly limited in this Agreement, Purchaser shall bear all risk of all occurrences of any nature (including Force Majeure or any other event beyond the reasonable control of either Party) affecting any interconnection facilities, substations, transmission lines and other facilities on Purchaser's side of the applicable Delivery Point and the Gas Delivery Point.
8.2 Place of Measurement. All Energy from the Facility shall be measured by the Facility's meters (such meters collectively, the "Interconnection Meters"), and the Energy delivered from the Facility shall be the Interconnection Meters' readings of the quantities of Energy, reduced by an amount equal to the applicable Energy quantity necessary to compensate for the loss, if any, between the Interconnection Meters and the Delivery Point.
8.3 Testing and Calibration of Interconnection Meters. Seller shall inspect and calibrate the Interconnection Meters at least once a year. Seller shall give Purchaser reasonable advance notice of any inspection, testing or calibration of the Interconnection Meters. Purchaser shall have the right to have a representative present at such inspection, testing or calibration of the Interconnection Meters. Purchaser shall have the right to require, at Purchaser's expense except as set forth in Section 8.4, a test of any of the Interconnection Meters not more often than once every twelve (12) months. If any Interconnection Meter is found to be inaccurate by one half of a percent (0.5%) or less, then any previous recordings of such Interconnection Meter shall be deemed accurate, but Seller shall use its reasonable efforts to adjust such Interconnection Meter immediately and accurately. In the event that any Interconnection Meter is found to be inaccurate by more than one half of a percent (0.5%), Energy delivered at the corresponding Delivery Point shall be measured by reference to Customers' check-meters, if installed and registering accurately, or the meter readings at the Delivery Point for the period of inaccuracy shall be adjusted as far as can be reasonably ascertained by Seller from the best available data from both Parties. If the period of the inaccuracy cannot be ascertained reasonably, any such adjustment shall be for a period equal to one half of the time elapsed since the preceding test. Customers' check meters, if installed, shall be subject to Seller's right to require, at Seller's expense except as set forth in Section 8.4, a test of any of the check-meters not more often than once every twelve (12) months. If any of Customers' check meters is found to be inaccurate by one half of a percent (0.5%) or less, then any previous recordings of such check meter shall be deemed accurate, but Customers shall use their reasonable efforts to adjust such check meter immediately and accurately.
8.4 Delivered Energy Adjustments. In the event that, due to correction
for inaccurate Interconnection Meters with an inaccuracy in excess of one half
of a percent (0.5%) (determined in accordance with Section 8.3), the amount of
Delivered Energy is increased or decreased, the revised quantity of Delivered
Energy shall be used for purposes of calculating the Energy Payment pursuant to
Section 4.2. If any Energy Payment has already been calculated using the
previous quantity of Delivered Energy, the Energy Payment shall be recalculated
using the revised quantity of Delivered Energy. If the recalculation (i)
increases the Energy Payment, Purchaser shall pay to Seller the amount of such
increase, or (ii) decreases the Energy Payment, Seller shall refund to Purchaser
the amount of such decrease. In any such case, the required payment shall be
included on the next invoice to be issued and shall be paid at the time payment
of such invoice is required pursuant to Section 9. Any payment required under
this Section 8.4 shall bear interest in accordance with Section 9.3 from the
original due date (or from the date paid in the case of a refund) until the date
paid (or until the date refunded in the case of a refund). In the case of
inaccurate Meters with an inaccuracy in excess of one half of a percent (0.5%),
the Party which owns such Meters shall promptly cause such Meters to be
corrected and, where such inaccuracy was determined pursuant to a test required
by the other Party, the Party which owns such Meters shall bear the expense of
any such test.
SECTION 9 METHOD OF PAYMENT
9.1 Invoicing and Payment. As soon as reasonably practicable after the
first day of each month commencing with the second month or portion thereof
during which Test Energy is delivered to Purchaser and continuing for each month
until the first month after the end of the Operating Period, Seller shall submit
to Purchaser an invoice as described in Section 9.2. If such invoice indicates a
net amount payable to Seller, Purchaser shall pay such invoice within ten (10)
Business Days of Purchaser's receipt of the invoice. Such payment shall be made
in U.S. dollars by wire transfer of immediately available funds prior to 3:00
p.m. Eastern Prevailing Time, on the date of payment in accordance with the
invoice instructions. Payments made after 3:00 p.m. Eastern Prevailing Time or
on a day that is not a Business Day shall be deemed to be made on the next
subsequent Business Day. If such invoice indicates a net amount payable to
Purchaser, Seller shall pay such amount within ten (10) Business Days of
Purchaser's receipt of the invoice.
9.2 Monthly Invoices. Each monthly invoice shall show the amount and
calculation of the following, as applicable: (i) the Capacity Payment and Energy
Payment payable by Purchaser to Seller for the preceding month net of any
amounts to be credited by Seller to Purchaser for such month; (ii) following
each Contract Year, the net amount payable by Purchaser or Seller pursuant to
Section 4.3 respecting the Availability Incentive Payment and Availability
Damages, as the case may be; and (iii) payments, refunds, credits and
reductions, if any, payable by either Party pursuant to Sections 9.3 or 9.4.
9.3 Late Payments. Any amount due from either Party hereunder not paid in full on or before the date such payment is due will incur a delayed payment charge on the unpaid amount from the original due date until the date paid at an annual rate equal to the then current Prime Rate plus six (6) percentage points (or such lesser annual rate as is the maximum rate permitted by applicable Law).
9.4 Billing Disputes. In the event of any dispute as to all or any
portion of any monthly invoice, Purchaser shall give notice of the dispute to
Seller but shall pay the full amount of the invoiced charges when due (or if
applicable, Seller shall give notice to Purchaser of Seller's dispute regarding
any information provided by Purchaser that was a factor in any calculation
supporting invoiced amounts). Such notice shall state the amount in dispute and
set forth a full statement of the grounds on which such dispute is based.
Purchaser and Seller shall give all due and prompt consideration to any such
dispute. Upon final determination (whether by agreement, dispute resolution
pursuant to Section 18 hereof, or otherwise) of the dispute, any amounts due to
Purchaser or Seller, together with interest from the date due until the date
paid at the rate specified in Section 9.3, shall be paid no later than thirty
(30) days following such final determination. Purchaser and Seller shall have
until the end of one hundred eighty (180) days after its receipt of any invoice,
statement or information supporting invoice calculations to question or contest
the correctness of any charge or credit on such invoice or statement.
9.5 Audit Rights. Until the end of one hundred eighty (180) days after Purchaser's receipt of any invoice, Seller and Purchaser will make available to the other upon written request, and the Purchaser or Seller may audit, such books and records of the other (or other information to which Purchaser or Seller has access) as are reasonably necessary for Purchaser or Seller to calculate and determine the amounts shown on such invoice and thereby to verify the accuracy and appropriateness of the amounts billed or credited to Purchaser or Seller hereunder; provided, however, that Purchaser shall coordinate its rights under this section with the other Customers in order to conduct joint, rather than individual, audits pursuant to this provision. The Parties shall maintain their respective books and records in accordance with generally accepted accounting principles applicable from time to time.
ARTICLE 10
CHANGE IN LAW; MODIFICATION OF AGREEMENT
10.1.1 The Parties acknowledge that a Change in Law may increase or decrease Seller's costs in providing service under this Agreement. In the event of such a Change in Law, Seller may give notice to Purchaser that Seller's costs of providing service under this Agreement have changed (which notice will include reasonably detailed information about such cost changes) and, in the event such notice is given, this Agreement shall be modified to reflect such changes in costs, subject to Section 18, provided, however, that in the event Seller provides notice of such an increase, then Purchaser may provide documentation to Seller of other Changes in Law that have decreased the cost of providing service under this Agreement and Seller shall set-off any such decrease in cost against the increase in cost identified in the Seller's notice.
10.1.2 Purchaser shall pay the adjusted amount calculated pursuant to Section 10.1.1 for the period commencing with the notice of changed cost through the date of termination of this Agreement. The Parties shall make such payments as are appropriate to adjust all prior billings or payments to reflect the adjustments described herein.
10.1.3 A "Change in Law" shall mean a change in Law which constitutes a new environmental or tax Law or a new interpretation of such Law (not including a change in tax Laws that assess taxes only on Seller's net income) or a change in the provisions contained in the Site Certification permits and which generally affects the cost of, or restricts, operation of the Facility.
10.2 Modification of Agreement. In the event the FERC modifies this Agreement, the Parties agree to make all changes necessary to preserve as nearly as possible the bargain contained in this Agreement, including but not limited to, the total amounts of Capacity and Energy delivered to Purchaser and the total amount of revenues to be received by Seller hereunder; provided, however, that Seller shall have the right to terminate this Agreement without further obligation to Purchaser in the event that modifications to this Agreement by FERC cause a material adverse effect on the economic value of this Agreement to Seller; provided, further, that Purchaser shall have the right to terminate this Agreement without further obligation to Seller in the event that modifications to this Agreement by FERC cause a material adverse effect on the economic value of this Agreement to Purchaser; and provided, further, that in the event Seller elects to terminate this Agreement pursuant to this Section 10.2, then Purchaser and Seller agree to expeditiously proceed with a sale at net book value of Seller's entire ownership interest in the Facility to Purchaser and the other Customers in accordance with the provisions of the Ownership Agreement. Seller agrees to use good faith efforts, consistent with Prudent Utility Practice, to resist any changes to this Agreement proposed by the FERC or any other Governmental Body or their respective staffs, and Purchaser agrees not to seek, request, promote or support any changes to this Agreement before the FERC or any other Governmental Body.
SECTION 11 FORCE MAJEURE
11.1 Force Majeure Notice and Obligations. With respect to those obligations of the Parties set forth in this Agreement that expressly excuse performance in the event of a Force Majeure, the existence of Force Majeure that causes a Party (the "Non-Performing Party") to delay performance or fail to perform such obligations shall excuse the Non-Performing Party's delay in performing, or failure to perform, such obligations, subject to any express limitations on such excuse provided or referenced in the Section invoking the excuse. In the event of Force Majeure that causes the Non-Performing Party to delay performance or fail to perform its obligations under this Agreement and that excuses such delay or failure:
11.1.1 the Non-Performing Party shall give the other Party
written notice and full details as soon as
practicable after learning of the Force Majeure;
11.1.2 the Non-Performing Party shall use reasonable
dispatch to remedy its inability to perform (except
that this provision shall not impose a requirement on
either Party to deliver or receive Energy at a
delivery point other than a Delivery Point), and, if
Seller is the Non-Performing Party, Seller shall use
reasonable efforts to provide Energy from the
Facility at a Delivery Point; and
11.1.3 when the Non-Performing Party is able to resume
performance of its obligations under this Agreement,
that Party shall give the other Party written notice
to that effect.
SECTION 12
EVENTS OF DEFAULT; TERMINATION
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12.1 Events of Default of Seller. Except when excused due to a Force Majeure event pursuant to the provisions of Section 11 hereof, an Event of Default shall be deemed to have occurred with respect to Seller upon the occurrence and during the continuance of any of the following events:
12.1.1 The Bankruptcy of Seller;
12.1.2 Seller fails to pay any invoiced amount or any undisputed non-invoiced amount when due under this Agreement within five (5) Business Days after receiving notice of such failure;
12.1.3 Seller fails to perform or observe any of its material obligations or covenants hereunder or otherwise is in material breach of this Agreement (other than payment obligations addressed in Section 12.1.2) and such failure or breach continues unremedied for a period of thirty (30) days following notice from Purchaser demanding cure of such failure or breach (or within such longer period of time as is reasonably necessary to accomplish such cure, if it cannot be reasonably accomplished within such 30-day period and Seller diligently commences such cure in such period and continues such cure to completion); or
12.1.4 Any representation or warranty made by Seller herein, in the Ownership Agreement or in any document or certificate furnished by Seller hereunder shall have been false when made and such false representation or warranty has a material and adverse effect on Purchaser and, if capable of being cured, such false representation or warranty is not cured within thirty (30) days after notice thereof from Purchaser.
12.2 Events of Default of Purchaser. An Event of Default shall be deemed to have occurred with respect to Purchaser upon the occurrence and during the continuance of any of the following events:
12.2.1 The Bankruptcy of Purchaser;
12.2.2 Purchaser fails: (i) to pay any invoiced amount or
any undisputed non-invoiced amount when due under this Agreement
within ten (10) Business Days after receiving notice of such
failure; or (ii) to make any payment of principal or interest
under the Bond Legislation or any other bond resolution,
indenture or similar secured instrument of the Purchaser relating
to the All Requirements Project when due (at maturity, upon
redemption or otherwise), which failure is not cured within ten
(10) Business Days;
12.2.3 Purchaser fails to perform or observe any of its
material obligations or covenants hereunder or otherwise is in
material breach of this Agreement (other than payment
obligations, which are addressed in Section 12.2.2) and such
failure or breach continues unremedied for a period of thirty
(30) days following notice from Seller demanding cure of such
failure or breach (or within such longer period of time as is
reasonably necessary to accomplish such cure, if it cannot
reasonably be accomplished within such 30-day period and
Purchaser diligently commences such cure in such period and
continues such cure to completion);
12.2.4 Any representation or warranty made by Purchaser herein, in the Ownership Agreement or in any document or certificate furnished by Purchaser shall have been false when made and such false representation or warranty has a material and adverse effect on Seller and, if capable of being cured, such false representation or warranty is not cured within thirty (30) days after notice thereof from Seller; or
12.2.5 Purchaser fails to comply with any of the requirements of Section 15 within thirty (30) days of receipt of Seller's written notice of such failure.
12.3 Remedies; Notice of Intent to Terminate. Subject to the provisions
of this Agreement providing for limitations on damages and for exclusive
remedies under certain circumstances, upon the occurrence and during the
continuation of any Event of Default, the Party not in default (the
"Non-Defaulting Party") shall have the right to pursue all remedies available at
law or in equity, suspend its performance under this Agreement to the extent of
the Event of Default and/or to deliver a notice of intent to terminate ("Notice
of Intent to Terminate") this Agreement to the Party in default ("Defaulting
Party"). Any Notice of Intent to Terminate shall specify the Event of Default
giving rise to such Notice of Intent to Terminate. Following the giving of a
Notice of Intent to Terminate, the Parties shall negotiate pursuant to the
provisions of Section 18 hereof, following which, unless the Parties shall have
otherwise mutually agreed on a remedy or the Defaulting Party or any lender or
financing party ("Lender") to the Defaulting Party or its affiliate, or agent on
behalf of a Lender, shall have cured such default or is diligently pursuing a
remedy to cure the Event of Default, the Non-Defaulting Party having given the
Notice of Intent to Terminate may terminate this Agreement by giving written
notice thereof to the Defaulting Party, whereupon this Agreement shall
immediately terminate; provided, however, that upon a default under Section
12.2.2, the Non-Defaulting Party may serve a notice of termination of this
Agreement, without having first to deliver a Notice of Intent to Terminate and
to negotiate under Section 18, whereupon this Agreement shall terminate
immediately upon delivery of such notice of termination, unless such default
shall have been cured prior to the delivery of such notice of termination.
Except as provided in Sections 2.2, 2.3, 5.1.2, 10.2, 12.4, and 12.5 or in this
Section 12.3, or in Section 4.3 of the Ownership Agreement, neither Party shall
have any right to terminate this Agreement.
12.4 Notice to Lenders. Any and all notices given by Purchaser to Seller under this Section 12 shall also be given at the same time by Purchaser to any Lender for which Seller provides written notice to Purchaser of the need to provide such notice and the address to which such notice must be sent. No termination of this Agreement by Purchaser will be effective until and unless Purchaser shall have given Seller's Lenders notice of Seller's Event of Default and an opportunity to cure such Event of Default, which notice and cure period shall be as set forth in any consent executed by Purchaser with Seller's Lenders but in any event such notice and cure period shall be at least concurrent with that provided to Seller under this Agreement.
12.5.1 Except in the case of an Event of Default under
Section 12.2.2 under the circumstances that are described in
Section 12.5.2 below or an Event of Default under Section 12.1.3
under the circumstances that are described in Section 12.5.3
below, in the event that a Non-Defaulting Party terminates this
Agreement pursuant to Section 12.3 and provided an Event of
Default shall not have occurred and be continuing as to such
Non-Defaulting Party, the Defaulting Party shall pay the
Non-Defaulting Party the Termination Payment, as defined below,
within thirty (30) days of the effective date of the termination.
Except as so otherwise provided in Section 12.5.2 or 12.5.3, the
Termination Payment (if applicable) shall be the Defaulting
Party's sole liability arising out of a termination of this
Agreement pursuant to Section 12.3, and neither Party shall have
any other liability or obligation to the other Party arising out
of a termination of this Agreement pursuant to Section 12.3. The
Defaulting Party's Termination Payment (if applicable) to the
Non-Defaulting Party resulting from an Event of Default under
this Agreement shall be calculated as follows:
Termination Payment = TPR * APCN
Where:
TPR = a termination payment rate in dollar
per kilowatt, which is equal to: (i)
[redacted] if the Notice of Intent to
Terminate is given between the date of this
Agreement's execution and the end of the
twelfth (12th) month after the date Purchaser
gives notice under Section 2.2 or 2.3 that it
has elected to terminate this Agreement; (ii)
[redacted] if the Notice of Intent to
Terminate is given between the end of such
twelfth (12th) month and the end of the
twenty-fourth (24th) month after the date
Purchaser gives such notice; or (iii)
[redacted] if the Notice of Intent to
Terminate is given between the end of such
twenty-fourth (24th) month and the expected
termination of this Agreement twelve (12)
months later; and
APCN = the Annual Purchaser's Capacity
Nomination, in kilowatts, that is in effect
on the date of the Notice of Intent to
Terminate.
Delivery of a Notice to Terminate or calculation or payment of the Termination Payment shall not relieve the Defaulting Party of its obligation to pay all other amounts that became or have become due and payable by the Defaulting Party hereunder prior to the effective date of termination.
12.5.2 In the case of an Event of Default under Section 12.2.2 by Purchaser at a time when Purchaser is able to pay its debts generally as they come due, Seller shall be entitled to recover its actual damages, which the Parties recognize may be greater than, or less than, the Termination Payment. In determining actual damages, any amounts actually recovered from Seller's reasonable efforts to mitigate such damages shall be taken into account.
12.5.3 In the case of an Event of Default by Seller under Section
12.1.3 that results from a failure by Seller to deliver Energy from
the Facility to Purchaser as required by this Agreement at a time when
(i) the Facility was capable of delivering such Energy to Seller as
required by this Agreement consistent with Prudent Utility Practice,
the Technical Limits and applicable Law and Permit requirements, and
(ii) Seller sold such Energy to a third party, then Purchaser shall be
entitled to recover the actual damages of Purchaser,which the Parties
recognize may be greater than, or less than, the Termination Payment.
In determining actual damages, the actual results of Purchaser's
reasonable efforts to mitigate such damages shall be taken into
account.
12.5.4 In receiving a Termination Payment or recovering actual damages, the Non-Defaulting Party shall also be entitled to recover its reasonable attorney fees in enforcing this provision.
SECTION 13 WAIVER
Failure by either Party to exercise any of its rights under this Agreement shall not constitute a waiver of such rights. Neither Party shall be deemed to have waived any right resulting from any failure to perform by the other Party unless it has made such waiver specifically in writing, and no such waiver shall operate as a waiver of any future failure to perform whether of a like or different character. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
SECTION 14 REPRESENTATIONS AND WARRANTIES
14.1 Representations and Warranties of Seller. Seller hereby represents and warrants to Purchaser as follows:
14.1.1 Organization and Existence. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, is qualified to transact business in Florida, and has sufficient power and authority to execute and deliver this Agreement and the Collateral Documents and to perform its obligations hereunder and thereunder. Seller has full power and authority to carry on its business as it is now being conducted and as it is contemplated hereunder and under the Collateral Documents to be conducted in the future.
14.1.2 Due Authorization. The execution, delivery and performance of this Agreement and the Collateral Documents by Seller has been duly and effectively authorized by all requisite action on the part of Seller. This Agreement and the Collateral Documents constitute the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity.
14.1.3 Litigation. There is no action, suit, claim, proceeding or investigation pending or, to Seller's knowledge, threatened against Seller or The Southern Company by or before any Governmental Body having jurisdiction over Seller or The Southern Company which, if adversely determined, would have a material adverse effect upon Seller's ability to enter into and perform its obligations and consummate the transactions contemplated by this Agreement and the Collateral Documents or the material rights of Purchaser under this Agreement or the Collateral Documents. Neither Seller nor The Southern Company is subject to any material outstanding judgment, order, writ, injunction or decree of any Governmental Body having jurisdiction over Seller or The Southern Company which would materially and adversely affect its ability to enter into and perform its obligations under this Agreement and the Collateral Documents or the material rights of Purchaser under this Agreement or the Collateral Documents.
14.1.4 No Violation or Conflict. The execution, delivery and performance by Seller of this Agreement and the Collateral Documents do not violate or conflict with Seller's operating agreement, any existing Law applicable to Seller, or any note, bond, indenture, agreement or instrument to which Seller is a party or by which it is bound.
14.1.5 Approvals. Other than the approvals by the Governmental Bodies described in Attachment A of the Ownership Agreement, there are no approvals or consents, the absence of which would materially impair Seller's ability to consummate the transactions described in, or to perform its obligations under, this Agreement and the Collateral Documents.
14.2 Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller as follows:
14.2.1 Organization and Existence. Purchaser is a governmental legal entity duly organized, validly existing and in good standing under the laws of the State of Florida and has sufficient statutory power and authority to execute and deliver this Agreement and the Collateral Documents and to perform its obligations hereunder and thereunder. Purchaser has full statutory power and authority to carry on its business as it is now being conducted and as it is contemplated hereunder and under the Collateral Documents to be conducted in the future.
14.2.2 Due Authorization. The execution, delivery and performance of this Agreement and the Collateral Documents by Purchaser has been duly and effectively authorized by all requisite action on the part of Purchaser's governing board. This Agreement and the Collateral Documents constitute the legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity.
14.2.3 Litigation. There is no action, suit, claim, proceeding or investigation pending or, to Purchaser's knowledge, threatened against Purchaser by or before any Governmental Body having jurisdiction over Purchaser which, if adversely determined, would have a material adverse effect upon Purchaser's ability to enter into and perform its obligations and consummate the transactions contemplated by this Agreement and the Collateral Documents or the material rights of Seller under this Agreement or the Collateral Documents. Purchaser is not subject to any material outstanding judgment, order, writ, injunction or decree of any Governmental Body having jurisdiction over Purchaser which would materially and adversely affect its ability to enter into and perform its obligations under this Agreement and the Collateral Documents or the material rights of Seller under this Agreement or the Collateral Documents.
14.2.4 No Violation or Conflict. The execution, delivery and performance by Purchaser of this Agreement and the Collateral Documents do not violate or conflict with Purchaser's charter or bylaws, any existing Law applicable to Purchaser, or any note, bond, resolution, indenture, agreement or instrument to which Purchaser is a party or by which it is bound.
14.2.5 Approvals. Other than the approvals by the Governmental Bodies described in Attachment C of the Ownership Agreement, there are no approvals or consents, the absence of which would materially impair Purchaser's ability to consummate the transactions described in, or to perform its obligations under, this Agreement and the Collateral Documents.
14.2.6 No Immunity. With respect to its contractual obligations hereunder and performance thereof, Purchaser is not entitled to claim immunity on the grounds of sovereignty or similar grounds with respect to itself or its revenues or assets from: (a) suit; (b) jurisdiction of any Florida court; or (c) relief by way of injunction, order for specific performance or attachment of property that is subject to execution or levy under Florida Law (including the Eligible Collateral).
14.3 Warranties Regarding Energy, Capacity and Ancillary Services. Seller warrants that the Energy, Capacity and Ancillary Services provided under this Agreement (i) shall have been delivered in accordance with applicable Law, and (ii) meets the requirements set forth in this Agreement. THE FOREGOING IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, IN FACT OR BY LAW WITH RESPECT TO THE ENERGY, CAPACITY AND ANCILLARY SERVICES PROVIDED HEREUNDER. SELLER HEREBY DISCLAIMS ANY AND ALL OTHER WARRANTIES WHATSOEVER.
SECTION 15 PERFORMANCE ASSURANCE
15.1 In the event that Purchaser experiences a Material Adverse Change, as defined below, as security for Purchaser's payment obligations under this Agreement, Purchaser shall deliver to Seller within ten (10) Business Days of Seller's written request therefor, Eligible Collateral in an amount equal to the lesser of: (i) [redacted] of Capacity Payments, or (ii) [redacted] of the total of Capacity Payments for the remainder of the Operating Period.
15.1.1 As used in this Section 15.1: (i) a "Material Adverse Change" shall occur (A) when Purchaser's credit rating on its senior securities falls below the lower of (x) BBB- (Standard & Poors) or Baa3 (Moody's) and (y) the lowest credit rating of Southern Guarantor's senior securities under either Moody's or Standard & Poors, (B) upon an Event of Default by Purchaser under Section 12.2.2, (C) upon a failure by Purchaser to make any required deposit into any debt service account under the Bond Legislation or any other bond resolution, indenture or similar secured instrument entered into in connection with the issuance of additional debt (each a "Debt Instrument"), or (D) upon a failure by Purchaser to maintain in any debt service reserve account under the Bond Legislation or any Debt Instrument at least fifty percent (50%) of amount required to be maintained in such account requirement; and (ii) "Eligible Collateral" means cash deposited into an operating reserve account from "Revenues", as that term is defined in the Bond Legislation, or an unconditional letter of credit from an "A" rated bank, as determined by Standard & Poors or Moody's, in a form reasonably acceptable to Seller; provided, however, that for purposes of Sections 15.1.1(i)(C) and 15.1.1(i)(D), Eligible Collateral shall constitute an unconditional letter of credit from an "A" rated bank, as determined by Standard & Poors or Moody's, in a form reasonably acceptable to Seller. Costs of a letter of credit shall be borne by Purchaser.
15.1.2 If at any time during the term of this Agreement neither Standard & Poors nor Moody's is in the business of providing credit ratings or willing to rate Purchaser, then Purchaser and Seller will negotiate in good faith to choose and implement an alternative mechanism for determining if and when a "Material Adverse Change" has occurred.
15.2 In the event that legislation is enacted in the State of Florida which contains provisions that will cause an Event of Default by Purchaser at any time during the term of this Agreement, Seller will have the right, from and after the date of enactment of such legislation, to provide Purchaser with written notice requesting Eligible Collateral, as defined above, in an amount equal to the lesser of: (i) [redacted] of Capacity Payments, or (ii) [redacted] of the total of Capacity Payments for the remainder of the Operating Period. Upon receipt of such notice, in addition to Purchaser's other payment obligations under this Agreement, Purchaser shall within thirty (30) days provide such Eligible Collateral.
15.3. To the extent Purchaser delivers Eligible Collateral in the form of cash to be held in an operating reserve account pursuant to Sections 15.5 or 15.6, Purchaser hereby grants to Seller a present and continuing security interest in, and lien on (and right of setoff against), and assignment of, such Eligible Collateral, and any and all proceeds resulting therefrom or from the liquidation thereof, and Purchaser agrees to take such action as Seller reasonably requires in order to perfect Seller's first-priority security interest in, and lien on (and right of setoff against), such Eligible Collateral and any and all proceeds resulting therefrom or from the liquidation thereof. This Agreement is intended to, and does, constitute a security agreement between Seller and Purchaser with regard to any cash which may constitute Eligible Collateral.
15.4. Upon or any time after the occurrence and during the continuation of an Event of Default of Purchaser, Seller may (i) exercise any of the rights and remedies of a secured party with respect to the Eligible Collateral, including any such rights and remedies under Law then in effect, such as but not limited to the Uniform Commercial Code, and (ii) liquidate and/or draw on any outstanding Eligible Collateral issued for its benefit (free from any claim or right of any nature whatsoever of Purchaser including any equity or right of purchase or redemption by Purchaser) with respect to Purchaser's obligations under this Agreement. In the event that Seller liquidates or draws on any of the Eligible Collateral, Purchaser shall within ten (10) Business Days of notice from Seller of such liquidation or draw, deliver additional cash or increase the amount of the letter of credit, as the case may be, in order to replenish the amount of the Eligible Collateral to the extent of the liquidation or draw.
15.5. If the trigger of a Material Adverse Change was occurrence of the circumstances in Sections 15.1.1(i)(A) or the circumstances described in Section 15.2 occur, then: (i) if the Eligible Collateral is in the form of cash, Seller will hold the Eligible Collateral in an interest-bearing operating reserve account, established by Seller, and the agent for which shall act pursuant to Seller's instructions and will return the balance of such account, including interest, at such time as the circumstances described in Sections 15.1.1(i)(A) and 15.2 no longer apply (provided that Purchaser shall be entitled to receive any funds in such operating reserve account at any time and to the extent that such funds exceed [redacted] of the total of Capacity Payments for the remainder of the Operating Period); or (ii) if the Eligible Collateral is in the form of a letter of credit, such letter of credit shall expire at such time as the circumstances described in Sections 15.1.1 and 15.2 no longer apply and Seller shall return such letter of credit to Purchaser (provided that Purchaser shall be entitled to reduce the amount available under the letter of credit at any time and to the extent that such amount exceeds [redacted] of the total of Capacity Payments for the remainder of the Operating Period).
15.6 If the trigger of a Material Adverse Change was occurrence of the
circumstances described in Section 15.1.1(i)(B), then (i) if the Eligible
Collateral is in the form of cash, Seller will hold the Eligible Collateral in
an interest-bearing operating reserve account, established by Seller, and the
agent for which shall act pursuant to Seller's instructions and will return the
balance of such account, including interest, at such time as Purchaser shall
have (A) cured the Event of Default under Section 12.2.2 that triggered the
Material Adverse Change and (B) thereafter avoided both any further Events of
Default under Section 12.2.2 and a Material Adverse Change as described in
Section 15.1.1(i)(A) or 15.2 for a period of sixty (60) continuous days
(provided that Purchaser shall be entitled to receive any funds in such
operating reserve account at any time and to the extent that such funds exceed
[redacted] of the total of Capacity Payments for the remainder of the Operating
Period); or (ii) if the Eligible Collateral is in the form of a letter of
credit, such letter of credit shall expire (and Seller shall return such letter
of credit) at such time as Purchaser shall have (C) cured the Events of Default
under Section 12.2.2 that triggered the Material Adverse Change and (D)
thereafter avoided both any further Events of Default under Section 12.2.2 and a
Material Adverse Change as described in Section 15.1.1(i)(A) or 15.2 for a
period of sixty (60) continuous days (provided that Purchaser shall be entitled
to reduce the amount available under the letter of credit at any time and to the
extent that such amount exceeds [redacted] of the total of Capacity Payments for
the remainder of the Operating Period).
15.7 In the event that the Purchaser exercises its right to elect an Extended Term or any Further Extension of this Agreement pursuant to Sections 2.2 and 2.3, and on any day of such Extended Term or Further Extensions the circumstances of either Sections 15.1.1 or 15.2 apply, then, Purchaser shall deliver to Seller within ten (10) Business Days of the date of such occurrence, Eligible Collateral, as defined above, in an amount equal to [redacted] of Capacity Payments, and the provisions of Sections 15.3, 15.4, 15.5 and 15.6 shall apply to such Eligible Collateral.
SECTION 16 LIABILITY OF PARTIES
16.1.1 TO THE EXTENT PERMITTED BY LAW, EACH PARTY (THE "INDEMNIFYING PARTY") SHALL FULLY INDEMNIFY AND DEFEND THE OTHER PARTY AND EACH OF THE OTHER PARTY'S SUBSIDIARIES AND AFFILIATES, AND THE PARTNERS, MEMBERS, PARTICIPANTS, PRINCIPALS, REPRESENTATIVES, SHAREHOLDERS, DIRECTORS, OFFICERS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF EACH OF THEM (THE "INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL LOSSES, COSTS, DAMAGES, INJURIES, LIABILITIES, CLAIMS, DEMANDS, PENALTIES AND INTEREST, INCLUDING REASONABLE ATTORNEYS' FEES, RESULTING FROM THIRD PARTY CLAIMS DIRECTLY OR INDIRECTLY RELATED TO THIS AGREEMENT, TO THE EXTENT CAUSED OR CONTRIBUTED TO BY THE FAULT, INTENTIONAL ACT, NEGLIGENCE OR STRICT LIABILITY OF THE INDEMNIFYING PARTY OR ITS SUBSIDIARIES, AFFILIATES, CONTRACTORS OR SUBCONTRACTORS OR ANY OF THE OFFICERS, PARTNERS, MEMBERS, PARTICIPANTS, SHAREHOLDERS, PRINCIPALS, DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES, SUCCESSORS OR ASSIGNS OF ANY OF THEM OR BY BREACH BY THE INDEMNIFYING PARTY OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT ANY LIABILITY TO THIRD PARTIES INCURRED BY SELLER IN PERFORMANCE OF ITS AGENCY FUNCTIONS PURSUANT TO THE OWNERSHIP AGREEMENT OR THE OPERATING AGREEMENT SHALL BE APPORTIONED IN ACCORDANCE WITH ARTICLE 9 OF THE OWNERSHIP AGREEMENT OR ARTICLE 7 OF THE OPERATING AGREEMENT.
16.1.2 IF ANY INDEMNIFIED PARTY INTENDS TO SEEK INDEMNIFICATION UNDER THIS
SECTION 16.1 FROM AN INDEMNIFYING PARTY WITH RESPECT TO ANY ACTION OR CLAIM, THE
INDEMNIFIED PARTY SHALL GIVE THE INDEMNIFYING PARTY WRITTEN NOTICE OF SUCH CLAIM
OR ACTION PROMPTLY FOLLOWING THE RECEIPT OF ACTUAL KNOWLEDGE OR INFORMATION BY
THE INDEMNIFIED PARTY OF A POSSIBLE CLAIM OR OF THE COMMENCEMENT OF A CLAIM OR
ACTION, WHICH WRITTEN NOTICE SHALL IN NO EVENT BE DELIVERED LATER THAN THE FIRST
TO OCCUR OF (A) FIFTEEN (15) DAYS PRIOR TO THE LAST DAY FOR RESPONDING TO SUCH
CLAIM OR ACTION OR (B) THE EXPIRATION OF THE FIRST HALF OF THE PERIOD ALLOWED
FOR RESPONDING TO SUCH CLAIM OR ACTION. THE INDEMNIFYING PARTY SHALL HAVE NO
LIABILITY UNDER THIS SECTION FOR ANY CLAIM OR ACTION FOR WHICH SUCH NOTICE IS
NOT PROVIDED TO THE EXTENT THAT THE FAILURE TO GIVE SUCH WRITTEN NOTICE
MATERIALLY PREJUDICES THE INDEMNIFYING PARTY. UPON ACKNOWLEDGMENT OF ITS
OBLIGATIONS UNDER THIS SECTION 16.1, THE INDEMNIFYING PARTY SHALL HAVE THE RIGHT
TO ASSUME THE DEFENSE OF ANY CLAIM OR ACTION, AT ITS SOLE COST AND EXPENSE, WITH
COUNSEL DESIGNATED BY THE INDEMNIFYING PARTY AND REASONABLY SATISFACTORY TO THE
INDEMNIFIED PARTY; PROVIDED, HOWEVER, THAT IF THE DEFENDANTS IN ANY SUCH ACTION
INCLUDE BOTH THE INDEMNIFIED PARTY AND THE INDEMNIFYING PARTY, AND THE
INDEMNIFIED PARTY SHALL HAVE REASONABLY CONCLUDED THAT THERE MAY BE LEGAL
DEFENSES AVAILABLE TO IT WHICH ARE DIFFERENT FROM OR ADDITIONAL TO THOSE
AVAILABLE TO THE INDEMNIFYING PARTY, THE INDEMNIFIED PARTY SHALL HAVE THE RIGHT
TO SELECT SEPARATE COUNSEL, AT THE INDEMNIFYING PARTY'S EXPENSE, TO ASSERT SUCH
LEGAL DEFENSES AND TO OTHERWISE PARTICIPATE IN THE DEFENSE OF SUCH ACTION ON
BEHALF OF SUCH INDEMNIFIED PARTY.
16.1.3 EXCEPT TO THE EXTENT EXPRESSLY PROVIDED HEREIN, NO INDEMNIFIED PARTY SHALL SETTLE ANY CLAIM OR ACTION WITH RESPECT TO WHICH IT HAS SOUGHT OR INTENDS TO SEEK INDEMNIFICATION PURSUANT TO THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFYING PARTY. SHOULD ANY INDEMNIFIED PARTY BE ENTITLED TO INDEMNIFICATION UNDER THIS SECTION 16.1 AS A RESULT OF A CLAIM OR ACTION BY A THIRD PARTY, AND SHOULD THE INDEMNIFYING PARTY FAIL TO ASSUME THE DEFENSE OF SUCH CLAIM OR ACTION, THE INDEMNIFIED PARTY MAY, AT THE EXPENSE OF THE INDEMNIFYING PARTY, CONTEST (OR, WITH OR WITHOUT THE PRIOR CONSENT OF THE INDEMNIFYING PARTY, SETTLE) SUCH CLAIM OR ACTION. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED HEREIN, NO INDEMNIFYING PARTY SHALL SETTLE ANY CLAIM OR ACTION WITH RESPECT TO WHICH IT MAY BE LIABLE TO PROVIDE INDEMNIFICATION PURSUANT TO THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFIED PARTY; PROVIDED, HOWEVER, THAT IF THE INDEMNIFYING PARTY HAS REACHED A BONA FIDE SETTLEMENT AGREEMENT WITH THE PLAINTIFF(S) IN ANY SUCH ACTION AND THE INDEMNIFIED PARTY DOES NOT CONSENT TO SUCH SETTLEMENT AGREEMENT, THEN THE AMOUNT SPECIFIED IN THE SETTLEMENT AGREEMENT, PLUS THE INDEMNIFIED PARTY'S REASONABLE ATTORNEY FEES INCURRED PRIOR TO THE DATE OF SUCH SETTLEMENT AGREEMENT, SHALL ACT AS AN ABSOLUTE MAXIMUM LIMIT ON THE INDEMNIFICATION OBLIGATION OF THE INDEMNIFYING PARTY WITH RESPECT TO THE CLAIM, OR PORTION THEREOF, THAT IS THE SUBJECT OF SUCH SETTLEMENT AGREEMENT TO THE EXTENT SUCH SETTLEMENT AGREEMENT FULLY RELEASES THE INDEMNIFIED PARTY AND DOES NOT REQUIRE ANY PAYMENT FROM, OR IMPOSE ANY RESTRICTION ON, THE INDEMNIFIED PARTY.
16.2 LIMITATION ON DAMAGES. NEITHER PARTY NOR ITS SUBSIDIARIES OR AFFILIATES NOR THE OFFICERS, AGENTS, EMPLOYEES, REPRESENTATIVES, PARTICIPANTS, PARTNERS, MEMBERS, SHAREHOLDERS, PRINCIPALS, DIRECTORS, SUCCESSORS OR ASSIGNS OF ANY OF THEM SHALL IN ANY EVENT BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATES OR THE OFFICERS, AGENTS, EMPLOYEES, REPRESENTATIVES, PARTICIPANTS, PARTNERS, MEMBERS, SHAREHOLDERS, PRINCIPALS OR DIRECTORS OF ANY OF THEM FOR CLAIMS FOR INCIDENTAL, PUNITIVE, CONSEQUENTIAL, EXEMPLARY OR INDIRECT DAMAGES OF ANY NATURE, ARISING AT ANY TIME, FROM ANY CAUSE WHATSOEVER, WHETHER ARISING IN TORT, CONTRACT, WARRANTY, STRICT LIABILITY, BY OPERATION OF LAW OR OTHERWISE, CONNECTED WITH OR RESULTING FROM PERFORMANCE OR NON-PERFORMANCE UNDER THIS AGREEMENT; PROVIDED, HOWEVER, THAT THIS SECTION 16.2 IS NOT INTENDED, NOR SHALL IT BE CONSTRUED, TO LIMIT OR ELIMINATE A PARTY'S OBLIGATION TO PAY LIQUIDATED DAMAGES OR TERMINATION PAYMENTS OR MAKE ANY OTHER PAYMENTS EXPRESSLY CONTEMPLATED HEREIN, OR IN ANY COLLATERAL DOCUMENT, EVEN IF IT MAY BE POSSIBLE TO CHARACTERIZE SUCH LIQUIDATED DAMAGES OR TERMINATION PAYMENTS OR OTHER PAYMENTS AS INCIDENTAL, PUNITIVE, CONSEQUENTIAL OR INDIRECT DAMAGES.
16.3 Seller Affiliate Guarantee. Seller shall at all times following the Effective Date of this Agreement cause an Affiliate of Seller to maintain in place a payment guarantee in the form attached to this Agreement as Appendix E. For purposes of the previous sentence, an "Affiliate" of Seller shall be any entity controlling, under common control with or controlled by Seller, which has a credit rating on its senior securities at or above BBB- (Standard & Poors) and Baa3 (Moody's). If at any time during the term of this Agreement neither Standard & Poors nor Moody's is in the business of providing credit ratings or willing to rate Seller's affiliates, then Purchaser and Seller will negotiate in good faith to choose and implement an alternative mechanism for determining if and when an entity controlling, under common control with or controlled by Seller has sufficient credit-worthiness to qualify as an "Affiliate."
16.4 No Penalty. The Parties agree that it would be extremely difficult to precisely determine the amount of actual damages that would be suffered by Purchaser due to Seller's failure to meet the Availability Guarantee or achieve the schedule provided under Section 5.1.1, that the Availability Damages set forth in Section 4.3 and the liquidated damages set forth in Section 5.1.2 are fair and reasonable determinations of the amount of actual damages which would be suffered by Purchaser or Seller, as the case may be, by reason of such failure, and that the Availability Damages and other liquidated damages do not constitute a penalty. Similarly, the Parties agree that it would be extremely difficult to precisely determine the amount of actual damages that would be suffered by either Party in case of an Event of Default and a termination of this Agreement by the Non-defaulting Party, that the Termination Payment set forth in Section 12.5.1 is a fair and reasonable determination of the amount of actual damages which would be suffered by the Non-defaulting Party in such event, and that the Termination Payment does not constitute a penalty.
SECTION 17 ASSIGNMENT
17.1 Agreement Binding. This Agreement shall be binding upon, and shall inure to the benefit of, the Parties and their successors and permitted assigns.
17.2 Permitted Assignment. This Agreement shall not be assignable by Seller without the prior written consent of Purchaser, except that this Agreement (a) may be assigned by Seller without the requirement for such consent (but with notice to Purchaser) (i) to any Lender from time to time providing financing to Seller or its affiliate with respect to all or any portion of the Project or (ii) to any Lender or its designee in connection with a foreclosure or other exercise of remedies, and (b) unless otherwise waived by Purchaser, shall be assigned in whole or in part by Seller without the requirement for such consent (but with notice to Purchaser) in the event of a sale by Seller of all or a substantial portion of Seller's interest in the Facility, with the purchaser of Seller's interest in the Facility assuming Seller's obligations under this Agreement in the same percentage as the portion of Seller's interest being transferred bears to Seller's entire interest in the Facility. This Agreement shall not be assignable by Purchaser without the prior written consent of Seller, provided, however, that Purchaser may assign this Agreement to another Customer without the requirement for such consent (but with notice to Seller) so long as such Customer has not experienced a Material Adverse Change under its PPA. Any such transferee, assignee or purchaser (other than a Lender through collateral assignment in connection with a lease or other financing transaction permitted under Section 6.2.8 of the Ownership Agreement) shall confirm its willingness to accept all of the assigning Party's obligations under this Agreement by writing reasonably acceptable to the non-assigning Party. Any such assignee, transferee or purchaser (other than a Lender through collateral assignment in connection with a lease or other financing transaction permitted under Section 6.2.8 of the Ownership Agreement) must be sufficiently creditworthy and otherwise capable of performing all of the assigning Party's obligations under this Agreement. No assignment or transfer of this Agreement by a Party shall be permitted during any period in which an Event of Default of such Party shall have occurred and be continuing and not cured, unless the other Party shall agree. No assignment of this Agreement shall relieve the assigning Party of any of its obligations under this Agreement, except that the assignor shall be released from its obligations under this Agreement at such time as all future obligations of the assignor hereunder shall have been assumed by the assignee in a written agreement delivered to the other Party. Any assignment that does not comply with the provisions of this Section 17 shall be null and void.
SECTION 18 DISPUTE RESOLUTION
18.1 Good-Faith Negotiations. The Parties shall first negotiate in good faith to attempt to resolve any dispute, controversy or claim arising out of, under, or relating to this Agreement (a "Dispute"), unless otherwise mutually agreed to by the Parties. In the event that the Parties are unsuccessful in resolving a Dispute through such negotiations, either Party may proceed immediately to litigation concerning the Dispute.
18.1.1 The process of "good-faith negotiations" requires that each Party set out in writing to the other its reason(s) for adopting a specific conclusion or for selecting a particular course of action, together with the sequence of subordinate facts leading to the conclusion or course of action. The Parties shall attempt to agree on a mutually agreeable resolution of the Dispute. A Party shall not be required as part of these negotiations to provide any information which is confidential or proprietary in nature unless it is satisfied in its discretion that the other Party will maintain the confidentiality of and will not misuse such information or any information subject to attorney-client or other privilege under applicable Law regarding discovery and production of documents.
18.1.2 The negotiation process shall include at least two (2) meetings to discuss any Dispute. Unless otherwise mutually agreed, the first meeting shall take place within ten days after either Party has received notice from the other of the desire to commence formal negotiations concerning the Dispute. Unless otherwise mutually agreed, the second meeting shall take place no more than ten days later. In the event a Party refuses to attend a negotiation meeting, either Party may proceed immediately to litigation concerning the Dispute.
18.2 Confidentiality and Non-Admissibility of Statements Made in, and Evidence Specifically Prepared for, Good Faith Negotiations. Each Party hereby agrees that all statements made in the course of good faith negotiations, as contemplated in Section 18.1, shall be confidential and shall not be disclosed to or shared with any third parties (other than any person whose presence is necessary to facilitate the negotiation process). Each Party agrees and acknowledges that no statements made in or evidence specifically prepared for good faith negotiations under Section 18.1 shall be admissible for any purpose in any subsequent litigation.
SECTION 19 AMENDMENT
This Agreement cannot be amended, modified or supplemented except by written agreement making specific reference hereto executed by both Parties.
SECTION 20 NOTICES
Other than telephonic notices required or permitted under Section 6.1 or Appendix B, any notice required or permitted to be given hereunder shall be in writing and shall be: (i) personally delivered; (ii) transmitted by postage prepaid registered mail; (iii) transmitted by a recognized overnight courier service; or (iv) transmitted by facsimile to the receiving Party as follows, as elected by the Party giving such notice:
Orlando Utilities Commission 500 South Orange Avenue Orlando, Florida 32801 Attention: Vice-President of Power Resources Telephone: 407-244-8372 Facsimile: 407-275-4120
Florida Municipal Power Agency
8553 Commodity Circle
Orlando, Florida 32819-9002
Attention: General Manager
Telephone: 407-355-7767
Facsimile: 407-355-5793
Southern Company Services, Inc. 270 Peachtree Street, Bin 935 Atlanta, Georgia 30303 Attention: Director of Contract Administration Telephone: 404-506-5100 Facsimile: 404-506-0304
Troutman Sanders LLP
Bank of America Plaza
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Attention: Robert H. Forry, Esq.
Telephone: 404-885-3142
Facsimile: 404-962-6559
All notices and other communications shall be deemed to have been duly given on
(i) the date of receipt if delivered personally, (ii) five (5) days after the
date of posting if transmitted by mail, (iii) the Business Day following
delivery to the courier if transmitted by overnight delivery service, or (iv)
the date of transmission with confirmation if transmitted by facsimile,
whichever shall first occur. Any Party may change its address for purposes
hereof by notice to the other Party.
SECTION 21 APPLICABLE LAW
This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida, exclusive of any conflict of laws provisions thereof that would apply the laws of another jurisdiction. The Parties hereby submit to the jurisdiction of, and agree that venue for actions hereunder shall be, the U.S. District Court for the Middle District of Florida, if the U.S. District Court has jurisdiction, or, if the U.S. District Court does not have jurisdiction, the Circuit Court of the State of Florida sitting in Orange County, Florida, and the Parties hereby waive any objection to venue in such courts and any objection to any action or proceeding on the basis of forum non conveniens.
SECTION 22 SEVERABILITY
The invalidity or unenforceability of any provision or portion of this Agreement will not affect the validity of the remainder of this Agreement. If any provision of this Agreement is determined to be invalid or unenforceable, the Parties will negotiate in good faith to agree upon substitute provisions to carry out the purpose and intent of the invalid or unenforceable provision. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any Party as a result thereof, the Parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the Parties.
SECTION 23 ENTIRE AGREEMENT
This Agreement and the Collateral Documents contain the complete agreement of the Parties hereto with respect to the matters contained herein and supersede all other agreements, understandings and negotiations, whether written or oral, with respect to the matters contained herein.
SECTION 24 NO THIRD PARTY BENEFICIARIES
This Agreement is intended to be solely for the benefit of Purchaser and Seller and their respective successors and permitted assigns and is not intended to and shall not confer any rights or benefits on any Person not a signatory hereto.
SECTION 25 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute only one legal instrument.
SECTION 26 INFORMATION AND CONFIDENTIALITY
Where a Party makes any calculation of costs or damages under this
Agreement, such Party shall provide, upon the reasonable request of the other
Party, documentation supporting such calculation. Neither Party shall disclose
or otherwise make available to any other party any information of a technical,
commercial or business nature regarding the Project or this Agreement that has
been marked or identified as confidential or proprietary ("Confidential
Information") without the prior written consent of the other Party, except that
(a) Seller or its affiliate may provide Confidential Information to its or any
such affiliate's prospective Lenders, underwriters, investors, affiliates,
advisors, employees, officers and directors to the extent reasonably required in
connection with the administration of this Agreement, the issuance of debt or
equity or other financing activities of Seller or its affiliate, or the
performance of any duties relating to this Agreement; (b) Purchaser may provide
Confidential Information to its advisors, employees, officers, directors and
Lenders to the extent reasonably required in connection with the administration
of this Agreement or the performance of any such Person's duties relating to
this Agreement; (c) any Party may disclose any such Confidential Information in
any litigation or proceeding to enforce or recover damages under this Agreement;
(d) any Party (or its affiliate) may disclose any such Confidential Information
as may be required by any applicable Law, regulation or governmental order; and
(e) any Party (or its affiliate) may disclose such Confidential Information to
any person or entity succeeding to all or substantially all the assets of such
Party (or its affiliate) or all or a substantial portion of its interest in the
Facility; provided, that in the case of (e), any such successor shall agree to
be bound by the provisions of this Section 26. Confidential Information shall
not include information that: (i) the receiving Party can demonstrate was known
to it prior to its disclosure by the other Party; (ii) is, or later becomes,
public knowledge without breach of this Agreement by the receiving Party; (iii)
was received by the receiving Party from a third party without obligation of
confidentiality; or (iv) is developed by the receiving Party independently from
Confidential Information received from the other Party, as evidenced by
appropriate documentation. In the event that disclosure is required by a valid
order of a court or Governmental Body, the Party subject to such requirement may
disclose Confidential Information to the extent so required, but shall promptly
notify the other Party and shall cooperate with the other Party's efforts to
obtain protective orders or similar restraints with respect to such disclosure.
The provisions of this Section 26 shall continue in effect until three years
after the end of the Operating Period.
The Parties understand that under the Florida Public Records Law (Section 119.10, Florida Statutes), any Party or all of them may be subject to statutory fines and penalties, including but not limited to a requesting Party's costs and attorney's fees for failure to make public records available for public inspection upon request (Chapter 119, Florida Statutes). In addition, each Party may be subject to its own costs and expenses of litigation. With this understanding in mind, the Parties agree that in the event Purchaser in an attempt to comply with this Agreement, refuses to honor a public records request under Chapter 119, Florida Statutes, for examination or inspection of a confidential document of Seller or any affiliate of Seller and is forced to defend its actions in a court of competent jurisdiction, Seller shall indemnify, defend, and hold Purchaser harmless from and against any fines, penalties, costs, attorney's fees and expenses, including, but not by way of limitation, attorney's fees, expert fees, court costs and other costs arising from or related to defending any lawsuit bought pursuant to Chapter 119, Florida Statutes; provided, however, Seller's consent with such refusal shall be obtained before Seller can be liable under this Section 26. In addition, the Parties shall cooperate to provide witnesses to support the Parties' declarations and certification that the Confidential Information is a valid trade secret under the above cited Florida law and meets all definitional requirements therein or is exempt from disclosure under other applicable Florida law.
SECTION 27 PUBLIC STATEMENTS
Seller and Purchaser shall consult with each other and neither of them shall issue a press release or make a statement intended for release to the general public with respect to the transactions contemplated hereby without the consent of the other Party, which consent shall not be unreasonably withheld, unless the Party desiring to make such statement or press release is advised by legal counsel that a statement or press release is required by applicable Law (including information provided pursuant to a request for public information under the Florida Public Records Law, Section 119.10, Florida Statutes); provided, however, that in this event the Party making the public statement or press release shall notify the other Party in advance of such statement or press release and allow the other Party reasonable time to comment on such statement or press release. Notwithstanding the immediately preceding sentence, the Parties acknowledge that certain meetings of the Orlando Utilities Commission and the City of Orlando are open to the public, and nothing in this Agreement shall be deemed to require that the proceedings of such meetings not be made public or to restrict the reporting by the media of such proceedings.
SECTION 28 INSURANCE
Seller and Purchaser, and all contractors and subcontractors performing any services in connection with the operation or maintenance of the Facility, shall obtain and maintain in force comprehensive general liability insurance, and property insurance for injury to persons and property, automobile liability insurance and workman's compensation insurance, all in amounts and under terms as required by the Operating Agreement.
SECTION 29 TAXES
Purchaser shall reimburse Seller for, or pay to Seller, all sales, use, personal property and other taxes of every kind, paid or collected by Seller, if any, that are not currently levied and are hereafter levied on the purchase, sale or use of fuel consumed by the Facility to provide Energy or Ancillary Services in accordance with this Agreement or the purchase, sale or use of Capacity, Energy or Ancillary Services under this Agreement, but excluding any taxes levied on Seller's net income. Purchaser shall pay directly for all such sales, use, personal property and other taxes which it is legally obligated and empowered to pay. In the event Seller, on behalf of Purchaser, pays any taxes that are the responsibility of Purchaser to reimburse or pay, under the first two sentences of this Section 29, the amount so paid by Seller shall be added to a monthly invoice submitted by Seller to Purchaser under Section 9, and Purchaser shall pay such amount in accordance with Section 9. Upon the reasonable request of Purchaser, Seller agrees to (i) provide documents related to taxes or assessments to be reimbursed or paid by Purchaser under this Agreement and (ii) cooperate with Purchaser at Purchaser's expense should Purchaser seek to obtain from the entity to which taxes were paid a refund of any taxes paid by Seller and/or reimbursed or paid by Purchaser.
APPENDIX A
TECHNICAL LIMITS
Unit Operating Modes
The Facility will have several different operating modes.
o Mode 1: Normal Operation--both gas turbines (CTs) operating with no supplemental firing of the Heat Recovery Steam Generator (HRSG) and no gas turbine power augmentation.
o Mode 2: Supplemental Firing Operation--both gas turbines operating at full load with supplemental firing of the HRSG.
o Mode 3: Power Augmentation Operation--both gas turbines operating at full load with supplemental firing of the HRSG's (Mode 2 Supplemental Firing Operation) to produce both steam for full steam turbine-generator output with the maximum allowed continuous throttle flow at the maximum allowed continuous throttle pressure and steam for full gas turbine power augmentation (steam injection.)
o Mode 4: Part-load Operation--one or both gas turbines operating at less than full load.
The Facility will require "pipeline quality gas" meeting the requirements of GE fuel specification "GEI 41040E - Process Specification Fuel Gases for Combustion in Heavy Duty Gas Turbines".
Natural gas is to be delivered to the Facility by pipeline and the pipeline and gas must meet the following equipment characteristics and requirements:
o Nominal Maximum N.G. Flow (HHV) per Block (2x1) [redacted]
o Nominal N.G. Higher Heating Value [redacted]
o Minimum Fuel Supply Temperature (after PRV) [redacted]
o Fuel Pressure at Gas Control Valve** [redacted]
[redacted]
* Based on Winter Peaking (19(degree)F) Power during Full Pressure Operation.
** Reference GE Pub. GEI 41040E.
The Facility will require fuel oil that is in compliance with ASTM Standard Specification D-2880 (as revised) and "GE Gas Turbine Liquid Fuel Specifications" (document number GEI 41047H). This No. 2 GT Grade Gas Turbine Fuel Oil must be in compliance with the specifications and procedures for No. 2 Fuel Oil as defined in ASTM D396.
Note that environmental permitting may create conditions for sulfur, fuel bound nitrogen and other specifications which could affect or add minimum specifications, such as, but not limited to, those identified in the following table:
ASTM TEST
SPECIFICATIONS METHOD
Sulfur, % Wt., Max. 0.05 D - 1266
Fuel Bound Nitrogen 0.050% Max.
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o The Facility will be capable of operating with fuel oil. The Facility may fire oil in the gas turbines only and not in the HRSG duct burners. During these periods, the Facility shall operate in Mode 1 (Normal Operation) only.
o The Facility will require shutdown for a minimum of one hour prior to switching from natural gas to oil firing. The fuel oil forwarding system will not be operated during normal gas firing, but operation of the fuel forwarding system will be initiated upon proper notice of a requirement for fuel switching. The Facility will be capable of switching from oil to natural gas without shutdown; however, the Facility may be required to decrease to a minimum load and stabilize prior to ramping to full load.
o The Facility will be capable of being controlled via Automatic Generation Control (AGC) in Mode 1 (Normal Operation). The AGC load range and ramp rate will be set by the Facility's operator based on the actual capability of the CTs as determined through testing. With the duct burners firing (Mode 2 - Supplemental Firing Operation), the load range and ramp rate will be set and manually controlled by the Facility's operator based on the capabilities of the duct burners. No load following capability is available in Mode 3 (Power Augmentation Operation).
o The Facility will be allowed to operate in Mode 3 (Power Augmentation Operation) only at ambient temperatures of [redacted].
o The Facility will require [redacted] of de-mineralized water for Mode 1 (Normal Operation).
o The expected maximum allowable rate of load increase for the Facility will be [redacted]. Actual maximum load increase rate will be determined by actual testing and in light of final permit restrictions and emissions tests.
o The Facility will be expected to be capable of operating minimum load with one CT [redacted]. Actual minimum load will be determined in light of final NOx emissions and permit restrictions and testing.
o Required startup times for the Facility shall be as follows:
Mode 1 (Normal Operation): refer to Attachment 1 - Time to Dispatch Curve. Note: Actual Curve to be determined by testing.
Mode 2 (Supplemental Firing Operation): [redacted] Mode 1 (Normal Operation).
Mode 3 (Power Augmentation Operation): [redacted] Mode 1 (Normal Operation) or [redacted] Mode 2 (Supplemental Firing Operation).
o The Facility will be allowed to operate in Mode 3 (Power Augmentation Operation) a [redacted] /year based on the LTSA contract with GE.
o The Facility will not be allowed to operate in a traditional CT only mode (no simple cycle operation, i.e., no bypass stack). However, the CTs will be capable of operating independently of the steam turbine utilizing the steam bypass systems for a limited time. Most major plant equipment (such as HRSG BFP's, condenser, cooling tower and circulating water pumps) will be required during operation in this mode. The HRSG duct burners will not be available in this mode. The maximum generation capability of the Facility operating in this mode will be [redacted].
The Facility's CT evaporative coolers should not
be operated at ambient temperatures less than
[redacted] to prevent freezing at the CT
compressor inlet.
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[redacted]
APPENDIX B
REQUESTS FOR ENERGY
1.1 Schedules for Requested Quantities of Energy. Purchaser and each other Customer shall provide Seller with a single Request for Energy in order to schedule requested quantities of each category of unit output as follows:
1.1.1 Day Ahead Daily Schedule. Customers shall communicate
the day ahead Request for Energy for each day to
Seller at or before [redacted] of the immediately
preceding day before delivery is to be made, or such
other earlier time that may be required by an RTO.
1.1.1.1 When AGC mode is available, during each hour
the unit is scheduled to be in AGC mode, the
Request for Energy shall specify the maximum
amount of Energy desired for each of the
twenty-four (24) hours. During each hour the
unit is in AGC mode, the Customers shall not
be permitted to reduce the Request for
Energy to an amount less than [redacted] of
the maximum Energy scheduled during that
hour in the Request for Energy from the
Customers' aggregate Equity Capacity and the
Customers' aggregate capacity available
under the Power Purchase Agreements
(Customers' "PPA Capacity"). If in any hour,
should the Customers reduce the Request for
Energy amount by more than [redacted], the
Customers shall pay Seller [redacted] for
the difference between the amount of the
Delivered Energy and [redacted] below the
Request for Energy amount.
1.1.1.2 During each hour the Facility is not
scheduled to be in AGC mode or the AGC mode
is unavailable, the Request for Energy shall
specify the amount of Energy from the
Customers' aggregate PPA Capacity and
aggregate Equity Capacity for each of the
twenty-four (24) hours. Requests for Energy
shall be submitted in [redacted] in a total
amount that falls between the Facility's
minimum capability and its maximum
capability as described in the Technical
Limits.
1.2. Hourly Changes to the Daily Schedule. The Customers
jointly shall be entitled to make changes to a
Request for Energy by communicating such changes to
Seller no later than [redacted] prior to the
beginning of the hour in which such changes are to
become effective. The Customers shall be responsible
for any costs associated with OASIS notifications and
NERC tagging requirements.
1.3. Capacity Emergency. During any periods in which the
Customers experience a Capacity Emergency, the
Customers shall be entitled to increase the Request
for Energy on shorter notice than that provided in
paragraph 1.2 above by an amount not to exceed the
Customers' unavailable resources that were the cause
of the Capacity Emergency and Seller shall endeavor
to comply with the request consistent with the
Technical Limits, Prudent Utility Practice,
applicable Law and Permit requirements.
1.4. Minimum Start-up Time. If the Customers have
scheduled a zero amount of Capacity in
any hour and the Facility is not on-line,
the Customers shall provide notice
consistent with the Technical Limits prior to
scheduling any Request for Energy.
1.5. Load Following Service. The Customers shall have the
ability to control the output of the Facility using
the AGC mode, if available, only to the extent that
the Facility has the ability to operate in the AGC
mode consistent with the Technical Limits, Prudent
Utility Practice, and applicable Law and Permit
requirements.
1.6 Electronic Scheduling. The Customers shall use
electronic scheduling for Requests for Energy under
this Agreement, if and to the extent that Seller's
electronic scheduling capability is operational. To
the extent it is not, the Parties will use other
mutually agreed-upon communication procedures (such
as fax).
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2.1.1 If the Facility is in load following service and OUC, acting for
itself and on behalf of the other Customers, determines that the actual
output of the Facility is not within [redacted] of the Request for Energy,
OUC shall communicate to Seller the amount of error. Seller shall endeavor
to adjust the actual output of the Facility to be equal to the Request for
Energy within [redacted] of receipt of the notification. If the actual
output of the Facility does not equal the Request for Energy within
[redacted] of the notification, the Customers shall be entitled to
reimbursement of their costs from Seller as follows:
2.1.1.1 If the actual output of the Facility is greater than the Request for Energy (an "Oversupply Condition"), the decremental cost associated with over-generation shall be documented by the Customers until the actual output of the Facility equals the Request for Energy. OUC, acting for itself and on behalf of the other Customers, shall coordinate with Seller during the period that the actual output of the Facility exceeds the Request for Energy. The Customers shall advise Seller of the total decremental costs associated with each instance of an Oversupply Condition. Seller shall compensate OUC, on its own behalf and as agent for KUA and FMPA, for any such Oversupply Condition.
2.1.1.2 If the actual output of the unit is less than the Request for Energy (an "Undersupply Condition"), the provisions of Section 4.3 will apply if applicable.
2.1.2 If the Facility is not in load following service and OUC, acting for itself and on behalf of the other Customers, determines that the actual output of the unit is not within [redacted] of the schedule included in the Request for Energy (plus any other scheduled output pursuant to Seller's right to schedule Energy pursuant to Section 4.5 of this Agreement), then OUC shall communicate to Seller the amount of the error. Seller shall endeavor to adjust the actual output of the Facility to be equal to the Request for Energy (plus any other scheduled output pursuant to Seller's right to schedule Energy) within [redacted] of receipt of the notification. If the actual output of the Facility does not equal the schedule included in the Request for Energy (plus any other scheduled output pursuant to Seller's right to schedule Energy) within [redacted] of the notification, the Customers shall be entitled to reimbursement of their costs from Seller as follows:
2.1.2.1 If an Oversupply Condition exists, the decremental cost associated with over-generation shall be documented by the Customers until the actual output of the unit equals the Request for Energy (plus any other scheduled output pursuant to Seller's right to schedule Energy). The Customers shall advise Seller of the total decremental costs associated with each instance of an Oversupply Condition.
2.1.2.2 If an Undersupply Condition exists, the provisions of Section
4.3 will apply if applicable.
3.1 Notification Requirements for Delivery of Energy from
Alternate Resources.
3.1.1 When the Facility is available and running at minimum load and
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spinning reserves are available, Seller will notify OUC if Seller has scheduled delivery of Energy from Alternate Resources to meet all or a portion of Customers' Schedule at least [redacted] (or the amount of time in which an RTO has determined that the Physical Transmission Rights ("PTRs") may be recalled) prior to the scheduled commencement of delivery of such Energy. For purposes of paragraph 3.1, the phrase "has scheduled delivery" means that Seller has scheduled and arranged the OASIS, tagging, and any transmission rights required by an RTO. If an RTO is established in Florida, and under such condition the RTO determines that Physical Transmission Rights (PTRs) may be recalled if not utilized, then Seller will notify OUC if Seller has so scheduled delivery of Energy from Alternate Resources at least [redacted] (or the amount of time in which an RTO has determined that the PTRs may be recalled) and [redacted] prior to the scheduled commencement of delivery of such Energy. At the time Seller notifies OUC that Seller has so scheduled delivery of Energy from Alternate Resources, Seller will identify the source and quantity of such Energy and the path of its transmission to OUC.
3.1.2 When the Facility is unavailable and is not scheduled to return to service in time for Seller to serve the Customers' Schedule, Seller will notify OUC within [redacted] after Seller's receipt of Customers' Schedule if Seller has scheduled delivery of Energy from Alternate Resources to meet all or a portion of such Customers' Schedule. At the time Seller notifies OUC that Seller has so scheduled delivery of Energy from Alternate Resources, Seller will identify the source and quantity of such Energy and the path of its transmission to OUC.
3.1.3 When the Facility becomes unavailable while Seller is serving
Customers' Schedule, Seller will notify OUC within [redacted] after the Facility
is deemed unavailable if Seller has scheduled delivery of Energy from Alternate
Resources to meet all or a portion of the remainder of Customers' Schedule. If
Seller notifies OUC that Seller has so scheduled delivery of Energy from
Alternate Resources, then Seller will schedule delivery of such Energy to begin
no later than the top of the next full hour following the hour that Seller
notified OUC of Seller's election. (Example: The Facility becomes unavailable at
[redacted] Seller gives notice no later than [redacted] if Seller will arrange
to deliver Energy from Alternate Resources. Delivery from Alternate Resources
should begin no later than [redacted]) At the time Seller notifies OUC that
Seller has so scheduled delivery of Energy from Alternate Resources, Seller will
identify the source and quantity of such Energy and the path of its transmission
to OUC.
3.1.4 When the Facility is expected to return from an outage, but does not, Seller will notify OUC within [redacted] of Seller's realization that the Facility will not be available as expected to meet the start of a Customer's Schedule. If the start of such Customer's Schedule is to begin within [redacted] or less from the time of such notice, Seller will notify OUC at the same time if Seller has scheduled delivery of Energy from Alternate Resources to meet all or a portion of such Customer's Schedule. Otherwise Seller will notify OUC if Seller has scheduled delivery of Energy from Alternate Resources to meet all or a portion of such Customer's Schedule at least [redacted] prior to the start of such Schedule and preferably at least [redacted] prior. If Seller notifies OUC that Seller has scheduled delivery of Energy from Alternate Resources, then Seller will schedule delivery of such Energy to begin no later than the top of the next full hour following the hour that Seller notified OUC of Seller's election (but not earlier than the original start of such Customers' Schedule). If an RTO develops in Florida, and under such condition the RTO determines that PTRs may be recalled if not utilized, then Seller will notify OUC if Seller has scheduled delivery of Energy from Alternate Resources at least [redacted] (or the amount of time in which an RTO has determined that the PTRs may be recalled) and [redacted] prior to the scheduled commencement of delivery of such Energy. At the time Seller notifies OUC that Seller has so scheduled delivery of Energy from Alternate Resources, Seller will identify the source and quantity of such Energy and the path of its transmission to OUC.
APPENDIX C
CAPACITY TESTING PROCEDURE
The capability of the Facility will be required to be demonstrated prior to the Commencement Date. The demonstration of the capability of the Facility following the Commencement Date shall be scheduled in accordance with the provisions of Section 4.1.2. As provided in Section 4.1.3, Participants may also request additional tests of the Facility which shall not be used as the basis for determining the Demonstrated Capability of the Facility. Purchaser shall have the right to monitor (either on-Site or otherwise) all performance tests.
All Capacity testing will be adjusted to the Rated Conditions using correction curves supplied by Seller. "Rated Conditions" means seventy (70) degrees Fahrenheit ((degree)F) and forty five percent (45%) relative humidity. The demonstrated net output of the Facility will be as measured by the Meters.
On the date of the Capacity test, Seller shall bring the Facility to maximum full load capability within the Technical Limits of the Facility for the ambient conditions for that day. The test shall be scheduled between the weekday hours of 11:00 a.m. and 7:00 p.m. (prevailing Eastern Time) and will be conducted over an eight consecutive hour period (or a lesser period if mutually agreed upon). Seller must notify Customers when the Facility is at maximum full load capability, at which time the Capacity test shall begin. The Demonstrated Capability will be the average net hourly output over the test period corrected to Rated Conditions.
APPENDIX D
Example Calculations of Quantities of Gas Transportation and/or Commodity Required for Delivery from Alternate Resources
Listed below are examples of the determination of the amount of gas transportation and/or commodity that the Fuel Supply Agent shall provide to Seller pursuant to Section 4.2.5.2 or 4.2.5.3 when Seller elects to deliver Energy from Alternate Resources.
Example 1
The facility is unavailable. The Customers have Scheduled 400 MWh of Energy in an hour. Seller notifies OUC that Seller will supply the 400 MWh of Energy for the subject hour from Alternate Resources.
In Example 1, the Fuel Supply Agent will provide [redacted]
Example 2
The facility is unavailable. The Customers have Scheduled 610 MWh of Energy in an hour. Seller notifies OUC that Seller will supply 550 MWh of Energy for the subject hour from Alternate Resources.
In Example 2, the Fuel Supply Agent will provide [redacted]
Example 3
The facility is available. The Customers have Scheduled 450 MWh of Energy in an hour. Seller notifies OUC that Seller will deliver 100 MWh of Energy for the subject hour from Alternate Resources and 350 MWh from the Facility.
In Example 3, the Fuel Supply Agent will provide [redacted]
Example 4
The facility is available. The Customers have Scheduled 600 MWh of Energy in an hour. Seller notifies OUC that Seller will deliver 200 MWh of Energy for the subject hour from Alternate Resources and 400 MWh from the Facility.
In Example 4, the Fuel Supply Agent will provide [redacted]
APPENDIX E
FORM OF PAYMENT GUARANTY
This Guaranty Agreement (the "Guaranty") is made by The Southern Company ("Guarantor"), a Delaware corporation, in favor of Florida Municipal Power Agency (All Requirements Power Supply Project) ("FMPA"), a governmental legal entity organized and existing under the laws of the State of Florida.
WHEREAS, Southern Company - Florida LLC ("Principal Obligor"), a Delaware limited liability company, and FMPA entered into that certain Power Purchase Agreement, dated as of March 26, 2001 (the "PPA");
WHEREAS, Guarantor has agreed to provide assurance for the payment of Principal Obligor's obligations in connection with the PPA as provided in this Guaranty; and
WHEREAS, the execution and delivery of this Guaranty by Guarantor is pursuant to the terms of the PPA in order to satisfy the requirement that Principal Obligor cause an Affiliate to maintain in place a guaranty of Principal Obligor's obligations under the PPA.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows:
1. Guaranty. Guarantor hereby irrevocably, unconditionally and absolutely guarantees the punctual payment when due of Principal Obligor's payment obligations arising under the PPA, as amended or modified from time to time, together with any interest thereon, including, without limitation, any interest amounts accruing under the PPA during the pendency of insolvency, bankruptcy, reorganization or other similar proceedings affecting Principal Obligor or its assets; provided, however, that the maximum liability of Guarantor under this Guaranty with respect to Principal Obligor's obligations under the PPA shall be limited to the amount that is equal to the then-current Termination Payment (as defined in the PPA), which shall not exceed in any event One Million Nine Hundred Forty-Six Thousand One Hundred Dollars ($1,946,100) (collectively, the "Guaranteed Obligations"); provided, further, that the cap on Guarantor's liability under this Guaranty established in the immediately preceding clause creates an absolute cap on Guarantor's liability to FMPA in relation to the PPA and, if and when Guarantor's liability under this Guaranty has reached such cap, then from and after such time, Guarantor shall have no further liability under this Guaranty whatsoever to FMPA and this Guaranty shall thereupon terminate; provided, further, that costs incurred by Guarantor under Section 4 hereof shall not be counted for purposes of determining whether Guarantor has reached such cap, unless and to the extent that Guarantor's costs under such Section 4, together with costs incurred by Guarantor under the corresponding provisions of Guarantor's other three Payment Guarantees of contemporaneous date to one or more of OUC, FMPA and KUA, exceed Three Million Dollars ($3,000,000) in the aggregate.
2. Guaranty Absolute. The liability of Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of or defect or deficiency in the PPA or any other documents executed in connection with the PPA;
(b) any assignment, transfer, modification, extension or waiver of any of the terms of the PPA;
(c) any change in the time, manner, terms of payment of or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from any agreement or instrument executed in connection therewith;
(d) any sale, exchange, release or non-perfection of any property standing as security for the liabilities hereby guaranteed or any liabilities incurred directly or indirectly hereunder or any set off against any of said liabilities, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations;
(e) applicable statutes of limitation, failure, omission, delay, waiver or refusal by FMPA to exercise, in whole or in part, any right or remedy held by FMPA with respect to the PPA or any transaction under the PPA; or
(f) any change in the existence, structure or ownership of Guarantor or Principal Obligor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting Principal Obligor or its assets.
The obligations of the Guarantor hereunder are several from the Principal Obligor or any other person, and are primary obligations concerning which the Guarantor is the principal obligor. There are no conditions precedent to the enforcement of this Guaranty, except as expressly contained herein.
This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations are annulled, set aside, invalidated, declared to be fraudulent or preferential, rescinded or must otherwise be returned, refunded or repaid by FMPA upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Principal Obligor or any other guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, Principal Obligor or any other guarantor or any substantial part of its property or otherwise, all as though such payment or payments had not been made.
3. Waiver. This is a guaranty of payment and not of collection. Guarantor hereby waives:
(a) notice of acceptance of this Guaranty, of the creation or existence of any of the Guaranteed Obligations and of any action by FMPA in reliance hereon or in connection herewith;
(b) except as expressly set forth herein, presentment, demand for payment, notice of dishonor or nonpayment, protest and notice of protest with respect to the Guaranteed Obligations; and
(c) any requirement that suit be brought against Principal Obligor or any other person as a condition to Guarantor's liability for the Guaranteed Obligations under this Guaranty or as a condition to the enforcement of this Guaranty against Guarantor.
Notwithstanding anything to the contrary set forth herein, Guarantor shall have the same defenses available to it as Principal Obligor may have with respect to any payment obligations arising under the PPA.
4. Expenses. Guarantor agrees to pay on demand any and all costs, including reasonable legal fees, and other expenses incurred by FMPA in enforcing Guarantor's payment obligations under this Guaranty; provided that the Guarantor shall not be liable for any expenses of FMPA if no payment under this Guaranty is due.
5. Subrogation. Guarantor shall be subrogated to all rights of FMPA against Principal Obligor in respect of any amounts paid by Guarantor pursuant to the Guaranty, provided that Guarantor waives any rights it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all of the Guaranteed Obligations shall have been irrevocably paid to FMPA in full. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all the Guaranteed Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of FMPA and shall forthwith be paid to FMPA to be applied to the Guaranteed Obligations. If (a) the Guarantor shall perform and shall make payment to FMPA of all or any part of the Guaranteed Obligations and (b) all the Guaranteed Obligations shall have been paid in full, FMPA shall, at the Guarantor's request, execute and deliver to the Guarantor appropriate documents necessary to evidence the transfer by subrogation to the Guarantor of any interest in the Guaranteed Obligations resulting from such payment by Guarantor.
6. Notices. All demands, notices and other communications provided for hereunder shall, unless otherwise specifically provided herein, (a) be in writing addressed to the party receiving the notice at the address set forth below or at such other address as may be designated by written notice, from time to time, to the other party, and (b) be effective upon delivery, when mailed by U.S. mail, registered or certified, return receipt requested, postage prepaid, or personally delivered. Notices shall be sent to the following addresses:
If to FMPA:
Florida Municipal Power Agency
7201 Lake Ellenor Drive
Orlando, FL 32809
Attention: General Manager
Tel: 407-355-7767
Fax: 407-355-5793
With a copy to:
Frederick M. Bryant
General Counsel, Florida Municipal Power Agency
P. O. Box 3209
Tallahassee, FL 32315-3209
Telephone: 850-297-2011
Facsimile: 850-297-2014
If to Guarantor:
The Southern Company
c/o Southern Company Services, Inc.
270 Peachtree Street NW
Suite 2000
Atlanta, GA 30303
Attention: Allen L. Leverett, Vice President and Treasurer
Tel: 404-506-0710
Fax: 404-506-0712
With a copy to:
Robert H. Forry, Esq.
Troutman Sanders LLP
Bank of America Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Tel: 404-885-3142
Fax: 404-962-6559
If to Principal Obligor:
Southern Company - Florida LLC
c/o Southern Company Services, Inc.
270 Peachtree Street NW
Suite 2000
Atlanta, GA 30303
Attention: Allen L. Leverett, Vice President and Treasurer
Tel: 404-506-0710
Fax: 404-506-0712
With a copy to:
Robert H. Forry, Esq.
Troutman Sanders LLP
Bank of America Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Tel: 404-885-3142
Fax: 404-962-6559
7. Demand and Payment. Any demand by FMPA for payment hereunder shall be in writing, signed by a duly authorized officer of FMPA and delivered to the Guarantor pursuant to Section 6 hereof, and shall (a) reference this Guaranty, (b) specifically identify the Principal Obligor, the Guaranteed Obligations to be paid and the amount of such Guaranteed Obligations and (c) set forth payment instructions. There are no other requirements of notice, presentment or demand. Guarantor shall pay, or cause to be paid, such Guaranteed Obligations within three (3) business days of receipt of such demand.
8. No Waiver; Remedies. Except as to applicable statutes of limitation, no failure on the part of FMPA to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
9. Replacement of Guarantor and Termination.
(a) Guarantor may assign and delegate its rights and obligations under this Guarantee, in whole or in part, as follows: (i) without the consent of FMPA, to Southern Power Company, a Delaware corporation and parent company of Principal Obligor, or other Affiliate of Principal Obligor, if Southern Power Company or such other Affiliate has achieved the following three characteristics: (1) a credit rating on its senior securities at or above BBB- (Standard & Poors) and Baa3 (Moody's), (2) Net Equity (as hereinafter defined) of at least Two Hundred Fifty Million Dollars ($250,000,000), as reflected on its most recent audited balance sheet, and (3) Gross Equity (as hereinafter defined) of at least Five Hundred Million Dollars ($500,000,000), provided, however, that the date on which Guarantor causes such a replacement of this Guaranty under this Section 9(a)(i) may not be earlier than the Commercial Operation Date (as defined in the Ownership Agreement); or (ii) with the consent of FMPA, which consent may not be unreasonably withheld, to an assignee which has a credit rating on its senior securities at or above BBB- (Standard & Poors) and Baa3 (Moody's) and which meets other reasonable financial criteria similar to those identified in Section 9(a)(i), provided, however, that if Guarantor requests FMPA's consent to such an assignment and delegation in connection with a permitted transfer or assignment of the PPA, then FMPA may not withhold such consent if the assignee meets the financial criteria in Section 9(a)(ii). An assignment and delegation of Guarantor's rights and obligations under this Section 9 shall become effective when the replacement guarantor executes and delivers to FMPA a replacement guaranty on terms and conditions substantially similar to this Guaranty.
(b) For purposes of this Guaranty, the following terms shall have the following meanings:
"Net Equity" shall mean the aggregate of the capital stock and other equity accounts (including retained earnings and paid-in capital) of Southern Power Company or other Affiliate of Principal Obligor, as the case may be.
"Gross Equity" shall mean Net Equity plus Guaranteed Debt plus loans to Southern Power Company from its parent corporation.
"Guaranteed Debt" shall mean any obligations of Southern Power Company or other Affiliate of Principal Obligor, as the case may be, for or in respect of (a) moneys borrowed or raised (whether or not for cash) by whatever means (including acceptances, deposits, discounting, letters of credit, factoring (other than on a non-recourse basis), finance leases, and any other form of financing which is recognized in Southern Power Company's or other Affiliate of Principal Obligor's, as the case may be, financial statements as being in the nature of a borrowing (excluding for the avoidance of doubt, share capital, share premium account and any capital prepayment reserve), which has been guaranteed by Guarantor, and (b) the deferred purchase price of assets or services (other than goods and services obtained on normal commercial terms in the ordinary course of business or operations), which has been guaranteed by Guarantor.
"Affiliate" of an Entity shall mean any other entity controlled by, controlling or under common control with such entity, where control of an entity means the ability to direct the policies of such entity through election of a majority of such entity's board of directors or other governing body or by contract or otherwise.
(c) This Guaranty shall terminate, and upon the effective date of such termination Guarantor shall have no further liability hereunder, on the earliest to occur of: (i) the satisfaction of all of the Guaranteed Obligations, (ii) the termination or expiration of the PPA, (iii) the date on which the liability cap is reached, as provided in Section 1 hereof, or (iv) the date on which an assignment and delegation by Guarantor of its rights and obligations hereunder becomes effective under Section 9(a) hereof.
10. Assignment by FMPA; Successors and Assigns. FMPA may, upon notice to Guarantor, assign its rights hereunder only to a subsequent owner of all of FMPA's interest in the Facility and the Interconnection Facilities (as defined in the PPA) without the consent of Guarantor. Subject to the foregoing, this Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, permitted assigns, and legal representatives.
11. Amendments, Etc. No amendment of this Guaranty shall be effective unless in writing and signed by Guarantor and FMPA. No waiver of any provisions of this Guaranty or consent to any departure by Guarantor therefrom shall in any event be effective unless such waiver shall be in writing and signed by FMPA. Any such waiver shall be effective only in the specific instance and for the specific purpose for which it was given.
12. Captions. The captions in this Guaranty have been inserted for convenience only and shall be given no substantive meaning or significance whatsoever in construing the terms and provisions of this Guaranty.
13. Representations and Warranties.
The Guarantor represents and warrants as follows:
(a) The Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full corporate power to execute, deliver and perform this Guaranty.
(b) The execution, delivery and performance of this Guaranty have been and remain duly authorized by all necessary corporate action and do not contravene the Guarantor's constitutional documents or any contractual restriction binding on the Guarantor or its assets.
(c) This Guaranty constitutes the legal, valid and binding obligation of the Guarantor enforceable against Guarantor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting FMPA's rights and to general equity principles.
(d) The financial statements of Guarantor for the year ended December 31, 2000 (the "Financial Statements"), heretofore delivered to FMPA or filed with the United States Securities Exchange Commission by Guarantor present fairly the financial condition and results of operations of Guarantor and its consolidated subsidiaries as of the dates and for the period specified therein in conformity with generally accepted accounting principles, and, except as otherwise expressly stated therein, consistently applied.
14. Limitation by Law. All rights, remedies and powers provided in this Guaranty may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Guaranty are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they will not render this Guaranty invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law.
15. Governing Law; Submission to Jurisdiction. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Georgia, exclusive of any conflict of laws provisions thereof that would apply the laws of another jurisdiction. The parties hereby submit to the jurisdiction of, and agree that venue for actions hereunder shall be, the U.S. District Court for the Northern District of Georgia, if the U.S. District Court has jurisdiction, or, if the U.S. District Court does not have jurisdiction, the Superior Court of the State of Georgia sitting in Fulton County, Georgia and the parties hereby waive any objection to venue in such courts and any objection to any action or proceeding on the basis of forum non conveniens.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its duly authorized officer effective as of this ___ day of __________, 2001.
"Guarantor"
THE SOUTHERN COMPANY
Exhibit 10.25
EXECUTION COPY
PUBLIC RELEASE VERSION
POWER PURCHASE AGREEMENT
BETWEEN
ORLANDO UTILITIES COMMISSION
AND
SOUTHERN COMPANY - FLORIDA LLC
Dated as of March 19, 2001
TABLE OF CONTENTS
Section Page
SECTION 1 DEFINITIONS AND EXPLANATION OF TERMS 2
SECTION 2 TERM OF AGREEMENT 13
SECTION 3 CONDITIONS PRECEDENT 14
SECTION 4 SALE AND PURCHASE 14
SECTION 5 SCHEDULE FOR DELIVERY OF CAPACITY AND ENERGY 28
SECTION 6 REQUESTS FOR ENERGY; OPERATION AND MAINTENANCE 31
SECTION 7 INTERCONNECTION AND TRANSMISSION 32
SECTION 8 RISK OF LOSS; METERING 33
SECTION 9 METHOD OF PAYMENT 35
ARTICLE 10 CHANGE IN LAW; MODIFICATION OF AGREEMENT 36
SECTION 11 FORCE MAJEURE 37
SECTION 12 EVENTS OF DEFAULT; TERMINATION 38
SECTION 13 WAIVER 41
SECTION 14 REPRESENTATIONS AND WARRANTIES 42
SECTION 15 PERFORMANCE ASSURANCE 44
SECTION 16 LIABILITY OF PARTIES 47
SECTION 17 ASSIGNMENT 50
SECTION 18 DISPUTE RESOLUTION 51
SECTION 19 AMENDMENT 52
SECTION 20 NOTICES 52
SECTION 21 APPLICABLE LAW 54
SECTION 22 SEVERABILITY 54
SECTION 23 ENTIRE AGREEMENT 54
SECTION 24 NO THIRD PARTY BENEFICIARIES 54
SECTION 25 COUNTERPARTS 55
SECTION 26 INFORMATION AND CONFIDENTIALITY 55
SECTION 27 PUBLIC STATEMENTS 56
SECTION 28 INSURANCE 56
SECTION 29 TAXES 57
APPENDIX A TECHNICAL LIMITS
APPENDIX B REQUESTS FOR ENERGY
APPENDIX C CAPACITY TESTING PROCEDURE
APPENDIX D EXAMPLE CALCULATIONS
APPENDIX E AFFILIATE GUARANTEE
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POWER PURCHASE AGREEMENT
This Power Purchase Agreement (this "Agreement") is made and entered into as of the 19th day of March, 2001, by and between the Orlando Utilities Commission, a statutory utilities commission organized and existing under the laws of the State of Florida ("Purchaser"), and Southern Company - Florida LLC, a limited liability company organized and existing under the laws of the State of Delaware ("Seller"). Purchaser and Seller are hereinafter each referred to individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, in addition and supplemental to their other powers, OUC, KUA and FMPA (the "Public Agencies"), pursuant to the Florida Interlocal Cooperation Act of 1969, Chapter 163, Part I, Florida Statutes, (the "Interlocal Act") are authorized and empowered to cooperate with each other on a basis of mutual advantage and thereby to provide services and facilities in a manner and pursuant to forms of government organizations that will best accord with geographic, economic, electrical generation requirements and other factors; and
WHEREAS, the Ownership Agreement was entered into by the Public Agencies as an interlocal agreement, to invoke all of the powers of the Interlocal Act, for the purpose of providing a structure for the Public Agencies, in participation with Seller, a foreign public utility, to operate, maintain, repair, improve, extend, or otherwise participate jointly in a nominal six hundred thirty-three (633) megawatt combined cycle electric generating facility (the "Facility"), which is proposed, and which is to be constructed, owned, and located within the State of Florida by Seller and the Public Agencies; and
WHEREAS, Seller intends to sell to Purchaser, and Purchaser intends to purchase from Seller, a portion of Seller's share of the Capacity and Energy generated by the Facility in accordance with the terms and conditions of this Agreement and in full compliance with the Interlocal Act;
WHEREAS, this Agreement and the two substantially similar contracts are being entered into to invoke all of the powers of the Interlocal Act for the purpose of obligating Customers, pursuant to such Interlocal Act, to purchase Seller's share of the Capacity of and Energy generated by the Facility in accordance with the terms and conditions of this Agreement; and
WHEREAS, Seller and Purchaser acknowledge that this Agreement is one of three substantially similar contracts through which Seller will sell and the three Purchasers will individually purchase their respective designated shares of Seller's share of the Capacity and Energy generated by the Facility.
NOW, THEREFORE, for the purpose of exercising all of the powers enumerated in the Interlocal Act and the Florida Joint Power Act, Part II of Chapter 361, Florida Statutes, (the "Joint Power Act") (collectively, the "Acts"), Purchaser hereby designates this Agreement as an interlocal agreement within the meaning and intent of the Interlocal Act, and invokes all powers contained therein with full powers to perform all of the provisions herein authorized to be performed by the Parties; and
FURTHER, NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound hereby, agree as follows:
SECTION 1 DEFINITIONS AND EXPLANATION OF TERMS
1.1 Definitions. When used in this Agreement, the following capitalized terms shall have the meanings set forth below:
1.1.1 "Actual Availability" has the meaning given such term in Section 4.3.3 or 4.3.4, as applicable.
1.1.2 "Actual Capability" means the amount of Capacity the Facility is capable of producing in any given hour.
1.1.3 "AGC" means automatic generation control, which is the capability to make automatic adjustments to load change by generation through the use of a digital computer. This control is based on such factors as frequency, cost and tie line flows.
1.1.4 "Agreement" means this Power Purchase Agreement, including all appendices attached hereto and all amendments hereto that may be made from time to time.
1.1.5 "Alternate Resources" has the meaning given such term in Section 4.4.
1.1.6 "Ancillary Services" means ancillary services customarily provided by an electric generating facility, including voltage/VAR control, load following, regulation and frequency response, spinning reserve and non-spinning reserve.
1.1.7 "Annual Capacity Charge" means [redacted].
1.1.8 "Annual Purchaser's Capacity Nomination" of the Purchaser means, during the first five Contract Years, fifty-two percent (52%) of the Demonstrated Capability, and thereafter, fifty-two percent (52%) of the Demonstrated Capability reduced by those amounts, if any, that Purchaser elects to subtract from the Capacity available to Purchaser pursuant to the process provided in Section 4.1.4 for the Customers jointly to make such elections.
1.1.9 "Availability Guarantee" has the meaning given such term in
Section 4.3.1.
1.1.10 "Availability Incentive Payment" has the meaning given such term in Section 4.3.2.
1.1.11 "Bankruptcy" means, with respect to a Party, (i) an
adjudication of bankruptcy or insolvency, or the entry of an order for
relief, under any Bankruptcy Law with respect to such Party; (ii) the
making by such Party of an assignment for the benefit of its creditors;
(iii) the filing by such Party of a petition in bankruptcy or for relief
under any Bankruptcy Law; (iv) the filing by such Party of an answer or
pleading admitting or failing to contest the material allegations of any
such petition; (v) the filing against such Party of any petition in
bankruptcy or for relief under any Bankruptcy Law (unless such petition is
dismissed within ninety (90) days from the date of filing thereof); (vi)
the appointment of a trustee, conservator or receiver for such Party or for
all or substantially all of its assets (unless such appointment is vacated
or stayed within ninety (90) days of such appointment); or (vii) the taking
by such Party of any action for its winding up or liquidation, or the
consent by such Party to any of the actions described in clauses (i)
through (vi) being taken against it.
1.1.12 "Bankruptcy Law" means any applicable bankruptcy or insolvency statute.
1.1.13 "Bond Legislation" shall mean the Junior Lien Resolution, the Senior Lien Resolution and the Master Note Resolution.
1.1.14 "BOP Capital Cost Range" has the meaning ascribed to the term in Section 6.7.1 of the Ownership Agreement.
1.1.15 "Business Day" means any day other than Saturday or Sunday on which commercial banks are authorized to open for business in Orlando, Florida.
1.1.16 "Capacity" means electric capacity.
1.1.17 "Capacity Emergency" means, with respect to any hour, that any one or more of Purchaser's resources is unavailable due to a forced outage and the summation of such Purchaser's firm Capacity obligations exceeds the summation of such Purchaser's available resources.
1.1.18 "Capacity Payment" has the meaning given such term in Section 4.1.1.
1.1.19 "Change in Law" has the meaning given such term in Section 10.1.3.
1.1.20 "Collateral Documents" means, collectively, the Ownership
Agreement, the Operating Agreement, the Interconnection Agreement, the
Power Purchase Agreements of the other Customers, the long term lease of
the Facility Site by OUC to and for the benefit of the Participants, the
guarantee to be provided by an affiliate of Seller as contemplated in
Section 16.3, and the agreement(s) pursuant to which Purchaser and/or the
other Customers provide station service and other support services
(including but not limited to demineralized water and cooling water supply)
to Seller.
1.1.21 "Commencement Date" has the meaning given such term in Section 5.2.
1.1.22 "Commercial Operation Date" has the meaning ascribed to such term in Section 1.1.13 of the Ownership Agreement.
1.1.23 "Confidential Information" has the meaning given such term in
Section 26.
1.1.24 "Contract Year" means (i) the period commencing on the Commencement Date or, if Seller elects the option under Section 4.5(ii)(a), the later of the Commencement Date or Scheduled Commencement Date, and ending on the last day of the month in which the first anniversary date of the Commencement Date falls, and (ii) each twelve (12)-month period thereafter, except that for the twelve (12)-month period during which the expiration or termination date of this Agreement occurs, Contract Year shall mean the period commencing on the first day of such twelve (12)-month period and ending on such expiration or termination date.
1.1.25 "Customers" means collectively all of OUC, Kissimmee Utility Authority and Florida Municipal Power Agency (All Requirements Power Supply Project), or their permitted assigns.
1.1.26 "Delivered Energy" means, in respect of a period of time, the amount of Energy from the Facility or from Alternate Resources delivered by Seller to Purchaser at the Delivery Point for sale to Purchaser pursuant to this Agreement.
1.1.27 "Delivery Point" means (a) with respect to Energy delivered from the Facility, the high side of generator step-up transformer, as further described in the Interconnection Agreement, and (b) with respect to Energy delivered from Alternate Resources, any unconstrained point on the Grid.
1.1.28 "Demonstrated Capability" means the net Capacity of the Facility, determined by a periodic Capacity test, adjusted to seventy degrees Fahrenheit (70(degree)F) and forty-five percent (45%) relative humidity.
1.1.29 "Dispute" has the meaning given such term in Section 18.
1.1.30 "Eastern Prevailing Time" or "EPT" means the time prevailing in the Eastern time zone of the United States of America.
1.1.31 "Effective Date" has the meaning given such term in Section 3.1.
1.1.32 "Eligible Collateral" has the meaning given such term in
Section 15.1.1.
1.1.33 "Energy" means electric energy (expressed in megawatt-hours).
1.I.34 "Energy Payment" has the meaning given such term in Section 4.2.
1.1.35 "Equipment Breakdown" means a mechanical breakdown of equipment at the Facility that is not the result of a Force Majeure that is an act of God or public enemy; landslide; sinkhole; lightning; earthquake; fire (unless caused by Seller's willful misconduct or failure to follow Prudent Utility Practice); storm; ice; snow; hurricane; tornado; wind; flood; riot; civil disturbance; insurrection; war; sabotage; terrorism; failure of contractors or suppliers (including, in the case of Seller, OUC and other Customers providing services to Seller) to provide fuel, equipment, material or services, provided that such failure would qualify as a Force Majeure under Section 1.1.44 if such failure were directly experienced by the applicable Party.
1.1.36 "Equity Capacity" with respect to each Participant means that Participant's percentage share of the Capacity of the Facility corresponding to such Participant's ownership interest in the Facility.
1.1.37 "Event of Default" means any of the events listed in Sections 12.1 and 12.2.
1.1.38 "Facility" means the gas fired combined cycle electric generating unit to be located on the Facility Site and owned by the Participants, and its associated interconnection facilities, as defined in the Ownership Agreement by the terms "Facility" and "Interconnection Facilities."
1.1.39 "Facility Site" means the parcel of land in Orlando, Florida on which the Facility is to be located, as further described in Appendix A.
1.1.40 "FDEP" means the Florida Department of Environmental Protection or any successor Governmental Body exercising the same or equivalent jurisdiction.
1.1.41 "FERC" means the Federal Energy Regulatory Commission or any successor Governmental Body exercising the same or equivalent jurisdiction.
1.1.42 "Firm Transmission Service" means (a) electric transmission service designated firm under the open access transmission tariff of a transmission provider having an open access transmission tariff or (b) if purchased from a transmission provider that does not have an open access transmission tariff, electric transmission service sold by such transmission provider as firm transmission service and generally considered, pursuant to Prudent Utility Practice and FRCC requirements, to be substantially equivalent to the firm transmission service referenced in item (a) of this definition.
1.1.43 "Fixed Amount" has the meaning ascribed to such term in Section 6.7.1 of the Ownership Agreement.
1.1.44 "Force Majeure" as to a Party means each of the following events as affects the Facility: act of God or public enemy; landslide; sinkhole; lightning; earthquake; fire (unless caused by the applicable Party's willful misconduct or failure to follow Prudent Utility Practice); storm; ice; snow; hurricane; tornado; wind; flood; riot; civil disturbance; insurrection; war; sabotage; terrorism; shutdown of the Facility by a court order or Governmental Body not resulting from any action or inaction by the applicable Party; strike, lockout or labor difficulty affecting the SEC Site generally (excluding in the case of Seller any strike, lockout or labor difficulty that is limited only to employees of either Seller or its affiliates, and excluding in the case of Purchaser any strike, lockout or labor difficulty limited only to the employees of Purchaser); failure of contractors or suppliers (including, in the case of Seller, OUC and other Customers providing services to Seller) to provide fuel, equipment, material or services, provided that such failure would qualify as a Force Majeure under this provision if such failure were directly experienced by the applicable Party; or any other occurrence, nonoccurrence or set of circumstances, whether or not foreseeable, that is beyond the reasonable control of the applicable Party and is not caused or exacerbated by the applicable Party's failure to follow Prudent Utility Practices.
1.1.45 "FRCC" means the Florida Reliability Coordinating Council or any successor organization.
1.1.46 "Fuel Supply Agent" has the meaning given such term in the Operating Agreement.
1.1.47 "Further Extension" has the meaning given such term in Section 2.3.
1.1.48 "Gas Delivery Point" shall have the meaning assigned to it in the Operating Agreement.
1.1.49 "Governmental Body" shall mean, except as provided in the following sentence, (i) any local, state, regional or federal administrative, legal, judicial, or executive agency, court, commission, department or other entity having jurisdiction or binding authority over any element of the Project or the performance of the Parties under this Agreement or the Collateral Documents, but excluding any agency, commission, department or other such entity acting in its capacity as lender, guarantor or mortgagee and (ii) NERC, FRCC and any RTO. Except as expressly provided otherwise in this Agreement, the definition "Governmental Body" shall be deemed to not include OUC, KUA and FMPA for the purposes of this Agreement.
1.1.50 "Grid" means (i) OUC's electric transmission system, or (ii) if ownership or control of and jurisdiction over OUC's electric transmission system is succeeded to by an RTO or other entity, the portion of the electric transmission system of that RTO or other successor entity that most closely resembles the OUC electric transmission system as it existed on the effective date of this Agreement.
1.1.51 "Guaranteed Output" means in any given hour the amount of Capacity (in MWh per hour) determined by adjusting the Demonstrated Capability to the prevailing ambient conditions in such hour and adjusting for degradation. [redacted]
1.1.52 "Indemnified Parties" has the meaning given such term in
Section 16.1.1.
1.1.53 "Indemnifying Party" has the meaning given such term in Section 16.1.1.
1.1.54 "Interconnection Agreement" means that certain Interconnection Agreement expected to be entered into among the Participants in 2001, the entry into of which is a condition precedent to the effectiveness of this Agreement.
1.1.55 "Interconnection Meters" has the meaning given such term in
Section 8.2.
1.1.56 "Junior Lien Resolution" shall mean the OUC resolution duly adopted on May 16, 1998, as supplemented and amended, authorizing the issuance of OUC's Water and Electric Subordinate Revenue Bonds.
1.1.57 "Lender" has the meaning given such term in Section 12.3.
1.1.58 "Law" shall mean all constitutions, charters, laws, codes, ordinances, orders, judgments, decrees, injunctions, licenses, rules, permits, approvals, regulations and requirements of every Governmental Authority (including OUC) having jurisdiction over the matter in question, whether federal, state or local, which may be applicable to any Party, as required by the context in which used, or to the Facility or OUC Interconnection Facilities, or to the use, manner of use, occupancy, possession, planning, licensing, design, procurement, construction, acquisition, testing, startup, operation, maintenance, management, control, addition, renewal, modification, replacement or disposal of the Facility and the OUC Interconnection Facilities or any portion of portions thereof.
1.1.59 "Market Price" shall mean the price established by Seller, or negotiated and agreed upon by the Parties, as the case may be, upon Seller's election pursuant to Section 2.3 with respect to any Further Extension, which shall become the Annual Capacity Charge for Capacity to be delivered by Seller during such Further Extension consistent with all other terms and conditions of this Agreement.
1.1.60 "Master Note Resolution" shall mean the OUC resolution duly adopted on August 25, 1998, as supplemented and amended, authorizing the issuance of OUC's Water and Electric Revenue Application Notes.
1.1.61 "Meters" means the Interconnection Meters and/or Customers' check-meters, as applicable.
1.1.62 "Minor Maintenance" shall mean maintenance events lasting not greater than 72 hours per occurrence, which have been scheduled and for which Purchaser and the other Customers have given consent in accordance with Section 6.4.
1.1.63 "MMBtu" means one million British thermal units, where one
British thermal unit is the amount of heat required to raise the
temperature of one (1) pound of water one (1) degree Fahrenheit from sixty
(60) degrees Fahrenheit.
1.1.64 "MW" means megawatt.
1.1.65 "MWh" means megawatt-hour.
1.1.66 "NERC" means the North American Electric Reliability Council or successor organization.
1.1.67 "Non-Performing Party" has the meaning given such term in
Section 11.1.
1.1.68 "Notice of Intent to Terminate" has the meaning given such term in Section 12.3.
1.1.69 "Off-Peak Period" means all the days of any given Contract Year other than the Peak Period days.
1.1.70 "Operating Agreement" means that certain Operating Agreement expected to be entered into among the Participants in 2001, the entry into of which is a condition precedent to the effectiveness of this Agreement.
1.1.71 "Operating Period" means the period from the beginning of the first Contract Year until the end of the last Contract Year.
1.1.72 "OUC" means Orlando Utilities Commission.
1.1.73 "OUC Interconnection Facilities" means the modifications to the Stanton Substation reasonably required for the receipt and delivery of Energy from the Facility onto the Grid consistent with Prudent Utility Practice.
1.1.74 "Ownership Agreement" means that certain Stanton Energy Center Combined Cycle Unit A Construction and Ownership Participation Agreement entered into among the Participants as of March 19, 2001.
1.1.75 "Participant" or "Participants" mean individually or collectively Orlando Utilities Commission, Kissimmee Utility Authority, Florida Municipal Power Agency (All Requirements Power Supply Project) and Seller.
1.1.76 "Parties" has the meaning given such term in the first paragraph of this Agreement.
1.1.77 "Peak Period" means for any given Contract Year the periods that include the days from January 1 through March 15, inclusive, May 15 through September 15, inclusive, and December 15 through December 31, inclusive.
1.1.78 "Permit" means any permit, license, approval, consent, waiver, authorization or other requirement in connection with the Project required from any Governmental Body under applicable Law.
1.1.79 "Person" means any individual, partnership, corporation, limited liability company, association, business, trust, Governmental Body or other entity.
1.1.80 "Planned Major Maintenance" means the Gas Turbine (GT) Combustor Inspection, the GT Hot Gas Path Inspection, and the GT Major Inspection, as these inspections are defined in the maintenance agreement with the GT vendor.
1.1.81 "Power Purchase Agreements" means this Agreement and those certain similar power purchase agreements between Seller and the other Customers respecting the delivery of Capacity and Energy from Seller's ownership share of the Capacity and Energy of the Facility.
1.1.82 "Prime Rate" means the prime rate of interest as published from time to time in the Wall Street Journal or such other comparable successor publication as the Participants may agree upon. The Prime Rate shall be calculated on the basis of a 365-day year for the actual number of days that a payment, reimbursement or adjustment, as the case may be, has not been made.
1.1.83 "Project" means the Facility, the Facility Site and all other appliances, parts, instruments, appurtenances, accessories and other property that may be incorporated or installed in, or otherwise become part of, any of the foregoing.
1.1.84 "Prudent Utility Practice" means any of the practices, methods and acts engaged in, or approved by, a significant portion of the electric utility industry in the United States (or, if more stringent, any of the practices, methods and acts engaged in, or approved by, a significant portion of the electric utility industry in the region covered by the FRCC) operating facilities of a size and technology similar to the Facility during the relevant time period or any of the practices, methods and acts, which, in the exercise of reasonable judgment in light of the facts known, or that reasonably should have been known, at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with applicable Laws, 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 acceptable practices, methods and acts generally accepted in the United States and having due regard for current editions of the National Electrical Safety Code, the National Electric Code and other applicable electrical, safety and maintenance codes and standards, manufacturers' warranties and applicable Laws.
1.1.85 "Request for Energy" or "Schedule" means a request for the delivery of Energy made by Purchaser and the other Customers in accordance with the process provided in Section 6 and Appendix B for the Customers jointly to Schedule Energy, and any adjustments thereto made in accordance with Appendix B.
1.1.86 "RTO" means a regional transmission organization.
1.1.87 "Scheduled Commencement Date" means the date that is twenty-four (24) months after the receipt of the Site Certification and all other Permits to be obtained by the Customers that are necessary for Seller to commence construction, as such date may be extended under the provisions of Section 5.1, but in no event earlier than October 1, 2003.
1.1.88 "Scheduled Maintenance" means the removal of the Facility or a component thereof from service (which removal reduces the capability of the Facility to operate) to perform maintenance, overhaul, inspection, testing or repair work, as contemplated in Section 6.4.
1.1.89 "SEC Site" means the parcel of land in Orlando, Florida on which the fossil fired generating stations Stanton Unit # 1 and Stanton Unit #2 are located, including the parcel of land on which the Facility is to be located.
1.1.90 "Seller" has the meaning given such term in the first paragraph of this Agreement.
1.1.91 "Senior Lien Resolution" shall mean the OUC resolution duly adopted on June 3, 1993, as supplemented and amended, authorizing the issuance of OUC's Water and Electric Revenue Bonds.
1.1.92 "Site Certification" means (i) the final approval by the applicable Governmental Body of the initial need for power determination and site certification permit applications pursuant to the Florida Electrical Power Plant Siting Act, and (ii) the receipt of the air construction (Prevention of Significant Deterioration) permit by OUC issued by FDEP pursuant to the delegated authority of the United States Environmental Protection Agency under the Clean Air Act Amendments of 1977.
1.1.93 "Technical Limits" means the limits and constraints relating to the operation and maintenance of the Facility, as described in Appendix A.
1.1.94 "Termination Payment" means the payment to be paid by a Defaulting Party to the Non-Defaulting Party under in Section 12.5.1.
1.1.95 "Test Energy" means (i) Energy produced by the Facility during testing of the Facility prior to the Commencement Date; and (ii) Energy produced by the Facility during periodic tests of the Facility's Capacity output capability following the Commencement Date.
1.2 Rules of Construction. In this Agreement, unless the context otherwise requires, the singular shall include the plural, the masculine shall include the feminine and neuter, and vice versa. The terms "include," "includes" and "including" shall be deemed to be followed by the words "without limitation." The term "month" refers to a calendar month, and any period measured by a "month" from a reference date refers to the period beginning on such reference date and ending on the same date of the next succeeding calendar month or, if no such date exists in the next succeeding calendar month, the last day of such next succeeding calendar month. References to a Section, Table or Appendix shall be references to a Section of, Table of or Appendix to this Agreement unless specifically stated otherwise. A reference to a given agreement or instrument shall be a reference to that agreement or instrument as modified, amended, supplemented and restated through the date as of which such reference is made. The term "or" is not exclusive, the term "shall" is mandatory and the term "may" is permissive. In the event that any index or publication referenced in this Agreement ceases to be published, each such reference shall be deemed to be a reference to a successor or alternate index or publication reasonably agreed by the Parties. Both Parties acknowledge that each was actively involved in the negotiation and drafting of this Agreement and that no law or rule of construction shall be raised or used in which the provisions of this Agreement shall be construed in favor of or against either Party because one is deemed to be the author thereof.
1.3 Consents. Whenever the consent or approval of either Party is required under this Agreement, such consent or approval shall not be unreasonably withheld, unless this Agreement provides that such consent or approval is to be given by such Party at its sole or absolute discretion or is otherwise qualified.
SECTION 2 TERM OF AGREEMENT
2.1 Initial Term.
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2.1.1 This Agreement shall become effective as set forth in
Section 3.1, and shall remain in full force and
effect, subject to the early termination provisions
set forth herein, through the later of (i) the last
day of the month in which the tenth (10th)
anniversary of the Scheduled Commencement Date occurs
or (ii) the last day of the month in which the tenth
(10th) anniversary of the Commencement Date occurs
(the "Initial Term").
2.1.2 Notwithstanding the provisions of Section 2.1.1, the
Initial Term shall terminate on (a) November 30, 2013
if Section 2.1.1 yields an end date falling between
December 1, 2013 and April 30, 2014, inclusive, or
(b) November 30, 2014 if Section 2.1.1 yields an end
date that falls on or after May 1, 2014.
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2.2 Extension of Initial Term.The Initial Term shall be automatically extended an additional five (5) years from the end of the Initial Term ("Extended Term"); provided, however, that the Purchaser shall have the option to elect to terminate this Agreement effective on the last day of the Initial Term by providing written notice of such election to Seller no later than the date that is three (3) years prior to the end of the Initial Term.
2.3 Extensions of Extended Term. The Extended Term shall be automatically extended three (3) successive periods of five (5) years each from the end of the Extended Term (the "Further Extensions"); provided, however, that the Purchaser shall have the option to elect to terminate this Agreement effective on the last day of any of (i) the Extended Term, (ii) the first Further Extension, or (iii) the second Further Extension, by providing written notice of such election to Seller no later than the date that is, respectively, three (3) years prior to the end of the Extended Term, three (3) years prior to the end of the first Further Extension, or three (3) years prior to the end of the second Further Extension, as the case may be; provided, further, that with respect to each Further Extension, Seller shall have the right to establish the Annual Capacity Charge for such Further Extension based on Seller's then-current assessment of market conditions by providing Purchaser written notice of the new proposed Annual Capacity Charge no later than the date that is three and one-half (3 1/2) years prior to the date that such Further Extension period is scheduled to begin, subject to Purchaser's right to request that Seller negotiate in good faith to agree on any other price that Purchaser believes in good faith reflects current market conditions.
2.4 Survival. Applicable provisions of this Agreement shall continue in effect after termination to the extent necessary to satisfy the terms and conditions of this Agreement and, as applicable, to provide for: final billings and adjustments related to the period prior to termination, repayment of any money due and owing either Party pursuant to this Agreement, repayment of principal and interest associated with security funds, and the indemnifications specified in this Agreement.
SECTION 3 CONDITIONS PRECEDENT
3.1 Condition Precedent to Effectiveness. The Parties agree and acknowledge that this Agreement shall be effective only upon the date on or before which both of the following have occurred (such date, the "Effective Date"): (i) the execution and delivery of the Ownership Agreement and the Operating Agreement and all other Collateral Documents; and (ii) the acknowledgment of the Participants' satisfaction of the foregoing condition and the accuracy of the cross-references to the Collateral Documents contained in this Agreement.
3.2 Conditions Precedent to Obligations. Notwithstanding any provisions of this Agreement to the contrary, the obligations of the Parties to this Agreement shall be subject to the fulfillment of each of the conditions (or the waiver in writing of such conditions by the respective Party or Parties) set forth in Article 8 of the Ownership Agreement.
SECTION 4 SALE AND PURCHASE
4.1 Capacity Delivery and Payment. Subject to the terms and conditions of this Agreement, during the Operating Period, Seller agrees to deliver and sell to Purchaser and Purchaser agrees to receive and purchase from Seller up to fifty-two percent (52%) of the Actual Capability of the Facility in accordance with the following provisions:
4.1.1 The Capacity payment (the "Capacity Payment" or "CP") in respect
of each month during the Operating Period shall be an amount equal to: the
product of the Annual Purchaser's Capacity Nomination (expressed in
kilowatts) multiplied by the Annual Capacity Charge. For any partial month
during the Operating Period, the Capacity Payment shall equal the amount
determined pursuant to the formula set forth in the preceding sentence
multiplied by a fraction, the numerator of which is the number of days of
such partial month within the Operating Period, and the denominator of
which is the total number of days in such month. If the Annual Purchaser's
Capacity Nomination changes during a month, then the Capacity Payment for
such month shall be equal to the product of the Annual Capacity Charge
multiplied by the sum of the two results obtained: (i) first by multiplying
the old Annual Purchaser's Capacity Nomination by the ratio of the number
of days in the month (including fractional days) prior to the time of the
change over the total number of days in the month; and (ii) second by
multiplying the new Annual Purchaser's Capacity Nomination by the ratio of
the number of days in the month (including fractional days) after the time
of the change over the total number of days in the month. The Capacity
Payment shall be paid by Purchaser to Seller in accordance with Section
9.1. Notwithstanding the above, if during the first three (3) months of the
Operating Period any Governmental Body shall prohibit the Facility from
operating because of Seller's failure to obtain, prior to the Commencement
Date any Permit required by Law for Seller to operate the Facility, then
Purchaser's obligation to make Capacity Payments shall be suspended until
the earlier of: (i) the lifting of such prohibition; or (ii) the date that
is three (3) months after the Commencement Date.
4.1.2 The initial Demonstrated Capability of the Facility shall be established in accordance with the Capacity testing procedure set forth in Appendix C. Following the first anniversary of the Commencement Date, Seller shall perform Capacity tests twice each Contract Year, pursuant to the testing procedures set forth in Appendix C, during the Summer and Winter periods as defined by FRCC; provided, however, that Seller shall be entitled to a fifty-eight (58)-hour period of maintenance that does not affect calculation of Actual Availability of the Facility (which period shall be prior to any such Capacity test from 9 p.m. Friday to 7 a.m. Monday, unless OUC, in its sole discretion, agrees otherwise). In addition, Seller may retest when a repair or modification of the Facility, or a corrected or improved operational or maintenance activity, results in an increase in the Capacity of the Facility (including adjustments made during initial shakedown), provided that the actual full load output (as adjusted to seventy degrees Fahrenheit (70(0)F) and forty-five percent (45%) relative humidity) is at least one hundred and one percent (101%) of the last Demonstrated Capability test amount. Should any test or retest conducted pursuant this Section 4.1.2 indicate that the actual full load output (as adjusted to seventy degrees Fahrenheit (70(0)F) and forty-five percent (45%) relative humidity) has changed by an amount equal to or greater than one percent (1%) of the last Demonstrated Capability test amount, the Demonstrated Capability shall be reset at such actual full load output for purposes of determining the Capacity Payment as of the time the test is completed; provided, however, that if the test is performed during a Force Majeure event and such Force Majeure event resulted in the reduction of the Demonstrated Capability, the Capacity Payment shall not be reduced thereby until the end of the forty-five (45) day period described in the last paragraph of Section 4.1 below.
4.1.3 Seller shall conduct additional tests as required by the FRCC or as requested by Purchaser pursuant to Purchaser's legal or contractual obligations with third parties; provided, however, such additional tests shall be for informational purposes and shall not be used to reset the Demonstrated Capability or otherwise determine the Capacity Payment under this Agreement.
4.1.4 Beginning with the sixth (6th) Contract Year and ending with the tenth (10th) Contract Year, the Customers shall have the irrevocable right to jointly reduce the total of their combined Annual Purchaser's Capacity Nominations, for the remainder of the Initial Term and any Extended Term or Further Extensions, by either twenty-five (25) MW or fifty (50) MW (as adjusted to seventy degrees Fahrenheit (70(0)F) and forty-five percent (45%) relative humidity) per year; provided, however, that such combined total of the Annual Purchaser's Capacity Nominations may not be reduced by more than 200 MW in the aggregate. Purchaser must give Seller notice of any such reduction elected by Purchaser not later than three (3) years prior to the commencement of the Contract Year in which such reduction shall occur; provided, however, that such notice shall be effective if and only if either it is made jointly with the other Customers or the other Customers give Seller a similar notice under their respective Power Purchase Agreements with all such notices together satisfying the above criteria; provided, further, that such notices shall specify any changes in the percentage of the Annual Purchaser's Capacity Nomination to be purchased by Purchaser under Section 4.1.1 and by the other Customers under the corresponding provisions of their respective Power Purchase Agreements.
Notwithstanding the foregoing provisions of this Section 4.1, if and to the extent that a Force Majeure event affects Seller's ability to deliver and sell to Purchaser the Capacity of the Facility or any portion thereof, Seller shall be excused from any delay in performing or failure to perform any or all of such obligations (and in this regard, the Parties shall follow the procedures contemplated in Section 11.1); provided, however, that notwithstanding such reduction or elimination of the Actual Capability of the Facility, Purchaser shall continue to pay Seller the full Capacity Payment attributable to the first forty-five (45) days following the date of Seller's notification to Purchaser of any such Force Majeure effect; provided, further, that if the effect of a Force Majeure event lasts for longer than forty-five (45) days, then Purchaser shall not be required to make Capacity Payments attributable to any continued period of Force Majeure declaration after the end of such forty-five (45) day period, but Purchaser must resume making Capacity Payments when Seller declares the Force Majeure period over and resumes its obligation for delivery of Energy under this Agreement; and provided, further, that the Capacity Payment relief contemplated in the immediately preceding clause shall not apply if the Force Majeure event affecting Seller resulted from a failure of Purchaser or another Customer to fulfill its obligations under this Agreement or any of the Collateral Documents; and provided, further, that a Force Majeure event that affects Purchaser's ability to receive Energy from the Facility shall not excuse Purchaser's obligation to make Capacity Payments, except solely to the extent provided for in Section 5.1.3 if and to the extent such provision is applicable.
4.2 Energy Delivery and Payment. Subject to the terms and conditions of this Agreement and, in particular, subject to the provisions of Section 6 and Appendix B, Seller shall sell and deliver, and Purchaser shall purchase and receive, during the Operating Period, Energy requested by Purchaser in a Request for Energy, as well as Energy generated by associated ramp up and ramp down of the Facility and Test Energy; provided, however, that Purchaser shall not be required to make any payments for Test Energy produced prior to the Commencement Date. The Customers shall pay for and supply all fuel associated with the Customers' Request for Energy in accordance with the provisions of Section 3.2 of the Operating Agreement. The Energy payment (the "Energy Payment" or "EP") in respect of each month shall be the sum of four (4) components: a variable O&M component for operation on natural gas, a variable O&M component for operation on fuel oil, a start-up component, and a fuel component for Energy delivered from Alternate Resources. The components of the Energy Payment shall be calculated as follows:
4.2.1 Variable O&M Component--Natural Gas. The variable O&M component for operation on natural gas shall be calculated as follows:
(SIGMA)i=Days in the month (SIGMA)j=Hours in the Day [(DENGij x VOMR) + HVOMij]
Where:
DENGij is Delivered Energy in MWh (other
than Test Energy prior to the Commencement
Date) from the Facility produced with
natural gas during hour j of day i;
provided, however, that if the Facility uses
both natural gas and fuel oil in a given
hour, then fifty percent (50%) of the
Delivered Energy in such hour shall be
deemed to be produced with natural gas; and
VOMR is the variable O&M rate (in $/MWh),
which shall be [redacted]; and
HVOM is the hourly variable O&M rate (in $
per hour) as determined from Table A and its
accompanying Notes applicable for hour j of
day i during which the Facility is operating
on natural gas and which is applicable only
when DENGij is > 0.
Table A
Hourly Variable O&M Charges for Operation on Natural Gas
Annual On-Line Factor Combined Hourly Variable O&M Rate (in $
--------------------- ---------------------------------------
per hour) for all Customers (see Notes
--------------------------------------
below)
------
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
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1) The Hourly Variable O&M Rate in Table A represents the rate applicable for the Annual Purchaser's Capacity Nominations of all Customers. The actual Hourly Variable O&M Rate for Purchaser for an hour in a particular Contract Year shall equal the product of the applicable rate from the table for such Contract Year multiplied by the ratio of Purchaser's portion of the Request for Energy for such hour over the total Request for Energy for such hour.
2) The Hourly Variable O&M Rate for a Contract Year shall be interpolated between the values shown in Table A when the Annual On-Line Factor for the previous Contract Year falls between the specific percentages shown on Table A. For example, with respect to an Annual On-Line Factor of [redacted].
3) The dollar amounts shown in Table A are expressed in January 1, 2003 dollars and shall be escalated based upon the U.S. Consumer Price Index on January 1 of each year.
4) The dollar amounts in Table A represent the charge for sixty-five
percent (65%) of the Facility's Capacity being sold to Customers under the
Power Purchase Agreements. If Purchaser and the other Customers elect to
reduce their combined Annual Purchaser's Capacity Nominations pursuant to
Section 4.1.4, then the dollar amounts in Table A shall be proportionately
reduced commensurate with such Capacity reduction.
5) The Annual On-Line Factor shall be calculated for each Contract Year, as follows:
Annual On-Line Factor = SH/ (PH - OH)
Where:
SH is the number of hours that the Customers Schedule and
Seller delivers Energy in a Contract Year; and
PH is the number of hours in a Contract Year; and
OH is the number of hours in a Contract Year during which
(i) the Facility is unavailable due to a forced outage or due to
a maintenance outage that Seller has scheduled pursuant to
Section 6.4 or, if applicable, that is a permitted fifty-eight
(58) hour pre-testing maintenance under Section 4.1.2, and (ii)
Seller does not deliver from an Alternate Resource.
6) For the first Contract Year, all monthly Energy billings will be made assuming an Annual On-Line Factor [redacted]. The rate shall be determined annually for each Contract Year based on the Annual On-Line Factor for the previous Contract Year. At the end of each Contract Year, the Annual On-Line Factor for such Contract Year shall be calculated and the Hourly Variable O&M charges for such Contract Year shall be recalculated using such Annual On-Line Factor for such Contract Year. A true-up payment or refund shall be made to adjust the amounts collected by Seller from Purchaser during each Contract Year to the amount computed by Seller using such Annual On-Line Factor for such Contract Year. Any true-up payments shall be included on an invoice as soon as reasonably practicable following the end of the applicable Contract Year.
4.2.2 Variable O&M Component--Fuel Oil. The variable O&M component for operation on fuel oil when firing the gas turbines shall be calculated as follows:
(SIGMA)i= Days in the Month (SIGMA)j= Hours in the Day [(DEFOij x VOMRFO) + HVOMFOij] Where:
DEFOij is Delivered Energy (other than Test Energy prior to the Commencement Date) produced with fuel oil during hour j of day i; provided that if the Facility uses both natural gas and fuel oil in a given hour, then fifty percent (50%) of the Delivered Energy in such hour shall be deemed to be produced with fuel oil; and
VOMRFO is the variable O&M rate (in $/MWh) for Energy produced with fuel oil, [redacted], subject to adjustment up or down based on the Participants' evaluation of General Electric's reports on the effect of burning fuel oil on variable O&M costs (as mutually agreed by the Participants following good faith negotiations); and
HVOMFO is the hourly variable O&M rate (in $ per hour) for hour j of day i during which the Facility is Operated on fuel oil, which rate [redacted], subject to adjustment up or down based on the Participants' evaluation of General Electric's reports on the effect of burning fuel oil on variable O&M costs (as mutually agreed by the Participants following good faith negotiations), and which is applicable only when DEFOij is > 0.
4.2.3 Start-up Component. The start-up component shall be calculated as follows:
GTS x SUR
Where:
GTS is the number of gas turbine starts required to meet a Request for
Energy (other than for Test Energy prior to the Commencement Date) where
the amount of Energy delivered from any single gas turbine increases from
zero to an amount greater than zero; provided, however, that the
calculation of GTS shall not include: (i) any starts required to resume
delivery to Purchaser due to an interruption caused by a forced outage, or
(ii) any starts initiated by Seller in order to make third party sales in
any given hour where the Facility would otherwise not have been started in
such hour to meet a Request for Energy.
SUR is the Start-up Rate (in $ per start) for each gas turbine as determined from Table B below and its accompanying Notes:
TABLE B
Start-Up Rates
Gas Turbine per Contract Year Gas Turbine for all Customers (see
----------------------------- ----------------------------------
Notes)
------
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
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1) The SUR in Table B represents the rate applicable to all Customers
for each start-up during a Contract Year. There shall be no charge for
[redacted], and the combined rate among all Customers participating in each
subsequent start-up during such Contract Year shall be as identified in the
Table B. The actual SUR for Purchaser (in $ per start) for any such
start-up shall equal the quotient of the applicable rate from the Table B
divided by the number of Customers participating in the Request for Energy
that requires the start-up (and in which Purchaser is one of those
Customers); provided, however, Purchaser will not have to pay for start-ups
in which it does not participate.
2) The SUR is expressed in January 1, 2003 dollars and shall be escalated based upon the U.S. Consumer Price Index on January 1 of each year.
3) The dollar amounts in Table B represent the charge for sixty-five percent (65%) of the Facility's Capacity being sold to Participants under the Power Purchase Agreements. If the Participants elect to reduce their combined Annual Purchaser's Capacity Nominations pursuant to Section 4.1.4, then the dollar amounts in Table B shall be proportionately reduced commensurate with such Capacity reduction.
4.2.4 O&M Rate Adjustment. The rates in Sections 4.2.1, 4.2.2 and 4.2.3 shall be increased or decreased based on good faith negotiation of the Parties (in accordance with Section 18) to reflect and include any actual increase or decrease in Seller's costs of operating the Facility that is caused by any mutually agreed-upon modification or design change or any actual increase or decrease in Purchaser's or another Customers' charges for providing any services to Seller.
4.2.5.1 If Seller elects to deliver Energy from Alternate Resources pursuant to Section 4.4, then the variable O&M component and the start-up component of the Energy Payment shall be calculated in accordance with Sections 4.2.1 and 4.2.3, respectively, for such Alternate Resource Energy as if it were delivered from the Facility. In addition, the fuel component for the Energy delivered from Alternate Resources shall be calculated as follows:
(SIGMA)i=Days in the month (SIGMA)j=Hours in the Day (MDEij x HRij x FRPij)
Where:
MDEij = Scheduled Energy in MWhs delivered from an Alternate Resource during hour j of day i;
when the Facility is unavailable, then HRij for an hour = [redacted];
when the Facility is available, then HRij for an hour = [redacted]; and
FRPij = the fuel rate proxy for an hour calculated in dollars per MMBtus in accordance with the applicable provisions of either Section 4.2.5.2 or 4.2.5.3.
4.2.5.2 If the Fuel Supply Agent has not already scheduled the transportation of gas to the Facility to meet the Customers' Schedules for the hour during which Seller elects to deliver the Scheduled Energy from Alternate Resources, then following notification from Seller of its election to deliver the Scheduled Energy from Alternate Resources, Seller shall be obligated to obtain the necessary quantities of gas and necessary gas transportation capacity to accommodate any portion of the Schedule that Seller has elected to satisfy from Alternate Resources. During periods that Seller elects to deliver Energy from Alternate Resources, the Fuel Supply Agent shall make available transportation capacity, within constraints of the pipeline tariffs and operational procedures in effect at the time and at no additional cost to the Fuel Supply Agent, in the amount determined by the quantity of Energy supplied from Alternate Resources and the applicable heat rate determined by the rules for defining HR in the formula provided in Section 4.2.5.1. An example of the determination of the transportation capacity is included in Appendix D. If Seller has delivered Energy from Alternate Resources under these circumstances, then the FRP (in $ per MMBtus) shall be equal to the sum of: (i) [redacted]; and (ii) the applicable firm gas transportation variable cost associated with deliveries to the Facility under such Participant's firm transportation agreement(s). All risks of gas supply and transportation interruption to accommodate deliveries of Energy from Alternate Resources shall be borne by Seller.
4.2.5.3 If the Fuel Supply Agent has already scheduled the transportation of gas to the Facility to meet the Customers' Schedules by the time Seller notifies Purchaser of Seller's election to deliver the Scheduled Energy from Alternate Resources, then at Seller's election:
(i) Seller shall direct Fuel Supply Agent to use commercially reasonable efforts to revise its scheduled transportation of gas to the Facility to provide for the delivery of the gas to Seller at any alternate delivery point designated by Seller that is available under the Customers' firm transportation agreement(s). The efforts of the Fuel Supply Agent shall be subject to the constraints of the pipeline tariffs and operational procedures in effect at the time, and the Fuel Supply Agent shall not be required to incur any additional cost as a result of the revision of the schedule of transportation of gas to the alternate delivery point. The amount of scheduled transportation of gas to be delivered to the alternate delivery point shall be determined by the quantity of Energy supplied from Alternate Resources and the applicable heat rate determined by the rules for defining HR in the formula provided in Section 4.2.5.1. An example of the determination of the transportation capacity is included in Appendix D. If Seller has delivered Energy from Alternate Resources under these circumstances, then the FRP (in $ per MMBtu) shall be [redacted]; or
(ii) Seller shall direct Fuel Supply Agent to use commercially
reasonable efforts to remarket to third parties the gas that has been
scheduled for delivery to the Facility on the best terms possible under the
circumstances. The efforts of the Fuel Supply Agent shall be subject to the
constraints of the pipeline tariffs and operational procedures in effect at
the time. The amount of scheduled transportation of gas to be remarketed to
third parties shall be determined by the quantity of Energy supplied from
Alternate Resources and the applicable heat rate determined by the rules
for defining HR in the formula provided in from paragraph 4.2.5.1. An
example of the determination of the transportation capacity is included in
Appendix D. If Seller has directed the Fuel Supply Agent to remarket the
gas under these circumstances, the FRP (in $ per MMBtu) shall be
[redacted].
4.3.1 Seller guarantees that the Actual Availability of the Facility
for each of the Peak and Off-Peak Periods of each Contract Year will equal
or exceed [redacted] ("Availability Guarantee"); provided, however, that
(i) the first three months of operation following the Commencement Date
shall be excluded from the Availability Guarantee, (ii) if and to the
extent that a Force Majeure event affects Seller's ability to achieve the
Availability Guarantee, other than in the case of Equipment Breakdown,
Seller shall be excused from the Availability Guarantee (and in this regard
the Parties shall follow the procedures contemplated in Section 11), and
(iii) to the extent that the Facility is fired with fuel oil in excess of
forty-eight (48) hours per combustion turbine unit in any Contract Year in
order to meet Purchaser's Request for Energy, then for every additional ten
(10) hours that the Facility is fired using fuel oil, the lower end of the
Availability Guarantee range, and the [redacted] in Sections 4.3.5.1 and
4.3.5.2, shall be reduced by [redacted], which reductions shall remain in
effect until the next Planned Major Maintenance occurs. If either
combustion turbine is not fired on oil during any Contract Year for the
same number of hours as the other combustion turbine, then for purposes of
calculating the adjustment to the Availability Guarantee, each combustion
turbine will be deemed to have been fired on oil during such Contract Year
for a number of hours that is equal to one half of the summation of the
number of hours that each combustion turbine was actually fired on oil
during such Contract Year.
4.3.2 In each Contract Year, or partial Contract Year in the case of
the first Contract Year (where the first three months are excluded) or the
last Contract Year, Seller shall be entitled to an availability incentive
payment from Purchaser ("Availability Incentive Payment") equal to
[redacted].
4.3.3 The Actual Availability for the Peak Period of each Contract Year, or partial Contract Year in the case of the first Contract Year (where the first three months are excluded) or the last Contract Year, shall be calculated as follows and then rounded up or down to the nearest tenth of a percentage point (based on the method that the rounding is up if the succeeding decimal is 5 or higher or otherwise the rounding is down); provided, however, that such Actual Availability shall not exceed one (1.00):
Actual Availability = (PH-OH -EDH+EMH+ARDH)/PH Where: "PH" (or "Period Hours") shall equal the hours in the Peak Period of such calendar year;
"OH" (or "Outage Hours") in the Peak Period of such Contract Year means all hours the Facility is unavailable for operation; provided, however, that OH shall not include hours in any day during which the Purchaser has not Scheduled any Energy from the Facility during the entirety of such day;
"EDH" (or "Equivalent Derated Hours") in the Peak Period of such Contract Year means the summation of EDH for each hour during the Peak Period; provided, however, that EDH shall not include hours in any day during which the Purchaser has not Scheduled any Energy from the Facility during the entirety of such day. In each hour for which the EDH of such hour must be calculated, EDH for the hour will equal (Guaranteed Output - Actual Capability)/Guaranteed Output;
"EMH" (or "Excused Maintenance Hours") shall equal hours that Seller
has scheduled maintenance on the Facility in the Peak Period of such
calendar year pursuant to Section 6.4 and, if applicable, the fifty-eight
(58) hours of pre-testing maintenance allowed prior to a Capacity test
under Section 4.1.2; provided, however, that in any hour EMH must be zero
if there is no Outage Hour in such hour; and
"ARDH" (or "Alternate Resource Delivery Hours") shall equal the number of hours that Seller delivers Energy to Purchaser from Alternate Resources in the Peak Period of such Contract Year to fully or partially make up for shortfalls caused by Facility outages or derates. Seller will not receive any credit for ARDH in any entire day unless Seller is able to deliver at least partial Energy in each hour of such day that Purchaser Schedules Energy, in which case Seller will receive ARDH credit for each hour of the day based on the lowest ratio during any hour of such day of Delivered Energy to Scheduled Energy.
4.3.4 The Actual Availability for the Off-Peak Period of each Contract
Year shall be calculated in a fashion similar to Section 4.3.3,
substituting "Off-Peak Period" for "Peak Period" where it appears in
Section 4.3.3.
4.3.5 In the event that the Actual Availability during the Peak Period or Off-Peak Period, or both, of any given Contract Year, or partial Contract Year in the case of the first Contract Year (where the first three months are excluded) or the last Contract Year, is less than the lower end of the Availability Guarantee range, then Purchaser shall be entitled to receive availability damages ("Availability Damages") from Seller as Purchaser's sole and exclusive remedy for Seller's failure to delivery Capacity and Energy from the Facility due to the unavailability of the Facility. 4.3.5.1 The Availability Damages for the Peak Period shall be calculated as follows (with any required adjustments as noted in Section 4.3.5.3):
Availability Damages for the Peak Period of any Contract Year =
[redacted]
4.3.5.2 The Availability Damages for the Off-Peak Period shall be
calculated as follows (with any required adjustments as noted in
Section 4.3.5.3):
Availability Damages for the Off-Peak Period of any Contract Year = [redacted]
4.3.5.3 In both of Sections 4.3.5.1 and 4.3.5.2, [redacted] shall be adjusted for the use of fuel oil pursuant to Section 4.3.1(iii), if applicable.
4.3.6 As soon as reasonably practicable [redacted], Seller shall submit to Purchaser a statement setting forth in reasonable detail the actual availability of the Facility during the prior month, including the underlying availability data.
4.3.7 As soon as reasonably practicable following each Contract Year, Seller shall submit to the Purchaser a statement setting forth the Actual Availability for the preceding Contract Year together with a calculation of the net amount of any Availability Incentive Payment due to Seller or Availability Damages due to the Purchaser for the preceding Contract Year based on the foregoing calculations, as applicable, with respect to the Peak Period and Off-Peak Period of such Contract Year. Within ten (10) Business Days of (a) receipt of such statement, Purchaser shall pay any Availability Incentive Payment due to Seller by wire transfer in immediately available funds, or (b) transmittal of such statement, Seller shall pay any Availability Damages due to Purchaser by wire transfer in immediately available funds.
4.4 Alternate Resources. In any hour in which the Facility is unavailable, Seller may continue to make deliveries of Energy in the full amount Scheduled by Purchaser from non-Facility sources (including, but not limited to, generating units on Seller's or its Affiliates' systems and Energy purchases available to Seller) ("Alternate Resources") to replace the Energy that would have been provided by the unavailable Facility. In any hour in which the Facility is available, Seller may choose to make deliveries of Energy in the full amount Scheduled by Purchaser, or any portion thereof, from Alternate Resources to replace the Energy that would have been provided by the available Facility; provided, however, that if the Facility is available, Seller must maintain the Facility on-line and committed at least at the Facility's minimum load, and Purchaser may Schedule spinning reserves from the Facility, all in accordance with Appendix B. Seller must deliver Energy from Alternate Resources to Purchaser at an unconstrained point on the Grid, and if Seller is making such delivery at a time when the Facility is unavailable, then Seller will purchase Firm Transmission Service for such delivery to the extent that such Firm Transmission Service is available for the Alternate Resource Energy from the point of its acquisition by Seller to the unconstrained point on the Grid. In utilizing Alternate Resources, Seller shall comply with the notice requirements of Section 3 of Appendix B.
4.5 Purchaser's Right to Capacity and Energy. During the Operating Period, Purchaser shall have the first call to purchase Seller's share of the Capacity and Energy generated by, and Ancillary Services associated with, the Facility (other than the reductions in Capacity elected jointly by the Customers pursuant to Section 4.1.4); provided, however, that (i) subject to Purchaser's right to Capacity and Energy under this Agreement and the Operating Agreement, Seller may make sales of any Capacity and Energy generated by, and Ancillary Services associated with, Seller's Equity Capacity when such Capacity and Energy is not Scheduled by Purchaser, and (ii) in the event that Seller determines that the Facility is capable of delivering Energy to the Grid prior to the Scheduled Commencement Date, Seller shall have the option of either (a) utilizing the Capacity and Energy generated by, and Ancillary Services associated with, its percentage ownership share of the Facility prior to the Scheduled Commencement Date for sales to third parties by delivering written notice of its election of this option thirty (30) days prior to the anticipated Commercial Operation Date, in which event Purchaser shall not make Capacity Payments until the later of the Scheduled Commencement Date or the Commencement Date, or (b) initiating delivery of Capacity and Energy to Purchaser under this Agreement on the Commencement Date. If Seller makes sales of either or both Capacity and Energy to third parties under Section 4.5(ii)(a) at a time when the Scheduled Commencement Date has passed but the Commencement Date has not yet occurred, then Seller will pay to Purchaser the portion, if any, of the proceeds of such sales that Seller actually receives.
SECTION 5 SCHEDULE FOR DELIVERY OF CAPACITY AND ENERGY
5.1.1 Seller anticipates that, the Facility will achieve the
Commencement Date by the Scheduled Commencement Date and shall be fully
capable of reliably producing the power and Energy to be provided under
this Agreement to Purchaser at the Delivery Point; provided, however, that
if and to the extent that a Force Majeure event affects Seller's ability to
timely comply with the foregoing guarantee, the Scheduled Commencement Date
shall be extended by the amount of time Seller reasonably needs to remedy
the effects of the Force Majeure that prevented Seller's performance (and
in this regard, the Parties shall follow the procedures contemplated in
Section 11).
5.1.2 In the event that Seller fails to achieve the Commencement Date by the date that is two (2) years after the Scheduled Commencement Date, then either (i) Seller shall have the right to simultaneously terminate all of the Power Purchase Agreements by delivering written notice of such election to Purchaser and the other Customers ("Seller's Termination Notice"), or (ii) Purchaser may terminate this Agreement, if and only if each of the other Customers also terminates contemporaneously its respective Power Purchase Agreement for the same reason, by delivering written notice of such election to Seller (collectively, together with the other Customers' similar notices, "Purchasers' Termination Notices"). Within ten (10) Business Days of the date of Seller's Termination Notice, Seller shall pay Purchaser liquidated damages in [redacted], this Agreement shall terminate effective as of the date of Seller's Termination Notice, and Seller shall have no further liability to Purchaser other than the liquidated damages paid under this Section 5.1.2. Within ten (10) Business Days of the date of Purchasers' Termination Notice, Seller shall pay Purchaser liquidated damages in [redacted], this Agreement shall terminate effective as of the date of Purchasers' Termination Notice, and Seller shall have no further liability to Purchaser other than the liquidated damages paid under this Section 5.1.2.
5.1.3 In the event that Seller's failure to achieve the Commencement
Date by the Scheduled Commencement Date is attributable to, in whole or in
part, the failure of any Customer to meet any of their respective
obligations under this Agreement or their respective Power Purchase
Agreements or the Collateral Documents, then (a) the Scheduled Commencement
Date shall be extended for such period of Purchaser's or such other
Customer's failure, and (b) Purchaser shall make Capacity Payments
[redacted] beginning as of the initial Scheduled Commencement Date (without
any extension); provided, however, that Purchaser shall not be required to
make any Capacity Payments under this Section 5.1.3 to the extent the delay
in achieving the Scheduled Commencement Date is attributable to the
concurrent failure of Purchaser or such other Customers and Seller (where
such concurrent failures are not co-extensive, such relief from Capacity
Payments shall apply only during the period of time that Seller's failure
to meet its obligations contributed to the delay); provided, further, that
in the event Purchaser's failure to meet its obligation was the result
solely of a Force Majeure event that prevented Purchaser's timely
completion of such obligation, then Purchaser will be excused from having
to make Capacity Payments as contemplated in Section 5.1.3(b) for the first
forty-five (45) days after the Scheduled Commencement Date (without benefit
of any extension thereof allowed under this Agreement), but if the
Commencement Date does not occur within such forty-five (45) day period,
then Purchaser shall recommence making Capacity Payments starting at the
beginning of the forty-sixth (46th) day after the Scheduled Commencement
Date and thereafter continue making Capacity Payments as contemplated in
Section 5.1.3(b).
5.2 Conditions to Commencement. Seller will notify Purchaser of the date when the Facility has achieved the following criteria (the "Commencement Date"), which notice will be accompanied by reasonable documentation evidencing satisfaction or occurrence of each of the following; provided, however, that Seller shall not be precluded from making third-party sales, in accordance with Section 4.5, of its percentage ownership share of Capacity and Energy from the Facility notwithstanding whether any or all of the following criteria have been met in whole or in part:
5.2.1 successful completion of required testing of the Facility has occurred for purposes of financing, project operation, air permitting, Purchaser's planning and reporting, and manufacturers' warranties, including establishment of the initial Demonstrated Capability of the Facility as contemplated in Section 4.1.2;
5.2.2 the Facility has completed four (4) successful start-ups without experiencing any abnormal operating conditions and has generated continuously for a period of not less than sixteen (16) hours while synchronized to the Grid at a net Capacity output of at least ninety percent (90%) of the Demonstrated Capability (adjusted for ambient conditions) without experiencing any abnormal operating conditions;
5.2.3 the Facility is in compliance with the Interconnection Agreement, either is capable of operation in the AGC mode or is capable of responding to manual load change instructions, has achieved initial synchronization with the Grid, and has demonstrated the reliability of its communications systems and communications with the Florida Municipal Power Pool Energy Control Center located in the OUC Pershing Operations Building (or the replacement for such control center if the Customers decide to have their generation control performed at a different location); and
5.2.4 certificates of insurance coverages and/or insurance policies required of Seller have been obtained and submitted to Purchaser as required by Section 28.
5.3 Test Energy. Seller shall coordinate the production and delivery of Test Energy with Purchaser. Purchaser shall cooperate with Seller to facilitate Seller's testing of the Facility, provide the fuel necessary to conduct testing, and shall accept Test Energy delivered to Purchaser in accordance with the provisions of Section 4.2.
SECTION 6 REQUESTS FOR ENERGY; OPERATION AND MAINTENANCE
6.1 Communicating Requests for Energy. Purchaser shall have the right to request deliveries of Energy by providing a Request for Energy to Seller in accordance with this Section 6 and Appendix B; provided, however, that Purchaser and the other Customers shall coordinate their Scheduling requirements by jointly submitting a single Request for Energy that covers all of their respective requirements on any given day.
6.1.1 The Customer's joint Requests for Energy may request the full output of the Facility, reduced by those amounts, if any, that Customers jointly elect to subtract from the Capacity available to Customers pursuant to the process provided in Section 4.1.4 of this Agreement and the other Power Purchase Agreements. If the Customer's joint Request for Energy is for less than the full output of the facility, then the request shall be deemed to be a Request for Energy first from Purchaser's Equity Capacity and, if such Equity Capacity is not sufficient, then from Purchaser's purchased Energy under this Agreement.
6.1.2 The Parties hereby consent to the recording of all conversations on the telephone lines used for communicating Requests for Energy and related notices and instructions in accordance with customary industry practice. The contents of such recordings shall be definitive.
6.2 Limitations on Requests for Energy. Notwithstanding anything to the contrary in this Agreement, any Request for Energy, operation in the AGC mode or operation in response to a Capacity Emergency that would require the Facility to operate in a manner inconsistent with the Technical Limits, Prudent Utility Practice or applicable Law and Permit requirements shall be deemed not to comply with the requirements and limitations set forth in this Section 6. If and when a Customers' Request for Energy does not comply with the requirements and limitations of this Section 6 by reason of the previous sentence, Seller will notify Customers of such noncompliance promptly after Seller realizes that the Request for Energy is noncompliant and will modify Customer's Request for Energy to make it consistent with the Technical Limits, Prudent Utility Practice and all applicable Laws and Permits to the extent it is reasonably possible to do so consistent with such standards.
6.3 Operation of the Facility. Seller shall operate and maintain the Facility in accordance with this Agreement, Prudent Utility Practice, the Technical Limits and all applicable Laws and Permit requirements. Any emission allowances required for operation of the Facility as contemplated in this Agreement shall be provided in accordance with the applicable provisions of the Operating Agreement.
6.4 Scheduled Maintenance. Seller agrees to schedule Planned Major Maintenance during the Off-Peak Period, or to obtain Purchaser's consent to schedule such maintenance during the Peak Period. Seller will submit to Purchaser an annual maintenance projection and will make reasonable efforts to coordinate the scheduling of such Planned Major Maintenance with Purchaser, including estimated start dates and return to service dates. Seller must seek the consent of OUC, acting for itself and on behalf of the other Customers (which Purchaser hereby authorizes) in scheduling of any Minor Maintenance; provided, however, that Purchaser guarantees Seller will be afforded a minimum of four (4) such Minor Maintenance events distributed approximately evenly over the Off-Peak Period, with a maximum of six (6) such Minor Maintenance events during any year; provided, further, that requests for Minor Maintenance events during the period from May 15 through September 15 may be granted or withheld in OUC's sole discretion.
6.5 Transmission Operator. Coordination with an RTO regarding security and reliability of the Grid as it relates to the Facility, or any other entity, having control over the security and reliability of the Grid shall be the responsibility of Seller as the operator of the Facility. Coordination with an RTO, or other entity, having balancing authority or scheduling authority over the Facility should be handled by Purchaser for any schedules to Purchaser from the Facility and by Seller for any other schedules from the Facility. Any orders, directives or operating requirements that Seller is required to follow by Law imposed on Seller by an RTO, or any other entity, having control over the security and reliability of the Grid shall take precedence over this Agreement. To the extent the requirements of such order, directive or operating requirement necessarily prevent Seller from fulfilling its obligations under this Agreement, Seller shall be relieved of its obligations hereunder. To the extent the requirements of such order, directive or operating requirement conflict with Seller's fulfillment of its obligations hereunder, the rights and obligations of the Parties hereunder shall be adjusted as necessary to comply with such orders, directives or operating requirements.
SECTION 7 INTERCONNECTION AND TRANSMISSION
7.1 Interconnection Facilities. The Parties shall execute an Interconnection Agreement pursuant to applicable interconnection policies and procedures of OUC. The Interconnection Agreement shall contain terms and conditions governing the interconnection and parallel operation of the Facility with the Grid.
7.2 Delay in Interconnection. Purchaser shall complete the OUC Interconnection Facilities and ensure that the Grid is capable of providing and receiving Energy by the date that is eight (8) months prior to the anticipated Commercial Operation Date, but in no event earlier than January 15, 2003. By the date that Seller has completed the collector bus and the 230 kv line to the OUC Interconnection Facilities, but no earlier than the date that is eleven (11) months prior to the anticipated Commercial Operation Date, OUC shall provide service to the Facility for the purposes of engineering and testing the collector bus and other systems by either providing 230 kv service at the 230 kv Interconnection Point or by providing service to the 4160 kv SWGR bus. If for any reason, other than the fault of Seller, OUC fails to complete the OUC Interconnection Facilities and/or if the Grid is not capable of providing and receiving Energy (as determined by OUC and as supported by reasonable documentation) in accordance with the preceding sentence and, as a result, OUC cannot accommodate Seller's start-up and testing of the Facility (such a delay, an "IF/Grid Delay"), then the Scheduled Commencement Date shall be extended by that period of time equal to the IF/Grid Delay; provided, however, that Purchaser shall make the Capacity Payments as provided in Section 5.1.3(b); provided, further, that if Seller would not have been capable of delivering Energy from the Facility to the OUC Interconnection Facilities, even in the absence of an IF/Grid Delay, on the original anticipated Commercial Operating Date ("Seller's Delay"), then extension of the Scheduled Commencement Date and the date on which Purchaser is obligated to make Capacity Payments shall be adjusted by the period of time of Seller's Delay.
7.3 Transmission.
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7.3.1 Purchaser shall be responsible for all costs
associated with and for making all necessary
transmission arrangements for Delivered Energy,
including tagging and any required Ancillary
Services, with the transmission service provider for
delivery from and beyond the Delivery Point.
7.3.2 Seller shall bear all costs and losses and shall be
responsible for making all arrangements for
transmission service, including tagging and any
required ancillary services, with respect to delivery
of Capacity and Energy from an Alternate Resource to
an unconstrained point on the Grid.
SECTION 8
RISK OF LOSS; METERING
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8.1 Risk of Loss. Delivered Energy sold pursuant to this Agreement shall be made available to Purchaser at the Delivery Point. Risk of loss with respect to all such Energy shall pass to Purchaser when such Delivered Energy is made available to Purchaser at the Delivery Point. Risk of loss with respect to the natural gas supply utilized to deliver Energy pursuant to this Agreement shall pass to Seller when such natural gas supply is made available to Seller at the Gas Delivery Point. For purposes of this Agreement, and except to the extent expressly limited in this Agreement, Purchaser shall bear all risk of all occurrences of any nature (including Force Majeure or any other event beyond the reasonable control of either Party) affecting any interconnection facilities, substations, transmission lines and other facilities on Purchaser's side of the applicable Delivery Point and the Gas Delivery Point.
8.2 Place of Measurement. All Energy from the Facility shall be measured by the Facility's meters (such meters collectively, the "Interconnection Meters"), and the Energy delivered from the Facility shall be the Interconnection Meters' readings of the quantities of Energy, reduced by an amount equal to the applicable Energy quantity necessary to compensate for the loss, if any, between the Interconnection Meters and the Delivery Point.
8.3 Testing and Calibration of Interconnection Meters. Seller shall inspect and calibrate the Interconnection Meters at least once a year. Seller shall give Purchaser reasonable advance notice of any inspection, testing or calibration of the Interconnection Meters. Purchaser shall have the right to have a representative present at such inspection, testing or calibration of the Interconnection Meters. Purchaser shall have the right to require, at Purchaser's expense except as set forth in Section 8.4, a test of any of the Interconnection Meters not more often than once every twelve (12) months. If any Interconnection Meter is found to be inaccurate by one half of a percent (0.5%) or less, then any previous recordings of such Interconnection Meter shall be deemed accurate, but Seller shall use its reasonable efforts to adjust such Interconnection Meter immediately and accurately. In the event that any Interconnection Meter is found to be inaccurate by more than one half of a percent (0.5%), Energy delivered at the corresponding Delivery Point shall be measured by reference to Customers' check-meters, if installed and registering accurately, or the meter readings at the Delivery Point for the period of inaccuracy shall be adjusted as far as can be reasonably ascertained by Seller from the best available data from both Parties. If the period of the inaccuracy cannot be ascertained reasonably, any such adjustment shall be for a period equal to one half of the time elapsed since the preceding test. Customers' check meters, if installed, shall be subject to Seller's right to require, at Seller's expense except as set forth in Section 8.4, a test of any of the check-meters not more often than once every twelve (12) months. If any of Customers' check meters is found to be inaccurate by one half of a percent (0.5%) or less, then any previous recordings of such check meter shall be deemed accurate, but Customers shall use their reasonable efforts to adjust such check meter immediately and accurately.
8.4 Delivered Energy Adjustments. In the event that, due to correction
for inaccurate Interconnection Meters with an inaccuracy in excess of one half
of a percent (0.5%) (determined in accordance with Section 8.3), the amount of
Delivered Energy is increased or decreased, the revised quantity of Delivered
Energy shall be used for purposes of calculating the Energy Payment pursuant to
Section 4.2. If any Energy Payment has already been calculated using the
previous quantity of Delivered Energy, the Energy Payment shall be recalculated
using the revised quantity of Delivered Energy. If the recalculation (i)
increases the Energy Payment, Purchaser shall pay to Seller the amount of such
increase, or (ii) decreases the Energy Payment, Seller shall refund to Purchaser
the amount of such decrease. In any such case, the required payment shall be
included on the next invoice to be issued and shall be paid at the time payment
of such invoice is required pursuant to Section 9. Any payment required under
this Section 8.4 shall bear interest in accordance with Section 9.3 from the
original due date (or from the date paid in the case of a refund) until the date
paid (or until the date refunded in the case of a refund). In the case of
inaccurate Meters with an inaccuracy in excess of one half of a percent (0.5%),
the Party which owns such Meters shall promptly cause such Meters to be
corrected and, where such inaccuracy was determined pursuant to a test required
by the other Party, the Party which owns such Meters shall bear the expense of
any such test.
SECTION 9 METHOD OF PAYMENT
9.1 Invoicing and Payment. As soon as reasonably practicable after the
first day of each month commencing with the second month or portion thereof
during which Test Energy is delivered to Purchaser and continuing for each month
until the first month after the end of the Operating Period, Seller shall submit
to Purchaser an invoice as described in Section 9.2. If such invoice indicates a
net amount payable to Seller, Purchaser shall pay such invoice within ten (10)
Business Days of Purchaser's receipt of the invoice. Such payment shall be made
in U.S. dollars by wire transfer of immediately available funds prior to 3:00
p.m. Eastern Prevailing Time, on the date of payment in accordance with the
invoice instructions. Payments made after 3:00 p.m. Eastern Prevailing Time or
on a day that is not a Business Day shall be deemed to be made on the next
subsequent Business Day. If such invoice indicates a net amount payable to
Purchaser, Seller shall pay such amount within ten (10) Business Days of
Purchaser's receipt of the invoice.
9.2 Monthly Invoices. Each monthly invoice shall show the amount and
calculation of the following, as applicable: (i) the Capacity Payment and Energy
Payment payable by Purchaser to Seller for the preceding month net of any
amounts to be credited by Seller to Purchaser for such month; (ii) following
each Contract Year, the net amount payable by Purchaser or Seller pursuant to
Section 4.3 respecting the Availability Incentive Payment and Availability
Damages, as the case may be; and (iii) payments, refunds, credits and
reductions, if any, payable by either Party pursuant to Sections 9.3 or 9.4.
9.3 Late Payments. Any amount due from either Party hereunder not paid in full on or before the date such payment is due will incur a delayed payment charge on the unpaid amount from the original due date until the date paid at an annual rate equal to the then current Prime Rate plus six (6) percentage points (or such lesser annual rate as is the maximum rate permitted by applicable Law).
9.4 Billing Disputes. In the event of any dispute as to all or any
portion of any monthly invoice, Purchaser shall give notice of the dispute to
Seller but shall pay the full amount of the invoiced charges when due (or if
applicable, Seller shall give notice to Purchaser of Seller's dispute regarding
any information provided by Purchaser that was a factor in any calculation
supporting invoiced amounts). Such notice shall state the amount in dispute and
set forth a full statement of the grounds on which such dispute is based.
Purchaser and Seller shall give all due and prompt consideration to any such
dispute. Upon final determination (whether by agreement, dispute resolution
pursuant to Section 18 hereof, or otherwise) of the dispute, any amounts due to
Purchaser or Seller, together with interest from the date due until the date
paid at the rate specified in Section 9.3, shall be paid no later than thirty
(30) days following such final determination. Purchaser and Seller shall have
until the end of one hundred eighty (180) days after its receipt of any invoice,
statement or information supporting invoice calculations to question or contest
the correctness of any charge or credit on such invoice or statement.
9.5 Audit Rights. Until the end of one hundred eighty (180) days after Purchaser's receipt of any invoice, Seller and Purchaser will make available to the other upon written request, and the Purchaser or Seller may audit, such books and records of the other (or other information to which Purchaser or Seller has access) as are reasonably necessary for Purchaser or Seller to calculate and determine the amounts shown on such invoice and thereby to verify the accuracy and appropriateness of the amounts billed or credited to Purchaser or Seller hereunder; provided, however, that Purchaser shall coordinate its rights under this section with the other Customers in order to conduct joint, rather than individual, audits pursuant to this provision. The Parties shall maintain their respective books and records in accordance with generally accepted accounting principles applicable from time to time.
ARTICLE 10
CHANGE IN LAW; MODIFICATION OF AGREEMENT
10.1.1 The Parties acknowledge that a Change in Law may increase or decrease Seller's costs in providing service under this Agreement. In the event of such a Change in Law, Seller may give notice to Purchaser that Seller's costs of providing service under this Agreement have changed (which notice will include reasonably detailed information about such cost changes) and, in the event such notice is given, this Agreement shall be modified to reflect such changes in costs, subject to Section 18, provided, however, that in the event Seller provides notice of such an increase, then Purchaser may provide documentation to Seller of other Changes in Law that have decreased the cost of providing service under this Agreement and Seller shall set-off any such decrease in cost against the increase in cost identified in the Seller's notice.
10.1.2 Purchaser shall pay the adjusted amount calculated pursuant to Section 10.1.1 for the period commencing with the notice of changed cost through the date of termination of this Agreement. The Parties shall make such payments as are appropriate to adjust all prior billings or payments to reflect the adjustments described herein.
10.1.3 A "Change in Law" shall mean a change in Law which constitutes a new environmental or tax Law or a new interpretation of such Law (not including a change in tax Laws that assess taxes only on Seller's net income) or a change in the provisions contained in the Site Certification permits and which generally affects the cost of, or restricts, operation of the Facility.
10.2 Modification of Agreement. In the event the FERC modifies this Agreement, the Parties agree to make all changes necessary to preserve as nearly as possible the bargain contained in this Agreement, including but not limited to, the total amounts of Capacity and Energy delivered to Purchaser and the total amount of revenues to be received by Seller hereunder; provided, however, that Seller shall have the right to terminate this Agreement without further obligation to Purchaser in the event that modifications to this Agreement by FERC cause a material adverse effect on the economic value of this Agreement to Seller; provided, further, that Purchaser shall have the right to terminate this Agreement without further obligation to Seller in the event that modifications to this Agreement by FERC cause a material adverse effect on the economic value of this Agreement to Purchaser; and provided, further, that in the event Seller elects to terminate this Agreement pursuant to this Section 10.2, then Purchaser and Seller agree to expeditiously proceed with a sale at net book value of Seller's entire ownership interest in the Facility to Purchaser and the other Customers in accordance with the provisions of the Ownership Agreement. Seller agrees to use good faith efforts, consistent with Prudent Utility Practice, to resist any changes to this Agreement proposed by the FERC or any other Governmental Body or their respective staffs, and Purchaser agrees not to seek, request, promote or support any changes to this Agreement before the FERC or any other Governmental Body.
SECTION 11 FORCE MAJEURE
11.1 Force Majeure Notice and Obligations. With respect to those obligations of the Parties set forth in this Agreement that expressly excuse performance in the event of a Force Majeure, the existence of Force Majeure that causes a Party (the "Non-Performing Party") to delay performance or fail to perform such obligations shall excuse the Non-Performing Party's delay in performing, or failure to perform, such obligations, subject to any express limitations on such excuse provided or referenced in the Section invoking the excuse. In the event of Force Majeure that causes the Non-Performing Party to delay performance or fail to perform its obligations under this Agreement and that excuses such delay or failure:
11.1.1 the Non-Performing Party shall give the other Party written notice and full details as soon as practicable after learning of the Force Majeure;
11.1.2 the Non-Performing Party shall use reasonable dispatch to remedy its inability to perform (except that this provision shall not impose a requirement on either Party to deliver or receive Energy at a delivery point other than a Delivery Point), and, if Seller is the Non-Performing Party, Seller shall use reasonable efforts to provide Energy from the Facility at a Delivery Point; and
11.1.3 when the Non-Performing Party is able to resume performance of its obligations under this Agreement, that Party shall give the other Party written notice to that effect.
SECTION 12 EVENTS OF DEFAULT; TERMINATION
12.1 Events of Default of Seller. Except when excused due to a Force Majeure event pursuant to the provisions of Section 11 hereof, an Event of Default shall be deemed to have occurred with respect to Seller upon the occurrence and during the continuance of any of the following events:
12.1.1 The Bankruptcy of Seller;
12.1.2 Seller fails to pay any invoiced amount or undisputed non-invoiced amount when due under this Agreement within five (5) Business Days after receiving notice of such failure;
12.1.3 Seller fails to perform or observe any of its material
obligations or covenants hereunder or otherwise is in material breach
of this Agreement (other than obligations addressed in Section 12.1.2)
and such failure or breach continues unremedied for a period of thirty
(30) days following notice from Purchaser demanding cure of such
failure or breach (or within such longer period of time as is
reasonably necessary to accomplish such cure, if it cannot be
reasonably accomplished within such 30-day period and Seller
diligently commences such cure in such period and continues such cure
to completion); or
12.1.4 Any representation or warranty made by Seller herein, in the Ownership Agreement or in any document or certificate furnished by Seller hereunder shall have been false when made and such false representation or warranty has a material and adverse effect on Purchaser and, if capable of being cured, such false representation or warranty is not cured within thirty (30) days after notice thereof from Purchaser.
12.2 Events of Default of Purchaser. An Event of Default shall be deemed to have occurred with respect to Purchaser upon the occurrence and during the continuance of any of the following events:
12.2.1 The Bankruptcy of Purchaser;
12.2.2 Purchaser fails: (i) to pay any invoiced amount or any undisputed non-invoiced amount when due under this Agreement within ten (10) Business Days after receiving notice of such failure; or (ii) to make any payment of principal or interest under the Bond Legislation or any other bond resolution, indenture or similar secured instrument of the Purchaser when due (at maturity, upon redemption or otherwise), which failure is not cured within ten (10) Business Days;
12.2.3 Purchaser fails to perform or observe any of its material obligations or covenants hereunder or otherwise is in material breach of this Agreement (other than payment obligations, which are addressed in Section 12.2.2) and such failure or breach continues unremedied for a period of thirty (30) days following notice from Seller demanding cure of such failure or breach (or within such longer period of time as is reasonably necessary to accomplish such cure, if it cannot reasonably be accomplished within such 30-day period and Purchaser diligently commences such cure in such period and continues such cure to completion);
12.2.4 Any representation or warranty made by Purchaser
herein, in the Ownership Agreement or in any document
or certificate furnished by Purchaser shall have been
false when made and such false representation or
warranty has a material and adverse effect on Seller
and, if capable of being cured, such false
representation or warranty is not cured within thirty
(30) days after notice thereof from Seller; or
12.2.5 Purchaser fails to comply with any of the requirements of Section 15 within thirty (30) days of receipt of Seller's written notice of such failure.
12.3 Remedies; Notice of Intent to Terminate. Subject to the provisions
of this Agreement providing for limitations on damages and for exclusive
remedies under certain circumstances, upon the occurrence and during the
continuation of any Event of Default, the Party not in default (the
"Non-Defaulting Party") shall have the right to pursue all remedies available at
law or in equity, suspend its performance under this Agreement to the extent of
the Event of Default and/or to deliver a notice of intent to terminate ("Notice
of Intent to Terminate") this Agreement to the Party in default ("Defaulting
Party"). Any Notice of Intent to Terminate shall specify the Event of Default
giving rise to such Notice of Intent to Terminate. Following the giving of a
Notice of Intent to Terminate, the Parties shall negotiate pursuant to the
provisions of Section 18 hereof, following which, unless the Parties shall have
otherwise mutually agreed on a remedy or the Defaulting Party or any lender or
financing party ("Lender") to the Defaulting Party or its affiliate, or agent on
behalf of a Lender, shall have cured such default or is diligently pursuing a
remedy to cure the Event of Default, the Non-Defaulting Party having given the
Notice of Intent to Terminate may terminate this Agreement by giving written
notice thereof to the Defaulting Party, whereupon this Agreement shall
immediately terminate; provided, however, that upon a default under Section
12.2.2, the Non-Defaulting Party may serve a notice of termination of this
Agreement, without having first to deliver a Notice of Intent to Terminate and
to negotiate under Section 18, whereupon this Agreement shall terminate
immediately upon delivery of such notice of termination, unless such default
shall have been cured prior to the delivery of such notice of termination.
Except as provided in Sections 2.2, 2.3, 5.1.2, 10.2, 12.4, and 12.5 or in this
Section 12.3, or in Section 4.3 of the Ownership Agreement, neither Party shall
have any right to terminate this Agreement.
12.4 Notice to Lenders. Any and all notices given by Purchaser to Seller under this Section 12 shall also be given at the same time by Purchaser to any Lender for which Seller provides written notice to Purchaser of the need to provide such notice and the address to which such notice must be sent. No termination of this Agreement by Purchaser will be effective until and unless Purchaser shall have given Seller's Lenders notice of Seller's Event of Default and an opportunity to cure such Event of Default, which notice and cure period shall be as set forth in any consent executed by Purchaser with Seller's Lenders but in any event such notice and cure period shall be at least concurrent with that provided to Seller under this Agreement.
12.5.1 Except in the case of an Event of Default under Section
12.2.2 under the circumstances that are described in Section 12.5.2
below or an Event of Default under Section 12.1.3 under the
circumstances that are described in Section 12.5.3 below, in the event
that a Non-Defaulting Party terminates this Agreement pursuant to
Section 12.3 and provided an Event of Default shall not have occurred
and be continuing as to such Non-Defaulting Party, the Defaulting
Party shall pay the Non-Defaulting Party the Termination Payment, as
defined below, within thirty (30) days of the effective date of the
termination. Except as so otherwise provided in Section 12.5.2 or
12.5.3, the Termination Payment (if applicable) shall be the
Defaulting Party's sole liability arising out of a termination of this
Agreement pursuant to Section 12.3, and neither Party shall have any
other liability or obligation to the other Party arising out of a
termination of this Agreement pursuant to Section 12.3. The Defaulting
Party's Termination Payment (if applicable) to the Non-Defaulting
Party resulting from an Event of Default under this Agreement shall be
calculated as follows:
Termination Payment = TPR * APCN
Where:
TPR = a termination payment rate in dollar per kilowatt, which is
equal to: (i) [redacted] if the Notice of Intent to Terminate is given
between the date of this Agreement's execution and the end of the
twelfth (12th) month after the date Purchaser gives notice under
Section 2.2 or 2.3 that it has elected to terminate this Agreement;
(ii) [redacted] if the Notice of Intent to Terminate is given between
the end of such twelfth (12th) month and the end of the twenty-fourth
(24th) month after the date Purchaser gives such notice; or (iii)
[redacted] if the Notice of Intent to Terminate is given between the
end of such twenty-fourth (24th) month and the expected termination of
this Agreement twelve (12) months later; and
APCN = the Annual Purchaser's Capacity Nomination, in kilowatts, that is in effect on the date of the Notice of Intent to Terminate.
Delivery of a Notice to Terminate or calculation or payment of the Termination Payment shall not relieve the Defaulting Party of its obligation to pay all other amounts that became or have become due and payable by the Defaulting Party hereunder prior to the effective date of termination.
12.5.2 In the case of an Event of Default under Section 12.2.2 by Purchaser at a time when Purchaser is able to pay its debts generally as they come due, Seller shall be entitled to recover its actual damages, which the Parties recognize may be greater than, or less than, the Termination Payment. In determining actual damages, any amounts actually recovered from Seller's reasonable efforts to mitigate such damages shall be taken into account.
12.5.3 In the case of an Event of Default by Seller under Section
12.1.3 that results from a failure by Seller to deliver Energy from
the Facility to Purchaser as required by this Agreement at a time when
(i) the Facility was capable of delivering such Energy to Seller as
required by this Agreement consistent with Prudent Utility Practice,
the Technical Limits and applicable Law and Permit requirements, and
(ii) Seller sold such Energy to a third party, then Purchaser shall be
entitled to recover the actual damages of Purchaser, which the Parties
recognize may be greater than, or less than, the Termination Payment.
In determining actual damages, the actual results of Purchaser's
reasonable efforts to mitigate such damages shall be taken into
account.
12.5.4 In receiving a Termination Payment or recovering actual damages, the Non-Defaulting Party shall also be entitled to recover its reasonable attorney fees in enforcing this provision.
SECTION 13 WAIVER
Failure by either Party to exercise any of its rights under this Agreement shall not constitute a waiver of such rights. Neither Party shall be deemed to have waived any right resulting from any failure to perform by the other Party unless it has made such waiver specifically in writing, and no such waiver shall operate as a waiver of any future failure to perform whether of a like or different character. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
SECTION 14 REPRESENTATIONS AND WARRANTIES
14.1 Representations and Warranties of Seller. Seller hereby represents and warrants to Purchaser as follows:
14.1.1 Organization and Existence. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, is qualified to transact business in Florida, and has sufficient power and authority to execute and deliver this Agreement and the Collateral Documents and to perform its obligations hereunder and thereunder. Seller has full power and authority to carry on its business as it is now being conducted and as it is contemplated hereunder and under the Collateral Documents to be conducted in the future.
14.1.2 Due Authorization. The execution, delivery and performance of this Agreement and the Collateral Documents by Seller has been duly and effectively authorized by all requisite action on the part of Seller. This Agreement and the Collateral Documents constitute the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity.
14.1.3 Litigation. There is no action, suit, claim, proceeding or investigation pending or, to Seller's knowledge, threatened against Seller or The Southern Company by or before any Governmental Body having jurisdiction over Seller or The Southern Company which, if adversely determined, would have a material adverse effect upon Seller's ability to enter into and perform its obligations and consummate the transactions contemplated by this Agreement and the Collateral Documents or the material rights of Purchaser under this Agreement or the Collateral Documents. Neither Seller nor The Southern Company is subject to any material outstanding judgment, order, writ, injunction or decree of any Governmental Body having jurisdiction over Seller or The Southern Company which would materially and adversely affect its ability to enter into and perform its obligations under this Agreement and the Collateral Documents or the material rights of Purchaser under this Agreement or the Collateral Documents.
14.1.4 No Violation or Conflict. The execution, delivery and performance by Seller of this Agreement and the Collateral Documents do not violate or conflict with Seller's operating agreement, any existing Law applicable to Seller, or any note, bond, indenture, agreement or instrument to which Seller is a party or by which it is bound.
14.1.5 Approvals. Other than the approvals by the Governmental Bodies described in Attachment A of the Ownership Agreement, there are no approvals or consents, the absence of which would materially impair Seller's ability to consummate the transactions described in, or to perform its obligations under, this Agreement and the Collateral Documents.
14.2 Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller as follows:
14.2.1 Organization and Existence. Purchaser is a statutory utilities commission duly organized, validly existing and in good standing under the laws of the State of Florida and has sufficient statutory power and authority to execute and deliver this Agreement and the Collateral Documents and to perform its obligations hereunder and thereunder. Purchaser has full statutory power and authority to carry on its business as it is now being conducted and as it is contemplated hereunder and under the Collateral Documents to be conducted in the future.
14.2.2 Due Authorization. The execution, delivery and performance of this Agreement and the Collateral Documents by Purchaser has been duly and effectively authorized by all requisite action on the part of Purchaser's governing board. This Agreement and the Collateral Documents constitute the legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and by general principles of equity.
14.2.3 Litigation. There is no action, suit, claim, proceeding or investigation pending or, to Purchaser's knowledge, threatened against Purchaser by or before any Governmental Body having jurisdiction over Purchaser which, if adversely determined, would have a material adverse effect upon Purchaser's ability to enter into and perform its obligations and consummate the transactions contemplated by this Agreement and the Collateral Documents or the material rights of Seller under this Agreement or the Collateral Documents. Purchaser is not subject to any material outstanding judgment, order, writ, injunction or decree of any Governmental Body having jurisdiction over Purchaser which would materially and adversely affect its ability to enter into and perform its obligations under this Agreement and the Collateral Documents or the material rights of Seller under this Agreement or the Collateral Documents.
14.2.4 No Violation or Conflict. The execution, delivery and performance by Purchaser of this Agreement and the Collateral Documents do not violate or conflict with Purchaser's charter or bylaws, any existing Law applicable to Purchaser, or any note, bond, resolution, indenture, agreement or instrument to which Purchaser is a party or by which it is bound.
14.2.5 Approvals. Other than the approvals by the Governmental Bodies described in Attachment A of the Ownership Agreement, there are no approvals or consents, the absence of which would materially impair Purchaser's ability to consummate the transactions described in, or to perform its obligations under, this Agreement and the Collateral Documents.
14.2.6 No Immunity. With respect to its contractual obligations hereunder and performance thereof, Purchaser is not entitled to claim immunity on the grounds of sovereignty or similar grounds with respect to itself or its revenues or assets from: (a) suit; (b) jurisdiction of any Florida court; or (c) relief by way of injunction, order for specific performance or attachment of property that is subject to execution or levy under Florida Law (including the Eligible Collateral).
14.3 Warranties Regarding Energy, Capacity and Ancillary Services. Seller warrants that the Energy, Capacity and Ancillary Services provided under this Agreement (i) shall have been delivered in accordance with applicable Law, and (ii) meets the requirements set forth in this Agreement. THE FOREGOING IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, IN FACT OR BY LAW WITH RESPECT TO THE ENERGY, CAPACITY AND ANCILLARY SERVICES PROVIDED HEREUNDER. SELLER HEREBY DISCLAIMS ANY AND ALL OTHER WARRANTIES WHATSOEVER.
SECTION 15 PERFORMANCE ASSURANCE
15.1 In the event that Purchaser experiences a Material Adverse Change, as defined below, as security for Purchaser's payment obligations under this Agreement, Purchaser shall deliver to Seller within ten (10) Business Days of Seller's written request therefor, Eligible Collateral in an amount equal to the lesser of: (i) [redacted], or (ii) [redacted] of the total of Capacity Payments for the remainder of the Operating Period.
15.1.1 As used in this Section 15.1: (i) a "Material Adverse Change" shall occur (A) when Purchaser's credit rating on its senior securities falls below the lower of (x) BBB- (Standard & Poors) or Baa3 (Moody's) and (y) the lowest credit rating of Southern Guarantor's senior securities under either Moody's or Standard & Poors, (B) upon an Event of Default by Purchaser under Section 12.2.2(i), (C) upon a failure by Purchaser to make any required deposit into any sinking fund under the Bond Legislation or any other bond resolution, indenture or similar secured instrument entered into in connection with the issuance of additional debt (each a "Debt Instrument"), or (D) upon a failure by Purchaser to maintain in any debt service reserve account under the Bond Legislation or any Debt Instrument at least fifty percent (50%) of the amount required to be maintained in such account; and (ii) "Eligible Collateral" means cash deposited into an operating account from "Revenues", as that term is defined in the Senior Lien Resolution, or an unconditional letter of credit from an "A" rated bank, as determined by Standard & Poors or Moody's, in a form reasonably acceptable to Seller; provided, however, that for purposes of Sections 15.1.1(i)(C) and 15.1.1(i)(D), Eligible Collateral shall constitute an unconditional letter of credit from an "A" rated bank, as determined by Standard & Poors or Moody's, in a form reasonably acceptable to Seller. Costs of a letter of credit shall be borne by Purchaser.
15.1.2 If at any time during the term of this Agreement neither Standard & Poors nor Moody's is in the business of providing credit ratings or willing to rate Purchaser, then Purchaser and Seller will negotiate in good faith to choose and implement an alternative mechanism for determining if and when a "Material Adverse Change" has occurred.
15.2 In the event that legislation is enacted in the State of Florida which contains provisions that will cause an Event of Default by Purchaser at any time during the term of this Agreement, Seller will have the right, from and after the date of enactment of such legislation, to provide Purchaser with written notice requesting Eligible Collateral, as defined above, in an amount equal to the lesser of: (i) [redacted] of Capacity Payments, or (ii) [redacted] for the remainder of the Operating Period. Upon receipt of such notice, in addition to Purchaser's other payment obligations under this Agreement, Purchaser shall within thirty (30) days provide such Eligible Collateral.
15.3. To the extent Purchaser delivers Eligible Collateral in the form of cash to be held in an operating reserve account pursuant to Sections 15.5 or 15.6, Purchaser hereby grants to Seller a present and continuing security interest in, and lien on (and right of setoff against), and assignment of, such Eligible Collateral, and any and all proceeds resulting therefrom or from the liquidation thereof, and Purchaser agrees to take such action as Seller reasonably requires in order to perfect Seller's first-priority security interest in, and lien on (and right of setoff against), such Eligible Collateral and any and all proceeds resulting therefrom or from the liquidation thereof. This Agreement is intended to, and does, constitute a security agreement between Seller and Purchaser with regard to any cash which may constitute Eligible Collateral.
15.4. Upon or any time after the occurrence and during the continuation of an Event of Default of Purchaser, Seller may (i) exercise any of the rights and remedies of a secured party with respect to the Eligible Collateral, including any such rights and remedies under Law then in effect, such as but not limited to the Uniform Commercial Code, and (ii) liquidate and/or draw on any outstanding Eligible Collateral issued for its benefit (free from any claim or right of any nature whatsoever of Purchaser including any equity or right of purchase or redemption by Purchaser) with respect to Purchaser's obligations under this Agreement. In the event that Seller liquidates or draws on any of the Eligible Collateral, Purchaser shall within ten (10) Business Days of notice from Seller of such liquidation or draw, deliver additional cash or increase the amount of the letter of credit, as the case may be, in order to replenish the amount of the Eligible Collateral to the extent of the liquidation or draw.
15.5. If the trigger of a Material Adverse Change was occurrence of the circumstances in Sections 15.1.1(i)(A) or the circumstances described in Section 15.2 occur, then: (i) if the Eligible Collateral is in the form of cash, Seller will hold the Eligible Collateral in an interest-bearing operating reserve account, established by Seller, and the agent for which shall act pursuant to Seller's instructions and will return the balance of such account, including interest, at such time as the circumstances described in Sections 15.1.1(i)(A) and 15.2 no longer apply (provided that Purchaser shall be entitled to receive any funds in such operating reserve account at any time and to the extent that such funds exceed [redacted] of the total of Capacity Payments for the remainder of the Operating Period); or (ii) if the Eligible Collateral is in the form of a letter of credit, such letter of credit shall expire at such time as the circumstances described in Sections 15.1.1 and 15.2 no longer apply and Seller shall return such letter of credit to Purchaser (provided that Purchaser shall be entitled to reduce the amount available under the letter of credit at any time and to the extent that such amount exceeds [redacted] of the total of Capacity Payments for the remainder of the Operating Period).
15.6 If the trigger of a Material Adverse Change was occurrence of the
circumstances described in Section 15.1.1(i)(B), then (i) if the Eligible
Collateral is in the form of cash, Seller will hold the Eligible Collateral in
an interest-bearing operating reserve account, established by Seller, and the
agent for which shall act pursuant to Seller's instructions and will return the
balance of such account, including interest, at such time as Purchaser shall
have (A) cured the Event of Default under Section 12.2.2 that triggered the
Material Adverse Change and (B) thereafter avoided both any further Events of
Default under Section 12.2.2 and a Material Adverse Change as described in
Section 15.1.1(i)(A) or 15.2 for a period of sixty (60) continuous days
(provided that Purchaser shall be entitled to receive any funds in such
operating reserve account at any time and to the extent that such funds exceed
[redacted] of the total of Capacity Payments for the remainder of the Operating
Period); or (ii) if the Eligible Collateral is in the form of a letter of
credit, such letter of credit shall expire (and Seller shall return such letter
of credit) at such time as Purchaser shall have (C) cured the Events of Default
under Section 12.2.2 that triggered the Material Adverse Change and (D)
thereafter avoided both any further Events of Default under Section 12.2.2 and a
Material Adverse Change as described in Section 15.1.1(i)(A) or 15.2 for a
period of sixty (60) continuous days (provided that Purchaser shall be entitled
to reduce the amount available under the letter of credit at any time and to the
extent that such amount exceeds [redacted] of the total of Capacity Payments for
the remainder of the Operating Period).
15.7 In the event that the Purchaser exercises its right to elect an Extended Term or any Further Extension of this Agreement pursuant to Sections 2.2 and 2.3, and on any day of such Extended Term or Further Extensions the circumstances of either Sections 15.1.1 or 15.2 apply, then, Purchaser shall deliver to Seller within ten (10) Business Days of the date of such occurrence, Eligible Collateral, as defined above, in an amount equal to [redacted] of Capacity Payments, and the provisions of Sections 15.3, 15.4, 15.5 and 15.6 shall apply to such Eligible Collateral.
SECTION 16 LIABILITY OF PARTIES
16.1.1 TO THE EXTENT PERMITTED BY LAW, EACH PARTY (THE "INDEMNIFYING PARTY") SHALL FULLY INDEMNIFY AND DEFEND THE OTHER PARTY AND EACH OF THE OTHER PARTY'S SUBSIDIARIES AND AFFILIATES, AND THE PARTNERS, MEMBERS, PARTICIPANTS, PRINCIPALS, REPRESENTATIVES, SHAREHOLDERS, DIRECTORS, OFFICERS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF EACH OF THEM (THE "INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL LOSSES, COSTS, DAMAGES, INJURIES, LIABILITIES, CLAIMS, DEMANDS, PENALTIES AND INTEREST, INCLUDING REASONABLE ATTORNEYS' FEES, RESULTING FROM THIRD PARTY CLAIMS DIRECTLY OR INDIRECTLY RELATED TO THIS AGREEMENT, TO THE EXTENT CAUSED OR CONTRIBUTED TO BY THE FAULT, INTENTIONAL ACT, NEGLIGENCE OR STRICT LIABILITY OF THE INDEMNIFYING PARTY OR ITS SUBSIDIARIES, AFFILIATES, CONTRACTORS OR SUBCONTRACTORS OR ANY OF THE OFFICERS, PARTNERS, MEMBERS, PARTICIPANTS, SHAREHOLDERS, PRINCIPALS, DIRECTORS, EMPLOYEES, AGENTS, REPRESENTATIVES, SUCCESSORS OR ASSIGNS OF ANY OF THEM OR BY BREACH BY THE INDEMNIFYING PARTY OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT ANY LIABILITY TO THIRD PARTIES INCURRED BY SELLER IN PERFORMANCE OF ITS AGENCY FUNCTIONS PURSUANT TO THE OWNERSHIP AGREEMENT OR THE OPERATING AGREEMENT SHALL BE APPORTIONED IN ACCORDANCE WITH ARTICLE 9 OF THE OWNERSHIP AGREEMENT OR ARTICLE 7 OF THE OPERATING AGREEMENT.
16.1.2 IF ANY INDEMNIFIED PARTY INTENDS TO SEEK INDEMNIFICATION
UNDER THIS SECTION 16.1 FROM AN INDEMNIFYING PARTY WITH RESPECT TO ANY
ACTION OR CLAIM, THE INDEMNIFIED PARTY SHALL GIVE THE INDEMNIFYING
PARTY WRITTEN NOTICE OF SUCH CLAIM OR ACTION PROMPTLY FOLLOWING THE
RECEIPT OF ACTUAL KNOWLEDGE OR INFORMATION BY THE INDEMNIFIED PARTY OF
A POSSIBLE CLAIM OR OF THE COMMENCEMENT OF A CLAIM OR ACTION, WHICH
WRITTEN NOTICE SHALL IN NO EVENT BE DELIVERED LATER THAN THE FIRST TO
OCCUR OF (A) FIFTEEN (15) DAYS PRIOR TO THE LAST DAY FOR RESPONDING TO
SUCH CLAIM OR ACTION OR (B) THE EXPIRATION OF THE FIRST HALF OF THE
PERIOD ALLOWED FOR RESPONDING TO SUCH CLAIM OR ACTION. THE
INDEMNIFYING PARTY SHALL HAVE NO LIABILITY UNDER THIS SECTION FOR ANY
CLAIM OR ACTION FOR WHICH SUCH NOTICE IS NOT PROVIDED TO THE EXTENT
THAT THE FAILURE TO GIVE SUCH WRITTEN NOTICE MATERIALLY PREJUDICES THE
INDEMNIFYING PARTY. UPON ACKNOWLEDGMENT OF ITS OBLIGATIONS UNDER THIS
SECTION 16.1, THE INDEMNIFYING PARTY SHALL HAVE THE RIGHT TO ASSUME
THE DEFENSE OF ANY CLAIM OR ACTION, AT ITS SOLE COST AND EXPENSE, WITH
COUNSEL DESIGNATED BY THE INDEMNIFYING PARTY AND REASONABLY
SATISFACTORY TO THE INDEMNIFIED PARTY; PROVIDED, HOWEVER, THAT IF THE
DEFENDANTS IN ANY SUCH ACTION INCLUDE BOTH THE INDEMNIFIED PARTY AND
THE INDEMNIFYING PARTY, AND THE INDEMNIFIED PARTY SHALL HAVE
REASONABLY CONCLUDED THAT THERE MAY BE LEGAL DEFENSES AVAILABLE TO IT
WHICH ARE DIFFERENT FROM OR ADDITIONAL TO THOSE AVAILABLE TO THE
INDEMNIFYING PARTY, THE INDEMNIFIED PARTY SHALL HAVE THE RIGHT TO
SELECT SEPARATE COUNSEL, AT THE INDEMNIFYING PARTY'S EXPENSE, TO
ASSERT SUCH LEGAL DEFENSES AND TO OTHERWISE PARTICIPATE IN THE DEFENSE
OF SUCH ACTION ON BEHALF OF SUCH INDEMNIFIED PARTY.
16.1.3 EXCEPT TO THE EXTENT EXPRESSLY PROVIDED HEREIN, NO INDEMNIFIED PARTY SHALL SETTLE ANY CLAIM OR ACTION WITH RESPECT TO WHICH IT HAS SOUGHT OR INTENDS TO SEEK INDEMNIFICATION PURSUANT TO THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFYING PARTY. SHOULD ANY INDEMNIFIED PARTY BE ENTITLED TO INDEMNIFICATION UNDER THIS SECTION 16.1 AS A RESULT OF A CLAIM OR ACTION BY A THIRD PARTY, AND SHOULD THE INDEMNIFYING PARTY FAIL TO ASSUME THE DEFENSE OF SUCH CLAIM OR ACTION, THE INDEMNIFIED PARTY MAY, AT THE EXPENSE OF THE INDEMNIFYING PARTY, CONTEST (OR, WITH OR WITHOUT THE PRIOR CONSENT OF THE INDEMNIFYING PARTY, SETTLE) SUCH CLAIM OR ACTION. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED HEREIN, NO INDEMNIFYING PARTY SHALL SETTLE ANY CLAIM OR ACTION WITH RESPECT TO WHICH IT MAY BE LIABLE TO PROVIDE INDEMNIFICATION PURSUANT TO THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE INDEMNIFIED PARTY; PROVIDED, HOWEVER, THAT IF THE INDEMNIFYING PARTY HAS REACHED A BONA FIDE SETTLEMENT AGREEMENT WITH THE PLAINTIFF(S) IN ANY SUCH ACTION AND THE INDEMNIFIED PARTY DOES NOT CONSENT TO SUCH SETTLEMENT AGREEMENT, THEN THE AMOUNT SPECIFIED IN THE SETTLEMENT AGREEMENT, PLUS THE INDEMNIFIED PARTY'S REASONABLE ATTORNEY FEES INCURRED PRIOR TO THE DATE OF SUCH SETTLEMENT AGREEMENT, SHALL ACT AS AN ABSOLUTE MAXIMUM LIMIT ON THE INDEMNIFICATION OBLIGATION OF THE INDEMNIFYING PARTY WITH RESPECT TO THE CLAIM, OR PORTION THEREOF, THAT IS THE SUBJECT OF SUCH SETTLEMENT AGREEMENT TO THE EXTENT SUCH SETTLEMENT AGREEMENT FULLY RELEASES THE INDEMNIFIED PARTY AND DOES NOT REQUIRE ANY PAYMENT FROM, OR IMPOSE ANY RESTRICTION ON, THE INDEMNIFIED PARTY.
16.2 LIMITATION ON DAMAGES. NEITHER PARTY NOR ITS SUBSIDIARIES OR
AFFILIATES NOR THE OFFICERS, AGENTS, EMPLOYEES, REPRESENTATIVES,
PARTICIPANTS, PARTNERS, MEMBERS, SHAREHOLDERS, PRINCIPALS, DIRECTORS,
SUCCESSORS OR ASSIGNS OF ANY OF THEM SHALL IN ANY EVENT BE LIABLE TO
THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATES OR THE OFFICERS,
AGENTS, EMPLOYEES, REPRESENTATIVES, PARTICIPANTS, PARTNERS, MEMBERS,
SHAREHOLDERS, PRINCIPALS OR DIRECTORS OF ANY OF THEM FOR CLAIMS FOR
INCIDENTAL, PUNITIVE, CONSEQUENTIAL, EXEMPLARY OR INDIRECT DAMAGES OF
ANY NATURE, ARISING AT ANY TIME, FROM ANY CAUSE WHATSOEVER, WHETHER
ARISING IN TORT, CONTRACT, WARRANTY, STRICT LIABILITY, BY OPERATION OF
LAW OR OTHERWISE, CONNECTED WITH OR RESULTING FROM PERFORMANCE OR
NON-PERFORMANCE UNDER THIS AGREEMENT; PROVIDED, HOWEVER, THAT THIS
SECTION 16.2 IS NOT INTENDED, NOR SHALL IT BE CONSTRUED, TO LIMIT OR
ELIMINATE A PARTY'S OBLIGATION TO PAY LIQUIDATED DAMAGES OR
TERMINATION PAYMENTS OR MAKE ANY OTHER PAYMENTS EXPRESSLY CONTEMPLATED
HEREIN, OR IN ANY COLLATERAL DOCUMENT, EVEN IF IT MAY BE POSSIBLE TO
CHARACTERIZE SUCH LIQUIDATED DAMAGES OR TERMINATION PAYMENTS OR OTHER
PAYMENTS AS INCIDENTAL, PUNITIVE, CONSEQUENTIAL OR INDIRECT DAMAGES.
16.3 Seller Affiliate Guarantee. Seller shall at all times following the Effective Date of this Agreement cause an Affiliate of Seller to maintain in place a payment guarantee in the form attached to this Agreement as Appendix E. For purposes of the previous sentence, an "Affiliate" of Seller shall be any entity controlling, under common control with or controlled by Seller, which has a credit rating on its senior securities at or above BBB- (Standard & Poors) and Baa3 (Moody's). If at any time during the term of this Agreement neither Standard & Poors nor Moody's is in the business of providing credit ratings or willing to rate Seller's affiliates, then Purchaser and Seller will negotiate in good faith to choose and implement an alternative mechanism for determining if and when an entity controlling, under common control with or controlled by Seller has sufficient credit-worthiness to qualify as an "Affiliate."
16.4 No Penalty. The Parties agree that it would be extremely difficult to precisely determine the amount of actual damages that would be suffered by Purchaser due to Seller's failure to meet the Availability Guarantee or achieve the schedule provided under Section 5.1.1, that the Availability Damages set forth in Section 4.3 and the liquidated damages set forth in Section 5.1.2 are fair and reasonable determinations of the amount of actual damages which would be suffered by Purchaser or Seller, as the case may be, by reason of such failure, and that the Availability Damages and other liquidated damages do not constitute a penalty. Similarly, the Parties agree that it would be extremely difficult to precisely determine the amount of actual damages that would be suffered by either Party in case of an Event of Default and a termination of this Agreement by the Non-defaulting Party, that the Termination Payment set forth in Section 12.5.1 is a fair and reasonable determination of the amount of actual damages which would be suffered by the Non-defaulting Party in such event, and that the Termination Payment does not constitute a penalty.
SECTION 17 ASSIGNMENT
17.1 Agreement Binding. This Agreement shall be binding upon, and shall inure to the benefit of, the Parties and their successors and permitted assigns.
17.2 Permitted Assignment. This Agreement shall not be assignable by
Seller without the prior written consent of Purchaser, except that this
Agreement (a) may be assigned by Seller without the requirement for such consent
(but with notice to Purchaser) (i) to any Lender from time to time providing
financing to Seller or its affiliate with respect to all or any portion of the
Project or (ii) to any Lender or its designee in connection with a foreclosure
or other exercise of remedies, and (b) unless otherwise waived by Purchaser,
shall be assigned in whole or in part by Seller without the requirement for such
consent (but with notice to Purchaser) in the event of a sale by Seller of all
or a portion of Seller's interest in the Facility, with the purchaser of
Seller's interest in the Facility assuming Seller's obligations under this
Agreement in the same percentage as the portion of Seller's interest being
transferred bears to Seller's entire interest in the Facility. This Agreement
shall not be assignable by Purchaser without the prior written consent of
Seller, provided, however, that Purchaser may assign this Agreement to another
Customer without the requirement for such consent (but with notice to Seller) so
long as such Customer has not experienced a Material Adverse Change under its
PPA. Any such transferee, assignee or purchaser (other than a Lender through
assignment in connection with a lease or other financing transaction permitted
under Section 6.2.8 of the Ownership Agreement) shall confirm its willingness to
accept all of the assigning Party's obligations under this Agreement by writing
reasonably acceptable to the non-assigning Party. Any such assignee, transferee
or purchaser (other than a Lender through assignment in connection with a lease
or other financing transaction permitted under Section 6.2.8 of the Ownership
Agreement) must be sufficiently creditworthy and otherwise capable of performing
all of the assigning Party's obligations under this Agreement. No assignment or
transfer of this Agreement by a Party shall be permitted during any period in
which an Event of Default of such Party shall have occurred and be continuing
and not cured, unless the other Party shall agree. No assignment of this
Agreement shall relieve the assigning Party of any of its obligations under this
Agreement, except that the assignor shall be released from its obligations under
this Agreement at such time as all future obligations of the assignor hereunder
shall have been assumed by the assignee in a written agreement delivered to the
other Party. Any assignment that does not comply with the provisions of this
Section 17 shall be null and void.
SECTION 18 DISPUTE RESOLUTION
18.1 Good-Faith Negotiations. The Parties shall first negotiate in good faith to attempt to resolve any dispute, controversy or claim arising out of, under, or relating to this Agreement (a "Dispute"), unless otherwise mutually agreed to by the Parties. In the event that the Parties are unsuccessful in resolving a Dispute through such negotiations, either Party may proceed immediately to litigation concerning the Dispute.
18.1.1 The process of "good-faith negotiations" requires that each Party set out in writing to the other its reason(s) for adopting a specific conclusion or for selecting a particular course of action, together with the sequence of subordinate facts leading to the conclusion or course of action. The Parties shall attempt to agree on a mutually agreeable resolution of the Dispute. A Party shall not be required as par of these negotiations to provide any information which is confidential or proprietary in nature unless it is satisfied in its discretion that the other Party will maintain the confidentiality of and will not misuse such information or any information subject to attorney-client or other privilege under applicable Law regarding discovery and production of documents.
18.1.2 The negotiation process shall include at least two (2) meetings to discuss any Dispute. Unless otherwise mutually agreed, the first meeting shall take place within ten days after either Party has received notice from the other of the desire to commence formal negotiations concerning the Dispute. Unless otherwise mutually agreed, the second meeting shall take place no more than ten days later. In the event a Party refuses to attend a negotiation meeting, either Party may proceed immediately to litigation concerning the Dispute.
18.2 Confidentiality and Non-Admissibility of Statements Made in, and Evidence Specifically Prepared for, Good Faith Negotiations. Each Party hereby agrees that all statements made in the course of good faith negotiations, as contemplated in Section 18.1, shall be confidential and shall not be disclosed to or shared with any third parties (other than any person whose presence is necessary to facilitate the negotiation process). Each Party agrees and acknowledges that no statements made in or evidence specifically prepared for good faith negotiations under Section 18.1 shall be admissible for any purpose in any subsequent litigation.
SECTION 19 AMENDMENT
This Agreement cannot be amended, modified or supplemented except by written agreement making specific reference hereto executed by both Parties.
SECTION 20 NOTICES
Other than telephonic notices required or permitted under Section 6.1 or Appendix B, any notice required or permitted to be given hereunder shall be in writing and shall be: (i) personally delivered; (ii) transmitted by postage prepaid registered mail; (iii) transmitted by a recognized overnight courier service; or (iv) transmitted by facsimile to the receiving Party as follows, as elected by the Party giving such notice:
Orlando Utilities Commission 500 South Orange Avenue Orlando, Florida 32801 Attention: Vice-President of Power Resources Telephone: 407-244-8372 Facsimile: 407-275-4120
Orlando Utilities Commission 500 South Orange Avenue Orlando, Florida 32801 Attention: Legal Department Telephone: 407-423-9100 Facsimile: 407-423-9198
Southern Company Services, Inc. 270 Peachtree Street, Bin 935 Atlanta, Georgia 30303 Attention: Director of Contract Administration Telephone: 404-506-5100 Facsimile: 404-506-0304
Troutman Sanders LLP
Bank of America Plaza
600 Peachtree Street N.E.
Atlanta, Georgia 30308
Attention: Robert H. Forry, Esq.
Telephone: 404-885-3142
Facsimile: 404-962-6559
All notices and other communications shall be deemed to have been duly given on
(i) the date of receipt if delivered personally, (ii) five (5) days after the
date of posting if transmitted by mail, (iii) the Business Day following
delivery to the courier if transmitted by overnight delivery service, or (iv)
the date of transmission with confirmation if transmitted by facsimile,
whichever shall first occur. Any Party may change its address for purposes
hereof by notice to the other Party.
SECTION 21 APPLICABLE LAW
This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida, exclusive of any conflict of laws provisions thereof that would apply the laws of another jurisdiction. The Parties hereby submit to the jurisdiction of, and agree that venue for actions hereunder shall be, the U.S. District Court for the Middle District of Florida, if the U.S. District Court has jurisdiction, or, if the U.S. District Court does not have jurisdiction, the Circuit Court of the State of Florida sitting in Orange County, Florida, and the Parties hereby waive any objection to venue in such courts and any objection to any action or proceeding on the basis of forum non conveniens.
SECTION 22 SEVERABILITY
The invalidity or unenforceability of any provision or portion of this Agreement will not affect the validity of the remainder of this Agreement. If any provision of this Agreement is determined to be invalid or unenforceable, the Parties will negotiate in good faith to agree upon substitute provisions to carry out the purpose and intent of the invalid or unenforceable provision. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any Party as a result thereof, the Parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the Parties.
SECTION 23 ENTIRE AGREEMENT
This Agreement and the Collateral Documents contain the complete agreement of the Parties hereto with respect to the matters contained herein and supersede all other agreements, understandings and negotiations, whether written or oral, with respect to the matters contained herein.
SECTION 24 NO THIRD PARTY BENEFICIARIES
This Agreement is intended to be solely for the benefit of Purchaser and Seller and their respective successors and permitted assigns and is not intended to and shall not confer any rights or benefits on any Person not a signatory hereto.
SECTION 25 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute only one legal instrument.
SECTION 26 INFORMATION AND CONFIDENTIALITY
Where a Party makes any calculation of costs or damages under this
Agreement, such Party shall provide, upon the reasonable request of the other
Party, documentation supporting such calculation. Neither Party shall disclose
or otherwise make available to any other party any information of a technical,
commercial or business nature regarding the Project or this Agreement that has
been marked or identified as confidential or proprietary ("Confidential
Information") without the prior written consent of the other Party, except that
(a) Seller or its affiliate may provide Confidential Information to its or any
such affiliate's prospective Lenders, underwriters, investors, affiliates,
advisors, employees, officers and directors to the extent reasonably required in
connection with the administration of this Agreement, the issuance of debt or
equity or other financing activities of Seller or its affiliate, or the
performance of any duties relating to this Agreement; (b) Purchaser may provide
Confidential Information to its advisors, employees, officers, directors and
Lenders to the extent reasonably required in connection with the administration
of this Agreement or the performance of any such Person's duties relating to
this Agreement; (c) any Party may disclose any such Confidential Information in
any litigation or proceeding to enforce or recover damages under this Agreement;
(d) any Party (or its affiliate) may disclose any such Confidential Information
as may be required by any applicable Law, regulation or governmental order; and
(e) any Party (or its affiliate) may disclose such Confidential Information to
any person or entity succeeding to all or substantially all the assets of such
Party (or its affiliate) or all or a substantial portion of its interest in the
Facility; provided, that in the case of (e), any such successor shall agree to
be bound by the provisions of this Section 26. Confidential Information shall
not include information that: (i) the receiving Party can demonstrate was known
to it prior to its disclosure by the other Party; (ii) is, or later becomes,
public knowledge without breach of this Agreement by the receiving Party; (iii)
was received by the receiving Party from a third party without obligation of
confidentiality; or (iv) is developed by the receiving Party independently from
Confidential Information received from the other Party, as evidenced by
appropriate documentation. In the event that disclosure is required by a valid
order of a court or Governmental Body, the Party subject to such requirement may
disclose Confidential Information to the extent so required, but shall promptly
notify the other Party and shall cooperate with the other Party's efforts to
obtain protective orders or similar restraints with respect to such disclosure.
The provisions of this Section 26 shall continue in effect until three years
after the end of the Operating Period.
The Parties understand that under the Florida Public Records Law (Section 119.10, Florida Statutes), any Party or all of them may be subject to statutory fines and penalties, including but not limited to a requesting Party's costs and attorney's fees for failure to make public records available for public inspection upon request (Chapter 119, Florida Statutes). In addition, each Party may be subject to its own costs and expenses of litigation. With this understanding in mind, the Parties agree that in the event Purchaser in an attempt to comply with this Agreement, refuses to honor a public records request under Chapter 119, Florida Statutes, for examination or inspection of a confidential document of Seller or any affiliate of Seller and is forced to defend its actions in a court of competent jurisdiction, Seller shall indemnify, defend, and hold Purchaser harmless from and against any fines, penalties, costs, attorney's fees and expenses, including, but not by way of limitation, attorney's fees, expert fees, court costs and other costs arising from or related to defending any lawsuit bought pursuant to Chapter 119, Florida Statutes; provided, however, Seller's consent with such refusal shall be obtained before Seller can be liable under this Section 26. In addition, the Parties shall cooperate to provide witnesses to support the Parties' declarations and certification that the Confidential Information is a valid trade secret under the above cited Florida law and meets all definitional requirements therein or is exempt from disclosure under other applicable Florida law.
SECTION 27 PUBLIC STATEMENTS
Seller and Purchaser shall consult with each other and neither of them shall issue a press release or make a statement intended for release to the general public with respect to the transactions contemplated hereby without the consent of the other Party, which consent shall not be unreasonably withheld, unless the Party desiring to make such statement or press release is advised by legal counsel that a statement or press release is required by applicable Law (including information provided pursuant to a request for public information under the Florida Public Records Law, Section 119.10, Florida Statutes); provided, however, that in this event the Party making the public statement or press release shall notify the other Party in advance of such statement or press release and allow the other Party reasonable time to comment on such statement or press release. Notwithstanding the immediately preceding sentence, the Parties acknowledge that certain meetings of the Orlando Utilities Commission and the City of Orlando are open to the public, and nothing in this Agreement shall be deemed to require that the proceedings of such meetings not be made public or to restrict the reporting by the media of such proceedings.
SECTION 28 INSURANCE
Seller and Purchaser, and all contractors and subcontractors performing any services in connection with the operation or maintenance of the Facility, shall obtain and maintain in force comprehensive general liability insurance, and property insurance for injury to persons and property, automobile liability insurance and workman's compensation insurance, all in amounts and under terms as required by the Operating Agreement.
SECTION 29 TAXES
Purchaser shall reimburse Seller for, or pay to Seller, all sales, use, personal property and other taxes of every kind paid or collected by Seller, if any, that are not currently levied and are hereafter levied on the purchase, sale or use of fuel consumed by the Facility to provide Energy or Ancillary Services in accordance with this Agreement or the purchase, sale or use of Capacity, Energy or Ancillary Services under this Agreement, but excluding any taxes levied on Seller's net income. Purchaser shall pay directly for all such sales, use, personal property and other taxes which it is legally obligated and empowered to pay. In the event Seller, on behalf of Purchaser, pays any taxes that are the responsibility of Purchaser to reimburse or pay, under the first two sentences of this Section 29, the amount so paid by Seller shall be added to a monthly invoice submitted by Seller to Purchaser under Section 9, and Purchaser shall pay such amount in accordance with Section 9. Upon the reasonable request of Purchaser, Seller agrees to (i) provide documents related to taxes or assessments to be reimbursed or paid by Purchaser under this Agreement and (ii) cooperate with Purchaser at Purchaser's expense should Purchaser seek to obtain from the entity to which taxes were paid a refund of any taxes paid by Seller and/or reimbursed or paid by Purchaser.
APPENDIX A
TECHNICAL LIMITS
Unit Operating Modes
The Facility will have several different operating modes.
o Mode 1: Normal Operation--both gas turbines (CTs) operating with no supplemental firing of the Heat Recovery Steam Generator (HRSG) and no gas turbine power augmentation.
o Mode 2: Supplemental Firing Operation--both gas turbines operating at full load with supplemental firing of the HRSG.
o Mode 3: Power Augmentation Operation--both gas turbines operating at full load with supplemental firing of the HRSG's (Mode 2 Supplemental Firing Operation) to produce both steam for full steam turbine-generator output with the maximum allowed continuous throttle flow at the maximum allowed continuous throttle pressure and steam for full gas turbine power augmentation (steam injection.)
o Mode 4: Part-load Operation--one or both gas turbines operating at less than full load.
The Facility will require "pipeline quality gas" meeting the requirements of GE fuel specification "GEI 41040E - Process Specification Fuel Gases for Combustion in Heavy Duty Gas Turbines".
Natural gas is to be delivered to the Facility by pipeline and the pipeline and gas must meet the following equipment characteristics and requirements:
o Nominal Maximum N.G. Flow (HHV) per Block (2x1) [redacted]
o Nominal N.G. Higher Heating Value [redacted]
o Minimum Fuel Supply Temperature (after PRV) [redacted]
o Fuel Pressure at Gas Control Valve** [redacted]
[redacted]
* Based on Winter Peaking (19(degree)F) Power during Full Pressure Operation.
** Reference GE Pub. GEI 41040E.
The Facility will require fuel oil that is in compliance with ASTM Standard Specification D-2880 (as revised) and "GE Gas Turbine Liquid Fuel Specifications" (document number GEI 41047H). This No. 2 GT Grade Gas Turbine Fuel Oil must be in compliance with the specifications and procedures for No. 2 Fuel Oil as defined in ASTM D396.
Note that environmental permitting may create conditions for sulfur, fuel bound nitrogen and other specifications which could affect or add minimum specifications, such as, but not limited to, those identified in the following table:
ASTM TEST
SPECIFICATIONS METHOD
------
Sulfur, % Wt., Max. 0.05 D - 1266
Fuel Bound Nitrogen 0.050% Max.
|
The Facility will be capable of operating with fuel oil. The Facility may fire oil in the gas turbines only and not in the HRSG duct burners. During these periods, the Facility shall operate in Mode 1 (Normal Operation) only.
The Facility will require shutdown for a minimum of one hour prior to switching from natural gas to oil firing. The fuel oil forwarding system will not be operated during normal gas firing, but operation of the fuel forwarding system will be initiated upon proper notice of a requirement for fuel switching. The Facility will be capable of switching from oil to natural gas without shutdown; however, the Facility may be required to decrease to a minimum load and stabilize prior to ramping to full load.
The Facility will be capable of being controlled via Automatic Generation Control (AGC) in Mode 1 (Normal Operation). The AGC load range and ramp rate will be set by the Facility's operator based on the actual capability of the CTs as determined through testing. With the duct burners firing (Mode 2 - Supplemental Firing Operation), the load range and ramp rate will be set and manually controlled by the Facility's operator based on the capabilities of the duct burners. No load following capability is available in Mode 3 (Power Augmentation Operation).
The Facility will be allowed to operate in Mode 3 (Power Augmentation Operation) only at ambient temperatures of [redacted].
The Facility will require [redacted] of de-mineralized water for Mode 1 (Normal Operation).
The expected maximum allowable rate of load increase for the Facility will be [redacted]. Actual maximum load increase rate will be determined by actual testing and in light of final permit restrictions and emissions tests.
The Facility will be expected to be capable of operating minimum load with one CT [redacted]. Actual minimum load will be determined in light of final NOx emissions and permit restrictions and testing.
Required startup times for the Facility shall be as follows:
Mode 1 (Normal Operation): refer to Attachment 1 - Time to Dispatch Curve. Note: Actual Curve to be determined by testing.
Mode 2 (Supplemental Firing Operation): [redacted] Mode 1 (Normal Operation).
Mode 3 (Power Augmentation Operation): [redacted] Mode 1 (Normal Operation) or [redacted] Mode 2 (Supplemental Firing Operation).
The Facility will be allowed to operate in Mode 3 (Power Augmentation Operation) a [redacted] /year based on the LTSA contract with GE.
The Facility will not be allowed to operate in a traditional CT only mode (no simple cycle operation, i.e., no bypass stack). However, the CTs will be capable of operating independently of the steam turbine utilizing the steam bypass systems for a limited time. Most major plant equipment (such as HRSG BFP's, condenser, cooling tower and circulating water pumps) will be required during operation in this mode. The HRSG duct burners will not be available in this mode. The maximum generation capability of the Facility operating in this mode will be [redacted] CT load.
The Facility's CT evaporative coolers should not be operated at ambient temperatures less than [redacted] to prevent freezing at the CT compressor inlet.
[redacted]
APPENDIX B
REQUESTS FOR ENERGY
1.1 Schedules for Requested Quantities of Energy. Purchaser and each other Customer shall provide Seller with a single Request for Energy in order to schedule requested quantities of each category of unit output as follows:
1.1.1 Day Ahead Daily Schedule. Customers shall communicate the day ahead Request for Energy for each day to Seller at or before [redacted] of the immediately preceding day before delivery is to be made, or such other earlier time that may be required by an RTO.
1.1.1.1 When AGC mode is available, during each hour the unit is scheduled to be in AGC mode, the Request for Energy shall specify the maximum amount of Energy desired for each of the twenty-four (24) hours. During each hour the unit is in AGC mode, the Customers shall not be permitted to reduce the Request for Energy to an amount less than [redacted] of the maximum Energy scheduled during that hour in the Request for Energy from the Customers' aggregate Equity Capacity and the Customers' aggregate capacity available under the Power Purchase Agreements (Customers' "PPA Capacity"). If in any hour, should the Customers reduce the Request for Energy amount by more than [redacted], the Customers shall pay Seller [redacted] hour for the difference between the amount of the Delivered Energy and [redacted] below the Request for Energy amount.
1.1.1.2 During each hour the Facility is not scheduled to be in AGC mode or the AGC mode is unavailable, the Request for Energy shall specify the amount of Energy from the Customers' aggregate PPA Capacity and aggregate Equity Capacity for each of the twenty-four (24) hours. Requests for Energy shall be submitted in [redacted] in a total amount that falls between the Facility's minimum capability and its maximum capability as described in the Technical Limits.
1.2. Hourly Changes to the Daily Schedule. The Customers jointly shall be entitled to make changes to a Request for Energy by communicating such changes to Seller no later than [redacted] prior to the beginning of the hour in which such changes are to become effective. The Customers shall be responsible for any costs associated with OASIS notifications and NERC tagging requirements.
1.3. Capacity Emergency. During any periods in which the Customers experience a Capacity Emergency, the Customers shall be entitled to increase the Request for Energy on shorter notice than that provided in paragraph 1.2 above by an amount not to exceed the Customers' unavailable resources that were the cause of the Capacity Emergency and Seller shall endeavor to comply with the request consistent with the Technical Limits, Prudent Utility Practice, applicable Law and Permit requirements.
1.4. Minimum Start-up Time. If the Customers have scheduled a zero amount of Capacity in any hour and the Facility is not on-line, the Customers shall provide notice consistent with the Technical Limits prior to scheduling any Request for Energy.
1.5. Load Following Service. The Customers shall have the ability to control the output of the Facility using the AGC mode, if available, only to the extent that the Facility has the ability to operate in the AGC mode consistent with the Technical Limits, Prudent Utility Practice, and applicable Law and Permit requirements.
1.6 Electronic Scheduling. The Customers shall use electronic scheduling for Requests for Energy under this Agreement, if and to the extent that Seller's electronic scheduling capability is operational. To the extent it is not, the Parties will use other mutually agreed-upon communication procedures (such as fax).
2.1.1 If the Facility is in load following service and OUC, acting for
itself and on behalf of the other Customers, determines that the actual
output of the Facility is not within [redacted] of the Request for Energy,
OUC shall communicate to Seller the amount of error. Seller shall endeavor
to adjust the actual output of the Facility to be equal to the Request for
Energy within [redacted] of receipt of the notification. If the actual
output of the Facility does not equal the Request for Energy within
[redacted] of the notification, the Customers shall be entitled to
reimbursement of their costs from Seller as follows:
2.1.1.1 If the actual output of the Facility is greater than the Request for Energy (an "Oversupply Condition"), the decremental cost associated with over-generation shall be documented by the Customers until the actual output of the Facility equals the Request for Energy. OUC, acting for itself and on behalf of the other Customers, shall coordinate with Seller during the period that the actual output of the Facility exceeds the Request for Energy. The Customers shall advise Seller of the total decremental costs associated with each instance of an Oversupply Condition. Seller shall compensate OUC, on its own behalf and as agent for KUA and FMPA, for any such Oversupply Condition.
2.1.1.2 If the actual output of the unit is less than the Request for Energy (an "Undersupply Condition"), the provisions of Section 4.3 will apply if applicable.
2.1.2 If the Facility is not in load following service and OUC, acting for itself and on behalf of the other Customers, determines that the actual output of the unit is not within [redacted] of the schedule included in the Request for Energy (plus any other scheduled output pursuant to Seller's right to schedule Energy pursuant to Section 4.5 of this Agreement), then OUC shall communicate to Seller the amount of the error. Seller shall endeavor to adjust the actual output of the Facility to be equal to the Request for Energy (plus any other scheduled output pursuant to Seller's right to schedule Energy) within [redacted] of receipt of the notification. If the actual output of the Facility does not equal the schedule included in the Request for Energy (plus any other scheduled output pursuant to Seller's right to schedule Energy) within [redacted] of the notification, the Customers shall be entitled to reimbursement of their costs from Seller as follows:
2.1.2.1 If an Oversupply Condition exists, the decremental cost associated with over-generation shall be documented by the Customers until the actual output of the unit equals the Request for Energy (plus any other scheduled output pursuant to Seller's right to schedule Energy). The Customers shall advise Seller of the total decremental costs associated with each instance of an Oversupply Condition.
2.1.2.2 If an Undersupply Condition exists, the provisions of Section 4.3 will apply if applicable.
3.1 Notification Requirements for Delivery of Energy from Alternate Resources.
3.1.1 When the Facility is available and running at minimum load and spinning reserves are available, Seller will notify OUC if Seller has scheduled delivery of Energy from Alternate Resources to meet all or a portion of Customers' Schedule at least [redacted] (or the amount of time in which an RTO has determined that the Physical Transmission Rights ("PTRs") may be recalled) prior to the scheduled commencement of delivery of such Energy. For purposes of paragraph 3.1, the phrase "has scheduled delivery" means that Seller has scheduled and arranged the OASIS, tagging, and any transmission rights required by an RTO. If an RTO is established in Florida, and under such condition the RTO determines that Physical Transmission Rights (PTRs) may be recalled if not utilized, then Seller will notify OUC if Seller has so scheduled delivery of Energy from Alternate Resources at least [redacted] (or the amount of time in which an RTO has determined that the PTRs may be recalled) and [redacted] prior to the scheduled commencement of delivery of such Energy. At the time Seller notifies OUC that Seller has so scheduled delivery of Energy from Alternate Resources, Seller will identify the source and quantity of such Energy and the path of its transmission to OUC.
3.1.2 When the Facility is unavailable and is not scheduled to return to service in time for Seller to serve the Customers' Schedule, Seller will notify OUC within [redacted] after Seller's receipt of Customers' Schedule if Seller has scheduled delivery of Energy from Alternate Resources to meet all or a portion of such Customers' Schedule. At the time Seller notifies OUC that Seller has so scheduled delivery of Energy from Alternate Resources, Seller will identify the source and quantity of such Energy and the path of its transmission to OUC.
3.1.3 When the Facility becomes unavailable while Seller is serving Customers' Schedule, Seller will notify OUC within [redacted] after the Facility is deemed unavailable if Seller has scheduled delivery of Energy from Alternate Resources to meet all or a portion of the remainder of Customers' Schedule. If Seller notifies OUC that Seller has so scheduled delivery of Energy from Alternate Resources, then Seller will schedule delivery of such Energy to begin no later than the top of the next full hour following the hour that Seller notified OUC of Seller's election. (Example: The Facility becomes unavailable at [redacted] Seller gives notice no later than [redacted] if Seller will arrange to deliver Energy from Alternate Resources. Delivery from Alternate Resources should begin no later than [redacted]) At the time Seller notifies OUC that Seller has so scheduled delivery of Energy from Alternate Resources, Seller will identify the source and quantity of such Energy and the path of its transmission to OUC.
3.1.4 When the Facility is expected to return from an outage, but does
not, Seller will notify OUC within [redacted] of Seller's realization that
the Facility will not be available as expected to meet the start of a
Customer's Schedule. If the start of such Customer's Schedule is to begin
within [redacted] or less from the time of such notice, Seller will notify
OUC at the same time if Seller has scheduled delivery of Energy from
Alternate Resources to meet all or a portion of such Customer's Schedule.
Otherwise Seller will notify OUC if Seller has scheduled delivery of Energy
from Alternate Resources to meet all or a portion of such Customer's
Schedule at least [redacted] prior to the start of such Schedule and
preferably at least [redacted] prior. If Seller notifies OUC that Seller
has scheduled delivery of Energy from Alternate Resources, then Seller will
schedule delivery of such Energy to begin no later than the top of the next
full hour following the hour that Seller notified OUC of Seller's election
(but not earlier than the original start of such Customers' Schedule). If
an RTO develops in Florida, and under such condition the RTO determines
that PTRs may be recalled if not utilized, then Seller will notify OUC if
Seller has scheduled delivery of Energy from Alternate Resources at least
[redacted] (or the amount of time in which an RTO has determined that the
PTRs may be recalled) and [redacted] prior to the scheduled commencement of
delivery of such Energy. At the time Seller notifies OUC that Seller has so
scheduled delivery of Energy from Alternate Resources, Seller will identify
the source and quantity of such Energy and the path of its transmission to
OUC.
APPENDIX C
CAPACITY TESTING PROCEDURE
The capability of the Facility will be required to be demonstrated prior to the Commencement Date. The demonstration of the capability of the Facility following the Commencement Date shall be scheduled in accordance with the provisions of Section 4.1.2. As provided in Section 4.1.3, Participants may also request additional tests of the Facility which shall not be used as the basis for determining the Demonstrated Capability of the Facility. Purchaser shall have the right to monitor (either on-Site or otherwise) all performance tests.
All Capacity testing will be adjusted to the Rated Conditions using correction curves supplied by Seller. "Rated Conditions" means seventy (70) degrees Fahrenheit ((degree)F) and forty five percent (45%) relative humidity. The demonstrated net output of the Facility will be as measured by the Meters.
On the date of the Capacity test, Seller shall bring the Facility to maximum full load capability within the Technical Limits of the Facility for the ambient conditions for that day. The test shall be scheduled between the weekday hours of 11:00 a.m. and 7:00 p.m. (prevailing Eastern Time) and will be conducted over an eight consecutive hour period (or a lesser period if mutually agreed upon). Seller must notify Customers when the Facility is at maximum full load capability, at which time the Capacity test shall begin. The Demonstrated Capability will be the average net hourly output over the test period corrected to Rated Conditions.
APPENDIX D
Example Calculations of Quantities of Gas Transportation and/or Commodity Required for Delivery from Alternate Resources
Listed below are examples of the determination of the amount of gas transportation and/or commodity that the Fuel Supply Agent shall provide to Seller pursuant to Section 4.2.5.2 or 4.2.5.3 when Seller elects to deliver Energy from Alternate Resources.
Example 1
The facility is unavailable. The Customers have Scheduled 400 MWh of Energy in an hour. Seller notifies OUC that Seller will supply the 400 MWh of Energy for the subject hour from Alternate Resources.
In Example 1, the Fuel Supply Agent will provide [redacted]
Example 2
The facility is unavailable. The Customers have Scheduled 610 MWh of Energy in an hour. Seller notifies OUC that Seller will supply 550 MWh of Energy for the subject hour from Alternate Resources.
In Example 2, the Fuel Supply Agent will provide [redacted]
Example 3
The facility is available. The Customers have Scheduled 450 MWh of Energy in an hour. Seller notifies OUC that Seller will deliver 100 MWh of Energy for the subject hour from Alternate Resources and 350 MWh from the Facility.
In Example 3, the Fuel Supply Agent will provide [redacted]
Example 4
The facility is available. The Customers have Scheduled 600 MWh of Energy in an hour. Seller notifies OUC that Seller will deliver 200 MWh of Energy for the subject hour from Alternate Resources and 400 MWh from the Facility.
In Example 4, the Fuel Supply Agent will provide [redacted]
APPENDIX E
AFFILIATE GUARANTEE
[FORM OF] PAYMENT GUARANTY
This Guaranty Agreement (the "Guaranty") is made by The Southern Company ("Guarantor"), a Delaware corporation, in favor of Orlando Utilities Commission ("OUC"), a Florida statutory chartered public utility commission.
WHEREAS, Southern Company - Florida LLC ("Principal Obligor"), a Delaware limited liability company, and OUC entered into that certain Power Purchase Agreement, dated as of March 19, 2001 (the "PPA");
WHEREAS, Guarantor has agreed to provide assurance for the payment of Principal Obligor's obligations in connection with the PPA as provided in this Guaranty; and
WHEREAS, the execution and delivery of this Guaranty by Guarantor is pursuant to the terms of the PPA in order to satisfy the requirement that Principal Obligor cause an Affiliate to maintain in place a guaranty of Principal Obligor's obligations under the PPA.
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees as follows:
1. Guaranty. Guarantor hereby irrevocably, unconditionally and absolutely guarantees the punctual payment when due of Principal Obligor's payment obligations arising under the PPA, as amended or modified from time to time, together with any interest thereon, including, without limitation, any interest amounts accruing under the PPA during the pendency of insolvency, bankruptcy, reorganization or other similar proceedings affecting Principal Obligor or its assets; provided, however, that the maximum liability of Guarantor under this Guaranty with respect to Principal Obligor's obligations under the PPA shall be limited to the amount that is equal to the then-current Termination Payment (as defined in the PPA), which shall not exceed in any event Fifteen Million Five Hundred Sixty-Eight Thousand Eight Hundred Dollars ($15,568,800) (collectively, the "Guaranteed Obligations"); provided, further, that the cap on Guarantor's liability under this Guaranty established in the immediately preceding clause creates an absolute cap on Guarantor's liability to OUC in relation to the PPA and, if and when Guarantor's liability under this Guaranty has reached such cap, then from and after such time, Guarantor shall have no further liability under this Guaranty whatsoever to OUC and this Guaranty shall thereupon terminate; provided, further, that costs incurred by Guarantor under Section 4 hereof shall not be counted for purposes of determining whether Guarantor has reached such cap, unless and to the extent that Guarantor's costs under such Section 4, together with costs incurred by Guarantor under the corresponding provisions of Guarantor's other three Payment Guarantees of contemporaneous date to one or more of OUC, FMPA and KUA, exceed Three Million Dollars ($3,000,000) in the aggregate.
2. Guaranty Absolute. The liability of Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of or defect or deficiency in the PPA or any other documents executed in connection with the PPA;
(b) any assignment, transfer, modification, extension or waiver of any of the terms of the PPA;
(c) any change in the time, manner, terms of payment of or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from any agreement or instrument executed in connection therewith;
(d) any sale, exchange, release or non-perfection of any property standing as security for the liabilities hereby guaranteed or any liabilities incurred directly or indirectly hereunder or any set off against any of said liabilities, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations;
(e) applicable statutes of limitation, failure, omission, delay, waiver or refusal by OUC to exercise, in whole or in part, any right or remedy held by OUC with respect to the PPA or any transaction under the PPA; or
(f) any change in the existence, structure or ownership of Guarantor or Principal Obligor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting Principal Obligor or its assets.
The obligations of the Guarantor hereunder are several from the Principal Obligor or any other person, and are primary obligations concerning which the Guarantor is the principal obligor. There are no conditions precedent to the enforcement of this Guaranty, except as expressly contained herein.
This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations are annulled, set aside, invalidated, declared to be fraudulent or preferential, rescinded or must otherwise be returned, refunded or repaid by OUC upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Principal Obligor or any other guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, Principal Obligor or any other guarantor or any substantial part of its property or otherwise, all as though such payment or payments had not been made.
3. Waiver. This is a guaranty of payment and not of collection. Guarantor hereby waives:
(a) notice of acceptance of this Guaranty, of the creation or existence of any of the Guaranteed Obligations and of any action by OUC in reliance hereon or in connection herewith;
(b) except as expressly set forth herein, presentment, demand for payment, notice of dishonor or nonpayment, protest and notice of protest with respect to the Guaranteed Obligations; and
(c) any requirement that suit be brought against Principal Obligor or any other person as a condition to Guarantor's liability for the Guaranteed Obligations under this Guaranty or as a condition to the enforcement of this Guaranty against Guarantor.
Notwithstanding anything to the contrary set forth herein, Guarantor shall have the same defenses available to it as Principal Obligor may have with respect to any payment obligations arising under the PPA.
4. Expenses. Guarantor agrees to pay on demand any and all costs, including reasonable legal fees, and other expenses incurred by OUC in enforcing Guarantor's payment obligations under this Guaranty; provided that the Guarantor shall not be liable for any expenses of OUC if no payment under this Guaranty is due.
5. Subrogation. Guarantor shall be subrogated to all rights of OUC against Principal Obligor in respect of any amounts paid by Guarantor pursuant to the Guaranty, provided that Guarantor waives any rights it may acquire by way of subrogation under this Guaranty, by any payment made hereunder or otherwise, until all of the Guaranteed Obligations shall have been irrevocably paid to OUC in full. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all the Guaranteed Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of OUC and shall forthwith be paid to OUC to be applied to the Guaranteed Obligations. If (a) the Guarantor shall perform and shall make payment to OUC of all or any part of the Guaranteed Obligations and (b) all the Guaranteed Obligations shall have been paid in full, OUC shall, at the Guarantor's request, execute and deliver to the Guarantor appropriate documents necessary to evidence the transfer by subrogation to the Guarantor of any interest in the Guaranteed Obligations resulting from such payment by Guarantor.
6. Notices. All demands, notices and other communications provided for hereunder shall, unless otherwise specifically provided herein, (a) be in writing addressed to the party receiving the notice at the address set forth below or at such other address as may be designated by written notice, from time to time, to the other party, and (b) be effective upon delivery, when mailed by U.S. mail, registered or certified, return receipt requested, postage prepaid, or personally delivered. Notices shall be sent to the following addresses:
If to OUC:
Orlando Utilities Commission
500 South Orange Avenue
Orlando, FL 32801
Attention: Vice-President of Power Resources
Tel: 407-244-8372
Fax: 407-275-4120
With a copy to:
Orlando Utilities Commission
500 South Orange Avenue
Orlando, FL 32801
Attention: Legal Department
Telephone: 407-423-9100
Facsimile: 407-423-9198
If to Guarantor:
The Southern Company
c/o Southern Company Services, Inc.
270 Peachtree Street NW
Suite 2000
Atlanta, GA 30303
Attention: Allen L. Leverett, Vice President and Treasurer
Tel: 404-506-0710
Fax: 404-506-0712
With a copy to:
Robert H. Forry, Esq.
Troutman Sanders LLP
Bank of America Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Tel: 404-885-3142
Fax: 404-962-6559
If to Principal Obligor:
Southern Company - Florida LLC
c/o Southern Company Services, Inc.
270 Peachtree Street NW
Suite 2000
Atlanta, GA 30303
Attention: Allen L. Leverett, Vice President and Treasurer
Tel: 404-506-0710
Fax: 404-506-0712
With a copy to:
Robert H. Forry, Esq.
Troutman Sanders LLP
Bank of America Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Tel: 404-885-3142
Fax: 404-962-6559
7. Demand and Payment. Any demand by OUC for payment hereunder shall be in
writing, signed by a duly authorized officer of OUC and delivered to the
Guarantor pursuant to Section 6 hereof, and shall (a) reference this
Guaranty, (b) specifically identify the Principal Obligor, the Guaranteed
Obligations to be paid and the amount of such Guaranteed Obligations and
(c) set forth payment instructions. There are no other requirements of
notice, presentment or demand. Guarantor shall pay, or cause to be paid,
such Guaranteed Obligations within three (3) business days of receipt of
such demand.
8. No Waiver; Remedies. Except as to applicable statutes of limitation, no failure on the part of OUC to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
9. Replacement of Guarantor and Termination.
(a) Guarantor may assign and delegate its rights and obligations under this Guarantee, in whole or in part, as follows: (i) without the consent of OUC, to Southern Power Company, a Delaware corporation and parent company of Principal Obligor, or other Affiliate of Principal Obligor, if Southern Power Company or such other Affiliate has achieved the following three characteristics: (1) a credit rating on its senior securities at or above BBB- (Standard & Poors) and Baa3 (Moody's), (2) Net Equity (as hereinafter defined) of at least Two Hundred Fifty Million Dollars ($250,000,000), as reflected on its most recent audited balance sheet, and (3) Gross Equity (as hereinafter defined) of at least Five Hundred Million Dollars ($500,000,000), provided, however, that the date on which Guarantor causes such a replacement of this Guaranty under this Section 9(a)(i) may not be earlier than the Commercial Operation Date (as defined in the Ownership Agreement); or (ii) with the consent of OUC, which consent may not be unreasonably withheld, to an assignee which has a credit rating on its senior securities at or above BBB- (Standard & Poors) and Baa3 (Moody's) and which meets other reasonable financial criteria similar to those identified in Section 9(a)(i), provided, however, that if Guarantor requests OUC's consent to such an assignment and delegation in connection with a permitted transfer or assignment of the PPA, then OUC may not withhold such consent if the assignee meets the financial criteria in Section 9(a)(ii). An assignment and delegation of Guarantor's rights and obligations under this Section 9 shall become effective when the replacement guarantor executes and delivers to OUC a replacement guaranty on terms and conditions substantially similar to this Guaranty.
(b) For purposes of this Guaranty, the following terms shall have the following meanings:
"Net Equity" shall mean the aggregate of the capital stock and other equity accounts (including retained earnings and paid-in capital) of Southern Power Company or other Affiliate of Principal Obligor, as the case may be.
"Gross Equity" shall mean Net Equity plus Guaranteed Debt plus loans to Southern Power Company from its parent corporation.
"Guaranteed Debt" shall mean any obligations of Southern Power Company or other Affiliate of Principal Obligor, as the case may be, for or in respect of (a) moneys borrowed or raised (whether or not for cash) by whatever means (including acceptances, deposits, discounting, letters of credit, factoring (other than on a non-recourse basis), finance leases, and any other form of financing which is recognized in Southern Power Company's or other Affiliate of Principal Obligor's, as the case may be, financial statements as being in the nature of a borrowing (excluding for the avoidance of doubt, share capital, share premium account and any capital prepayment reserve), which has been guaranteed by Guarantor, and (b) the deferred purchase price of assets or services (other than goods and services obtained on normal commercial terms in the ordinary course of business or operations), which has been guaranteed by Guarantor.
"Affiliate" of an Entity shall mean any other entity controlled by, controlling or under common control with such entity, where control of an entity means the ability to direct the policies of such entity through election of a majority of such entity's board of directors or other governing body or by contract or otherwise.
(c) This Guaranty shall terminate, and upon the effective date of such termination Guarantor shall have no further liability hereunder, on the earliest to occur of: (i) the satisfaction of all of the Guaranteed Obligations, (ii) the termination or expiration of the PPA, (iii) the date on which the liability cap is reached, as provided in Section 1 hereof, or (iv) the date on which an assignment and delegation by Guarantor of its rights and obligations hereunder becomes effective under Section 9(a) hereof.
10. Assignment by OUC; Successors and Assigns. OUC may, upon notice to Guarantor, assign its rights hereunder only to a subsequent owner of all of OUC's interest in the Facility and the Interconnection Facilities (as defined in the PPA) without the consent of Guarantor. Subject to the foregoing, this Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, permitted assigns, and legal representatives.
11. Amendments, Etc. No amendment of this Guaranty shall be effective unless in writing and signed by Guarantor and OUC. No waiver of any provisions of this Guaranty or consent to any departure by Guarantor therefrom shall in any event be effective unless such waiver shall be in writing and signed by OUC. Any such waiver shall be effective only in the specific instance and for the specific purpose for which it was given.
12. Captions. The captions in this Guaranty have been inserted for convenience only and shall be given no substantive meaning or significance whatsoever in construing the terms and provisions of this Guaranty.
13. Representations and Warranties.
The Guarantor represents and warrants as follows:
(a) The Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full corporate power to execute, deliver and perform this Guaranty.
(b) The execution, delivery and performance of this Guaranty have been and remain duly authorized by all necessary corporate action and do not contravene the Guarantor's constitutional documents or any contractual restriction binding on the Guarantor or its assets.
(c) This Guaranty constitutes the legal, valid and binding obligation of the Guarantor enforceable against Guarantor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting OUC's rights and to general equity principles.
(d) The financial statements of Guarantor for the year ended December 31, 2000 (the "Financial Statements"), heretofore delivered to OUC or filed with the United States Securities Exchange Commission by Guarantor present fairly the financial condition and results of operations of Guarantor and its consolidated subsidiaries as of the dates and for the period specified therein in conformity with generally accepted accounting principles, and, except as otherwise expressly stated therein, consistently applied.
14. Limitation by Law. All rights, remedies and powers provided in this Guaranty may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Guaranty are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they will not render this Guaranty invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law.
15. Governing Law; Submission to Jurisdiction. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Georgia, exclusive of any conflict of laws provisions thereof that would apply the laws of another jurisdiction. The parties hereby submit to the jurisdiction of, and agree that venue for actions hereunder shall be, the U.S. District Court for the Northern District of Georgia, if the U.S. District Court has jurisdiction, or, if the U.S. District Court does not have jurisdiction, the Superior Court of the State of Georgia sitting in Fulton County, Georgia and the parties hereby waive any objection to venue in such courts and any objection to any action or proceeding on the basis of forum non conveniens.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed and delivered by its duly authorized officer effective as of this ___ day of __________, 2001.
"Guarantor"
THE SOUTHERN COMPANY
Exhibit 10.26
EXECUTION COPY
PUBLIC RELEASE VERSION
POWER AND GAS SUPPLY AGREEMENT
Dated as of March 28, 2002
Among
SOUTHERN POWER COMPANY,
DYNEGY POWER MARKETING, INC.
and
DYNEGY MARKETING AND TRADE
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS...........................................................................................2
ARTICLE 2: TERM OF AGREEMENT....................................................................................12
2.1 Filing of Agreement..................................................................................12
2.2 Termination Date.....................................................................................12
2.3 Effect of Termination................................................................................12
2.4 Effective Date.......................................................................................12
ARTICLE 3: DETERMINATION OF CONTRACT CAPACITY; SALE AND PURCHASE OF CONTRACT CAPACITY AND ENERGY................12
3.1 Determination of Contract Capacity...................................................................12
3.2 Sale and Purchase of Contract Capacity...............................................................13
3.3 Sale and Purchase of Contract Energy.................................................................13
3.4 Source of Contract Energy............................................................................14
ARTICLE 4: THE FACILITY, SCHEDULED ENERGY AND COMMITTED CAPACITY................................................14
4.1 The Facility.........................................................................................14
4.2 Pre-Scheduled Excused Hours..........................................................................14
4.3 Permits; Compliance with Laws........................................................................16
4.4 Operating Procedures and Operating Committee.........................................................16
4.5 Provision of Contract Capacity and Contract Energy...................................................16
ARTICLE 5: PAYMENTS.............................................................................................20
5.1 Reservation Payment..................................................................................20
5.2 Energy Payment.......................................................................................20
5.3 Gas Payment, Fuel Purchase Payment, and Gas Reservation Payment......................................20
5.4 Initial Dispatch Payment.............................................................................20
5.5 Performance Bonus....................................................................................21
5.6 Additional Payments..................................................................................22
5.7 Regulatory...........................................................................................22
5.8 Wholesale Generation Rates..........................................................................236
ARTICLE 6: SCHEDULING, SOUTHERN'S AND DYPM'S RIGHTS TO THE FACILITY, TITLE AND RISK OF LOSS.....................23
6.1 Scheduling...........................................................................................23
6.2 Replacement Resources Gas............................................................................23
6.3 Southern's Rights to the Facility....................................................................25
6.4 Title and Risk of Loss...............................................................................25
6.5 Provision of Committed Capacity......................................................................26
ARTICLE 7: TRANSMISSION SERVICE.................................................................................26
7.1 DYPM Obligations and Assumption of Transmission Risk.................................................26
7.2 Southern Obligations.................................................................................26
7.3 Imbalances and Penalties.............................................................................27
7.4 Optional System Upgrades.............................................................................27
ARTICLE 8: GAS DELIVERY OBLIGATIONS AND GAS ARRANGEMENTS........................................................28
8.1 DMT Obligations......................................................................................28
8.2 Southern Obligations.................................................................................29
8.3 Transportation Obligations...........................................................................29
8.4 Pipeline Imbalance Charges...........................................................................29
8.5 Gas Nominations Responsibility.......................................................................29
8.6 Title ...............................................................................................29
8.7 Specifications.......................................................................................30
8.8 Gas Metering.........................................................................................30
8.9 Hourly Southern Gas Costs............................................................................31
8.10 Operating Procedures..............................................................................31
8.11 Obligations with Respect to Gas...................................................................31
8.12 Determination of Adjusted Gas Volume and Monthly Adjusted Gas Volume..............................31
8.13 Determination of Replacement Resources Gas Costs and Hourly Performance Payment Gas Cost..........32
8.14 Initial Performance Target........................................................................33
8.15 Degradation of Initial Heat Rate..................................................................33
8.16 Ramping Gas and Energy............................................................................34
ARTICLE 9: ELECTRIC METERING....................................................................................34
9.1 Metering.............................................................................................34
9.2 Industry Standards...................................................................................35
9.3 Access...............................................................................................35
9.4 Calibration..........................................................................................35
9.5 Records..............................................................................................35
9.6 Meter Errors.........................................................................................35
9.7 Subject to Interconnection Agreement.................................................................36
ARTICLE 10: BILLING AND PAYMENT.................................................................................36
10.1 Timing; Method of Payment.........................................................................36
10.2 Late Payment......................................................................................36
10.3 Disputed Billings.................................................................................36
10.4 Adjustments.......................................................................................36
10.5 Audit Rights......................................................................................36
ARTICLE 11: CHANGE IN LAW.......................................................................................37
11.1 Limitations.......................................................................................37
11.2 Determination.....................................................................................37
11.3 Initiation of Surcharge...........................................................................37
11.4 Timing............................................................................................37
11.5 Contest and Dialogue..............................................................................37
ARTICLE 12: LIABILITY ALLOCATION; LIMITATIONS ON LIABILITY......................................................37
12.1 Costs, Taxes and Charges..........................................................................37
12.2 Indemnification...................................................................................38
12.3 Limitation of Liability...........................................................................38
ARTICLE 13: FORCE MAJEURE EVENT.................................................................................39
13.1 Force Majeure Event Defined.......................................................................39
13.2 Applicability of Force Majeure Event..............................................................39
13.3 Effect of Force Majeure Event.....................................................................40
13.4 Other Effects of Force Majeure Events.............................................................40
ARTICLE 14: EVENT OF DEFAULT....................................................................................40
14.1 Event of Default..................................................................................40
14.2 Exclusive Remedies................................................................................41
ARTICLE 15: CREDITWORTHINESS AND SECURITY.......................................................................43
15.1 Guaranty in favor of Southern.....................................................................43
15.2 Negative Watch Credit Support in favor of Southern................................................43
15.3 Credit Support in favor of Southern for Junk Rating...............................................43
15.4 Post December 31, 2005 Provisions.................................................................44
15.5 Guaranty in favor of DYPM/DMT.....................................................................44
15.6 Negative Watch Credit Support in favor of DYPM/DMT................................................44
15.7 Credit Support in favor of DYPM/DMT for Junk Rating...............................................45
15.8 Post June 1, 2005 Provisions......................................................................45
ARTICLE 16: DELIVERY EXCUSE.....................................................................................45
16.1 Definition........................................................................................45
16.2 No Breach for Delivery Excuse.....................................................................46
ARTICLE 17: REPRESENTATIONS AND WARRANTIES......................................................................46
17.1 Execution.........................................................................................46
17.2 Permits...........................................................................................46
17.3 Binding Obligations...............................................................................46
17.4 Execution and Consummation........................................................................47
17.5 Actions and Proceedings...........................................................................47
17.6 Processor.........................................................................................47
ARTICLE 18: ASSIGNMENT..........................................................................................47
18.1 General Rule......................................................................................47
18.2 Consent Required..................................................................................47
ARTICLE 19: DISPUTE RESOLUTION..................................................................................47
19.1 Senior Officers...................................................................................48
19.2 Arbitration.......................................................................................48
19.3 Binding Nature of Proceedings.....................................................................49
ARTICLE 20: MISCELLANEOUS.......................................................................................49
20.1 Governing Law; Waiver of Jury Trial...............................................................49
20.2 Confidentiality...................................................................................49
20.3 Survivorship of Obligations.......................................................................50
20.4 Notice of Proceedings.............................................................................50
20.5 No Third Party Beneficiaries......................................................................50
20.6 Section Headings Not to Affect Meaning............................................................50
20.7 Computation of Time...............................................................................50
20.8 Interest..........................................................................................51
20.9 Entire Agreement..................................................................................51
20.10 Counterparts......................................................................................51
20.11 Amendments........................................................................................51
20.12 Guarantee of Performance..........................................................................51
20.13 Waivers...........................................................................................51
20.14 No Partnership Created............................................................................51
20.15 Character of Sale.................................................................................51
20.16 Notices...........................................................................................52
20.17 Survival..........................................................................................54
20.18 Construction......................................................................................54
20.19 Imaged Agreement..................................................................................54
20.20 GDP-IPD...........................................................................................54
20.21 Higher Heating Value..............................................................................54
APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
APPENDIX F
APPENDIX G
APPENDIX H
|
POWER AND GAS SUPPLY AGREEMENT
AMONG
SOUTHERN POWER COMPANY,
DYNEGY POWER MARKETING, INC.
AND
DYNEGY MARKETING AND TRADE
This POWER AND GAS SUPPLY AGREEMENT is made and entered into as of this 28th day of March, 2002 (the "Execution Date"), by and among SOUTHERN POWER COMPANY (hereafter referred to as "Southern" or "Seller"), a Delaware corporation having its principal office and place of business at 600 North 18th Street, Birmingham, Alabama 35233, DYNEGY POWER MARKETING, Inc., (hereinafter referred to as "DYPM"), a corporation organized and existing under the laws of the State of Texas having its principal office and place of business at 1000 Louisiana St., Suite 5800, Houston, TX 77002, and DYNEGY MARKETING AND TRADE ("DMT" or "Supplier"), a Colorado general partnership having its principal office and place of business at 1000 Louisiana Street, Suite 5800, Houston, Texas 77002. Southern, DYPM, and DMT are hereafter referred to individually and collectively as a "Party" or the "Parties," respectively.
RECITALS:
DYPM desires to purchase and Southern desires to sell, Contract Capacity and Contract Energy in accordance with this Agreement for the period from June 1, 2005 through May 31, 2030.
Subject to the terms and conditions of this Agreement, Southern will deliver and sell to DYPM, and DYPM will accept and purchase from Southern, Contract Capacity and Contract Energy from the Facility or from other resources as provided in this Agreement.
As an integral part of the supply of Contract Capacity and Contract Energy by Southern hereunder, DYPM's affiliate, DMT, has agreed to supply and Southern has agreed to purchase, natural gas in accordance with this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
The following terms shall have the respective meanings set forth below.
"Actual Gas Volume" has the meaning set forth in Section 8.12.1.
"Adjusted Gas Volume" has the meaning set forth in Section 8.12.1.
"Affiliate" means, with respect to a corporation, partnership or other entity, each such other corporation, partnership or other entity that directly or indirectly (through one or more intermediaries) controls, is controlled by, or is under common control with, such corporation, partnership, or other entity.
"Agreement" means this Power and Gas Supply Agreement, including, to the extent applicable, any amendments and appendices hereto that the Parties may execute now or at any time in the future.
"Alternate Delivery Point" means a point of delivery as agreed to by the Parties for the delivery of Contract Capacity and Scheduled Energy.
"Alternate Gas Delivery Point(s)" means those alternate points to which DMT is required to deliver Replacement Gas pursuant to Section 6.2.
"Annual ENDH" means [redacted] for each Contract Year.
"Banked Pre-Scheduled Excused Hours" has the meaning set forth in
Section 4.2.1(b).
"Billing Month" means each Month during the Term beginning with the second Month of the first Contract Year and includes the Month immediately following the expiration or early termination of this Agreement.
"BTU" means British Thermal Units.
"Business Day" means any Day on which Federal Reserve Member Banks in New York, New York are open for business. A Business Day shall begin at 0800 CPT and end at 1700 CPT.
"Carry Period" has the meaning set forth in Section 4.5.2(a).
"Central Prevailing Time" or "CPT" means the local time at any point in Birmingham, Alabama.
"Change in Law" means a Law (including a new or changed interpretation of an existing Law by a Government Agency, or an interpretation by a Government Agency previously unknown to Southern) that becomes effective after the date of the Agreement and generally affects the cost of electric generation [redacted]. Examples of a Change in Law include (but are not limited to): (i) Laws pertaining to changes in environmental Laws that seek to decrease existing limits (e.g., NOx) or to establish limits for currently uncontrolled substances (e.g., CO2); and (ii) Laws pertaining to the imposition of energy taxes on wholesale power sales. A Change in Law does not include changes in: (i) income taxes; (ii) taxes assessed or imposed by a county or municipal authority (such as ad valorem taxes); (iii) franchise and occupational taxes; or (iv) Laws that have unique application to the Facility.
"Cold Start" means an Initial Dispatch when Scheduled Energy has not been delivered from any resource for a period of greater than [redacted].
"Commercially Reasonable" or "Commercially Reasonable Efforts" means, with respect to any purchase, sale, decision, or other action made, attempted or taken by a Party, such efforts as a reasonably prudent business would undertake for the protection of its own interest under the conditions affecting such purchase, sale, decision, or other action, including without limitation, electric system reliability and stability, the amount of notice of the need to take such action, the duration and type of the purchase or sale or other action, and the commercial environment in which such purchase, sale, decision, or other action occurs.
"Committed Capacity" means that capacity that DYPM may receive pursuant to Section 6.5.
"Committed Resource" has the meaning set forth in 6.5.3.
"Contest" means with respect to any Person, a contest of: (i) any Governmental Approval, acts or omissions by any Government Agency or any related matters; or (ii) the amount or validity of any claim pursued by such Person in good faith and by appropriate legal, administrative or other proceedings diligently conducted, so long as the contesting Party could not reasonably be expected to be prevented from performing its material obligations under this Agreement pending the outcome of such contest.
"Contract Capacity" has the meaning set forth in Section 3.1.
"Contract Energy" has the meaning set forth in Section 3.3.
"Contract Year" means: (i) for the first Contract Year, the Effective Date of Service through May 31, 2006; and (ii) for each Contract Year thereafter, each twelve (12) Month period thereafter beginning June 1 and ending May 31.
"Day" means the twenty-four (24) hour period beginning and ending at
2400 CPT.
"Delivered Energy" means the amounts of energy, expressed in MWhs, that are delivered by Southern from the Facility or Replacement Resources in accordance with this Agreement.
"Delivery Excuse" has the meaning set forth in Section 16.1.
"Delivery Point" means the Interconnection Point(s) or such Alternate Delivery Point(s) as may be mutually agreed upon by Southern and DYPM.
"Determination Period" has the meaning set forth in Section 4.5.1(b).
"DMT" has the meaning set forth in the introductory paragraph hereof.
"DYPM" has the meaning set forth in the introductory paragraph hereof.
"Effective Date of Service" means June 1, 2005.
"Electric Metering Equipment" means electric meters and associated equipment, including metering transformers and meters for measuring kWh, amperes and voltage, utilized in determining the Energy Output Level at the Interconnection Point(s). The Electric Metering Equipment shall include meters and any back-up meters utilized to measure deliveries of energy to the Southern Company Transmission System, and the use of energy at the Facility.
"Eligible Guaranty" has the meaning set forth in Section 15.1.
"Eligible Guaranty Threshold" has the meaning set forth in
Section 15.1.
"Emergency Condition" means a condition or situation (not principally caused by Southern) that presents an imminent physical threat of danger to life, health or property, or a situation in which delivery of Scheduled Energy from the Facility could reasonably be expected to cause a significant disruption on the Southern Company Transmission System.
"ENDH" means an excused non-delivery hour (or portion of an hour) in which an Unavailability has occurred for which Southern accumulates ENDH pursuant to Section 4.5.2. ENDH for any hour shall equal the ratio of the amount of Contract Capacity associated with the Scheduled Energy not provided to the Contract Capacity for such hour.
"ENDH Accumulated" means the number of Equivalent ENDH as calculated pursuant to Section 4.5.4.
"ENDH Available" means, for any point in time in any Month, the number of ENDH (or partial ENDH) that are available for accumulation pursuant to Southern's election under Section 4.5.2. The amount of ENDH Available in any Month shall be equal to the difference between Annual ENDH for the Contract Year in which such Month occurs and the sum of (i) ENDH Accumulated during such Month (before the point of calculation) and (ii) ENDH Accumulated during all of the Months elapsed during such Contract Year preceding the Month in which the calculation is made.
"Energy Output Level" means the hourly quantity of energy (in MWh) generated by the Facility to supply Scheduled Energy, plus energy simultaneously generated by the Facility in connection with energy production from the Reserved Capacity to the extent such production is made pursuant to the Other Southern Agreement.
"Energy Payment" means the payment for Delivered Energy to be made by DYPM to Southern as calculated in Section 5.2.
"Energy Price" means, [redacted]
"Equivalent ENDH" has the meaning set forth in Section 4.5.4.
"Event of Default" has the meaning set forth in Section 14.1.
"Execution Date" has the meaning set forth in the introductory paragraph hereof.
"Extended Outage Period" has the meaning set forth in Section 4.5.1(b).
"Extended Unavailability" has the meaning set forth in Section 4.5.6.
"Facility" means the electric generating unit currently known as "Goat Rock 3" with an anticipated initial capacity of approximately 625 MW (including power augmentation), which Facility is part of that certain natural gas combined cycle electric generating plant located in Lee County, Alabama which directly interconnects to the Southern Company Transmission System, or such other generating facility mutually agreed by the Parties.
"Facility Actual Capacity" means, for each hour, the actual capacity (taking into account the effect of any Unavailability) of the Facility (measured in MW), as reasonably determined by Southern on such Day.
"Facility Metering Equipment" means Gas meters and associated equipment located at the Facility.
"FERC" means the Federal Energy Regulatory Commission, or any successor to its functions.
"Force Majeure Event" has the meaning set forth in Section 13.1.
"Force Majeure Hour" shall occur in any hour (or portion of an hour) in
which a Force Majeure Event occurs or is continuing. During a Force Majeure
Hour, if the energy available from the Facility (as measured in hourly amounts
and expressed in MWh) is greater than zero but less than the amount of Scheduled
Energy, then a partial Force Majeure Hour shall be determined equal to the ratio
of the amount of Contract Capacity not available from the Facility in such hour
due to the Force Majeure Event to the Contract Capacity for such hour.
"Fuel Purchase Payment" has the meaning set forth in Section 5.3.2.
"GDP-IPD" means the Gross Domestic Product Implicit Price Deflator published in the National Income and Product Account by the U.S. Department of Commerce.
"Gas" means natural gas.
"Gas Delivery Point" means the outlet flange of the Gas Metering Equipment.
"Gas Index" means [redacted].
"Gas Metering Equipment" means Gas meters and associated equipment located at the interconnection between the pipeline lateral serving the Facility and the Transporter's pipeline.
"Gas Nomination" or "Gas Nominations" means communicating and confirming that a particular amount of Gas is to be delivered or received at the Gas Delivery Point and/or the Alternate Gas Delivery Point(s) and providing all information that may be necessary to cause such delivery or receipt to occur.
"Gas Payment" has the meaning set forth in Section 5.3.
"Gas Requirements" means, for each hour, Actual Gas Volume less Southern Gas Consumed.
"Gas Tariff" means the Gas transportation tariff of the applicable Transporter as maintained and approved by FERC from time to time, as the same may be amended or supplemented during the Term.
"Government Agency" means any federal, state, local, territorial or municipal government and any department, commission, board, bureau, agency, instrumentality, judicial or administrative body thereof.
"Governmental Approval" means any authorization, consent, approval, license, ruling, permit, exemption, variance, order, judgment, decree, declarations of or regulation of any Government Agency relating to the Facility or to the execution, delivery or performance of this Agreement.
"Guarantor" has the meaning set forth in Section 14.1.2.
"Guaranty" means a Guaranty or other instrument guaranteeing a Party's obligations under this Agreement as contemplated under Article 15.
"Heat Rate Test" means a heat rate test requested by either DYPM or Southern which is conducted for the Facility in accordance with Prudent Industry Practices as determined by Southern.
"Hot Start" means an Initial Dispatch of the Facility when Scheduled
Energy has not been delivered from any resource for a period of less than
[redacted].
"Hour Block" means any period within a Day that is comprised of either a succession of Off Peak Hours or a succession of On Peak Hours.
"Hourly Performance Payment Gas Cost" has the meaning set forth in
Section 8.13.3.
"Hourly Replacement Resources Gas Cost" has the meaning set forth in
Section 8.13.1.
"Imaged Agreement" has the meaning set forth in Section 20.19.
"Increased Generation Costs" means [redacted].
"Initial Dispatch" means each time that DYPM goes from not having any energy Scheduled to having some amount of energy Scheduled.
"Initial Dispatch Payment" has the meaning set forth in Section 5.4.
"Initial Heat Rate" means the heat rate, expressed in Higher Heating Value, established by a Heat Rate Test of the Facility prior to the Effective Date of Service.
"Initial Performance Target" has the following meaning:
The entire Facility shall have an Initial Performance Target of [redacted]
"Interconnection Agreement" means the interconnection agreement between the applicable transmission provider and Southern governing the interconnection of the Facility to the Southern Company Transmission System, as the same may be amended from time to time, or such successor interconnection agreement as may be required pursuant to an assignment of transmission provider responsibilities to a regional power exchange, regional transmission organization, independent system operator or other transmission system operator.
"Interconnection Point" means the substation where the Facility is physically interconnected to the Southern Company Transmission System.
"kW" means kilowatt(s).
"kWh" means kilowatt hour(s).
"Law" means any statute, law, requirement, rule or regulation imposed by a Government Agency, whether in effect now or at any time in the future.
"MMBTU" means one million BTU.
"MW" means megawatt(s).
"MWh" means megawatt hour(s).
"Maintenance Outage Hours" has the meaning set forth in
Section 4.2.1(c).
"Major Bank" means the Federal Reserve Bank of Atlanta, Georgia.
"Maximum Allowable Degradation" means the Initial Heat Rate multiplied by [redacted].
"Minimum Schedule Capacity" shall have the meaning set forth in Section 6.1.3.
"Month" means a calendar month.
"Monthly DYPM Gas Costs" has the meaning set forth in Section 8.12.2.
"Monthly Replacement Resources Gas Costs" has the meaning set forth in Section 8.13.2.
"Monthly Gas Reservation Payment" has the meaning set forth in
Section 5.3.3.
"Monthly Weighting Factor" means, for any Month, the weighting factor for such Month in the table below:
Month Weighting Factor
January [redacted]
February [redacted]
March [redacted]
April [redacted]
May [redacted]
June [redacted]
July [redacted]
August [redacted]
September [redacted]
October [redacted]
November [redacted]
December [redacted]
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"NERC" means the North American Electric Reliability Council, or any successor to its functions.
"Non-Summer DPF" has the meaning set forth in Section 5.5.2.
"Non-Summer PAF" has the meaning set forth in Section 5.5.2.
"Non-Summer Performance Bonus" has the meaning set forth in Section 5.5.2.
"OATT" means the Open Access Transmission Tariff of Southern Companies or a successor tariff governing transmission on the Southern Company Transmission System that has been accepted by FERC, as the same may be changed or amended from time to time.
"Off Peak Hour" means: (i) any hour from 2200 CPT to 0600 CPT, Monday through and including Friday; (ii) any hour during any holiday recognized by NERC; and (iii) any hour during Saturday and Sunday.
"On Peak Hour" means any hour from 0600 CPT to 2200 CPT, Monday through and including Friday, excluding any hour of any holiday recognized by NERC.
"Operating Committee" has the meaning set forth in Section 4.4.2.
"Operating Procedures" has the meaning set forth in Section 4.4.1.
"Optional System Upgrades" means those transmission upgrades of the Southern Company Transmission System that are in addition to those facilities that Southern Company Transmission requires in order to interconnect the Facility to the Southern Company Transmission System.
"Other Southern Agreement" means that certain capacity and energy purchase agreement providing, among other things, at Southern's election, rights with respect to the Reserved Capacity.
"Peak Period" means, for each Contract Year, the Months of June, July, August, September, January and February.
"Performance Payment" means [redacted].
"Person" means any individual, corporation, limited liability corporation, partnership, joint venture, trust, unincorporated organization, Government Agency or other entity.
"Pre-Scheduled Excused Hours" means hours in which the Facility is unavailable for Scheduling for reasons relating to the maintenance of the Facility or as may otherwise be necessary to comply with Prudent Industry Practices, as such hours are designated and scheduled in accordance with Section 4.2.
"Prime Rate" means, for any Day on which the calculation of an interest amount begins under this Agreement, the "Prime Rate" specified for such Day (or, if such Day is not a Business Day, on the first Business Day following such Day) under the "Money Rate" table of the Wall Street Journal. In the event that the Wall Street Journal ceases to report a Prime Rate, the Prime Rate for purposes of this Agreement shall be the prime rate (or its functional equivalent) charged by the Major Bank in the United States of America.
"Protective Apparatus" means such equipment and apparatus, including protective relays, circuit breakers and the like, necessary or appropriate to isolate the Facility from the Southern Company Transmission System consistent with Prudent Industry Practices and any requirements of Southern Company Transmission.
"Prudent Industry Practices" means any of the practices, methods, standards and acts (including the practices, methods and acts engaged in or approved by a significant portion of the electric power industry in the United States) that, at a particular time, in the exercise of reasonable judgment in light of the facts known or that should reasonably have been known at the time a decision was made, could have been expected to accomplish the desired result consistent with good business practices, reliability, economy, safety and expedition, and which practices, methods, standards and acts generally conform to operation and maintenance standards recommended by equipment suppliers and manufacturers, applicable design limits and applicable Governmental Approvals and Laws.
"Replacement Cost" means, [redacted].
"Replacement Gas Price" has the meaning set forth in Section 6.2.
"Replacement Resources" means all resources other than the Facility (whether such other resources are owned, purchased or otherwise controlled by Southern, or that are otherwise available to Southern) from which Southern may elect to provide Contract Capacity and Scheduled Energy.
"Replacement Value" has the meaning set forth in Section 14.2.4.
"Reservation Payment" has the meaning set forth in Section 5.1.
"Reserved Capacity" means 400 MW, which represents the capacity from the Facility that is not available to DYPM under this Agreement, but which, at Southern's election, is subject to the Other Southern Agreement.
"Schedule" means the right of DYPM to schedule the delivery of Scheduled Energy in accordance with this Agreement. Any form of the term Schedule (e.g., "Scheduled" or "Scheduling") shall refer to the exercise of such right by DYPM.
"Scheduled Energy" means the amounts of energy, expressed in MWh, Scheduled by DYPM to be delivered by Southern in accordance with this Agreement.
"Scheduling Constraints" has the meaning set forth in Appendix B.
"Seller" has the meaning set forth in the introductory paragraph hereof.
"Seller Election Period" has the meaning set forth in Section 4.5.1(b).
"Southern" has the meaning set forth in the introductory paragraph.
"Southern Company" means The Southern Company, a publicly held corporation organized and existing under the laws of the State of Delaware and having its principal place of business in Atlanta, Georgia.
"Southern Company Transmission" means the functional transmission division of Southern Company Services, Inc., or any successor transmission provider.
"Southern Company Transmission System" means the integrated transmission systems of the electric operating companies of Southern Company, as such systems may be modified or expanded from time-to-time, as well as any successor transmission system(s).
"Southern Gas Consumed" has the meaning set forth in Section 8.12.1.
"Summer DPF" has the meaning set forth in Section 5.5.1.
"Summer PAF" has the meaning set forth in Section 5.5.1.
"Summer Performance Bonus" has the meaning set forth in Section 5.5.1.
"Taxes" means any or all ad valorem, property, occupational, severance, emissions, generation, first use, conservation, energy, transmission, utility, gross receipts, privilege, sales, use, excise and other taxes, governmental charges, licenses, fees, permits and assessments, and taxes based on net income or net worth.
"Term" means the period from the Execution Date through May 31, 2030, or such earlier date on which this Agreement is terminated in accordance with its terms.
"Tested Heat Rate" has the meaning set forth in Section 8.15.
"Transporter" means any Person that transports Gas upstream and to the Gas Delivery Point or the Alternate Gas Delivery Point(s).
"Unavailability" means any time in which the Facility (or any part thereof) is physically incapable of providing all or a portion of Scheduled Energy or Committed Capacity for reasons including an actual or threatened unplanned component failure that requires the generating capability of the Facility to be reduced (or derated); provided that for an Unavailability to exist, the actual output of the Facility must have in fact been reduced. Unavailability does not include those times that the Facility's capability is reduced (in whole or in part) due to a Force Majeure Event, Delivery Excuse, or maintenance activities during Pre-Scheduled Excused Hours or Maintenance Outage Hours.
"Undelivered Energy" means that quantity of Scheduled Energy that Southern fails to deliver to the Delivery Point in response to a Schedule for which ENDH is not accumulated and which failure is not attributable to a Force Majeure Event or Delivery Excuse.
"VOM Charge" means [redacted].
"Warm Start" means an Initial Dispatch when Scheduled Energy
has not been delivered from any resource for a period greater than or equal to
[redacted] and less than or equal to [redacted].
ARTICLE 2
TERM OF AGREEMENT
2.1 Filing of Agreement. This Agreement shall be filed with the FERC on or before such date as may be required by law. To the extent practicable, any such filing shall be made under a request for confidential treatment. This Agreement shall not be contingent on such filing.
2.2 Termination Date. Unless earlier terminated in accordance with its terms, this Agreement shall continue in effect from the Execution Date through May 31, 2030. In addition, this Agreement shall terminate immediately upon the termination of the Other Southern Agreement.
2.3 Effect of Termination. Subject to the exercise of a non-defaulting Party's rights under Section 14.2, in the event that this Agreement is terminated, the rights and obligations of the Parties hereunder shall continue unaffected until the termination is effective in accordance with the terms and conditions thereof. Any such termination shall not relieve DYPM of its obligation to pay any unpaid invoices for any Contract Capacity made available and Contract Energy supplied prior to the effective date of such termination, or relieve Southern of its obligation to provide Contract Capacity and to deliver Scheduled Energy (or pay a Performance Payment) prior to the effective date of such termination.
2.4 Effective Date. This Agreement shall become effective on the Execution Date without regard to the status of the construction of the Facility, permits relating to the Facility, or with respect to any other condition that could affect the construction, operation or existence of the Facility.
ARTICLE 3
DETERMINATION OF CONTRACT CAPACITY; SALE AND PURCHASE OF
CONTRACT CAPACITY AND ENERGY
3.1 Determination of Contract Capacity.
3.1.1 Quantity. The Contract Capacity shall equal the full capability of the Facility (including power augmentation if appropriate) as the Facility is designed and existing on the Effective Date of Service (as may be adjusted pursuant to Section 3.1.2), consistent with Prudent Industry Practices and excluding the effects of any Unavailability, Force Majeure Event or Delivery Excuse, less the Reserved Capacity.
3.1.2 Adjustment. The Contract Capacity may be adjusted on a Day to Day or an hourly basis based on the ambient temperature and relative humidity levels at the Facility and normal capacity degradation.
3.1.3 Capability Projection. The Operating Committee shall implement procedures in order to project the amount of the Contract Capacity for each Day. Such procedures shall provide for a Day ahead projection of hourly ambient temperatures at the Facility. Unless otherwise agreed by the Operating Committee, the basis of such projected temperatures shall be the high and low temperatures for each Day as forecasted by the office of the United States National Weather Service that is nearest to the Facility. Such temperatures shall be utilized in conjunction with the chart set forth in Figure 1 of Appendix C in order to project Contract Capacity for each hour. This chart will be modified by the Operating Committee from time to time in order to reflect capacity degradation.
3.1.4 Uprates. After the Effective Date of Service, Southern has the unilateral right to increase the capacity of (i.e., uprate) the Facility. If and when an uprate of the Facility is completed and to the extent that additional output above the Contract Capacity and the Reserved Capacity is available from the Facility as a result, then following such uprate, Southern shall offer DYPM the right to purchase any such additional output as an addition to the Contract Capacity and related rights existing under this Agreement. Southern shall make such offer by written notice to DYPM, which notice shall include the pricing at which Southern is willing to make such additional output available. Within twenty (20) Business Days following DYPM's receipt of such offer from Southern, DYPM shall advise Southern of its decision to accept or reject the offer. A failure to respond within such twenty (20) Business Day period shall be deemed to be a rejection of the offer. If DYPM accepts the offer, then Southern and DYPM shall amend this Agreement to provide DYPM the additional output consistent with the terms and conditions of this Agreement. If the additional output is not purchased by DYPM, then Southern has the right to market the additional output provided that fuel additional to that supplied hereunder is obtained by Southern for the incremental capacity and energy. Southern's use of the capacity and energy associated with any such uprate not purchased by DYPM shall be subordinate to DYPM's Schedule. In addition, no uprate of the Facility shall be deemed to adversely affect any of the heat rate characteristics or other performance characteristics set forth in this Agreement. Southern shall indemnify and hold DYPM harmless from and against any such negative effects associated with any such uprate in comparison to the rights and benefits associated with the Facility prior to such uprate.
3.2 Sale and Purchase of Contract Capacity. Subject to the terms and conditions of this Agreement, beginning on the Effective Date of Service and until the end of the Term, Southern shall make available and sell to DYPM at the Delivery Point, and DYPM shall accept and purchase, the Contract Capacity.
3.3 Sale and Purchase of Contract Energy. Subject to the terms and conditions of this Agreement, beginning on the Effective Date of Service and until the end of the Term, Southern shall deliver and sell to DYPM, and DYPM shall accept and purchase from Southern, energy at the Delivery Point up to the Contract Capacity ("Contract Energy").
3.4 Source of Contract Energy. [redacted].
ARTICLE 4
THE FACILITY, SCHEDULED ENERGY AND COMMITTED CAPACITY
4.1 The Facility. Southern shall perform its obligations hereunder relative to the Facility in accordance with Prudent Industry Practices and the terms of this Agreement.
4.2 Pre-Scheduled Excused Hours.
4.2.1(a) Scheduling of Pre-Scheduled Excused Hours. On or before April 1 prior to each Contract Year, DYPM shall provide to Southern a non-binding proposed schedule of energy and Initial Dispatches for each Month of such Contract Year. Within one hundred twenty (120) Days after receiving DYPM's proposed schedule, Southern shall submit to DYPM a proposed schedule of Pre-Scheduled Excused Hours for the applicable Contract Year. The proposed schedule of Pre-Scheduled Excused Hours shall give due consideration to, and shall take into account, the proposed schedule submitted by DYPM; provided, however, that in no event shall Southern's proposed schedule provide for any Pre-Scheduled Excused Hours during a Peak Period without the prior written consent of DYPM. Within thirty (30) Days after receiving Southern's proposed schedule of Pre-Scheduled Excused Hours, DYPM may request, in writing, that Southern reschedule any such Pre-Scheduled Excused Hours. Following receipt of such request of DYPM, Southern shall inform DYPM as to whether it can accommodate DYPM's request and, if so, shall further advise DYPM of the good faith estimated costs that will be incurred by Southern in connection with accommodating the request of DYPM to re-schedule the Pre-Scheduled Excused Hours. DYPM shall then within five (5) Days of the receipt of the estimated costs provided by Southern determine whether Southern should reschedule the Pre-Scheduled Excused Hours. Without regard to any prior estimate, DYPM shall reimburse Southern for all Commercially Reasonable costs related to such change in schedule. While Southern must use Commercially Reasonable Efforts to accommodate a request of DYPM to re-schedule any Pre-Scheduled Excused Hours, Southern may elect to decline rescheduling, if, in Southern's Commercially Reasonable judgment, it would cause a failure on the part of Southern to observe Prudent Industry Practices, or if the proposed re-schedule would cause Southern to incur costs which DYPM is unwilling to reimburse. If Southern makes the election not to accommodate a request of DYPM to reschedule Pre-Scheduled Excused Hours, DYPM may propose an alternate schedule for Pre-Scheduled Excused Hours, in which case Southern and DYPM shall continue to negotiate the rescheduling of Pre-Scheduled Excused Hours as provided above, but in no event shall such negotiation continue after September 30 of the Contract Year for which such Pre-Scheduled Excused Hours are scheduled. In addition to the foregoing, within thirty (30) Days after the beginning of each Contract Year, Southern shall provide to DYPM a non-binding schedule of Pre-Scheduled Excused Hours for the next three (3) Contract Years.
(b) Pre-Scheduled Excused Hours for any Contract Year shall not exceed
[redacted]. If, however, during any Contract Year, Southern does not utilize its
allocation of Pre-Scheduled Excused Hours for that Contract Year, then the
unused portion of Pre-Scheduled Excused Hours (the "Banked Pre-Scheduled Excused
Hours") may be carried forward to the next succeeding Contract Year and may be
utilized by Southern in addition to the regular allotment of Pre-Scheduled
Excused Hours. The total of all available Pre-Scheduled Excused Hours available
to Southern during any Contract Year, including the hours that comprise Banked
Pre-Scheduled Excused Hours may not exceed [redacted]. Unless otherwise agreed
by the Operating Committee, Banked Pre-Scheduled Excused Hours may only be
utilized by Southern during a Contract Year in which utilization of such Banked
Pre-Scheduled Excused Hours is necessary for Southern, in Southern's
Commercially Reasonable judgment to comply with Prudent Industry Practices.
(c) In addition to Pre-Scheduled Excused Hours, Southern may at any time request Maintenance Outage Hours during any Month of any Contract Year. Southern shall request Maintenance Outage Hours at least twenty-four (24) hours in advance. Such request shall identify the purpose for such maintenance and the equipment and Contract Capacity that will not be available for Scheduling and the proposed start time and duration for the Maintenance Outage Hours. DYPM shall respond to Southern's request as soon as reasonably practicable. Southern shall not take Maintenance Outage Hours without DYPM's prior written consent, and such consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that the Parties acknowledge that it shall be reasonable for DYPM to deny any request for Maintenance Outage Hours if DYPM reasonably believes that it may Schedule the Facility to a level that would require the availability of the equipment that is proposed to be unavailable during the Maintenance Outage Hours. DYPM shall have the right to revoke its consent to Maintenance Outage Hours if changed conditions require Scheduling of the Contract Capacity to be unavailable during such Maintenance Outage Hours; provided, however, that DYPM may only revoke its consent if it provides Southern with notice of revocation at least twelve (12) hours prior to the scheduled start of the Maintenance Outage Hours. In addition, if DYPM reasonably requests Southern to return all or part of that portion of the Facility that is affected by the Maintenance Outage Hours to full availability status, Southern shall comply as soon as reasonably practical.
4.2.2 Accumulation of Pre-Scheduled Excused Hours. DYPM and Southern shall include procedures with respect to the logging and record keeping of actual Pre-Scheduled Excused Hours elapsed during any Month in the Operating Procedures agreed upon pursuant to Section 4.4.
4.2.3 No Scheduling during Pre-Scheduled Excused Hours, Banked Pre-Scheduled Excused Hours, or Maintenance Outage Hours. DYPM shall not have the right to submit a Schedule during any Pre-Scheduled Excused Hours, Banked Pre-Scheduled Excused Hours, or Maintenance Outage Hour.
4.2.4 No Operation during Pre-Scheduled Excused Hours, Banked Pre-Scheduled Excused Hours, and Maintenance Outage Hours. DYPM and Southern agree that Pre-Scheduled Excused Hours, Banked Pre-Scheduled Excused Hours, and Maintenance Outage Hours are intended to encompass periods during which the Facility is unavailable for Scheduling or operation by any Party. Therefore, except to the extent Southern determines that the Facility can be partially operated in accordance with Prudent Industry Practices (but subject to DYPM's right to Schedule any Contract Capacity made partially available), Southern shall not be permitted to operate the Facility during Pre-Scheduled Excused Hours, Banked Pre-Scheduled Excused Hours, or Maintenance Outage Hours other than testing and operations associated with the basis for such Pre-Scheduled Excused Hours, Banked Pre-Scheduled Excused Hours, and Maintenance Outage Hours.
4.3 Permits; Compliance with Laws.
4.3.1 Governmental Approvals. Subject to the right of Contest, each Party shall, at its expense, acquire and maintain in effect all Governmental Approvals necessary for it to perform its obligations under this Agreement.
4.3.2 Compliance by Southern. Subject to the right of Contest, Southern shall at all times comply with all Laws and Governmental Approvals applicable to Southern and/or to the Facility necessary for Southern to perform its obligations under this Agreement.
4.3.3 Compliance by DYPM and DMT. Subject to the right of Contest, DYPM and DMT shall at all times comply with all Laws and Governmental Approvals applicable to them necessary for DYPM and DMT to perform their obligations under this Agreement.
4.4 Operating Procedures and Operating Committee.
4.4.1 Operating Procedures. DYPM, DMT, and Southern shall develop written Operating Procedures no later than thirty (30) Days before the Effective Date of Service. The Operating Procedures shall establish the protocol under which the Parties shall perform their respective responsibilities under this Agreement, including method of Day-to-Day communications, key personnel lists, coordinating fuel arrangements and operating procedures for Gas supply, logging and tracking of hours of Unavailability, Pre-Scheduled Excused Hours, Force Majeure Hours, ENDH Accumulated, Maintenance Outage Hours, hours of Delivery Excuse, and daily capacity level and energy reports. The Operating Procedures must also include a process for determining the amount of Contract Capacity pursuant to Section 3.1.
4.4.2 Operating Committee. The Parties shall form a committee to act in matters relating to the performance of their respective obligations under this Agreement ("Operating Committee"). Each Party shall appoint one representative and one alternate representative to serve on the Operating Committee. The Parties shall notify each other in writing of such appointments and any changes thereto. The Operating Committee shall have no authority to modify the terms or conditions of this Agreement. The Operating Committee shall meet as frequently as it deems necessary, and all of its decisions must be the unanimous decision of the representatives. The Operating Committee may consult with representatives of Southern Company Transmission as appropriate in reaching its decisions.
4.4.3 Southern shall disclose to the Operating Committee any condition or defect in or with respect to the Facility of which it is actually aware and that may reasonably be expected to cause the Facility to be unable to provide Scheduled Energy; provided, however, that the foregoing shall not be construed to require Southern to make inspections of the Facility.
4.5 Provision of Contract Capacity and Contract Energy.
4.5.1 Unavailability.
(a) Notification. Southern shall promptly notify DYPM
after discovering any circumstance that could reasonably be expected to
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result in an Unavailability.
(b) Periods of Unavailability. In the event of an Unavailability, the period after commencement of such Unavailability shall be divided into two distinct, contiguous periods:
(i) The period beginning at the time of the occurrence of the Unavailability until the earlier of the removal of the Unavailability or 2400 CPT of the Day in which such occurrence happens shall be referred to as the "Determination Period"; and
(ii) The period from the end of the Determination Period until the removal of the Unavailability shall be referred to as the "Extended Outage Period".
The four hour period immediately following the occurrence of an Unavailability (which may include a portion of the Determination Period and/or the Extended Outage Period) shall be referred to as the "Seller Election Period"; provided, however, that if the Unavailability is resolved, the Seller Election Period shall end at such time.
(c) Circumstances of Unavailability. With regard to any Unavailability that results in an Extended Outage Period, as soon as practicable after the commencement of such Extended Outage Period, Southern shall notify DYPM of:
(i) The cause (or if not known, Southern's best estimate of the cause) of the Unavailability;
(ii) The proposed corrective action that can be taken by Southern to resolve the Unavailability; and
(iii) Southern's best estimate of the expected duration of the Extended Outage Period.
In addition, Southern shall advise DYPM of any material information relating to the cause, duration and resolution of an Unavailability as soon as practicable after such information becomes known to Southern whether before or after the commencement of an Extended Outage Period. Southern shall have an ongoing obligation to keep DYPM advised as to any significant changes with respect to the information provided pursuant to this subsection (c). Southern's estimate of the duration of an Unavailability shall be based on the best information then available to Southern. Southern shall promptly notify DYPM of any expected changes in the period of the Unavailability and shall continue its investigation in a Commercially Reasonable manner for the duration of such Unavailability.
(d) Obligations of Southern. Consistent with Prudent Industry Practices, Southern shall use Commercially Reasonable Efforts to avoid Unavailability and to minimize the duration of any Unavailability.
4.5.2 Southern Elections during an Unavailability.
(a) Seller Election Period. Within [redacted] after the commencement of the Seller Election Period, Southern shall provide telephonic (or acceptable electronic) notice to DYPM of whether it will, to the extent of the Unavailability, either: [redacted].
Notwithstanding the occurrence of an Unavailability, [redacted]. Such action by Southern during the Carry Period shall not constitute an election for purposes of the Seller Election Period. Once made, however, such election shall apply for the remainder of the Seller Election Period, with appropriate recognition for Southern's actions (if any) during the Carry Period.
(b) Determination Period. Within [redacted] after the commencement of
an Unavailability, Southern shall, for each Hour Block within the
Determination Period (but only for those hours not covered by an election
in the Seller Election Period) and subject to Section 4.5.2(d), provide
telephonic (or acceptable electronic) notice to DYPM (along with notice of
the election for the first Day of the Extended Outage Period as required by
Section 4.5.2(c)) of whether it will, to the extent of the Unavailability,
either: [redacted]
(c) Extended Outage Period. For each Day of an Extended Outage Period,
Southern shall, for each Hour Block within such Day (but only for those
hours not covered by an election in the Seller Election Period) and subject
to Section 4.5.2(d), provide telephonic (or acceptable electronic) notice
to DYPM of whether it will, to the extent of the Unavailability, either:
[redacted]
Notice under this subsection (c) shall be provided by Southern no later than:
(i) for the first Day of the Extended Outage Period, the time that notice is
provided under Section 4.5.2(b); and (ii) for all other Days of the Extended
Outage Period, thirty (30) minutes after receipt of DYPM's Schedule for such Day
under Section 6.1 (but no earlier than 0800 CPT). In addition, upon the
commencement of the Extended Outage Period, Southern shall provide DYPM a
non-binding projection of its anticipated elections under this subsection (c)
for each Day of the expected duration of the Extended Outage Period.
(f) Schedule Changes during an Unavailability. For any hour of any Day
during an Unavailability, if DYPM changes a Schedule provided pursuant to
Section 6.1 after 0900 CPT of the previous Day so that Scheduled Energy is
greater in such hour than contemplated at 0900 CPT of such previous Day
(such greater amount being referred to as "Increased Scheduled Energy"),
notwithstanding any other provision of this Section 4.5.2, Southern shall
have the right, by providing telephonic (or electronic) notice to DYPM
[redacted] after Southern receives DYPM's notice of such change, to either:
[redacted]. If Southern does not make an election under this subsection (f)
for any hour, Southern shall be deemed to have elected to cover Increased
Scheduled Energy for such hour in the same manner as its prior elections
under Section 4.5.2(a), (b) and (c). An election made by Southern (or
deemed to have been made) under this subsection (f) shall only apply to
Increased Scheduled Energy and shall not alter elections for Scheduled
Energy made under Section 4.5.2(a), (b) and (c).
(g) DYPM Right to Purchase Undelivered Energy. With respect to any Unavailability, DYPM shall have the right to purchase Undelivered Energy using Commercially Reasonable Efforts [redacted].
(h) Exclusive Remedy. Southern's sole and exclusive liability and DYPM's sole and exclusive remedy for an Unavailability shall be determined by the election(s) chosen (or deemed to have been chosen) by Southern in accordance with this Section 4.5.2.
4.5.3 Performance in Accordance with Elections.
For any hour of an Unavailability, Southern shall be required to [redacted], but only to the extent that DYPM has properly requested and is entitled to receive Scheduled Energy for such hour in accordance with the terms of this Agreement.
4.5.4 Calculation of Equivalent ENDH.
For any hour in which Southern [redacted].
4.5.5 Example Calculations.
To demonstrate the application of provisions related to
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[redacted], example calculations are set forth in Appendix D.
4.5.6 Extended Unavailability.
[redacted].
4.5.7 Force Majeure Event.
(a) No Obligation to Deliver. For any hour in which a Force Majeure Event affecting the Facility or the facilities up to and at the Interconnection Point(s) is occurring or is continuing, to the extent that such event prevents Southern from delivering Scheduled Energy, Southern shall not be obligated to deliver, and DYPM shall not be entitled to receive, Scheduled Energy. In such event, to the extent of such Force Majeure Event, Southern shall not be required to make any of the elections under Section 4.5.2 [redacted].
(b) Adjustment of Reservation Payment. [redacted].
---------------------------------
4.5.8 Delivery Excuse.
(a) No Obligation to Deliver. For any hour in which a Delivery
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Excuse is occurring or is continuing, to the extent of such Delivery Excuse, Southern shall not be obligated to deliver, and DYPM shall not be entitled to receive, Scheduled Energy. In such event, to the extent of the Delivery Excuse, Southern shall not be required to make any of the elections under Section 4.5.2 and shall not be required to [redacted].
(b) Continuation of DYPM Obligations. DYPM shall not be relieved of its performance obligations hereunder during a Delivery Excuse, including its obligation to pay Southern the Reservation Payment, even if such Delivery Excuse continues for the remainder of the Term.
4.5.9 Delivery from the Facility.
Under no circumstance shall Southern be permitted to accumulate ENDH, claim an Unavailability, or claim a Force Majeure Event to the extent Southern is able, in a manner that is consistent with Prudent Industry Practices, to provide Scheduled Energy from the Facility as required hereunder.
ARTICLE 5
PAYMENTS
5.1 Reservation Payment. Commencing on the Effective Date of Service and for each Month of the Term, DYPM shall pay to Southern a Reservation Payment for the Contract Capacity. The Reservation Payments for each Month are set forth in Appendix A.
5.2 Energy Payment. Commencing on the Effective Date of Service and for each Month of the Term, DYPM shall pay to Southern an Energy Payment. The Energy Payment for each Month shall be equal to the product of: [redacted].
5.3 Gas Payment, Fuel Purchase Payment, and Gas Reservation Payment.
5.3.1 Commencing on the Effective Date of Service and for each Month
of the Term, DYPM shall pay to Southern a Gas Payment equal to the sum of:
[redacted].
5.3.2 Commencing on the Effective Date of Service and for each Month of the Term, Southern shall pay to DMT a Fuel Purchase Payment equal to the sum of [redacted].
5.3.3 Commencing on the Effective Date of Service and for each Month of the Term, Southern shall pay to DMT a Monthly Gas Reservation Payment equal to [redacted].
5.4 Initial Dispatch Payment. Commencing on the Effective Date of Service and for each Month of the Term, DYPM shall pay to Southern an Initial Dispatch Payment equal to the sum of the Initial Dispatch Prices during such Month. The Initial Dispatch Price shall equal [redacted].
5.5 Performance Bonus. For the Term of this Agreement, Southern shall receive a Summer Performance Bonus and a Non-Summer Performance Bonus, if applicable.
5.5.1 Summer Performance Bonus
The Summer Performance Bonus will be calculated based on the Months of June through August of each Contract Year and shall be paid by DYPM to Southern within thirty (30) Days after August 31 of each Contract Year. The Summer Performance Bonus shall be calculated as follows:
Summer
Performance
Bonus [redacted]
where:
Summer PAF is the performance adjustment factor corresponding to the calculated summer delivery performance factor ("Summer DPF") set forth in the Table below:
------------------------------------------------ -------------------------
Summer DPF Summer PAF
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
Summer DPF is computed as follows:
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Summer DPF = [redacted].
5.5.2 Non-Summer Performance Bonus
The Non-Summer Performance Bonus will be calculated based on the Months of September through May of each Contract Year and shall be paid by DYPM to Southern within thirty (30) Days after May 31 of each Contract Year. The Non-Summer Performance Bonus shall be calculated as follows:
Non-Summer
Performance
Bonus [redacted]
where:
Non-Summer PAF is the performance adjustment factor corresponding to the calculated non-summer delivery performance factor ("Non-Summer DPF") set forth in the Table below:
Non-Summer DPF Non-Summer PAF
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
--
Non-Summer DPF is computed as follows:
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Non-Summer DPF = [redacted]
5.5.3 Notwithstanding the foregoing, the sum of the Summer Performance Bonus and the Non-Summer Performance Bonus shall not exceed [redacted] for any Contract Year.
5.6 Additional Payments. In addition to the payments specified in this Section 5, the Parties shall pay all amounts due pursuant to the other provisions of this Agreement.
5.7 Regulatory.
5.7.1 The Parties anticipate that this Agreement will be filed with and accepted by FERC as a market based contract, and thus this Agreement shall not be contingent on FERC acceptance. Having freely negotiated and agreed upon the economic bargain among them as set forth hereunder and in the Other Southern Agreement, Southern, DYPM, and DMT waive all rights under Sections 205 and 206 of the Federal Power Act to effect a change in the Agreement. Moreover, it is the Parties' mutual intent that FERC be precluded, to the fullest extent permitted by law, from altering this Agreement in any way. Notwithstanding the foregoing, if at any time FERC takes some action that reduces the economic benefit of this Agreement and the Other Southern Agreement to Southern as contemplated on the Execution Date ("Original Economic Benefit"), Southern shall be deemed to have retained rights under Section 205 to file for changes in the Agreement, but only to the extent required to restore the Original Economic Benefit.
5.7.2 Southern may exercise its Section 205 rights provided under Section 5.7.1 if at any time it reasonably determines in its sole discretion that the application of FERC's ratemaking practices and procedures may support the restoration of some or all of the Original Economic Benefit. Before exercising such rights, Southern shall negotiate with DYPM and/or DMT in an effort to reach mutual agreement regarding amendments to this Agreement that would restore some or all of the Original Economic Benefit. Southern shall file any resulting amendments for acceptance by FERC, and DYPM and DMT shall actively support such filing(s). If the Parties are unable to agree upon such amendment(s), Southern shall be entitled to make unilateral filing(s) at FERC to modify the Agreement in order to restore some or all of the Original Economic Benefit. In this latter event, DYPM and DMT shall actively support Southern's filing and its right to recover the Original Economic Benefit; however, DYPM and DMT reserve the right to propose modifications based on a good faith belief that such filing implements revisions that would exceed the Original Economic Benefit.
5.7.3 Any amendment(s) or unilateral filing(s) contemplated hereunder shall restore the Original Economic Benefit (or any allowed portion thereof) for the remainder of the Term, including any portion of the Original Economic Benefit associated with prior periods (with interest). Nothing in this Agreement is intended to or shall restrict the number of times that Southern may exercise the above-described Section 205 rights during the Term or within any specific time frame.
5.8 Wholesale Generation Rates. All payments specified in this Article 5 are the unbundled power sales rates for wholesale generation. Transmission related services are addressed in Article 7.
ARTICLE 6
SCHEDULING, SOUTHERN'S AND DYPM'S RIGHTS TO THE FACILITY, TITLE AND RISK OF
LOSS
6.1 Scheduling.
6.1.1 Daily Schedule. On each Business Day, Southern shall
inform DYPM before [redacted] of the amount of Contract Energy expected to be
available from the Facility (with and without power augmentation) for each hour
of the following Day that is a Business Day, and any intervening Day. DYPM shall
provide Southern its Schedule for each hour of each Day(s) on or before
[redacted] of the previous Business Day. Such Schedule shall be consistent with
the Scheduling Constraints and the terms of this Agreement. [redacted]. DYPM
shall be responsible for complying with all transmission reservation, scheduling
and tagging requirements (whether under the OATT or other industry scheduling
requirements or standards) associated with the delivery of Scheduled Energy at
and after the Delivery Point. All costs and expenses (including penalties)
associated with a Schedule and Scheduled Energy at and beyond the Delivery Point
shall be the sole responsibility of DYPM unless caused by Southern.
6.1.2 Delivery of Scheduled Energy. Subject to Southern's elections (if any) in Section 4.5.2, Southern shall deliver Scheduled Energy to the Delivery Point in accordance with DYPM's Schedule.
6.1.3 Schedule Limitation. [redacted].
6.2 Replacement Resources Gas
6.2.1 Within [redacted] after receiving DYPM's Schedule for the next Day under Section 6.1.1 (but no earlier than [redacted], Southern shall notify DYPM (either telephonic or electronic) whether it will cover DYPM's Schedule utilizing Replacement Resources. If Southern provides notice that it will cover some portion (or all) of the Schedule with Replacement Resources, within [redacted] after receiving such notice by Southern, DMT shall offer a delivered price (in $/MMBTU) ("Replacement Gas Price") for the quantity of Gas (in MMBTU) equal to: (A) the quantity of Gas (in MMBTU) that would be required by the Facility to produce the sum of: (i) the Energy Output Level; (ii) energy to be served by Replacement Resources which is the subject of the current Southern election; and (iii) all previously established Replacement Energy Blocks and Performance Energy Blocks still in effect for such hour(s); less (B) the quantity of Gas (in MMBTU) required to produce (i) and (iii) (such quantities to be determined utilizing Figure 2 of Appendix C with appropriate recognition of ambient temperature and relative humidity levels at the Facility). The difference calculated in the foregoing sentence shall be referred to herein as Replacement Gas. Within [redacted] of receiving such price, Southern shall then elect to: (i) treat the price offered by DMT as the Replacement Gas Price (including for purposes of Section 5.3.1) and not require DMT to deliver Replacement Gas; or (ii) treat the price offered by DMT as the Replacement Gas Price (including for purposes of Section 5.3.1) and require DMT to deliver Replacement Gas at alternate delivery points, provided that Southern shall compensate DMT for the additional actual costs (if any) incurred to deliver to such alternate points in lieu of delivery to the Facility. In the case of (ii), Southern shall receive and purchase from DMT, and DMT shall supply and sell to Southern, the Replacement Gas at the Replacement Gas Price, at such alternate delivery point(s) specified by Southern (such transaction to be performed pursuant to another contemporaneous agreement between the Parties). DMT will use Commercially Reasonable Efforts to arrange for delivery to the alternate delivery point(s); provided, however, that Southern bears the risk to the extent the delivery arrangements associated with delivery to the Facility are not adequate to arrange for deliveries to the alternate delivery point(s).
6.2.2 In the event that DYPM increases the amount of Scheduled
Energy (or submits a Schedule where none existed) (such increased amount being
referred to as the "Increased Scheduled Energy") for any hour after it has
submitted the Schedule for such hour pursuant to the second sentence of Section
6.1 (or after 0900 CPT if no Schedule was submitted), then Southern shall notify
DYPM (either telephonic or electronic) whether it will cover DYPM's Schedule
utilizing Replacement Resources. If Southern provides notice that it will cover
some portion (or all) of the Increased Scheduled Energy with Replacement
Resources, the Parties shall follow the procedures set forth in Section 6.2.1
with regard to establishing a Replacement Gas Price, determining quantity(ies)
of Replacement Gas and, if required by Southern, accomplishing the delivery of
Replacement Gas by DMT to alternate delivery point(s); provided, however, the
Operating Committee shall establish the pertinent time frames for communications
of the Parties in this regard.
6.2.3 In the event that DYPM decreases the amount of Scheduled Energy for any hour in which Southern has previously notified DYPM that it will provide some portion of Scheduled Energy from Replacement Resources, and to the extent that Southern determines (consistent with Scheduling Constraints and the terms of this Agreement) that the requested decrease will not be accommodated by lowering the output of the Facility, Southern shall decrease the amount of Scheduled Energy provided from Replacement Resources (the amount of such decrease from Replacement Resources being referred to as the "Decreased Replacement Energy"). Southern shall propose to DYPM a delivered price (in $/MMBTU) ("Decreased Replacement Gas Price) for the amount of Gas (in MMBTU) that would have been required for the Decreased Replacement Energy amount at the Facility (such amount to be determined utilizing Figure 2 of Appendix C with appropriate recognition of ambient temperature and relative humidity levels at the Facility and being referred to herein as "Decreased Replacement Gas") assuming the entire amount of Scheduled Energy and energy associated with the Reserved Capacity scheduled under the Other Southern Agreement was to be produced at the Facility (including the Decreased Replacement Energy). After receiving such price, DYPM shall then elect to: (i) treat the price offered by Southern as the Decreased Replacement Gas Price and not require Southern to deliver Decreased Replacement Gas; or (ii) treat the price offered by Southern as the Decreased Replacement Gas Price and require Southern to deliver Decreased Replacement Gas at alternate delivery points, provided that DYPM shall compensate Southern for the additional actual costs (if any) incurred to deliver Decreased Replacement Gas to such alternate delivery points in lieu of delivery to the Facility. In the case of (ii), DYPM shall receive and purchase from Southern, and Southern shall supply and sell to DYPM, the Decreased Replacement Gas at the Decreased Replacement Gas Price, at such alternate delivery point(s) specified by DYPM (such transaction to be performed pursuant to another contemporaneous agreement between the Parties). Southern will use Commercially Reasonable Efforts to arrange for delivery to the alternate delivery point(s); provided, however, that DYPM bears the risk to the extent the delivery arrangements associated with delivery to the Facility are not adequate to arrange for deliveries to the alternate delivery point(s). In addition, the Parties shall calculate a Replacement Gas Adjustment. The Replacement Gas Adjustment shall equal the product of: (i) the Replacement Gas Price less the Decreased Replacement Gas Price; and (ii) the Decreased Replacement Gas. If the Replacement Gas Adjustment is positive, then DYPM shall owe such amount to Southern. If the Replacement Gas Adjustment is negative, then Southern shall owe the absolute value of such amount to DYPM. In the event that there are multiple Replacement Gas Prices applicable to multiple Replacement Gas quantities for any hour (pursuant to Section 6.2.1 and 6.2.2), for the purposes of calculating the Replacement Gas Adjustment, the Replacement Gas Price(s) shall be utilized in the order they were established until the entire quantity of Decreased Replacement Gas is satisfied with corresponding quantities of Replacement Gas. The Operating Committee shall establish the pertinent time frames for communications of the Parties under this Section 6.2.3.
6.2.4 In the event that Southern elects to pay Performance Payments for any hour pursuant to Section 4.5.2, the Parties shall follow procedures consistent with those set forth in Section 6.2.1 and/or Section 6.2.2 in order to establish a Replacement Gas Price for calculating the applicable Hourly Performance Payment Gas Cost under Section 8.13.3 and, if required by Southern, accomplishing the delivery of Replacement Gas by DMT to alternate delivery point(s); provided, however, the Operating Committee shall establish the pertinent time frames for communications of the Parties in this regard. Any decreases in Scheduled Energy covered by Performance Payments shall be treated consistent with Section 6.2.3.
6.3 Southern's Rights to the Facility. During any time for which DYPM has not submitted (or is not permitted to submit) a Schedule or during any time when Scheduled Energy is being provided from Replacement Resources, Southern shall have the right to dispatch the Facility for its own purposes to the extent not Scheduled (or permitted to be Scheduled) or Scheduled Energy is not provided from the Facility, including for the purpose of supplying energy to third parties. Any Schedule provided by DYPM in accordance with the terms of this Agreement (including Section 6.1) shall have priority over Southern's dispatch.
6.4 Title and Risk of Loss. Southern shall be deemed to be in exclusive control of the Scheduled Energy prior to the Delivery Point. DYPM shall be deemed to be in exclusive control of the Scheduled Energy at and after the Delivery Point. Custody, title and risk of loss of Contract Capacity and Scheduled Energy shall transfer from Southern to DYPM at the Delivery Point.
6.5 Provision of Committed Capacity.
6.5.1 [redacted].
6.5.2 [redacted].
6.5.3 [redacted].
6.5.4 [redacted].
6.5.5 [redacted].
6.5.6 [redacted].
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ARTICLE 7
TRANSMISSION SERVICE
7.1 DYPM Obligations and Assumption of Transmission Risk. DYPM, or its designee, shall arrange, obtain, contract, and pay for any and all transmission service and ancillary services required (including service under the OATT) to deliver the Contract Capacity and Scheduled Energy (and any other energy hereunder) from and beyond the Delivery Point. During transmission curtailments, Southern will cooperate to assist DYPM in modifying deliveries of Scheduled Energy with less restrictive notice provisions than those set forth in Article 6; provided, however, Southern shall have no liability or obligation to the extent it does not allow DYPM to deviate from such notice requirements. Notwithstanding anything set forth in Section 7.2, Section 7.4 or elsewhere to the contrary, it is DYPM's sole and exclusive responsibility at all times to arrange, obtain, contract and pay for any and all transmission and ancillary services required to deliver any energy hereunder from and beyond the Delivery Point. DYPM assumes all risk associated with the availability, adequacy and cost of such transmission service and ancillary services.
7.2 Southern Obligations. Southern, or its designee, shall arrange, obtain, contract, and pay for any transmission service required to deliver Contract Capacity and Scheduled Energy (whether from the Facility or Replacement Resources) to the Delivery Point. Southern will also be responsible for securing and maintaining an Interconnection Agreement with the applicable transmission provider that allows Southern to deliver Scheduled Energy to the Interconnection Point up to the Energy Output Level. Southern shall not form or permit to be formed, a "control area" or a similar arrangement with respect to the Facility, without the prior written consent of DYPM, which consent shall not be unreasonably withheld.
7.3 Imbalances and Penalties. Any penalties or imbalances resulting from actions or inactions of DYPM or DMT (or any third party to which DYPM may be supplying the capacity and energy provided hereunder) will be the responsibility of DYPM and/or DMT. Any penalties or imbalances resulting from actions or inactions of Southern will be the responsibility of Southern.
7.4 Optional System Upgrades.
7.4.1 As soon as practicable, Southern shall provide DYPM the final System Impact Study (as defined in the OATT) performed by Southern Company Transmission in connection with the interconnection of the Facility to the Southern Company Transmission System. Within ten (10) Days after the System Impact Study is provided to DYPM, DYPM shall notify Southern ("Study Notice") whether it desires Southern Company Transmission to conduct a Facilities Study (as defined in the OATT) in order to identify Optional System Upgrades and the costs of such Optional System Upgrades. DYPM's Study Notice shall specifically identify those transmission constraints which DYPM desires the Optional System Upgrades to address. If DYPM does not provide the Study Notice within ten (10) Days after the System Impact Study is provided, DYPM shall be deemed to have decided not to pursue any Optional System Upgrades and the other provisions of this Section 7.4 shall not apply. DYPM shall be responsible for all costs and expenses charged to Southern by Southern Company Transmission in connection with the study of Optional System Upgrades. DYPM shall reimburse Southern for such costs and expenses (with interest) within ten (10) Days after receiving an invoice from Southern for the same.
7.4.2 As soon as practicable, Southern shall provide DYPM all portions of the final Facilities Study performed by Southern Company Transmission that address Optional System Upgrades. Within fifteen (15) Days after such Facilities Study is provided, DYPM shall notify Southern ("Facilities Notice") of the Optional System Upgrades that it desires to have constructed. If DYPM does not provide the Facilities Notice within such fifteen (15) Day period, DYPM shall be deemed to have decided not to pursue any Optional System Upgrades and the other provisions of this Section 7.4 shall not apply. If the Facilities Notice indicates that DYPM desires to have Optional System Upgrades constructed, Southern shall utilize Commercially Reasonable best efforts in order to include the relevant Optional System Upgrades in the Interconnection Agreement or some other agreement as determined by Southern; provided, however, Southern shall have no liability or obligation to DYPM if Southern Company Transmission determines that Optional System Upgrades cannot be included in the Interconnection Agreement or another agreement.
7.4.3 During the course of Southern's negotiation of the Interconnection Agreement (or other pertinent agreement), Southern shall consult with DYPM to ensure that the scope of the Optional System Upgrades and estimated timing for construction of upgrades included in such agreement is consistent with the desires of DYPM relative to such upgrades. Southern shall also consult with DYPM regarding DYPM's desired payment schedule for the costs of Optional System Upgrades and will, to the extent possible, negotiate the Interconnection Agreement (or other agreement) so that it reflects the desired payment schedule. DYPM acknowledges, however, that the schedule of payments for and the timing for construction and operation of Optional System Upgrades are outside the control of Southern and will be determined solely by Southern Company Transmission. Southern shall have no liability or obligation to DYPM with respect to the cost of Optional System Upgrades (including any costs of such upgrades that exceed projected costs under the Interconnection Agreement) or the timing for the construction and operation of such upgrades (including any delays beyond any dates set forth in the Interconnection Agreement for construction and operation of such upgrades). DYPM expressly assumes all risk associated with delays and cost overruns in connection with Optional System Upgrades.
7.4.4 Prior to executing an Interconnection Agreement that includes provisions with respect to Optional System Upgrades desired by DYPM under this Section 7.4, Southern shall first obtain DYPM's approval of those provisions of the Interconnection Agreement relating to Optional System Upgrades and related payment requirements. Southern shall, however, be entitled to execute at any time an Interconnection Agreement that does not contain provisions addressing Optional System Upgrades; provided, however, that Southern shall provide DYPM fifteen (15) Days prior notice before it executes such an Interconnection Agreement.
7.4.5 DYPM shall pay to Southern (for payment to Southern Company Transmission, or reimburse Southern if Southern shall have paid) all amounts required to be paid for Optional System Upgrades pursuant to the Interconnection Agreement or other pertinent agreement (including any amounts in excess of projected costs for such upgrades). DYPM shall pay Southern such amounts at least ten (10) Business Days prior to the time that corresponding payments are required to be made under the Interconnection Agreement (or other agreement). To the extent that DYPM pays for Optional System Upgrades under the Interconnection Agreement (or other agreement), Southern shall transfer to DYPM any transmission credits that Southern receives with respect to such payments (excluding any credits received with respect to other facilities under the Interconnection Agreement). As currently contemplated by the OATT, such credits would effectively represent a right on the part of the Southern to be reimbursed for the costs of Optional System Upgrades as transmission service from the Facility is reserved or taken. Such reimbursement may take the form of an offset to payments otherwise owed to Southern Company Transmission by Southern. Southern shall transfer such credits to DYPM as they are received from Southern Company Transmission (including any interest that Southern may receive from Southern Company Transmission in connection with such credits).
ARTICLE 8
GAS DELIVERY OBLIGATIONS AND GAS ARRANGEMENTS
8.1 DMT Obligations. DMT shall deliver the Gas Requirements to Southern
at the Gas Delivery Point. DMT shall deliver Replacement Gas pursuant to Section
6.2 at the Alternate Gas Delivery Point(s). DMT shall make any and all Gas
Nominations required for the delivery of the Gas hereunder to the Gas Delivery
Point and Alternate Gas Delivery Point(s). DMT shall not be obligated to deliver
Gas in excess of the Gas Requirements, except as may be required under Section
6.2. DMT's obligation to supply Gas hereunder shall commence upon the Effective
Date of Service and shall continue until the end of the Term.
8.2 Southern Obligations. Southern shall purchase and receive the Gas Requirements from DMT at the Gas Delivery Point. Southern shall purchase and receive Replacement Gas pursuant to Section 6.2 at the Alternate Gas Delivery Point(s).
8.3 Transportation Obligations. DMT shall be solely responsible, at its sole cost and expense, for procuring all transportation capacity from the applicable Transporter(s) required to deliver: (i) the Gas Requirements to the Gas Delivery Point; and (ii) Replacement Gas under Section 6.2 to the Alternate Gas Delivery Point(s). DMT shall bear all costs and expenses in connection with the delivery of Gas hereunder prior to and at the Gas Delivery Point and/or the Alternate Gas Delivery Point(s). Under no circumstance shall Southern have any obligation to obtain or pay for transportation capacity in order to deliver Gas hereunder to the Gas Delivery Point or the Alternate Gas Delivery Point(s) (except for those costs Southern has expressly agreed to bear under Section 6.2).
8.4 Pipeline Imbalance Charges.
8.4.1 The Parties acknowledge that due to normal operating characteristics and efficiencies of the Facility, imbalances between the quantities of Gas nominated by DMT hereunder and the Gas Requirements will occur and cannot be avoided. Such imbalances will result from, among other things, the variation of the Facility's heat rate on a Day to Day and an hourly basis.
8.4.2 Notwithstanding any other provision contained herein or elsewhere, but subject to Section 8.4.3 below, [redacted].
8.4.3 [redacted].
8.4.4 Subject to Section 8.4.3, [redacted].
8.5 Gas Nominations Responsibility. DMT shall be responsible for making all Gas Nominations with the applicable Transporters upstream of and to the Gas Delivery Point and Alternate Gas Delivery Point(s). DMT shall provide Southern any information that a Transporter may require from Southern. DMT shall nominate quantities of Gas sufficient to produce the Energy Output Level. Variances between the nominated quantities and quantities required to produce the Energy Output Level as determined utilizing Figure 2 of Appendix C (with appropriate recognition of ambient temperature and relative humidity levels at the Facility) may be permitted so long as the variances are consistent with the Transporter's then current application of the Gas Tariff. To the extent that Southern, as delivery point operator at the Gas Delivery Point, is requested by the Transporter to conform nominated quantities to actual deliveries at the Gas Delivery Point during any given period, DMT and/or DYPM shall conform its nominated quantities to the Gas Requirements for such period (which, if necessary, shall include altering the Energy Output Level).
8.6 Title. Title to all Gas delivered by DMT under this Agreement shall pass to Southern at the Gas Delivery Point and/or the Alternate Gas Delivery Point(s). DMT shall be deemed to be in exclusive control and possession of the Gas delivered hereunder prior to and at the Gas Delivery Point and/or the Alternate Gas Delivery Point(s). Southern shall be deemed to be in exclusive control and possession of Gas delivered hereunder after the Gas Delivery Point and/or the Alternate Gas Delivery Point(s).
8.7 Specifications. Gas delivered by DMT shall meet or exceed the
minimum quality specifications of the applicable Transporter(s). Gas delivered
by DMT shall be delivered at pressures sufficient to cause such Gas to enter the
applicable facilities at the Gas Delivery Point and/or the Alternate Gas
Delivery Point(s), but not below the minimum allowable or above the maximum
allowable operating pressure specified by the Transporter(s). Gas provided by
DMT hereunder shall be free from contamination and shall conform to the Gas
Tariff specifications. If any Gas delivered by DMT shall fail to conform to the
requirements of this Section 8.7 ("Non-Conforming Gas"), Southern shall be
entitled, in its sole discretion, to refuse to accept the delivered quantities.
In such event, DMT will be deemed to have failed to perform its obligation to
deliver Gas hereunder. To the extent that Southern incurs damages, costs and/or
expenses as a result of its receipt of Non-Conforming Gas, notwithstanding the
reason for or any third party responsibility for such Non-Conforming Gas, DMT
shall reimburse Southern for such damages, costs and/or expenses within
[redacted] after receiving an invoice from Southern for the same. DMT shall be
solely responsible for making any claims against or seeking indemnification from
a Transporter for any such damages, costs and/or expenses it pays hereunder.
8.8 Gas Metering.
8.8.1 To the maximum extent possible and subject to the capabilities of the Gas Metering Equipment, Gas delivered by DMT hereunder shall be measured at the Gas Delivery Point on a continuous real-time basis. The Gas Metering Equipment shall be used to determine the quantity of Gas delivered at the Gas Delivery Point. Facility Metering Equipment may be installed at the Facility to monitor consumption (on a continuous real time basis) of Gas at the Facility.
8.8.2 Southern shall be responsible for performing, or causing
to be performed, and shall bear all costs and expenses of the installation,
maintenance, repair, testing and initial calibration of the Gas Metering
Equipment and the Facility Metering Equipment (to the extent not otherwise
installed, maintained, tested and calibrated by the Transporter or other third
party). DMT shall reimburse Southern for up to [redacted] in costs and expenses
incurred by Southern to install the Facility Metering Equipment within
[redacted] after receipt of an invoice from Southern for the same.
8.8.3. Southern will cooperate with DMT in order to permit DMT, at DMT's sole cost and expense, to either install electronic access to Gas Metering Equipment and Facility Metering Equipment, or to install DMT's own real-time meters downstream of the Gas Metering Equipment.
8.8.4 The Operating Committee shall establish procedures to ensure the accuracy of the Gas Metering Equipment and the Facility Metering Equipment.
8.9 Hourly Southern Gas Costs. For each hour, Hourly Southern Gas
Costs shall be calculated. The Hourly Southern Gas Costs shall equal
[redacted].
8.10 Operating Procedures. The Operating Committee shall develop any other Gas Nominations and operating procedures to apply under this Agreement.
8.11 Obligations with Respect to Gas.
8.11.1 DMT is responsible for procuring and supplying all Gas required to produce the Energy Output Level and as otherwise required by this Agreement.
8.11.2 In the event of and for the duration of a Delivery Excuse under Section 16.1, Southern shall have no obligation to procure any portion of the Gas supply, or make any substitute arrangement, in order for the Facility to produce any portion of the Energy Output Level, even if such Delivery Excuse lasts for the duration of the Term. Southern may, however, procure Gas in order to produce energy from the Facility for its own purposes, including for sale to third parties.
8.12 Determination of DYPM Gas Costs.
8.12.1 For each hour the Facility produces energy or is ramping up or down, the Hourly DYPM Gas Costs shall be calculated as follows:
Hourly DYPM Gas Costs = [redacted]
Where:
Adjusted Gas
Volume
(in MMBTU) = [redacted]
Actual Gas
Volume = [redacted]
Reserved Capacity
Gas = [redacted]
Reserved
Capacity Energy = [redacted]
Southern Gas
Consumed = [redacted]
Gas Index = [redacted].
8.12.2 [redacted].
8.13 Determination of Replacement Resources Gas Costs and Hourly
Performance Payment Gas Cost.
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8.13.1 For each hour that Southern provides some portion of Scheduled Energy and/or energy associated with Reserved Capacity [redacted]:
Hourly Replacement Resources Gas Costs ($) = [redacted] Where: Replacement Energy Block = [redacted] Replacement Gas Costs = [redacted] Replacement Gas Price = [redacted] Replacement Resources Gas = [redacted] |
8.13.2 [redacted].
8.13.3 For each hour that Southern elects to pay Performance Payments pursuant to Section 4.5.2 and/or in connection with energy associated with the Reserved Capacity, an Hourly Performance Payment Gas Cost shall be calculated as follows:
Hourly Performance Payment Gas Cost ($) = [redacted] Where: Performance Energy Block = [redacted] Performance Gas Costs = [redacted]. Replacement Gas Price = [redacted]. Performance Gas = [redacted] |
8.13.4 It is the intent of the Parties that all Gas volumes calculated under this Section 8.13 associated with energy not delivered from the Facility shall be determined as if such energy was produced by the Facility incremental to (i.e., above) the Energy Output Level in the relevant period (as determined pursuant to Figure 1 of Appendix C).
8.14 Initial Performance Target. Southern does not guarantee or warrant that the Initial Heat Rate of the Facility will meet the Initial Performance Target. Nevertheless, in the event the Initial Performance Target is not met and [redacted]
8.15 Degradation of Initial Heat Rate. The Parties acknowledge that the Facility may experience an increase in the Initial Heat Rate over time due to normal operations. In the event DYPM believes the Initial Heat Rate of the Facility has increased by more than the Maximum Allowable Degradation, DYPM may require Southern to perform a Heat Rate Test. DYPM may request a Heat Rate Test no more frequently than once every [redacted]. The cost of Heat Rate Tests will be paid by DYPM if the results of the Heat Rate Test ("Tested Heat Rate") reveal a Tested Heat Rate below the Initial Heat Rate plus the Maximum Allowable Degradation and by Southern if the Tested Heat Rate exceeds the sum of the Initial Heat Rate plus the Maximum Allowable Degradation. Upon completion of a Heat Rate Test, if the Tested Heat Rate is greater than the Initial Heat Rate plus the Maximum Allowable Degradation, DYPM shall be compensated in accordance with the calculation set forth below for the increased heat rate degradation based on the amount by which the Tested Heat Rate exceeds the sum of the Initial Heat Rate plus the Maximum Allowable Degradation. The compensation shall begin on the date that DYPM requested the Heat Rate Test revealing the excessive degradation and shall continue until such time as Southern conducts a subsequent Heat Rate Test and establishes a new Tested Heat Rate, which Heat Rate Test shall be conducted at Southern's expense. If the new Tested Heat Rate is less than the Initial Heat Rate plus the Maximum Allowable Degradation, Southern shall no longer be required to compensate DYPM as described below. If the new Tested Heat Rate is greater than the Initial Heat Rate plus the Maximum Allowable Degradation, Southern shall continue to compensate DYPM in accordance with the formula set forth below; provided, however, such compensation shall be revised based on the new Tested Heat Rate. The Monthly Heat Rate Compensation shall be calculated using the formulas below for each Billing Month:
MHRC = [redacted]
where:
MHRC = [redacted]
= [redacted].
MAGV = [redacted]
= [redacted].
Fuel Cost = [redacted].
|
If the period of calculation for the Monthly Heat Rate Compensation includes a partial Billing Month, all values used in said calculations will include only the Days of the Billing Month which are subject to the Monthly Heat Rate Compensation.
8.16 Ramping Gas and Energy. Appendix C includes tables indicating the amount of Gas required, expected duration, megawatt hours produced, and time required for a Cold Start, Warm Start, Hot Start, and the termination of energy deliveries pursuant to a Schedule. DMT shall be responsible for procuring and supplying all Gas required to ramp the Facility up and down to produce the Energy Output Level. DYPM shall receive and accept at the Interconnection Point all energy produced by the Facility during ramping in connection with the Energy Output Level. Ramp energy shall not be deemed to be Scheduled Energy under this Agreement. Southern shall have no liability or obligation with respect to ramp energy (or the failure to provide such energy). In addition, Southern shall not be required to make any elections under Section 4.5.2 with respect to ramp energy and shall not be required to deliver such energy from Replacement Resources, accumulate ENDH or pay Performance Payments with respect to such energy.
ARTICLE 9
ELECTRIC METERING
9.1 Metering.
9.1.1 To the maximum extent possible given the capabilities of the Electric Metering Equipment, the Energy Output Levels shall be metered at the Delivery Point on a continuous real-time basis (or elsewhere as corrected to the Delivery Point based on agreed upon industry standard loss compensation mechanisms to be determined by the Operating Committee). The Electric Metering Equipment shall be used to determine conclusively, subject to Section 9.4, the Energy Output Level at the Delivery Point.
9.1.2 Southern shall be responsible for performing, or causing to be performed, and shall bear all costs and expenses of the installation, maintenance, testing and initial calibration of the Electric Metering Equipment and the maintenance and testing of the electrical facilities and Protective Apparatus, including any transmission equipment and related facilities, necessary to interconnect the Facility at the Interconnection Point. All Electric Metering Equipment must conform to the requirements of Southern Company Transmission.
9.1.3 Southern will work with DYPM to permit DYPM, at DYPM's expense, either to install electronic access to the existing real-time electric meters or to install DYPM's own real-time meters.
9.1.4 Energy delivered to an Alternate Delivery Point as provided in this Agreement shall be measured in accordance with Prudent Industry Practices.
9.2 Industry Standards. All Electric Metering Equipment, whether owned by Southern or by a third party, shall be operated, maintained and tested by and/or on behalf of Southern in accordance with Prudent Industry Practices.
9.3 Access. Each Party shall have the right to receive reasonable advance notice with respect to, and to be present at the time of, any installing, changing, repairing, inspecting, testing, calibrating or adjusting of Electric Metering Equipment irrespective of whether such Electric Metering Equipment is owned or operated by Southern or by a third party. Upon reasonable advance notice, Southern shall make available to DYPM all data, records and charts relating to the Electric Metering Equipment, together with measurements and calculations therefrom, for inspection and verification.
9.4 Calibration. Southern at its sole cost and expense shall inspect and calibrate, or cause to be inspected and calibrated, all Electric Metering Equipment periodically, but not less frequently than as required by Southern Company Transmission, or if not specified in the Interconnection Agreement, in accordance with Prudent Industry Practices.
9.5 Records. The Parties shall maintain accurate and detailed records relating to the hourly Energy Output Level for three years or for such longer period as may be required by FERC or an applicable Government Agency. All records shall be available for inspection by either Party upon reasonable notice.
9.6 Meter Errors. If the Electric Metering Equipment fails to register,
or if the measurement made by a metering device is found upon testing to vary by
more than the variance permitted under the Interconnection Agreement from the
measurement made by the standard meter used in the test, an adjustment shall be
made correcting all measurements of energy made by the Electric Metering
Equipment during: (i) the actual period when inaccurate measurements were made,
if that period can be determined to the mutual satisfaction of the Parties; or
(ii) if such actual period cannot be determined to the mutual satisfaction of
the Parties, the latter half of the period from the date of the last test of the
Electric Metering Equipment to the data such failure is discovered or such test
is made (each being an "Adjustment Period"). If the Parties are unable to agree
on the amount of the adjustment to be applied to the Adjustment Period, the
amount of the adjustment shall be determined: (i) by correcting the error if the
percentage of error is ascertainable by calibration, tests or mathematical
calculation; or (ii) if not so ascertainable, by estimating on the basis of
deliveries under similar conditions during the period since the last test. If a
discrepancy is discovered for an Adjustment Period between the quantities of
Delivered Energy and the measured quantities of the Electric Metering Equipment,
then unless physical (and corresponding financial) discrepancies between such
quantities have been previously resolved through reconciliation provisions
imposed by the applicable transmission provider or through other controlling
true-up mechanisms separate from this Agreement governing the generation and
delivery of energy from the Facility, within thirty (30) Days after the
determination of the amount of any necessary adjustment under this Section 9.6,
DYPM shall pay Southern any additional amounts then due for deliveries of
Scheduled Energy during the Adjustment Period or DYPM shall be entitled to a
credit against any subsequent payments for Schedule Energy, as the case may be.
9.7 Subject to Interconnection Agreement. The application of the provision in this Article 9 shall be subject to all of the pertinent requirements and limitations of the Interconnection Agreement.
ARTICLE 10
BILLING AND PAYMENT
10.1 Timing; Method of Payment. The billing Party will submit to the other Party, as promptly as practicable after the first of each Billing Month, an invoice (by mail, facsimile or electronic means) for transactions and the amounts due under the terms of this Agreement for the preceding Month. Bills for each Billing Month shall be due and payable on the tenth (10th) Day after the Day on which the billed Party receives the invoice, unless otherwise agreed. Payment shall be made, on or before the due date, to the billing Party in accordance with the invoice in immediately available funds through wire transfer, or other mutually agreeable method.
10.2 Late Payment. Amounts that are owed by a Party shall, if not remitted within the time period specified under Section 10.1, be subject to a late payment charge equal to the interest calculated pursuant to Section 20.8, accrued and payable on a monthly basis with respect to the unpaid amount. Such late payment charge shall accrue from the due date of such amount until the date on which it is paid.
10.3 Disputed Billings. [redacted]
10.4 Adjustments. If any overcharge or undercharge in any form whatsoever shall at any time be found and the invoice therefor has been paid, the Party that has been paid the overcharge shall refund the amount of the overcharge to the other Party, and the Party that has been undercharged shall pay the amount of the undercharge to the other Party, within thirty (30) Days after final determination thereof; provided, however, that no retroactive adjustment shall be made for any overcharge or undercharge unless written notice of the same is provided to the other Party within a period of twenty-four (24) Months from the date of the invoice in which such overcharge or undercharge was first included. Any such adjustments shall be made with interest calculated in accordance with Section 20.8 from the date that the undercharge or overcharge actually occurred.
10.5 Audit Rights. The Parties shall keep complete and accurate records, meter readings and memoranda of their operations under this Agreement and shall maintain such data for a period of at least two (2) years after the completion of each Billing Month hereunder; provided, however, records relating to a disputed matter shall be retained until the dispute is resolved. Such records shall be available for inspection and audit by the other Party upon reasonable request and during a regular Business Day.
ARTICLE 11
CHANGE IN LAW
11.1 Limitations. The Parties acknowledge that during the Term of this Agreement, Changes in Law that increase Southern's cost of providing capacity and/or energy hereunder could occur. During the Term, Southern will be responsible for up to a total of [redacted] of Increased Generation Costs ("Cost Threshold"). Notwithstanding the foregoing, any Increased Generation Costs in any Contract Year in excess of [redacted] will be paid by DYPM through an additional payment or surcharge (the "Change in Law Surcharge"). Once Southern has incurred Increased Generation Costs up to the Cost Threshold, DYPM shall pay for all Increased Generation Costs through the Change in Law Surcharge, as provided below. In lieu of the Change in Law Surcharge, the Parties may agree on other payment mechanisms whereby DYPM shall pay for Increased Generation Costs. Alternatively, the Parties may mutually agree on certain reductions in DYPM's rights to purchase Contract Capacity and Scheduled Energy in lieu of payment of Increased Generation Costs.
11.2 Determination. [redacted].
11.3 Initiation of Surcharge. In the event that total Increased Generation Costs for any Contract Year will exceed [redacted], or if the Cost Threshold will be exceeded, Southern shall provide DYPM with written notice of a proposed Change in Law Surcharge. No earlier than [redacted] thereafter, Southern may initiate the Change in Law Surcharge consistent with such notice. For purposes of developing the Change in Law Surcharge, appropriate proration shall be made to reflect any uprates under Section 3.1.4 that DYPM elected not to purchase and to which Southern is entitled to utilize.
11.4 Timing. [redacted].
11.5 Contest and Dialogue. [redacted]. Whenever either Party anticipates the possibility of a Change in Law, it may request meeting(s) to engage in open dialogue with the other to exchange ideas regarding potential courses of action.
ARTICLE 12
LIABILITY ALLOCATION; LIMITATIONS ON LIABILITY
12.1 Costs, Taxes and Charges. Except as otherwise provided in this Agreement, in addition to all other amounts due and payable under this Agreement: (i) Southern shall be responsible for all costs, Taxes, and charges of any kind relating to the delivery of energy, capacity, transmission, and/or related services prior to the Delivery Point (by way of clarification of the foregoing, Taxes prior to the Delivery Point include: ad valorem taxes on the Facility; income taxes on Southern or its property; and taxes on payments made to Southern under this Agreement); and (ii) DYPM shall be responsible for all costs, Taxes, and charges of any kind relating to the delivery of energy, capacity, transmission, and/or related services at and after the Delivery Point (by way of clarification of the foregoing, Taxes at and after the Delivery Point include: income taxes on DYPM or its property, and any taxes incurred in connection with downstream sales of the Scheduled Energy). Each Party shall provide the other Party upon written request a certificate of exemption or other reasonably satisfactory evidence of exemption if any exemption from or reduction of any Tax is applicable. Each Party shall exercise Commercially Reasonable Efforts to obtain and to cooperate in obtaining any exemption from or reduction of any Tax.
12.2 Indemnification.
12.2.1 Unless otherwise agreed in writing by the Parties, Southern and DYPM shall each defend, indemnify and save harmless the other and their respective officers, directors, servants, agents, employees and representatives from and against any and all claims, demands, costs or expenses (including reasonable attorneys' fees) for loss, damage or injury to any person, property or interest arising out of or in any way related to this Agreement to the extent such loss, damage or injury occurs on its own side of the Delivery Point, irrespective of negligence, whether actual or claimed, of the other. Nothing in this Agreement shall create a contractual relationship between one Party and the customers of the other Party, nor shall it create a duty of any kind to such customers.
12.2.2 Unless otherwise agreed in writing by the Parties, Southern and DMT shall each defend, indemnify and save harmless the other and their respective officers, directors, servants, agents, employees and representatives from and against any and all claims, demands, costs or expenses (including reasonable attorneys' fees) for loss, damage or injury to any person, property or interest arising out of or in any way related to this Agreement to the extent such loss, damage or injury occurs on its own side of the Gas Delivery Point, irrespective of negligence, whether actual or claimed, of the other. Nothing in this Agreement shall create a contractual relationship between one Party and the customers of the other Party, nor shall it create a duty of any kind to such customers.
12.3 Limitation of Liability.
12.3.1 there are no warranties under this agreement EXCEPT TO THE EXTENT SPeciFICALLy set forth HEREIN. the parties hereby specifically disclaim and exclude all implied warranties, including the implied warranties of merchantability and of fitness for a particular purpose.
12.3.2 NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES SUFFERED BY THAT PARTY OR BY ANY CUSTOMER OF THAT PARTY, FOR lost profits or other business interruption damages, WHETHER BY VIRTUE OF ANY STATUTE, IN TORT OR CONTRACT, UNDER ANY PROVISION OF INDEMNITY OR OTHERWISE. THE PARTIES INTEND THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT, AND THAT THE LIQUIDATED DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.
12.3.3 In the event that any provision of this Section 12.3 is held to be invalid or unenforceable, this Section shall be void and of no effect solely to the extent of such invalidity or unenforceability, and no claim arising out of such invalidity or lack of enforceability shall be made by one Party against the other or its officers, agents, or employees. Notwithstanding the foregoing, this Section 12.3 shall not limit or negate the right of either Party to be fully indemnified as provided in Section 12.2 or limit the remedies available for an Event of Default.
ARTICLE 13
FORCE MAJEURE event
13.1 Force Majeure Event Defined.
13.1.1 General Rule. As used herein, an Event of Force Majeure means an unforeseeable cause(s) beyond the reasonable control of and without the fault or negligence of the Party claiming Force Majeure, including but not limited to acts of God, strike, flood, earthquake, storm, fire, lightning, epidemic, war, riot, civil disturbance, sabotage, terrorism, change in law or applicable regulation subsequent to the Execution Date and action or inaction by any federal, state or local legislative, executive, administrative or judicial agency or body which, by exercise of due foresight such Party could not reasonably have expected and which, by the exercise of due diligence, it is unable to overcome.
13.1.2 Exceptions. Notwithstanding anything contained in Section 13.1.1, the term Force Majeure shall not include any of the following:
[redacted]
13.2 Applicability of Force Majeure Event.
Neither Party shall be in breach or liable for any delay or failure in its performance under this Agreement (except for such Party's performance of its payment obligations hereunder, which shall not be excused by any Force Majeure Event) to the extent such performance is prevented or delayed due to a Force Majeure Event, provided that:
13.2.1 The non-performing Party shall give the other Party written notice within three (3) Business Days of the commencement of the Force Majeure Event, with available details to be supplied within [redacted] after the commencement of the Force Majeure Event further describing the particulars of the occurrence of the Force Majeure Event;
13.2.2 The delay in performance shall be of no greater scope and of no longer duration than is directly caused by the Force Majeure Event;
13.2.3 The Party whose performance is delayed or prevented shall proceed with Commercially Reasonable Efforts to overcome the events or circumstances preventing or delaying performance and shall, as requested (but not more often than weekly), provide written progress reports to the other Party during the period that performance is delayed or prevented describing actions taken and to be taken to remedy the consequences of the Force Majeure Event, the schedule for such actions and the expected date by which performance shall no longer be affected by the Force Majeure Event; and
13.2.4 When the performance of the Party claiming the Force Majeure Event is no longer being delayed or prevented, that Party shall give the other Party written notice to that effect.
13.3 Effect of Force Majeure Event.
13.3.1 Except for the obligation of either Party to make any required payments under this Agreement, the Parties shall be excused from performing their respective obligations under this Agreement and shall not be liable in damages or otherwise if and to the extent that they are unable to so perform or are prevented from performing by a Force Majeure Event.
13.3.2 [redacted].
13.4 Other Effects of Force Majeure Events. If any Force Majeure Event claimed by a Party shall continue for more than [redacted] from the date of notice provided by such Party in Section 13.2.1, then the other Party may, at any time following the end of such period, terminate this Agreement upon written notice to the affected Party. Upon such termination, neither Party shall have any further obligation to the other Party except as to payment of any costs and liabilities incurred prior to the effective date of such termination. Any notice of termination under this Section must be received during the period that performance continues to be delayed or prevented by the Force Majeure Event.
ARTICLE 14
EVENT OF DEFAULT
14.1 Event of Default. The occurrence of any one of the following shall constitute an "Event of Default":
14.1.1 The failure by a Party to make payment to the other Party for amounts due under this Agreement after said amounts have become due and payable and such failure is not cured within fifteen (15) Days after receiving written notice from the Party to which such payments are due;
14.1.2 A Party or any Party guaranteeing such Party's obligations hereunder (a "Guarantor") shall: (i) admit in writing its inability to pay its debts as such debts become due; (ii) make a general assignment or an arrangement or composition with or for the benefit of its creditors; (iii) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against such Party or such Guarantor under any bankruptcy or similar law; (iv) take any action for the purpose of effectuating any of the foregoing; or (v) fails to comply with the terms and conditions of its Guaranty;
14.1.3 A proceeding or case shall be commenced, without the application or consent of the Party or its Guarantor, in any court of competent jurisdiction, seeking: (i) its liquidation, reorganization of its debts, dissolution or winding-up, or the composition or readjustment of its debts; (ii) the appointment of a receiver, custodian, liquidator or the like of the Party or its Guarantor or of all or any substantial part of its assets or the assets of its Guarantor; or (iii) similar relief in respect of such Party or its Guarantor under any law relating to bankruptcy, insolvency, reorganization of its debts, winding-up, composition or adjustment of debt;
14.1.4 The failure of any Party to comply with the requirements of Article 15 regarding creditworthiness and/or security;
14.1.5 The failure of a Party to comply with the requirements of Article 18 regarding assignment;
14.1.6 Any representation or warranty made by a Party under Article 17 proves to have been false or misleading in any material respect and such representation or warranty is not made true within twenty (20) Days after notice thereof to such Party; provided, however, that the cure must also remove any adverse effect on the non-defaulting Party;
14.1.7 The occurrence of a default or event of default by such Party (or its Affiliate) under the Other Southern Agreement;
14.1.8 A Party shall fail to pay when due (subject to any applicable cure or grace period), whether by acceleration or otherwise, any principal or interest on indebtedness aggregating in excess of [redacted] in principal amount; or any indebtedness aggregating in excess of [redacted] shall be declared due and payable or be required to be prepaid (other than by a regularly scheduled payment) prior to the stated maturity of such indebtedness; or
14.1.9 The material failure by a Party to comply with any
material provision of this Agreement (other than the events described above and
those for which a remedy is expressly provided) if such failure is not the
result of a Force Majeure Event, an Unavailability or is not otherwise excused
in accordance with this Agreement, and such failure continues uncured for
[redacted] after written notice thereof switch order from the other Party;
provided, however, if such failure is not capable of being cured within such
period of [redacted] with the exercise of reasonable diligence, then such cure
period shall be extended for an additional reasonable period of time (not to
exceed [redacted]), so long as the Party is exercising reasonable diligence to
cure such failure.
14.2 Exclusive Remedies.
14.2.1 Upon the occurrence of an Event of Default and at all times during any applicable cure period, for so long as such Event of Default is continuing (or as long as the defaulting Party is attempting to cure during such cure period), the non-defaulting Party's sole and exclusive remedy shall be to suspend its performance under this Agreement and/or declare an Early Termination Date as provided below.
14.2.2 If an Event of Default has occurred, the non-defaulting Party shall have the right, in its sole discretion, by no more than [redacted] notice to the defaulting Party, to designate a Day no earlier than the Day such notice is effective as the date on which the Agreement shall terminate ("Early Termination Date"). Subject to Section 20.3, this Agreement shall terminate on the Early Termination Date and neither Party shall have any further liability or obligation to the other hereunder, except as provided in Sections 14.2.3 or 14.2.4 below, as applicable. The exercise by DYPM (as an Affiliate of DMT) of its rights under this Section 14.2 shall be the sole and exclusive remedy of DMT for an Event of Default by Southern.
14.2.3 With respect to an Event of Default by either DYPM or
DMT, Southern's notice under Section 14.2.2 shall be to DYPM and shall indicate
one of the following elections: (i) receive a [redacted]; or (ii) receive a
continuing damage payment. In the event Southern elects to receive the
[redacted], DYPM shall pay Southern such amount within three (3) Business Days
after the Early Termination Date as liquidated damages for all claims associated
with the Event of Default under this Agreement. In the event Southern elects to
receive the continuing damage payment, Southern shall calculate an amount equal
to: [redacted]. This process shall continue until the total of the monthly
Damage Differentials (treating the negative amounts as positive for this
purpose) equals a net present value [redacted] as of the Early Termination Date.
14.2.4 With respect to an Event of Default by Southern, within fifteen (15) Days after DYPM/DMT's notice under Section 14.2.2, the Parties shall each select an independent party to determine the [redacted] of the Agreement. Within thirty (30) Days after such notice, the two independent parties shall select a third independent party to determine the [redacted] of the Agreement. Within sixty (60) Days after such notice, the three (3) independent parties shall provide the Parties with their respective estimates of the [redacted]. The actual [redacted] shall equal the arithmetic average of the three estimates. If one Party disputes the actual [redacted], within five (5) Business Days of notice of the actual [redacted] determined by the independent parties, such Party may submit the dispute for resolution pursuant to the arbitration procedures of Article 19. If the actual [redacted] ultimately used is the value determined by the three independent parties, then such value cannot exceed a net present value (using a discount rate of 8%) of [redacted] as of the Early Termination Date. If the actual [redacted] ultimately used is the value determined pursuant to arbitration, then such value cannot exceed a net present value (using a discount rate of 8%) of [redacted] as of the date of the arbitrators' decision. If the final determination of the [redacted] indicates that a payment is owed to DYPM, then the actual [redacted] will be paid by Southern to DYPM within three (3) Business Days of such determination. If the final determination of the [redacted] indicates that a payment would be owed to Southern absent the Event of Default by Southern, then although the [redacted] to DYPM would be negative, neither Party shall be required to pay the other any amount hereunder. As used herein, [redacted]
ARTICLE 15
CREDITWORTHINESS AND SECURITY
15.1 Guaranty in favor of Southern. Simultaneously with the execution of this Agreement, DYPM and DMT shall cause Dynegy Holdings Inc., the parent company of DYPM and DMT, to execute and deliver a Guaranty Agreement in the form of that attached hereto as Appendix E (DYPM Guaranty). If at any time during the Term, the long term senior unsecured indebtedness of Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) has or drops to a rating below either (i) Baa3 by Moody's Investors Service ("Moody's") (or future equivalent) or BBB- by Standard & Poor's Ratings Group ("S&P") (or future equivalent), then DYPM and DMT shall provide a substitute guaranty in form and substance substantially similar to the DYPM Guaranty (the "Eligible Guaranty") issued by an entity with a long term senior unsecured indebtedness rating of at or above both (i) Baa3 by Moody's (or future equivalent) and (ii) BBB- by S&P (or future equivalent) (the "Eligible Guaranty Threshold"). DYPM and DMT shall provide such Eligible Guaranty within ten (10) Days of receipt of notice from Southern that DYPM and DMT are required to provide an Eligible Guaranty due to the downgrade to a rating below either (i) Baa3 by Moody's (or future equivalent) or (ii) BBB- by S&P (or future equivalent). If DYPM and DMT are unable to provide an Eligible Guaranty to Southern during such ten (10) Day period, then DYPM, DMT and Dynegy Holdings Inc. must be and remain in compliance with and Southern must receive the security and payments as required by the terms of Section 15.3 and 15.4 below.
15.2 Negative Watch Credit Support in favor of Southern. If at any time during the period beginning on the date hereof through December 31, 2005, the long term senior unsecured indebtedness of Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) has or drops to a rating of either (i) Baa3 by Moody's (or future equivalent) and Dynegy Holdings Inc. (or the provider of an Eligible Guaranty), its credit rating or indebtedness is on watch for possible downgrade by Moody's (or future equivalent) or (ii) BBB- by S&P (or future equivalent) and Dynegy Holdings Inc. (or the provider of an Eligible Guaranty), its credit rating or indebtedness is on negative CreditWatch by S&P (or future equivalent), then DYPM, DMT or Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) shall within three (3) Business Days after such event provide to and maintain in favor of Southern a letter of credit issued by an issuer reasonably acceptable to Southern in the amount of [redacted] in substantially the form of Appendix F hereto unless a [redacted] letter of credit has been properly issued and remains in effect in accordance with the first sentence of Section 15.3 or 15.4 below.
15.3 Credit Support in favor of Southern for Junk Rating. If at any
time during the period beginning on the date hereof through December 31, 2005,
the long term senior unsecured indebtedness of Dynegy Holdings Inc. (or the
provider of an Eligible Guaranty) has or drops to a rating of below either (i)
Baa3 by Moody's (or future equivalent) or (ii) BBB- by S&P (or future
equivalent), then DYPM, DMT or Dynegy Holdings Inc. (or the provider of an
Eligible Guaranty) shall within three (3) Business Days after such event provide
to and maintain in favor of Southern a letter of credit issued by an issuer
reasonably acceptable to Southern in the amount of [redacted] in substantially
the form of Appendix F hereto unless a [redacted] letter of credit has been
properly issued and remains in effect in accordance with the first sentence of
Section 15.2 above or Section 15.4 below.
15.4 Post December 31, 2005 Provisions. If at any time after December
31, 2005, the long term senior unsecured indebtedness of Dynegy Holdings Inc.
(or the provider of an Eligible Guaranty) has or drops to a rating below either
(i) Baa3 by Moody's (or future equivalent) or (ii) BBB- by S&P (or future
equivalent), then DYPM, DMT or Dynegy Holdings Inc. (or the provider of an
Eligible Guaranty) shall within three (3) Business Days after such event provide
to and maintain in favor of Southern a letter of credit issued by an issuer
reasonably acceptable to Southern in the amount of [redacted] in substantially
the form of Appendix F hereto, unless a [redacted] letter of credit has been
properly issued and remains in effect in accordance with the first sentence of
Section 15.2 or 15.3 above.
15.5 Guaranty in favor of DYPM/DMT. If hereafter Southern's net worth
(calculated by subtracting Southern's liabilities (net of intercompany loans)
from Southern's total assets (excluding goodwill) as such terms are determined
in accordance with GAAP) falls below [redacted], Southern shall provide to DYPM
and DMT a guaranty from an entity with a long term senior unsecured indebtedness
rating at or above (i) Baa3 by Moody's (or future equivalent) and (ii) BBB- by
S&P (or future equivalent) in substantially the form of Appendix G (Southern
Guaranty) in an amount equal to thirty percent (30%) of the amount by which
[redacted] exceeds Southern's net worth (the "Shortfall Amount") or, at
Southern's option, Southern shall deliver to DYPM a letter of credit in the
Shortfall Amount in substantially the form of Appendix H hereto. If at any time
during the Term, the long term senior unsecured indebtedness of the provider of
the Southern Guaranty has or drops to a rating below either (i) Baa3 by Moody's
(or future equivalent) or (ii) BBB- by S&P (or future equivalent), then Southern
shall provide a Southern Guaranty issued by an entity with a long term senior
unsecured indebtedness rating at or above the Guaranty Threshold. Southern shall
provide such Southern Guaranty within ten (10) Days of receipt of notice from
DYPM and DMT that Southern is required to provide a Southern Guaranty due to the
downgrade below either (i) Baa3 by Moody's (or future equivalent) or (ii) BBB-
by S&P (or future equivalent). If Southern is unable to provide a Southern
Guaranty during the applicable periods described above, then Southern shall
provide and maintain substitute collateral of a value equal to the Shortfall
Amount in form and substance reasonably satisfactory to DYPM and DMT which
security shall cover and secure Southern's obligations under this Agreement. The
foregoing substitute collateral shall be replenished so that at all times
substitute collateral of a value equal to the Shortfall Amount is securing
Southern's obligations to DYPM and DMT until such time as a Southern Guaranty is
provided. If at any time a Southern Guaranty becomes available, Southern may
elect to provide such Southern Guaranty in replacement of any security
previously provided. Once a Southern Guaranty is provided, any security
previously provided by Southern shall be immediately returned or cancelled as
the case may be, at which time the Southern Guaranty shall remain in place until
the latter of it is terminated in accordance with its terms or until such time
as collateral is again required and provided due to the downgrades of the
provider of the Southern Guaranty to a level below the Eligible Guaranty
Threshold.
15.6 Negative Watch Credit Support in favor of DYPM/DMT. If at any time
prior to June 1, 2005, the long term senior unsecured indebtedness of Southern
has or drops to a rating of either (i) Baa3 by Moody's (or future equivalent)
and Southern, its credit rating or indebtedness is on watch for possible
downgrade by Moody's (or future equivalent) or (ii) BBB- by S&P (or future
equivalent) and Southern, its credit rating or indebtedness is on negative
CreditWatch by S&P (or future equivalent), then Southern shall within three (3)
Business Days after such event provide to and maintain in favor of DYPM and DMT
either (1) a letter of credit issued by an issuer reasonably acceptable to DYPM
and DMT in an amount of [redacted] in substantially the form of Appendix H
hereto or (2) a guaranty from an entity with a long term senior unsecured
indebtedness rating at or above (i) Baa3 by Moody's (or future equivalent) and
(ii) BBB- by S&P (or future equivalent) in the form of Appendix G (Southern
Guaranty), unless a letter of credit or guaranty has been properly issued and
remain in effect in accordance with Section 15.7 or 15.8 below.
15.7 Credit Support in favor of DYPM/DMT for Junk Rating. If at any time prior to June 1, 2005, the long term senior unsecured indebtedness of Southern has or drops to a rating of below either (i) Baa3 by Moody's (or future equivalent) or (ii) BBB- by S&P (or future equivalent), then Southern shall within three (3) Business Days after such event provide to and maintain in favor of DYPM and DMT either (1) a letter of credit issued by an issuer reasonably acceptable to DYPM and DMT in an amount of [redacted] in substantially the form of Appendix H hereto or (2) a guaranty from an entity with a long term senior unsecured indebtedness rating at or above (i) Baa3 by Moody's (or future equivalent) and (ii) BBB- by S&P (or future equivalent) in the form of Appendix G (Southern Guaranty), unless a letter of credit or guaranty has been properly issued and remains in effect in accordance with Section 15.6 above or Section 15.8 below.
15.8 Post June 1, 2005 Provisions. If at any time on or after June 1, 2005, the long term senior unsecured indebtedness of Southern has or drops to a rating below either (i) Baa3 by Moody's (or future equivalent) or (ii) BBB- by S&P (or future equivalent), then Southern shall provide to and maintain in favor of DYPM and DMT either (1) a letter of credit issued by an issuer reasonably acceptable to DYPM and DMT in the amount of [redacted] in substantially the form of Appendix H hereto or (2) a guaranty from an entity with a long term senior unsecured indebtedness rating at or above (i) Baa3 by Moody's (or future equivalent) and (ii) BBB- by S&P (or future equivalent) in the form of Appendix G (Southern Guaranty), unless a letter of credit or guaranty has been properly issued and remains in effect in accordance with Section 15.6 or Section 15.7 above.
ARTICLE 16
DELIVERY EXCUSE
16.1 Definition. As used in this Agreement, "Delivery Excuse" means:
(i) any Event of Default of DYPM or DMT under this Agreement or any event which,
with the giving of notice or lapse of time or both, would become an Event of
Default under this Agreement; (ii) DMT for any reason (other than a failure
resulting from a default or failure to perform by Southern or one of its
Affiliates) does not supply Gas required by the Facility (unless the Facility is
not constructed) or to an Alternate Gas Delivery Point(s) (as required by
Section 6.2); provided, however, that failures to supply to Alternate Gas
Delivery Point(s) for reasons beyond DMT's reasonable control shall not
constitute a Delivery Excuse; or (iii) the delivery of Gas to the Facility that
does not meet the specifications of applicable transportation pipelines serving
the Facility; (iv) any failure or inability of DYPM to acquire and maintain
adequate transmission service for the delivery of energy; and (v) any Emergency
Condition. Nothing contained in this Agreement or elsewhere shall require
Southern to replace, either in whole or in part, the Gas supply provided by DMT
hereunder with any other Gas supply arrangement.
16.2 No Breach for Delivery Excuse. Southern shall not be liable for or deemed in breach of this Agreement to the extent a Delivery Excuse has occurred or is continuing, even if the duration of such Delivery Excuse is for the remainder of the Term of this Agreement; provided that the following shall apply with regard to a condition that would result in a Delivery Excuse:
(i) Each Party shall promptly notify the other after discovering any condition or circumstance that could reasonably be expected to lead to a Delivery Excuse. Upon either Party becoming aware of a condition that constitutes a Delivery Excuse, that Party shall provide the other Party with prompt written notice of such condition, with details further describing the particulars of the condition to be supplied within twelve (12) Days after commencement of such condition;
(ii) Any delay in performance shall be of no greater scope and of no longer duration than is directly caused by the Delivery Excuse; and
(iii) When a Party becomes aware that the condition constituting a Delivery Excuse no longer exists, such Party shall promptly notify the other when the condition of Delivery Excuse is no longer preventing such Party's performance under this Agreement.
ARTICLE 17
REPRESENTATIONS AND WARRANTIES
17.1. Execution. Each Party represents and warrants to the other Party that: (i) it has all the necessary corporate and legal power and authority and has been duly authorized by all necessary corporate action to enable it to lawfully execute, deliver and perform under this Agreement; and (ii) it is a valid legal entity duly organized and validly existing in good standing under the laws of the state of its formation and is, to the extent required, qualified to do business in the State of Alabama;
17.2. Permits. Each Party represents and warrants to the other Party that it will hold all permits, licenses or approvals necessary to lawfully perform its obligations contained herein in the manner prescribed by this Agreement.
17.3 Binding Obligations. Each Party represents and warrants to the other Party that this Agreement is the valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other equitable laws affecting creditor's rights.
17.4 Execution and Consummation. Each Party represents and warrants to the other Party that the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with any of the terms, conditions or provisions of any law or partnership agreement, or other evidence of indebtedness or any other agreement or instrument to which it is a party or by which it or any of its property is bound, or result in a breach or default under any of the foregoing.
17.5 Actions and Proceedings. Each Party represents and warrants to the other that there is no pending or, to the knowledge of such Party, threatened action or proceeding affecting such Party before any Government Agency that purports to adversely affect the validity or enforceability of this Agreement.
17.6 Processor. With respect to the purchase of Contract Capacity, DYPM represents and warrants that it is a producer, processor, commercial user or merchant handling energy, and it is entering into the transactions contemplated by this Agreement for purposes related to its business as such.
ARTICLE 18
ASSIGNMENT
18.1. General Rule. This Agreement shall be binding upon and inure to the benefit of the permitted successors and assigns of the Parties hereto. Except as set forth in Section 18.2, no permitted sale, assignment, transfer or other disposition shall release or discharge DYPM, DMT or Southern from its obligations under this Agreement, but all such obligations shall also be assumed by the successor or assign of the Party hereto.
18.2. Consent Required. Neither Party shall assign its interest in this Agreement in whole or part without the prior written consent of the other Party, such consent not to be unreasonably withheld or delayed; provided, however, that, notwithstanding the foregoing, either Party may assign this Agreement to its parent, or to any direct or indirect wholly-owned subsidiary of such parent and, upon the approval of the creditworthiness and the ability to perform of such assignee by the non-assigning Party (which approval shall not be unreasonably withheld or delayed), the assignor shall be released and discharged from its obligations under this Agreement. Either Party may collaterally assign this Agreement to any lender or financial institution without the written consent of the other Party. Each Party agrees to provide such consents to collateral assignment as may be reasonably requested by the other Party; provided that neither Party shall be obligated to provide a consent to collateral assignment that would have the effect of materially altering the obligations of such Party under this Agreement.
ARTICLE 19
DISPUTE RESOLUTION
19.1 Senior Officers.
19.1.1 Each of the Parties will designate in writing to the other Parties a representative who will be authorized to resolve any dispute arising under this Agreement in an equitable manner and, unless otherwise expressly provided herein, to exercise the authority of such Party to make decisions by mutual agreement.
19.1.2 If such designated representatives are unable to resolve a dispute under this Agreement, such dispute will be referred by each Party's representative, respectively, to a designated senior officer.
19.1.3 The Parties hereto agree: (i) to attempt to resolve all
disputes arising hereunder promptly, equitably and in a good faith manner; and
(ii) to provide each other with reasonable access during normal business hours
to any and all non-privileged and non-confidential records, information and data
pertaining to any such dispute. Non-confidential information shall be made
available to a Party pursuant to a confidentiality agreement acceptable to the
disclosing Parties.
19.2 Arbitration. All disputes arising under, out of, or in relation to any provision of this Agreement that are not resolved pursuant to Section 19.1 within 30 Days after either Party's receipt of notice referring the dispute to the senior officers of the Parties (and in any event within the time which legal or equitable proceedings based on such claim, dispute, or controversy would not be barred by the applicable statute of limitations) will be submitted upon written request of any Party to binding arbitration. Each Party will have the right to designate an arbitrator of its choice, who need not be from the American Arbitration Association ("AAA") panel of arbitrators but who (a) will be an expert in the independent power electric generation field and (b) will not be and will not have been previously an employee or agent of or consultant or counsel to either Party and will not have a direct or indirect interest in either Party or the subject matter of the arbitration. Such designation will be made by notice to the other Party and to the AAA within ten (10) Days or, in the case of payment disputes, five (5) Days after the date of the giving of notice of the demand for arbitration. The arbitrators designated by the Parties will designate a third arbitrator, who will have a background in legal and judicial matters (and who will act as chairman), within ten (10) Days or, in the case of payment disputes, five (5) Days after the date of the designation of the last of the arbitrators to be designated by the Parties, and the arbitration will be decided by the three arbitrators. If the two arbitrators cannot or do not select a third independent arbitrator within such period, either Party may apply to the AAA for the purpose of appointing any person listed with the AAA as the third independent arbitrator under the expedited rules of the AAA. Such arbitration will be held in alternating locations of the home offices of the Parties, commencing with DYPM's home office, or in any other mutually agreed upon location. The rules of the AAA will apply to the extent not inconsistent with the rules herein specified. Each Party will bear its own expenses (including attorneys' fees) with respect to the arbitration, unless the arbitrator decides on a different allocation of expenses. The arbitrators will designate the Party to bear the expenses of the arbitrators or the respective amounts of such expense to be borne by each Party.
19.3 Binding Nature of Proceedings. Each Party understands that this Agreement contains an agreement to arbitrate with respect to specified disputes. After signing this Agreement, each Party understands that it will not be able to bring a lawsuit concerning any dispute that may arise that is covered by this arbitration provision. Instead, each Party agrees to submit any such dispute to arbitration pursuant to Section 19.2. Any award of the arbitrator may be enforced by the Party in whose favor such award is made in any court of competent jurisdiction.
ARTICLE 20
MISCELLANEOUS
20.1 Governing Law; Waiver of Jury Trial.
20.1.1 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ALABAMA, EXCLUSIVE OF ITS CONFLICTS OF LAW PROVISIONS, AND, TO THE EXTENT APPLICABLE, BY THE FEDERAL LAW OF THE UNITED STATES OF AMERICA. BY CHOOSING TO HAVE THIS AGREEMENT GOVERNED BY AND CONSTRUED UNDER THE LAW OF THE STATE OF ALABAMA, THE PARTIES ARE IN NO WAY SUBMITTING TO OR INCORPORATING INTO THIS AGREEMENT ANY ALABAMA STATUTE, REGULATION, OR ORDER, OR ANY OF THE SAME INVOLVING THE GENERATION, SALE, PURCHASE OR TRANSMISSION OF ELECTRIC CAPACITY OR ELECTRIC ENERGY IN, OR FOR CONSUMPTION IN, THE STATE OF ALABAMA.
20.1.2 EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
20.2 Confidentiality.
20.2.1 Until such time as the terms of the Agreement are readily accessible by the public (other than due to the fault of a Party), neither Party shall disclose the terms of this Agreement to any third party (other than such Party's (or its Affiliates') employees, lenders, legal counsel, accountants, or other advisors), except in order to comply with any applicable law, order, regulatory or exchange rule. Each Party shall notify the other Party of any proceeding of which it is aware that may result in disclosure and shall use reasonable efforts to prevent or limit such disclosure. Notwithstanding the foregoing, either Party may disclose the terms and conditions of this Agreement to any third party providing permanent or construction financing with respect to the Facility (in the case of Southern) or with respect to other financing obtained by a Party. In connection with a disclosure to any third party financiers, the disclosing Party shall take such steps as may be reasonably required to limit the scope of such disclosure and to ensure that disclosure is not subsequently made by any such financier.
20.2.2 Anything in this Section 20.2 to the contrary notwithstanding, the Parties agree and acknowledge that, in the course of performance under this Agreement, the Parties may exchange confidential and proprietary information (including financial information related to the Agreement). Each Party agrees and covenants that any and all information it receives in connection with its performance under this Agreement that the disclosing Party has designated as confidential will be kept confidential and shall not be disclosed by the receiving Party to any third party without the express written consent of the disclosing Party, except in order to comply with any applicable law, order, regulatory or exchange rule. Any filing by a Party pursuant to any of the foregoing in compliance with applicable law, order, regulatory or exchange rule, shall be made under a request for confidential treatment (unless the filing Party reasonably believes such a request would be futile) and the other Party shall have the opportunity to review such filing prior to its dissemination. Neither Party shall issue a press release or similar disclosure with respect to the existence of this Agreement or its contents without first obtaining the written consent of the other Party, which consent shall not be unreasonably withheld.
20.3 Survivorship of Obligations. The termination or cancellation of this Agreement shall not discharge any Party from any obligation it owes the other Party under this Agreement by reason of any transaction, loss, cost, damage, expense or liability occurring, accruing or arising prior to such termination. It is the intent of the Parties that any such obligation owed (whether the same shall be known or unknown as of the termination or cancellation of this Agreement) will survive the termination or cancellation of this Agreement in favor of the Party to which such obligation is owed. The Parties also intend that the indemnification and limitation of liability provisions contained in Section 12 shall remain operative and in full force and effect.
20.4 Notice of Proceedings. Each Party, to the extent it has pertinent knowledge, shall promptly notify the other Party of any pending or anticipated federal or state regulatory, judicial or administrative actions, including but not limited to notice of violations, arising directly out of, caused by, or related to the Facility, including any generation equipment comprising the Facility, that could materially and adversely affect either Party's ability to carry out its obligations under this Agreement.
20.5 No Third Party Beneficiaries. This Agreement is not intended to, and shall not, create rights, remedies or benefits of any character whatsoever in favor of any Persons, corporations, associations, or entities other than the Parties, and the rights and obligations of each of the Parties under this Agreement are solely for the use and benefit of, and may be enforced solely by the Parties, their successors in interest or permitted assigns.
20.6 Section Headings Not to Affect Meaning. The descriptive headings of the various Articles and Sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions thereof.
20.7 Computation of Time. In computing any period of time prescribed or allowed by this Agreement, the designated period of time shall begin to run on the Day immediately following the Day of the act, event or default that precipitated the running of the designated period of time. The designated period shall expire on the last Day of the period so computed unless that Day is not a Business Day, in which event the period shall run until the end of the next Business Day.
20.8 Interest. Whenever the provisions of this Agreement require the calculation of an interest rate, such rate shall be computed at an annual rate equal to the Prime Rate as of the date on which the calculation begins, but not to exceed the maximum rate which may be lawfully charged. Interest on obligations arising under this Agreement shall be compounded quarterly based on a calendar quarter.
20.9 Entire Agreement. This Agreement constitutes the entire agreement
between the Parties relating to the subject matter hereof and supersedes any
other agreements, written or oral, between the Parties concerning such subject
matter.
20.10 Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
20.11 Amendments. This Agreement may only be amended by written agreement signed by duly authorized representatives of the Parties.
20.12 Guarantee of Performance. It is the intent of the Parties that with respect to the contract provisions referenced below, the rights, duties and obligations of DYPM and DTM shall be joint and several: Section 3.2, Section 3.3, Article 8, Article 11, Section 12.2 and Article 14. DYPM and DMT guarantee to Southern the performance of DYPM and DMT's respective obligations under those provisions. For all other provisions, the respective rights, duties and obligations of these Parties shall be established on the basis of the specific language and context of the provision in questions.
20.13 Waivers. Waivers of the provisions of this Agreement or excuses of any violations of the Agreement shall be valid only if in writing and signed by an authorized officer of the Party issuing the waiver or excuse. A waiver or excuse issued under one set of circumstances shall not extend to other occurrences under similar circumstances.
20.14 No Partnership Created. Any provision of this Agreement to the contrary notwithstanding, the Parties do not intend to create hereby any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit. If it should appear that one or more changes to this Agreement would be required in order not to create an entity referenced in the preceding sentence, the Parties agree to negotiate promptly and in good faith with respect to such changes.
20.15 Character of Sale. The sale of Contract Capacity and Contract Energy hereunder shall not constitute a sale, lease, transfer or conveyance to DYPM or any other party of any contractual rights or ownership interests in any generating unit or other equipment comprising the Facility, nor does the sale of Contract Capacity and Contract Energy hereunder constitute a dedication of ownership of any generating unit or other equipment comprising the Facility.
20.16 Notices. Any notice, demand, request, payment, statement, or correspondence provided for in this Agreement, or any notice which a Party may desire to give to the other, shall be in writing (unless otherwise expressly provided by this Agreement) and shall be considered duly delivered when received by hand delivery, first-class mail, facsimile, or by overnight delivery, at the addresses listed below; provided, however, if actual delivery occurs at a time other than between the hours of 0800 and 1700 CPT on a Business Day (each a "Business Hour"), delivery shall be deemed to have occurred in the next Business Hour after actual delivery.
(i) To Southern:
Southern Power Company
270 Peachtree Street
Atlanta, Georgia 30303
Attention: Chief Financial Officer Telephone: 404-506-5243 Facsimile: 404-506-0333 |
With a copy to:
Southern Company Generation and Energy Marketing
270 Peachtree Street
Atlanta, Georgia 30303
Attention: Vice President
Telephone: 404-506-0357
Payment by Wire: Bank of America
|
ABA 111000012
Account #: 3751237789
(ii) To DYPM
Dynegy Power Marketing, Inc.
1000 Louisiana Street, Suite 5800
Houston, Texas 77002
Attention: Asset Management Telephone: (713) 507-6400 Facsimile: (713) 767-5931 |
With copies to:
Dynegy Power Marketing, Inc.
1000 Louisiana Street, Suite 5800
Houston, Texas 77002
Attention: General Counsel
Telephone: (713) 507-6832
Facsimile: (713) 507-6986
And
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Dynegy Power Marketing, Inc. 125 Townpark Drive, Suite 175 Kennesaw, Georgia 30144
Attention: Vice President
Telephone: (770) 420-6851 Facsimile: (770) 420-6855
Payment by Wire:
For the Acct. of Dynegy Power Marketing
The First National Bank of Chicago
ABA # 071 000 013
Account # 552 7651
Invoices:
Dynegy Power Marketing, Inc.
1000 Louisiana Street, Suite 5800
Houston, Texas 77002-5050
Attn: Accounts Payable-Electric
Facsimile: 713-767-5958
(iii) To DMT
Dynegy Marketing and Trade 1000 Louisiana Street, Suite 5800 Houston, Texas 77002
Telephone: 713-507-6400
Payment by Wire:
For the Acct. of Dynegy Power Marketing
The First National Bank of Chicago ABA # 071-000-013 Account No. 55-53911
Each Party shall provide the other Party with all names, addresses, telephone and facsimile numbers necessary for its performance under this Agreement; and either Party may change the information set forth in Section this 20.16 by giving written notice to the other Party in the manner prescribed by such section.
20.17 Survival. Any provision(s) of this Agreement that expressly comes into or remains in force following the termination or expiration of this Agreement shall survive the termination or expiration of this Agreement.
20.18 Construction. The language used in this Agreement is the product of both Parties' efforts. Accordingly, each Party irrevocably waives the benefit of any rule of contract construction that disfavors the drafter of a contract or the drafter of specific language in a contract.
20.19 Imaged Agreement. Any original executed Agreement, schedule confirmation or other related document may be photocopied and stored on computer tapes and disks (the "Imaged Agreement"). The Imaged Agreement, if introduced as evidence on paper, the schedule confirmation, if introduced as evidence in automated facsimile form, the transaction tape, if introduced as evidence in its original form and as transcribed onto paper, and all computer records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative proceedings, will be admissible as between the Parties to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissibility of the transaction tape, the schedule confirmation or the Imaged Agreement (or photocopies of the transcription of the transaction tape, the schedule confirmation or the Imaged Agreement) on the basis that such were not originated or maintained in documentary form under either the hearsay rule, the best evidence rule or other rule of evidence.
20.20 GDP-IPD. In connection with the calculations under this Agreement that are referenced to increases based on the values of GDP-IPD, the base value for all GDP-IPD inflation calculations will be the Implicit Price Deflator published quarterly by the U.S. Department of Commerce in Table 5 (Quantity and Price Indexes for Gross Domestic Product) in the Bureau of Economic Analysis (BEA) National Income and Product Accounts Tables for the first quarter of 2005, as revised by the BEA. The escalation adjustments will be made by dividing the GDP-IPD for the first calendar quarter preceding the beginning of a new Contract Year (as revised by the BEA and reported prior to May 31 for the upcoming Contract Year) by the base GDP-IPD (as revised) from the first calendar quarter of 2005.
20.21 Higher Heating Value. All Gas quantities referenced herein shall be in terms of the higher heating value of natural gas.
[The Next Page is the Signature Page.]
IN WITNESS WHEREOF, Southern, DYPM, and DMT have caused this Agreement to be executed in duplicate by their respective duly authorized officers as of the Execution Date.
SOUTHERN POWER COMPANY
By: ___________________________________ NAME: Douglas E. Jones Title: Vice President |
........
DYNEGY POWER MARKETING, INC.
By: ___________________________________ NAME: Matthew K. Schatzman Title: President |
DYNEGY MARKETING AND TRADE
BY: _____________________________________ NAME: Matthew K. Schatzman TITLE: President |
APPENDIX A
Reservation Payments
[redacted]
APPENDIX B
Scheduling Constraints
[redacted]
APPENDIX C
Unit Performance Characteristics
[redacted]
APPENDIX D
ENDH and Performance Payment Sample Calculations
[redacted]
APPENDIX E
Guaranty Agreement
[redacted]
APPENDIX F
Proposed Form of Letter of Credit
[redacted]
APPENDIX G
Guaranty Agreement
[redacted]
APPENDIX H
Proposed Form of Letter of Credit
[redacted]
Exhibit 10.27
EXECUTION COPY
PUBLIC RELEASE VERSION
ENERGY CONTRACT
Dated as of March 28, 2002
Between
SOUTHERN POWER COMPANY
as Seller
And
DYNEGY POWER MARKETING, INC.
as Purchaser
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS...........................................................................................1
ARTICLE 2: TERM OF AGREEMENT.....................................................................................9
2.1 Filing of Agreement...................................................................................9
2.2 Termination Date......................................................................................9
2.3 Effect of Termination.................................................................................9
2.4 Effective Date........................................................................................9
ARTICLE 3: DETERMINATION OF CONTRACT CAPACITY; SALE AND PURCHASE OF CONTACT CAPACITY AND ENERGY..................9
3.1 Determination of Contract Capacity....................................................................9
3.2 Sale and Purchase of Contract Capacity................................................................9
3.3 Sale and Purchase of Contract Energy.................................................................10
3.4 Source of Contract Energy............................................................................10
ARTICLE 4: SELLER'S RESOURCES AND CURTAILMENTS..................................................................10
4.1 Specified Seller's Resources.........................................................................10
4.2 Pre-Scheduled Excused Hours..........................................................................10
4.3 Permits; Compliance with Laws........................................................................12
4.4 Administrative Procedures and Administrative Committee...............................................12
4.5 Provision of Contract Capacity and Contract Energy...................................................12
ARTICLE 5: PAYMENTS.............................................................................................16
5.1 Reservation Payment..................................................................................16
5.2 Energy Payment.......................................................................................16
5.3 Conversion Payment...................................................................................16
5.4 Performance Bonus....................................................................................16
5.5 Additional Payments..................................................................................18
5.6 Regulatory...........................................................................................18
5.7 Wholesale Generation Rates...........................................................................19
ARTICLE 6: SCHEDULING, SOUTHERN'S AND DYPM'S RIGHTS TO SELLER'S RESOURCES, TITLE AND RISK OF LOSS...............19
6.1 Scheduling...........................................................................................19
6.2 Replacement Gas......................................................................................19
6.3 Southern's Rights to the Specified Seller's Resources................................................21
6.4 Title and Risk of Loss...............................................................................21
ARTICLE 7: TRANSMISSION SERVICE.................................................................................21
7.1 DYPM Obligations and Assumption of Transmission Risk.................................................22
7.2 Southern Obligations.................................................................................22
7.3 Imbalances and Penalties.............................................................................22
ARTICLE 8: METERING.............................................................................................22
8.1 Metering.............................................................................................22
ARTICLE 9: BILLING AND PAYMENT..................................................................................22
9.1 Timing; Method of Payment............................................................................22
9.2 Late Payment.........................................................................................23
9.3 Disputed Billings....................................................................................23
9.4 Adjustments..........................................................................................23
9.5 Audit Rights.........................................................................................23
ARTICLE 10: CHANGE IN LAW.......................................................................................23
10.1 Limitations.......................................................................................23
10.2 Determination.....................................................................................23
10.3 Initiation of Surcharge...........................................................................23
10.4 Timing............................................................................................24
10.5 Contest and Dialogue..............................................................................24
ARTICLE 11: LIABILITY ALLOCATION; LIMITATIONS ON LIABILITY......................................................24
11.1 Costs, Taxes and Charges..........................................................................24
11.2 Indemnification...................................................................................24
11.3 Limitation of Liability...........................................................................24
ARTICLE 12: FORCE MAJEURE EVENT.................................................................................25
12.1 Force Majeure Event Defined.......................................................................25
12.2 Applicability of Force Majeure Event..............................................................26
12.3 Effect of Force Majeure Event.....................................................................26
12.4 Other Effects of Force Majeure Events.............................................................26
ARTICLE 13: EVENT OF DEFAULT....................................................................................27
13.1 Event of Default..................................................................................27
13.2 Exclusive Remedies................................................................................28
ARTICLE 14: CREDITWORTHINESS AND SECURITY.......................................................................29
14.1 Guaranty in Favor of Southern.....................................................................29
14.2 Negative Watch Credit Support in Favor of Southern................................................29
14.3 Credit Support in Favor of Southern for Junk Rating...............................................30
14.4 Post December 31, 2005 Provisions.................................................................30
14.5 Guaranty in Favor of DYPM.........................................................................31
14.6 Negative Watch Credit Support in Favor of DYPM....................................................31
14.7 Credit Support in Favor of DYPM for Junk Rating...................................................32
14.8 Post June 1, 2005 Provisions......................................................................32
ARTICLE 15: DELIVERY EXCUSE.....................................................................................32
15.1 Definition........................................................................................32
15.2 No Breach for Delivery Excuse.....................................................................33
ARTICLE 16: REPRESENTATIONS AND WARRANTIES......................................................................33
16.1 Execution.........................................................................................33
16.2 Permits...........................................................................................33
16.3 Binding Obligations...............................................................................33
16.4 Execution and Consummation........................................................................34
16.5 Actions and Proceedings...........................................................................34
16.6 Processor........................................................................................34
ARTICLE 17: ASSIGNMENT..........................................................................................34
17.1 General Rule......................................................................................34
17.2 Consent Required..................................................................................34
ARTICLE 18: DISPUTE RESOLUTION..................................................................................34
18.1 Senior Officers...................................................................................35
18.2 Arbitration.......................................................................................35
18.3 Binding Nature of Proceedings.....................................................................35
ARTICLE 19: MISCELLANEOUS.......................................................................................36
19.1 Governing Law; Waiver of Jury Trial...............................................................36
19.2 Confidentiality...................................................................................36
19.3 Survivorship of Obligations.......................................................................37
19.4 Notice of Proceedings.............................................................................37
19.5 No Third Party Beneficiaries......................................................................37
19.6 Section Headings Not to Affect Meaning............................................................37
19.7 Computation of Time...............................................................................37
19.8 Interest..........................................................................................38
19.9 Entire Agreement..................................................................................38
19.10 Counterparts......................................................................................38
19.11 Amendments........................................................................................38
19.12 Waivers...........................................................................................38
19.13 No Partnership Created............................................................................38
19.14 Character of Sale.................................................................................38
19.15 Notices...........................................................................................38
19.16 Survival..........................................................................................40
19.17 Construction......................................................................................40
19.18 Imaged Agreement..................................................................................40
19.19 GDP-IPD...........................................................................................41
19.20 Higher Heating Value..............................................................................41
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APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
APPENDIX F
APPENDIX G
ENERGY CONTRACT
BETWEEN
SOUTHERN POWER COMPANY
AND
DYNEGY POWER MARKETING, INC.
This ENERGY CONTRACT is made and entered into as of this 28th day of March, 2002 (the "Execution Date"), by and between SOUTHERN POWER COMPANY (hereafter referred to as "Southern" or "Seller"), a Delaware corporation having its principal office and place of business at 600 North 18th Street, Birmingham, Alabama 35233, and DYNEGY POWER MARKETING, Inc., (hereinafter referred to as "DYPM"), a corporation organized and existing under the laws of the State of Texas having its principal office and place of business at 1000 Louisiana St., Suite 5800, Houston, TX 77002. (Southern and DYPM are hereafter referred to individually and collectively as a "Party" or the "Parties," respectively.)
RECITALS:
DYPM desires to purchase and Southern desires to sell, Contract Capacity and Contract Energy in accordance with this Agreement for the period from June 1, 2005 through May 31, 2030.
Subject to the terms and conditions of this Agreement, Southern will deliver and sell to DYPM, and DYPM will accept and purchase from Southern, Contract Capacity and Contract Energy from Seller's Resources as provided in this Agreement.
NOW THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
The following terms shall have the respective meanings set forth below.
"Administrative Committee" has the meaning set forth in Section 4.4.2.
"Administrative Procedures" has the meaning set forth in Section 4.4.1.
"Affiliate" shall mean, with respect to a corporation, partnership or other entity, each such other corporation, partnership or other entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such corporation, partnership, or other entity.
"Agreement" means this Energy Contract, including, to the extent applicable, any amendments and appendices hereto that the Parties may execute now or at any time in the future.
"Alternate Delivery Point" means a point of delivery as agreed to by the Parties for the delivery of Contract Capacity and Scheduled Energy from Replacement Seller's Resources.
"Annual ENDH" means [redacted] for each Contract Year.
"Billing Month" means each Month during the Term beginning with the second Month of the first Contract Year and includes the Month immediately following the expiration or early termination of this Agreement.
"BTU" means British Thermal Units.
"Business Day" means any Day on which Federal Reserve Member Banks in New York, New York are open for business. A Business Day shall begin at 0800 CPT and end at 1700 CPT.
"Central Prevailing Time" or "CPT" means the local time at any point in Birmingham, Alabama.
"Change-in-Law" means a Law (including a new or changed interpretation of an existing Law by a Government Agency, or an interpretation by a Government Agency previously unknown to Southern) that becomes effective after the date of the Agreement and generally affects the cost of electric generation [redacted]. Examples of a Change in Law include (but are not limited to): (i) Laws pertaining to changes in environmental Laws that seek to decrease existing limits (e.g., NOx) or to establish limits for currently uncontrolled substances (e.g., CO2); and (ii) Laws pertaining to the imposition of energy taxes on wholesale power sales. A Change in Law does not include changes in: (i) income taxes; (ii) taxes assessed or imposed by a county or municipal authority (such as ad valorem taxes); (iii) franchise and occupational taxes; or (iv) Laws that have unique application to the Specified Seller's Resources.
"Commercially Reasonable" or "Commercially Reasonable Efforts" means, with respect to any purchase, sale, decision, or other action made, attempted or taken by a Party, such efforts as a reasonably prudent business would undertake for the protection of its own interest under the conditions affecting such purchase, sale, decision, or other action, including without limitation, electric system reliability and stability, the amount of notice of the need to take such action, the duration and type of the purchase or sale or other action, and the commercial environment in which such purchase, sale, decision, or other action occurs.
"Contest" means with respect to any Person, a contest of: (i) any Governmental Approval, acts or omissions by any Government Agency or any related matters; or (ii) the amount or validity of any claim pursued by such Person in good faith and by appropriate legal, administrative or other proceedings diligently conducted, so long as the contesting Party could not reasonably be expected to be prevented from performing its material obligations under this Agreement pending the outcome of such contest.
"Contract Capacity" has the meaning set forth in Section 3.1.
"Contract Energy" has the meaning set forth in Section 3.3.
"Contract Heat Rate" means [redacted].
"Contract Year" means: (i) for the first Contract Year, the Effective Date of Service through May 31, 2006; and (ii) for each Contract Year thereafter, each twelve (12) Month period thereafter beginning June 1 and ending May 31.
"Conversion Payment" has the meaning set forth in Section 5.3
"Day" means the twenty-four (24) hour period beginning and ending at
2400 CPT.
"Delivered Energy" means the amounts of energy, expressed in MWhs, that are delivered by Southern from Seller's Resources in accordance with this Agreement.
"Delivery Excuse" has the meaning set forth in Section 15.1.
"Delivery Point" means the Interconnection Point(s) or such Alternate Delivery Point(s) connected with the Southern Company Transmission System as may be mutually agreed upon by Southern and DYPM.
"Determination Period" has the meaning set forth in Section 4.5.1(b).
"DYPM" has the meaning set forth in the introductory paragraph hereof.
"Effective Date of Service" means June 1, 2005.
"Eligible Guaranty" has the meaning set forth in Section 14.1.
"Eligible Guaranty Threshold" has the meaning set forth in Section 14.1.
"Emergency Condition" means a condition or situation (not principally caused by Southern) that presents an imminent physical threat of danger to life, health or property, or a situation in which delivery of Scheduled Energy to the Delivery Point could reasonably be expected to cause a significant disruption on the Southern Company Transmission System.
"ENDH" means an excused non-delivery hour (or portion of an hour) in which an Unavailability has occurred for which Southern accumulates ENDH pursuant to Section 4.5.2. ENDH for any hour shall equal the ratio of the amount of Contract Capacity associated with the Scheduled Energy not provided to the Contract Capacity for such hour.
"ENDH Accumulated" means, for a Month, the number of Equivalent ENDH accumulated pursuant to Section 4.5.4.
"ENDH Available" means, for any point in time in any Month, the number of ENDH (or partial ENDH) that are available for accumulation pursuant to Southern's election under Section 4.5.2. The amount of ENDH Available in any Month shall be equal to the difference between Annual ENDH for the Contract Year in which such Month occurs and the sum of (i) ENDH Accumulated during such Month (before the point of calculation) and (ii) ENDH Accumulated during all of the Months elapsed during such Contract Year preceding the Month in which the calculation is made.
"Energy Payment" means the payment for Delivered Energy to be made by DYPM to Southern as calculated in Section 5.2.
"Energy Price" means, [redacted].
"Equivalent ENDH" has the meaning set forth in Section 4.5.4.
"Event of Default" has the meaning set forth in Section 13.1.
"Execution Date" has the meaning set forth in the introductory paragraph hereof.
"Extended Outage Period" has the meaning set forth in Section 4.5.1(b).
"Extended Unavailability" has the meaning set forth in Section 4.5.6.
"FERC" means the Federal Energy Regulatory Commission, or any successor to its functions.
"Force Majeure Event" has the meaning set forth in Section 12.1.
"Force Majeure Hour" shall occur in any hour (or portion of an hour) in which a Force Majeure Event occurs or is continuing. During a Force Majeure Hour, if the energy available from the Seller's Resources (as measured in hourly amounts and expressed in MWh) is greater than zero but less than the amount of Scheduled Energy, then a partial Force Majeure Hour shall be determined equal to the ratio of the amount of Contract Capacity not available from the Seller's Resources in such hour due to the Force Majeure Event to the Contract Capacity that would have been available for such hour absent such Force Majeure Event.
"Gas" means Natural Gas.
"Gas Index" means [redacted]
"GDP-IPD" means the Gross Domestic Product Implicit Price Deflator published in the National Income and Product Account by the U.S. Department of Commerce.
"Government Agency" means any federal, state, local, territorial or municipal government and any department, commission, board, bureau, agency, instrumentality, judicial or administrative body thereof.
"Governmental Approval" means any authorization, consent, approval, license, ruling, permit, exemption, variance, order, judgment, decree, declarations of or regulation of any Government Agency relating to Seller's Resources or to the execution, delivery or performance of this Agreement.
"Guarantor" has the meaning set forth in 13.1.2.
"Guaranty" means a Guaranty or other instrument guaranteeing a Party's obligations under this Agreement as contemplated under Article 14.
"Hour Block" means any period within a Day that is comprised of either a succession of Off Peak Hours or a succession of On Peak Hours.
"Imaged Agreement" has the meaning set forth in Section 19.18.
"Increased Electricity Costs" means the additional costs and expenses of electric power hereunder that result from utilizing Commercially Reasonable Efforts to comply with or recognize a Change in Law (or cumulative Changes in Law). For purposes of calculating the Increased Electricity Costs for any Contract Year associated with capitalized expenditures (determined in accordance with Generally Accepted Accounting Principles), the Parties will at that time establish an appropriate levelized fixed charge rate (incorporating in appropriate proportions: (i) Southern Company's cost of equity, as determined by a mutually agreeable third party; and (ii) Southern's cost of debt in the cost of capital calculation used to develop that rate) for application to the original capital cost. This calculation will represent the total cost associated with the capital expenditures. Any costs and expenses not otherwise reflected in a levelized fixed charge rate calculation shall be treated as Increased Electricity Costs as incurred.
"Interconnection Point" means the substation(s) where the Specified
Seller's Resources are physically interconnected to the Southern Company
Transmission System.
"kW" means kilowatt(s).
"kWh" means kilowatt hour(s).
"Law" means any statute, law, requirement, rule or regulation imposed by a Government Agency, whether in effect now or at any time in the future.
"MMBTU" means million BTU.
"MW" means megawatt(s).
"MWh" means megawatt hour(s).
"Major Bank" means the Federal Reserve Bank of Atlanta, Georgia.
"Month" means a calendar month.
"Monthly Weighting Factor" means, for any Month, the weighting factor set forth opposite such Month in the table below:
Month Weighting Factor January...................[redacted] February..................[redacted] March.....................[redacted] April.....................[redacted] May.......................[redacted] June......................[redacted] July......................[redacted] August....................[redacted] September.................[redacted] October...................[redacted] November..................[redacted] December..................[redacted] |
"NERC" means the North American Electric Reliability Council, or any successor to its functions.
"Non-Summer DPF" has the meaning set forth in Section 5.4.2.
"Non-Summer PAF" has the meaning set forth in Section 5.4.2.
"Non-Summer Performance Bonus" has the meaning set forth in Section 5.4.2.
"OATT" means the Open Access Transmission Tariff of Southern Companies or a successor tariff governing transmission on the Southern Company Transmission System that has been accepted by FERC, as the same may be changed or amended from time to time.
"Off Peak Hour" means: (i) any hour from 2200 CPT to 0600 CPT, Monday through and including Friday; (ii) any hour during any holiday recognized by NERC; and (iii) any hour during Saturday and Sunday.
"On Peak Hour" means any hour from 0600 CPT to 2200 CPT, Monday through and including Friday, excluding any hour of any holiday recognized by NERC.
"Peak Period" means, for each Contract Year, the Months of June, July, August, September, January and February.
"Performance Payment" means [redacted].
"Person" means any individual, corporation, limited liability corporation, partnership, joint venture, trust, unincorporated organization, Government Agency or other entity.
"Pre-Scheduled Excused Hours" means hours in which the Specified Seller's Resources are unavailable for Scheduling, as such hours are designated and scheduled in accordance with Section 4.2.
"Prime Rate" means, for any Day on which the calculation of an interest amount begins under this Agreement, the "Prime Rate" specified for such Day (or, if such Day is not a Business Day, on the first Business Day following such Day) under the "Money Rate" table of the Wall Street Journal. In the event that the Wall Street Journal ceases to report a Prime Rate, the Prime Rate for purposes of this Agreement shall be the prime rate (or its functional equivalent) charged by the Major Bank in the United States of America.
"Prudent Industry Practices" means any of the practices, methods, standards and acts (including the practices, methods and acts engaged in or approved by a significant portion of the electric power industry in the United States) that, at a particular time, in the exercise of reasonable judgment in light of the facts known or that should reasonably have been known at the time a decision was made, could have been expected to accomplish the desired result consistent with good business practices, reliability, economy, safety and expedition, and which practices, methods, standards and acts generally conform to operation and maintenance standards recommended by equipment suppliers and manufacturers, applicable design limits and applicable Governmental Approvals and Laws.
"Replacement Gas Price" has the meaning set forth in Section 6.2.1.
"Replacement Cost" means, [redacted].
"Replacement Seller's Resources" means [redacted].
"Replacement Value" has the meaning set forth in Section 13.2.4.
"Reservation Payment" has the meaning set forth in Section 5.1.
"Schedule" means the right of DYPM to schedule the delivery of Scheduled Energy in accordance with this Agreement. Any form of the term Schedule (e.g., "Scheduled" or "Scheduling") shall refer to the exercise of such right by DYPM.
"Scheduled Energy" means the amounts of energy, expressed in MWh, Scheduled by DYPM to be delivered by Southern in accordance with this Agreement.
"Scheduling Constraints" has the meaning set forth in Appendix B.
"Seller" has the meaning set forth in the introductory paragraph hereof.
"Seller Election Period" has the meaning set forth in Section 4.5.1(b).
"Seller's Resources" means: (i) the Specified Seller's Resources; and/or (ii) the Replacement Seller's Resources.
"Southern" has the meaning set forth in the introductory paragraph hereof.
"Southern Company" means The Southern Company, a publicly held corporation organized and existing under the laws of the State of Delaware and having its principal place of business in Atlanta, Georgia.
"Southern Company Transmission" means the functional transmission division of Southern Company Services, Inc., or any successor transmission provider.
"Southern Company Transmission System" means the integrated transmission systems of the electric operating companies of Southern Company, as such systems may be modified or expanded from time-to-time, as well as any successor transmission system(s).
"Specified Seller's Resources" means the physical generating resource(s) (including any adjacent and/or associated facilities or equipment and including non-generating facilities) designated by Southern in its sole discretion pursuant to Section 4.1 from which Southern may provide the Contract Capacity and Scheduled Energy that: (i) is interconnected to the Southern Company Transmission System; (ii) will comply with applicable Laws as of the Effective Date of Service; and (iii) is a Gas fired combined cycle facility.
"Summer DPF" has the meaning set forth in Section 5.4.1.
"Summer PAF" has the meaning set forth in Section 5.4.1.
"Summer Performance Bonus" has the meaning set forth in Section 5.4.1.
"Taxes" means any or all ad valorem, property, occupational, severance, emissions, generation, first use, conservation, energy, transmission, utility, gross receipts, privilege, sales, use, excise and other taxes, governmental charges, licenses, fees, permits and assessments, and taxes based on net income or net worth.
"Term" means the period from the Execution Date through May 31, 2030, or such earlier date on which this Agreement is terminated in accordance with its terms.
"Unavailability" means any time in which the Specified Seller's Resources (or any part thereof) are physically incapable of providing all or a portion of Scheduled Energy for reasons other than a Force Majeure Event or Delivery Excuse.
"Undelivered Energy" means that quantity of Scheduled Energy that Southern fails to deliver to the Delivery Point in response to a Schedule for which ENDH is not accumulated and which failure is not attributable to a Force Majeure Event or Delivery Excuse.
"VOM Charge" means [redacted]
ARTICLE 2
TERM OF AGREEMENT
2.1 Filing of Agreement. This Agreement shall be filed with the FERC on or before such date as may be required by Law. To the extent practicable, any such filing shall be made under a request for confidential treatment. This Agreement shall not be contingent on such filing.
2.2 Termination Date. Unless earlier terminated in accordance with its terms, this Agreement shall continue in effect from the Execution Date through May 31, 2030.
2.3 Effect of Termination. Subject to the exercise of a non-defaulting Party's rights under Section 13.2, in the event that this Agreement is terminated, the rights and obligations of the Parties hereunder shall continue unaffected until the termination is effective in accordance with the terms and conditions thereof. Any such termination shall not relieve DYPM of its obligation to pay any unpaid invoices for any Contract Capacity made available and Contract Energy supplied prior to the effective date of such termination, or relieve Southern of its obligation to provide Contract Capacity and to deliver Scheduled Energy (or pay a Performance Payment) prior to the effective date of such termination.
2.4 Effective Date. This Agreement shall become effective on the Execution Date without regard to the status of the construction of the Specified Seller's Resources, permits relating to the Specified Seller's Resources, or with respect to any other condition that could affect the construction, operation or existence of the Specified Seller's Resources.
ARTICLE 3
DETERMINATION OF CONTRACT CAPACITY; SALE AND PURCHASE OF CONTRACT CAPACITY
AND ENERGY
3.1 Determination of Contract Capacity. The Contract Capacity shall equal [redacted] for the Term of this Agreement. The Contract Capacity shall not be subject to adjustment during the Term for any reason, including the performance of the Specified Seller's Resources, and re-designation of the Specified Seller's Resources.
3.2 Sale and Purchase of Contract Capacity. Subject to the terms and conditions of this Agreement, beginning on the Effective Date of Service and until the end of the Term, Southern shall make available and sell to DYPM at the Delivery Point, and DYPM shall accept and purchase, the Contract Capacity.
3.3 Sale and Purchase of Contract Energy. Subject to the terms and conditions of this Agreement, beginning on the Effective Date of Service and until the end of the Term, Southern shall deliver and sell to DYPM, and DYPM shall accept and purchase from Southern, energy at the Delivery Point up to the Contract Capacity ("Contract Energy").
3.4 Source of Contract Energy. [redacted].
ARTICLE 4
SELLER'S RESOURCES AND CURTAILMENTS
4.1 Specified Seller's Resources.
4.1.1 At any time prior to January 1, 2003, Southern shall by notice to DYPM designate, in its sole discretion, the Specified Seller's Resources. Southern shall perform all of Southern's obligations hereunder relative to Specified Seller's Resources in accordance with Prudent Industry Practices and the terms of this Agreement.
4.1.2 Southern may from time to time during the Term request a
change in the designation of Specified Seller's Resources made pursuant to
Section 4.1.1. Southern shall make such requested change no later than six (6)
Months prior to the commencement of a particular Contract Year, which change if
accepted by DYPM as provided below, shall result in the newly designated
resource becoming the Specified Seller's Resource(s) for the upcoming Contract
Year and thereafter until an additional request is made by Southern and accepted
by DYPM. Following the receipt of a request to change the designation of the
Specified Seller's Resource(s), DYPM may, in its sole discretion, elect to
accept or reject the requested re-designation. DYPM shall indicate its decision
to accept or reject the proposed re-designation within thirty (30) Days of
DYPM's receipt, provided however, that if DYPM fails to respond during such
period DYPM shall be deemed to have rejected the requested re-designation.
Nothing in this Agreement shall require Southern to request a change in
designation hereunder, and any such request shall be made at Southern's sole
discretion.
4.2 Pre-Scheduled Excused Hours.
4.2.1(a) Scheduling of Pre-Scheduled Excused Hours. On or before April 1 prior to each Contract Year, DYPM shall provide to Southern a non-binding proposed schedule of energy for each Month of such Contract Year. Within one hundred twenty (120) Days after receiving DYPM's proposed schedule, Southern shall submit to DYPM a proposed schedule of Pre-Scheduled Excused Hours for the applicable Contract Year. The proposed schedule of Pre-Scheduled Excused Hours shall give due consideration to, and shall take into account, the proposed schedule submitted by DYPM; provided, however, that in no event shall Southern's proposed schedule provide for any Pre-Scheduled Excused Hours during a Peak Period without the prior written consent of DYPM. Within thirty (30) Days after receiving Southern's proposed schedule of Pre-Scheduled Excused Hours, DYPM may request, in writing, that Southern reschedule any such Pre-Scheduled Excused Hours. Following receipt of such request of DYPM, Southern shall inform DYPM as to whether it can accommodate DYPM's request and, if so, shall further advise DYPM of the good faith estimated costs that will be incurred by Southern in connection with accommodating the request of DYPM to re-schedule the Pre-Scheduled Excused Hours. DYPM shall then within five (5) Days of the receipt of the estimated costs provided by Southern determine whether Southern should reschedule the Pre-Scheduled Excused Hours. Without regard to any prior estimate, DYPM shall reimburse Southern for all Commercially Reasonable costs related to such change in schedule. While Southern must use Commercially Reasonable Efforts to accommodate a request of DYPM to re-schedule any Pre-Scheduled Excused Hours, Southern may elect to decline rescheduling if, in Southern's Commercially Reasonable judgment, it would cause a failure on the part of Southern to observe Prudent Industry Practices, or if the proposed re-schedule would cause Southern to incur costs which DYPM is unwilling to reimburse. If Southern makes the election not to accommodate a request of DYPM to reschedule Pre-Scheduled Excused Hours, DYPM may propose an alternate schedule for Pre-Scheduled Excused Hours, in which case Southern and DYPM shall continue to negotiate the rescheduling of Pre-Scheduled Excused Hours as provided above, but in no event shall such negotiation continue after September 30 of the Contract Year for which such Pre-Scheduled Excused Hours are scheduled. In addition to the foregoing, within thirty (30) Days after the beginning of each Contract Year, Southern shall provide to DYPM a non-binding schedule of Pre-Scheduled Excused Hours for the next three (3) Contract Years.
(b) Pre-Scheduled Excused Hours for any Contract Year shall not exceed [redacted]. If, however, during any Contract Year, Southern does not utilize its allocation of Pre-Scheduled Excused Hours for that Contract Year, then the unused portion of Pre-Scheduled Excused Hours (the "Banked Pre-Scheduled Excused Hours") may be carried forward to the next succeeding Contract Year and may be utilized by Southern in addition to the regular allotment of Pre-Scheduled Excused Hours. The total of all available Pre-Scheduled Excused Hours available to Southern during any Contract Year, including the hours that comprise Banked Pre-Scheduled Excused Hours may not exceed [redacted]. Unless otherwise agreed by the Administrative Committee, Banked Pre-Scheduled Excused Hours may only be utilized by Southern during a Contract Year in which utilization of such Banked Pre-Scheduled Excused Hours is necessary for Southern, in Southern's Commercially Reasonable judgment, to comply with Prudent Industry Practices.
4.2.2 Accumulation of Pre-Scheduled Excused Hours. DYPM and Southern shall include procedures with respect to the logging and record keeping of actual Pre-Scheduled Excused Hours elapsed during any Month in the Administrative Procedures agreed upon pursuant to Section 4.4.
4.2.3 No Scheduling during Pre-Scheduled Excused Hours or Banked Pre-Scheduled Excused Hours. DYPM shall not have the right to submit a Schedule during any Pre-Scheduled Excused Hour or Banked Pre-Scheduled Excused Hour.
4.3 Permits; Compliance with Laws.
4.3.1 Governmental Approvals. Subject to the right of Contest, each Party shall, at its expense, acquire and maintain in effect all Governmental Approvals necessary for it to perform its obligations under this Agreement.
4.3.2 Compliance by Southern. Subject to the right of Contest, Southern shall at all times comply with all Laws and Governmental Approvals applicable to Southern and/or to the Specified Seller's Resources necessary for Southern to perform its obligations under this Agreement.
4.3.3 Compliance by DYPM. Subject to the right of Contest, DYPM shall at all times comply with all Laws and Governmental Approvals applicable to DYPM necessary for DYPM to perform its obligations under this Agreement.
4.4 Administrative Procedures and Administrative Committee.
4.4.1 Administrative Procedures. DYPM and Southern shall develop written Administrative Procedures no later than thirty (30) Days before the Effective Date of Service. The Administrative Procedures shall establish the protocol under which the Parties shall perform their respective responsibilities under this Agreement, including method of Day-to-Day communications, key personnel lists, logging and tracking of hours of Unavailability, Pre-Scheduled Excused Hours, Force Majeure Hours, ENDH Accumulated, hours of Delivery Excuse, and daily capacity level and energy reports.
4.4.2 Administrative Committee. DYPM and Southern shall form a committee to act in matters relating to the performance of their respective obligations under this Agreement ("Administrative Committee"). Each Party shall appoint one representative and one alternate representative to serve on the Administrative Committee. The Parties shall notify each other in writing of such appointments and any changes thereto. The Administrative Committee shall have no authority to modify the terms or conditions of this Agreement. The Administrative Committee shall meet as frequently as it deems necessary, and all of its decisions must be the unanimous decision of the representatives. The Administrative Committee may consult with representatives of the Southern Company Transmission System as appropriate in reaching its decisions.
4.4.3 Southern shall disclose to the Administrative Committee any condition or defect in or with respect to the Specified Seller's Resources of which it is actually aware and that may reasonably be expected to cause the Specified Seller's Resource to be unable to provide Scheduled Energy; provided, however, that the foregoing shall not be construed to require Southern to make inspections of the Specified Seller's Resources.
4.5 Provision of Contract Capacity and Contract Energy.
4.5.1 Unavailability.
(a) Notification. Southern shall promptly notify DYPM
after discovering any circumstance that could reasonably be expected to
|
result in an Unavailability.
(b) Periods of Unavailability. In the event of an Unavailability, the period after commencement of such Unavailability shall be divided into two distinct, contiguous periods:
(i) The period beginning at the time of the occurrence of the Unavailability until the earlier of the removal of the Unavailability or 2400 CPT of the Day in which such occurrence happens shall be referred to as the "Determination Period"; and
(ii) The period from the end of the Determination Period until the removal of the Unavailability shall be referred to as the "Extended Outage Period".
The four hour period immediately following the occurrence of an Unavailability (which may include a portion of the Determination Period and/or the Extended Outage Period) shall be referred to as the "Seller Election Period"; provided, however, that if the Unavailability is resolved, the Seller Election Period shall end at such time.
(c) Circumstances of Unavailability. With regard to any Unavailability that results in an Extended Outage Period, as soon as practicable after the commencement of such Extended Outage Period, Southern shall notify DYPM of:
(i) The cause (or if not known, Southern's best estimate of the cause) of the Unavailability;
(ii) The proposed corrective action that can be taken by Southern to resolve the Unavailability; and
(iii) Southern's best estimate of the expected duration of the Extended Outage Period.
In addition, Southern shall advise DYPM of any material information relating to the cause, duration and resolution of an Unavailability as soon as practicable after such information becomes known to Southern whether before or after the commencement of an Extended Outage Period. Southern shall have an ongoing obligation to keep DYPM advised as to any significant changes with respect to the information provided pursuant to this subsection (c). Southern's estimate of the duration of an Unavailability shall be based on the best information then available to Southern. Southern shall promptly notify DYPM of any expected changes in the period of the Unavailability and shall continue its investigation in a Commercially Reasonable manner for the duration of such Unavailability.
(d) Obligations of Southern. Consistent with Prudent Industry Practices, Southern shall use Commercially Reasonable Efforts to avoid Unavailability and to minimize the duration of any Unavailability.
4.5.2 Southern Elections during an Unavailability.
(a) Seller Election Period. Within [redacted] after the commencement of the Seller Election Period, Southern shall provide telephonic (or acceptable electronic) notice to DYPM of whether it will, to the extent of the Unavailability, either:
[redacted]
Notwithstanding the occurrence of an Unavailability, [redacted]. Such action by Southern during the Carry Period shall not constitute an election for purposes of the Seller Election Period. Once made, however, such election shall apply for the remainder of the Seller Election Period, with appropriate recognition for Southern's actions (if any) during the Carry Period.
(b) Determination Period. Within [redacted] after the commencement of an Unavailability, Southern shall, for each Hour Block within the Determination Period (but only for those hours not covered by an election in the Seller Election Period) and subject to Section 4.5.2(d), provide telephonic (or acceptable electronic) notice to DYPM (along with notice of the election for the first Day of the Extended Outage Period as required by Section 4.5.2(c)) of whether it will, to the extent of the Unavailability, either:
[redacted].
(c) Extended Outage Period. For each Day of an Extended Outage
Period, Southern shall, for each Hour Block within such Day (but only for those
hours not covered by an election in the Seller Election Period) and subject to
Section 4.5.2(d), provide telephonic (or acceptable electronic) notice to DYPM
of whether it will, to the extent of the Unavailability, either:
[redacted].
Notice under this subsection (c) shall be provided by Southern no later than:
(i) for the first Day of the Extended Outage Period, the time that notice is
provided under Section 4.5.2(b); and (ii) for all other Days of the Extended
Outage Period, thirty (30) minutes after receipt of DYPM's Schedule for such Day
under Section 6.1 (but no earlier than 0800 CPT). In addition, upon the
commencement of the Extended Outage Period, Southern shall provide DYPM a
non-binding projection of its anticipated elections under this subsection (c)
for each Day of the expected duration of the Extended Outage Period.
(f) Schedule Changes during an Unavailability. For any hour of
any Day during an Unavailability, if DYPM changes a Schedule provided pursuant
to Section 6.1 after 0900 CPT of the previous Day so that Scheduled Energy is
greater in such hour than contemplated at 0900 CPT of such previous Day (such
greater amount being referred to as "Increased Scheduled Energy"),
notwithstanding any other provision of this Section 4.5.2, Southern shall have
the right, by providing telephonic (or electronic) notice to DYPM thirty (30)
minutes after Southern receives DYPM's notice of such change, to either:
[redacted]. If Southern does not make an election under this subsection (f) for
any hour, Southern shall be deemed to have elected to cover Increased Scheduled
Energy for such hour in the same manner as its elections under Section 4.5.2(a),
(b) and (c). An election made by Southern (or deemed to have been made) under
this subsection (f) shall only apply to Increased Scheduled Energy and shall not
alter elections for Scheduled Energy made under Section 4.5.2(a), (b) and (c).
(g) DYPM Right to Purchase Undelivered Energy. With respect to any Unavailability, DYPM shall have the right to purchase Undelivered Energy using Commercially Reasonable Efforts [redacted].
(h) Exclusive Remedy. Southern's sole and exclusive liability and DYPM's sole and exclusive remedy for an Unavailability shall be determined by the election(s) chosen (or deemed to have been chosen) by Southern in accordance with this Section 4.5.2.
4.5.3 Performance in Accordance with Elections.
For any hour of an Unavailability, Southern shall be required to [redacted], but only to the extent that DYPM has properly requested and is entitled to receive Scheduled Energy for such hour in accordance with the terms of this Agreement.
4.5.4 Calculation of Equivalent ENDH.
For any hour in which Southern [redacted].
4.5.5 Example Calculations.
To demonstrate the application of provisions related to
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[redacted], example calculations are set forth in Appendix B.
4.5.6 Extended Unavailability.
[redacted].
4.5.7 Force Majeure Event.
(a) No Obligation to Deliver. For any hour in which a Force Majeure Event affecting the Specified Seller's Resources or the facilities up to and at the Interconnection Point(s) is occurring or is continuing, to the extent that such event prevents Southern from delivering Scheduled Energy, Southern shall not be obligated to deliver, and DYPM shall not be entitled to receive, Scheduled Energy. In such event, to the extent of such Force Majeure Event, Southern shall not be required to make any of the elections under Section 4.5.2 [redacted].
(b) Adjustment of Reservation Payment. [redacted].
---------------------------------
4.5.8 Delivery Excuse.
(a) No Obligation to Deliver. For any hour in which a Delivery
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Excuse is occurring or is continuing, to the extent of such Delivery Excuse, Southern shall not be obligated to deliver, and DYPM shall not be entitled to receive, Scheduled Energy. In such event, to the extent of the Delivery Excuse, Southern shall not be required to make any of the elections under Section 4.5.2 and shall not be required to [redacted].
(b) Continuation of DYPM Obligations. DYPM shall not be relieved of its performance obligations hereunder during a Delivery Excuse, including its obligation to pay Southern the Reservation Payment, even if such Delivery Excuse continues for the remainder of the Term.
4.5.9 Delivery from Specified Seller's Resources.
Under no circumstance shall Southern be permitted to accumulate ENDH, claim an Unavailability, or claim a Force Majeure Event to the extent Southern is able, in a manner that is consistent with Prudent Industry Practices, to provide Scheduled Energy from the Specified Seller's Resources as required hereunder.
ARTICLE 5
PAYMENTS
5.1 Reservation Payment. Commencing on the Effective Date of Service and for each Month of the Term, DYPM shall pay to Southern a Reservation Payment for the Contract Capacity. The Reservation Payments for each Month are set forth in Appendix A.
5.2 Energy Payment. Commencing on the Effective Date of Service and for each Month of the Term, DYPM shall pay to Southern an Energy Payment. The Energy Payment for each Month shall be equal to the product of: [redacted].
5.3 Conversion Payment. Commencing on the Effective Date of Service and
for each Month of the Term, DYPM shall pay to Southern a Conversion Payment.
The Conversion Payment shall be equal to the sum across all hours of a Month
of: [redacted]. The Conversion Payment shall be calculated on an hourly basis
and accumulated to determine the monthly total. For purposes of this
calculation, a Replacement Energy Block is defined as that quantity of
Delivered Energy (in MWh) provided from Replacement Seller's Resources
associated with a certain Replacement Gas Price established pursuant to
Section 6.2.
5.4 Performance Bonus. For the Term of this Agreement, Southern shall receive a Summer Performance Bonus and a Non-Summer Performance Bonus, if applicable.
5.4.1 Summer Performance Bonus
The Summer Performance Bonus will be calculated based on the Months of June through August of each Contract Year and shall be paid by DYPM to Southern within thirty (30) Days after August 31 of each Contract Year. The Summer Performance Bonus shall be calculated as follows:
Summer
Performance
Bonus = [redacted]
where:
Summer PAF is the performance adjustment factor corresponding to the calculated summer delivery performance factor ("Summer DPF") set forth in the Table below:
Summer DPF Summer PAF
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
Summer DPF is computed as follows:
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Summer DPF = [redacted].
5.4.2 Non-Summer Performance Bonus
The Non-Summer Performance Bonus will be calculated based on the Months of September through May of each Contract Year and shall be paid by DYPM to Southern within thirty (30) Days after May 31 of each Contract Year. The Non-Summer Performance Bonus shall be calculated as follows:
Non-Summer
Performance
Bonus = [redacted]
where:
Non-Summer PAF is the performance adjustment factor corresponding to the calculated non-summer delivery performance factor ("Non-Summer DPF") set forth in the Table below:
Non-Summer DPF Non-Summer PAF
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
[redacted] [redacted]
Non-Summer DPF is computed as follows:
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Non-Summer DPF = [redacted].
5.4.3 Notwithstanding the foregoing, the sum of the Summer Performance Bonus and the Non-Summer Performance shall not exceed [redacted].
5.5 Additional Payments. In addition to the payments specified in this Article 5, the Parties shall pay as all amounts due pursuant to the other provisions of this Agreement.
5.6 Regulatory.
5.6.1 The Parties anticipate that this Agreement will be filed with and accepted by FERC as a market based contract, and thus this Agreement shall not be contingent on FERC acceptance. Having freely negotiated and agreed upon the economic bargain among them as set forth hereunder, Southern and DYPM waive all rights under Sections 205 and 206 of the Federal Power Act to effect a change in the Agreement. Moreover, it is the Parties' mutual intent that FERC be precluded, to the fullest extent permitted by law, from altering this Agreement in any way. Notwithstanding the foregoing, if at any time FERC takes some action that reduces the economic benefit of this Agreement to Southern as contemplated on the Execution Date ("Original Economic Benefit"), Southern shall be deemed to have retained rights under Section 205 to file for changes in the Agreement, but only to the extent required to restore the Original Economic Benefit.
5.6.2 Southern may exercise its Section 205 rights provided under Section 5.6.1 if at any time it reasonably determines in its sole discretion that the application of FERC's ratemaking practices and procedures may support the restoration of some or all of the Original Economic Benefit. Before exercising such rights, Southern shall negotiate with DYPM in an effort to reach mutual agreement regarding amendments to this Agreement that would restore some or all of the Original Economic Benefit. Southern shall file any resulting amendments for acceptance by FERC, and DYPM shall actively support such filing(s). If the Parties are unable to agree upon such amendment(s), Southern shall be entitled to make unilateral filing(s) at FERC to modify the Agreement in order to restore some or all of the Original Economic Benefit. In this latter event, DYPM shall actively support Southern's filing and its right to recover the Original Economic Benefit; however, DYPM reserves the right to propose modifications based on a good faith belief that such filing implements revisions that would exceed the Original Economic Benefit.
5.6.3 Any amendment(s) or unilateral filing(s) contemplated hereunder shall restore the Original Economic Benefit (or any allowed portion thereof) for the remainder of the Term, including any portion of the Original Economic Benefit associated with prior periods (with interest). Nothing in this Agreement is intended to or shall restrict the number of times that Southern may exercise the above-described Section 205 rights during the Term or within any specific time frame.
5.7 Wholesale Generation Rates. All payments specified in this
Section 5 are the unbundled power sales rates for wholesale
generation. Transmission related services are addressed in Article 7.
ARTICLE 6
SCHEDULING, SOUTHERN'S AND DYPM'S RIGHTS TO SELLER'S RESOURCES, TITLE AND
RISK OF LOSS
6.1 Scheduling.
6.1.1 Daily Schedule. On each Business Day, Southern shall inform DYPM before [redacted] of the amount of Contract Energy expected to be available from the Specified Seller's Resources for each hour of the following Day that is a Business Day, and any intervening Day. DYPM shall provide Southern its Schedule for each hour of each Day(s) on or before [redacted] of the previous Business Day. Such Schedule shall be consistent with the Scheduling Constraints and the terms of this Agreement. [redacted] DYPM shall be responsible for complying with all transmission reservation, scheduling and tagging requirements (whether under the OATT or other industry scheduling requirements or standards) associated with the delivery of Scheduled Energy at and after the Delivery Point. All costs and expenses (including penalties) associated with a Schedule and Scheduled Energy at and beyond the Delivery Point shall be the sole responsibility of DYPM unless caused by Southern.
6.1.2 Delivery of Scheduled Energy. Subject to Southern's elections (if any) in Section 4.5.2, Southern shall deliver Scheduled Energy to the Delivery Point in accordance with DYPM's Schedule.
6.1.3 Minimum Amount of Scheduled Energy. Any Schedule submitted by DYPM under this Agreement for any hour must be for a minimum of 150 MW.
6.2 Replacement Gas.
6.2.1 Within [redacted] after receiving DYPM's Schedule for the next Day under Section 6.1.1 (but no earlier than [redacted], Southern shall notify DYPM (either telephonic or electronic) whether it will cover DYPM's Schedule utilizing Replacement Seller's Resources. If Southern provides notice that it will cover some portion of the Schedule with Replacement Seller's Resources, within [redacted] after receiving such notice by Southern, DYPM shall offer a delivered price (in $/MMBTU) ("Replacement Gas Price") for the amount of Gas (in MMBTU) that would have been required by the Specified Seller's Resources to produce the energy to be served by Replacement Seller's Resources ("Replacement Gas"). Within [redacted] of receiving such price, Southern shall then elect to: (i) treat the price offered by DYPM as the Replacement Gas Price (including for purposes of Section 5.3); or (ii) treat the price offered by DYPM as the Replacement Gas Price (including for purposes of Section 5.3) and require DYPM to cause one of its Affiliates to deliver Replacement Gas at alternate delivery points, provided that Southern shall compensate such Affiliate for the additional actual costs (if any) incurred to deliver to such alternate points in lieu of delivery to the Specified Seller's Resources. In the case of (ii), Southern shall receive and purchase from DYPM's Affiliate, and DYPM shall cause one of its Affiliates to supply and sell to Southern, the Replacement Gas at the Replacement Gas Price, at such alternate delivery point(s) specified by Southern (such transaction to be performed pursuant to another contemporaneous agreement between the Parties). DYPM's Affiliates shall use Commercially Reasonable Efforts to arrange for the delivery to the alternate delivery point(s); provided, however, that Southern bears the risk to the extent the delivery arrangements associated with delivery to Specified Seller's Resources are not adequate for delivering to the alternate delivery point(s).
6.2.2 In the event that DYPM increases the amount of Scheduled
Energy (or submits a Schedule where none existed) (such increased amount being
referred to as the "Increased Scheduled Energy") for any hour after it has
submitted the Schedule for such hour pursuant to the second sentence of Section
6.1 (or after 0900 CPT if no Schedule was submitted), then Southern shall notify
DYPM (either telephonic or electronic) whether it will cover DYPM's Schedule
utilizing Replacement Seller's Resources. If Southern provides notice that it
will cover some portion (or all) of the Increased Scheduled Energy with
Replacement Seller's Resources, the Parties shall follow the procedures set
forth in Section 6.2.1 with regard to establishing a Replacement Gas Price and,
if required by Southern, accomplishing the delivery of Replacement Gas by an
Affiliate of DYPM to alternate delivery point(s); provided, however, the
Administrative Committee shall establish the pertinent time frames for
communications of the Parties in this regard.
6.2.3 In the event that DYPM decreases the amount of Scheduled Energy for any hour in which Southern has previously notified DYPM that it will provide some portion of Scheduled Energy from Replacement Seller's Resources, and to the extent that Southern determines (consistent with Scheduling Constraints and the terms of this Agreement) that the requested decrease will not be accommodated by lowering the output of the Specified Seller's Resources, Southern shall decrease the amount of Scheduled Energy provided from Replacement Seller's Resources (the amount of such decrease from Replacement Seller's Resources being referred to as the "Decreased Replacement Energy"). Southern shall propose to DYPM a delivered price (in $/MMBTU) ("Decreased Replacement Gas Price") for the amount of Gas (in MMBTU) that would have been required to produce the Decreased Replacement Energy at the Specified Seller's Resources ("Decreased Replacement Gas"). After receiving such price, DYPM shall then elect to: (i) treat the price offered by Southern as the Decreased Replacement Gas Price and not require Southern to deliver Decreased Replacement Gas; or (ii) treat the price offered by Southern as the Decreased Replacement Gas Price and require Southern to deliver Decreased Replacement Gas at alternate delivery points, provided that DYPM shall compensate Southern for the additional actual costs (if any) incurred to deliver Decreased Replacement Gas to such alternate delivery points in lieu of delivery to the Specified Seller's Resources. In the case of (ii), DYPM shall receive and purchase from Southern, and Southern shall supply and sell to DYPM, the Decreased Replacement Gas at the Decreased Replacement Gas Price, at such alternate delivery point(s) specified by DYPM (such transaction to be performed pursuant to another contemporaneous agreement between the Parties). Southern will use Commercially Reasonable Efforts to arrange for delivery to the alternate delivery point(s); provided, however, that DYPM bears the risk to the extent the delivery arrangements associated with delivery to the Specified Seller's Resources are not adequate to arrange for deliveries to the alternate delivery point(s). In addition, the Parties shall calculate a Replacement Gas Adjustment. The Replacement Gas Adjustment shall equal the product of: (i) the Replacement Gas Price less the Decreased Replacement Gas Price; and (ii) the Decreased Replacement Gas. If the Replacement Gas Adjustment is positive, then DYPM shall owe such amount to Southern. If the Replacement Gas Adjustment is negative, then Southern shall owe the absolute value of such amount to DYPM. In the event that there are multiple Replacement Gas Prices applicable to multiple Replacement Gas quantities for any hour (pursuant to Section 6.2.1 and 6.2.2), for the purposes of calculating the Replacement Gas Adjustment, the Replacement Gas Price(s) shall be utilized in the order they were established until the entire quantity of Decreased Replacement Gas is satisfied with corresponding quantities of Replacement Gas. The Administrative Committee shall establish the pertinent time frames for communications of the Parties under this Section 6.2.3.
6.2.4 In the event that Southern elects to pay Performance Payments for any hour pursuant to Section 4.5.2, the Parties shall follow procedures consistent with those set forth in Section 6.2.1 and/or Section 6.2.2 in order to establish a Replacement Gas Price for calculating the applicable Conversion Payment and, if required by Southern, accomplishing the delivery of Replacement Gas by an Affiliate of DYPM to alternate delivery point(s); provided, however, the Administrative Committee shall establish the pertinent time frames for communications of the Parties in this regard. Any decreases in Scheduled Energy covered by Performance Payments shall be treated consistent with Section 6.2.3.
6.3 Southern's Rights to the Specified Seller's Resources. During any time for which DYPM has not submitted (or is not permitted to submit) a Schedule or during any time when Scheduled Energy is not provided from the Specified Seller's Resources, Southern shall have the right to dispatch the Specified Seller's Resources for its own purposes to the extent not Scheduled (or permitted to be Scheduled) or Scheduled Energy is not provided from the Specified Seller's Resources, including for the purpose of supplying energy to third parties. Any Schedule provided by DYPM in accordance with the terms of this Agreement (including Section 6.1) shall have priority over Southern's schedule.
6.4 Title and Risk of Loss. Southern shall be deemed to be in exclusive control of the Scheduled Energy prior to the Delivery Point. DYPM shall be deemed to be in exclusive control of the Scheduled Energy at and after the Delivery Point. Custody, title and risk of loss of Contract Capacity and Scheduled Energy shall transfer from Southern to DYPM at the Delivery Point.
ARTICLE 7
TRANSMISSION SERVICE
7.1 DYPM Obligations and Assumption of Transmission Risk. DYPM, or its designee, shall arrange, obtain, contract, and pay for any and all transmission service and ancillary services required (including service under the OATT) to deliver the Contract Capacity and Scheduled Energy from and beyond the Delivery Point. During transmission curtailments, Southern will cooperate to assist DYPM in modifying deliveries of Scheduled Energy with less restrictive notice provisions than those set forth in Article 6; provided, however, Southern shall have no liability or obligation to the extent it does not allow DYPM to deviate from such notice requirements. Notwithstanding anything set forth in Section 7.2 or elsewhere to the contrary, it is DYPM's sole and exclusive responsibility at all times to arrange, obtain, contract and pay for any and all transmission and ancillary services required to deliver any energy hereunder from and beyond the Delivery Point. DYPM assumes all risk associated with the availability, adequacy and cost of such transmission service and ancillary services.
7.2 Southern Obligations. Southern, or its designee, shall arrange, obtain, contract, and pay for any transmission service required to deliver Contract Capacity and Scheduled Energy (whether from the Specified Seller's Resources or Replacement Seller's Resources) to the Delivery Point. Southern will also be responsible for securing and maintaining an interconnection agreement with the applicable transmission provider that allows Southern to deliver Scheduled Energy from Seller's Specified Resources to the Interconnection Point.
7.3 Imbalances and Penalties. Any penalties or imbalances resulting from actions or inactions of DYPM (or any third party to which DYPM may be supplying the capacity and energy provided hereunder) will be the responsibility of DYPM. Any penalties or imbalances resulting from actions or inactions of Southern will be the responsibility of Southern.
ARTICLE 8
METERING
8.1. Metering. All quantities of energy delivered under this Agreement shall be measured in accordance with Prudent Industry Practices.
ARTICLE 9
BILLING AND PAYMENT
9.1 Timing; Method of Payment. The billing Party will submit to the
other Party, as promptly as practicable after the first of each Billing
Month, an invoice (by mail, facsimile or electronic means) for transactions
and the amounts due under the terms of this Agreement for the preceding
Month. Bills for each Billing Month shall be due and payable on the tenth
(10th) Day after the Day on which the billed Party receives the invoice,
unless otherwise agreed. Payment shall be made, on or before the due date, to
the billing Party in accordance with the invoice in immediately available
funds through wire transfer, or other mutually agreeable method.
9.2 Late Payment. Amounts that are owed by a Party shall, if not
remitted within the time period specified under Section 9.1, be subject to a
late payment charge equal to the interest calculated pursuant to Section
19.8, accrued and payable on a monthly basis with respect to the unpaid
amount. Such late payment charge shall accrue from the due date of such
amount until the date on which it is paid.
9.3 Disputed Billings. [redacted].
9.4 Adjustments. If any overcharge or undercharge in any form whatsoever shall at any time be found and the invoice therefor has been paid, the Party that has been paid the overcharge shall refund the amount of the overcharge to the other Party, and the Party that has been undercharged shall pay the amount of the undercharge to the other Party, within thirty (30) Days after final determination thereof; provided, however, that no retroactive adjustment shall be made for any overcharge or undercharge unless written notice of the same is provided to the other Party within a period of twenty-four (24) Months from the date of the invoice in which such overcharge or undercharge was first included. Any such adjustments shall be made with interest calculated in accordance with Section 19.8 from the date that the undercharge or overcharge actually occurred.
9.5 Audit Rights. The Parties shall keep complete and accurate records, meter readings and memoranda of their operations under this Agreement and shall maintain such data for a period of at least two (2) years after the completion of each Billing Month hereunder; provided, however, records relating to a disputed matter shall be retained until the dispute is resolved. Such records shall be available for inspection and audit by the other Party upon reasonable request and during regular Business hours.
ARTICLE 10
CHANGE IN LAW
10.1 Limitations. The Parties acknowledge that during the term of this Agreement, Changes in Law that increase Southern's cost of providing capacity and/or energy hereunder could occur. During the Term, Southern will be responsible for up to a total of [redacted] of Increased Electricity Costs ("Cost Threshold"). Notwithstanding the foregoing, any Increased Electricity Costs in any Contract Year in excess of [redacted] will be paid by DYPM through an additional payment or surcharge (the "Change in Law Surcharge"). Once Southern has incurred Increased Electricity Costs up to the Cost Threshold, DYPM shall pay for all Increased Electricity Costs through the Change in Law Surcharge, as provided below. In lieu of the Change in Law Surcharge, the Parties may agree on other payment mechanisms whereby DYPM shall pay for Increased Electricity Costs. Alternatively, the Parties may mutually agree on certain reductions in DYPM's rights to purchase Contract Capacity and Scheduled Energy in lieu of payment of Increased Electricity Costs.
10.2 Determination. [redacted]
10.3 Initiation of Surcharge. In the event that total Increased Electricity Costs for any Contract Year will exceed [redacted], or if the Cost Threshold will be exceeded, Southern shall provide DYPM with written notice of a proposed Change in Law Surcharge. No earlier than [redacted] thereafter, Southern may initiate the Change in Law Surcharge consistent with such notice.
10.4 Timing. [redacted].
10.5 Contest and Dialogue. [redacted]. Whenever either Party anticipates the possibility of a Change in Law, it may request meeting(s) to engage in open dialogue with the other to exchange ideas regarding potential courses of action.
ARTICLE 11
LIABILITY ALLOCATION; LIMITATIONS ON LIABILITY
11.1 Costs, Taxes and Charges. Except as otherwise provided in this Agreement, in addition to all other amounts due and payable under this Agreement: (i) Southern shall be responsible for all costs, Taxes, and charges of any kind relating to the delivery of energy, capacity, transmission, and/or related services prior to the Delivery Point (by way of clarification of the foregoing, Taxes prior to the Delivery Point include: ad valorem taxes on the Specified Seller's Resources; income taxes on Southern or its property; and taxes on payments made to Southern under this Agreement); and (ii) DYPM shall be responsible for all costs, Taxes, and charges of any kind relating to the delivery of energy, capacity, transmission, and/or related services at and after the Delivery Point (by way of clarification of the foregoing, Taxes at and after the Delivery Point include: income taxes on DYPM or its property, and any taxes incurred in connection with downstream sales of the Scheduled Energy). Each Party shall provide the other Party upon written request a certificate of exemption or other reasonably satisfactory evidence of exemption if any exemption from or reduction of any Tax is applicable. Each Party shall exercise Commercially Reasonable Efforts to obtain and to cooperate in obtaining any exemption from or reduction of any Tax.
11.2 Indemnification. Unless otherwise agreed in writing by the Parties, Southern and DYPM shall each defend, indemnify and save harmless the other and their respective officers, directors, servants, agents, employees and representatives from and against any and all claims, demands, costs or expenses (including reasonable attorneys' fees) for loss, damage or injury to any person, property or interest arising out of or in any way related to this Agreement to the extent such loss, damage or injury occurs on its own side of the Delivery Point, irrespective of negligence, whether actual or claimed, of the other. Nothing in this Agreement shall create a contractual relationship between one Party and the customers of the other Party, nor shall it create a duty of any kind to such customers.
11.3 Limitation of Liability.
11.3.1 there are no warranties under this agreement EXCEPT TO THE EXTENT SPeciFICALLy set forth HEREIN. the parties hereby specifically disclaim and exclude all implied warranties, including the implied warranties of merchantability and of fitness for a particular purpose.
11.3.2 NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES SUFFERED BY THAT PARTY OR BY ANY CUSTOMER OF THAT PARTY, FOR lost profits or other business interruption damages, WHETHER BY VIRTUE OF ANY STATUTE, IN TORT OR CONTRACT, UNDER ANY PROVISION OF INDEMNITY OR OTHERWISE. THE PARTIES INTEND THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT, AND THAT THE LIQUIDATED DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.
11.3.3 In the event that any provision of this Section 11.3 is held to be invalid or unenforceable, this Section shall be void and of no effect solely to the extent of such invalidity or unenforceability, and no claim arising out of such invalidity or lack of enforceability shall be made by one Party against the other or its officers, agents, or employees. Notwithstanding the foregoing, this Section 11.3 shall not limit or negate the right of either Party to be fully indemnified as provided in Section 11.2 or limit the remedies available for an Event of Default.
ARTICLE 12
FORCE MAJEURE event
12.1 Force Majeure Event Defined.
12.1.1 General Rule. As used herein, an Event of Force Majeure means an unforeseeable cause(s) beyond the reasonable control of and without the fault or negligence of the Party claiming Force Majeure, including but not limited to acts of God, strike, flood, earthquake, storm, fire, lightning, epidemic, war, riot, civil disturbance, sabotage, terrorism, change in law or applicable regulation subsequent to the Execution Date and action or inaction by any federal, state or local legislative, executive, administrative or judicial agency or body which, by exercise of due foresight such Party could not reasonably have expected and which, by the exercise of due diligence, it is unable to overcome.
12.1.2 Exceptions. Notwithstanding anything contained in Section 12.1.1, the term Force Majeure shall not include any of the following:
[redacted]
12.2 Applicability of Force Majeure Event.
Neither Party shall be in breach or liable for any delay or failure in its performance under this Agreement (except for such Party's performance of its payment obligations hereunder, which shall not be excused by any Force Majeure Event) to the extent such performance is prevented or delayed due to a Force Majeure Event, provided that:
12.2.1 The non-performing Party shall give the other Party written notice within three (3) Business Days of the commencement of the Force Majeure Event, with available details to be supplied within [redacted] after the commencement of the Force Majeure Event further describing the particulars of the occurrence of the Force Majeure Event;
12.2.2 The delay in performance shall be of no greater scope and of no longer duration than is directly caused by the Force Majeure Event;
12.2.3 The Party whose performance is delayed or prevented shall proceed with Commercially Reasonable Efforts to overcome the events or circumstances preventing or delaying performance and shall, as requested (but not more often than weekly), provide written progress reports to the other Party during the period that performance is delayed or prevented describing actions taken and to be taken to remedy the consequences of the Force Majeure Event, the schedule for such actions and the expected date by which performance shall no longer be affected by the Force Majeure Event; and
12.2.4 When the performance of the Party claiming the Force Majeure Event is no longer being delayed or prevented, that Party shall give the other Party written notice to that effect.
12.3 Effect of Force Majeure Event.
12.3.1 Except for the obligation of either Party to make any required payments under this Agreement, the Parties shall be excused from performing their respective obligations under this Agreement and shall not be liable in damages or otherwise if and to the extent that they are unable to so perform or are prevented from performing by a Force Majeure Event.
12.3.2 [redacted]
12.4 Other Effects of Force Majeure Events. If any Force Majeure Event claimed by a Party shall continue for more than [redacted] from the date of notice provided by such Party in Section 12.2.1, then the other Party may, at any time following the end of such period, terminate this Agreement upon written notice to the affected Party. Upon such termination, neither Party shall have any further obligation to the other Party except as to payment of any costs and liabilities incurred prior to the effective date of such termination. Any notice of termination under this Section must be received during the period that performance continues to be delayed or prevented by the Force Majeure Event.
ARTICLE 13
EVENT OF DEFAULT
13.1 Event of Default. The occurrence of any one of the following shall constitute an "Event of Default":
13.1.1 The failure by a Party to make payment to the other Party for amounts due under this Agreement after said amounts have become due and payable and such failure is not cured within [redacted] after receiving written notice from the Party to which such payments are due;
13.1.2 A Party or any Party guaranteeing such Party's obligations hereunder (a "Guarantor") shall: (i) admit in writing its inability to pay its debts as such debts become due; (ii) make a general assignment or an arrangement or composition with or for the benefit of its creditors; (iii) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against such Party or such Guarantor under any bankruptcy or similar law; (iv) take any action for the purpose of effectuating any of the foregoing; or (v) fails to comply with the terms and conditions of its Guaranty;
13.1.3 A proceeding or case shall be commenced, without the application or consent of the Party or its Guarantor, in any court of competent jurisdiction, seeking: (i) its liquidation, reorganization of its debts, dissolution or winding-up, or the composition or readjustment of its debts; (ii) the appointment of a receiver, custodian, liquidator or the like of the Party or its Guarantor or of all or any substantial part of its assets or the assets of its Guarantor; or (iii) similar relief in respect of such Party or its Guarantor under any law relating to bankruptcy, insolvency, reorganization of its debts, winding-up, composition or adjustment of debt;
13.1.4 The failure of any Party to comply with the requirements of Article 14 regarding creditworthiness and/or security;
13.1.5 The failure of a Party to comply with the requirements of Article 17 regarding assignment;
13.1.6 Any representation or warranty made by a Party under Article 16 proves to have been false or misleading in any material respect and such representation or warranty is not made true within twenty (20) Days after notice thereof to such Party; provided, however, that the cure must also remove any adverse effect on the non-defaulting Party;
13.1.7 A Party shall fail to pay when due (subject to any applicable cure or grace period), whether by acceleration or otherwise, any principal or interest on indebtedness aggregating in excess of [redacted] in principal amount; or any indebtedness aggregating in excess of [redacted] shall be declared due and payable or be required to be prepaid (other than by a regularly scheduled payment) prior to the stated maturity of such indebtedness; or
13.1.8 The material failure by a Party to comply with any
material provision of this Agreement (other than the events described above and
those for which a remedy is expressly provided) if such failure is not the
result of a Force Majeure Event, an Unavailability or is not otherwise excused
in accordance with this Agreement, and such failure continues uncured for
[redacted] after written notice thereof switch order from the other Party;
provided, however, if such failure is not capable of being cured within such
period of [redacted] with the exercise of reasonable diligence, then such cure
period shall be extended for an additional reasonable period of time (not to
exceed [redacted]), so long as the Party is exercising reasonable diligence to
cure such failure.
13.2 Exclusive Remedies.
13.2.1 Upon the occurrence of an Event of Default and at all times during any applicable cure period, for so long as such Event of Default is continuing (or as long as the defaulting Party is attempting to cure during such cure period), the non-defaulting Party's sole and exclusive remedy shall be to suspend its performance under this Agreement and/or declare an Early Termination Date as provided below.
13.2.2 If an Event of Default has occurred, the non-defaulting Party shall have the right, in its sole discretion, by no more than [redacted] notice to the defaulting Party, to designate a Day no earlier than the Day such notice is effective as the date on which the Agreement shall terminate ("Early Termination Date"). Subject to Section 19.3, this Agreement shall terminate on the Early Termination Date and neither Party shall have any further liability or obligation to the other hereunder, except as provided in Sections 13.2.3 or 13.2.4 below, as applicable.
13.2.3 Southern's notice under Section 13.2.2 shall indicate one of the following elections: [redacted] payment; or (ii) receive a continuing damage payment. In the event Southern elects to receive the [redacted], DYPM shall pay Southern such amount within three (3) Business Days after the Early Termination Date as liquidated damages for all claims associated with the Event of Default under this Agreement. In the event Southern elects to receive the continuing damage payment, Southern shall calculate an amount equal to: [redacted].
13.2.4 With fifteen (15) Days after DYPM's notice under Section
13.2.2, the Parties shall each select an independent party to determine the
[redacted] of the Agreement. Within thirty (30) Days after such notice, the
two independent parties shall select a third independent party to determine
the [redacted] of the Agreement. Within sixty (60) Days after such notice,
the three (3) independent parties shall provide the Parties with their
respective estimates of the [redacted]. The actual [redacted]. If one Party
disputes the actual [redacted], within five (5) Business Days of notice of
the actual [redacted] determined by the independent parties, such Party may
submit the dispute for resolution pursuant to the arbitration procedures of
Article 18. If the actual [redacted] ultimately used is the value
determined by the three independent parties, then such value cannot exceed
a net present value (using a discount rate of 8%) of [redacted] as of the
Early Termination Date. If the actual [redacted] ultimately used is the
value determined pursuant to arbitration, then such value cannot exceed a
net present value (using a discount rate of 8%) of [redacted] as of the
date of the arbitrators' decision. If the final determination of the
[redacted] indicates that a payment is owed to DYPM, then the actual
[redacted] will be paid by Southern to DYPM within three (3) Business Days
of such determination. If the final determination of the [redacted]
indicates that a payment would be owed to Southern absent the Event of
Default by Southern, then although the [redacted] to DYPM would be
negative, neither Party shall be required to pay the other any amount
hereunder. As used herein, [redacted].
ARTICLE 14
CREDITWORTHINESS AND SECURITY
14.1 Guaranty in Favor of Southern. Simultaneously with the execution
of this Agreement, DYPM shall cause Dynegy Holdings Inc., the parent company of
DYPM, to execute and deliver a Guaranty Agreement in the form of that attached
hereto as Appendix D (DYPM Guaranty). If at any time during the Term, the long
term senior unsecured indebtedness of Dynegy Holdings Inc. (or the provider of
an Eligible Guaranty) has or drops to a rating below either (i) Baa3 by Moody's
Investors Service ("Moody's") (or future equivalent) or BBB- by Standard &
Poor's Ratings Group ("S&P") (or future equivalent), then DYPM shall provide a
substitute guaranty in form and substance substantially similar to the DYPM
Guaranty (the "Eligible Guaranty") issued by an entity with a long term senior
unsecured indebtedness rating of at or above both (i) Baa3 by Moody's (or future
equivalent) and (ii) BBB- by S&P (or future equivalent) (the "Eligible Guaranty
Threshold"). DYPM shall provide such Eligible Guaranty within ten (10) Days of
receipt of notice from Southern that DYPM is required to provide an Eligible
Guaranty due to the downgrade to a rating below either (i) Baa3 by Moody's (or
future equivalent) or (ii) BBB- by S&P (or future equivalent). If DYPM is unable
to provide an Eligible Guaranty to Southern during such ten (10) Day period,
then DYPM and Dynegy Holdings Inc. must be and remain in compliance with and
Southern must receive the security and payments as required by the terms of
Section 14.3 and 14.4 below.
14.2 Negative Watch Credit Support in Favor of Southern. If at any time during the period beginning on the date hereof through December 31, 2005, the long term senior unsecured indebtedness of Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) has or drops to a rating of either (i) Baa3 by Moody's (or future equivalent) and Dynegy Holdings Inc. (or the provider of an Eligible Guaranty), its credit rating or indebtedness is on watch for possible downgrade by Moody's (or future equivalent) or (ii) BBB- by S&P (or future equivalent) and Dynegy Holdings Inc. (or the provider of an Eligible Guaranty), its credit rating or indebtedness is on negative CreditWatch by S&P (or future equivalent), then DYPM or Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) shall within three (3) Business Days after such event provide to and maintain in favor of Southern a letter of credit issued by an issuer reasonably acceptable to Southern in the amount of [redacted] in substantially the form of Appendix E hereto unless a [redacted] letter of credit has been properly issued and remains in effect in accordance with the first sentence of Section 14.3 or 14.4 below. Without limiting the foregoing, if at any time during the period June 1, 2005 through December 31, 2005, the long term senior unsecured indebtedness of Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) has or drops to a rating of either (i) Baa3 by Moody's (or future equivalent) and Dynegy Holdings Inc. (or the provider of an Eligible Guaranty), its credit rating or indebtedness is on watch for possible downgrade by Moody's (or future equivalent) or (ii) BBB- by S&P (or future equivalent) and Dynegy Holdings Inc. (or the provider of an Eligible Guaranty), its credit rating or indebtedness is on negative CreditWatch by S&P (or future equivalent), then DYPM or Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) shall within three (3) Business Days after such event provide or cause to be provided to Southern a [redacted] payment in lieu of the last twenty-four (24) months of monthly Reservation Payments unless the monthly Reservation Payments to Southern under this Agreement are immediately and thereafter remain increased by $150,000 per month.
14.3 Credit Support in Favor of Southern for Junk Rating. If at any time during the period beginning on the date hereof through December 31, 2005, the long term senior unsecured indebtedness of Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) has or drops to a rating of below either (i) Baa3 by Moody's (or future equivalent) or (ii) BBB- by S&P (or future equivalent), then DYPM or Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) shall within three (3) Business Days after such event provide to and maintain in favor of Southern a letter of credit issued by an issuer reasonably acceptable to Southern in the amount of [redacted] in substantially the form of Appendix E hereto unless a [redacted] letter of credit has been properly issued and remains in effect in accordance with the first sentence of Section 14.2 above or Section 14.4 below. Without limiting the foregoing, if at any time during the period June 1, 2005 through December 31, 2005, the long term senior unsecured indebtedness of Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) has or drops to a rating of below either (i) Baa3 by Moody's (or future equivalent) or (ii) BBB- by S&P (or future equivalent), then DYPM or Dynegy Holdings Inc. (or the provider of an Eligible Guaranty) shall, unless the monthly Reservation Payments to Southern under this Agreement are immediately and thereafter remain increased by [redacted] per month, within three (3) Business Days after such event provide or cause to be provided to Southern either (i) a [redacted] in lieu of the last forty-eight (48) months of monthly Reservation Payments or (ii) a [redacted] payment in lieu of the last twenty-four (24) months of monthly Reservation Payments subject to the restriction that this option (ii) shall not be available unless the monthly Reservation Payments to Southern under this Agreement are immediately and thereafter remain increased by [redacted] per month.
14.4 Post December 31, 2005 Provisions. If at any time after December
31, 2005, the long term senior unsecured indebtedness of Dynegy Holdings Inc.
(or the provider of an Eligible Guaranty) has or drops to a rating below either
(i) Baa3 by Moody's (or future equivalent) or (ii) BBB- by S&P (or future
equivalent), then DYPM or Dynegy Holdings Inc. (or the provider of an Eligible
Guaranty) shall within three (3) Business Days after such event provide to and
maintain in favor of Southern a letter of credit issued by an issuer reasonably
acceptable to Southern in the amount of [redacted] in substantially the form of
Appendix E hereto, unless a [redacted] letter of credit has been properly issued
and remains in effect in accordance with the first sentence of Section 14.2 or
14.3 above.
14.5 Guaranty in Favor of DYPM. If hereafter Southern's net worth
(calculated by subtracting Southern's liabilities (net of intercompany loans)
from Southern's total assets (excluding goodwill) as such terms are determined
in accordance with GAAP) falls below [redacted], Southern shall provide to DYPM
a guaranty from an entity with a long term senior unsecured indebtedness rating
at or above (i) Baa3 by Moody's (or future equivalent) and (ii) BBB- by S&P (or
future equivalent) in substantially the form of Appendix F (Southern Guaranty)
in an amount equal to seventy percent (70%) of the amount by which [redacted]
exceeds Southern's net worth (the "Shortfall Amount") or, at Southern's option,
Southern shall deliver to DYPM a letter of credit in the Shortfall Amount in
substantially the form of Appendix G hereto. If at any time during the Term, the
long term senior unsecured indebtedness of the provider of the Southern Guaranty
has or drops to a rating below either (i) Baa3 by Moody's (or future equivalent)
or (ii) BBB- by S&P (or future equivalent), then Southern shall provide a
Southern Guaranty issued by an entity with a long term senior unsecured
indebtedness rating at or above the Eligible Guaranty Threshold. Southern shall
provide such Southern Guaranty within ten (10) Days of receipt of notice from
DYPM that Southern is required to provide a Southern Guaranty due to the
downgrade below either (i) Baa3 by Moody's (or future equivalent) or (ii) BBB-
by S&P (or future equivalent). If Southern is unable to provide a Southern
Guaranty during the applicable periods described above, then Southern shall
provide and maintain substitute collateral of a value equal to the Shortfall
Amount in form and substance reasonably satisfactory to DYPM which security
shall cover and secure Southern's obligations under this Agreement. The
foregoing substitute collateral shall be replenished so that at all times
substitute collateral of a value equal to the Shortfall Amount is securing
Southern's obligations to DYPM until such time as a Southern Guaranty is
provided. If at any time a Southern Guaranty becomes available, Southern may
elect to provide such Southern Guaranty in replacement of any security
previously provided. Once a Southern Guaranty is provided, any security
previously provided by Southern shall be immediately returned or cancelled as
the case may be, at which time the Southern Guaranty shall remain in place until
the latter of it is terminated in accordance with its terms or until such time
as collateral is again required and provided due to the downgrades of the
provider of the Southern Guaranty to a level below the Eligible Guaranty
Threshold.
14.6 Negative Watch Credit Support in Favor of DYPM. If at any time
prior to June 1, 2005, the long term senior unsecured indebtedness of Southern
has or drops to a rating of either (i) Baa3 by Moody's (or future equivalent)
and Southern, its credit rating or indebtedness is on watch for possible
downgrade by Moody's (or future equivalent) or (ii) BBB- by S&P (or future
equivalent) and Southern, its credit rating or indebtedness is on negative
CreditWatch by S&P (or future equivalent), then Southern shall within three (3)
Business Days after such event provide to and maintain in favor of DYPM either
(1) a letter of credit issued by an issuer reasonably acceptable to DYPM in an
amount of [redacted] in substantially the form of Appendix G hereto or (2) a
guaranty from an entity with a long term senior unsecured indebtedness rating at
or above (i) Baa3 by Moody's (or future equivalent) and (ii) BBB- by S&P (or
future equivalent) in the form of Appendix F (Southern Guaranty), unless a
letter of credit or guaranty has been properly issued and remain in effect in
accordance with Section 14.7 or 14.8 below.
14.7 Credit Support in Favor of DYPM for Junk Rating. If at any time
prior to June 1, 2005, the long term senior unsecured indebtedness of Southern
has or drops to a rating of below either (i) Baa3 by Moody's (or future
equivalent) or (ii) BBB- by S&P (or future equivalent), then Southern shall
within three (3) Business Days after such event provide to and maintain in favor
of DYPM either (1) a letter of credit issued by an issuer reasonably acceptable
to DYPM in an amount of [redacted] in substantially the form of Appendix G
hereto or (2) a guaranty from an entity with a long term senior unsecured
indebtedness rating at or above (i) Baa3 by Moody's (or future equivalent) and
(ii) BBB- by S&P (or future equivalent) in the form of Appendix F (Southern
Guaranty), unless a letter of credit or guaranty has been properly issued and
remains in effect in accordance with Section 14.6 above or Section 14.8 below.
14.8 Post June 1, 2005 Provisions. If at any time on or after June 1,
2005, the long term senior unsecured indebtedness of Southern has or drops to a
rating below either (i) Baa3 by Moody's (or future equivalent) or (ii) BBB- by
S&P (or future equivalent), then Southern shall provide to and maintain in favor
of DYPM either (1) a letter of credit issued by an issuer reasonably acceptable
to DYPM in the amount of [redacted] in substantially the form of Appendix G
hereto or (2) guaranty from an entity with a long term senior unsecured
indebtedness rating at or above (i) Baa3 by Moody's (or future equivalent) and
(ii) BBB- by S&P (or future equivalent) in the form of Appendix F (Southern
Guaranty), unless a letter of credit or guaranty has been properly issued and
remains in effect in accordance with Section 14.6 or Section 14.7 above.
ARTICLE 15
DELIVERY EXCUSE
15.1 Definition. As used in this Agreement, "Delivery Excuse" means:
(i) any Event of Default of DYPM under this Agreement or any event which, with
the giving of notice or lapse of time or both, would become an Event of Default
under this Agreement; (ii) the failure of any portion of Gas supply intended for
Specified Seller's Resources under any Gas supply agreement to which Southern is
a party (other than a failure resulting from a default or failure to perform by
Southern or one of its Affiliates) for any reason or the failure of Gas supply
to an alternate gas delivery point(s) (as required by Section 6.2), provided,
however, that failures to supply to alternate delivery point(s) for reasons
beyond DYPM's control shall not constitute a Delivery Excuse; or (iii) the
delivery of Gas to the Specified Seller's Resources that does not meet the
specifications of applicable transportation pipelines serving the Specified
Seller's Resources; (iv) any failure or inability of DYPM to acquire and
maintain adequate transmission service for the delivery of energy; and (v) any
Emergency Condition. Prior to the Effective Date of Service, Southern and DYPM
(or its Affiliate(s)) shall enter into an agreement for the supply of Gas by
DYPM (or its Affiliate(s)) for use by Specified Seller's Resource(s). Nothing
contained in this Agreement or elsewhere shall require Southern to replace,
either in whole or in part, any failure of Gas supply under any Gas supply
agreement (including such an agreement with DYPM or its Affiliate(s)) or
arrangement with any other Gas supply arrangement.
15.2 No Breach for Delivery Excuse. Southern shall not be liable for or deemed in breach of this Agreement to the extent a Delivery Excuse has occurred or is continuing, even if the duration of such Delivery Excuse is for the remainder of the Term of this Agreement; provided that the following shall apply with regard to a condition that would result in a Delivery Excuse:
(i) Each Party shall promptly notify the other after discovering any condition or circumstance that could reasonably be expected to lead to a Delivery Excuse. Upon either Party becoming aware of a condition that constitutes a Delivery Excuse, that Party shall provide the other Party with prompt written notice of such condition, with details further describing the particulars of the condition to be supplied within twelve (12) Days after commencement of such condition;
(ii) Any delay in performance shall be of no greater scope and of no longer duration than is directly caused by the Delivery Excuse; and
(iii) When a Party becomes aware that the condition constituting a Delivery Excuse no longer exists, such Party shall promptly notify the other when the condition of Delivery Excuse is no longer preventing such Party's performance under this Agreement.
ARTICLE 16
REPRESENTATIONS AND WARRANTIES
16.1. Execution. Each Party represents and warrants to the other Party that: (i) it has all the necessary corporate and legal power and authority and has been duly authorized by all necessary corporate action to enable it to lawfully execute, deliver and perform under this Agreement; and (ii) it is a valid legal entity duly organized and validly existing in good standing under the laws of the state of its formation and is qualified to do business in the State of Alabama;
16.2. Permits. Each Party represents and warrants to the other Party that it will hold all permits, licenses or approvals necessary to lawfully perform its obligations contained herein in the manner prescribed by this Agreement.
16.3 Binding Obligations. Each Party represents and warrants to the other Party that this Agreement is the valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other equitable laws affecting creditor's rights.
16.4 Execution and Consummation. Each Party represents and warrants to the other Party that the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with any of the terms, conditions or provisions of any law or partnership agreement, or other evidence of indebtedness or any other agreement or instrument to which it is a party or by which it or any of its property is bound, or result in a breach or default under any of the foregoing.
16.5 Actions and Proceedings. Each Party represents and warrants to the other that there is no pending or, to the knowledge of such Party, threatened action or proceeding affecting such Party before any Government Agency that purports to adversely affect the validity or enforceability of this Agreement.
16.6 Processor. With respect to the purchase of Contract Capacity, DYPM represents and warrants that it is a producer, processor, commercial user or merchant handling energy, and it is entering into the transactions contemplated by this Agreement for purposes related to its business as such.
ARTICLE 17
ASSIGNMENT
17.1 General Rule. This Agreement shall be binding upon and inure to the benefit of the permitted successors and assigns of the Parties hereto. Except as set forth in Section 17.2, no permitted sale, assignment, transfer or other disposition shall release or discharge DYPM or Southern from its obligations under this Agreement, but all such obligations shall also be assumed by the successor or assign of the Party hereto.
17.2 Consent Required. Neither Party shall assign its interest in this Agreement in whole or part without the prior written consent of the other Party, such consent not to be unreasonably withheld or delayed; provided, however, that, notwithstanding the foregoing, either Party may assign this Agreement to its parent, or to any direct or indirect wholly-owned subsidiary of such parent and, upon the approval of the creditworthiness and the ability to perform of such assignee by the non-assigning Party (which approval shall not be unreasonably withheld or delayed), the assignor shall be released and discharged from its obligations under this Agreement. Either Party may collaterally assign this Agreement to any lender or financial institution without the written consent of the other Party. Each Party agrees to provide such consents to collateral assignment as may be reasonably requested by the other Party; provided that neither Party shall be obligated to provide a consent to collateral assignment that would have the effect of materially altering the obligations of such Party under this Agreement.
ARTICLE 18
DISPUTE RESOLUTION
18.1 Senior Officers.
18.1.1 Each of the Parties will designate in writing to the other Parties a representative who will be authorized to resolve any dispute arising under this Agreement in an equitable manner and, unless otherwise expressly provided herein, to exercise the authority of such Party to make decisions by mutual agreement.
18.1.2 If such designated representatives are unable to resolve a dispute under this Agreement, such dispute will be referred by each Party's representative, respectively, to a designated senior officer.
18.1.3 The Parties hereto agree: (i) to attempt to resolve all
disputes arising hereunder promptly, equitably and in a good faith manner; and
(ii) to provide each other with reasonable access during normal business hours
to any and all non-privileged and non-confidential records, information and data
pertaining to any such dispute. Non-confidential information shall be made
available to a Party pursuant to a confidentiality agreement acceptable to the
disclosing Parties.
18.2 Arbitration. All disputes arising under, out of, or in relation to any provision of this Agreement that are not resolved pursuant to Section 18.1 within 30 Days after either Party's receipt of notice referring the dispute to the senior officers of the Parties (and in any event within the time which legal or equitable proceedings based on such claim, dispute, or controversy would not be barred by the applicable statute of limitations) will be submitted upon written request of any Party to binding arbitration. Each Party will have the right to designate an arbitrator of its choice, who need not be from the American Arbitration Association ("AAA") panel of arbitrators but who (a) will be an expert in the independent power electric generation field and (b) will not be and will not have been previously an employee or agent of or consultant or counsel to either Party and will not have a direct or indirect interest in either Party or the subject matter of the arbitration. Such designation will be made by notice to the other Party and to the AAA within ten (10) Days or, in the case of payment disputes, five (5) Days after the date of the giving of notice of the demand for arbitration. The arbitrators designated by the Parties will designate a third arbitrator, who will have a background in legal and judicial matters (and who will act as chairman), within ten (10) Days or, in the case of payment disputes, five (5) Days after the date of the designation of the last of the arbitrators to be designated by the Parties, and the arbitration will be decided by the three arbitrators. If the two arbitrators cannot or do not select a third independent arbitrator within such period, either Party may apply to the AAA for the purpose of appointing any person listed with the AAA as the third independent arbitrator under the expedited rules of the AAA. Such arbitration will be held in alternating locations of the home offices of the Parties, commencing with DYPM's home office, or in any other mutually agreed upon location. The rules of the AAA will apply to the extent not inconsistent with the rules herein specified. Each Party will bear its own expenses (including attorneys' fees) with respect to the arbitration, unless the arbitrator decides on a different allocation of expenses. The arbitrators will designate the Party to bear the expenses of the arbitrators or the respective amounts of such expense to be borne by each Party.
18.3 Binding Nature of Proceedings. Each Party understands that this Agreement contains an agreement to arbitrate with respect to specified disputes. After signing this Agreement, each Party understands that it will not be able to bring a lawsuit concerning any dispute that may arise that is covered by this arbitration provision. Instead, each Party agrees to submit any such dispute to arbitration pursuant to Section 18.2. Any award of the arbitrator may be enforced by the Party in whose favor such award is made in any court of competent jurisdiction.
ARTICLE 19
MISCELLANEOUS
19.1 Governing Law; Waiver of Jury Trial.
19.1.1 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ALABAMA, EXCLUSIVE OF ITS CONFLICTS OF LAW PROVISIONS, AND, TO THE EXTENT APPLICABLE, BY THE FEDERAL LAW OF THE UNITED STATES OF AMERICA. BY CHOOSING TO HAVE THIS AGREEMENT GOVERNED BY AND CONSTRUED UNDER THE LAW OF THE STATE OF ALABAMA, THE PARTIES ARE IN NO WAY SUBMITTING TO OR INCORPORATING INTO THIS AGREEMENT ANY ALABAMA STATUTE, REGULATION, OR ORDER, OR ANY OF THE SAME INVOLVING THE GENERATION, SALE, PURCHASE OR TRANSMISSION OF ELECTRIC CAPACITY OR ELECTRIC ENERGY IN, OR FOR CONSUMPTION IN, THE STATE OF ALABAMA.
19.1.2 EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
19.2 Confidentiality.
19.2.1 Until such time as the terms of the Agreement are readily accessible by the public (other than due to the fault of a Party), neither Party shall disclose the terms of this Agreement to any third party (other than such Party's (or its Affiliates') employees, lenders, legal counsel, accountants, or other advisors), except in order to comply with any applicable law, order, regulatory or exchange rule. Each Party shall notify the other Party of any proceeding of which it is aware that may result in disclosure and shall use reasonable efforts to prevent or limit such disclosure. Notwithstanding the foregoing, either Party may disclose the terms and conditions of this Agreement to any third party providing permanent or construction financing with respect to the Specified Seller's Resources (in the case of Southern) or with respect to other financing obtained by a Party. In connection with a disclosure to any third party financiers, the disclosing Party shall take such steps as may be reasonably required to limit the scope of such disclosure and to ensure that disclosure is not subsequently made by any such financier.
19.2.2 Anything in this Section 19.2 to the contrary notwithstanding, the Parties agree and acknowledge that, in the course of performance under this Agreement, the Parties may exchange confidential and proprietary information (including financial information related to the Agreement). Each Party agrees and covenants that any and all information it receives in connection with its performance under this Agreement that the disclosing Party has designated as confidential will be kept confidential and shall not be disclosed by the receiving Party to any third party without the express written consent of the disclosing Party, except in order to comply with any applicable law, order, regulatory or exchange rule. Any filing by a Party pursuant to any of the foregoing in compliance with applicable law, order, regulatory or exchange rule, shall be made under a request for confidential treatment (unless the filing Party reasonably believes such a request would be futile) and the other Party shall have the opportunity to review such filing prior to its dissemination. Neither Party shall issue a press release or similar disclosure with respect to the existence of this Agreement or its contents without first obtaining the written consent of the other Party, which consent shall not be unreasonably withheld.
19.3 Survivorship of Obligations. The termination or cancellation of this Agreement shall not discharge any Party from any obligation it owes the other Party under this Agreement by reason of any transaction, loss, cost, damage, expense or liability occurring, accruing or arising prior to such termination. It is the intent of the Parties that any such obligation owed (whether the same shall be known or unknown as of the termination or cancellation of this Agreement) will survive the termination or cancellation of this Agreement in favor of the Party to which such obligation is owed. The Parties also intend that the indemnification and limitation of liability provisions contained in Section 11.2 shall remain operative and in full force and effect.
19.4 Notice of Proceedings. Each Party, to the extent it has pertinent knowledge, shall promptly notify the other Party of any pending or anticipated federal or state regulatory, judicial or administrative actions, including but not limited to notice of violations, arising directly out of, caused by, or related to the Specified Seller's Resources, including any generation equipment comprising the Specified Seller's Resources, that could materially and adversely affect either Party's ability to carry out its obligations under this Agreement.
19.5 No Third Party Beneficiaries. This Agreement is not intended to, and shall not, create rights, remedies or benefits of any character whatsoever in favor of any Persons, corporations, associations, or entities other than the Parties, and the rights and obligations of each of the Parties under this Agreement are solely for the use and benefit of, and may be enforced solely by the Parties, their successors in interest or permitted assigns.
19.6 Section Headings Not to Affect Meaning. The descriptive headings of the various Articles and Sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms and provisions thereof.
19.7 Computation of Time. In computing any period of time prescribed or allowed by this Agreement, the designated period of time shall begin to run on the Day immediately following the Day of the act, event or default that precipitated the running of the designated period of time. The designated period shall expire on the last Day of the period so computed unless that Day is not a Business Day, in which event the period shall run until the end of the next Business Day.
19.8 Interest. Whenever the provisions of this Agreement require the calculation of an interest rate, such rate shall be computed at an annual rate equal to the Prime Rate as of the date on which the calculation begins, but not to exceed the maximum rate which may be lawfully charged. Interest on obligations arising under this Agreement shall be compounded quarterly based on a calendar quarter.
19.9 Entire Agreement. This Agreement constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes any other agreements, written or oral, between the Parties concerning such subject matter.
19.10 Counterparts. This Agreement may be executed simultaneously in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
19.11 Amendments. This Agreement may only be amended by written agreement signed by duly authorized representatives of the Parties.
19.12 Waivers. Waivers of the provisions of this Agreement or excuses of any violations of the Agreement shall be valid only if in writing and signed by an authorized officer of the Party issuing the waiver or excuse. A waiver or excuse issued under one set of circumstances shall not extend to other occurrences under similar circumstances.
19.13 No Partnership Created. Any provision of this Agreement to the contrary notwithstanding, the Parties do not intend to create hereby any joint venture, partnership, association taxable as a corporation, or other entity for the conduct of any business for profit. If it should appear that one or more changes to this Agreement would be required in order not to create an entity referenced in the preceding sentence, the Parties agree to negotiate promptly and in good faith with respect to such changes.
19.14 Character of Sale. The sale of Contract Capacity and Contract Energy hereunder shall not constitute a sale, lease, transfer or conveyance to DYPM or any other party of any contractual rights or ownership interests in any generating unit or other equipment comprising the Specified Seller's Resources, nor does the sale of Contract Capacity and Contract Energy hereunder constitute a dedication of ownership of any generating unit or other equipment comprising the Specified Seller's Resources.
19.15 Notices. Any notice, demand, request, payment, statement, or correspondence provided for in this Agreement, or any notice which a Party may desire to give to the other, shall be in writing (unless otherwise expressly provided by this Agreement) and shall be considered duly delivered when received by hand delivery, first-class mail, facsimile, or by overnight delivery, at the addresses listed below; provided, however, if actual delivery occurs at a time other than between the hours of 0800 and 1700 CPT on a Business Day (each a "Business Hour"), delivery shall be deemed to have occurred in the next Business Hour after actual delivery.
(i) To Southern:
Southern Power Company
270 Peachtree Street
Atlanta, Georgia 30303
Attention: Chief Financial Officer Telephone: 404-506-5243 Facsimile: 404-506-0333 |
With a copy to:
Southern Company Generation and Energy Marketing
270 Peachtree Street
Atlanta, Georgia 30303
Attention: Vice President
Telephone: 404-506-0357 Payment by Wire: Bank of America ABA 111000012 |
Account #: 3751237789
(ii) To DYPM
Dynegy Power Marketing, Inc. 1000 Louisiana Street, Suite 5800 Houston, Texas 77002
Attention: Asset Management Telephone: (713) 507-6400 Facsimile: (713) 767-5931 |
With copies to:
Dynegy Power Marketing, Inc. 1000 Louisiana Street, Suite 5800 Houston, Texas 77002
Attention: General Counsel
Telephone: (713) 507-6832
Facsimile: (713) 507-6986
And
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Dynegy Power Marketing, Inc. 125 Townpark Drive, Suite 175 Kennesaw, Georgia 30144
Attention: Vice President
Telephone: (770) 420-6851 Facsimile: (770) 420-6855
Payment by Wire:
For the Acct. of Dynegy Power Marketing
The First National Bank of Chicago
ABA # 071 000 013
Account # 552 7651
Invoices:
Dynegy Power Marketing, Inc.
1000 Louisiana Street, Suite 5800
Houston, Texas 77002-5050
Attn: Accounts Payable-Electric Facsimile: 713-767-5958
Each Party shall provide the other Party with all names, addresses, telephone and facsimile numbers necessary for its performance under this Agreement; and either Party may change the information set forth in this Section 19.15 by giving written notice to the other Party in the manner prescribed by such section.
19.16 Survival. Any provision(s) of this Agreement that expressly comes into or remains in force following the termination or expiration of this Agreement shall survive the termination or expiration of this Agreement.
19.17 Construction. The language used in this Agreement is the product of both Parties' efforts. Accordingly, each Party irrevocably waives the benefit of any rule of contract construction that disfavors the drafter of a contract or the drafter of specific language in a contract.
19.18 Imaged Agreement. Any original executed Agreement, schedule confirmation or other related document may be photocopied and stored on computer tapes and disks (the "Imaged Agreement"). The Imaged Agreement, if introduced as evidence on paper, the schedule confirmation, if introduced as evidence in automated facsimile form, the transaction tape, if introduced as evidence in its original form and as transcribed onto paper, and all computer records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative proceedings, will be admissible as between the Parties to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissibility of the transaction tape, the schedule confirmation or the Imaged Agreement (or photocopies of the transcription of the transaction tape, the schedule confirmation or the Imaged Agreement) on the basis that such were not originated or maintained in documentary form under either the hearsay rule, the best evidence rule or other rule of evidence.
19.19 GDP-IPD. In connection with the calculations under this Agreement that are referenced to increases based on the values of GDP-IPD, the base value for all GDP-IPD inflation calculations will be the Implicit Price Deflator published quarterly by the U.S. Department of Commerce in Table 5 (Quantity and Price Indexes for Gross Domestic Product) in the Bureau of Economic Analysis ("BEA") National Income and Product Accounts Tables for the first quarter of 2005, as revised by the BEA. The escalation adjustments will be made by dividing the GDP-IPD for the first calendar quarter preceding the beginning of a new Contract Year (as revised by the BEA and reported prior to May 31 for the upcoming Contract Year) by the base GDP-IPD (as revised) from the first calendar quarter of 2005.
19.20 Higher Heating Value. All Gas quantities referenced herein shall be in terms of the higher heating value of natural gas.
[The next page is the signature page]
IN WITNESS WHEREOF, Southern and DYPM have caused this Agreement to be executed in duplicate by their respective duly authorized officers as of the Execution Date.
SOUTHERN POWER COMPANY
By: ___________________________________
NAME: Douglas E. Jones
Title: Vice President
........
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DYNEGY POWER MARKETING, INC.
By: ___________________________________ NAME: Matthew K. Schatzman Title: President |
APPENDIX A
Payment Schedule[redacted]
APPENDIX B
Scheduling Constraints
[redacted]
APPENDIX C
ENDH Allowance and Performance Payment Sample Calculations
[redacted]
APPENDIX D
Guaranty Agreement
[redacted]
APPENDIX E
Proposed Form of Letter of Credit
[redacted]
APPENDIX F
Guaranty Agreement
[redacted]
APPENDIX G
Proposed Form of Letter of Credit
[redacted]
Exhibit 10.28
THE SOUTHERN COMPANY
EMPLOYEE SAVINGS PLAN
As Amended and Restated
Effective January 1, 2002
TABLE OF CONTENTS
ARTICLE I PURPOSE............................................................1
ARTICLE II DEFINITIONS.......................................................2
2.1 Account......................................................2
2.2 Actual Contribution Percentage Test..........................2
2.3 Actual Deferral Percentage...................................2
2.4 Actual Deferral Percentage Test..............................2
2.5 Affiliated Employer..........................................2
2.6 Aggregate Account............................................2
2.7 Aggregation Group............................................3
2.8 Annual Addition..............................................3
2.9 Average Actual Deferral Percentage...........................3
2.10 Average Contribution Percentage..............................3
2.11 Beneficiary..................................................4
2.12 Board of Directors...........................................4
2.13 Break-in-Service Date........................................4
2.14 Code.........................................................4
2.15 Committee....................................................4
2.16 Common Stock.................................................4
2.17 Company......................................................4
2.18 Compensation.................................................4
2.19 Contribution Percentage......................................5
2.20 Determination Date...........................................5
2.21 Determination Year...........................................5
2.22 Direct Rollover..............................................5
2.23 Distributee..................................................5
2.24 Elective Employer Contribution...............................5
2.25 Eligible Employee............................................6
2.26 Eligible Participant.........................................6
2.27 Eligible Retirement Plan.....................................6
2.28 Eligible Rollover Distribution...............................7
2.29 Employee.....................................................7
2.30 Employer Matching Contribution...............................7
2.31 Employing Company............................................7
2.32 Enrollment Date..............................................7
2.33 ERISA........................................................7
2.34 Excess Aggregate Contributions...............................7
2.35 Excess Deferral Amount.......................................7
2.36 Excess Deferral Contributions................................8
2.37 Highly Compensated Employee..................................8
2.38 Hour of Service..............................................8
2.39 Investment Fund..............................................8
2.40 Key Employee.................................................8
2.41 Limitation Year..............................................8
2.42 Look-Back Year...............................................8
2.43 Mirant.......................................................8
2.44 Mirant Services.............................................8
2.45 Mirant Stock................................................8
2.46 Mirant Stock Account.........................................8
2.47 Mirant Stock Fund............................................8
2.48 Non-Highly Compensated Employee..............................8
2.49 Normal Retirement Date.......................................9
2.50 One-Year Break in Service....................................9
2.51 Participant..................................................9
2.52 Permissive Aggregation Group.................................9
2.53 Plan.........................................................9
2.54 Plan Year....................................................9
2.55 Present Value of Accrued Retirement Income...................9
2.56 Required Aggregation Group...................................9
2.57 Rollover Contribution........................................9
2.58 SCEM........................................................10
2.59 SEPCO.......................................................10
2.60 SEPCO Plan..................................................10
2.61 SEPCO Transferred Account...................................10
2.62 Super-Top-Heavy Group.......................................10
2.63 Surviving Spouse............................................10
2.64 Top-Heavy Group.............................................10
2.65 Transferred ESOP Account....................................10
2.66 Trust or Trust Fund.........................................10
2.67 Trust Agreement.............................................10
2.68 Trustee.....................................................10
2.69 Valuation Date..............................................10
2.70 Voluntary Participant Contribution..........................11
2.71 Year of Service.............................................11
ARTICLE III PARTICIPATION....................................................12
3.1 Eligibility Requirements....................................12
3.2 Participation upon Reemployment.............................12
3.3 No Restoration of Previously Distributed Benefits...........12
3.4 Loss of Eligible Employee Status............................12
3.5 Military Leave..............................................12
ARTICLE IV ELECTIVE EMPLOYER CONTRIBUTIONS AND VOLUNTARY PARTICIPANT
CONTRIBUTIONS........................................................13
4.1 Elective Employer Contributions.............................13
4.2 Maximum Amount of Elective Employer Contributions...........13
4.3 Distribution of Excess Deferral Amounts.....................13
4.4 Additional Rules Regarding Elective Employer
Contributions...............................................14
4.5 Section 401(k) Nondiscrimination Tests......................15
4.6 Voluntary Participant Contributions.........................18
4.7 Manner and Time of Payment of Elective Employer
Contributions and Voluntary Participant Contributions.......18
4.8 Change in Contribution Rate.................................18
4.9 Change in Contribution Amount...............................18
4.10 Rollover Contributions and Direct Transfers from the
SEPCO and ECMC Plans........................................18
4.11 Rollovers from Other Plans..................................19
ARTICLE V EMPLOYER MATCHING CONTRIBUTIONS....................................20
5.1 Amount of Employer Matching Contributions...................20
5.2 Payment of Employer Matching Contributions..................20
5.3 Limitations on Employer Matching Contributions and
Voluntary Participant Contributions.........................20
5.4 Multiple Use Limitation.....................................22
5.5 Reversion of Employing Company Contributions................23
5.6 Correction of Prior Incorrect Allocations and
Distributions...............................................23
ARTICLE VI LIMITATIONS ON CONTRIBUTIONS......................................24
6.1 Section 415 Limitations.....................................24
6.2 Correction of Contributions in Excess of Section 415
Limits......................................................24
6.3 Combination of Plans........................................25
ARTICLE VII SUSPENSION OF CONTRIBUTIONS......................................26
7.1 Suspension of Contributions.................................26
7.2 Resumption of Contributions.................................26
ARTICLE VIII INVESTMENT OF CONTRIBUTIONS.....................................27
8.1 Investment Funds............................................27
8.2 Investment of Participant Contributions.....................27
8.3 Investment of Employer Matching Contributions...............27
8.4 Investment of Earnings......................................27
8.5 Transfer of Assets between Funds............................28
8.6 Change in Investment Direction..............................28
8.7 Section 404(c) Plan.........................................28
8.8 Mirant Stock Fund...........................................28
ARTICLE IX MAINTENANCE AND VALUATION OF PARTICIPANTS' ACCOUNTS...............29
9.1 Establishment of Accounts...................................29
9.2 Valuation of Investment Funds...............................30
9.3 Rights in Investment Funds..................................30
ARTICLE X VESTING............................................................31
10.1 Vesting.....................................................31
ARTICLE XI WITHDRAWALS AND LOANS.............................................32
11.1 Withdrawals by Participants.................................32
11.2 Notice of Withdrawal........................................33
11.3 Form of Withdrawal..........................................33
11.4 Minimum Withdrawal..........................................33
11.5 Source of Withdrawal........................................33
11.6 Requirement of Hardship.....................................33
11.7 Loans to Participants.......................................35
11.8 Special Waiver for Participants Employed in the
United Kingdom..............................................37
ARTICLE XII DISTRIBUTION TO PARTICIPANTS.....................................38
12.1 Distribution upon Retirement................................38
12.2 Distribution upon Disability................................39
12.3 Distribution upon Death.....................................39
12.4 Designation of Beneficiary in the Event of Death............39
12.5 Distribution upon Termination of Employment.................40
12.6 Commencement of Benefits....................................40
12.7 Transfer between Employing Companies........................41
12.8 Distributions to Alternate Payees...........................41
12.9 Requirement for Direct Rollovers............................42
12.10 Consent and Notice Requirements.............................42
12.11 Form of Payment.............................................43
12.12 Partial Distribution upon Termination of Employment.........43
12.13 Distribution of Dividends Payable on Common Stock...........43
ARTICLE XIII ADMINISTRATION OF THE PLAN......................................45
13.1 Membership of Committee.....................................45
13.2 Acceptance and Resignation..................................45
13.3 Transaction of Business.....................................45
13.4 Responsibilities in General.................................45
13.5 Committee as Named Fiduciary................................45
13.6 Rules for Plan Administration...............................46
13.7 Employment of Agents........................................46
13.8 Co-Fiduciaries..............................................46
13.9 General Records.............................................46
13.10 Liability of the Committee..................................46
13.11 Reimbursement of Expenses and Compensation of
Committee...................................................47
13.12 Expenses of Plan and Trust Fund.............................47
13.13 Responsibility for Funding Policy...........................47
13.14 Management of Assets........................................47
13.15 Notice and Claims Procedures................................48
13.16 Bonding.....................................................48
13.17 Multiple Fiduciary Capacities...............................48
13.18 Change in Administrative Procedures.........................48
ARTICLE XIV TRUSTEE OF THE PLAN..............................................49
14.1 Trustee.....................................................49
14.2 Purchase of Common Stock....................................49
14.3 Voting of Common Stock......................................49
14.4 Voting of Other Investment Fund Shares......................50
14.5 Uninvested Amounts..........................................50
14.6 Independent Accounting......................................50
ARTICLE XV AMENDMENT AND TERMINATION OF THE PLAN.............................51
15.1 Amendment of the Plan.......................................51
15.2 Termination of the Plan.....................................51
15.3 Merger or Consolidation of the Plan.........................52
15.4 Transfer of Plan Assets.....................................52
ARTICLE XVI TOP-HEAVY REQUIREMENTS...........................................53
16.1 Top-Heavy Plan Requirements.................................53
16.2 Determination of Top-Heavy Status...........................53
16.3 Minimum Allocation for Top-Heavy Plan Years.................54
ARTICLE XVII GENERAL PROVISIONS..............................................55
17.1 Plan Not an Employment Contract.............................55
17.2 No Right of Assignment or Alienation........................55
17.3 Payment to Minors and Others................................55
17.4 Source of Benefits..........................................56
17.5 Unclaimed Benefits..........................................56
17.6 Governing Law...............................................56
ARTICLE XVIII SPECIAL REQUIREMENTS FOR ACCOUNT BALANCES ATTRIBUTABLE
TO ACCRUED BENEFITS TRANSFERRED FROM THE SEPCO PLAN..................57
18.1 SEPCO Transferred Accounts..................................57
18.2 In-Service Withdrawals from SEPCO Transferred
Accounts....................................................57
18.3 Loans from SEPCO Transferred Accounts.......................57
18.4 Distribution of SEPCO Transferred Accounts..................57
18.5 Code Section 411(d)(6) Protected Benefits...................59
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THE SOUTHERN COMPANY
EMPLOYEE SAVINGS PLAN
As Amended and Restated
Effective January 1, 2002
ARTICLE I
PURPOSE
The purpose of the Plan is to encourage employee thrift, to create
added employee interest in the affairs of The Southern Company, to provide a
means for becoming a shareholder in The Southern Company, to supplement
retirement and death benefits, and to create a competitive compensation program
for employees through the establishment of a formal plan under which
contributions by and on behalf of Participants are supplemented by contributions
of Employing Companies. This Plan is intended to be a stock bonus plan, and all
contributions made by an Employing Company to this Plan are expressly
conditioned upon the deductibility of such contributions under Code Section 404.
In addition, with the exception of the portion of the Plan that is invested in
the common stock of Mirant Corporation, the Plan is also intended to be an
employee stock ownership plan, as defined in Code Section 4975(e)(7) and ERISA
Section 407(d)(6), and is designed to invest primarily in qualifying employer
securities, as defined in Code Section 409(l). The Plan was originally effective
March 1, 1976, and was most recently amended and restated effective as of
January 1, 2002 to incorporate a variety of plan design and other changes.
ARTICLE II
DEFINITIONS
All references to articles, sections, subsections, and paragraphs shall be to articles, sections, subsections, and paragraphs of this Plan unless another reference is expressly set forth in this Plan. Any words used in the masculine shall be read and be construed in the feminine where they would so apply. Words in the singular shall be read and construed in the plural, and all words in the plural shall be read and construed in the singular in all cases where they would so apply.
For purposes of this Plan, unless otherwise required by the context, the following terms shall have the meanings set forth opposite such terms:
2.1 "Account" shall mean the total amount credited to the account of a Participant, as described in Section 9.1.
2.2 "Actual Contribution Percentage Test" shall mean the test described in Section 5.3(a).
2.3 "Actual Deferral Percentage" shall mean the ratio (expressed as a percentage) of Elective Employer Contributions on behalf of an Eligible Participant for the Plan Year to the Eligible Participant's compensation for the Plan Year. For the purpose of determining an Eligible Participant's Actual Deferral Percentage for a Plan Year, the Committee may elect to consider an Eligible Participant's compensation for (a) the entire Plan Year or (b) that portion of the Plan Year in which the Eligible Participant was eligible to have Elective Employer Contributions made on his behalf, provided that such election is applied uniformly to all Eligible Participants for the Plan Year. The Actual Deferral Percentage of an Eligible Participant who does not have Elective Employer Contributions made on his behalf shall be zero.
2.4 "Actual Deferral Percentage Test" shall mean the test described in
Section 4.5(a).
2.5 "Affiliated Employer" shall mean an Employing Company and (a) any
corporation which is a member of a controlled group of corporations (as defined
in Section 414(b) of the Code) which includes such Employing Company, (b) any
trade or business (whether or not incorporated) which is under common control
(as defined in Section 414(c) of the Code) with such Employing Company, (c) any
organization (whether or not incorporated) which is a member of an affiliated
service group (as defined in Section 414(m) of the Code) which includes such
Employing Company, and (d) any other entity required to be aggregated with such
Employing Company pursuant to regulations under Section 414(o) of the Code.
Notwithstanding the foregoing, for purposes of applying the limitations of
Article VI, the term Affiliated Employer shall be adjusted as required by Code
Section 415(h).
2.6 "Aggregate Account" shall mean with respect to a Participant as of the Determination Date, the sum of the following:
(a) the Account balance of such Participant as of the most recent valuation occurring within a twelve-month period ending on the Determination Date;
(b) an adjustment for any contributions due as of the Determination Date;
(c) any Plan distributions, including unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), but not related rollovers or plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), made within the one-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group. In the case of a distribution made for a reason other than severance from employment (or separation from service), death or disability, this provision shall be applied by substituting "five-year period" for "one-year period";
(d) any Employee contributions, whether voluntary or mandatory;
(e) unrelated rollovers and plan-to-plan transfers to this Plan accepted prior to January 1, 1984; and
(f) related rollovers and plan-to-plan transfers to this Plan.
2.7 "Aggregation Group" shall mean either a Required Aggregation Group or a Permissive Aggregation Group.
2.8 "Annual Addition" shall mean the amount allocated to a Participant's Account and accounts under all defined contribution plans maintained by the Affiliated Employers during a Limitation Year that constitutes
(a) Affiliated Employer contributions,
(b) Voluntary Participant Contributions,
(c) forfeitures, if any, allocated to a Participant's Account or accounts under all defined contribution plans maintained by the Affiliated Employers, and
(d) amounts described in Sections 415(l)(1) and 419A(d)(2) of the Code.
2.9 "Average Actual Deferral Percentage" shall mean the average (expressed as a percentage) of the Actual Deferral Percentages of the Eligible Participants in a group.
2.10 "Average Contribution Percentage" shall mean the average (expressed as a percentage) of the Contribution Percentages of the Eligible Participants in a group.
2.11 "Beneficiary" shall mean any person(s) who, or estate(s), trust(s), or organization(s) which, in accordance with the provisions of Section 12.4, become entitled to receive benefits upon the death of a Participant.
2.12 "Board of Directors" shall mean the Board of Directors of Southern Company Services, Inc.
2.13 "Break-in-Service Date" means the earlier of:
(a) the date on which an Employee terminates employment, is discharged, retires, or dies; or
(b) the last day of an approved leave of absence including any extension.
For purposes of subsection (a) above, an Employee who ceases to be eligible to participate in the Plan pursuant to paragraph (5) of Section 2.25 shall be deemed to have experienced a termination of employment as of the date as of which Section 2.25(5) first applies.
In the case of an individual who is absent from work for maternity or paternity reasons, such individual shall not incur a Break-in-Service Date earlier than the expiration of the second anniversary of the first date of such absence; provided, however, that the twelve-consecutive-month period beginning on the first anniversary of the first date of such absence shall not constitute a Year of Service. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the Employee, (b) by reason of a birth of a child of the Employee, (c) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement.
2.14 "Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor statute, and the rulings and regulations promulgated thereunder. In the event an amendment to the Code renumbers a section of the Code referred to in this Plan, any such reference automatically shall become a reference to such section as renumbered.
2.15 "Committee" shall mean the committee appointed pursuant to
Section 13.1 to serve as plan administrator.
2.16 "Common Stock" shall mean the common stock of The Southern Company.
2.17 "Company" shall mean Southern Company Services, Inc., and its successors.
2.18 "Compensation" shall mean the salary or wages of a Participant, including all amounts contributed by an Employing Company to The Southern Company Flexible Benefits Plan on behalf of a Participant pursuant to a salary reduction arrangement under such plan, plus monthly shift and monthly seven-day schedule differentials, geographic premiums, monthly customer service premiums, monthly nuclear plant premiums, sales commissions paid under a sales commission payment program sponsored by an Employing Company for sales commissioned based employees, and overtime pay resulting from fluctuations in a Participant's weekly hours worked pursuant to a pre-determined flexible work schedule established or approved by an Employing Company that is intended to produce, on average, forty (40) hour work weeks, and before deduction of taxes, social security, etc., but excluding all awards under any incentive pay plans sponsored by the Employing Company, including but not limited to, The Southern Company Performance Pay Plan, The Southern Company Productivity Improvement Plan, and The Southern Company Executive Productivity Improvement Plan, overtime pay (except as specifically included above), any hourly shift differentials, substitution pay, such amounts which are reimbursements to a Participant paid by any Employing Company, including but not limited to, reimbursement for such items as moving expenses and travel and entertainment expenses, and imputed income for automobile expenses, tax preparation expenses and health and life insurance premiums paid by the Employing Company.
The Compensation of each Participant taken into account for purposes of this Plan shall not exceed the applicable limit under Code Section 401(a)(17).
2.19 "Contribution Percentage" shall mean the ratio (expressed as a percentage), of the sum of the Voluntary Participant Contributions and Employer Matching Contributions under the Plan on behalf of the Eligible Participant for the Plan Year to the Eligible Participant's compensation for the Plan Year. For the purpose of determining an Eligible Participant's Contribution Percentage for a Plan Year, the Committee may elect to consider an Eligible Participant's compensation for (a) the entire Plan Year or (b) that portion of the Plan Year in which the individual is an Eligible Participant, provided that such election is applied uniformly to all Eligible Participants for the Plan Year. The Contribution Percentage of an Eligible Participant who does not make Voluntary Participant Contributions or have Employer Matching Contributions made on his behalf shall be zero.
2.20 "Determination Date" shall mean with respect to a Plan Year, the last day of the preceding Plan Year.
2.21 "Determination Year" shall mean the Plan Year being tested.
2.22 "Direct Rollover" shall mean a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.
2.23 "Distributee" shall include an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is an alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse.
2.24 "Elective Employer Contribution" shall mean contributions made pursuant to Section 4.1 during the Plan Year by an Employing Company, at the election of the Participant, in lieu of cash compensation and shall include contributions made pursuant to a salary reduction agreement.
2.25 "Eligible Employee" shall mean an Employee who is employed by an Employing Company and (a) who was eligible to be included in the Plan on January 1, 1991, or (b) who is a regular full-time, regular part-time, or cooperative education employee other than:
(1) an individual who is classified by an Employing
Company as a leased employee, regardless of whether
such classification is determined to be in error;
(2) any Employee who is represented by a collective
bargaining agent unless the representatives of his
bargaining unit and the Employing Company mutually
agree to participation in the Plan subject to its
terms by members of his bargaining unit;
(3) an individual who is a cooperative education employee
and who first performs an Hour of Service on or after
January 1, 1995;
(4) an individual who is classified by the Employing
Company as a temporary employee (who was not
eligible to be included in the Plan on January 1,
1991) or an independent contractor, regardless of
whether such classification is determined to be in
error. Effective September 1, 1998, any individual
classified by the Employing Company as a temporary
employee shall be excluded from the Plan,
regardless of any prior inclusion in the Plan and
regardless of whether the "temporary employee"
classification is determined to be in error; and
(5) an individual who is employed by Mirant Services.
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2.26 "Eligible Participant" shall mean an Eligible Employee who is authorized to have Elective Employer Contributions or Voluntary Participant Contributions allocated to his Account for the Plan Year.
2.27 "Eligible Retirement Plan" shall mean an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, a plan described in Section 403(b) of the Code, a
plan described in Section 457(b) of the Code which is maintained by a state, an
agency or instrumentality of a state or political subdivision of a state and
which agrees to separately account for amounts transferred into such plan from
this Plan, or a qualified trust described in Section 401(a) of the Code that
accepts the Distributee's Eligible Rollover Distribution. This definition of
Eligible Retirement Plan shall also apply in the case of a distribution to a
surviving spouse, or to a spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code Section 414(p).
2.28 "Eligible Rollover Distribution" shall mean any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: (a) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee, the joint lives (or joint life expectancies) of the Distributee and the Distributee's Beneficiary, or for a specified period of 10 years or more; (b) any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; (c) the portion of any distribution that is not includable in gross income (determined without regard to the exclusion from net unrealized appreciation with respect to employer securities); and (d) any hardship distribution described in Section 401(k)(2)(B)(i)(IV) of the Code.
2.29 "Employee" shall mean each individual who is employed by an Affiliated Employer under common law and each individual who is required to be treated as an employee pursuant to the "leased employee" rules of Code Section 414(n) other than a leased employee described in Code Section 414(n)(5).
2.30 "Employer Matching Contribution" shall mean a contribution made by an Employing Company pursuant to Section 5.1 with respect to Elective Employer Contributions and Voluntary Participant Contributions made on behalf of each Participant each payroll period.
2.31 "Employing Company" shall mean the Company and any affiliate or subsidiary of The Southern Company which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of them. The Employing Companies are set forth on Appendix A to the Plan as updated from time to time. No such entity shall be treated as an Employing Company prior to the date it adopts the Plan.
2.32 "Enrollment Date" shall mean the first day of each payroll period.
2.33 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor statute, and the rulings and regulations promulgated thereunder. In the event an amendment to ERISA renumbers a section of ERISA referred to in this Plan, any such reference automatically shall become a reference to such section as renumbered.
2.34 "Excess Aggregate Contributions" shall mean the amount referred to in Code Section 401(m)(6)(B) with respect to a Participant. In no event may the Excess Aggregate Contributions for any Highly Compensated Employee exceed the amount of the Employer Matching Contributions or Voluntary Participant Contributions made on behalf of the Highly Compensated Employee for the Plan Year.
2.35 "Excess Deferral Amount" shall mean the amount of Elective Employer Contributions for a calendar year that exceed the Code Section 402(g) limits as allocated to this Plan pursuant to Section 4.3(b).
2.36 "Excess Deferral Contributions" shall mean the amount of Elective Employer Contributions on behalf of a Highly Compensated Employee referred to in Code Section 401(k)(8)(B).
2.37 "Highly Compensated Employee" shall mean (in accordance with and subject to Code Section 414(q) and any regulations, rulings, notices or procedures thereunder), with respect to any Plan Year: (1) any Employee who was a five percent (5%) owner of The Southern Company or an Affiliated Employer (as determined pursuant to Code Section 416) during the Plan Year or the immediately preceding Plan Year, or (2) any Employee who earned more than $80,000 in the preceding Plan Year. The $80,000 amount shall be adjusted for inflation and for short Plan Years, pursuant to Code Section 414(q). The Employer may, at its election, limit Employees earning more than $80,000 to only those Employees who fall within the "top-paid group," as defined in Code Section 414(q) excluding those employees described in Code Section 414(q)(8) for such purpose. In determining whether an Employee is a Highly Compensated Employee, the Committee may make any elections authorized under applicable regulations, rulings, notices, or revenue procedures.
2.38 "Hour of Service" shall mean each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Affiliated Employer.
2.39 "Investment Fund" shall mean any one of the funds described in Article VIII which constitutes part of the Trust Fund.
2.40 "Key Employee" shall mean any Employee or former Employee (and his Beneficiary) who is a key employee within the meaning of Code Section 416(i)(1).
2.41 "Limitation Year" shall mean the Plan Year.
2.42 "Look-Back Year" shall mean the Plan Year preceding the Determination Year.
2.43 "Mirant" shall mean Mirant Corporation, any subsidiary of Mirant Corporation, or any successor thereto.
2.44 "Mirant Services" shall mean Mirant Services, LLC.
2.45 "Mirant Stock" shall mean the common stock of Mirant.
2.46 "Mirant Stock Account" shall mean the total amount credited to the Account of a Participant as described in Section 9.1(c).
2.47 "Mirant Stock Fund" shall mean, effective April 2, 2001, the fund established to hold Mirant Stock as described in Section 8.8.
2.48 "Non-Highly Compensated Employee" shall mean an Employee who is not a Highly Compensated Employee.
2.49 "Normal Retirement Date" shall mean the first day of the month following a Participant's sixty-fifth (65th) birthday.
2.50 "One-Year Break in Service" shall mean each twelve-consecutive-month period within the period commencing with an Employee's Break-in-Service Date and ending on the date the Employee is again credited with an Hour of Service.
2.51 "Participant" shall mean (a) an Eligible Employee who has elected to participate in the Plan as provided in Article III and whose participation in the Plan at the time of reference has not been terminated as provided in the Plan, (b) an Employee or former Employee who has ceased to be a Participant under (a) above, but for whom an Account is maintained under the Plan, (c) an Eligible Employee who has made a Rollover Contribution to this Plan to the extent that the Provisions of the Plan apply to such Rollover Contribution of the Eligible Employee, and (d) an Employee or former Employee for whom a Transferred ESOP Account is maintained under the Plan.
2.52 "Permissive Aggregation Group" shall mean a group of plans consisting of the Required Aggregation Group and, at the election of the Affiliated Employers, such other plan or plans not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code Section 401(a)(4) or 410.
2.53 "Plan" shall mean The Southern Company Employee Savings Plan (known as the Employee Savings Plan for The Southern Company System prior to January 1, 1991), as described herein or as from time to time amended.
2.54 "Plan Year" shall mean the twelve-month period commencing January 1st and ending on the last day of December next following.
2.55 "Present Value of Accrued Retirement Income" shall mean an amount determined solely for the purpose of determining if the Plan, or any other plan included in a Required Aggregation Group of which the Plan is a part, is top heavy in accordance with Code Section 416.
2.56 "Required Aggregation Group" shall mean those plans that are required to be aggregated as determined under this Section 2.56. In determining a Required Aggregation Group hereunder, each plan of the Affiliated Employers in which a Key Employee is a participant and each other plan of the Affiliated Employers which enables any plan in which a Key Employee participates to meet the requirements of Code Section 410 or 401(a)(4) will be required to be aggregated.
2.57 "Rollover Contribution" shall mean that portion of an eligible rollover distribution that an Eligible Employee elects to contribute to this Plan in accordance with the requirements of Section 4.11. The Plan will accept a direct rollover of an eligible rollover distribution from (a) a qualified plan described in Code Section 401(a) or 403(a), (b) an annuity contract described in Code Section 403(b), or (c) an eligible plan under Code Section 457(b) In addition, the Plan will accept a Rollover Contribution from a conduit individual retirement account or annuity ("IRA"). However, in no event shall the Plan accept after-tax employee contributions as a Rollover Contribution.
2.58 "SCEM" shall mean Southern Company Energy Marketing, L.P.
2.59 "SEPCO" shall mean Savannah Electric and Power Company.
2.60 "SEPCO Plan" shall mean the Employee Savings Plan of Savannah Electric and Power Company as in effect December 31, 1992.
2.61 "SEPCO Transferred Account" shall mean the total amount credited to the account of a Participant as described in Section 9.1(b).
2.62 "Super-Top-Heavy Group" shall mean an Aggregation Group that would be a Top-Heavy Group if 90% were substituted for 60% in Section 2.64.
2.63 "Surviving Spouse" shall mean the person to whom the Participant
is married on the date of his death, if such spouse is then living, provided
that the Participant and such spouse shall have been married throughout the one
(1) year period ending on the date of the Participant's death.
2.64 "Top-Heavy Group" shall mean an Aggregation Group in which, as of the Determination Date, the sum of:
(a) the Present Value of Accrued Retirement Income of Key Employees under all defined benefit plans included in that group, and
(b) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds 60% of a similar sum determined for all employees.
2.65 "Transferred ESOP Account" shall mean the total amount credited to the Account of a Participant as described in Section 9.1(d).
2.66 "Trust" or "Trust Fund" shall mean the trust established pursuant to the Trust Agreement.
2.67 "Trust Agreement" shall mean the trust agreement between the Company and the Trustee, as described in Article XIV.
2.68 "Trustee" shall mean the person or corporation designated as trustee under the Trust Agreement, including any successor or successors.
2.69 "Valuation Date" shall mean each business day of the New York Stock Exchange.
2.70 "Voluntary Participant Contribution" shall mean a contribution made pursuant to Section 4.6 during the Plan Year.
2.71 "Year of Service" shall mean a twelve-month period of employment as an Employee, including any fractions thereof. Calculation of the twelve-month periods shall commence with the Employee's first day of employment, which is the date on which an Employee first performs an Hour of Service, and shall terminate on his Break-in-Service Date. Thereafter, if he has more than one period of employment as an Employee, his Years of Service for any subsequent period shall commence with the Employee's reemployment date, which is the first date following a Break-in-Service Date on which the Employee performs an Hour of Service, and shall terminate on his next Break-in-Service Date. An Employee who has a Break-in-Service Date and resumes employment with the Affiliated Employers within twelve months of his Break-in-Service Date shall receive a fractional Year of Service for the period of such cessation of employment.
Notwithstanding anything in this Section 2.71 to the contrary, an Employee shall not receive credit for more than one Year of Service with respect to any twelve-consecutive-month period.
ARTICLE III
PARTICIPATION
3.1 Eligibility Requirements. Each Eligible Employee who was an active Participant on December 31, 2001 shall continue to be an active Participant in the Plan on January 1, 2002, provided he remains an Eligible Employee. Each other Eligible Employee may elect to participate in the Plan as of any Enrollment Date after the Employee's first day of employment as an Eligible Employee or as soon as administratively practicable thereafter. An Eligible Employee shall make an election to participate by authorizing deductions from or reduction of his Compensation as contributions to the Plan in accordance with Article IV, and directing the investment of such contributions in accordance with Article VIII. Such Compensation deduction and/or reduction authorization and investment direction shall be made in accordance with the procedures established by the Committee.
3.2 Participation upon Reemployment. If an Employee terminates his employment with an Affiliated Employer and is subsequently reemployed as an Eligible Employee, he may elect to become an active Participant in the Plan as of the date of his reemployment or as soon as administratively practicable thereafter.
3.3 No Restoration of Previously Distributed Benefits. A Participant
who has terminated his employment with the Affiliated Employers and who has
received a distribution of the amount credited to his Account pursuant to
Section 12.5 shall not be entitled to restore the amount of such distribution to
his Account if he is reemployed and again becomes a Participant in the Plan.
A Participant whose benefit under the Plan was transferred to a qualified plan maintained by Mirant Services as a result of the spin-off of Mirant from the Southern Company controlled group on April 2, 2001 shall not be entitled to restoration of the amount of such transfer upon his subsequent reemployment by an Affiliated Employer.
3.4 Loss of Eligible Employee Status. If a Participant loses his status as an Eligible Employee, but remains an Employee, such Participant shall be ineligible to participate and shall be deemed to have elected to suspend making Voluntary Participant Contributions or to have Elective Employer Contributions made on his behalf.
3.5 Military Leave. Notwithstanding any provision of the Plan to the contrary, contributions, benefits, and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. Loan repayments will be suspended under the Plan as permitted under Section 414(u)(4) of the Code.
ARTICLE IV
ELECTIVE EMPLOYER CONTRIBUTIONS AND
VOLUNTARY PARTICIPANT CONTRIBUTIONS
4.1 Elective Employer Contributions. An Eligible Employee who meets the participation requirements of Article III may elect on a form provided by the Employing Company to have his Compensation reduced by a whole percentage of his Compensation, which percentage shall not be less than one percent (1%) nor more than sixteen percent (16%) (eight percent (8%) for a Highly Compensated Employee) of his Compensation, such Elective Employer Contribution to be contributed to his Account under the Plan.
4.2 Maximum Amount of Elective Employer Contributions. The maximum amount of Elective Employer Contributions that may be made on behalf of a Participant during any Plan Year to this Plan or any other qualified plan maintained by an Employing Company shall not exceed the dollar limitation set forth in Section 402(g) of the Code in effect at the beginning of such Plan Year.
4.3 Distribution of Excess Deferral Amounts
(a) In General. Notwithstanding any other provision of the
Plan, Excess Deferral Amounts and income allocable thereto shall be
distributed (and any corresponding Employer Matching Contributions
shall be forfeited) no later than April 15, 2002, and each April 15
thereafter, to Participants who allocate (or are deemed to allocate)
such amounts to this Plan pursuant to (b) below for the preceding
calendar year. Excess Deferral Amounts that are distributed shall not
be treated as an Annual Addition. Any Employer Matching Contributions
forfeited pursuant to this subsection (a) shall be applied, subject to
Section 6.1, toward funding Employing Company contributions (for the
Plan Year immediately following the Plan Year to which such forfeited
Employer Matching Contributions relate) or distributed, as directed by
the Committee, to the extent permitted by applicable law.
(b) Assignment. The Participant's allocation of amounts in excess of the Code Section 402(g) limits to this Plan shall be in writing; shall be submitted to the Committee no later than March 1; shall specify the Participant's Excess Deferral Amount for the preceding calendar year; and shall be accompanied by the Participant's written statement that if such amounts are not distributed, such Excess Deferral Amount, when added to amounts deferred under other plans or arrangements described in Section 401(k), 408(k), 408(p), 402(h)(1)(B), 457, 501(c)(18), or 403(b) of the Code, exceeds the limit imposed on the Participant by Section 402(g) of the Code for the year in which the deferral occurred. A Participant is deemed to notify the Committee of any Excess Deferral Amounts that arise by taking into account only those deferrals under this Plan and any other plans of an Affiliated Employer.
(c) Determination of Income or Loss. The Excess Deferral Amount distributed to a Participant with respect to a calendar year shall be adjusted for income or loss through the last day of the Plan Year or the date of distribution, as determined by the Committee. The income or loss allocable to Excess Deferral Amounts is the sum of:
(1) income or loss allocated to the Participant's Account for the taxable year multiplied by a fraction, the numerator of which is such Participant's Excess Deferral Amount for the year and the denominator is the Participant's Account balance attributable to Elective Employer Contributions, minus any income or plus any loss occurring during the Plan Year; and
(2) if the Committee shall determine in its sole
discretion, ten percent (10%) of the amount determined under
(1) above multiplied by the number of whole calendar months
between the end of the Plan Year and the date of the
distribution, counting the month of distribution if
distribution occurs after the 15th of the month.
Notwithstanding the above, the Committee may designate any reasonable method for computing the income or loss allocable to Excess Deferral Amounts, provided that the method does not violate Section 401(a)(4) of the Code, is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income or loss to Participants' Accounts.
(d) Maximum Distribution Amount. The Excess Deferral Amount, which would otherwise be distributed to the Participant, shall, if there is a loss allocable to such Excess Deferral Amount, in no event be less than the lesser of the Participant's Account under the Plan attributable to Elective Employer Contributions or the Participant's Elective Employer Contributions for the Plan Year.
Salary reduction agreements shall be governed by the following:
(a) A salary reduction agreement shall apply to payroll periods during which such salary reduction agreement is in effect. The Committee, in its discretion, may establish administrative procedures whereby the actual reduction in Compensation may be made to coincide with each payroll period of the Employing Company, or at such other times as the Committee may determine.
(b) The Employing Company may amend or revoke its salary reduction agreement with any Participant at any time, if the Employing Company determines that such revocation or amendment is necessary to ensure that a Participant's additions for any Plan Year will not exceed the limitations of Sections 4.2 and 6.1 of the Plan or to ensure that the Actual Deferral Percentage Test is satisfied.
(c) Except as required under (b) above, and under Section 4.5(b) below, no amounts attributable to Elective Employer Contributions may be distributed to a Participant or his Beneficiary from his Account prior to the earlier of:
(1) the severance from employment, death or disability of the Participant;
(2) the attainment of age 59 1/2 by the Participant;
(3) the termination of the Plan without establishment of a successor plan;
(4) a financial hardship of the Participant pursuant to
Section 11.6 of the Plan;
(5) the date of a sale by an Employing Company to an entity that is not an Affiliated Employer of substantially all of the assets (within the meaning of Code Section 409(d)(2)) with respect to a Participant who continues employment with the corporation acquiring such assets; or
(6) the date of the sale by an Employing Company or an Affiliated Employer of its interest in a subsidiary (within the meaning of Code Section 409(d)(3)) to an entity which is not an Affiliated Employer with respect to the Participant who continues employment with such subsidiary.
4.5 Section 401(k) Nondiscrimination Tests.
(a) Actual Deferral Percentage Test. The Plan shall satisfy the nondiscrimination test of Section 401(k)(3) of the Code, under which no Elective Employer Contributions shall be made that would cause the Actual Deferral Percentage for Eligible Participants who are Highly Compensated Employees to exceed the following:
(1) The Average Actual Deferral Percentage for the Eligible Participants who are Highly Compensated Employees in the current Plan Year shall not exceed the Average Actual Deferral Percentage for the prior Plan Year for Eligible Participants who were Non-Highly Compensated Employees for the prior Plan Year multiplied by 1.25; or
(2) The Average Actual Deferral Percentage for Eligible Participants who are Highly Compensated Employees in the current Plan Year shall not exceed the Average Actual Deferral Percentage for Eligible Participants who were Non-Highly Compensated Employees in the prior Plan Year multiplied by two (2), provided that the Average Actual Deferral Percentage for Eligible Participants who are Highly Compensated Employees in the current Plan Year does not exceed the Average Actual Deferral Percentage for the prior Plan Year for Eligible Participants who were Non-Highly Compensated Employees in the prior Plan Year by more than two (2) percentage points.
(1) In General. The Excess Deferral Contributions for a Highly Compensated Employee for a Plan Year which are to be distributed shall be distributed such that the Highly Compensated Employee with the highest amount of Elective Employer Contributions for the Plan Year shall be reduced to the extent required to:
(A) distribute the total amount of Excess Deferral Contributions, or
(B) cause the amount of such Highly Compensated Employee's Elective Employer Contributions to equal the amount of Elective Employer Contributions of the Highly Compensated Employee with the next highest amount of Elective Employer Contributions for the Plan Year.
This process must be repeated until all Excess Deferral Contributions are distributed.
Excess Deferral Contributions plus any income and
minus any loss allocable thereto shall be distributed (and any
corresponding Employer Matching Contribution shall be
forfeited) to Participants on whose behalf such Excess
Deferral Contributions were made within two and one-half
(2-1/2) months after the last day of the Plan Year in which
such excess amounts arose, and in any event not later than the
last day of the Plan Year following the close of the Plan Year
for which such contributions were made. Distribution of Excess
Deferral Contributions shall be made to Highly Compensated
Employees in accordance with this Section 4.5(b). Any Employer
Matching Contributions forfeited pursuant to this Subsection
(b)(1) shall be applied, subject to Section 6.1, toward
funding Employing Company contributions (for the Plan Year
immediately following the Plan Year to which such forfeited
Employer Matching Contributions relate) or distributed, as
directed by the Committee, to the extent permitted by
applicable law.
(2) Determination of Income or Loss. Excess Deferral Contributions to be distributed shall be adjusted for any income or loss through the last day of the Plan Year or the date of distribution, as determined by the Committee. The income or loss allocable to such Excess Deferral Contributions is the sum of:
(A) income or loss allocated to the Participant's Account for the taxable year multiplied by a fraction, the numerator of which is the Participant's Excess Deferral Contributions to be distributed for the year and the denominator is the Participant's Account balance attributable to Elective Employer Contributions, minus any income or plus any loss occurring during the Plan Year; and
(B) if the Committee shall determine in its sole discretion, ten percent (10%) of the amount determined under (A) above multiplied by the number of whole calendar months between the end of the Plan Year and the date of the distribution, counting the month of distribution if distribution occurs after the 15th of the month.
Notwithstanding the above, the Committee may designate any reasonable method for computing the income or loss allocable to Excess Deferral Contributions, provided that the method does not violate Section 401(a)(4) of the Code, is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income or loss to Participants' Accounts.
(3) Maximum Distribution Amount. The Excess Deferral Contributions which would otherwise be distributed to the Participant shall be adjusted for income; shall be reduced, in accordance with regulations, by the Excess Deferral Amount distributed to the Participant; and shall, if there is a loss allocable to the Excess Deferral Contributions, in no event be less than the lesser of the Participant's Account under the Plan attributable to Elective Employer Contributions or the Participant's Elective Employer Contributions for the Plan Year.
(1) For purposes of this Section 4.5, the Actual Deferral Percentage for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have deferral contributions allocated to his account under two (2) or more plans or arrangements described in Section 401(k) of the Code that are maintained by an Affiliated Employer shall be determined as if all such deferral contributions were made under a single arrangement. If a Highly Compensated Employee participates in two (2) or more cash or deferred arrangements that have different plan years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under Code Section 401(k).
(2) In the event that this Plan satisfies the
requirements of Code Section 401(k), 401(a)(4), or 410(b) only
if aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of Code Section 401(k),
401(a)(4), or 410(b) only if aggregated with this Plan, then
the actual deferral percentages shall be determined as if all
such plans were a single plan.
4.6 Voluntary Participant Contributions. An Eligible Employee who meets the participation requirements of Article III may elect in accordance with the procedures established by the Committee to contribute to his Account a Voluntary Participant Contribution consisting of any whole percentage of his Compensation, which percentage is not less than one percent (1%) nor more than sixteen percent (16%) of his Compensation. The maximum Voluntary Participant Contribution shall be reduced by the percent, if any, which is contributed as an Elective Employer Contribution on behalf of such Participant under Section 4.1. Notwithstanding the above, a Highly Compensated Employee may contribute not less than one percent (1%) nor more than three percent (3%) of his Compensation as a Voluntary Participant Contribution.
4.7 Manner and Time of Payment of Elective Employer Contributions and Voluntary Participant Contributions. Contributions made in accordance with Sections 4.1 and 4.6 will be made only through payroll deductions and will be effective as of the payroll period commencing as soon as practicable after the date on which the Participant elects to commence participation in the Plan. Contributions shall be remitted to the Trustee as of the earliest date on which such contributions can reasonably be segregated from each Employing Company's general assets, but in any event not later than the fifteenth (15th) business day of the month following the month during which such amounts would otherwise have been payable to the Participant in cash or such earlier time as may be prescribed by applicable law.
4.8 Change in Contribution Rate. A Participant may prospectively change the percentage of his Compensation that he has authorized as the Elective Employer Contribution to be made on his behalf or his Voluntary Participant Contribution to another permissible percentage in accordance with the procedures established by the Committee. Such election shall be effective as soon as practicable after it is made.
4.9 Change in Contribution Amount. In the event of a change in the Compensation of a Participant, the percentage of the Elective Employer Contribution made on his behalf or his Voluntary Participant Contribution currently in effect shall be applied as soon as practicable with respect to such changed Compensation without action by the Participant.
4.10 Rollover Contributions and Direct Transfers from the SEPCO and ECMC Plans.
(a) A Participant shall be entitled to transfer (or cause to
be transferred directly from the trustee) to the Trust to be held as
part of his Account all or a portion of the fair market value of the
cash or other property a Participant receives in the distribution of
his accrued benefits under the Profit Sharing Plan for Electric City
Merchandise Company, Inc. ("ECMC Plan"), reduced by any voluntary
participant contributions under such plan. Such rollover contribution
may only be made within sixty (60) days following the date the
Participant receives the distribution (or within such additional period
as may be provided under Section 408 of the Code if the Participant
shall have made a timely deposit of the distribution in an individual
retirement account). No such rollover contribution or trustee to
Trustee transfer shall be made by a Participant (or on his behalf) if
not otherwise permissible under the Code or if such rollover
contribution or transfer would subject this Plan to the requirements of
Section 401(a)(11)(A) of the Code.
Notwithstanding the foregoing, the Trustee is specifically authorized to accept any rollover accounts under the terms of the SEPCO Plan as are necessary to reflect a Participant's interest in the Plan resulting from the merger of the SEPCO Plan into this Plan effective as of January 1, 1993. Any such rollover account shall be held as part of the Participant's Account and shall be subject to the requirements of Article XVIII.
(b) Any amounts so transferred to the Trust shall be entitled to share in earnings or losses of the Trust in the same manner as other Employing Company contributions to the Trust.
(c) The portion of a Participant's Account attributable to any rollover contribution or trustee to Trustee transfer shall be distributed with the balance of the Participant's Account pursuant to Article XII of the Plan.
4.11 Rollovers from Other Plans. An Eligible Employee who is hired or
rehired and has received a distribution of his interest in a retirement plan of
a former employer, or a distribution of the interest of his deceased spouse in a
retirement plan of his spouse's former employer, under circumstances meeting the
requirements of Section 402(c)(4) of the Code relating to eligible rollover
distributions from qualified plans, including plans established under Code
Section 403(b) or 457(b), may elect to deposit all or any portion (as designated
by such Eligible Employee) of the amount of such distribution as a Rollover
Contribution to this Plan. A Rollover Contribution may be made only within 60
days following the date the Eligible Employee receives the distribution from the
plan of his former employer (or within such additional period as may be provided
under Section 408 of the Code if the Eligible Employee shall have made a timely
deposit of the distribution in an individual retirement account) and within 18
months after the date of his employment or reemployment with an Employing
Company. However, the 18-month requirement shall not apply with respect to
Rollover Contributions attributable to the distribution of the interest of an
Eligible Employee's deceased spouse in a retirement plan of the spouse's former
employer.
The Committee shall establish rules and procedures to implement this
Section 4.11, including without limitation, such procedures as may be
appropriate to permit the Committee to verify the tax qualified status of the
plan of the former employer and compliance with any applicable provisions of the
Code relating to such contributions. The amount contributed to the Trustee
pursuant to this Section 4.11 shall be placed in the Eligible Employee's
Rollover Contribution subaccount for the benefit of the Eligible Employee
pursuant to Section 9.1. The Eligible Employee shall have a fully vested
interest in the balance of his Rollover Contribution subaccount at all times and
such Rollover Contribution subaccount shall share in the earnings, gains, and
losses of the Trust Fund as set forth in Article IX of the Plan. An Employee
shall be entitled to a distribution of his Rollover Contribution subaccount
pursuant to the applicable provisions of Articles XI and XII hereof.
ARTICLE V
EMPLOYER MATCHING CONTRIBUTIONS
5.1 Amount of Employer Matching Contributions. The Board of Directors, in its sole and absolute discretion, shall determine the amount of Employer Matching Contributions that shall be made by each Employing Company on behalf of each Participant in its employ. The amount of Employer Matching Contributions shall be fixed by resolutions of the Board of Directors and communicated to each Employing Company prior to the first day of each Plan Year.
5. 2 Payment of Employer Matching Contributions. Except as provided herein, Employer Matching Contributions shall be remitted to the Trustee as soon as practicable after the payroll period to which they relate.
5. 3 Limitations on Employer Matching Contributions and Voluntary Participant Contributions.
(a) Actual Contribution Percentage Test. The Plan shall satisfy the nondiscrimination test of Section 401(m) of the Code, under which the Average Contribution Percentage for Eligible Participants shall not exceed (1) or (2) as follows:
(1) The Average Contribution Percentage for Eligible Participants who are Highly Compensated Employees in the current Plan Year shall not exceed the Average Contribution Percentage for the prior Plan Year for Eligible Participants who were Non-Highly Compensated Employees in the prior Plan Year multiplied by 1.25; or
(2) The Average Contribution Percentage for Eligible
Participants who are Highly Compensated Employees in the
current Plan Year shall not exceed the Average Contribution
Percentage for Eligible Participants who were Non-Highly
Compensated Employees in the prior Plan Year multiplied by two
(2), provided that the Average Contribution Percentage for
Eligible Participants who are Highly Compensated Employees in
the current Plan Year does not exceed the Average Contribution
Percentage for the prior Plan Year for Eligible Participants
who were Non-Highly Compensated Employees in the prior Plan
Year by more than two (2) percentage points.
(1) In General. The Excess Aggregate Contributions for a Highly Compensated Employee for a Plan Year which are to be distributed shall be distributed such that the Highly Compensated Employee with the highest amount of Matching Employer Contributions and Voluntary Participant Contributions shall be reduced to the extent required to:
(A) distribute the total amount of Excess Aggregate Contributions, or
(B) cause the amount of such Highly Compensated Employee's Employer Matching Contributions and Voluntary Participant Contributions to equal the amount of Employer Matching Contributions and Voluntary Participant Contributions of the Highly Compensated Employee with the next highest amount of Employer Matching Contributions and Voluntary Participant Contributions for the Plan Year.
This process must be repeated until all Excess Aggregate Contributions are distributed.
Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be distributed (or, if forfeitable, forfeited) within 2-1/2 months after the last day of the Plan Year in which such excess amounts arose, and in any event not later than the last day of the following Plan Year, to Participants to whose Accounts such Excess Aggregate Contributions were allocated for the Plan Year. Excess Aggregate Contributions shall be treated as Annual Additions.
(2) Determination of Income or Loss. Excess Aggregate Contributions to be distributed shall be adjusted for any income or loss through the last day of the Plan Year or the date of distribution, as determined by the Committee. The income or loss allocable to such Excess Aggregate Contributions is the sum of:
(A) income or loss allocated to the Participant's Account attributable to Voluntary Participant Contributions and Employer Matching Contributions to be distributed for the Plan Year multiplied by a fraction, the numerator of which is the Participant's Excess Aggregate Contributions for the year and the denominator is the Participant's Account balance attributable to Voluntary Participant Contributions and Employer Matching Contributions, minus any income or plus any loss occurring during the Plan Year; and
(B) if the Committee shall determine in its sole discretion, ten percent (10%) of the amount determined under (1) above multiplied by the number of whole calendar months between the end of the Plan Year and the date of the distribution, counting the month of distribution if distribution occurs after the 15th of the month.
Notwithstanding the above, the Committee may designate any reasonable method for computing the income or loss allocable to Excess Aggregate Contributions, provided that the method does not violate Section 401(a)(4) of the Code, is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income or loss to Participants' Accounts.
(3) Accounting for Excess Aggregate Contributions. Excess Aggregate Contributions shall be distributed first from Voluntary Participant Contributions allocated to the Participant's Account and any corresponding Employer Matching Contribution shall also be forfeited and then, if necessary, distributed from the remaining Employer Matching Contribution allocated to the Participant's Account.
(c) Special Rules.
(1) The Contribution Percentage for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to make voluntary participant contributions, to receive employer matching contributions, or to make deferral contributions under two or more plans described in Section 401(a) of the Code or arrangements described in Section 401(k) of the Code that are maintained by an Affiliated Employer shall be determined as if all such contributions were made under a single plan.
(2) In the event that this Plan satisfies the
requirements of Code Section 401(m), 401(a)(4), or 410(b) only
if aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of Code Section 401(m),
401(a)(4), or 410(b) only if aggregated with this Plan, then
the contribution percentages shall be determined as if all
such plans were a single plan.
(3) The determination and treatment of the Contribution Percentage of any Eligible Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury.
5. 4 Multiple Use Limitation. If both the Average Actual Deferral Percentage and the Average Contribution Percentage of the Highly Compensated Employees exceed 1.25 of the Average Actual Deferral Percentage and the Average Contribution Percentage of the Non-Highly Compensated Employees and if one or more Highly Compensated Employees makes Elective Employer Contributions and receives Employer Matching Contributions, and the sum of the Actual Deferral Percentage and Actual Contribution Percentage of those Highly Compensated Employees subject to either or both tests exceed the aggregate limit as defined in Treasury Regulation Section 1.401(m)-2, then the Employer Matching Contribution of those Highly Compensated Employees who participate in the cash or deferred arrangement will be reduced (beginning with such Highly Compensated Employee whose Employer Matching Contribution is the highest) so that the aggregate limit is not exceeded. For purposes of determining if the aggregate limit has been exceeded, the Actual Deferral Percentage and the Contribution Percentage of the Highly Compensated Employees shall be determined after any corrections required to meet the Actual Deferral Percentage Test and the Actual Contribution Percentage Test.
5. 5 Reversion of Employing Company Contributions. Employing Company contributions computed in accordance with the provisions of this Plan shall revert to the Employing Company under the following circumstances:
(a) In the case of an Employing Company contribution which is made by reason of a mistake of fact, such contribution upon written direction of the Employing Company shall be returned to the Employing Company within one year after the payment of the contribution.
(b) If any Employing Company contribution is determined to be nondeductible under Section 404 of the Code, then such Employing Company contribution, to the extent that it is determined to be nondeductible, upon written direction of the Employing Company shall be returned to the Employing Company within one year after the disallowance of the deduction.
The amount which may be returned to the Employing Company under this
Section 5.7 is the excess of (1) the amount contributed over (2) the amount that
would have been contributed had there not occurred a mistake of fact or
disallowance of the deduction. Earnings attributable to the excess contribution
shall not be returned to the Employing Company, but losses attributable thereto
shall reduce the amount to be so returned. If the withdrawal of the amount
attributable to the mistaken contribution would cause the balance of the Account
of any Participant to be reduced to less than the balance which would have been
in the Account had the mistaken amount not been contributed, then the amount to
be returned to the Employing Company shall be limited so as to avoid such
reduction.
5.6 Correction of Prior Incorrect Allocations and Distributions. Notwithstanding any provisions contained herein to the contrary, in the event that, as of any Valuation Date, adjustments are required in any Participants' Accounts to correct any incorrect allocation of contributions or investment earnings or losses, or such other discrepancies in Account balances that may have occurred previously, the Employing Companies may make additional contributions to the Plan to be applied to correct such incorrect allocations or discrepancies. The additional contributions shall be allocated by the Committee to adjust such Participants' Accounts to the value which would have existed on said Valuation Date had there been no prior incorrect allocation or discrepancies. The Committee shall also be authorized to take such other actions as it deems necessary to correct prior incorrect allocations or discrepancies in the Accounts of Participants under the Plan.
ARTICLE VI
LIMITATIONS ON CONTRIBUTIONS
6.1 Section 415 Limitations. Notwithstanding any provision of the Plan to the contrary, except to the extent permitted under Code Section 414(v), the total Annual Additions allocated to the Account (and the accounts under all defined contribution plans maintained by an Affiliated Employer) of any Participant for any Limitation Year in accordance with Code Section 415 and the regulations thereunder, which are incorporated herein by this reference, shall not exceed the lesser of the following amounts:
(a) one hundred percent (100%) of the Participant's compensation (as defined in Code Section 415(c)(3) and any rulings and regulations thereunder) in the Limitation Year; or
(b) $40,000 (as adjusted pursuant to Code Section
415(d)(1)(C)).
The Annual Addition for any Plan Year beginning before January 1, 1987 shall not be recomputed to treat all Voluntary Participant Contributions as an Annual Addition.
6.2 Correction of Contributions in Excess of Section 415 Limits. If the Annual Additions for a Participant exceed the limits of Section 6.1 as a result of the allocation of forfeitures, if any, a reasonable error in estimating a Participant's annual compensation for purposes of the Plan, a reasonable error in determining the amount of elective deferrals (within the meaning of Section 402(g)(3) of the Code) that may be made with respect to any individual, or under other limited facts and circumstances that the Commissioner of the Treasury finds justify the availability of the rules set forth in this Section 6.2, the excess amounts shall not be deemed Annual Additions if they are treated in accordance with any one or more or any combination of the following:
(a) distribute to the Participant that portion, or all, of his Elective Employer Contributions (as adjusted for income and loss) as is necessary to ensure compliance with Section 6.1;
(b) return to the Participant that portion, or all, of his Voluntary Participant Contributions (as adjusted for income and loss) as is necessary to ensure compliance with Section 6.1; and
(c) forfeiture of that portion, or all, of the Employer Matching Contributions (as adjusted for income and loss) and any forfeitures of Employer contributions that were allocated to the Participant's Account (as adjusted for income and loss), as is necessary to ensure compliance with Section 6.1.
Any amounts distributed or returned to the Participant under (a) or (b) above shall be disregarded for purposes of the Actual Deferral Percentage Test and for purposes of the Actual Contribution Percentage Test.
Any amounts forfeited under this Section 6.2 shall be held in a suspense account and shall be applied, subject to Section 6.1, toward funding the Employer Matching Contributions for the next succeeding Plan Year. Such application shall be made prior to any Employing Company contributions and prior to any Employer Matching Contributions that would constitute Annual Additions. No income or investment gains and losses shall be allocated to the suspense account provided for under this Section 6.2. If any amount remains in a suspense account provided for under this Section 6.2 upon termination of this Plan, such amount will revert to the Employing Companies notwithstanding any other provision of this Plan.
6.3 Combination of Plans. If an Employee participates in more than one defined contribution plan maintained by an Affiliated Employer and his Annual Additions exceed the limitations of Section 6.1, corrective adjustments shall be made first under this Plan and then, to the extent necessary, under The Southern Company Performance Sharing Plan and then, to the extent necessary, under The Southern Company Employee Stock Ownership Plan.
ARTICLE VII
SUSPENSION OF CONTRIBUTIONS
7.1 Suspension of Contributions. A Participant may (on a prospective basis) voluntarily suspend the Elective Employer Contributions made on his behalf and his Voluntary Participant Contributions in accordance with the procedures established by the Committee. Such suspension shall be effective as soon as practicable after it is made. Whenever Elective Employer Contributions made on a Participant's behalf and Voluntary Participant Contributions are suspended, Employer Matching Contributions shall also be suspended.
7.2 Resumption of Contributions. A Participant may terminate prospectively any such suspension in accordance with the procedures established by the Committee. Such resumption of contributions shall be effective as soon as practicable after the election to terminate prospectively the suspension is made. There shall be no make up of any contributions by a Participant or by an Employing Company with respect to a period of suspension.
ARTICLE VIII
INVESTMENT OF CONTRIBUTIONS
8.1 Investment Funds. The Investment Funds shall be selected from time to time by the Pension Fund Investment Review Committee of the Southern Company System. In addition to such other Investment Funds selected by the Pension Fund Investment Review Committee, the Investment Funds shall include the "Company Stock Fund". The Company Stock Fund shall be invested and, subject to Section 12.13 of the Plan, reinvested in Common Stock, provided that funds applicable to the purchase of Common Stock pending investment of such funds may be temporarily invested in short-term United States Government obligations, other obligations guaranteed by the United States Government, commercial paper, or certificates of deposit, and, if the Trustee so determines, may be transferred to money market funds utilized by the Trustee for qualified employee benefit trusts.
8.2 Investment of Participant Contributions. Each Participant shall direct, at the time he elects to participate in the Plan and at such other times as may be directed by the Committee or pursuant to Section 8.6, that his Elective Employer Contributions and Voluntary Participant Contributions be invested in one or more of the Investment Funds, provided such investments are made in one-percent (1%) increments.
8.3 Investment of Employer Matching Contributions. Employer Matching Contributions shall be invested entirely in the Company Stock Fund and shall remain invested in the Company Stock Fund except as follows:
(a) Any Participant whose employment with the Affiliated Employers is terminated as a result of his retirement pursuant to the defined benefit pension plan of an Affiliated Employer may elect to invest the amount credited to his Employer Matching Contribution subaccount in any of the Investment Funds under this Plan as provided in Section 8.5; and
(b) Any Participant may elect at any time on or after the fifth anniversary of the Enrollment Date on which he first became a Participant in this Plan to invest a portion of the amount credited to his Employer Matching Contribution subaccount in any of the Investment Funds under this Plan as provided in Section 8.5, except that the amount subject to such election attributable to Common Stock may not exceed fifty percent (50%) of the amount of Common Stock credited to his Employer Matching Contribution subaccount at the time the election is made.
8.4 Investment of Earnings. Except as provided in Section 12.13 of the Plan, interest, dividends, if any, and other distributions received by the Trustee with respect to an Investment Fund shall be invested in such Investment Fund.
8.5 Transfer of Assets between Funds. A Participant may direct in accordance with the provisions of this Section 8.5 and such procedures established by the Committee that all of his interest in an Investment Fund or Funds attributable to amounts in his Account (including Employer Matching Contributions other than those required to be invested in the Company Stock Fund pursuant to Section 8.3) or any portion of such amount (expressed in number of shares, whole dollar amounts, or one-percent (1%) increments) to the credit of his Account be transferred and invested by the Trustee as of such date in any other Investment Fund as designated by the Participant. Such direction shall be effective as soon as practicable after it is made.
8.6 Change in Investment Direction. Any investment direction given by a Participant shall continue in effect until changed by the Participant. A Participant may change his investment direction as to the future contributions and allocations to his Account (other than Employer Matching Contributions) in accordance with the procedures established by the Committee, and such direction shall be effective as soon as practicable after it is made.
8.7 Section 404(c) Plan. This Plan is intended to be a plan described in ERISA Section 404(c) and shall be interpreted in accordance with Department of Labor Regulations Section 1.404c-1, which is incorporated herein by this reference. The Committee shall take such actions as it deems necessary or appropriate in its discretion to cause the Plan to comply with such requirements, including, but not limited to, providing Participants with the right to request and receive written confirmation of their investment instructions. Further, the Committee shall take such actions as it deems necessary or appropriate in its discretion (a) to ensure that confidentiality procedures with respect to a Participant's ownership of Common Stock and the exercise of ownership rights with respect to such Common Stock are adequate and utilized, and (b) to appoint an independent fiduciary to carry out such actions as the Committee determines involve the potential for undue influence on Participants with regard to the direct or indirect exercise of shareholder rights with respect to Common Stock.
8.8 Mirant Stock Fund. All Mirant Stock received by the Plan pursuant to Sections 9.1(c) and 9.1(d) shall be held in a "Mirant Stock Fund." Participants may direct investments out of the Mirant Stock Fund and into the other Investment Funds in accordance with the procedures of this Article VIII. However, Participants may not direct investments into the Mirant Stock Fund and, should a Participant elect to direct investments out of the Mirant Stock Fund, he may not again direct any amount attributable to such investments back into the Mirant Stock Fund. In no event shall the Mirant Stock Fund remain as an Investment Fund under the Plan later than the end of the calendar quarter which includes the five-year anniversary of the date Mirant Stock is first held in the Mirant Stock Fund. The Mirant Stock Fund shall be treated as a portion of the Plan which is not an employee stock ownership plan in accordance with Treasury Regulation Section 1.410(b)-7(c)(2).
ARTICLE IX
MAINTENANCE AND VALUATION OF PARTICIPANTS' ACCOUNTS
9.1 Establishment of Accounts.
(a) An Account shall be established for each Participant. In addition, subaccounts shall be established for each Participant to reflect all Elective Employer Contributions, Voluntary Participant Contributions, Employer Matching Contributions, Rollover Contributions, and rollover contributions from the SEPCO Plan (and the earnings and/or losses on each subaccount). Each Participant will be furnished a statement of his Account at least annually and upon any distribution.
(b) The Committee shall also establish a subaccount known as a Participant's SEPCO Transferred Account to reflect the Participant's interest in the Plan resulting from the merger of the SEPCO Plan into this Plan effective as of January 1, 1993. To the extent that a Participant's Salary Deferral Account, Employer Contribution Account, and Rollover Account (as those terms were defined under the SEPCO Plan), were transferred to this Plan from the SEPCO Plan, such accounts shall retain their character as participant deferral, employer, or rollover contributions, respectively, and the Committee shall establish and maintain such bookkeeping accounts as it deems necessary to account for such contributions, and any subsequent earnings or losses attributable thereto, under this Plan.
(c) Upon the distribution by the Southern Company to its shareholders of the Mirant Stock held by the Southern Company pursuant to a tax-free spin-off under Code Section 355 or such similar transaction, the Committee shall establish a subaccount known as a Participant's "Mirant Account" to reflect the Participant's interest in the Mirant Stock received by the Plan (other than Mirant Stock transferred to the Plan as described in Section 9.1(d)) pursuant to such transaction. To the extent that shares of Mirant Stock are attributable to Common Stock in a Participant's subaccounts which reflect Elective Employer Contributions, Voluntary Participant Contributions, Employer Matching Contributions, Rollover Contributions, and amounts in a Participant's SEPCO Transferred Account, the shares of Mirant Stock attributable to each shall retain their character as Elective Employer Contributions, Voluntary Participant Contributions, Employer Matching Contributions, Rollover Contributions, and amounts in a Participant's SEPCO Transferred Account, respectively, and the Committee shall establish and maintain such bookkeeping accounts as it deems necessary to account for such Mirant Stock, and any subsequent earnings or losses attributable thereto, under this Plan.
(d) Upon the transfer to the Plan of the Mirant Stock distributed to The Southern Company Employee Stock Ownership Plan ("ESOP") in connection with a transaction described in Section 9.1(c), the Committee shall establish a subaccount known as a Participant's "Transferred ESOP Account" to reflect the Participant's interest in the Plan attributable to the Mirant Stock transferred to the Plan from the ESOP. The Committee shall establish and maintain separate bookkeeping accounts within the Transferred ESOP Account for amounts attributable to the Mirant Stock that was distributed on Common Stock which had been held in the ESOP for more than two years as of the date of transfer, amounts attributable to Mirant Stock that was distributed on Common Stock which had been held in the ESOP for more than one year but less than two years as of the date of transfer, and amounts attributable to Mirant Stock that was distributed on Common Stock which had been held in the ESOP for less than one year as of the date of transfer, respectively.
9.2 Valuation of Investment Funds. Except as provided in Section 12.13 of the Plan, a Participant's Account in respect of his interest in each Investment Fund shall be credited or charged, as the case may be, as of each Valuation Date with the dividends, income, gains, appreciation, losses, depreciation, forfeitures, expenses, and other transactions with respect to such Investment Fund for the Valuation Date as of which such credit or charge accrued. Such credits or charges to a Participant's Account shall be made in such proportions and by such method or formula as shall be deemed by the Committee to be necessary or appropriate to account for each Participant's proportionate beneficial interest in the Trust Fund in respect of his interest in each Investment Fund. Investments of each Investment Fund shall be valued at their fair market values as of each Valuation Date as determined by the Trustee, and such valuation shall conclusively establish such value.
9.3 Rights in Investment Funds. Nothing contained in this Article IX shall be deemed to give any Participant any interest in any specific property in any Investment Fund or any interest, other than the right to receive payments or distributions in accordance with the Plan or the right to instruct the Trustee how to vote Common Stock as provided in Section 14.3.
ARTICLE X
VESTING
10.1 Vesting. The amount to the credit of a Participant's Account shall at all times be fully vested and nonforfeitable.
ARTICLE XI
WITHDRAWALS AND LOANS
(a) Subject to the provisions of Article XII, this Section 11.1, and Sections 11.2 through 11.6, a Participant may make withdrawals from his Account effective as of any Valuation Date in the order of priority listed below:
(1) All or a portion of the value of his Account attributable to Voluntary Participant Contributions (not including any earnings or appreciation thereon) made prior to January 1, 1987;
(2) All amounts described above, plus all or a portion of the value of his Account attributable to Voluntary Participant Contributions, plus a ratable portion of the earnings and/or appreciation on Voluntary Participant Contributions;
(3) All amounts described above, plus effective April 1, 1997, all or a portion of the value of his Account attributable to Rollover Contributions (including earnings and appreciation thereon);
(4) All amounts described above, plus the value of his Transferred ESOP Account as described in Section 9.1(d); provided, however, that the amount in his Transferred ESOP Account attributable to Mirant Stock that was distributed on Common Stock which had been held in the ESOP for less than two years as of the date of transfer may not be distributed until the first day of the month following the two-year anniversary of the date such Common Stock was contributed to the ESOP;
(5) All amounts described above, plus up to fifty percent (50%) of the value of his Account attributable to Employer Matching Contributions (including earnings and appreciation thereon) allocated to his Account; provided, however, that said Participant shall have participated in the Plan for not less than sixty (60) months at the time of the withdrawal;
(6)(A) For Participants who have not attained age
59 1/2 or separated from service with the Affiliated
Employers (within the meaning of Code Section
401(k)(2)(B)(i)(I)), all amounts described above, plus all
or a portion of the value of his Account attributable to
Elective Employer Contributions (not including any earnings
or appreciation thereon for Plan Years beginning after
December 31, 1988); and
(B) For Participants who have attained age 59 1/2 or separated from service with the Affiliated Employers (within the meaning of Code Section 401(k)(2)(B)(i)(I)), all amounts described above, plus all or a portion of the value of his Account attributable to any earnings or appreciation on Elective Employer Contributions.
For purposes of this Section 11.1, any individual who becomes a Participant solely because a Transferred ESOP Account is established on behalf of such individual shall be treated as participating in the Plan as of the date such Transferred ESOP Account is established.
(b) Notwithstanding the foregoing, withdrawals from a Participant's SEPCO Transferred Account shall be made in accordance with Article XVIII.
11.2 Notice of Withdrawal. Notice of withdrawal must be given by a
Participant in accordance with the procedures established by the Committee, and
if such withdrawal would constitute an eligible rollover distribution (within
the meaning of Code Section 402(c)(4)), the consent and notice requirements of
Section 12.10 must be satisfied. Payment of a withdrawal shall be made as soon
as practicable and in accordance with Section 12.10, if applicable.
11.3 Form of Withdrawal. All distributions under this Article XI shall be made in the form of cash, provided that with respect to any distribution which is attributable to Common Stock the Participant shall have the right to demand that such portion of the distribution be made in the form of Common Stock to the extent of the whole number of shares of Common Stock in his Account. Such demand must be made in accordance with the procedures established by the Committee.
11.4 Minimum Withdrawal. No distribution under this Article XI shall be permitted in an amount which has a value of less than $300, unless the value of the amount available under the selected option is less than $300, in which case such available amount will be distributed.
11.5 Source of Withdrawal. Withdrawals shall be made in accordance with the instructions of the Participant from each of the Investment Funds in which the amount to be distributed is invested. The value of the amount to be distributed under any option listed in Section 11.1 shall be determined as soon as practicable in accordance with the procedures established by the Committee.
(a) Except as provided in (e) below, a withdrawal pursuant to Section 11.1(a)(6)(A), in addition to the other requirements of Article XI, shall be permitted only if the Committee determines that the withdrawal is to be made on account of an immediate and heavy financial need of the Participant, the amount of the withdrawal does not exceed such financial need, and the amount of the withdrawal is not reasonably available from other resources of the Participant.
(b) For purposes of this Section 11.6, the following shall be deemed to be immediate and heavy financial needs:
(1) Medical expenses described in Section 213(d) of the Code, including but not limited to, expenses for
(i) The diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body;
(ii) transportation primarily for and essential to such expenses referred to in (i) above; or
(iii) insurance (including amounts paid as premiums under part B of Title XVIII of the Social Security Act) relating to medical expenses referred to in (i) or (ii) above, provided such expenses are incurred by the Participant, the Participant's spouse or any person whom the Participant may properly claim as a dependent on his federal income tax return or are necessary for such persons to obtain the medical care described above; or
(2) Purchase (excluding mortgage payments) of a principal residence for the Participant; or
(3) Payment of tuition, related educational fees, and room and board expenses, for the next twelve (12) months of post-secondary education for the Participant, the Participant's spouse or child or children, or any person the Participant may properly claim as a dependent on his federal income tax return; or
(4) The need to prevent eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; or
(5) Any other need which the Commissioner of the Internal Revenue Service, through the publication of revenue rulings, notices, or other documents of general applicability, deems to be immediate and heavy.
(c) For purposes of this Section 11.6, a withdrawal shall be deemed necessary to satisfy an immediate and heavy financial need if:
(1) The distribution is not in excess of the amount of the immediate and heavy financial need of the Participant, including any amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution;
(2) The Participant has obtained all distributions and all nontaxable loans currently available to him under all plans maintained by an Affiliated Employer;
(3) The Participant agrees to suspend all elective employer contributions and voluntary participant contributions to all plans of an Affiliated Employer for at least six (6) months after receipt of the distribution under this Section 11.6; and
(4) The Participant agrees not to make elective contributions to this Plan or any other qualified or non-qualified deferred compensation plan sponsored by an Affiliated Employer (including stock purchase, stock option or similar plans) during the Participant's taxable year immediately following the taxable year of the hardship distribution in excess of the Participant's applicable elective deferral limits under Section 402(g) of the Code for such taxable year less the amount for the taxable year of the hardship distribution.
(d) When all suspensions pursuant to this Section 11.6 are ended, Elective Employer Contributions and/or Voluntary Participant Contributions may be resumed by the Participant (if the Participant is then eligible and elects to resume such contributions) beginning with the Participant's first payroll period commencing after all suspensions are ended, and Employer Matching Contributions by his Employing Company also shall be resumed. There shall be no make up of any contributions by a Participant or by an Employing Company with respect to a period of suspension.
(e) Notwithstanding (a) above, if a Participant has attained age 59 1/2 or severed from employment with the Affiliated Employers (within the meaning of Code Section 401(k)(2)(B)(i)(I)), he shall be permitted to make a withdrawal pursuant to Section 11.1(a)(6)(A), even if such withdrawal is not on account of hardship.
11.7 Loans to Participants.
(a) The Committee may, in its sole discretion, direct the
Trustee to make a loan or loans from the Trust Fund to any Participant
(other than a Participant with an existing Plan loan in arrears) (1)
who is an Employee on the active payroll of an Employing Company or is
a cooperative education employee, (2) who is receiving long-term
disability payments under a plan maintained by his Employing Company,
(3) who is on a leave of absence authorized by his Employing Company,
or (4) who is a party in interest as defined in Section 3(14) of ERISA.
All loan applications shall be made in accordance with the procedures
established by the Committee, which shall form a part of this Plan.
Such procedures shall establish the terms and conditions of loans under
the Plan, including the events constituting default, and shall be
consistent with the provisions of this Section 11.7.
(b) The total amount of all loans outstanding to any one
Participant under all qualified plans maintained by an Affiliated
Employer shall not exceed the lesser of (1) $50,000, reduced by the
excess of the highest outstanding balance of loans from all qualified
plans maintained by an Affiliated Employer during the twelve-month
period ending on the day before a loan is made, over the outstanding
balance of any loans to the Participant from all qualified plans
maintained by an Affiliated Employer on the date the loan is made, or
(2) fifty percent (50%) of such Participant's Account as of the
Valuation Date coinciding with or next following the date the loan
application is made. The minimum amount of any loan shall not equal
less than $1,000.
(c) The principal amount of a loan shall be obtained pro rata from each Investment Fund in which the Participant's Account is invested at that time such loan is obtained.
(d) The Committee shall adopt and follow uniform and nondiscriminatory procedures in making loans under this Plan to make certain that such loans (1) are available to all Participants on a reasonably equivalent basis, (2) are not made available to Highly Compensated Employees, officers, or shareholders in an amount greater than the amount made available to other Participants, (3) bear a reasonable rate of interest, and (4) are adequately secured. The repayment of such loans by any Participant who is an Employee on the active payroll of an Employing Company shall be made through payroll deduction. The minimum amount of any loan repayment shall not equal less than $20.00, and such repayment shall extend for a period certain of at least twelve (12) months (unless repaid in full), but not to exceed fifty-eight (58) months, expressed in any number of whole months (including the month the loan is made). The term of any loan may be for a period certain of more than fifty-eight (58) months, but not to exceed fifteen (15) years, only if the proceeds of such loan are used to acquire any dwelling used or, within a reasonable period of time, to be used as the principal residence of the Participant.
(e) The Committee shall direct the Trustee to obtain from the Participant such note and adequate security as it may require. All loans made pursuant to this Section 11.7 shall be secured by the Participant's Account, and no other types of collateral may be used to secure a loan from the Plan. Notwithstanding the provisions of Section 17.2, if a Participant defaults on a loan under the Plan or if the Participant's employment terminates prior to full repayment thereof, in addition to any other remedy provided in the loan instruments or by law, the Committee may direct the Trustee to charge against that portion of the Participant's Account which secures the loan the amount required to fully repay the loan. Under no circumstances, however, shall any unpaid loan be charged against a Participant's Account until permitted by applicable law. This Section authorizes only the making of bona fide loans and not distributions, and before resort is made against a Participant's Account for his failure to repay any loan, such other reasonable efforts to collect the same shall be made by the Committee as it deems reasonable and practical under the circumstances.
(f) No distribution shall be made to any Participant unless and until all unpaid loans to such Participant have either been paid in full or deducted from the Participant's Account.
(g) All loans made under this Section 11.7 shall be considered earmarked investments of the Participant's Account, and any repayment of principal and interest shall be reinvested in accordance with the Participant's investment direction in effect on the date of such repayment pursuant to Article VIII of the Plan.
11.8 Special Waiver for Participants Employed in the United Kingdom. A Participant shall be entitled to sign a waiver of his right to make withdrawals or loans from his Account under the provisions of this Article XI with respect to the Elective Employer Contributions and Employer Matching Contributions credited to his Account to the extent necessary to ensure that such contributions are not taxable in the United Kingdom. The purpose of such waiver is to meet the requirements of the Department of Inland Treasury of the United Kingdom for excluding such Elective Employer and Employer Matching Contributions from taxable income in the United Kingdom. Such waiver shall be made on a form prescribed by the Committee from time to time in accordance with the requirements of the Department of Inland Treasury of the United Kingdom.
ARTICLE XII
DISTRIBUTION TO PARTICIPANTS
12.1 Distribution upon Retirement.
(a) Subject to the provisions of Article XVIII, if a
Participant's employment with the Affiliated Employers is terminated as
a result of his retirement pursuant to the defined benefit pension plan
of an Affiliated Employer, in addition to the withdrawal options under
Section 11.1, the entire balance credited to his Account shall be
payable to him in the manner set forth in this Section 12.1 at such
time requested by the Participant pursuant to Section 12.6 and in
accordance with the procedures established by the Committee. The
distribution shall commence as soon as practicable after the Valuation
Date selected by the Participant in one of the following ways:
(1) In a single lump sum distribution; or
(2) In annual installments not to exceed twenty
(20), as selected by the Participant, or the Participant's
life expectancy. The amount of cash and/or the number of
shares of Common Stock and/or Mirant Stock in each
installment shall be equal to the proportionate value as of
each Valuation Date immediately preceding payment of the
balance then to the credit of the Participant in his Account
determined by dividing the amount credited to his Account as
of such Valuation Date by the number of payments remaining
to be made.
If a Participant who is receiving installment payments shall establish to the satisfaction of the Committee, in accordance with principles and procedures established by the Committee which are applicable to all persons similarly situated, that a financial emergency exists in his affairs, such as illness or accident to the Participant or a member of his immediate family or other similar contingency, the Committee may, for the purpose of alleviating such emergency, accelerate the time of payment of some or all of the remaining installments. If a Participant dies before receiving all of the amount to the credit of his Account in accordance with this paragraph (2), the amount remaining to the credit of his Account at his death shall be distributed to his Beneficiary as soon as practicable in accordance with Section 12.4.
(b) Notwithstanding a Participant's election to defer the receipt of the benefits under (a) above, the Committee shall direct payment in a single lump sum to such Participant if the balance of his Account does not exceed $5,000 in accordance with the requirements of Code Section 411(a)(11). The Committee shall not cash-out any Participant whose Account balance exceeds $5,000 without the written consent of the Participant.
12.2 Distribution upon Disability. If a Participant's employment with the Affiliated Employers is terminated prior to his Normal Retirement Date by reason of his total and permanent disability, as determined by the Social Security Administration and evidenced in a writing provided to the Committee, such disabled Participant, in addition to the withdrawal options under Section 11.1, shall be entitled to receive the entire value credited to his Account at such time as requested by the Participant or such legal representative pursuant to Section 12.6 and in accordance with the procedures established by the Committee. Any distribution pursuant to this Section 12.2 shall be made in a single lump sum as soon as practicable after the selected Valuation Date.
Notwithstanding the foregoing, the Committee shall direct payment in a single lump sum to such Participant or his legal representative if the balance of such Participant's Account does not exceed $5,000 in accordance with the requirements of Code Section 411(a)(11).
12.3 Distribution upon Death. If a Participant's employment with the Affiliated Employers is terminated by reason of death, the entire balance credited to the Participant's Account shall be distributed as soon as practicable to the Participant's surviving Beneficiary or Beneficiaries in a lump sum.
12.4 Designation of Beneficiary in the Event of Death. A Participant may designate a Beneficiary or Beneficiaries (who may be designated contingently) to receive all or part of the amount credited to his Account in case of his death before his receipt of all of his benefits under the Plan, provided that the Beneficiary of a married Participant shall be the Participant's Surviving Spouse, unless such Surviving Spouse shall consent in a writing witnessed by a notary public, which writing acknowledges the effect of the Participant's designation of a Beneficiary other than such Surviving Spouse. However, if such Participant establishes to the satisfaction of the Committee that such written consent may not be obtained because the Surviving Spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe, a designation by such Participant without the consent of the Surviving Spouse shall be valid.
Any consent necessary under this Section 12.4 shall be valid and effective only with respect to the Surviving Spouse who signs the consent or, in the event of a deemed consent, only with respect to a designated Surviving Spouse.
A designation of Beneficiary may be revoked by the Participant without the consent of any Beneficiary (or the Participant's Surviving Spouse) at any time before the commencement of the distribution of benefits. A Beneficiary designation or change or revocation of a Beneficiary designation shall be made in accordance with the procedures established by the Committee.
If no designated Beneficiary shall be living at the death of the Participant and/or such Participant's Beneficiary designation is not valid and enforceable under applicable law or the procedures of the Committee, such Participant's Beneficiary or Beneficiaries shall be the person or persons in the first of the following classes of successive preference, if then living:
(a) the Participant's spouse on the date of his death,
(b) the Participant's children, equally,
(c) the Participant's parents, equally,
(d) the Participant's brothers and sisters, equally, or
(e) the Participant's executors or administrators.
Payment to such one or more persons shall completely discharge the Plan and the Trustee with respect to the amount so paid.
(a) If a Participant's employment with the Affiliated Employers is terminated for any reason other than in accordance with Sections 12.1, 12.2, and 12.3, the balance to the credit of the Participant's Account shall be payable in a single lump sum. Such lump sum distribution shall be made as soon as practicable after the Participant's termination of employment, provided that one of the following conditions is met:
(1) the Participant's Account Balance does not exceed $5,000 in accordance with Code Section 411(a)(11), or
(2) in accordance with Section 12.10, the Participant elects to receive a distribution of his Account.
(b) A Participant who does not receive a distribution under
Section 12.5(a)(1) may elect to defer the commencement of the
distribution of his Account following the termination of his employment
until a later Valuation Date, provided that such distribution shall
commence not later than the date required under Section 12.6 of the
Plan. In addition to the withdrawal options under Section 11.1, any
deferred distribution shall commence as soon as practicable after the
Valuation Date selected by the Participant.
(a) Notwithstanding any other provision of the Plan, and except as further provided in Section 12.6(b) below, if the Participant does not elect to defer commencement of his benefit payments, the payment of his benefits shall begin at the Participant's election no later than the sixtieth (60th) day after the close of the Plan Year in which the latest of the following events occurs:
(1) the Participant attains the earlier of age sixty-five (65) or his Normal Retirement Date,
(2) the Participant's tenth (10th) anniversary of participation under the Plan, or
(3) the Participant's severance from employment with the Affiliated Employers.
(b) In no event shall the distribution of amounts in a Participant's Account commence later than the April 1 of the calendar year following the later of the calendar year in which the Participant attains age 70 1/2 or terminates employment with the Affiliated Employers, in accordance with regulations prescribed by the Secretary of the Treasury. The foregoing requirements in this Section 12.6(b) shall not be applied to restrict the implementation of any written designation given to the Committee by a Participant prior to January 1, 1984, with regard to the method of distribution of his Account, if such method was permissible under the Plan and Code prior to January 1, 1984. Notwithstanding the foregoing, the payment of benefits to a Participant who is a five percent (5%) owner of The Southern Company or an Affiliated Employer (as determined pursuant to Code Section 416) with respect to the Plan Year ending in the calendar year in which the Participant attains age 70 1/2 shall begin not later than April 1, of the calendar year following the calendar year in which the Participant attains age 70 1/2 regardless of the Participant's termination from employment. In addition, any Participant who attains age 70 1/2 on or after January 1, 1996, but prior to January 1, 1999, may elect to have payment of his benefits begin no later than April 1 of the calendar year following the calendar year during which the Participant attains age 70 1/2, regardless of the Participant's termination of employment.]
Any distribution made under this Plan shall be made in
accordance with the minimum distribution requirements of Code Section
401(a)(9), including the incidental death benefits requirements under
Code Section 401(a)(9)(G) and the Treasury Regulations thereunder.
With respect to distributions under the Plan made in calendar years beginning on or after January 1, 2001, the Plan will apply the minimum distribution requirements of Code Section 401(a)(9) in accordance with the regulations under Code Section 401(a)(9) that were proposed in January 2001, notwithstanding any provision of the Plan to the contrary. This amendment shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under Code Section 401(a)(9) or such other date specified in guidance published by the Internal Revenue Service.
12.7 Transfer between Employing Companies. A transfer by a Participant from one Employing Company to another Employing Company shall not affect his participation in the Plan. A transfer by a Participant from an Employing Company to an Affiliated Employer that is not an Employing Company shall not be deemed to be a termination of employment with an Employing Company.
12.8 Distributions to Alternate Payees. If the Participant's Account under the Plan shall become subject to any domestic relations order which (a) is a qualified domestic relations order satisfying the requirements of Section 414(p) of the Code and (b) requires the immediate distribution in a single lump sum of the entire portion of the Participant's Account required to be segregated for the benefit of an alternate payee, then the entire interest of such alternate payee shall be distributed in a single lump sum within ninety (90) days following the Employing Company's notification to the Participant and the alternate payee that the domestic relations order is qualified under Section 414(p) of the Code, or as soon as practicable thereafter. Such distribution to an alternate payee shall be made even if the Participant has not separated from the service of the Affiliated Employers. Any other distribution pursuant to a qualified domestic relations order shall not be made earlier than the Participant's termination of service, or his attainment of age fifty (50), if earlier, and shall not commence later than the date the Participant's (or his Beneficiary's) benefit payments otherwise commence. Such distribution to an alternate payee shall be made only in a manner permitted under Articles XI or XII of the Plan and only to the extent the Participant would be eligible for such distribution option.
12.9 Requirement for Direct Rollovers. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article XII, a Distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
12.10 Consent and Notice Requirements. If the value of the vested portion of a Participant's Account derived from Employing Company and Employee contributions exceeds $5,000 determined in accordance with the requirements of Code Section 411(a)(11), the Participant must consent to any distribution of such vested account balance prior to his Normal Retirement Date. The consent of the Participant shall be obtained within the ninety-day period ending on the first day of the first period for which an amount is payable as an annuity or in any other form under this Plan.
The Committee shall notify the Participant of the right to defer any distribution until the Participant's Account balance is no longer immediately distributable. Such notification shall include a general description of the material features and an explanation of the relative values of the operational forms of benefit available under the Plan in a manner that would satisfy the notice requirements of Section 417(a)(3) of the Code; such notification shall be provided no less than 30 days and no more than 90 days prior to the annuity starting date.
Distributions may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Treasury Regulations is given, provided that:
(a) the Committee informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution and a particular distribution option, and
(b) the Participant, after receiving the notice, affirmatively elects a distribution.
12.11 Form of Payment. All distributions under this Article XII shall be made in the form of cash, provided that the person entitled to such distribution may demand that the portion of any distribution which is attributable to Common Stock or Mirant Stock be distributed in the form of such Common Stock or Mirant Stock, respectively, to the extent of the whole number of shares in the Participant's Account, with a cash adjustment for any fractional shares.
12.12 Partial Distribution upon Termination of Employment. If a Participant's employment with the Affiliated Employers is terminated and such Participant is deemed not to have separated from service within the meaning of Code Section 401(k)(2)(B)(i)(I), such Participant, in addition to the withdrawal options available under Article XI, shall be entitled to elect a lump sum distribution of the entire balance to the credit of his Account less the amount credited to his Elective Employer Contribution subaccount. The amounts credited to his Elective Employer Contribution subaccount may be distributed in a lump sum distribution at such time permitted pursuant to Code Section 401(k)(2)(B)(i) and Section 4.4(c) hereof. Such lump sum distributions shall otherwise be subject to this Article XII.
12.13 Distribution of Dividends Payable on Common Stock. Each Participant may elect whether (i) to receive a cash distribution of all or a portion of the dividends payable on the shares of Common Stock credited to the Participant's Account as of the record date of the Common Stock or (ii) to have such dividends paid to the Plan and reinvested in Common Stock credited to the Participant's Account. The election of a Participant whether to receive a cash distribution of dividends shall remain in effect until such election is changed by the Participant. In the event a Participant fails to make an election with respect to the dividends payable on any shares of Common Stock credited to the Participant's Account, such Participant shall be deemed to have elected to have the dividends payable on such shares paid to the Plan and reinvested in Common Stock credited to the Participant's Account. Upon the death of a Participant, such Participant shall be deemed to have elected to have the dividends payable on all shares of Common Stock credited to the Participant's Account reinvested in Common Stock, notwithstanding any election in effect at the time of the Participant's death.
A Participant may change his election whether to receive a cash distribution of dividends at any time. However, with respect to each dividend on Common Stock, the election, or deemed election, of a Participant which is in effect on the last day of the first month in the calendar quarter which includes the record date for such dividend (the "Election Deadline") shall apply with respect to the dividends payable on the shares of Common Stock credited to the Participant's Account on such record date. In any event, all elections and deemed elections shall be irrevocable as of the Election Deadline. Participants are 100% vested in dividends payable on Common Stock. Payment of cash distributions under this Section 12.13 shall be made to the Plan and to Participants, as the case may be, as soon as administratively practicable following the payable date of the dividends. The Committee may establish such administrative procedures as it deems necessary or appropriate to effect the elections under this Section 12.13.
In addition to the foregoing, with respect to dividends paid in 2001 to
the Plan on the shares of Common Stock credited to a Participant's Account as of
any record date in 2001 which were not distributed in cash to such Participant
("Accumulated 2001 Dividends"), such Participant may elect in accordance with
the requirements of this paragraph and procedures established by the Committee
whether (i) to receive a cash distribution of all or a portion of his
Accumulated 2001 Dividends or (ii) to have such Accumulated 2001 Dividends
remain invested in the Participant's Account. In the event a Participant fails
to make an election with respect to Accumulated 2001 Dividends, such Participant
shall be deemed to have elected to have such dividends remain invested in the
Participant's Account. Any election, or deemed election, whether to receive a
cash distribution of Accumulated 2001 Dividends shall be irrevocable as of the
deadline established by the Committee by which Participants must make an
election with respect to Accumulated 2001 Dividends. The payment of cash
distributions of Accumulated 2001 Dividends shall be made to Participants after
a reasonable election period but in any event within ninety (90) days after the
end of the Plan Year ending on December 31, 2001. The Committee may establish
such administrative procedures as it deems necessary or appropriate to effect
the distribution of Accumulated 2001 Dividends, including limiting the amount of
Accumulated 2001 Dividends a Participant may receive in cash based on the
balance of the various subaccounts in the Participant's Account (as described in
Section 9.1) at the time the distribution is made and designating the Investment
Funds from which such distributions are withdrawn. The provisions of this
paragraph shall not apply to dividends paid to the Plan in 2001 which the
Participant elected in 2001 to receive in cash.
ARTICLE XIII
ADMINISTRATION OF THE PLAN
13.1 Membership of Committee. The Plan shall be administered by the Committee, which shall consist of the individuals then serving in the positions of Vice President, System Compensation and Benefits of The Southern Company; Senior Vice-President, Human Resources of The Southern Company; and Comptroller of The Southern Company or any other position or positions that succeed to the duties of the foregoing positions. The Committee shall be chaired by the Senior Vice-President, Human Resources of The Southern Company and may select a Secretary (who may, but need not, be a member of the Committee) to keep its records or to assist it in the discharge of its duties.
13.2 Acceptance and Resignation. Any person appointed to be a member of the Committee shall signify his acceptance in writing to the Chairman of the Committee. Any member of the Committee may resign by delivering his written resignation to the Committee and such resignation shall become effective upon delivery or upon any later date specified therein.
13.3 Transaction of Business. A majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business at any meeting. Any determination or action of the Committee may be made or taken by a majority of the members present at any meeting thereof or without a meeting by a resolution or written memorandum concurred in by a majority of the members then in office.
13.4 Responsibilities in General. The Committee shall administer the Plan and shall have the discretionary authority, power, and the duty to take all actions and to make all decisions necessary or proper to carry out the Plan and to control and manage the operation and administration of the Plan. The Committee shall have the discretion to interpret the Plan, including any ambiguities herein, and to determine the eligibility for benefits under the Plan in its sole discretion. The determination of the Committee as to any question involving the general administration and interpretation of the Plan shall be final, conclusive, and binding on all persons, except as otherwise provided herein or by law, and may be relied upon by the Company, all Employing Companies, the Trustee, the Participants, and their Beneficiaries. Any discretionary actions to be taken under the Plan by the Committee with respect to Employees and Participants or with respect to benefits shall be uniform in their nature and applicable to all persons similarly situated.
13.5 Committee as Named Fiduciary. For the purpose of compliance with the provisions of ERISA, the Committee shall be deemed the administrator of the Plan as the term "administrator" is defined in ERISA, and the Committee shall be, with respect to the Plan, a named fiduciary as that term is defined in ERISA. For the purpose of carrying out its duties, the Committee may, in its discretion, allocate its responsibilities under the Plan among its members and may, in its discretion, designate persons (in writing or otherwise) other than members of the Committee to carry out such responsibilities of the Committee under the Plan as it may see fit.
13.6 Rules for Plan Administration. The Committee may make and enforce rules and regulations for the administration of the Plan consistent with the provisions thereof and may prescribe the use of such forms or procedures as it shall deem appropriate for the administration of the Plan.
13.7 Employment of Agents. The Committee may employ independent qualified public accountants, as such term is defined in ERISA, who may be accountants to The Southern Company and any Affiliated Employer, legal counsel who may be counsel to The Southern Company and any Affiliated Employer, other specialists, and other persons as the Committee deems necessary or desirable in connection with the administration of the Plan. The Committee and any person to whom it may delegate any duty or power in connection with the administration of the Plan, the Company and the officers and directors thereof shall be entitled to rely conclusively upon and shall be fully protected in any action omitted, taken, or suffered by them in good faith in reliance upon any independent qualified public accountant, counsel, or other specialist, or other person selected by the Committee, or in reliance upon any tables, evaluations, certificates, opinions, or reports which shall be furnished by any of them or by the Trustee.
13.8 Co-Fiduciaries. It is intended that to the maximum extent permitted by ERISA, each person who is a fiduciary (as that term is defined in ERISA) with respect to the Plan shall be responsible for the proper exercise of his own powers, duties, responsibilities, and obligations under the Plan and the Trust, as shall each person designated by any fiduciary to carry out any fiduciary responsibilities with respect to the Plan or the Trust. No fiduciary or other person to whom fiduciary responsibilities are allocated shall be liable for any act or omission of any other fiduciary or of any other person delegated to carry out any fiduciary or other responsibility under the Plan or the Trust.
13.9 General Records. The Committee shall maintain or cause to be maintained an Account (and any separate subaccount) which accurately reflects the interest of each Participant, as provided for in Section 9.1, and shall maintain or cause to be maintained all necessary books of account and records with respect to the administration of the Plan. The Committee shall mail or cause to be mailed to Participants reports to be furnished to Participants in accordance with the Plan or as may be required by ERISA. Any notices, reports, or statements to be given, furnished, made, or delivered to a Participant shall be deemed duly given, furnished, made, or delivered when addressed to the Participant and delivered to the Participant in person or mailed by ordinary mail to his address last communicated to the Committee (or its delegate) or of his Employing Company.
13.10 Liability of the Committee. In administering the Plan, except as may be prohibited by ERISA, neither the Committee nor any person to whom it may delegate any duty or power in connection with administering the Plan shall be liable for any action or failure to act except for its or his own gross negligence or willful misconduct; nor for the payment of any amount under the Plan; nor for any mistake of judgment made by him or on his behalf as a member of the Committee; nor for any action, failure to act, or loss unless resulting from his own gross negligence or willful misconduct; nor for the neglect, omission, or wrongdoing of any other member of the Committee. No member of the Committee shall be personally liable under any contract, agreement, bond, or other instrument made or executed by him or on his behalf as a member of the Committee.
13.11 Reimbursement of Expenses and Compensation of Committee. Members of the Committee shall be reimbursed by the Company for expenses they may individually or collectively incur in the performance of their duties. Each member of the Committee who is a full-time employee of the Company or of any Employing Company shall serve without compensation for his services as such member; each other member of the Committee shall receive such compensation, if any, for his services as the Board of Directors may fix from time to time.
13.12 Expenses of Plan and Trust Fund. The expenses of establishment
and administration of the Plan and the Trust Fund, including all fees of the
Trustee, auditors, and counsel, shall be paid by the Company or the Employing
Companies. Notwithstanding the foregoing, to the extent provided in the Trust
Agreement, certain administrative expenses may be paid from the Trust Fund
either directly or through reimbursement of the Company or the Employing
Companies. Any expenses directly related to the investments of the Trust Fund,
such as stock transfer taxes, brokerage commissions, or other charges incurred
in the acquisition or disposition of such investments, shall be paid from the
Trust Fund (or from the particular Investment Fund to which such fees or
expenses relate) and shall be deemed to be part of the cost of such securities
or deducted in computing the proceeds therefrom, as the case may be. Investment
management fees for the Investment Funds shall be paid from the particular
Investment Fund to which they relate either directly or through reimbursement of
the Company or the Employing Companies unless the Company or the Employing
Companies do not elect to receive reimbursement for payment of such expenses.
Taxes, if any, on any assets held or income received by the Trustee and transfer
taxes on the transfer of Common Stock from the Trustee to a Participant or his
Beneficiary shall be charged appropriately against the Accounts of Participants
as the Committee shall determine. Any expenses paid by the Company pursuant to
Section 13.11 and this section shall be subject to reimbursement by other
Employing Companies of their proportionate shares of such expenses as determined
by the Committee.
13.13 Responsibility for Funding Policy. The Pension Fund Investment Review Committee of The Southern Company System shall have responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA.
13.14 Management of Assets. The Committee shall not have responsibility with respect to control or management of the assets of the Plan. The Trustee shall have the sole responsibility for the administration of the assets of the Plan as provided in the Trust Agreement, except to the extent that an investment advisor (who qualifies as an Investment Manager as that term is defined in ERISA) who is appointed by the Pension Fund Investment Review Committee shall have responsibility for the management of the assets of the Plan, or some part thereof (including powers to acquire and dispose of the assets of the Plan, or some part thereof).
13.15 Notice and Claims Procedures. Consistent with the requirements of ERISA and the regulations thereunder of the Secretary of Labor from time to time in effect, the Committee shall:
(a) provide adequate notice in writing to any Participant or Beneficiary whose claim for benefits under the Plan has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such Participant or Beneficiary, and
(b) afford a reasonable opportunity to any Participant or Beneficiary whose claim for benefits has been denied for a full and fair review of the decision denying the claim.
13.16 Bonding. Unless otherwise determined by the Board of Directors or required by law, no member of the Committee shall be required to give any bond or other security in any jurisdiction.
13.17 Multiple Fiduciary Capacities. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan, and any fiduciary with respect to the Plan may serve as a fiduciary with respect to the Plan in addition to being an officer, employee, agent, or other representative of a party in interest, as that term is defined in ERISA.
13.18 Change in Administrative Procedures. Notwithstanding any provision in the Plan to the contrary, the Committee shall be authorized to take whatever actions it deems necessary or appropriate in its discretion to implement administrative procedures, including, but not limited to, suspending plan participation (to the extent permitted by applicable law,) and suspending changes in investment directions and fund transfers, even though otherwise permitted or required under the Plan.
ARTICLE XIV
TRUSTEE OF THE PLAN
14.1 Trustee. The Company has entered into a Trust Agreement with the Trustee to hold the funds necessary to provide the benefits set forth in the Plan. If the Board of Directors so determines, the Company may enter into a Trust Agreement or Trust Agreements with additional trustees. Any Trust Agreement may be amended by the Company from time to time in accordance with its terms. Any Trust Agreement shall provide, among other things, that all funds received by the Trustee thereunder will be held, administered, invested, and distributed by the Trustee, and that no part of the corpus or income of the Trust held by the Trustee shall be used for or diverted to purposes other than for the exclusive benefit of Participants or their Beneficiaries, except as otherwise provided in the Plan. Any Trust Agreement may also provide that the investment and reinvestment of the Trust Fund, or any part thereof may be carried out in accordance with directions given to the Trustee by any Investment Manager or Investment Managers (as that term is defined in ERISA) who may be appointed by the Pension Fund Investment Review Committee. The Board of Directors may remove any Trustee or any successor Trustee, and any Trustee or any successor Trustee may resign. Upon removal or resignation of a Trustee, the Board of Directors shall appoint a successor Trustee.
14.2 Purchase of Common Stock. As soon as practicable after receipt of funds applicable to the purchase of Common Stock, the Trustee shall purchase Common Stock or cause Common Stock to be purchased. Such Common Stock may be purchased on the open market or by private purchase (including private purchases directly from The Southern Company); provided that (a) no private purchase may be made at any price greater than the last sale price or highest current independent bid price, whichever is higher, for Common Stock on the New York Stock Exchange, plus an amount equal to the commission payable in a stock exchange transaction; (b) if such private purchase shall be a purchase of Common Stock directly from The Southern Company, no commission shall be paid with respect thereto unless such commission satisfies the requirements of Prohibited Transaction Class Exemption 75-1; and (c) the Trustee may purchase Common Stock directly from The Southern Company under The Southern Investment Plan, as from time to time amended, or under any other similar plan made available to holders of record of shares of Common Stock which may be in effect from time to time, at the purchase price provided for in such plan. The Trustee may hold in cash, and may temporarily invest funds applicable to the purchase of Common Stock in short-term United States obligations, other obligations guaranteed by the United States Government, commercial paper, or certificates of deposit, and if the Trustee so determines, may transfer such funds to money market funds utilized by the Trustee for qualified employee benefit trusts.
14.3 Voting of Common Stock. Before each annual or special meeting of shareholders of The Southern Company, there shall be sent to each Participant a copy of the proxy soliciting material for the meeting, together with a form requesting instructions to the Trustee on how to vote the shares of Common Stock credited to such Participant's Account as of the record date of the Common Stock. If a Participant does not provide the Trustee or its designated agent with timely voting instructions for the Trustee, the Pension Fund Investment Review Committee of The Southern Company System or its delegate may direct the Trustee how to vote such Participant's shares. If the Pension Fund Investment Review Committee of The Southern Company System or its delegate does not provide the Trustee or its designated agent with timely voting instructions, the Trustee, if required to do so by applicable law, may vote such Participant's shares. The Pension Fund Investment Review Committee of The Southern Company System or its delegate may direct the Trustee with respect to voting unallocated shares of Common Stock, if any. If the Pension Fund Investment Review Committee of The Southern Company System or its delegate does not provide the Trustee or its designated agent with timely voting instructions, the Trustee, if required to do so by applicable law, may vote such unallocated shares. Procedures similar to those described above shall also apply to voting the Mirant Stock credited to each Participant's Account.
14.4 Voting of Other Investment Fund Shares. The Pension Fund Investment Review Committee or its delegate may direct the Trustee with respect to voting the shares in any Investment Fund other than the Company Stock Fund or Mirant Stock Fund. To the extent an Investment Manager has been designated with respect to an Investment Fund, such Investment Manager (and not the Pension Fund Investment Review Committee) shall direct the Trustee with respect to voting the shares in such Investment Fund. If the Investment Manager does not direct the Trustee with respect to voting such shares, the Pension Fund Investment Review Committee may direct the Trustee with respect to voting such shares. If the Pension Fund Investment Review Committee does not provide the Trustee or its designated agent with timely voting instructions, the Trustee, if required to do so by applicable law, may vote such shares.
14.5 Uninvested Amounts. The Trustee may keep uninvested an amount of cash sufficient in its opinion to enable it to carry out the purposes of the Plan.
14.6 Independent Accounting. The Board of Directors shall select a firm of independent public accountants to examine and report annually on the financial position and the results of operation of the Trust forming a part of the Plan.
ARTICLE XV
AMENDMENT AND TERMINATION OF THE PLAN
15.1 Amendment of the Plan. The Plan may be amended or modified by the Board of Directors pursuant to its written resolutions at any time and from time to time; provided, however, that no such amendment or modification shall make it possible for any part of the corpus or income of the Trust Fund to be used for or diverted to purposes other than for the exclusive benefit of Participants or their Beneficiaries under the Plan, including such part as is required to pay taxes and administration expenses of the Plan. The Plan may also be amended or modified by the Committee (a) if such amendment or modification does not involve a substantial increase in cost to any Employing Company, or (b) as may be necessary, proper, or desirable in order to comply with laws or regulations enacted or promulgated by any federal or state governmental authority and to maintain the qualification of the Plan under Sections 401(a) and 501(a) of the Code and the applicable provisions of ERISA as provided in regulations prescribed by the Secretary of the Treasury.
No amendment to the Plan shall have the effect of decreasing a
Participant's vested interest in his Account, determined without regard to such
amendment, as of the later of the date such amendment is adopted or the date it
becomes effective. In addition, if the vesting schedule of the Plan is amended,
any Participant who has completed at least three (3) Years of Service and whose
vested interest is at any time adversely affected by such amendment may elect to
have his vested interest determined without regard to such amendment during the
election period defined under Section 411(a)(10) of the Code. Finally, no
amendment shall eliminate an optional form of benefit in violation of Code
Section 411(d)(6).
15.2 Termination of the Plan. It is the intention of the Employing Companies to continue the Plan indefinitely. However, the Board of Directors pursuant to its written resolutions may at any time and for any reason suspend or terminate the Plan or suspend or discontinue the making of contributions of all Participants and of contributions by all Employing Companies. Any Employing Company may, by action of its board of directors and approval of the Board of Directors, suspend or terminate the making of contributions of Participants in the employ of such Employing Company and of contributions by such Employing Company.
In the event of termination of the Plan or partial termination or upon complete discontinuance of contributions under the Plan by all Employing Companies or by any one Employing Company, the amount to the credit of the Account of each Participant whose Employing Company shall be affected by such termination or discontinuance shall be determined as of the next Valuation Date and shall be distributed to him or his Beneficiary thereafter at such time or times and in such nondiscriminatory manner as is determined by the Committee in compliance with the restrictions on distributions set forth in Code Section 401(k).
15.3 Merger or Consolidation of the Plan. The Plan shall not be merged or consolidated with nor shall any assets or liabilities thereof be transferred to any other plan unless each Participant of the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately prior to the merger, consolidation, or transfer (if the Plan had then terminated).
15.4 Transfer of Plan Assets. Notwithstanding any provision of the Plan
to the contrary, upon the distribution by the Southern Company to its
shareholders of the Mirant Stock held by the Southern Company pursuant to a
tax-free spin-off under Code Section 355 or such similar transaction, the
Accounts of certain Participants who shall be identified in accordance with the
Employee Matters Agreement entered into between the Southern Company and Mirant
("Agreement") shall be transferred to a retirement plan established by Mirant
which is intended to constitute a qualified retirement plan under Code Section
401(a). The Committee shall determine the time of such transfers and shall
establish such rules and procedures as its deems necessary or appropriate to
effect the transfers, except that all actions with respect to the transfers
shall be taken in a manner consistent with the Agreement.
ARTICLE XVI
TOP-HEAVY REQUIREMENTS
16.1 Top-Heavy Plan Requirements. For any Plan Year the Plan shall be determined to be a top-heavy plan, the Plan shall provide the minimum allocation requirement of Section 16.3.
(a) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a top-heavy plan, if, as of the Determination Date, the sum of the Aggregate Accounts of Key Employees under this Plan exceeds 60% of the Aggregate Accounts of all Employees entitled to participate in this Plan.
(b) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a super-top-heavy plan, if, as of the Determination Date, the sum of the Aggregate Accounts of Key Employees under this Plan exceeds 90% of the Aggregate Accounts of all Employees entitled to participate in this Plan.
(c) In the case of a Required Aggregation Group, each plan in the group will be considered a top-heavy plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a top-heavy plan if the Aggregation Group is not a Top-Heavy Group.
In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a top-heavy plan if the Permissive Aggregation Group is a Top-Heavy Group. A plan that is not part of the Required Aggregation Group but that has nonetheless been aggregated as part of the Permissive Aggregation Group will not be considered a top-heavy plan even if the Permissive Aggregation Group is a Top-Heavy Group.
(d) For purposes of this Article XVI, if any Employee is a non-Key Employee for any Plan Year, but such Employee was a Key Employee for any prior Plan Year, such Employee's Present Value of Accrued Retirement Income and/or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a top-heavy or super-top-heavy plan (or whether any Aggregation Group which includes this Plan is a Top-Heavy Group). In addition, if an Employee or former Employee has not performed any services for any Employing Company maintaining the Plan at any time during the one-year period ending on the Determination Date, the Aggregate Account and/or Present Value of Accrued Retirement Income shall be excluded in determining whether this Plan is a top-heavy or super-top-heavy plan.
(e) Only those plans of the Affiliated Employers in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are top-heavy plans.
(a) Notwithstanding anything herein to the contrary, for any top-heavy Plan Year, the Employing Company contribution allocated to the Account of each non-Key Employee shall be an amount not less than the lesser of: (1) 3% of such Participant's compensation for that Plan Year, or (2) a percentage of that Participant's compensation not to exceed the percentage at which contributions are made under the Plan for the Key Employee for whom such percentage is highest for that Plan Year.
(b) For purposes of the minimum allocation of Section 16.3(a), the percentage allocated to the Account of any Key Employee shall be equal to the ratio of the Employing Company contributions allocated on behalf of such Key Employee divided by the compensation of such Key Employee for that Plan Year. Employer Matching Contributions shall be taken into account for purposes of satisfying the minimum contribution allocation requirements under Code Section 416(c)(2) and the Plan.
(c) For any top-heavy Plan Year, the minimum allocations of
Section 16.3(a) shall be allocated to the Accounts of all non-Key
Employees who are Participants and who are employed by the Affiliated
Employers on the last day of the Plan Year.
(d) Notwithstanding the foregoing, in any Plan Year in which a non-Key Employee is a Participant in both this Plan and a defined benefit plan, and both such plans are top-heavy plans, the Affiliated Employers shall not be required to provide a non-Key Employee with both the full separate minimum defined benefit and the full separate defined contribution plan allocations. Therefore, if a non-Key Employee is participating in a defined benefit plan maintained by the Affiliated Employers and the minimum benefit under Code Section 416(c)(1) is provided the non-Key Employee under such defined benefit plan, the minimum allocation provided for above shall not be applicable, and no minimum allocation shall be made on behalf of the non-Key Employee. Alternatively, the Employing Company may satisfy the minimum allocation requirement of Code Section 416(c)(2) for the non-Key Employee by providing any combination of benefits and/or contributions that satisfy the safe harbor rules of Treasury Regulation Section 1.416-1(M-12).
ARTICLE XVII
GENERAL PROVISIONS
17.1 Plan Not an Employment Contract. The Plan shall not be deemed to constitute a contract between an Affiliated Employer and any Employee, nor shall anything herein contained be deemed to give any Employee any right to be retained in the employ of an Employing Company or to interfere with the right of an Employing Company to discharge any Employee at any time and to treat him without regard to the effect which such treatment might have upon him as a Participant.
17.2 No Right of Assignment or Alienation. Except as may be otherwise permitted or required by law, no right or interest in the Plan of any Participant or Beneficiary and no distribution or payment under the Plan to any Participant or Beneficiary shall be subject in any manner to anticipation, alienation, sale, transfer (except by death), assignment (either at law or in equity), pledge, encumbrance, charge, attachment, garnishment, levy, execution, or other legal or equitable process, whether voluntary or involuntary, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, attach, garnish, levy, or execute or enforce any other legal or equitable process against the same shall be void, nor shall any such right, interest, distribution, or payment be in any way liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person entitled to such right, interest, distribution, or payment. If any Participant or Beneficiary is adjudicated bankrupt or purports to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge any such right, interest, distribution, or payment, voluntarily or involuntarily, or if any action shall be taken which is in violation of the provisions of the immediately preceding sentence, the Committee may hold or apply or cause to be held or applied such right, interest, distribution, or payment or any part thereof to or for the benefit of such Participant or Beneficiary in such manner as is in accordance with applicable law. In addition, a Participant's benefits may be offset pursuant to a judgment, order, or decree issued (or settlement agreement entered into) on or after August 5, 1997, if and to the extent that such offset is permissible or required under Code Section 401(a)(13).
Notwithstanding the above, the Committee and the Trustee shall comply with any domestic relations order (as defined in Section 414(p)(1)(B) of the Code) which is a qualified domestic relations order satisfying the requirements of Section 414(p) of the Code. The Committee shall establish procedures for (a) notifying Participants and alternate payees who have or may have an interest in benefits which are the subject of domestic relations orders, (b) determining whether such domestic relations orders are qualified domestic relations orders under Section 414(p) of the Code, and (c) distributing benefits which are subject to qualified domestic relations orders.
17.3 Payment to Minors and Others. If the Committee determines that any person entitled to a distribution or payment from the Trust Fund is an infant or a minor, is incompetent, or is unable to care for his affairs by reason of physical or mental disability, it may cause all distributions or payments thereafter becoming due to such person to be made to any other person for his benefit, without responsibility to follow the application of payments so made. Payments made pursuant to this provision shall completely discharge the Company, the Trustee, and the Committee with respect to the amounts so paid. No person shall have any rights under the Plan with respect to the Trust Fund, or against the Trustee or any Employing Company, except as specifically provided herein.
17.4 Source of Benefits. The Trust Fund established under the Plan shall be the sole source of the payments or distributions to be made in accordance with the Plan. No person shall have any rights under the Plan with respect to the Trust Fund, or against the Trustee or any Employing Company, except as specifically provided herein.
17.5 Unclaimed Benefits. If the Committee is unable, within five (5) years after any distribution becomes payable to a Participant or Beneficiary, to make or direct payment to the person entitled thereto because the identity or whereabouts of such person cannot be ascertained, notwithstanding the mailing of due notice to such person at his last known address as indicated by the records of either the Committee or his Employing Company, then such benefit or distribution will be disposed of as follows:
(a) If the whereabouts of the Participant is unknown to the Committee, distribution will be made to the Participant's Beneficiary or Beneficiaries.
Payment to such one or more persons shall completely discharge the Company, the Trustee, and the Committee with respect to the amounts so paid.
(b) If none of the persons described in (a) above, can be located, then the benefit payable under the Plan shall be forfeited and shall be applied to reduce future Employer Matching Contributions. Notwithstanding the foregoing sentence, such benefit shall be reinstated if a claim is made by the Participant or Beneficiary for the forfeited benefit.
In the event the Committee makes or directs a payment to the person entitled thereto but the check for such payment remains un-cashed for a period of 180 days, the Committee shall take such actions as it deems reasonable to determine the whereabouts of such person. If the whereabouts of the person is unknown or the check remains un-cashed, the Committee shall direct that such check be cancelled. In the event the person entitled to such payment subsequently requests payment, the Committee shall direct such payment to such person in the amount of the previous check.
17.6 Governing Law. The provisions of the Plan and the Trust shall be construed, administered, and enforced in accordance with the laws of the State of Georgia, except to the extent such laws are preempted by the laws of the United States.
ARTICLE XVIII
SPECIAL REQUIREMENTS FOR ACCOUNT BALANCES
ATTRIBUTABLE TO ACCRUED BENEFITS
TRANSFERRED FROM THE SEPCO PLAN
18.1 SEPCO Transferred Accounts. Notwithstanding any other provisions of this Plan to the contrary, a Participant's SEPCO Transferred Account shall be subject to the requirements of this Article XVIII.
18.2 In-Service Withdrawals from SEPCO Transferred Accounts. Except as provided in this Section 18.2, a Participant shall be entitled to a distribution of his SEPCO Transferred Account at the same time he is entitled to a distribution of his Account under the applicable provisions of Article XII.
(a) Age 59 1/2. A Participant who has attained age 59 1/2 shall have the right to withdraw all or a portion of his SEPCO Transferred Account in accordance with Section 11.6(e) provided that he shall have first withdrawn all other amounts available to him in accordance with the terms and order of priority set forth in Section 11.1.
(b) Hardship. A Participant who meets the requirements for hardship set forth in Section 11.6 hereof shall be entitled to withdraw amounts determined necessary to relieve such hardship from his SEPCO Transferred Account, provided that he shall have first withdrawn all other amounts available to him in accordance with the terms and order of priority set forth in Section 11.1.
18.3 Loans from SEPCO Transferred Accounts. Subject to the provisions of Section 11.7, a Participant may request that a loan be made to him from his SEPCO Transferred Account, provided, however, that the Participant has first borrowed all other amounts available to him under the terms of the Plan.
A Participant must obtain the consent of his or her spouse, if any, to
use any portion of his SEPCO Transferred Account as security for a loan. Within
the ninety-day period ending on the date on which a loan is made to a
Participant who is married, the Participant shall obtain and deliver to the
Committee the written consent of the Participant's spouse (1) to the loan, and
(2) to the reduction of the Participant's Account if the Participant's Account
is reduced because of nonpayment or other default with respect to the loan. No
further spousal consent shall be required in the event the Participant's Account
is subsequently reduced with respect to such loan, even if the Participant is
then married to a different spouse. A new spousal consent shall be required for
any subsequent loan to a Participant, if the Participant is then married.
18.4 Distribution of SEPCO Transferred Accounts. Notwithstanding any provisions of this Plan to the contrary, a Participant with a SEPCO Transferred Account shall be paid the vested benefits of the SEPCO Transferred Account upon retirement, death, total and permanent disability, or termination of employment as provided herein.
(a) All benefits from a Participant's SEPCO Transferred Account shall be distributed in accordance with the distribution options available under Article XII, with applicable spousal consent as provided under the SEPCO Plan, unless a Participant elects payment of benefits in the form of a life annuity pursuant to a written election filed with the Committee prior to commencement of distribution of benefits. The provisions of this Section 18.4 shall take precedence over any conflicting provisions of the Plan and shall apply to any Participant who has a SEPCO Transferred Account and who elects to receive payment of his benefits from his SEPCO Transferred Account in the form of a life annuity. A married Participant electing to receive benefits in the form of a life annuity shall receive the value of his benefit in the form of a qualified joint and survivor annuity, which shall provide an annuity for the life of the Participant with a survivor annuity for the life of the Participant's spouse which is either 50% or 100%, as elected by the Participant, of the amount of the annuity which is payable during the joint lives of the Participant and the Participant's spouse, and which is the actuarial equivalent of a single life annuity for the life of the Participant. An unmarried Participant who elects a life annuity shall receive the value of his benefits from his SEPCO Transferred Account in the form of an annuity for his lifetime.
(b) If the Participant's interest is to be distributed in other than a single sum, the amount required to be distributed for each calendar year, beginning with distributions for the first Distribution Calendar Year, must at least equal the quotient obtained by dividing the Participant's Benefit by the Applicable Life Expectancy.
(c) The minimum distribution required for the Participant's first Distribution Calendar Year must be made on or before the Participant's Required Beginning Date. The minimum distribution for other calendar years, including the minimum distribution for the Distribution Calendar Year in which the Participant's Required Beginning Date occurs, must be made on or before December 31 of that Distribution Calendar Year.
(d) If the Participant's benefit is distributed in the form of an annuity purchased from an insurance company, distributions thereunder shall be made in accordance with the requirements of Section 401(a)(9) of the Code and the proposed regulations thereunder.
(1) "Applicable Life Expectancy" means the life expectancy calculated using the attained age of the Participant as of the Participant's birthday in the applicable calendar year reduced by one for each calendar year which has elapsed since the date life expectancy was first calculated. If life expectancy is being recalculated, the applicable life expectancy shall be the life expectancy as so recalculated. The applicable calendar year shall be the first Distribution Calendar Year, and if life expectancy is being recalculated such succeeding calendar year.
(2) "Distribution Calendar Year" means a calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant's Required Beginning Date.
(3) "Participant's Benefit" means the account balance as of the last valuation date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. If any portion of the minimum distribution for the first Distribution Calendar Year is made in the second Distribution Calendar Year on or before the Required Beginning Date, the amount of the minimum distribution made in the second Distribution Calendar Year shall be treated as if it had been made in the immediately preceding Distribution Calendar Year.
(4) "Required Beginning Date" means April 1st of the calendar year following the calendar year in which the Participant attains age 70-1/2, in accordance with regulations prescribed by the Secretary of the Treasury.
(f) Notwithstanding anything contained herein to the contrary, the requirements of this Section shall apply to any distribution of a Participant's interest and will take precedence over any inconsistent provisions of this Plan. All distributions required under this Section shall be determined and made in accordance with the proposed regulations under Section 401(a)(9), including the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed regulations.
18.5 Code Section 411(d)(6) Protected Benefits. Notwithstanding any of the foregoing, the provisions of this Article XVIII to effectuate the merger of the SEPCO Plan into this Plan shall not decrease a Participant's accrued benefit, except to the extent permitted under Section 412(c)(8) of the Code, and shall not reduce or eliminate Code Section 411(d)(6) protected benefits determined immediately prior to the date of such merger. The Committee shall disregard any part of this Article XVIII or the Plan to the extent that application of such would fail to satisfy this paragraph. If the Committee disregards any portion of this Article XVIII or the Plan because it would eliminate a protected benefit, the Committee shall maintain a schedule of any such impacted early retirement option or other optional forms of benefit and the Plan shall continue such for the affected Participants. Notwithstanding the foregoing, any optional form of benefit provided under this Plan solely as a result of the merger of the SEPCO Plan into this Plan shall be eliminated to the extent permitted and in accordance with the regulations prescribed by the Secretary of the Treasury under Code Section 411(d)(6), provided that the elimination of such optional form of benefit shall not be effective before the earlier of (a) the 90th day after the Participant receives a summary of material modification describing the elimination of such optional form of benefit or (b) January 1, 2002.
IN WITNESS WHEREOF, the Company has caused this amendment and restatement of The Southern Company Employee Savings Plan effective as of January 1, 2002, to be executed this _______ day of __________________, 2002.
EMPLOYEE SAVINGS PLAN COMMITTEE
APPENDIX A - EMPLOYING COMPANIES
The Employing Companies as of January 1, 2002 are:
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company Southern Communications Services, Inc. Southern Company Energy Solutions, Inc. Southern Company Services, Inc. Southern Nuclear Operating Company, Inc.
Exhibit 10.29
FIRST AMENDMENT TO THE
SOUTHERN COMPANY
EMPLOYEE SAVINGS PLAN
WHEREAS, Southern Company Services, Inc. ("Company") adopted the latest amendment and restatement of The Southern Company Employee Savings Plan ("Plan"), effective as of January 1, 2002;
WHEREAS, the Board of Directors of the Company authorized the merger of The Southern Company Performance Sharing Plan into the Plan;
WHEREAS, the Employee Savings Plan Committee ("Committee") desires to amend the Plan to incorporate provisions relating to the merger of The Southern Company Performance Sharing Plan into the Plan, effective as of June 21, 2002;
WHEREAS, the Committee further desires to amend the Plan to incorporate certain "good faith" provisions required under the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"), to increase the deferral limits on before-tax and employee after-tax contributions under the Plan, to modify certain requirements for the diversification and withdrawal of matching contributions, and to reflect the change in the corporate structure of Southern Company Energy Solutions, Inc.
WHEREAS, the Committee is authorized pursuant to Section 15.1 of the Plan to amend the Plan at any time, provided that the amendment does not involve a substantial increase in cost to any Employing Company or is necessary or desirable to comply with the laws and regulations applicable to the Plan.
NOW, THEREFORE, the Committee hereby amends the Plan as follows, effective as of the dates provided herein:
1.
Section 2.51, "Participant," is deleted in its entirety and replaced with the following new Section 2.51, effective as of June 21, 2002:
2.51 "Participant" shall mean (a) an Eligible Employee who has elected to participate in the Plan as provided in Article III and whose participation in the Plan at the time of reference has not been terminated as provided in the Plan (b) an Employee or former Employee who has ceased to be a Participant under (a) above, but for whom an Account is maintained under the Plan, (c) an Eligible Employee who has made a Rollover Contribution to this Plan to the extent that the Provisions of the Plan apply to such Rollover Contribution of the Eligible Employee, (d) an Employee or former Employee for whom a Transferred ESOP Account is maintained under the Plan, and (e) an Employee or former Employee for whom an Account is maintained for amounts transferred to the Plan from the Performance Sharing Plan.
2.
A new definition Section 2.72 is added to the Plan, effective as of June 21, 2002:
2.72 "Performance Sharing Plan" shall mean The Southern Company Performance Sharing Plan, as such plan existed prior to June 21, 2002.
3.
Section 3.3, "No Restoration of Previously Distributed Benefits," is amended by adding the following paragraph to the end of such Section, effective as of June 21, 2002:
Notwithstanding the foregoing, a Participant who terminated employment at a time when he was zero percent (0%) vested in his account under the Performance Sharing Plan and was deemed cashed-out of the Performance Sharing Plan, and who returns to the employ of an Affiliated Employer before incurring five (5) consecutive One-Year Breaks in Service shall be deemed to have bought back into this Plan and shall be entitled to a restoration of his benefits attributable to amounts under the Performance Sharing Plan, unadjusted for any subsequent gains or losses.
4.
Section 4.1, "Elective Employer Contributions," is deleted in its entirety and replaced with the following new Section 4.1, effective as of July 1, 2002:
4.1 Elective Employer Contributions. An Eligible Employee who meets the participation requirements of Article III may elect in accordance with the procedures established by the Committee to have his Compensation reduced by a whole percentage of his Compensation, which percentage shall not be less than one percent (1%) nor more than twenty-five percent (25%) (twelve percent (12%) for a Highly Compensated Employee) of his Compensation, except to the extent permitted under Section 4.12 of the Plan and Code Section 414(v), such Elective Employer Contribution to be contributed to his Account under the Plan.
5.
Section 4.6, "Voluntary Participant Contributions," is deleted in its entirety and replaced with the following new Section 4.6, effective as of July 1, 2002:
4.6 Voluntary Participant Contributions. An Eligible Employee who meets the participation requirements of Article III may elect in accordance with the procedures established by the Committee to contribute to his Account a Voluntary Participant Contribution consisting of any whole percentage of his Compensation, which percentage is not less than one percent (1%) nor more than twenty-five percent (25%) of his Compensation. The maximum Voluntary Participant Contribution shall be reduced by the percent, if any, which is contributed as an Elective Employer Contribution
on behalf of such Participant under Section 4.1. Notwithstanding the above, a Highly Compensated Employee may elect to contribute not less than one percent (1%) nor more than three percent (3%) of his Compensation as a Voluntary Participant Contribution.
6.
Section 5.4, "Multiple Use Limitation," is deleted in its entirety, effective as of January 1, 2002.
7.
Section 6.3, "Combination of Plans," is deleted in its entirety and replaced with the following new Section 6.3, effective as of June 21, 2002:
6.3 Combination of Plans. If an Employee participates in more than one defined contribution plan maintained by an Affiliated Employer and his Annual Additions exceed the limitations of Section 6.1, corrective adjustments shall be made first under this Plan and then, to the extent necessary, under The Southern Company Employee Stock Ownership Plan.
8.
Section 8.3, "Investment of Employer Matching Contributions," is deleted in its entirety and replaced with the following new Section 8.3, effective as of July 12, 2002:
8.3 Investment of Employer Matching Contributions. Employer Matching
Contributions shall be initially invested entirely in the Company Stock
Fund. Nevertheless, a Participant may elect at any time to invest all or a
portion of the amount credited to his Employer Matching Contribution
subaccount in any of the Investment Funds under this Plan as provided in
Section 8.5.
9.
A new subsection (e) is added to Section 9.1, "Establishment of Accounts," effective as of June 21, 2002:
(e) Upon the merger of the Performance Sharing Plan into this Plan effective as of June 21, 2002, a Participant's interest in the Performance Sharing Plan which is transferred to this Plan shall be added to the Participant's Employer Matching Contributions subaccount and shall be treated as Employer Matching Contributions under the Plan. In the event a Participant for whom amounts were transferred from the Performance Sharing Plan did not have an Account under this Plan prior to such transfer, an Employer Matching Contributions subaccount shall be established for such Participant. Except as otherwise determined by the Committee, the investment elections in effect under the Performance Sharing Plan at the time amounts are transferred to this Plan shall continue to apply to such amounts under this Plan, and Participants may thereafter direct the
investment of such amounts notwithstanding any restrictions set forth in
Section 8.3.
10.
Subsection (a)(5) of Section 11.1, "Withdrawals by Participants," is deleted in its entirety and replaced with the following new subsection (a)(5), effective as of July 12, 2002:
(5) All amounts described above, plus all or a portion of the value of his Account attributable to his Employer Matching Contributions (including earnings and appreciation thereon) allocated to his Account; provided, however, that said Participant shall have participated in the Plan for not less than sixty (60) months at the time of the withdrawal;
11.
Subsection (c)(4) of Section 11.6, "Requirement of Hardship," is deleted in its entirety, effective as of January 1, 2002.
12.
Section 12.3, "Distribution upon Death," is deleted in its entirety and replaced with the following new Section 12.3, in order to clarify the death distribution provisions applicable to terminated vested participants:
12.3 Distribution upon Death. If a Participant dies before he begins receiving a distribution of his Account in accordance with this Article XII, the entire balance credited to the Participant's Account shall be distributed as soon as practicable to the Participant's surviving Beneficiary or Beneficiaries in a lump sum.
13.
Subsection (b) of Section 12.6, "Commencement of Benefits," is amended by deleting the last sentence in the first paragraph thereof, effective as of January 1, 2002.
14.
Section 12.13, "Distribution of Dividends Payable on Common Stock," is amended to clarify the election period applicable to dividend distributions by replacing the first sentence of the second paragraph thereof with the following:
A Participant may change his election whether to receive a cash distribution of dividends during the first month of each calendar quarter.
15.
Appendix A, "Employing Companies," is amended by deleting "Southern Company Energy Solutions, Inc." and by adding, effective as of March 5, 2001, "Southern Company Energy Solutions, LLC," and the current Appendix A is replaced with the Appendix A attached hereto.
16.
Except as amended herein by this First Amendment, the Plan shall remain in full force and effect as amended and restated by the Company prior to the adoption of this First Amendment.
IN WITNESS WHEREOF, Southern Company Services, Inc., through the duly authorized members of the Employee Savings Plan Committee, has adopted this First Amendment to The Southern Company Employee Savings Plan this ____ day of ___________________, 2002.
EMPLOYEE SAVINGS PLAN COMMITTEE:
APPENDIX A - EMPLOYING COMPANIES
The Employing Companies as of January 1, 2002 are:
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Energy Solutions, LLC
Southern Company Services, Inc.
Southern Nuclear Operating Company, Inc.
Exhibit 10.30
THE SOUTHERN COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
As Amended and Restated
Effective January 1, 2002
TABLE OF CONTENTS
PAGE
ARTICLE I - PURPOSE OF THE PLAN...............................................1
ARTICLE II - DEFINITIONS......................................................2
2.1 Account.....................................................2
2.2 Affiliated Employer.........................................2
2.3 Aggregate Account...........................................2
2.4 Aggregation Group...........................................3
2.5 Annual Addition.............................................3
2.6 Beneficiary.................................................3
2.7 Board of Directors..........................................3
2.8 Break-in-Service Date.......................................3
2.9 Code........................................................4
2.10 Committee...................................................4
2.11 Common Stock................................................4
2.12 Company.....................................................4
2.13 Compensation................................................4
2.14 Determination Date..........................................5
2.15 Determination Year..........................................5
2.16 Distributee.................................................5
2.17 Direct Rollover.............................................5
2.18 Eligible Employee...........................................5
2.19 Eligible Retirement Plan....................................5
2.20 Eligible Rollover Distribution..............................6
2.21 Employee....................................................6
2.22 Employing Company...........................................6
2.23 Enrollment Date.............................................6
2.24 ERISA.......................................................6
2.25 Highly Compensated Employee.................................6
2.26 Hour of Service.............................................7
2.27 Key Employee................................................7
2.28 Limitation Year.............................................7
2.29 Look-Back Year..............................................7
2.30 Mirant......................................................7
2.31 Mirant Services.............................................7
2.32 Mirant Stock................................................7
2.33 Non-Highly Compensated Employee.............................7
2.34 Normal Retirement Date......................................7
2.35 One-Year Break in Service...................................7
2.36 Participant.................................................7
2.37 Permissive Aggregation Group................................7
2.38 Plan........................................................7
2.39 Plan Year...................................................8
2.40 Present Value of Accrued Retirement Income..................8
2.41 Qualified Election Period...................................8
2.42 Qualified Participant.......................................8
2.43 Required Aggregation Group..................................8
2.44 SCEM........................................................8
2.45 SEPCO.......................................................8
2.46 SEPCO ESOP..................................................8
2.47 Super-Top-Heavy Group.......................................8
2.48 Surviving Spouse............................................8
2.49 Top-Heavy Group.............................................8
2.50 Trust or Trust Fund.........................................9
2.51 Trust Agreement.............................................9
2.52 Trustee.....................................................9
2.53 Valuation Date..............................................9
2.54 Year of Service.............................................9
ARTICLE III - PARTICIPATION..................................................10
3.1 Eligibility Requirements...................................10
3.2 Duration of Participation..................................10
3.3 Participation upon Reemployment............................10
3.4 No Restoration of Previously Distributed Benefit...........11
3.5 Military Leave.............................................11
ARTICLE IV - EMPLOYING COMPANY CONTRIBUTION..................................12
4.1 Amount of Contribution.....................................12
4.2 Time of Payment............................................12
4.3 Purchases of Common Stock..................................12
4.4 Restrictions on Common Stock...............................12
4.5 Exclusive Benefit of Employees.............................12
ARTICLE V - PARTICIPANT CONTRIBUTION.........................................14
5.1 Participant Contributions Not Allowed......................14
ARTICLE VI - ACCOUNTS OF PARTICIPANTS........................................15
6.1 Separate Accounts..........................................15
6.2 Allocation of Common Stock.................................15
6.3 Section 415 Limitations....................................15
6.4 Correction of Contributions in Excess of Section 415
Limits.....................................................16
6.5 Combination of Plans.......................................16
6.6 Allocation of Dividends and other Distributions............16
6.7 Valuations.................................................17
6.8 Voting Company Stock.......................................17
6.9 Correction of Prior Incorrect Allocations and
Distributions..............................................18
6.10 Transfer of Mirant Stock...................................18
ARTICLE VII - AUTHORIZED WITHDRAWALS.........................................19
7.1 In General.................................................19
7.2 Distributions in Lieu of Diversification of
Investments Pursuant to Code Section 401(a)(28)(B).........19
7.3 In-Service Withdrawals.....................................19
ARTICLE VIII - DISTRIBUTIONS TO PARTICIPANTS.................................21
8.1 Vesting....................................................21
8.2 Distribution upon Retirement...............................21
8.3 Distribution upon Death....................................21
8.4 Designation of Beneficiary in the Event of Death...........21
8.5 Distribution upon Disability...............................22
8.6 Distribution upon Termination of Employment................22
8.7 Property Distributed/Method of Payment.....................23
8.8 Commencement of Benefits...................................23
8.9 Distribution upon Death....................................25
8.10 Adjustments for Deferred Accounts or Installment
Payments...................................................25
8.11 Transfers between Employing Companies......................25
8.12 Distribution to Alternate Payees...........................25
8.13 Requirement for Direct Rollovers...........................25
8.14 Consent and Notice Requirements............................26
ARTICLE IX - ADMINSTRATION...................................................27
9.1 Membership of Committee....................................27
9.2 Acceptance and Resignation.................................27
9.3 Transaction of Business....................................27
9.4 Responsibilities in General................................27
9.5 Committee as Named Fiduciary...............................27
9.6 Rules for Plan Administration..............................28
9.7 Employment of Agents.......................................28
9.8 Co-Fiduciaries.............................................28
9.9 General Records............................................28
9.10 Liability of the Committee.................................28
9.11 Reimbursement of Expenses and Compensation of Committee....29
9.12 Expenses of Plan and Trust Fund............................29
9.13 Responsibility for Funding Policy..........................29
9.14 Code Section 411(d)(6) Protected Benefits..................29
9.15 Management of Assets.......................................29
9.16 Notice and Claims Procedure................................30
9.17 Bonding....................................................30
9.18 Multiple Fiduciary Capacities..............................30
ARTICLE X - THE TRUST FUND AND TRUSTEE.......................................31
10.1 Trustee....................................................31
10.2 Duties of the Trustee......................................31
10.3 Diversion..................................................31
ARTICLE XI - AMENDMENT AND TERMINATION.......................................32
11.1 Amendment of the Plan......................................32
11.2 Termination of the Plan....................................32
11.3 Merger or Consolidation of the Plan........................33
11.4 Transfer of Plan Assets....................................33
ARTICLE XII - TOP-HEAVY PROVISIONS...........................................34
12.1 Top-Heavy Plan Requirements................................34
12.2 Determination of Top-Heavy Status..........................34
12.3 Minimum Allocation for Top-Heavy Plan Years................35
ARTICLE XIII - GENERAL PROVISIONS............................................36
13.1 Plan Not an Employment Contract............................36
13.2 Non-Alienation or Assignment...............................36
13.3 Payments to Minors and Others..............................36
13.4 Source of Benefits.........................................37
13.5 Unclaimed Benefits.........................................37
13.6 Governing Law..............................................37
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ARTICLE I
PURPOSE OF THE PLAN
The purpose of this Plan is to enable Participants to share in the future of The Southern Company, to provide Participants with an opportunity to accumulate capital for their future economic security, and to enable Participants to acquire stock ownership interests in The Southern Company. Consequently, Employing Company contributions to the Plan will be invested primarily in Common Stock of The Southern Company.
The Plan is also designed to provide Participants with beneficial ownership of Common Stock of The Southern Company substantially in proportion to their relative Compensation without requiring any cash outlay, any reduction in pay or other benefits, or the surrender of any other rights on the part of Participants.
The Plan was originally effective January 1, 1976, and was last amended and restated effective as of January 1, 1997. The Plan is hereby amended and restated effective January 1, 2002 in order to incorporate a variety of plan design and other changes. It is intended that this Plan, as amended and restated effective as of January 1, 2002, shall constitute an employee stock ownership plan under Section 4975(e)(7) of the Internal Revenue Code of 1986, as amended ("Code") and Section 407(d)(6) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Plan is a stock bonus plan intended to be qualified under Section 401(a) of the Code.
ARTICLE II - DEFINITIONS
DEFINITIONS
All references to articles, sections, subsections, and paragraphs shall be to articles, sections, subsections, and paragraphs of this Plan unless another reference is expressly set forth in this Plan. Any words used in the masculine shall be read and be construed in the feminine where they would so apply. Words in the singular shall be read and construed in the plural, and all words in the plural shall be read and construed in the singular in all cases where they would so apply.
For purposes of this Plan, unless otherwise required by the context, the following terms shall have the meanings set forth opposite such terms:
2.1......"Account" shall mean the separate account maintained for each Participant in accordance with Section 6.1.
2.2......"Affiliated Employer" shall mean each Employing Company and
(a) any corporation which is a member of a controlled group of corporations (as
defined in Section 414(b) of the Code) which includes any Employing Company; (b)
any trade or business (whether or not incorporated) which is under common
control (as defined in Section 414(c) of the Code) with any Employing Company;
(c) any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Section 414(m) of the Code) which
includes any Employing Company; and (d) any other entity required to be
aggregated with an Employing Company pursuant to regulations under Section
414(o) of the Code. Notwithstanding the foregoing, for purposes of applying the
limitations of Section 6.3, the term Affiliated Employer shall be adjusted as
required by Code Section 415(h).
2.3......"Aggregate Account" shall mean with respect to a Participant as of the Determination Date, the sum of the following:
(a) the Account balance of such Participant as of the most recent valuation occurring within a twelve-month period ending on the Determination Date;
(b) an adjustment for any contributions due as of the Determination Date;
(c) any Plan distributions, including unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), but not related rollovers or plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), made within the one-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, if it had not been terminated, would have been required to be included in an Aggregation Group. In the case of a distribution made for a reason other than severance from employment (or separation from service), death or disability, this provision shall be applied by substituting "five-year period" for "one-year period";
(d) any Employee contributions, whether voluntary or mandatory;
(e) unrelated rollovers and plan-to-plan transfers to this Plan accepted prior to January 1, 1984; and
(f) related rollovers and plan-to-plan transfers to this Plan.
2.4 "Aggregation Group" shall mean either a Required Aggregation Group or a Permissive Aggregation
Group.
2.5......"Annual Addition" shall mean the amount allocated to a Participant's Account and accounts under all defined contribution plans maintained by the Affiliated Employers during a Limitation Year that constitutes:
(a) Affiliated Employer contributions,
(b) voluntary participant contributions,
(c) forfeitures, if any, allocated to a Participant's Account and accounts under all defined contribution plans maintained by the Affiliated Employers, and
(d) amounts described in Sections 415(l)(1) and 419A(d)(2) of the Code.
2.6 "Beneficiary" shall mean any person(s) who, or estate(s), trust(s), or organization(s) which, in accordance with the provisions of Section 8.4, become entitled to receive benefits upon the death of a Participant.
2.7 "Board of Directors" shall mean the Board of Directors of Southern Company Services, Inc.
2.8 "Break-in-Service Date" means the earlier of the following dates:
(a) the date on which an Employee terminates employment, is discharged, retires, or dies; or
(b) the last day of an approved leave of absence including any extension.
For purposes of subsection (a) above, an Employee who ceases to be eligible to participate in the Plan pursuant to paragraph (5) of Section 2.18 shall be deemed to have experienced a termination of employment as of the date as of which Section 2.18(5) first applies.
In the case of an individual who is absent from work for maternity or paternity reasons, such individual shall not incur a Break-in-Service Date earlier than the expiration of the second anniversary of the first date of such absence; provided, however, that the twelve-consecutive-month period beginning on the first anniversary of the first date of such absence shall not constitute a Year of Service. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the Employee, (b) by reason of a birth of a child of the Employee, (c) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement.
2.9......"Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor statute, and the rulings and regulations promulgated thereunder. In the event an amendment to the Code renumbers a section of the Code referred to in this Plan, any such reference automatically shall become a reference to such section as renumbered.
2.10....."Committee" shall mean the Committee appointed pursuant to
Section 9.1 to serve as plan administrator.
2.11....."Common Stock" shall mean the common stock of The Southern Company, which stock is a qualifying employer security within the meaning of Code Section 409(l)(1) and which stock is a registration-type class of securities as defined in Code Section 409(e)(4).
2.12 "Company" shall mean Southern Company Services, Inc., and its successors.
2.13....."Compensation" shall mean the total amount of a Participant's salary or wages, amounts received as sick pay and for leaves of absence with pay, overtime pay, any shift, nuclear, or other pay differentials, substitution pay, and other amounts received for personal services actually rendered, amounts paid by any Employing Company to The Southern Company Employee Savings Plan as Elective Employer Contributions (as defined therein) pursuant to the Participant's exercise of his deferral option made in accordance with Section 401(k) of the Code, all awards under any incentive pay plans sponsored by the Employing Company including, but not limited to, The Southern Company Performance Pay Plan, The Southern Company Productivity Improvement Plan, and The Southern Company Executive Productivity Improvement Plan, includable as gross income, and amounts contributed by an Employing Company to The Southern Company Flexible Benefits Plan on behalf of the Participant pursuant to his salary reduction election under either such plan, and before deduction of taxes, social security, etc. The term "Compensation" shall not include amounts which are reimbursement to a Participant paid by any Employing Company, including but not limited to, reimbursement for such items as moving expenses and travel and entertainment expenses, and imputed income for automobile expenses, tax preparation expenses, and health and life insurance premiums paid by an Employing Company.
The Compensation of each Participant taken into account for purposes of this Plan shall not exceed the applicable limit under Code Section 401(a)(17).
2.14 "Determination Date" shall mean with respect to a Plan Year, the last day of the preceding Plan Year.
2.15 "Determination Year" shall mean the Plan Year being tested.
2.16....."Distributee" shall include an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is an alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse.
2.17....."Direct Rollover" shall mean a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.
2.18....."Eligible Employee" shall mean an Employee who is employed by an Employing Company and (a) who was eligible to be included in the Plan on January 1, 1991, or (b) who is a regular full-time, regular part-time, or cooperative education employee other than:
(1) an individual who is classified by an Employing Company as a leased employee, regardless of whether such classification is determined to be in error;
(2) any Employee who is represented by a collective bargaining agent unless the representatives of his bargaining unit and the Employing Company mutually agree to participation in the Plan subject to its terms by members of his bargaining unit;
(3) an individual who is a cooperative education employee and who first performs an Hour of Service on or after January 1, 1995;
(4) an individual who is classified by the Employing Company as a temporary employee (who was not eligible to be included in the Plan on January 1, 1991) or an independent contractor, regardless of whether such classification is determined to be in error. Effective September 1, 1998, any individual classified by the Employing Company as a temporary employee shall be excluded from the Plan, regardless of any prior inclusion in the Plan and regardless of whether the "temporary employee" classification is determined to be in error; or
(5) an individual who is employed by Mirant Services.
2.19 "Eligible Retirement Plan" shall mean an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, a plan described in Section 403(b) of the Code, a
plan described in Section 457(b) of the Code which is maintained by a state, an
agency or instrumentality of a state or political subdivision of a state and
which agrees to separately account for amounts transferred into such plan from
this Plan, or a qualified trust described in Section 401(a) of the Code that
accepts the Distributee's Eligible Rollover Distribution. This definition of
Eligible Retirement Plan shall also apply in the case of a distribution to a
surviving spouse, or to a spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code Section 414(p).
2.20 "Eligible Rollover Distribution" shall mean any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: (a) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee, the joint lives (or joint life expectancies) of the Distributee and the Distributee's Beneficiary, or for a specified period of 10 years or more; (b) any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and (c) the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities).
2.21 "Employee" shall mean each individual who is employed by an Affiliated Employer under common law and each individual who is required to be treated as an employee pursuant to the "leased employee" rules of Code Section 414(n) other than a leased employee described in Code Section 414(n)(5).
2.22 "Employing Company" shall mean the Company and any affiliate or subsidiary of The Southern Company which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of them. The Employing Companies are set forth on Appendix A to the Plan, as updated from time to time. No such entity shall be treated as an Employing Company prior to the date it adopts the Plan.
2.23 "Enrollment Date" shall mean the day on which the Eligible Employee meets the requirements for participation in this Plan under Article III.
2.24 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor statute, and the rulings and regulations promulgated thereunder. In the event an amendment to ERISA renumbers a section of ERISA referred to in this Plan, any such reference automatically shall become a reference to such section as renumbered.
2.25 "Highly Compensated Employee" shall mean (in accordance with and subject to Code Section 414(q) and any regulations, rulings, notices or procedures thereunder), with respect to any Plan Year: (1) any Employee who was a five percent (5%) owner of The Southern Company or an Affiliated Employer (as determined pursuant to Code Section 416)) during the Plan Year or the immediately preceding Plan Year, or (2) any Employee who earned more than $80,000 in the preceding Plan Year. The $80,000 amount shall be adjusted for inflation and for short Plan Years, pursuant to Code Section 414(q). The Employer may, at its election, limit Employees earning more than $80,000 to only those Employees who fall within the "top-paid group," as defined in Code Section 414(q) excluding those employees described in Code Section 414(q)(8) for such purpose. In determining whether an Employee is a Highly Compensated Employee, the Committee may make any elections authorized under applicable regulations, rulings, notices, or revenue procedures.
2.26 "Hour of Service" shall mean each hour for which an Employee is paid or entitled to payment for the performance of duties for an Affiliated Employer.
2.27 "Key Employee" shall mean any Employee or former Employee (and his Beneficiary) who is a key employee within the meaning of Code Section 416(i)(1).
2.28 "Limitation Year" shall mean the Plan Year.
2.29 "Look-Back Year" shall mean the Plan Year preceding the Determination Year.
2.30 "Mirant" shall mean Mirant Corporation, any subsidiary of Mirant Corporation, or any successor thereto.
2.31 "Mirant Services" shall mean Mirant Services, LLC.
2.32 "Mirant Stock" shall mean the common stock of Mirant.
2.33 "Non-Highly Compensated Employee" shall mean an Employee who is not a Highly Compensated Employee.
2.34 "Normal Retirement Date" shall mean the first day of the month following a Participant's sixty-fifth (65th) birthday.
2.35 "One-Year Break in Service" shall mean each twelve-consecutive-month period within the period commencing with an Employee's Break-in-Service Date and ending on the date the Employee is again credited with an Hour of Service.
2.36 "Participant" shall mean (a) an Eligible Employee who satisfied the eligibility requirements set forth in Section 3.1 of the Plan and whose participation in the Plan at the time of reference has not been terminated as provided in the Plan and (b) an Employee or former Employee who has ceased to be a Participant under (a) above, but for whom an Account is maintained under the Plan.
2.37 "Permissive Aggregation Group" shall mean a group of plans consisting of the Required Aggregation Group and, at the election of the Affiliated Employers, such other plan or plans not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code Section 401(a)(4) or 410.
2.38 "Plan" shall mean The Southern Company Employee Stock Ownership Plan, as described herein and as it may be amended from time to time. Prior to January 1, 1991, the Plan was named The Employee Stock Ownership Plan of The Southern Company System.
2.39 "Plan Year" shall mean the twelve-month period commencing January 1st and ending on the last day of December next following.
2.40 "Present Value of Accrued Retirement Income" shall mean an amount determined solely for the purpose of determining if the Plan or any other plan included in a Required Aggregation Group of which the Plan is a part is top heavy in accordance with Code Section 416.
2.41 "Qualified Election Period" shall mean the six-Plan-Year period beginning with the Plan Year in which the Participant first becomes a Qualified Participant.
2.42 "Qualified Participant" shall mean a Participant who has attained age 55 and who has completed at least 10 years of participation in the Plan, whether or not he remains an Employee.
2.43 "Required Aggregation Group" shall mean those plans that are required to be aggregated as determined under this Section 2.43. In determining a Required Aggregation Group hereunder, each plan of the Affiliated Employers in which a Key Employee is a participant and each other plan of the Affiliated Employers which enables any plan in which a Key Employee participates to meet the requirements of Code Section 401(a)(4) or 410 will be required to be aggregated.
2.46 "SEPCO ESOP" shall mean the Employee Stock Ownership Plan of Savannah Electric and Power Company.
2.47 "Super-Top-Heavy Group" shall mean an Aggregation Group that would be a Top-Heavy Group if 90% were substituted for 60% in Section 2.49.
2.48 "Surviving Spouse" shall mean the person to whom the Participant
is married on the date of his death, if such spouse is then living, provided
that the Participant and such spouse shall have been married throughout the one
(1) year period ending on the date of the Participant's death.
2.49 "Top-Heavy Group" shall mean an Aggregation Group in which, as of the Determination Date, the sum of:
(a) the Present Value of Accrued Retirement Income of Key Employees under all defined benefit plans included in that group, and
(b) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds 60% of a similar sum determined for all employees.
2.50 "Trust or Trust Fund" shall mean the trust established pursuant to the Trust Agreement.
2.51 "Trust Agreement" shall mean the trust agreement between the Company and the Trustee, as described in Article X.
2.52 "Trustee" shall mean the person or corporation designated as trustee under the Trust Agreement, including any successor or successors.
2.53 "Valuation Date" shall mean each business day of the New York Stock Exchange.
2.54 "Year of Service" shall mean a twelve-month period of employment as an Employee, including any fractions thereof. Calculation of the twelve-month periods shall commence with the Employee's first day of employment, which is the date on which an Employee first performs an Hour of Service, and shall terminate on his Break-in-Service Date. Thereafter, if he has more than one period of employment as an Employee, his Years of Service for any subsequent period shall commence with the Employee's reemployment date, which is the first date following a Break-in-Service Date on which the Employee performs an Hour of Service, and shall terminate on his next Break-in-Service Date. An Employee who has a Break-in-Service Date and resumes employment with the Affiliated Employers within twelve months of his Break-in-Service Date shall receive a fractional Year of Service for the period of such cessation of employment.
For purposes of determining an Employee's eligibility to participate, the following years of service shall also be treated as Years of Service:
(a) In respect of an Employee of an Employing Company who transfers to an Employing Company from Mirant Services following its adoption of a defined contribution plan under Section 401(a) of the Code, his credited years of service under such plan as of his date of transfer.
(b) In respect of an Employee of an Employing Company who transfers to an Employing Company from SEPCO on or before December 31, 1992, his credited years of service under the SEPCO ESOP for actual service while employed at SEPCO as of his date of transfer.
Notwithstanding anything in this Section 2.54 to the contrary, an Employee shall not receive credit for more than one Year of Service with respect to any twelve-consecutive-month period.
ARTICLE III
PARTICIPATION
3.1 Eligibility Requirements. Each Eligible Employee shall become a Participant on the later of January 1, 1997 or the Enrollment Date next following the date on which the Eligible Employee completes a Year of Service.
3.2 Duration of Participation. Once an Eligible Employee becomes a Participant in the Plan, he shall remain an active Participant during each Plan Year in which he is an Eligible Employee as of the last day of such Plan Year; provided, however, that an Eligible Employee whose employment terminates during a Plan Year by reason of death, retirement pursuant to his Affiliated Employer's pension plan, or total and permanent disability, as determined by the Social Security Administration, shall not cease to be an active Participant until the first day of the Plan Year next following the date such termination of employment occurs. In addition, a Participant in the Plan shall remain an active Participant during periods of authorized leaves of absence granted by an Employing Company under rules uniformly applicable to all persons similarly situated, during periods of sickness, disability leave, jury or military duty, or vacation or holiday leave. If the Employee does not return to work within the period of his authorized leave of absence (not including sickness or disability leave) or within the period provided by law in respect of absence for military duty, he shall cease to be an active Participant in the Plan as of the first day next following the date his authorized leave of absence or military duty is terminated.
3.3 Participation upon Reemployment. If an Employee terminates his employment with an Affiliated Employer and is subsequently reemployed as an Eligible Employee, the following rules shall apply in determining his eligibility to participate:
(a) If the reemployed Eligible Employee had not completed the Year of Service requirement of Section 3.1 prior to his termination of employment and is reemployed following a One-Year Break in Service, he shall not receive credit for fractional periods of service completed prior to the One-Year Break in Service until he has completed a Year of Service after his return. A reemployed Employee who had not completed the Year of Service requirement and who is reemployed within 12 months of his Break-in-Service Date shall receive service credit for the period in which he performed no services in accordance with Section 2.54.
(b) If the reemployed Eligible Employee had fulfilled the eligibility requirements of Section 3.1 prior to his termination of employment and is reemployed as an Eligible Employee, whether before or after he incurs a One-Year Break in Service, he shall again become a Participant in the Plan as of the date of his reemployment.
For purposes of this Section 3.3, an Employee employed by Mirant on April 2, 2001 shall be considered to have terminated employment with an Affiliated Employer as of such date.
3.4 No Restoration of Previously Distributed Benefit. A Participant who had terminated his employment with the Affiliated Employers and who has received a distribution of the amount credited to his Account pursuant to Section 8.6 shall not be entitled to restore the amount of such distribution to his Account if he is reemployed and again becomes a Participant in the Plan.
A Participant whose benefit under the Plan was transferred to a qualified plan maintained by Mirant Services as a result of the spin-off of Mirant from the Southern Company controlled group on April 2, 2001 shall not be entitled to restoration of the amount of such transfer upon his subsequent reemployment by an Affiliated Employer.
3.5 Military Leave. Notwithstanding any provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code.
ARTICLE IV
EMPLOYING COMPANY CONTRIBUTION
4.1 Amount of Contribution. An Employing Company may contribute to the Plan, in respect of each Plan Year, cash or Common Stock in an amount (or under such formula) as the Company, in its sole and absolute discretion, shall determine. If Common Stock is contributed to the Plan, the number of shares contributed shall be determined by the market value of such Common Stock, as determined by the Company.
4.2 Time of Payment. The Employing Company shall transfer the amount of cash or Common Stock described in Section 4.1 to the Plan on any date or dates consistent with the law, which the Employing Company may select, provided that the contributions for a Plan Year shall be transferred not later than the time (including extensions) for filing the consolidated federal income tax return for such Plan Year.
4.3 Purchases of Common Stock. If a contribution to the Plan under
Section 4.1 is made in cash, the Trustee shall use such contribution to purchase
Common Stock; provided, however, that the Plan may retain a cash reserve in an
amount which does not exceed the value of fractional shares and declared cash
dividends allocable to those Participants entitled to receive an immediate
distribution of their Accounts at the time of the contribution of the cash. If
Common Stock is purchased from The Southern Company, the price paid therefor by
the Trustee shall be the market value of such Common Stock, as determined by the
Company.
4.4 Restrictions on Common Stock. No Common Stock held by the Plan may be used to satisfy a loan made to the Plan, nor may any Common Stock held by the Plan be used as collateral for a loan made to the Plan.
4.5 Exclusive Benefit of Employees. All contributions made pursuant to the Plan shall be held by the Trustee in accordance with the terms of the Trust Agreement for the exclusive benefit of those Employees, including former Employees, who are Participants under the Plan, and their Beneficiaries, and shall be applied to provide benefits under the Plan and to pay expenses of administration of the Plan and the Trust, to the extent that such expenses are not otherwise paid. At no time prior to the satisfaction of all liabilities with respect to such Employees and their Beneficiaries shall any part of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of such Employees and their Beneficiaries. However, notwithstanding the provisions of this Section 4.5:
(a) If any contribution under the Plan is conditioned on initial qualification of the Plan under Section 401(a) of the Code and if the Plan does not so qualify, the Trustee shall, upon written request of the Employing Company, return to the Employing Company the amount of such contribution (increased by earnings attributable thereto and reduced by losses attributable thereto) within one calendar year after the date that qualification of the Plan is denied; provided that the application for the determination is made by the time prescribed by law for filing the Employing Company's return for the taxable year in which the Plan is adopted or such later date as the Secretary of the Treasury may prescribe.
(b) If a contribution is conditioned upon the deductibility of the contribution under Section 404 of the Code, then to the extent the deduction is disallowed the Trustee shall, upon written request of the Employing Company, return the contribution (to the extent disallowed) to the Employing Company within one year after the date the deduction is disallowed.
(c) If a contribution or any portion thereof is made by the Employing Company by a mistake of fact, the Trustee shall, upon written request of the Employing Company, return the contribution or such portion to the Employing Company within one year after the date of payment to the Trustee.
The amount which may be returned to the Employing Company under this
Section 4.5 is the excess of (a) the amount contributed over (b) the amount that
would have been contributed had there not occurred a mistake of fact or
disallowance of the deduction. Earnings attributable to the excess contribution
shall not be returned to the Employing Company, but losses attributable thereto
shall reduce the amount to be so returned. If the withdrawal of the amount
attributable to the mistaken contribution would cause the balance of the Account
of any Participant to be reduced to less than the balance which would have been
in the Account had the mistaken amount not been contributed, then the amount to
be returned to the Employing Company shall be limited so as to avoid such
reduction.
ARTICLE V
PARTICIPANT CONTRIBUTION
5.1 Participant Contributions Not Allowed. Participant contributions are neither required nor permitted under the Plan. Notwithstanding the foregoing, to the extent that Participant contributions were permitted under the terms of the Plan in effect prior to January 1, 1983, such contributions and/or pledges of contributions attributable to Plan Years beginning before January 1, 1983, may be made in accordance with the applicable provisions of the terms of the Plan as in effect prior to January 1, 1983.
ARTICLE VI
ACCOUNTS OF PARTICIPANTS
6.1 Separate Accounts. The Committee shall establish and maintain a separate Account for each Participant, with separate subaccounts as the Committee shall direct in its sole discretion. The subaccounts maintained in accordance with this Section 6.1 shall be for bookkeeping purposes only. Subaccounts, to the extent they were created under the Plan prior to January 1, 1983, shall be maintained, if necessary.
The Committee shall also establish separate subaccounts for each Participant, as the Committee shall direct, as is necessary to reflect a Participant's interest in the Plan resulting from the transfer of his accounts from the SEPCO ESOP due to the merger of such plan into this Plan effective as of January 1, 1993. Any such subaccounts so established shall be subject to the terms and conditions of this Plan.
6.2 Allocation of Common Stock. All shares of Common Stock contributed or purchased with cash contributions for such Plan Year and all fractional rights to such shares shall be allocated as of the close of such Plan Year by the Committee to the Account of each Participant who was a Participant or deemed to be a Participant pursuant to Section 3.2 on the last day of such Plan Year. Such allocation shall be made in accordance with the ratio to which each eligible Participant's Compensation for such Plan Year bears to the total Compensation of all Participants eligible to share in the contribution for such Plan Year. Notwithstanding the foregoing, in no event shall a Participant who is employed by SCEM or Mirant Services on December 31, 2000 receive an allocation of Common Stock for the Plan Year ending on such date.
6.3 Section 415 Limitations. Notwithstanding any provision of the Plan to the contrary, except to the extent permitted under Code Section 414(v), the total Annual Additions allocated to the Account (and the accounts under all defined contribution plans maintained by an Affiliated Employer) of any Participant for any Limitation Year in accordance with Code Section 415 and the regulations thereunder, which are incorporated herein by this reference, shall not exceed the lesser of the following amounts:
(a) one hundred percent (100%) of the Participant's compensation (as defined in Code Section 415(c)(3) and any rulings and regulations thereunder) in the Limitation Year; or
(b) $40,000 (as adjusted pursuant to Code Section
415(d)(1)(C)).
The Annual Addition for any Plan Year beginning before January 1, 1987 shall not be recomputed to treat all employee contributions as an Annual Addition.
6.4 Correction of Contributions in Excess of Section 415 Limits. If the Annual Additions for a Participant exceed the limits of Section 6.3 as a result of the allocation of forfeitures, if any, a reasonable error in estimating a Participant's annual compensation for purposes of the Plan, a reasonable error in determining the amount of elective deferrals (within the meaning of Section 402(g)(3) of the Code) that may be made with respect to any individual, or under other limited facts and circumstances that the Commissioner of the Treasury finds justify the availability of the rules set forth in this Section 6.4, the excess amounts shall not be deemed Annual Additions if they are corrected by forfeiture of that portion, or all, of the Employing Company contributions that were allocated to the Participant's Account, as is necessary to ensure compliance with Section 6.3.
Any amounts forfeited under this Section 6.4 shall be held in a suspense account and shall be applied, subject to Section 6.3, toward funding the Employing Company contributions for the next succeeding Plan Year. Such application shall be made prior to any Employing Company contributions that would constitute Annual Additions. No income or investment gains and losses shall be allocated to the suspense account provided for under this Section 6.4. If any amount remains in a suspense account provided for under this Section 6.4 upon termination of this Plan, such amount will revert to the Employing Companies notwithstanding any other provision of this Plan.
6.5 Combination of Plans. If an Employee participates in more than one defined contribution plan maintained by an Affiliated Employer and his Annual Additions exceed the limitations of Section 6.3, corrective adjustments shall be made first under The Southern Company Employee Savings Plan and then, to the extent necessary, under The Southern Company Performance Sharing Plan and then, to the extent necessary, under this Plan.
(a) Any dividends or other distributions of cash on the Common Stock shall be allocated to a Participant's Account on the basis of Account balances. The amount of any cash dividends on Common Stock so allocated may be retained in the Participants' Accounts or paid to such Participants pursuant to (b) below. Any cash dividends retained in the Accounts of Participants and any other distributions of cash on the Common Stock so allocated shall be reinvested by the Trustee in Common Stock which shall be credited to each such Participant's Account. In reinvesting such dividends or other distributions of cash on the Common Stock, the Trustee may purchase Common Stock under The Southern Company's Dividend Reinvestment and Stock Purchase Plan, from The Southern Company, or on the open market.
If a dividend or other distribution on the Common Stock
allocated to a Participant's Account is of additional shares of Common
Stock, the Trustee shall credit such shares to the Participant's
Account. Except as provided in Section 6.10, if a dividend or other
distribution on the Common Stock allocated to a Participant's Account
is of property other than cash or additional shares of Common Stock,
the Trustee shall sell such property for an amount not less than its
fair market value as determined by the Trustee and reinvest the
proceeds of such sale in shares of Common Stock pursuant to this
Section 6.6.
(b) Any cash dividends received by the Trustee on Common Stock allocated to the Accounts of Participants (or Beneficiaries) may be retained in the Participants' Accounts as provided in (a) above or may be paid to such Participants at the sole discretion of the Committee; provided that any current payment in cash must be made within two years of the date such dividends are received by the Trustee, or, if the Employing Company desires a tax deduction for the amount of such dividends pursuant to Code Section 404(k), such cash dividends shall be distributed in cash not later than 90 days after the close of the Plan Year in which such dividends were paid.
(c) Notwithstanding (b) above, if during any Plan Year the Committee shall determine not to pay cash dividends received by the Trustee on Common Stock allocated to Accounts of Participants to such Participants, a Participant may elect to have such cash dividends (or other distributions) paid to him currently by the Trustee. Such an election shall be made in such time and manner as may be prescribed by the Committee and shall be effective only with respect to dividends which are payable by The Southern Company to the Trustee in the Plan Years which begin after the Plan Year in which the election is made. An election shall remain in full force until revoked by a Participant. Any revocation shall be made in accordance with procedures established by the Committee and shall become effective only with respect to dividends payable by The Southern Company to the Trustee in Plan Years which begin after the Plan Year in which the revocation is made.
6.7 Valuations. Each Participant shall be furnished a statement of his
Account no less frequently than annually and upon any distribution, which
statement shall reflect the balances of the subaccounts referred to in Section
6.1. Each Participant's Account shall be adjusted as of each Valuation Date to
reflect any increase or decrease in the number of shares of Common Stock
credited to his Account and to reflect the effect of income collected, realized
and unrealized gains and losses, and expenses attributable thereto.
6.8 Voting Company Stock. Before each annual or special meeting of shareholders of The Southern Company, there shall be sent to each Participant a copy of the proxy soliciting material for the meeting, together with a form requesting instructions to the Trustee on how to vote the shares of Common Stock credited to such Participant's Account as of the record date of the Common Stock. Fractional shares shall be combined and voted by the Trustee to the extent possible to reflect the instructions of Participants credited with such shares. If a Participant does not provide the Trustee or its designated agent with timely voting instructions for the Trustee, the Pension Fund Investment Review Committee of The Southern Company System may direct the Trustee how to vote such Participant's shares. If the Pension Fund Investment Review Committee of The Southern Company System does not provide the Trustee or its designated agent with timely voting instructions, the Trustee, if required to do so by applicable law, may vote such Participant's shares. The Pension Fund Investment Review Committee of The Southern Company System may direct the Trustee with respect to voting unallocated shares of Common Stock, if any. If the Pension Fund Investment Review Committee of The Southern Company System does not provide the Trustee or its designated agent with timely voting instructions, the Trustee, if required to do so by applicable law, may vote such unallocated shares.
6.9 Correction of Prior Incorrect Allocations and Distributions. Notwithstanding any provisions contained herein to the contrary, in the event that, as of any Valuation Date, adjustments are required in any Participants' Accounts to correct any incorrect allocation of contributions or investment earnings or losses, or such other discrepancies in Account balances that may have occurred previously, the Employing Companies may make additional contributions to the Plan to be applied to correct such incorrect allocations or discrepancies. The additional contributions shall be allocated by the Committee to adjust such Participants' Accounts to the value which would have existed on said Valuation Date had there been no prior incorrect allocation or discrepancies. The Committee shall also be authorized to take such other actions as it deems necessary to correct prior incorrect allocations under the Plan or discrepancies in the Accounts of the Participants.
6.10 Transfer of Mirant Stock. Upon the distribution by the Southern Company to its shareholders of the Mirant Stock held by the Southern Company pursuant to a tax-free spin-off under Code Section 355 or such similar transaction, all Mirant Stock received by the Plan on behalf of a Participant shall be transferred to a "Transferred ESOP Account" established for such Participant under The Southern Company Employee Savings Plan. The transfer of Mirant Stock shall be made contemporaneously with or as soon as administratively practicable following such transaction.
ARTICLE VII
AUTHORIZED WITHDRAWALS
7.1 In General. Except as provided in this Article VII, shares of Common Stock allocated to the Account of a Participant may be distributed to him only in the event he ceases to be an Employee, whether by reason of retirement, total and permanent disability, as determined by the Social Security Administration, death, or other termination of employment. Distributions upon termination of employment for any of the above reasons, shall be made in accordance with Article VIII.
7.2 Distributions in Lieu of Diversification of Investments Pursuant to Code Section 401(a)(28)(B).
(a) Each Qualified Participant shall be permitted to elect within 90 days after the last day of each Plan Year during the Participant's Qualified Election Period to receive a cash distribution from the Plan not to exceed 25% of the value of the Participant's Account balance attributable to Common Stock which was acquired by the Plan after December 31, 1986. Within 90 days after the close of the last Plan Year in the Participant's Qualified Election Period, a Qualified Participant may elect to receive a cash distribution from the Plan not to exceed 50% of the value of such Account balance.
(b) The Participant's election shall be made in accordance with the procedures established by the Committee and shall be effective no later than 180 days after the close of the Plan Year to which the election applies. The Plan shall distribute (notwithstanding Section 409(d) of the Code) the portion of the Participant's Account that is covered by the election within 90 days after the last day of the period during which the election can be made. This Section 7.2 shall apply notwithstanding any other provision of the Plan other than such provisions as may require the consent of the Participant to a distribution with a present value in excess of $5,000. If the Participant does not consent to a distribution with a present value in excess of $5,000 under this Section 7.2, such amount shall be retained in the Plan and the Plan shall be deemed to have satisfied the diversification requirements of Section 401(a)(28)(B) of the Code.
7.3 In-Service Withdrawals. Subject to the requirements of Section 8.14, a Participant who is employed by an Affiliated Employer may at any time elect to have distributed to him the cash value of a specific number of whole shares of Common Stock, provided such Common Stock shall have been credited to the Participant's Account for a period of at least 84 months. Such shares of Common Stock shall be distributed not prior to the first day of the 85th month following the month in which any full shares of Common Stock shall have been credited to his Account. The election shall be made in accordance with the procedures established by the Committee.
Any such withdrawal shall be subject to the following requirements:
(a) a withdrawal must be for a specific number of whole shares or the value of a specific number of whole shares of Common Stock;
(b) the specific number of shares requested must equal at least the lesser of 20 shares or the total number of whole shares available for withdrawal from the Participant's Account; and
(c) a withdrawal shall be made in the form of cash, provided that with respect to any distribution which is attributable to full shares of Common Stock, the Participant shall have the right to demand that such portion of the distribution be made in the form of Common Stock.
ARTICLE VIII
DISTRIBUTIONS TO PARTICIPANTS
8.1 Vesting. All amounts credited to the Account of a Participant under the Plan shall at all times be fully vested and nonforfeitable.
8.2 Distribution upon Retirement.
(a) If a Participant retires pursuant to his Affiliated Employer's pension plan, the entire balance credited to his Account shall be payable to him in the manner and time for commencement of benefits requested by the Participant pursuant to Sections 8.7 and 8.8.
(b) Notwithstanding a Participant's election to defer receipt
of benefits under (a) above, the Committee shall direct payment in a
lump sum to such Participant if the balance of his Account
(attributable to Employing Company and Employee contributions) does not
exceed $5,000 in accordance with the requirements of Code Section
411(a)(11). The Committee shall not cash-out any Participant whose
benefits exceed $5,000 without the written consent of the Participant.
8.3 Distribution upon Death. If a Participant's employment with the Affiliated Employers is terminated by reason of death, the entire balance credited to the Participant's Account shall be distributed as soon as practicable to the Participant's Beneficiary or Beneficiaries in a lump sum pursuant to Section 8.9(b).
8.4 Designation of Beneficiary in the Event of Death. A Participant may designate a Beneficiary or Beneficiaries (who may be designated contingently) to receive all or part of the amount credited to his Account in case of his death before his receipt of all of his benefits under the Plan, provided that the Beneficiary of a married Participant shall be the Participant's Surviving Spouse, unless such Surviving Spouse shall consent in a writing witnessed by a notary public, which writing acknowledges the effect of the Participant's designation of a Beneficiary other than such Surviving Spouse. However, if such Participant establishes to the satisfaction of the Committee that such written consent may not be obtained because the Surviving Spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe, a designation by such Participant without the consent of the Surviving Spouse shall be valid.
Any consent necessary under this Section 8.4 shall be valid and effective only with respect to the Surviving Spouse who signs the consent or, in the event of a deemed consent, only with respect to a designated Surviving Spouse.
A designation of Beneficiary may be revoked by the Participant without the consent of any Beneficiary (or the Participant's Surviving Spouse) at any time before the commencement of the distribution of benefits. A Beneficiary designation or change or revocation of a Beneficiary designation shall be made in accordance with the procedures established by the Committee.
If no designated Beneficiary shall be living at the death of the Participant and/or such Participant's Beneficiary designation is not valid and enforceable under applicable law or the procedures of the Committee, such Participant's Beneficiary of Beneficiaries shall be the person or persons in the first of the following classes of successive preference, if then living:
(a) the Participant's spouse on the date of his death,
(b) the Participant's children, equally,
(c) the Participant's parents, equally,
(d) the Participant's brothers and sisters, equally, or
(e) the Participant's executors or administrators.
Payment to such one or more persons shall completely discharge the Plan and the Trustee with respect to the amount so paid.
8.5 Distribution upon Disability. If a Participant's employment with the Affiliated Employers is terminated by reason of his total and permanent disability, as determined by the Social Security Administration, such disabled Participant shall be entitled to receive the full value of his Account immediately following the date the Social Security Administration determines the Participant is totally and permanently disabled, in a single lump sum payment. The Participant or his legal representative shall request the time for commencement of benefits pursuant to Section 8.8. Notwithstanding the foregoing, the Committee shall direct payment in a single lump sum to such Participant or his legal representative if the balance of the Participant's Account does not exceed $5,000 in accordance with the requirements of Code Section 411(a)(11).
(a) If a Participant's employment with the Affiliated Employers is terminated for any reason other than in accordance with Sections 8.2, 8.3, or 8.5, he shall become entitled to payment of the full value of his Account as hereinafter provided.
(b) Upon termination of employment with the Affiliated Employers, the Participant may request a distribution in a single lump sum of the full value of his Account. Alternatively, such Participant may elect to defer receipt of the full value of his Account until a time not later than the time specified in Section 8.8 below. Any deferred distribution shall commence as soon as practicable after the Valuation Date selected by the Participant.
(c) Notwithstanding a Participant's election to defer receipt of benefits under (b) above, the Committee shall direct payment in a lump sum to such Participant if the balance of his Account (attributable to Employing Company and Employee contributions) as of the last Valuation Date in the month in which such Participant terminates employment with the Affiliated Employers does not exceed $5,000 in accordance with Code Section 411(a)(11). The Committee shall not cash-out any Participant whose benefits exceed $5,000 without the written consent of the Participant.
(a) A Participant separating from service in accordance with
Section 8.2 shall elect the manner in which the Common Stock credited
to his Account is distributed and a time for commencement of the
distribution as provided hereinafter. The election by the Participant
shall be made in accordance with the procedures established by the
Committee. The Participant shall select one of the following
alternative forms of distribution of his Account:
(1) A lump sum distribution; or
(2) Annual installments for a period not to exceed five years or, in the case of a Participant whose Account exceeds $500,000, five years plus one additional year (but not more than five additional years) for each $100,000 or fraction thereof by which such Account exceeds $500,000. The dollar amounts contained in this paragraph (2) shall be adjusted by the Secretary of the Treasury pursuant to Section 409(o)(2) of the Code.
(b) All lump sum distributions under the Plan shall be made in cash, provided that a Participant shall have the right to request that such distribution be made in full shares of Common Stock, except that fractional shares shall be converted to and paid in cash, and declared but unpaid cash dividends shall be paid in cash. If any additional shares of Common Stock are subsequently allocated to the Participant's Account, such shares shall be distributed to the Participant or his Beneficiary within 60 days following the date on which such additional allocation is made.
(c) All installment distributions under this Section 8.7 shall be made in cash, unless the Participant shall request that such distribution be made in full shares of Common Stock and cash for any fractional shares and declared but unpaid cash dividends. If a Participant elects installment payments, any additional shares of Common Stock allocated to his Account shall be added to the undistributed balance of such Account and be distributed thereafter in the manner the Participant has elected.
(a) Unless the Participant elects to have payment begin at a later date, payment of benefits to the Participant shall begin at the Participant's election, in accordance with the procedures established by the Committee, not later than 60 days after the last day of the Plan Year in which the latest of the following occurs:
(1) the Participant attains the earlier of age 65 or his Normal Retirement Date;
(2) the Participant's 10th anniversary of participation under the Plan; or
(3) the Participant's separation from service.
(b) In no event shall the distribution of amounts in a Participant's Account commence later than the April 1 of the calendar year following the later of the calendar year in which the Participant attains age 70 1/2 or terminates employment with the Affiliated Employers, in accordance with regulations prescribed by the Secretary of the Treasury. The foregoing requirements in this Section 8.8(b) shall not be applied to restrict the implementation of any written designation given to the Committee by a Participant prior to January 1, 1984, with regard to the method of distribution of his Account, if such method was permissible under the Plan and Code prior to January 1, 1984. Notwithstanding the foregoing, the payment of benefits to a Participant who is a five percent (5%) owner of The Southern Company or an Affiliated Employer (as determined pursuant to Code Section 416) with respect to the Plan Year ending in the calendar year in which the Participant attains age 70 1/2 shall begin not later than April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2, regardless of the Participant's termination from employment. In addition, any Participant who attains age 70 1/2 on or after January 1, 1996, but prior to January 1, 1999, may elect to have payment of his benefits begin no later than April 1 of the calendar year following the calendar year during which the Participant attains age 70 1/2, regardless of the Participant's termination of employment.
Any distribution made under this Plan shall be made in
accordance with the minimum distribution requirements of Code Section
401(a)(9), including the incidental death benefits requirements under
Code Section 401(a)(9)(G) and the Treasury Regulations thereunder. With
respect to distributions under the Plan made in calendar years
beginning on or after January 1, 2001, the Plan will apply the minimum
distribution requirements of Code Section 401(a)(9) in accordance with
the regulations under Code Section 401(a)(9) that were proposed in
January 2001, notwithstanding any provision of the Plan to the
contrary. This amendment shall continue in effect until the end of the
last calendar year beginning before the effective date of final
regulations under Code Section 401(a)(9) or such other date specified
in guidance published by the Internal Revenue Service.
(a) If the Participant dies before his entire nonforfeitable interest has been distributed to him, the remaining portion of such interest shall be distributed in a single lump sum to his Beneficiary.
(b) If the Participant dies before the distribution of his nonforfeitable interest has begun, the entire interest shall be distributed in a single lump sum to his Beneficiary within 60 days following the Company's receipt of notification of the death of such Participant.
8.10 Adjustments for Deferred Accounts or Installment Payments. If the distribution of benefits to a Participant will either be paid in installments or the Participant elects to postpone distribution of his benefits payable in a lump sum, the Participant's Account shall remain in the Trust Fund and shall continue to participate in the valuations as provided in Sections 6.6 and 6.7 until fully distributed.
8.11 Transfers between Employing Companies. A transfer by a Participant from one Employing Company to another Employing Company shall not affect his participation in the Plan. A transfer by a Participant from an Employing Company to an Affiliated Employer that is not an Employing Company shall not be deemed to be a termination of employment with an Employing Company.
8.12 Distribution to Alternate Payees. If the Participant's Account under the Plan shall become subject to any domestic relations order which (a) is a qualified domestic relations order satisfying the requirements of Section 414(p) of the Code and (b) requires the immediate distribution in a single lump sum of the entire portion of the Participant's Account required to be segregated for the benefit of an alternate payee, then the entire interest of such alternate payee shall be distributed in a single lump sum within 90 days following the Employing Company's notification to the Participant and the alternate payee that the domestic relations order is qualified under Section 414(p) of the Code, or as soon as practicable thereafter. Such distribution to an alternate payee shall be made even if the Participant has not separated from the service of the Affiliated Employers. Any other distribution pursuant to a qualified domestic relations order shall not be made earlier than the Participant's termination of service or his attainment of age 50, if earlier, and shall not commence later than the date the Participant's (or his Beneficiary's) benefit payments otherwise commence. Such distribution to an alternate payee shall be made only in a manner permitted under Section 8.7 of the Plan and only to the extent the Participant would be eligible for such distribution option.
8.13 Requirement for Direct Rollovers. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article VIII, a Distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
8.14 Consent and Notice Requirements. If the value of the vested portion of a Participant's Account derived from Employing Company and Employee contributions exceeds $5,000 determined in accordance with the requirements of Code Section 411(a)(11), the Participant must consent to any distribution of such vested account balance prior to his Normal Retirement Date. The consent of the Participant shall be obtained within the ninety-day period ending on the first day of the first period for which an amount is payable as an annuity or in any other form under this Plan.
The Committee shall notify the Participant of the right to defer any distribution until the Participant's Account balance is no longer immediately distributable. Such notification shall include a general description of the material features and an explanation of the relative values of the operational forms of benefit available under the Plan in a manner that would satisfy the notice requirements of Section 417(a)(3) of the Code; such notification shall be provided no less than 30 days and no more than 90 days prior to the annuity starting date.
Distributions may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Treasury Regulations is given, provided that:
(a) the Committee informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution and a particular distribution option, and
(b) the Participant, after receiving the notice, affirmatively elects a distribution.
ARTICLE IX
ADMINISTRATION
9.1 Membership of Committee. The Plan shall be administered by the Committee, which shall consist of the individuals then serving in the positions of Vice President, System Compensation and Benefits of The Southern Company; Senior Vice-President, Human Resources of The Southern Company; and Comptroller of The Southern Company or any other position or positions that succeed to the duties of the foregoing positions. The Committee shall be chaired by the Senior Vice-President, Human Resources of The Southern Company and may select a Secretary (who may, but need not, be a member of the Committee) to keep its records or to assist it in the discharge of its duties.
9.2 Acceptance and Resignation. Any person appointed to be a member of the Committee shall signify his acceptance in writing to the Chairman of the Committee. Any member of the Committee may resign by delivering his written resignation to the Committee and such resignation shall become effective upon delivery or upon any later date specified therein.
9.3 Transaction of Business. A majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business at any meeting. Any determination or action of the Committee may be made or taken by a majority of the members present at any meeting thereof or without a meeting by a resolution or written memorandum concurred in by a majority of the members then in office.
9.4 Responsibilities in General. The Committee shall administer the Plan and shall have the discretionary authority, power, and the duty to take all actions and to make all decisions necessary or proper to carry out the Plan and to control and manage the operation and administration of the Plan. The Committee shall have the discretion to interpret the Plan, including any ambiguities herein, and to determine the eligibility for benefits under the Plan. The determination of the Committee as to any question involving the general administration and interpretation of the Plan shall be final, conclusive, and binding on all persons, except as otherwise provided herein or by law, and may be relied upon by the Company, all Employing Companies, the Trustee, Participants, and their Beneficiaries. Any discretionary actions to be taken under the Plan by the Committee with respect to Employees and Participants and with respect to benefits shall be uniform in their nature and applicable to all persons similarly situated.
9.5 Committee as Named Fiduciary. For the purpose of compliance with the provisions of ERISA, the Committee shall be deemed the administrator of the Plan, as the term "administrator" is defined in ERISA, and the Committee shall be, with respect to the Plan, a named fiduciary as that term is defined in ERISA. For the purpose of carrying out its duties, the Committee may, in its discretion, allocate its responsibilities under the Plan among its members and may, in its discretion, designate (in writing or otherwise) persons other than members of the Committee to carry out such responsibilities of the Committee under the Plan as it may see fit.
9.6 Rules for Plan Administration. The Committee may make and enforce rules and regulations for the administration of the Plan consistent with the provisions thereof and may prescribe the use of such forms or procedures as it shall deem appropriate for the administration of the Plan.
9.7 Employment of Agents. The Committee may employ independent qualified public accountants, as such term is defined in ERISA, who may be accountants to The Southern Company and any Affiliated Employer, legal counsel who may be counsel to The Southern Company and any Affiliated Employer, other specialists, and other persons as the Committee deems necessary or desirable in connection with the administration of the Plan. The Committee and any person to whom it may delegate any duty or power in connection with the administration of the Plan, the Company and the officers and directors thereof shall be entitled to rely conclusively upon and shall be fully protected in any action omitted, taken, or suffered by them in good faith in reliance upon any independent qualified public accountant, counsel, or other specialist or other person selected by the Committee, or in reliance upon any tables, evaluations, certificates, opinions, or reports which shall be furnished by any of them or by the Trustee.
9.8 Co-Fiduciaries. It is intended that, to the maximum extent permitted by ERISA, each person who is a fiduciary (as that term is defined in ERISA) with respect to the Plan shall be responsible for the proper exercise of his own powers, duties, responsibilities, and obligations under the Plan and the Trust, as shall each person designated by any fiduciary to carry out any fiduciary responsibility with respect to the Plan or the Trust. No fiduciary or other person to whom fiduciary responsibilities are allocated shall be liable for any act or omission of any other fiduciary or of any other person delegated to carry out any fiduciary or other responsibility under the Plan or the Trust.
9.9 General Records. The Committee shall maintain or cause to be maintained separate Accounts (and any separate subaccounts) which accurately reflect the interests of the Participants as provided for in Section 6.1, and shall maintain or cause to be maintained all necessary books of account and records with respect to the administration of the Plan. The Committee shall mail or cause to be mailed to Participants reports to be furnished to Participants in accordance with the Plan or as may be required by ERISA. Any notices, reports, or statements to be given, furnished, made, or delivered to a Participant shall be deemed duly given, furnished, made, or delivered when addressed to the Participant and delivered to the Participant in person or mailed by ordinary mail to his address last communicated to the Committee (or its delegate) or of his Employing Company.
9.10 Liability of the Committee. In administering the Plan, except as may be prohibited by ERISA, neither the Committee nor any person to whom it may delegate any duty or power in connection with administering the Plan shall be liable for any action or failure to act except for its or his own gross negligence or willful misconduct, nor for the payment of any amount under the Plan, nor for any mistake of judgment made by him or on his behalf as a member of the Committee; nor for any action, failure to act, or loss unless resulting from his own gross negligence or willful misconduct, nor for the neglect, omission, or wrongdoing of any other member of the Committee. No member of the Committee shall be personally liable under any contract, agreement, bond, or other instrument made or executed by him or on his behalf as a member of the Committee.
9.11 Reimbursement of Expenses and Compensation of Committee. Members of the Committee shall be reimbursed by the Company for expenses they may individually or collectively incur in the performance of their duties. Each member of the Committee who is a full-time employee of the Company or of any Employing Company shall serve without compensation for his services as such member; each other member of the Committee shall receive such compensation, if any, for his services as the Board of Directors may fix from time to time.
9.12 Expenses of Plan and Trust Fund. The expenses of establishment and administration of the Plan and the Trust Fund shall be paid by the Company or the Employing Companies. Notwithstanding the foregoing, to the extent provided in the Trust Agreement, certain administrative expenses may be paid from the Trust Fund either directly or through reimbursement of the Company or the Employing Companies. All fees of the auditors related to the audit of the Plan or the Trust Fund shall be paid from the Trust Fund either directly or through reimbursement of the Company or the Employing Companies. Any expenses directly related to the investments of the Trust Fund, such as stock transfer taxes, brokerage commissions, or other charges incurred in the acquisition or disposition of such investments, shall be paid from the Trust Fund and shall be deemed to be part of the cost of such securities or deducted in computing the proceeds therefrom, as the case may be. Taxes, if any, on any assets held or income received by the Trustee and transfer taxes on the transfer of Common Stock from the Trustee to a Participant or his Beneficiary shall be charged appropriately against the Accounts of Participants as the Committee shall determine. Any expenses paid by the Company pursuant to Section 9.11 and this section shall be subject to reimbursement by other Employing Companies of their proportionate shares of such expenses as determined by the Committee.
9.13 Responsibility for Funding Policy. The Pension Fund Investment Review Committee of The Southern Company System shall have responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA.
9.14 Code Section 411(d)(6) Protected Benefits. Notwithstanding anything to the contrary in this Plan, any provisions added to this Plan to effectuate the merger of the SEPCO ESOP into this Plan shall not be interpreted so as to decrease a Participant's accrued benefit except to the extent permitted under Section 412(c)(8) of the Code, and such provisions shall not reduce or eliminate Code Section 411(d)(6) protected benefits determined immediately prior to January 1, 1993. The Committee shall disregard such provision in the Plan to the extent that application of such would fail to satisfy this paragraph. If the Committee disregards any portion of the Plan because it would eliminate a protected benefit, the Committee shall maintain a schedule of any such impacted early retirement option or other optional forms of benefit and the Plan must continue such for the affected Participants.
9.15 Management of Assets. The Committee shall not have responsibility with respect to the control or management of the assets of the Plan. The Trustee shall have the sole responsibility for the administration of the assets of the Plan as provided in the Trust Agreement.
9.16 Notice and Claims Procedure. Consistent with the requirements of ERISA and the regulations thereunder of the Secretary of Labor from time to time in effect, the Committee shall:
(a) provide adequate notice in writing to any Participant or Beneficiary whose claim for benefits under the Plan has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such Participant or Beneficiary, and
(b) afford a reasonable opportunity to any Participant or Beneficiary whose claim for benefits has been denied for a full and fair review of the decision denying the claim.
9.17 Bonding. Unless Otherwise determined by the Board of Directors or required by law, no member of the Committee shall be required to give any bond or other security in any jurisdiction.
9.18 Multiple Fiduciary Capacities. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan, and any fiduciary with respect to the Plan may serve as a fiduciary with respect to the Plan in addition to being an officer, employee, agent, or other representative of a party in interest, as that term is defined in ERISA.
ARTICLE X
THE TRUST FUND AND TRUSTEE
10.1 Trustee. The Company has entered into a Trust Agreement with the Trustee to hold the funds necessary to provide the benefits set forth in the Plan. The Company may remove the Trustee or appoint a successor trustee at any time upon 60 days notice in writing to the Trustee and the Committee. Any Trust Agreement may be amended by the Company from time to time in accordance with its terms. Any Trust Agreement shall provide, among other things, for a Trust Fund. The Trust Fund shall be administered by the Trustee to receive contributions, to hold, invest, and reinvest all property and funds of the Trust Fund, and to distribute benefits to eligible Participants and Beneficiaries.
10.2 Duties of the Trustee. The Trustee shall have sole responsibility for the investment and safekeeping of the assets of the Trust Fund and shall have no responsibility for the operation or administration of the Plan, except as expressly provided herein.
10.3 Diversion. At no time shall any part of the corpus or income of the Trust Fund be used for or diverted to purposes other than for the exclusive benefit of Participants or their Beneficiaries; provided, however, that contributions may be returned to the Employing Company in accordance with the provisions of Section 4.5.
ARTICLE XI
AMENDMENT AND TERMINATION
11.1 Amendment of the Plan. The Plan may be amended or modified by the Board of Directors pursuant to its written resolutions at any time and from time to time; provided, however, that no such amendment or modification shall make it possible for any part of the corpus or income of the Trust Fund to be used for or diverted to purposes other than for the exclusive benefit of Participants or their Beneficiaries under the Plan, including such part as is required to pay taxes and administration expenses of the Plan. The Plan may also be amended or modified by the Committee (a) if such amendment or modification does not involve a substantial increase in cost to any Employing Company, or (b) as may be necessary, proper, or desirable in order to comply with laws or regulations enacted or promulgated by any federal or state governmental authority and to maintain the qualification of the Plan under Sections 401(a) and 501(a) of the Code and the applicable provisions of ERISA.
Notwithstanding the foregoing, the formula in Section 6.2 of this Plan under which shares of Common Stock are allocated to the Accounts of Plan Participants shall not be amended more frequently than once every six months.
No amendment to the Plan shall have the effect of decreasing a
Participant's vested interest in his Account, determined without regard to such
amendment, as of the later of the date such amendment is adopted or the date it
becomes effective. In addition, if the vesting schedule of the Plan is amended,
any Participant who has completed at least three (3) Years of Service and whose
vested interest is at any time adversely affected by such amendment may elect to
have his vested interest determined without regard to such amendment during the
election period defined under Section 411(a)(10) of the Code. Finally, no
amendment shall eliminate an optional form of benefit in violation of Code
Section 411(d)(6), as provided in regulations prescribed by the Secretary of the
Treasury.
11.2 Termination of the Plan. It is the intention of the Employing Companies to continue the Plan indefinitely. However, the Board of Directors pursuant to its written resolutions may at any time and for any reason suspend or terminate the Plan or suspend or discontinue the making of contributions to the Plan by all Employing Companies. Any Employing Company may, by action of its board of directors and approval by the Board of Directors suspend or terminate the making of contributions to the Plan by such Employing Company.
In the event of termination of the Plan or partial termination or upon complete discontinuance of contributions under the Plan by all Employing Companies or by any one Employing Company, the amount to the credit of the Account of each Participant whose Employing Company shall be affected by such termination or discontinuance shall be determined as of the next Valuation Date and shall be distributed to him or his Beneficiary thereafter at such time or times and in such nondiscriminatory manner as is determined by the Committee. Notwithstanding the above, so long as a Participant continues to be an Employee, no distribution may be made of shares of Common Stock which have been allocated to the Participant's Account for a period of less than 84 months commencing after the month in which such allocation occurred, unless such distribution is pursuant to Section 7.2 of the Plan or on account of termination of the Plan after December 31, 1984.
11.3 Merger or Consolidation of the Plan. The Plan shall not be merged or consolidated with nor shall any assets or liabilities thereof be transferred to any other plan unless each Participant of the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately prior to the merger, consolidation, or transfer (if the Plan had then terminated).
11.4 Transfer of Plan Assets. Notwithstanding any provision of the Plan to the contrary, upon the distribution by the Southern Company to its shareholders of the Mirant Stock held by the Southern Company pursuant to a tax-free spin-off under Code Section 355 or such similar transaction, the Accounts of certain Participants may be transferred to a retirement plan established by Mirant which is intended to constitute a qualified retirement plan under Code Section 401(a) pursuant to the Employee Matters Agreement entered into between the Southern Company and Mirant ("Agreement"). The Participants whose Accounts shall be transferred, if any, shall be identified in accordance with the Agreement. The Committee shall determine the time of such transfers and shall establish such rules and procedures as its deems necessary or appropriate to effect the transfers, except that all actions with respect to the transfers shall be taken in a manner consistent with the Agreement.
ARTICLE XII
TOP-HEAVY PROVISIONS
12.1 Top-Heavy Plan Requirements. For any Plan Year the Plan shall be determined to be a top-heavy plan, the Plan shall provide the minimum allocation requirement of Section 12.3.
(a) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a top-heavy plan, if, as of the Determination Date, the sum of the Aggregate Accounts of Key Employees under this Plan exceeds 60% of the Aggregate Accounts of all Employees entitled to participate in this Plan.
(b) For any Plan Year commencing after December 31, 1983, the Plan shall be determined to be a super-top-heavy plan, if, as of the Determination Date, the sum of the Aggregate Accounts of Key Employees under this Plan exceeds 90% of the Aggregate Accounts of all Employees entitled to participate in this Plan.
(c) In the case of a Required Aggregation Group, each plan in the group will be considered a top-heavy plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a top-heavy plan if the Aggregation Group is not a Top-Heavy Group.
In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a top-heavy plan if the Permissive Aggregation Group is a Top-Heavy Group. A plan that is not part of the Required Aggregation Group but that has nonetheless been aggregated as part of the Permissive Aggregation Group will not be considered a top-heavy plan even if the Permissive Aggregation Group is a Top-Heavy Group.
(d) For purposes of this Article XII, if any Employee is a non-Key Employee for any Plan Year, but such Employee was a Key Employee for any prior Plan Year, such Employee's Present Value of Accrued Retirement Income and/or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a top-heavy or super-top-heavy plan (or whether any Aggregation Group which includes this Plan is a Top-Heavy Group). In addition, if an Employee or former Employee has not performed any services for any Employing Company maintaining the Plan at any time during the one-year period ending on the Determination Date, the Aggregate Account and/or Present Value of Accrued Retirement Income shall be excluded in determining whether this Plan is a top-heavy or super-top-heavy plan.
(e) Only those plans of the Affiliated Employers in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are top-heavy plans.
(a) Notwithstanding anything herein to the contrary, for any top-heavy Plan Year, the Employing Company contribution allocated to the Account of each non-Key Employee shall be an amount not less than the lesser of: (1) 3% of such Participant's compensation for that Plan Year, or (2) a percentage of that Participant's compensation not to exceed the percentage at which contributions are made under the Plan for the Key Employee for whom such percentage is highest for that Plan Year.
(b) For purposes of the minimum allocation of Section 12.3(a), the percentage allocated to the Account of any Key Employee shall be equal to the ratio of the Employing Company contributions allocated on behalf of such Key Employee divided by the compensation of such Key Employee for that Plan Year.
(c) For any top-heavy Plan Year, the minimum allocations of
Section 12.3(a) shall be allocated to the Accounts of all non-Key
Employees who are Participants and who are employed by the Affiliated
Employers on the last day of the Plan Year.
(d) Notwithstanding the foregoing, in any Plan Year in which a non-Key Employee is a Participant in both this Plan and a defined benefit plan, and both such plans are top-heavy plans, the Affiliated Employers shall not be required to provide a non-Key Employee with both the full separate minimum defined benefit and the full separate defined contribution plan allocations. Therefore, if a non-Key Employee is participating in a defined benefit plan maintained by the Affiliated Employers and the minimum benefit under Code Section 416(c)(1) is provided the non-Key Employee under such defined benefit plan, the minimum allocation provided for above shall not be applicable, and no minimum allocation shall be made on behalf of the non-Key Employee. Alternatively, the Employing Company may satisfy the minimum allocation requirement of Code Section 416(c)(2) for the non-Key Employee by providing any combination of benefits and/or contributions that satisfy the safe harbor rules of Treasury Regulation Section 1.416-1(M-12).
ARTICLE XIII
GENERAL PROVISIONS
13.1 Plan Not an Employment Contract. The Plan shall not be deemed to constitute a contract between an Affiliated Employer and any Employee, nor shall anything herein contained be deemed to give any Employee any right to be retained in the employ of an Employing Company, or to interfere with the right of an Employing Company to discharge any Employee at any time and to treat him without regard to the effect which such treatment might have upon him as a Participant.
13.2 Non-Alienation or Assignment. Except as may be otherwise permitted or required by law, no right or interest in the Plan of any Participant or Beneficiary and no distribution or payment under the Plan to any Participant or Beneficiary of a deceased Participant shall be subject in any manner to anticipation, alienation, sale, transfer (except by death), assignment (either at law or in equity), pledge, encumbrance, charge, attachment, garnishment, levy, execution, or other legal or equitable process, whether voluntary or involuntary, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, attach, garnish, levy, execute, or enforce any other legal or equitable process against the same shall be void, nor shall any such right, interest, distribution, or payment be in any way liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person entitled to such right, interest, distribution, or payment. If any Participant or Beneficiary is adjudicated bankrupt or purports to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge any such right, interest, distribution, or payment, voluntarily or involuntarily, or if any action shall be taken which is in violation of the provisions of the immediately preceding sentence, the Committee may hold or apply or cause to be held or applied such right, interest, distribution, or payment or any part thereof to or for the benefit of such Participant or Beneficiary in such manner as is in accordance with applicable law. In addition, a Participant's benefits may be offset pursuant to a judgment, order, or decree issued (or settlement agreement entered into) on or after August 5, 1997, if and to the extent that such offset is permissible or required under Code Section 401(a)(13).
Notwithstanding the above, the Committee and the Trustee shall comply with any domestic relations order (as defined in Section 414(p)(1)(B) of the Code) which is a qualified domestic relations order satisfying the requirements of Section 414(p) of the Code. The Committee shall establish procedures for (a) notifying Participants and alternate payees who have or may have an interest in benefits which are the subject of domestic relations orders, (b) determining whether such domestic relations orders are qualified domestic relations orders under Section 414(p) of the Code, and (c) distributing benefits which are subject to qualified domestic relations orders.
13.3 Payments to Minors and Others. If the Committee determines that any person entitled to a distribution or payment from the Trust Fund is an infant or a minor, is incompetent or is unable to care for his affairs by reason of physical or mental disability, it may cause all distributions or payments thereafter becoming due to such person to be made to any other person for his benefit, without responsibility to follow the application of payments so made. Payments made pursuant to this provision shall completely discharge the Company, the Trustee, and the Committee with respect to the amounts so paid.
13.4 Source of Benefits. The Trust Fund established under the Plan shall be the sole source of the payments or distributions to be made in accordance with the Plan. No persons shall have any rights under the Plan with respect to the Trust Fund, or against the Trustee or any Employing Company, except as specifically provided herein.
13.5 Unclaimed Benefits. If the Committee is unable, within five (5) years after any distribution becomes payable to a Participant or Beneficiary, to make or direct payment to the person entitled thereto because the identity or whereabouts of such person cannot be ascertained, notwithstanding the mailing of due notice to such person at his last known address as indicated by the records of either the Committee or his Employing Company, then such benefit or distribution will be disposed of as follows:
(a) If the whereabouts of the Participant is unknown to the Committee, distribution will be made to the Participant's Beneficiary or Beneficiaries.
Payment to such one or more persons shall completely discharge the Company, the Trustee, and the Committee with respect to the amounts so paid.
(b) If none of the persons described in (a) above, can be located, then the benefit payable under the Plan shall be forfeited and shall be applied to reduce future Employing Company contributions. Notwithstanding the foregoing sentence, such benefit shall be reinstated if a claim is made by the Participant or Beneficiary for the forfeited benefit.
In the event the Committee makes or directs a payment to the person entitled thereto but the check for such payment remains un-cashed for a period of 180 days, the Committee shall take such actions as it deems reasonable to determine the whereabouts of such person. If the whereabouts of the person is unknown or the check remains un-cashed, the Committee shall direct that such check be cancelled. In the event the person entitled to such payment subsequently requests payment, the Committee shall direct such payment to such person in the amount of the previous check.
13.6 Governing Law. The provisions of the Plan and the Trust shall be construed, administered, and enforced in accordance with the laws of the State of Georgia, except to the extent such laws are preempted by the laws of the United States.
IN WITNESS WHEREOF, the Company has caused this amendment and restatement of the Plan to be executed this _____ day of _______________, 2002 to be effective as of January 1, 2002.
EMPLOYEE STOCK OWNERSHIP PLAN COMMITTEE
THE SOUTHERN COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
APPENDIX A
The Employing Companies as of July 1, 1998 are:
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Energy Solutions, Inc.
Southern Company Services, Inc.
Southern Nuclear Operating Company, Inc.
Exhibit 10.31
SOUTHERN COMPANY
OMNIBUS INCENTIVE COMPENSATION PLAN
Amended and Restated
Effective May 23, 2001
Contents
Article 1. Establishment, Objectives, and Duration................................................1
Article 2. Definitions............................................................................1
Article 3. Administration.........................................................................5
Article 4. Shares Subject to the Plan and Maximum Awards..........................................5
Article 5. Eligibility and Participation..........................................................6
Article 6. Stock Options..........................................................................7
Article 7. Stock Appreciation Rights..............................................................8
Article 8. Restricted Stock and Restricted Stock Units...........................................10
Article 9. Performance Units, Performance Shares, and Cash-Based Awards..........................11
Article 10. Performance Measures..................................................................13
Article 11. Beneficiary Designation...............................................................14
Article 12. Deferrals.............................................................................15
Article 13. Rights of Employees/Directors.........................................................15
Article 14. Amendment, Modification, and Termination..............................................15
Article 15. Withholding...........................................................................16
Article 16. Indemnification.......................................................................16
Article 17. Successors............................................................................17
Article 18. General Provisions....................................................................17
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Southern Company Omnibus Incentive Compensation Plan
Article 1.........Establishment, Objectives, and Duration
1.1......Establishment of the Plan. The Southern Company (hereinafter referred to as the "Company"), hereby establishes an incentive compensation plan to be known as the "Southern Company Omnibus Incentive Compensation Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, and Cash-Based Awards.
Subject to approval by the Company's stockholders, the Plan shall become effective as of May 23, 2001 (the "Effective Date") and shall remain in effect as provided in Section 1.3 hereof.
1.2......Objectives of the Plan. The objectives of the Plan are to optimize the profitability and growth of the Company through annual and long-term incentives that are consistent with the Company's goals and that link the personal interests of Participants to those of the Company's stockholders; to provide Participants with an incentive for excellence in individual performance; and to promote teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Employees and Directors who make significant contributions to the Company's success and to allow those individuals to share in the success of the Company.
1.3......Duration of the Plan. The Plan shall commence on the Effective Date, as described in Section 1.1 hereof, and shall remain in effect, subject to the right of the Board of Directors to amend or terminate the Plan at any time pursuant to Article 14 hereof, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan on or after the tenth anniversary of the Effective Date.
Article 2.........Definitions
Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized:
2.1. "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act.
2.2. "Award" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, or Cash-Based Awards.
2.3. "Award Agreement" means an agreement entered into by the Company and each Participant setting forth the terms and provisions applicable to Awards granted under this Plan.
2.4 "Base Value" shall mean the Fair Market Value of a Stock Appreciation Right on the date of its grant.
2.5. "Beneficial Owner" or "Beneficial Ownership" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations of the Exchange Act.
2.6. "Board" or "Board of Directors" means the Board of Directors of the Company.
2.7. "Cash-Based Award" means an Award granted to a Participant, as described in Article 9 herein.
2.8. "Change in Control Benefit Plan Determination Policy" shall mean the change in control benefit plan determination policy, as approved by the Board of Directors of Southern Company Services, Inc., as it may be amended from time to time in accordance with the provisions therein.
2.9. "Code" means the Internal Revenue Code of 1986, as amended from time to time.
2.10. "Committee" means any committee appointed by the Board to administer Awards to Employees, as specified in Article 3 herein. The Committee shall at all times maintain compliance with Code Section 162(m), or any successor statute thereto, as to the composition of the Committee.
2.11. "Common Stock" shall mean the common stock of the Company.
2.12. "Company" means The Southern Company, a Delaware corporation, and any successor thereto as provided in Article 17 herein.
2.13. "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or agencies.
2.15. "Covered Employee" means a Participant who, as of the date of vesting and/or payout of an Award, as applicable, is one of the group of "covered employees," as defined in the regulations promulgated under Code Section 162(m), or any successor statute.
2.16. "Director" means any individual who is a member of the Board of Directors of the Company or any Subsidiary; provided, however, that any Director who is employed by the Company or any Subsidiary shall be considered an Employee under the Plan.
2.17. "Disability" shall have the meaning ascribed to such term in the Participant's governing long-term disability plan, or if no such plan exists, at the discretion of the Committee.
2.18. "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.19. "Employee" means any employee of the Company or its Subsidiaries. Directors who are employed by the Company or its Subsidiaries shall be considered Employees under this Plan.
2.20. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
2.21. "Fair Market Value" shall mean the average of the high and low prices at which a share of Common Stock shall have been traded on the respective measurement date, such as the date of grant or the exercise of an Award, or on the next preceding trading day if such date was not a trading date, as reported by the principal securities exchange on which the Shares are traded or, if there is no such sale on the relevant date, then on the last previous day on which a sale was reported. If the Shares are not listed for trading on a national securities exchange, the fair market value of the Shares shall be determined by the Committee in good faith. In no event shall the Fair Market Value equal less than the par value of the Common Stock.
2.22. "Freestanding SAR" means an SAR that is granted independently of any Options, as described in Article 7 herein.
2.23. "Incentive Stock Option" or "ISO" means an option to purchase Shares granted under Article 6 herein and which is designated as an Incentive Stock Option and which is intended to meet the requirements of Code Section 422.
2.24. "Insider" shall mean an individual who is, on the relevant date, an officer, director or ten percent (10%) beneficial owner of any class of the Company's equity securities that is registered pursuant to Section 12 of the Exchange Act, all as defined under Section 16 of the Exchange Act.
2.25. "Nonqualified Stock Option" or "NQSO" means an option to purchase Shares granted under Article 6 herein and which is not intended to meet the requirements of Code Section 422.
2.26. "Option" means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6 herein.
2.27. "Option Price" means the price at which a Share may be purchased by a Participant pursuant to an Option.
2.28. "Participant" means an Employee or Director who has been selected to receive an Award or, with respect to whom, an Award is outstanding under the Plan.
2.29. "Performance-Based Exception" means the performance-based exception from the tax deductibility limitations of Code Section 162(m).
2.30. "Performance Share" means an Award granted to a Participant, as described in Article 9 herein.
2.31. "Performance Unit" means an Award granted to a Participant, as described in Article 9 herein.
2.32. "Period of Restriction" means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 8 herein.
2.33. "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) thereof.
2.34. "Restricted Stock" means an Award granted to a Participant, as described in Article 8 herein.
2.35 "Restricted Stock Unit" means an Award granted to a Participant, as described in Article 8 herein.
2.36. "Retirement" shall have the meaning ascribed to such term in The Southern Company Pension Plan.
2.37. "Shares" means the shares of Common Stock.
2.38. "Stock Appreciation Right" or "SAR" means an Award, granted alone or in connection with a related Option, designated as an SAR, pursuant to the terms of Article 7 herein.
2.39. "Subsidiary" means any corporation, partnership, joint venture, limited liability company, or other entity (other than the Company) which is part of an unbroken chain of entities beginning with the Company if, at the time of the granting of an Award, each of the entities in the unbroken chain (other than the last entity) owns more than 50% of the total combined voting power in one of the other entities in such chain.
2.40. "Tandem SAR" means an SAR that is granted in connection with a related Option pursuant to Article 7 herein, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled).
2.41. "Trust" shall mean the Southern Company Deferred Compensation Trust.
2.42. "Trustee" shall mean the trustee of the Trust.
2.43. "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors.
Article 3.........Administration
3.1......General. The Plan shall be administered by a Committee. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors. The Committee shall be responsible for administration of the Plan; provided, however, that the determination of the number of Awards to be granted to Directors shall remain vested in the Board of Directors. The Committee shall have the authority to delegate administrative duties to (i) officers, Employees or Directors of the Company or Subsidiaries, or (ii) other Persons or organizations.
3.2......Authority of the Committee. Except as limited by law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions herein, the Committee shall have full power to select Employees and Directors who shall participate in the Plan; determine the sizes and types of Awards; determine the terms and conditions of Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan; establish, amend, or waive rules and regulations for the Plan's administration; determine and certify whether Award requirements have been met; and (subject to the provisions of Articles 13 and 14 herein) amend the terms and conditions of any outstanding Award as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law (and subject to Section 3.1 herein), the Committee may delegate its authority as identified herein.
3.3......Decisions Binding. All determinations and decisions made by the Board or the Committee pursuant to the provisions of the Plan and all related orders and resolutions of the Board or the Committee shall be final, conclusive and binding on all persons, including the Company, its stockholders, Directors, Employees, Participants, their estates and beneficiaries and the Subsidiaries.
Article 4.........Shares Subject to the Plan and Maximum Awards
4.1......Number of Shares Available for Grants. Subject to adjustment as provided in Section 4.2 herein, the number of Shares hereby reserved for issuance to Participants under the Plan shall be 30,000,000 (thirty million). Additionally, any Shares available for issuance under the Southern Company Performance Stock Plan on May 23, 2001 shall be transferred to the Plan, added to the reserved Shares and available for issuance to Participants under the Plan. No more than 15,000,000 (fifteen million) of the Shares available for issuance under the Plan may be granted in the form of Awards other than Stock Options. The Committee shall determine the appropriate methodology for calculating the number of Shares issued pursuant to the Plan. Unless and until the Committee determines that an Award to a Covered Employee shall not be designed to comply with the Performance-Based Exception, the following rules shall apply to grants of such Awards under the Plan:
(a) Stock Options: The maximum aggregate number of Shares that may be granted in the form of Stock Options, pursuant to any Award granted in any one fiscal year to any one single Participant shall be 5,000,000 (five million).
(b) SARs: The maximum aggregate number of Shares that may be granted in the form of Stock Appreciation Rights, pursuant to any Award granted in any one fiscal year to any one single Participant shall be 5,000,000 (five million).
(c) Restricted Stock: The maximum aggregate grant with respect to Awards of Restricted Stock granted in any one fiscal year to any one Participant shall be 1,000,000 (one million).
(d) Restricted Stock Units: The maximum aggregate payout (determined as of the end of the applicable restriction period) with respect to Awards of Restricted Stock Units granted in any one fiscal year to any one Participant shall be the greater of $10,000,000 (ten million dollars) or 1,000,000 (one million) shares.
(e) Performance Shares. The maximum aggregate payout (determined as of the end of the applicable performance period) with respect to Awards of Performance Shares granted in any one fiscal year to any one Participant shall be $10,000,000 (ten million dollars) or 1,000,000 (one million) shares.
(f) Performance Units and Cash-Based Awards: The maximum aggregate payout (determined as of the end of the applicable performance period) with respect to Performance Units or Cash-Based Awards awarded in any one fiscal year to any one Participant shall be $10,000,000 (ten million dollars).
4.2......Adjustments in Authorized Shares. In the event of any change in corporate capitalization, such as a stock split, stock dividend or reclassification, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Company, such adjustment shall be made in the number and class of Shares which may be delivered under Section 4.1, in the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, and in the Award limits set forth in Section 4.1 as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; provided, however, that the number of Shares subject to any Award shall always be a whole number.
Article 5.........Eligibility and Participation
5.1......Eligibility. Persons eligible to participate in this Plan include all Employees and Directors.
5.2......Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees and Directors, those to whom Awards shall be granted and shall determine the nature and amount of each Award.
Article 6.........Stock Options
6.1......Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee.
6.2......Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO within the meaning of Code Section 422, or an NQSO whose grant is intended not to fall under the provisions of Code Section 422.
The Committee, in its sole discretion, shall have the ability to require in the Award Agreement that the Participant must certify in a manner acceptable to the Committee that he/she is in compliance with the terms and conditions of the Plan and the Award Agreement. In the event that a Participant fails to comply with the provisions of this Section 6.2 prior to, or during the six (6) month period after any exercise, payment, or delivery pursuant to an Option, such exercise, payment, or delivery may be rescinded by the Committee within two (2) years thereafter. In the event of such rescission, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, payment, or delivery, in such manner and or such terms and conditions as may be required, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company.
6.3......Option Price. The Option Price for each grant of an Option under this Plan shall be determined by the Committee.
6.4......Duration of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant.
6.5......Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant.
6.6......Payment. Options granted under this Article 6 shall be
exercised by the delivery of a written notice of exercise to the Company and/or
the Committee, setting forth the number of Shares with respect to which the
Option is to be exercised, accompanied by full payment for the Shares. The
Option Price upon exercise of any Option shall be payable to the Company in full
either: (a) in cash or its equivalent, or (b) by forgoing compensation that the
Committee agrees otherwise would be owed, or (c) by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are tendered
must have been held by the Participant for at least six (6) months prior to
their tender to satisfy the Option Price), (d) by the attestation of Shares, or
(e) by any combination of (a), (b), (c) or (d).
The Committee also may allow cashless exercise as permitted under Federal Reserve Board's Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law.
Subject to any governing rules or regulations, after receipt of a written notification of exercise and full payment, the Company may deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).
All payments under all of the methods indicated above shall be paid in United States dollars.
6.7......Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
6.8......Termination of Employment/Directorship. Each Participant's Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment or directorship with the Company. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.
6.9......Transferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a Participant's Award Agreement, no NQSO granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Agreement, all NQSOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant.
Article 7.........Stock Appreciation Rights
7.1......Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of SARs granted to each Participant (subject to Article 4 herein) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of a Share on the date of grant of the SAR. The grant price of Tandem SARs shall equal the Option Price of the related Option.
7.2......Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.
Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO.
7.3......Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them.
7.4......SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine.
7.5......Term of SARs. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion; provided, however, that such term shall not exceed ten (10) years.
7.6......Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
(a) The difference between the Fair Market Value of a Share on the date of exercise over the Fair Market Value of a Share on the date of grant; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The Committee's discretionary authority regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR.
7.7......Termination of Employment/Directorship. Each SAR Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment or directorship with the Company and/or its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, and need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
7.8......Nontransferability of SARs. Except as otherwise provided in a Participant's Award Agreement, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Agreement, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant.
Article 8.........Restricted Stock and Restricted Stock Units
8.1......Grant of Restricted Stock/Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no shares are actually awarded to the Participant except that the Committee may designate that a portion of the Restricted Stock Unit be paid out in Shares.
8.2......Award Agreement. Each Restricted Stock and Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or Restricted Stock Units granted, and such other provisions as the Committee shall determine.
8.3......Transferability. Except as provided in this Article 8, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Award Agreement. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant.
Except as otherwise provided in the Award Agreement, Restricted Stock Units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Agreement, a Participant's rights with respect to the Restricted Stock Units granted under the Plan shall be available during the Participant's lifetime only to such Participant.
8.4......Other Restrictions. Subject to Article 10 herein, the Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals (Company-wide, divisional, and/or individual), time-based restrictions on vesting following the attainment of the performance goals, and/or restrictions under applicable federal or state securities laws.
The Company, directly or through its designee, may retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the applicable Period of Restriction.
8.5......Voting Rights. Subject to the terms of the Award Agreements, Participants holding Shares of Restricted Stock granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant has no voting rights with Restricted Stock Units.
8.6......Dividends and Other Distributions. Subject to the terms of the Award Agreements, during the Period of Restriction, Participants holding Shares of Restricted Stock or Restricted Stock Units granted hereunder may be credited with regular cash dividends paid with respect to the underlying Shares while they are so held. The Committee may apply any restrictions to the dividends that the Committee deems appropriate. Without limiting the generality of the preceding sentence, if the grant or vesting of Restricted Shares or Restricted Stock Units granted to a Covered Employee is designed to comply with the requirements of the Performance-Based Exception, the Committee may apply any restrictions it deems appropriate to the payment of dividends declared with respect to such Restricted Shares or Restricted Stock Units, such that the dividends and/or the Restricted Shares or Restricted Stock Units maintain eligibility for the Performance-Based Exception.
8.7......Termination of Employment/Directorship. Each Award Agreement shall set forth the extent to which the Participant shall have the right to receive unvested Restricted Shares or Restricted Stock Units following termination of the Participant's employment or directorship with the Company. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination; provided, however that, except in the cases of terminations connected with a "Change in Control" (as defined in the Change in Control Benefit Plan Determination Policy) and terminations by reason of retirement, death or Disability, the vesting of Shares of Restricted Stock or Restricted Stock Units which qualify for the Performance-Based Exception and which are held by Covered Employees shall not be accelerated.
Article 9.........Performance Units, Performance Shares, and Cash-Based Awards
9.1......Grant of Performance Units/Shares and Cash-Based Awards. Subject to the terms of the Plan, Performance Units, Performance Shares, and/or Cash-Based Awards may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee.
9.2......Value of Performance Units/Shares and Cash-Based Awards. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. Each Cash-Based Award shall have a value as may be determined by the Committee. The Committee shall set performance or other goals, including without limitation time-based goals, in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares and Cash-Based Awards which will be paid out to the Participant. For purposes of this Article 9, the time period during which the performance goals must be met shall be called a "Performance Period."
9.3......Earning of Performance Units/Shares and Cash-Based Awards. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Shares and Cash-Based Awards shall be entitled to receive payout on the number and value of Performance Units/Shares and Cash-Based Awards earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
9.4 ....Determination of Awards. The factors required to determine Awards under the Plan shall be fixed in all events by the end of the applicable performance period established by the Committee.
9.5......Form and Timing of Payment of Performance Units/Shares and Cash-Based Awards. Payment of earned Performance Units/Shares and Cash-Based Awards shall be made in such form and at such time as the Committee shall determine at the time of the Award. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Units/Shares and Cash-Based Awards in the form of cash or in Shares (or in a combination thereof) which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares and Cash-Based Awards at the close of the applicable Performance Period. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. The discretionary authority of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
At the discretion of the Committee, Participants may be entitled to
receive any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares which have
been earned, but not yet distributed to Participants (such dividends shall be
subject to the same accrual, forfeiture, and payout restrictions as apply to
dividends earned with respect to Shares of Restricted Stock, as set forth in
Section 8.6 herein). In addition, Participants may, at the discretion of the
Committee, be entitled to exercise their voting rights with respect to such
Shares.
9.6......Termination of Employment/Directorship Due to Death, Disability, or Retirement. Unless determined otherwise by the Committee and set forth in the Participant's Award Agreement, in the event the employment or directorship of a Participant is terminated by reason of death, Disability, or Retirement during a Performance Period, the Participant shall receive a payout of the Performance Units/Shares or Cash-Based Awards which is prorated, as specified by the Committee in its discretion.
Payment of earned Performance Units/Shares or Cash-Based Awards shall be made at a time specified by the Committee in its sole discretion following the Performance Period and set forth in the Participant's Award Agreement. Notwithstanding the foregoing, with respect to Covered Employees who retire during a Performance Period, payments shall be made at the same time as payments are made to Participants who did not retire during the applicable Performance Period.
9.7......Termination of Employment/Directorship for Other Reasons. In the event that a Participant's employment or directorship terminates for any reason other than those reasons set forth in Section 9.6 herein, all Performance Units/Shares and Cash-Based Awards shall be forfeited by the Participant to the Company unless determined otherwise by the Committee, as set forth in the Participant's Award Agreement.
9.8......Nontransferability. Except as otherwise provided in a Participant's Award Agreement, Performance Units/Shares and Cash-Based Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Agreement, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative.
Article 10........Performance Measures
Unless and until the Committee proposes for shareholder vote and shareholders approve a change in the general performance measures set forth in this Article 10, the attainment of which may determine the degree of payout and/or vesting with respect to Awards to Covered Employees which are designed to qualify for the Performance-Based Exception, the performance measure(s) to be used for purposes of such grants shall be chosen from among:
(a) Earnings per share;
(b) Net income or net operating income (before or after taxes and before or after extraordinary items);
(c) Return measures (including, but not limited to, return on assets, equity, or sales);
(d) Cash flow return on investments which equals net cash flows divided by owners equity;
(e) Earnings before or after taxes;
(f) Gross revenues;
(g) Gross margins;
(h) Share price (including, but not limited to, growth measures and total shareholder return);
(i) Economic Value Added, which equals net income or net operating income minus a charge for use of capital;
(j) Operating margins;
(k) Market share;
(l) Revenues growth;
(m) Capacity utilization;
(n) Increase in customer base;
(o) Environmental health and safety;
(p) Diversity; and
(q) Quality.
The Committee, in its sole discretion, shall have the ability to set such performance measures at the corporate level or the subsidiary/business unit level. If the Company's Shares are traded on an established securities market, any Awards issued to Covered Employees are intended but not required to meet the requirements of the Treasury Regulations under Code Section 162(m) necessary to satisfy the Performance Based Exception.
The Committee shall have the discretion to adjust the determinations of the degree of attainment of the preestablished performance goals; provided, however, that Awards which are designed to qualify for the Performance-Based Exception, and which are held by Covered Employee, may not be adjusted upward (the Committee shall retain the discretion to adjust such Awards downward).
In the event that applicable tax and/or securities laws change to
permit Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
No Award shall be paid unless the Committee certifies that the requirements necessary to receive the Award have been met.
Article 11........Beneficiary Designation
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company or the Committee, and will be effective only when filed by the Participant in writing with the Company or the Committee during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate.
Article 12........Deferrals
The Committee may permit or require a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock or Restricted Stock Units, or the satisfaction of any requirements or goals with respect to Performance Units, Performance Shares or Cash-Based Awards. If any such deferral election is required or permitted, the Committee may, in its sole discretion, establish rules and procedures for such payment deferrals.
Article 13........Rights of Employees/Directors
13.1.....Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company.
13.2.....Participation. No Employee or Director shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
13.3.....Rights as a Stockholder. Except as otherwise provided in an Award Agreement, a Participant shall have none of the rights of a shareholder with respect to shares of Common Stock covered by any Award until the Participant becomes the record holder of such shares.
Article 14........Amendment, Modification, and Termination
14.1.....Amendment, Modification, and Termination. Subject to the terms of the Plan, the Board may at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part. Notwithstanding the foregoing, Section 18.4 of the Plan may not be amended following a "Change in Control" or "Southern Termination" (as such terms are defined in the Change in Control Benefit Plan Determination Policy).
14.2.....Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan; provided that, unless the
Committee determines otherwise at the time such adjustment is considered, no
such adjustment shall be authorized to the extent that such authority would be
inconsistent with the Plan's meeting the requirements of Section 162(m) of the
Code, as from time to time amended.
14.3.....Awards Previously Granted. Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award, except any action needed to preserve pooling of interests accounting.
14.4.....Compliance with Code Section 162(m). At all times when Code
Section 162(m) is applicable, all Awards granted under this Plan shall comply
with the requirements of Code Section 162(m); provided, however, that in the
event the Board determines that such compliance is not desired with respect to
any Award or Awards available for grant under the Plan, and such determination
is communicated to the Committee, then compliance with Code Section 162(m) will
not be required. In addition, in the event that changes are made to Code Section
162(m) to permit greater flexibility with respect to any Award or Awards
available under the Plan, the Board or the Committee may, subject to this
Article 14, make any adjustments it deems appropriate.
Article 15........Withholding
15.1.....Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
15.2.....Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
Article 16........Indemnification
Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Certificate of Incorporation of Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
Article 17........Successors
All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
Article 18........General Provisions
18.1.....Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.
18.2. Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included, provided that the remaining provisions shall be construed in a manner necessary to accomplish the intentions of the Company upon execution of the Plan.
18.3. Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
18.4. Change in Control. The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control or preliminary change in control of Southern Company or a Subsidiary, the funding of the Trust and the benefits to be provided hereunder in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein.
18.5.....Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares under the Plan prior to:
(a) Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
(b) Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.
18.6.....Securities Law Compliance. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions or Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the plan or action by the Board or Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Board or Committee.
18.7.....No Additional Rights. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, or confer upon any Participant any right to continue in the employ of the Company.
No Employee or Director shall have the right to be selected to receive an Award under this Plan or having been so selected, to be selected to receive a future Award.
Neither the Award nor any benefits arising under this Plan shall constitute part of a Participant's employment contract with the Company or any Affiliate, and accordingly, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to liability on the part of the Company or any Affiliate for severance payments.
18.8.....No Effect on Other Benefits. This receipt of Awards under the Plan shall have no effect on any benefits and obligations to which a Participant may be entitled from the Company or any Affiliate, under another plan or otherwise, or preclude a Participant from receiving any such benefits.
18.9.....Employees Based Outside of the United States. Notwithstanding any provision of the Plan to the contrary, in order to comply with provisions of laws in other countries in which the Company and its Subsidiaries operate or have Employees, the Board or the Committee, in their sole discretion, shall have the power and authority to:
(a) Determine which Employees employed outside the United States are eligible to participate in the Plan;
(b) Modify the terms and conditions of any Award granted to Employees who are employed outside the United States; and
(c) Establish subplans, modified exercise procedures, and other terms and procedures to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 18.9 by the Board or the Committee shall be attached to this Plan document as Appendices.
18.10....Shareholder Approval. Notwithstanding anything in the Plan to the contrary, the ISO portion of this Plan shall be effective only if approved by the shareholders of the Company (excluding a Subsidiary) within 12 months before or after the date the Plan is adopted. If not so approved, any Options which were designated as ISOs hereunder shall be automatically be converted to NQSOs.
18.11....Governing Law. To the extent not preempted by federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware.
SOUTHERN COMPANY
By:/s/H. Allen Franklin
H. Allen Franklin
Chairman of the Board, President and
Chief Executive Officer
ATTEST:
|
By:__________________________________________________
Patricia L. Roberts
Assistant Secretary
Exhibit 10.32
THE SOUTHERN COMPANY
PENSION PLAN
EFFECTIVE AS OF JANUARY 1, 1997
TABLE OF CONTENTS
Page
Article I - Definitions
Article II - Eligibility
2.1 Employees.........................................................................................15
2.2 Employees represented by a collective
bargaining agent...............................................................................15
2.3 Persons in military service and Employees
on authorized leave of absence.................................................................15
2.4 Employees reemployed..............................................................................16
2.5 Participation upon return to eligible class.......................................................16
2.6 Exclusion of certain categories of employees......................................................17
2.7 Waiver of participation...........................................................................17
Article III - Retirement
3.1 Retirement at Normal Retirement Date..............................................................18
3.2 Retirement at Early Retirement Date...............................................................18
3.3 Retirement at Deferred Retirement Date............................................................18
Article IV - Determination of Accredited Service
4.1 Accredited Service pursuant to Prior Plan.........................................................19
4.2 Accredited Service................................................................................19
4.3 Accredited Service and Years of Service
in respect of service of certain
Employees previously employed by
an Employing Company or by certain
Affiliated Employers...........................................................................20
4.4 Accrual of Retirement Income during period
of total disability............................................................................21
4.5 Employees leaving Employer's service..............................................................22
4.6 Transfers to or from Savannah Electric
and Power Company..............................................................................23
Article V - Retirement Income
5.1 Normal Retirement Income..........................................................................25
5.2 Minimum Retirement Income payable upon
retirement at Normal Retirement Date
or Deferred Retirement Date....................................................................25
5.3 Minimum Retirement Income upon retirement
at Early Retirement Date or upon
termination of service by reason of
death or otherwise prior to retirement.........................................................26
5.4 Calculation of Social Security Offset.............................................................26
5.5 Early Retirement Income...........................................................................27
5.6 Deferred Retirement Income........................................................................28
5.7 Payment of Retirement Income......................................................................28
5.8 Termination of Retirement Income..................................................................29
5.9 Required distributions............................................................................30
5.10 Suspension of Retirement Income for
reemployment...................................................................................32
5.11 Increase in Retirement Income of retired
Employees......................................................................................32
5.12 Special provisions relating to the
treatment of absence of an Employee
from the service of an Employing
Company to serve in the Armed Forces
of the United States...........................................................................33
Article VI - Limitations on Benefits
6.1 Maximum Retirement Income.........................................................................35
6.2 Adjustment to Defined Benefit Dollar
Limitation for Early or Deferred
Retirement.....................................................................................36
6.3 Adjustment of limitation for Years of
Service or participation.......................................................................37
6.4 Limitation on benefits from multiple plans........................................................37
6.5 Special rules for plans subject to overall
limitations under Code Section 415(e)..........................................................38
6.6 Combination of Plans..............................................................................39
6.7 Incorporation of Code Section 415.................................................................39
Article VII - Provisional Payee
7.1 Adjustment of Retirement Income to provide
for payment to Provisional Payee...............................................................40
7.2 Form and time of election and notice
requirements...................................................................................41
7.3 Circumstances in which election and
designation are inoperative....................................................................42
7.4 Pre-retirement death benefit......................................................................43
7.5 Post-retirement death benefit - qualified
joint and survivor annuity.....................................................................45
7.6 Election and designation by former
Employee entitled to Retirement Income
in accordance with Article VIII................................................................45
7.7 Death benefit for Provisional Payee of
former Employee................................................................................47
7.8 Limitations on Employee's and Provisional
Payee's benefits...............................................................................48
7.9 Effect of election under Article VII..............................................................48
7.10 Effects of change in retirement at Early
Retirement Date................................................................................48
7.11 Commencement of new optional forms of
payment........................................................................................49
7.12 Special form of benefit for former
Employees......................................................................................50
Article VIII - Termination of Service
8.1 Vested interest...................................................................................53
8.2 Early distribution of vested benefit..............................................................53
8.3 Years of Service of reemployed Employees..........................................................54
8.4 Cash-out and buy-back.............................................................................55
8.5 Calculation of present value for cash-out
of benefits and for determining amount
of benefits....................................................................................56
8.6 Retirement Income under Prior Plans...............................................................56
8.7 Requirement for Direct Rollovers..................................................................57
Article IX - Contributions
9.1 Contributions generally...........................................................................59
9.2 Return of Employing Company contributions.........................................................59
9.3 Expenses..........................................................................................60
Article X - Administration of Plan
10.1 Retirement Board..................................................................................61
10.2 Organization and transaction of business
of Retirement Board............................................................................61
10.3 Administrative responsibilities of
Retirement Board...............................................................................62
10.4 Retirement Board, the "Administrator".............................................................62
10.5 Fiduciary responsibilities........................................................................63
10.6 Employment of actuaries and others................................................................63
10.7 Accounts and tables...............................................................................64
10.8 Indemnity of members of Retirement Board..........................................................64
10.9 Areas in which the Retirement Board
does not have responsibility...................................................................64
10.10 Claims Procedures.................................................................................65
Article XI - Management of Trust
11.1 Trust.............................................................................................66
11.2 Disbursement of the Trust Fund....................................................................66
11.3 Rights in the Trust...............................................................................66
11.4 Merger of the Plan................................................................................67
Article XII - Termination of the Plan
12.1 Termination of the Plan...........................................................................68
12.2 Limitation on benefits for certain
highly paid employees..........................................................................68
Article XIII - Amendment of the Plan
13.1 Amendment of the Plan.............................................................................70
Article XIV - Special Provisions
14.1 Exclusive benefit.................................................................................71
14.2 Assignment or alienation..........................................................................71
14.3 Voluntary undertaking.............................................................................72
14.4 Top-Heavy Plan requirements.......................................................................72
14.5 Determination of Top-Heavy status.................................................................72
14.6 Minimum Retirement Income for Top-Heavy
Plan Years.....................................................................................76
14.7 Vesting requirements for Top-Heavy Plan Years.....................................................77
14.8 Adjustments to maximum benefits for
Top-Heavy Plans................................................................................78
Article XV - New Pension Program
15.1 Eligibility.......................................................................................79
15.2 Retirement Income payable upon retirement.........................................................79
15.3 Early Retirement Reduction........................................................................80
15.4 Transfers from Savannah Electric and
Power Company..................................................................................80
15.5 Effect on other Plan provisions...................................................................80
Article XVI - Special Provisions Concerning Certain
of Southern Electric International, Inc.
16.1 Eligibility and Recognition of Service for
Former Employees of Scott Paper Company........................................................82
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Appendix A
Schedules
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Southern Company Services, Inc.
Southern Nuclear Operating Company, Inc.
Introductory Statement
The Southern Company Pension Plan, effective as of January 1, 1997 and hereinafter set forth (the "Plan"), is a modification and continuation of the Pension Plan for Employees of Southern Company Services, Inc. which originally became effective November 1, 1949, and which has been amended from time to time.
Effective January 1, 1997, the following other plans are merged into the Plan:
o Pension Plan for Employees of Alabama Power Company
o Pension Plan for Employees of Georgia Power Company
o Pension Plan for Employees of Gulf Power Company
o Pension Plan for Employees of Mississippi Power Company
o Pension Plan for Employees of Southern Company
Services, Inc., as adopted by Southern
Communications Services, Inc.
o Pension Plan for Employees of Southern Company
Services, Inc., as adopted by Southern
Development and Investment Group, Inc.
o Pension Plan for Employees of Southern Company Services,
Inc., as adopted by Southern Electric
International, Inc.
o Pension Plan for Employees of Southern Nuclear Operating
Company, Inc.
Employees participating in the Merged Plans and employed by an Employing Company on January 1, 1997 shall become immediately covered under the Plan and upon the merger such Employees shall be eligible to receive a benefit immediately after the merger which is equal to or greater than the benefit they would have been entitled to receive immediately before the merger. In addition, notwithstanding any provision of the Plan, the terms of the Prior Plans govern an Employee's circumstances with regard to actions taken or occurring before January 1, 1997.
To the extent that different terms and conditions exist under the Merged Plans and must be protected in the Plan in accordance with requirements under the Code and ERISA, these differences are set forth in schedules attached to and incorporated into the Plan and supersede any inconsistent provisions otherwise set forth in the Plan.
Retirement Income of former Employees (or Provisional Payees of former Employees) who retired in accordance with the provisions of the Prior Plans is payable in accordance with the provisions of the Prior Plans.
All contributions made by the Employing Companies to this Plan are
expressly conditioned upon the continued qualification of the Plan under Section
401(a) of the Code, including any amendments to the Plan, and upon the
deductibility of such contributions by the Employing Companies pursuant to
Section 404 of the Code.
Article I
Definitions
The following words and phraseology as used herein have the following meanings unless a different meaning is plainly required by the context:
1.1 "Accrued Retirement Income" means with respect to any Employee at any particular date, the Retirement Income, determined pursuant to Section 5.1 as may be modified by Article 15, commencing on his Normal Retirement Date which would be payable to such Employee in the form of a single life annuity on the basis of his Accredited Service to the date as of which the computation of Retirement Income is made.
1.2 "Accredited Service" means with respect to any Employee included in the Plan, the period of service as provided in Article IV.
1.3 "Actuarial Equivalent" means a benefit of equivalent value when computed on the basis of five percent (5%) interest per annum, compounded annually and the 1951 Group Annuity Mortality Table for males. The ages for all Employees under the above table shall be set back six (6) years and the ages for such Employees' spouses shall be set back one year. All actuarial adjustments and actuarial determinations required and made under the terms of the Plan shall be calculated in accordance with such assumptions.
1.4 "Affiliated Employer" means an Employing Company and any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes such Employing Company; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with such Employing Company; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes such Employing Company; and any other entity required to be aggregated with such Employing Company pursuant to regulations under Section 414(o) of the Code.
1.5 "Average Monthly Earnings" means the greater of: (a) an Employee's
Monthly Earnings averaged over the three (3) highest Plan Years of participation
which shall produce the highest monthly average within the last ten (10) Plan
Years; or (b) an Employee's Monthly Earnings averaged over the three (3) highest
Plan Years of participation which shall produce the highest monthly average
within the last ten (10) Plan Years during which the Employee actively performed
services for an Employing Company. If an Employee has completed less than three
(3) Plan Years of participation upon his termination of employment, his Average
Monthly Earnings will be based on his Earnings during his participation to his
date of termination.
1.6 "Board of Directors" means the Board of Directors of Southern Company Services, Inc.
1.7 "Code" means the Internal Revenue Code of 1986, as amended from time to time.
1.8 "Deferred Retirement Date" means the first day of the month after a retirement subsequent to the Normal Retirement Date.
Employment subsequent to Normal Retirement Date shall be deemed to be a retirement if an Employee has less than forty (40) Hours of Service during a calendar month.
1.9 "Defined Benefit Dollar Limitation" means the limitation
set forth in Section 415(b)(1)(A) or
(d) of the Code.
1.10 "Defined Contribution Dollar Limitation" means the limitation set forth in Section 415(c)(1)(A) of the Code.
1.11 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.
1.12 "Early Retirement Date" means the first day of the month following the retirement of an Employee on or after his fifty-fifth (55th) birthday and before his sixty-fifth (65th) birthday.
Effective for Employees who have an Hour of Service on or after January 1, 1996 and who (a) are not covered by the terms of a collective bargaining agreement or (b) are covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)" in the preceding paragraph.
1.13 (a) "Earnings" with respect to any Employee including any Employee whose service is terminated by reason of disability (as defined in Section 4.4) means (1) the highest annual rate of salary or wages of an Employee of any Affiliated Employer within any Plan Year before deductions for taxes, Social Security, etc., (2) all amounts contributed by any Affiliated Employer to The Southern Company Employee Savings Plan as Elective Employer Contributions, as said term is described under Section 4.1 of such plan, pursuant to the Employee's exercise of his deferral option made thereunder in accordance with the requirements of Section 401(k) of the Code, and (3) all amounts contributed by any Affiliated Employer to The Southern Electric System Flexible Benefits Plan or The Southern Company Flexible Benefits Plan on behalf of an Employee pursuant to his salary reduction election, and applied to provide one or more of the optional benefits available under such plan, but (4) shall exclude all amounts deferred under any non-qualified deferred compensation plan maintained by any Affiliated Employer.
(b) Notwithstanding the above, "Earnings" with respect to any
commissioned salesperson means the salary or wages of an Employee of any
Affiliated Employer within any Plan Year, without including overtime, and before
deductions for taxes, Social Security, etc. but applying those adjustments
identified in paragraphs (a)(2), (3) and (4) above. In addition, "Earnings" for
any Employee who is a regular part-time employee means with regard to paragraph
(a)(1) above the highest annual rate of salary or wages based on a forty (40)
hour work week.
(c) With respect to an Employee whose service terminates because of a
disability under Section 4.4, Earnings shall be deemed to continue in effect
throughout the period of the Employee's Disability Leave, as also defined in
Section 4.4.
(d) With respect to an Employee on approved leave of absence to serve in the Armed Forces of the United States, Earnings shall be determined for the recognized period of his absence at the rate which is paid to him on the day he returns to the service of an Affiliated Employer or at the rate which was payable to him at the time he left the employment of an Employing Company to enter the Armed Forces of the United States, if such amount was greater.
(e) For Plan Years beginning after December 31, 1988 and prior to January 1, 1994, the annual compensation of each Employee taken into account for purposes of this Plan shall not exceed $200,000 (as adjusted by the Secretary of Treasury). The imposition of this limitation shall not reduce an Employee's Retirement Income below the amount as determined on December 31, 1988. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual compensation of each Employee taken into account under the Plan shall not exceed $150,000, as adjusted for increases in the cost of living in accordance with Code Section 401(a)(17). The cost of living adjustment in effect for a calendar year applies to any period, not exceeding twelve (12) months, over which compensation is determined (the "determination period") beginning in such calendar year. If the determination period is less than twelve (12) months, the limit shall be prorated.
If compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year beginning on or after January 1, 1989 or January 1, 1994, as applicable, the compensation for that prior determination period is subject to the $200,000 or the $150,000 compensation limit in effect for that prior determination period.
Notwithstanding any other provision in the Plan, each Employee's Accrued Retirement Income under this Plan will be the greater of:
(a) the Employee's Accrued Retirement Income as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with Treasury Regulation Section 1.401(a)(4)-13, or
(b) the Employee's Accrued Retirement Income determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the employee's total Years of Service taken into account under the Plan for purposes of benefit accruals.
1.14 "Effective Date" means January 1, 1997.
1.15 "Eligibility Year of Service" is a Year of Service commencing on the Employee's date of employment or reemployment or anniversary date thereof.
1.16 "Employee" means any person who is currently employed by an Employing Company as (a) a regular full-time employee, (b) a regular part-time employee, (c) a cooperative education employee, or (d) a temporary employee (whether full-time or part-time) paid directly or indirectly by an Employing Company. The term also includes "leased employees" within the meaning of Section 414(n)(2) of the Code, unless the total number of leased employees constitutes less than twenty percent (20%) of the Employing Company's non-highly compensated workforce within the meaning of Section 414(n)(5)(C)(ii) and such leased employees are covered by a plan described in Section 414(n)(5)(B) of the Code.
1.17 "Employer" means Southern Company Services, Inc., and its successors.
1.18 "Employing Company" means the Employer and any affiliate or subsidiary of The Southern Company which the Board of Directors may from time to time, and upon such terms and conditions as may be fixed by the Board of Directors, determine to bring under the Plan, and any successor to them. The Employing Companies are set forth on Appendix A to the Plan as updated from time to time. No entity shall be treated as an Employing Company prior to the date it adopts the Plan.
1.19 "Full Current Costs" means the normal cost, as defined in Treasury Regulation Section 1.404(a)-6, for all years since the Effective Date of the Plan, plus interest on any unfunded liability during such period.
1.20 "Hour of Service" means an Employee shall be credited with one Hour of Service for each hour for which (a) he is paid, or entitled to payment, for the performance of duties for an Affiliated Employer, and such hours shall be credited to the Employee for the computation period or periods in which the duties are performed; (b) he is paid, or entitled to payment, by an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence in which case the Employee shall be credited with Hours of Service for the computation period or periods in which the period during which no duties were performed occurs; (c) back pay, irrespective of mitigation of damages, has been either awarded or agreed to by an Affiliated Employer, in which case the Employee shall be credited with Hours of Service for the computation period or periods to which the award or agreement pertains, rather than the computation period in which the award, agreement, or payment is made; and (d) solely for the purpose of calculating Vesting Years of Service, he was on any form of authorized leave of absence. The same Hours of Service shall not be credited under clauses (a), (b), (c), and (d).
An Employee who is entitled to be credited with Hours of Service in accordance with clause (b) or (d) of this Section 1.20 shall be credited with such number of Hours of Service for the period of time during which no duties were performed as though he were in the active employment of an Employing Company during such period of time. However, an Employee shall not be credited with Hours of Service in accordance with clause (b) of this Section 1.20 for unused vacation for which payment is received at termination of employment, or if the payment which is made to him or to which he is entitled in accordance with clause (b) is made or due under a plan maintained solely for the purpose of complying with applicable Worker's Compensation, or unemployment compensation or disability insurance laws, or if such payment is one which solely reimburses an Employee for medical or medically related expenses incurred by the Employee.
Provided there is no duplication of Hours of Service credited in accordance with the foregoing provisions, if an Employee is on an approved leave of absence to serve in the Armed Forces of the United States, he shall be credited with such number of Hours of Service with respect to all or such portion of the period of his absence to serve in the Armed Forces of the United States as may be recognized under Sections 1.41(b), 2.3, and 4.2(a).
The rules set forth in paragraphs (b) and (c) of Department of Labor Regulations 2530.200b-2 are incorporated in the Plan by this reference and made a part hereof.
1.21 "Limitation Year" means the Plan Year.
1.22 "Merged Plans" means the following:
Pension Plan for Employees of Alabama Power Company;
Pension Plan for Employees of Georgia Power Company;
Pension Plan for Employees of Gulf Power Company;
Pension Plan for Employees of Mississippi Power Company;
Pension Plan for Employees of Southern Company Services, Inc., as adopted by Southern Communications Services, Inc.;
Pension Plan for Employees of Southern Company Services, Inc., as adopted by Southern Development and Investment Group, Inc.;
Pension Plan for Employees of Southern Company Services, Inc., as adopted by Southern Electric International, Inc.; and
Pension Plan for Employees of Southern Nuclear Operating Company, Inc.
1.23 "Monthly Earnings" means one-twelfth (1/12) of the Earnings of an Employee of an Affiliated Employer during a Plan Year.
1.24 "Normal Retirement Date" means the first day of the month following an Employee's sixty-fifth (65th) birthday, except that the Normal Retirement Date of any Employee hired on or after his sixtieth (60th) birthday shall be the fifth (5th) anniversary of his initial participation in the Plan.
1.25 "One-Year Break in Service" means a twelve (12) consecutive month period commencing on or after January 1, 1976 which would constitute a Year of Service but for the fact that the Employee has not completed more than 500 Hours of Service during such period.
Solely for the purpose of determining whether a One-Year Break in
Service has occurred for eligibility or vesting purposes, an Employee who is
absent from work for maternity or paternity reasons shall receive credit for the
Hours of Service which would otherwise have been credited to such Employee but
for such absence, or in any case in which such hours cannot be determined, eight
(8) Hours of Service per day of such absence. In no event shall Hours of Service
credited under this paragraph be in excess of the amount necessary to prevent a
One-Year Break in Service from occurring. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an absence (a) by
reason of the pregnancy of the Employee, (b) by reason of a birth of a child of
the Employee, (c) by reason of the placement of a child with the Employee in
connection with the adoption of such child by such Employee, or (d) for purposes
of caring for such child for a period beginning immediately following such birth
or placement. The Hours of Service shall be credited under this paragraph: (a)
in the vesting or eligibility period in which the absence begins if the Hours of
Service credited are necessary to prevent a One-Year Break in Service in such
period, and (b) in all other cases, in the vesting or eligibility period
following the period in which the absence begins.
1.26 "Past Service" means with respect to any Employee included in the Plan, the period of his Accredited Service prior to January 1, 1997 as determined under the Prior Plans.
1.27 "Plan" means The Southern Company Pension Plan, as set forth herein and as hereinafter amended, effective January 1, 1997.
1.28 "Plan Year" means the twelve (12) month period commencing on the first day of January and ending on the last day of December next following.
1.29 "Plan Year of Service" is a Year of Service determined as if the date of employment or reemployment is the first day of the Plan Year.
1.30 "Prior Plans" means the Pension Plan for Employees of Southern Company Services, Inc. and the Merged Plans in effect prior to January 1, 1997. With respect to any particular Employee, Prior Plan means the last plan described in the preceding sentence in which the Employee participated prior to January 1, 1997.
1.31 "Provisional Payee" means a spouse designated or deemed to have been designated by an Employee or former Employee pursuant to Article VII to receive Retirement Income on the death of the Employee or former Employee.
1.32 "Qualified Election" means an election by an Employee or former Employee on a prescribed form that concerns the form of distribution of Retirement Income that must be in writing and must be consented to by the Employee's spouse. The spouse's consent to such an election must acknowledge the effect of such election, must be in writing, and must be witnessed by a notary public. Notwithstanding this consent requirement, if the Employee establishes to the satisfaction of the Retirement Board (or its delegee) that such written consent may not be obtained because the spouse cannot be located or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe, an election by the Employee will be deemed a Qualified Election. Any consent necessary under this provision shall be valid and effective only with respect to the spouse who signs the consent, or in the event of a deemed Qualified Election, with respect to such spouse.
A revocation of a prior Qualified Election may be made by the Employee without consent at any time commencing within ninety (90) days before such Employee's fifty-fifth (55th) birthday but not later than before the commencement of Retirement Income. Effective for Employees who have an Hour of Service on or after January 1, 1996 and who (a) are not covered by the terms of a collective bargaining agreement or (b) are covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)" in the preceding sentence.
1.33 "Retirement Board" means the managing board of the Plan provided for in Article X.
1.34 "Retirement Date" means the Employee's Normal, Early, or Deferred Retirement Date, whichever is applicable to him.
1.35 "Retirement Income" means the monthly Retirement Income provided for by the Plan.
1.36 "Social Security Offset" shall mean an amount equal to one-half (1/2) of the amount, if any, of the Federal primary Social Security benefit (primary old age insurance benefit) to which it is estimated that an Employee will become entitled in accordance with the Social Security Act in force as provided in subparagraphs (a) through (e) below which shall exceed $168 per month on and after January 1, 1989, $250 per month on and after January 1, 1991, and for Employees who (a) are not covered by the terms of a collective bargaining agreement or (b) are covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan as amended, $325 per month on and after January 1, 1996, multiplied by a fraction not greater than one, the numerator of which shall be the Employee's total Accredited Service, and the denominator of which shall be such total Accredited Service plus the Accredited Service the Employee could have accumulated if he had continued his employment from the date he terminates service with any Affiliated Employer until his Normal Retirement Date. For purposes of determining the estimated Federal primary Social Security benefit used in the Social Security Offset, an Employee shall be deemed to be entitled to receive Federal primary Social Security benefits after retirement or death, if earlier, regardless of the fact that he may have disqualified himself to receive payment thereof. In addition to the foregoing, the calculation of the Social Security benefit shall be based on the salary history of the Employee as provided in Section 5.4 and shall be determined pursuant to the following, as applicable:
(a) With regard to an Employee described in Section 5.2, the Social Security benefit shall be computed at retirement. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled, it shall be assumed that he will receive no wages for Social Security purposes after his retirement on his Normal Retirement Date or Deferred Retirement Date, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement.
(b) With regard to an Employee described in Section 5.3(a), the Social
Security benefit to which it is estimated that he will be entitled at sixty-five
(65), shall be computed at the time of his retirement. In estimating the amount
of the Federal primary Social Security benefit to which the Employee would be
entitled at age sixty-five (65), it shall be assumed that he will receive no
wages for Social Security purposes after his Early Retirement Date, and it will
be further assumed in calculating his estimated Federal primary Social Security
benefit that the amount thereof will be the amount determined under the
recomputation provision, if applicable, of the Social Security Act in effect at
his Early Retirement Date.
(c) With regard to an Employee described in Section 5.3(b), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his date of death, if later, had he not died, shall be computed at the time of his death. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of death, if later, it shall be assumed that he would not have received any wages for Social Security purposes after the date of his death, and it will be further assumed in calculating his Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his death.
(d) With regard to an Employee described in Section 5.3(c), the Social Security benefit to which it is estimated that he will become entitled at age sixty-five (65) or his date of termination, if later, shall be computed at the date of termination. In estimating the amount of the Federal primary Social Security benefit to which the Employee would be entitled at age sixty-five (65) or his date of termination, if later, it shall be assumed that he will receive no wages for Social Security purposes after his date of termination, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at his date of termination.
(e) With regard to an Employee described in Section 5.3(d), the Social Security benefit to which it is estimated that he would have been entitled to receive at age sixty-five (65) or his initial date of disability, if later, had he not become disabled, shall be computed at the time of his retirement. In estimating the amount of Federal primary Social Security benefit to which the Employee would have been entitled at age sixty-five (65) or his date of disability, if later, it shall be assumed that he would have received wages for Social Security purposes as specified in Section 5.4, and it will be further assumed in calculating his estimated Federal primary Social Security benefit that the amount thereof will be the amount determined under the recomputation provision, if applicable, of the Social Security Act in effect at the time of his retirement.
1.37 "Social Security Retirement Age" means age sixty-five (65) if the Employee attains age sixty-two (62) before January 1, 2000 (i.e., born before January 1, 1938), age sixty-six (66) if the Employee attains age sixty-two (62) after December 31, 1999, but before January 1, 2017 (i.e., born after December 31, 1937, but before January 1, 1955), and age sixty-seven (67) if the Employee attains age sixty-two (62) after December 31, 2016 (i.e., born after December 31, 1954).
1.38 "Trust" or "Trust Fund" means all such money or other property which shall be held by the Trustee pursuant to the terms of the Trust Agreement or pursuant to contracts with life insurance companies.
1.39 "Trust Agreement" means the Trust agreement or agreements between the Employer and the Trustee established for the purpose of funding the Retirement Income to be paid.
1.40 "Trustee" means the trustee or trustees acting as such under the Trust Agreement, including any successor or successors.
1.41 "Vesting Year of Service" means an Employee's Years of Service
including: (a) Years of Service with an Affiliated Employer; (b) active service
with the Armed Forces of the United States if the Employee entered or enters
active service or training in such Armed Forces directly from the employ of an
Employing Company and after discharge or release therefrom returns within ninety
(90) days to the employ of an Affiliated Employer or is deemed to return under
Section 2.3 because of the death of such Employee while in active service with
such Armed Forces; and (c) any period during which the Employee was on any other
form of authorized leave of absence. For purposes of this Section 1.41 in
determining Vesting Years of Service with respect to a period of absence
referred to in clause (b) or (c) of this Section 1.41, an Employee shall be
credited with Hours of Service as though the period of absence were a period of
active employment with the Affiliated Employer.
Each Employee who participated in the Prior Plans shall be credited with such Vesting Years of Service, if any, earned under such Prior Plans as of December 31, 1996.
1.42 "Year of Service" means with respect to an Employee in the service of an Affiliated Employer:
(a) a twelve (12) consecutive month period commencing on the Employee's most recent date of hire by the Affiliated Employer (or date of reemployment as provided in Section 2.4) and any subsequent twelve (12) consecutive month period commencing on an anniversary date of such date of hire, provided he has completed at least 1000 Hours of Service during each such twelve (12) consecutive month period; and
(b) to the extent not resulting in duplication, each Year of Service restored to the Employee upon reemployment as provided in Section 8.3.
An Employee's vested interest in his Accrued Retirement Income shall be based on his Vesting Years of Service and an Employee's eligibility to participate in the Plan pursuant to Article II shall be based on his Eligibility Year of Service. Breaks in service will be measured on the same computation period as the Year of Service.
In the Plan and Trust Agreement, where the context requires, words in the masculine gender include the feminine and neuter genders and words in the singular include the plural and words in the plural include the singular.
Article IIArticle II
Eligibility
2.1 Employees2.1 Employees. Each Employee participating in the Plan as of January 1, 1997 shall continue to be included in the Plan. With respect to Employees participating in Merged Plans as of December 31, 1996 who are employed by an Employing Company on January 1, 1997, such Employees will be treated as participating in the Plan as of January 1, 1997 for purposes of the preceding sentence. Each other Employee, except as provided in this Article II, shall be included in the Plan on the first day of the month next following the date on which he first completes an Eligibility Year of Service.
2.2 Employees represented by a collective bargaining agent2.2 Employees represented by a collective bargaining agent. An Employee who is represented by a collective bargaining agent may participate in the Plan, subject to its terms, if the representative(s) of his bargaining unit and an Employing Company mutually agree to participation in the Plan by members of his bargaining unit.
2.3 Persons in military service and Employees on authorized leave of absence2.3 Persons in military service and Employees on authorized leave of absence. Any person not already included in the Plan who leaves or has left the employ of an Employing Company to enter the Armed Forces of the United States or is on authorized leave of absence without regular pay and who returns to the employ of an Affiliated Employer within ninety (90) days after discharge from such military service or on or before termination of his leave of absence, shall, upon such return, be included in the Plan effective as of the first day of the month next following the date on which he first met or meets the eligibility requirement of Section 2.1. In determining whether an Employee entering the service of an Affiliated Employer has completed an Eligibility Year of Service, his Hours of Service prior to such authorized leave of absence without regular pay or entry into the Armed Forces shall be taken into account, and for purposes of Section 2.4, he shall be deemed not to have incurred a One-Year Break in Service by reason of such absence.
If an Employee dies while in active service with the Armed Forces of the United States, such Employee shall be deemed to have returned to the employ of an Employing Company on his date of death.
An Employee not already included in the Plan who is on authorized leave of absence and receiving his regular pay shall be considered credited with Hours of Service as though the period of absence was a period of active employment with an Employing Company, and he shall be included in the Plan if and when he meets the requirements of this Article II regardless of whether he is, on the date of such inclusion, on such leave of absence.
2.4 Employees reemployed2.4 Employees reemployed. An Employee whose service terminates at any time and who is reemployed as an Employee, unless excluded under Section 2.6, will be included in the Plan as provided in Section 2.1 unless:
(a) prior to termination of his service he had completed at least one Year of Service; and
(b) upon his reemployment, to the extent provided in Section 8.3 without regard to Section 8.4, he is entitled to restoration of his Years of Service, in which case he will be included in the Plan as of the date of his reemployment.
For purposes of determining Years of Service of an Employee who is reemployed by an Affiliated Employer subsequent to a One-Year Break in Service, a Year of Service subsequent to his reemployment shall be computed on the basis of the twelve (12) consecutive month period commencing on his date of reemployment or an anniversary thereof.
2.5 Participation upon return to eligible class2.5 Participation upon return to eligible class. If an Employee is a participant in the Plan before July 1, 1991, the exclusion from participation provided in Section 2.6, as it regards temporary employees, shall not apply with respect to such Employee, and such Employee shall be eligible to participate in the Plan after July 1, 1991 whether or not he is classified as a temporary employee.
If an Employee first becomes a participant on or after July 1, 1991, in the event such Employee ceases to be a member of an eligible class of Employees and becomes ineligible to participate, but has not incurred a One-Year Break in Service, such Employee will participate immediately upon returning to an eligible class of Employees. If such Employee incurred a One-Year Break in Service, eligibility will be determined under Section 2.4 of the Plan.
In all other instances, if an Employee is not a member of an eligible class of Employees but then becomes a member of an eligible class, such Employee will commence participation in the Plan as of the first day of the month next following the later of (a) the date such Employee completes an Eligibility Year of Service or (b) the date he becomes a member of an eligible class of Employees.
2.6 Exclusion of certain categories of employees2.6 Exclusion of certain categories of employees. Notwithstanding any other provision of this Article II, leased employees shall not be eligible to participate in the Plan. In addition, temporary employees, except Employees as defined in Section 1.16 participating in the Plan prior to July 1, 1991, shall not be eligible to participate in the Plan. Any person who is employed by Electric City Merchandise Company, Inc. on or after May 1, 1988, or who is employed by Savannah Electric and Power Company on or after March 3, 1988, shall not be entitled to accrue Retirement Income under the Plan while employed at such companies.
2.7 Waiver of participation2.7Waiver of participation. Notwithstanding the above, an Employee may elect voluntarily not to participate in the Plan. The election not to participate must be communicated in writing to and acknowledged by the Retirement Board (or its delegee) and shall be effective as of the date set forth in such written waiver.
Article IIIArticle III
Retirement
3.1 Retirement at Normal Retirement Date3.1 Retirement at Normal Retirement Date. Each Employee eligible to participate in the Plan shall have a nonforfeitable right to his Accrued Retirement Income by no later than his sixty-fifth (65th) birthday, or in the case of any Employee hired on or after his sixtieth (60th) birthday, the fifth (5th) anniversary of his initial participation in the Plan. Notwithstanding the above, an Employee's Normal Retirement Date shall be as provided in Section 1.24.
3.2 Retirement at Early Retirement Date3.2 Retirement at Early
Retirement Date. An Employee having at least ten (10) Years of Accredited
Service (including any Accredited Service to which he is entitled under the
pension plan of any Affiliated Employer from which such Employee was transferred
pursuant to Section 4.6, or which was credited to him in accordance with Section
4.3) may elect to retire on an Early Retirement Date on or after his fifty-fifth
(55th) birthday and before his sixty-fifth (65th) birthday and to have his
Retirement Income commence on the first day of any month up to and including the
Employee's Normal Retirement Date.
Effective for Employees who have an Hour of Service on or after January 1, 1996 and who (a) are not covered by the terms of a collective bargaining agreement or (b) are covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)" in the preceding paragraph.
3.3 Retirement at Deferred Retirement Date3.3 Retirement at Deferred Retirement Date. An Employee included in the Plan may remain in active service after his Normal Retirement Date. The involuntary retirement of an Employee on or after his Normal Retirement Date shall not be permitted solely on the basis of the Employee's age, except in accordance with the provisions of the Age Discrimination in Employment Act, as amended from time to time. Termination of service of such an Employee for any reason after Normal Retirement Date shall be deemed retirement as provided in the Plan.
Article IVArticle IV
Determination of Accredited Service
4.1 Accredited Service pursuant to Prior Plan4.1 Accredited Service pursuant to Prior Plan. Each Employee who participated in the Prior Plans shall be credited with such Accredited Service, if any, earned under such Prior Plans as of December 31, 1996.
(a) Each Employee meeting the requirements of Article II shall, in addition to any Accredited Service to which he may be entitled in accordance with Section 4.1, be credited with Accredited Service as set forth in (b) below. Any such Employee who is on authorized leave of absence with regular pay shall be credited with Accredited Service during the period of such absence. Any such Employee who is on an approved leave of absence to serve in the Armed Forces of the United States shall, subject to Sections 1.41(b) and 2.3, be credited with Accredited Service during all or such portion of the period of his absence. Employees on authorized leave of absence without regular pay, other than Employees deemed to accrue Hours of Service under Section 4.4 and Employees described in the preceding sentence, shall not be credited with Accredited Service for the period of such absence.
(b) For each Plan Year commencing after December 31, 1996, an Employee included in the Plan who is credited with a Plan Year of Service shall be credited with Accredited Service as follows:
(1) if an Employee completes at least 1,680 Hours of Service in a Plan Year, he shall be credited with one year of Accredited Service;
(2) if an Employee completes less than 1,680 Hours of Service in a Plan Year, but not less than 1,000 Hours of Service, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service; or
(3) if an Employee's initial eligibility in the Plan shall occur after the beginning of the Plan Year, and the Employee shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service during such Plan Year after his inclusion in the Plan.
(c) If an Employee (1) who has previously satisfied the eligibility requirements under Article II shall again be included in the Plan at such time which is after the beginning of the Plan Year, or (2) shall terminate his employment for any reason before the close of such Plan Year and shall therefore have completed less than 1,000 Hours of Service in such Plan Year, he shall be credited with one-twelfth (1/12) of a year of Accredited Service for each 140 Hours of Service during such Plan Year after his inclusion in the Plan or before his termination of employment in such Plan Year, as the case may be.
(d) In addition to the foregoing, Accredited Service may include Accredited Service accrued subsequent to a One-year Break in Service including such Accredited Service which may be restored in accordance with the provisions of Section 8.3.
(e) Notwithstanding the above, the maximum number of years of
Accredited Service with respect to any Employee participating in the Plan shall
not exceed forty-three (43), except with respect to Employees eligible under
Section 15.1 whose Accredited Service shall not be limited to any maximum
number.
4.3 Accredited Service and Years of Service in respect of service of
certain Employees previously employed by an Employing Company or by certain
Affiliated Employers4.3 Accredited Service and Years of Service in respect of
service of certain Employees previously employed by an Employing Company or by
certain Affiliated Employers. An Employee in the service of an Employing Company
on January 1, 1976 or employed thereafter who meets the requirements of
paragraph (a) of this Section 4.3, in addition to any other Years of Service or
Accredited Service to which he may be entitled under the Plan, upon completion
of an Eligibility Year of Service where required under Section 8.3(c) (which
shall also be considered to be Accredited Service) shall be credited with such
number of Years of Service (and fractions thereof to the nearest whole month for
service prior to January 1, 1976) and such Accredited Service and Retirement
Income as shall be determined in accordance with the provisions of paragraphs
(b) and (c) of this Section 4.3.
(a) (1) Such Employee shall have been employed prior to January 1, 1976 by an Employing Company or by a company which at that time was an Affiliated Employer; (2) he shall have terminated his service with such Employing Company or such Affiliated Employer other than by retirement and he shall not be entitled to receive at any time any retirement income under the pension plan of any such prior employer in respect of any period of time for which he shall receive credit for Years of Service or Accredited Service under this Section 4.3; and (3) for Employees reemployed on or after January 1, 1985, the number of consecutive One-Year Breaks in Service incurred by the Employee prior to the date of his employment by an Employing Company does not equal or exceed the greater of (A) five (5), or (B) the aggregate number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) with an Employing Company and such Affiliated Employer. The years of Accredited Service credited to an Employee reemployed prior to January 1, 1985, with regard to years of Accredited Service immediately prior to the termination of his service, shall be determined under the terms of the Prior Plans in effect prior to January 1, 1985.
(b) The number of Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and the Accredited Service, respectively, which shall be credited to such Employee shall be equal to the respective number of his Years of Service (and fractions thereof to the nearest whole month for service prior to January 1, 1976) and Accredited Service which were forfeited by the Employee and not restored under the pension plans of an Employing Company or an Affiliated Employer described in the preceding paragraph.
(c) There shall be credited to the Employee Retirement Income equal to retirement income which was accrued by him under the pension plan of an Employing Company or an Affiliated Employer during the period of his Accredited Service which was forfeited and which is credited under the Plan in accordance with this Section 4.3. The amount of Retirement Income credited in accordance with this paragraph (c) shall be treated as Prior Plans Retirement Income for purposes of determining the amount of Retirement Income to which the Employee is entitled, and shall be determined in accordance with the provisions of the pension plan of the Employing Company or the Affiliated Employer in effect at the time the Employee's service with such Employing Company or the Affiliated Employer terminated without regard to any minimum provisions of such pension plan; for this purpose and if relevant in respect of the Employee, it shall be assumed that the pension plan of the Employing Company or the Affiliated Employer in effect at the time the Employee's service with such Employing Company or the Affiliated Employer terminated contained provisions concerning service in the Armed Forces of the United States as provided under the terms of the Prior Plans. For Plan Years beginning after December 31, 1987, an Employee who meets the requirements of paragraph (a) of this Section 4.3 shall be deemed to have transferred to or from an Affiliated Employer for the purpose of the transfer of assets or liabilities as provided under the terms of the Prior Plans.
4.4 Accrual of Retirement Income during period of total disability
4.4 Accrual of Retirement Income during period of total disability.
(a) If an Employee included in the Plan who has completed at least five
(5) Vesting Years of Service becomes totally disabled and is granted either
Social Security disability benefits or long-term disability benefits under a
long-term disability benefit plan of an Employing Company, he shall be
considered to be on a leave of absence, herein referred to as a "Disability
Leave." An Employee's Disability Leave shall be deemed to begin on the initial
date of the disability and shall continue until the earlier of: (1) the end of
the month in which he shall cease to be entitled to receive Social Security
Disability benefits and long-term disability benefits under a long-term
disability benefit plan of an Employing Company; (2) his death; and (3) his
Retirement Date if he elects to have his Retirement Income commence on such
date. During the period of the Employee's Disability Leave, he shall, for
purposes of the Plan, be deemed to have received Earnings at the regular rate in
effect for him.
(b) A disabled Employee who applies for and would be granted long-term disability benefits under a long-term disability benefit plan of an Employing Company, if it were not for the fact that the deductions therefrom attributable to other disability benefits equal or exceed the amount of his unreduced benefit under such long-term disability benefit plan of the Employing Company, will be considered as being currently granted benefits under such long-term disability benefit plan.
(c) An Employee's Disability Leave shall be deemed to be a period for which Hours of Service shall be credited to the Employee as though the period of his Disability Leave were a period of active employment.
(d) If an Employee's Disability Leave shall terminate prior to his Normal Retirement Date and he shall fail to return to the employment of the Employing Company within sixty (60) days after the termination of such leave, his service shall be deemed to have terminated upon the termination of his Disability Leave and his rights shall be determined in accordance with Article VIII, unless at such time he shall be entitled to retire on an Early Retirement Date, in which event his termination of service shall be deemed to constitute his retirement under Section 3.2.
(e) Notwithstanding the above, the years of Accredited Service for any Employee whose initial date of disability occurred under the Prior Plans shall be determined under the terms of the applicable Prior Plans.
4.5 Employees leaving Employer's service4.5 Employees leaving Employer's service. If the service of an Employee is terminated prior to retirement as provided by Article III, such Employee will forfeit any Vesting Years of Service and Accredited Service which he may have subject to possible restoration of some or all of his Vesting Years of Service and Accredited Service in accordance with Article VIII. The provisions of this Section 4.5 shall not affect the rights, if any, of an Employee under Article VIII nor shall the rights of an Employee be affected during or by reason of a layoff, due to lack of work, which continues for a period of one year or less, except that such period of layoff shall not be deemed to be service with an Employing Company. If the service of an Employee is terminated, or if he is not reemployed before the expiration of one year after being laid off for lack of work, and he is subsequently reemployed, he will be treated as provided in Section 3.2.
Forfeitures arising by reason of an Employee's termination of service for any reason shall not be applied to increase the benefits any Employee would otherwise receive under the Plan but shall be used to reduce contributions of the Employing Companies to the Plan.
4.6 Transfers to or from Savannah Electric and Power Company
4.6 Transfers to or from Savannah Electric and Power Company.
(a) In the case of the transfer to an Employing Company of an employee of Savannah Electric and Power Company ("SEPCO"), such Employee, if and when he attains his Normal Retirement Date or Deferred Retirement Date, shall be entitled to receive Retirement Income calculated pursuant to Section 5.1 or 5.2, as appropriate, based upon his Accredited Service with an Employing Company and Accredited Service attributable to actual service during his employment with SEPCO. Such amount calculated in accordance with the preceding sentence shall be reduced by the amount of retirement income calculated under the defined benefit pension plan of SEPCO attributable to Accredited Service during his actual service during his employment with SEPCO. Any Retirement Income based upon an Employee's Accredited Service with an Employing Company and Accredited Service attributable to actual service during his employment with SEPCO shall be subject to the provisions of the Plan relating to Retirement Income payable at an Early Retirement Date, or if such Retirement Income shall be payable in accordance with the provisions of Section 8.2 or 8.6, subject to the provisions of such Section.
This Section 4.6 shall also apply in calculating the Retirement Income payable under this Plan to a former employee of SEPCO who is hired by an Employing Company and is entitled to credit for years of Accredited Service under the Plan attributable to his actual service with SEPCO.
(b) Subject to paragraph (a) above, in the case of an Employee who transfers from an Employing Company to SEPCO, such Employee shall receive the following Accredited Service under the Plan or Credited Service under the Employees' Retirement Plan of Savannah Electric and Power Company (the "SEPCO Plan"), as the case may be.
(1) With respect to service with an Employing Company through the date of transfer, Accredited Service shall be determined in accordance with the terms of the Plan in effect for such Employee as of his transfer date.
(2) With respect to the "Computation Year," as defined in the SEPCO Plan, in which the Employee transfers, Credited Service under the SEPCO Plan shall be equal to the greater of (a) the Credited Service that the Employee would be credited with under the SEPCO Plan during the entire Computation Year in which the transfer occurs without regard to the transfer of employment, or (b) Accredited Service earned under the terms of the Plan as of the date of transfer.
(3) With respect to Computation Years after the year in which the transfer occurs, the Employee shall receive Credited Service as determined in accordance with the terms of the SEPCO Plan.
(c) Subject to paragraph (a) above, in the case of an Employee who transfers from SEPCO to an Employing Company, such Employee shall receive the following Accredited Service under the Plan or Credited Service under the SEPCO Plan, as the case may be.
(1) With respect to service with SEPCO through the date of transfer, Credited Service shall be determined in accordance with the terms of the SEPCO Plan in effect for such Employee as of his transfer date.
(2) With respect to the Plan Year in which the Employee transfers, Accredited Service under the Plan shall be determined on the basis of the equivalency set forth in 29 C.F.R. ss. 2530.200b-3(e)(1)(i).
(3) With respect to Plan Years after the year in which the transfer occurs, Accredited Service under the Plan shall be determined in accordance with the terms of the Plan.
(d) With respect to paragraphs (b) and (c) above, in no event is an Employee subject to this Section 4.6 entitled to more than one (1) year of Accredited Service or Credited Service as the case may be in the year of transfer.
Article V
Retirement Income
5.1 Normal Retirement Income5.1 Normal Retirement Income. The monthly Retirement Income payable as a single life annuity to an Employee included in the Plan who retires from the service of an Employing Company at his Normal Retirement Date after January 1, 1997, subject to the limitations of Article VI, shall be the greater of (a) and (b):
(a) the amount determined under (1) or (2) below, whichever is greater:
(1) the Accrued Retirement Income determined in accordance with Section 5.1 of the Prior Plans without regard to the Minimum Retirement Income requirement, plus $25.00 times the Employee's years of Accredited Service earned after December 31, 1996; and
(2) $25.00 times an Employee's years of Accredited Service; and
(b) the Minimum Retirement Income as determined in accordance with Section 5.2.
5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date5.2 Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date. The monthly Minimum Retirement Income payable to an Employee (or his Provisional Payee) who retires from the service of an Employing Company at his Normal Retirement Date or Deferred Retirement Date (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Normal Retirement Date or Deferred Retirement Date including a Social Security Offset.
Any provisions of this Article V to the contrary notwithstanding, Retirement Income determined in accordance with this Article V with respect to an Employee who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income which would have been payable with respect to such Employee commencing on an Early Retirement Date which would have resulted in the greatest Retirement Income if such Retirement Income had been payable in the same form as his Retirement Income commencing on his Normal Retirement Date or Deferred Retirement Date.
5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement5.3 Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement. The monthly Minimum Retirement Income payable to an Employee (or his Provisional Payee), if he shall retire on his Early Retirement Date, or if his service shall terminate by reason of death or otherwise prior to retirement, shall be determined in accordance with the following provisions:
(a) Upon retirement at Early Retirement Date, his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service earned as of his Early Retirement Date including a Social Security Offset.
(b) Upon termination of service by reason of the death of the Employee prior to retirement and after the effective date of his Provisional Payee designation or deemed designation, the Minimum Retirement Income for the purpose of determining the Employee's Accrued Retirement Income upon which payment to his Provisional Payee in accordance with Section 7.4 shall be based shall be an amount equal to 1.70% of the Employee's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to the date of his death including a Social Security Offset.
(c) For an Employee who terminates his service with an Employing Company with entitlement to receive Retirement Income in accordance with Section 8.1, upon retirement at Early Retirement Date or Normal Retirement Date his Minimum Retirement Income (before adjustment for Provisional Payee designation, if any) shall be an amount equal to 1.70% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his date of termination including a Social Security Offset.
(d) Upon termination of service by reason of disability (as defined in
Section 4.4) of the Employee prior to retirement, provided such Employee does
not return to the service of an Employing Company prior to his Retirement Date,
the Minimum Retirement Income shall be an amount equal to 1.70% of the
Employee's Average Monthly Earnings multiplied by his years (and fraction of a
year) of Accredited Service to his Retirement Date including a Social Security
Offset.
5.4 Calculation of Social Security Offset5.4 Calculation of Social Security Offset. For purposes of determining the Social Security Offset in calculating an Employee's Retirement Income under the Plan, the Social Security Offset shall be determined by using the actual salary history of the Employee during his employment with any Affiliated Employer, provided that in the event that the Retirement Board (or its delegee) is unable to secure such actual salary history within one hundred eighty (180) days following the later of the date of the Employee's separation from service (by retirement or otherwise) and the time when the Employee is notified of the Retirement Income to which he is entitled, the salary history shall be determined in the following manner:
(1) The salary history shall be estimated by applying a salary scale, projected backwards, to the Employee's compensation for W-2 purposes from the Affiliated Employer which last employed the Employee for the first Plan Year following the most recent Plan Year for which the salary history is estimated. The salary scale shall be a level percentage per year equal to six percent (6%) per annum.
(2) The Plan shall give clear written notice to each Employee of the Employee's right to supply the actual salary history and of the financial consequences of failing to supply such history. Such notice shall state that the actual salary history is available from the Social Security Administration.
For purposes of determining the Social Security Offset in calculating the Retirement Income of an Employee entitled to receive a public pension based on his employment with a Federal, state, or local government agency, no reduction in such Employee's Social Security benefit resulting from the receipt of a public pension shall be recognized.
5.5 Early Retirement Income5.5 Early Retirement Income. The monthly amount of Retirement Income payable to an Employee who retires from the service of an Employing Company at his Early Retirement Date subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.3 based on his Accredited Service to his Early Retirement Date, reduced by three-tenths of one percent (0.3%) for each calendar month by which the commencement date of his Retirement Income precedes his Normal Retirement Date but follows the first day of the month following his attainment of his fifty-fifth (55th) birthday.
Effective for Employees who have an Hour of Service on or after January 1, 1996, and who (a) are not covered by the terms of a collective bargaining agreement or (b) are covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan and (c) elect to retire in accordance with this Section 5.5 on or after attainment of age fifty (50) but before attainment of age fifty-five (55), Retirement Income shall be determined as in the preceding paragraph including an additional reduction of one-third of one percent (0.33%) for each calendar month by which the commencement date precedes the first day of the month following any such Employee's attainment of his fifty-fifth (55th) birthday.
At the option of the Employee exercised at or prior to commencement of
his Retirement Income on or after his Early Retirement Date (provided he shall
not have in effect at such Early Retirement Date a Provisional Payee designation
pursuant to Article VII), he may have his Retirement Income adjusted upwards in
an amount which will make his Retirement Income payable up to age sixty-five
(65) equal, as nearly as may be, to the amount of his Federal primary Social
Security benefit (primary old age insurance benefit) estimated to become payable
after age sixty-five (65), as computed at the time of his retirement in
accordance with Section 5.3(a), plus a reduced amount, if any, of Retirement
Income actuarially determined to be payable after age sixty-five (65). The
Federal primary Social Security benefit used in calculating an Employee's
Retirement Income payable under the Plan shall be determined by using the salary
history of the Employee during his employment with any Affiliated Employer, as
calculated in accordance with Section 5.4.
5.6 Deferred Retirement Income5.6 Deferred Retirement Income. The monthly amount of Retirement Income payable to an Employee who retires from the service of the Employer at his Deferred Retirement Date, subject to the limitations of Section 6.2, will be equal to his Retirement Income determined in accordance with Sections 5.1 and 5.2 based on his Accredited Service to his Deferred Retirement Date.
5.7 Payment of Retirement Income5.7 Payment of Retirement Income. The first payment of an Employee's Retirement Income will be made on his Early Retirement Date, Normal Retirement Date, Deferred Retirement Date, or date of commencement of payment of Retirement Income in accordance with Section 8.1, 8.2 or 8.6, as the case may be; provided that commencement of the distribution of an Employee's Retirement Income shall not be made prior to his Normal Retirement Date without the consent of such Employee, except as provided in Section 8.4 of the Plan.
Notwithstanding anything to the contrary above, if in accordance with this Section 5.7, an Employee is entitled to receive Retirement Income commencing at his Early Retirement Date, he may, in lieu of commencing payment of his Retirement Income upon his Early Retirement Date, elect to receive such Retirement Income commencing as of the first day of any month after his Early Retirement Date and preceding his Normal Retirement Date in an amount equal to his Accrued Retirement Income determined as of the commencement of his Retirement Income on or after his Early Retirement Date determined in accordance with Section 5.5. An election pursuant to this Section 5.7 to have Retirement Income commence prior to Normal Retirement Date shall be made on a prescribed form and shall be filed with the Retirement Board (or its delegee) at least thirty (30) days before Retirement Income is to commence.
In the event of the death of an Employee who has designated a
Provisional Payee or is deemed to have done so in accordance with Article VII,
if the designation has become effective, the first payment to be made to the
Provisional Payee pursuant to Article VII shall be made to the Provisional Payee
on the first day of the month after the later of (a) the Employee's death and
(b) the date on which the Employee would have attained his fifty-fifth (55th)
birthday if he had survived to such date, if the Provisional Payee shall then be
alive and proof of the Employee's death satisfactory to the Retirement Board (or
its delegee) shall have been received by it. Subsequent payments will be made
monthly thereafter until the death of such Provisional Payee.
Effective for Employees who have an Hour of Service on or after January 1, 1996 and who (a) are not covered by the terms of a collective bargaining agreement or (b) are covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)" in the preceding paragraph.
In any event, payment of Retirement Income, including any adjustments thereto caused by an amendment to the Plan providing for or which has the effect of providing retroactively increased Retirement Income, to the Employee shall begin not later than the sixtieth (60th) day after the later of the close of the Plan Year in which falls (a) the Employee's Normal Retirement Date or (b) the date the Employee terminates his service with any Affiliated Employer. Notwithstanding the provisions of the Plan for the monthly payment of Retirement Income, such income may be adjusted and payable annually in arrears if the amount of the Retirement Income is less than $10.00 per month.
5.8 Termination of Retirement Income5.8Termination of Retirement Income. The monthly payment of Retirement Income will cease with the last payment preceding the retired Employee's death; subject, however, to the continuation of payments to a surviving Provisional Payee, if one has been designated or deemed to have been designated, which likewise will cease with the last payment preceding the death of the Provisional Payee. There shall be no benefits payable under the Plan on behalf of any Employee whose death occurs prior to his retirement, except as otherwise provided in Article VII with respect to a Provisional Payee of an Employee. Following the death of an Employee and of his Provisional Payee, if any, no further payments will be made under the Plan on account of such Employee or to his estate.
5.9 Required distributions
(a) Once a written claim for benefits is filed with the Retirement Board (or its delegee), payment of benefits to the Employee shall begin not later than sixty (60) days after the last day of the Plan Year in which the latest of the following events occurs:
(1) the Employee's Normal Retirement Date;
(2) the tenth (10th) anniversary of the date the Employee commenced participation in the Plan; or
(3) the Employee's separation from service from any Affiliated Employer.
(b) Required minimum distributions
(1) The payment of Retirement Income to any Employee shall
begin April 1 of the calendar year following the calendar year in which
the Employee attains age 70-1/2 or, if later, the calendar year in
which such Employee retires. Notwithstanding the preceding sentence,
with respect to any Employee who is a five-percent owner as defined in
Section 14.5(g) with regard to the Plan Year ending in which the
Employee attains age 70-1/2 or any Employee who commenced receipt of
his Retirement Income in accordance with the minimum distribution
provisions of the Prior Plans before January 1, 1997, the payment of
Retirement Income shall commence no later than April 1 of the Plan Year
following the Plan Year in which the Employee attains age 70-1/2.
(2) With respect to an Employee who commences receipt of Retirement Income while in active service, the amount of his Retirement Income shall be computed as of the end of the Plan Year the Employee attains age 70-1/2 and shall be recomputed as of the close of each Plan Year thereafter and preceding his actual retirement date. Any additional Retirement Income he accrues at the close of any Plan Year pursuant to the preceding sentence shall be offset (but not below zero) by the value of the benefit payments received in such Plan Year. With respect to the Plan Year of retirement, Retirement Income calculated at the Employee's Deferred Retirement Date shall be offset (but not below zero) by the value of the benefit payments received on or after January 1 but before his retirement date in such Plan Year. The receipt by an Employee of any payments or distributions as a result of his attaining age 70-1/2 prior to his actual retirement or death shall in no way affect the entitlement of an otherwise eligible Employee to additional accrued benefits.
(3) With respect to an Employee who retires after attaining age 70-1/2 and who has not previously commenced receipt of his Retirement Income pursuant to this Section 5.9(b) while an Employee of an Affiliated Employer, he shall receive Retirement Income based on his actual retirement date, but which Retirement Income shall not be less than the Actuarial Equivalent of his Retirement Income as of the first of the month following attainment of age 70-1/2.
(c) Distribution upon death of Employee
(1) Death after commencement of benefits
If the Employee dies before his entire nonforfeitable interest has been distributed to him, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution selected by the Employee as set forth in the provisions of Article VII.
(2) Death prior to commencement of benefits
If the Employee dies before the distribution of his nonforfeitable interest has begun, the entire interest, subject to the provisions of Article VII, shall be distributed monthly to his Provisional Payee, if any, over such Provisional Payee's remaining lifetime.
(d) Determining required minimum distributions
Notwithstanding anything in this Plan to the contrary, all distributions, including the minimum amounts which must be distributed each calendar year, under this Plan shall be made in accordance with Code Section 401(a)(9) and the regulations thereunder.
(e) Minimum distribution transitional rules
Any distribution made pursuant to Section 242(b)(2) of the Tax Equity
and Fiscal Responsibility Act of 1982 shall meet the requirements of Code
Section 401(a)(9) as in effect on December 31, 1983, and shall also satisfy Code
Sections 401(a)(11) and 417.
5.10 Suspension of Retirement Income for reemployment
(a) If a former Employee who is receiving Retirement Income shall be reemployed by any Affiliated Employer as an Employee and shall not elect to waive his right to participate under the Plan or the pension plan of the Affiliated Employer, whichever applies, his Retirement Income shall cease during each calendar month after his reemployment in which he completes forty (40) or more Hours of Service. The Retirement Income payable upon his subsequent retirement shall be reduced by the Actuarial Equivalent of any Retirement Income he received prior to his reemployment.
(b) No payment shall be withheld by the Plan pursuant to this Section 5.10 unless the Plan notifies the Employee by personal delivery or first class mail during the first calendar month in which the Plan withholds payments that his Retirement Income is suspended.
(c) If the payment of Retirement Income has been suspended, payments shall resume no later than the first day of the third calendar month after the calendar month in which the Employee ceases to be employed in ERISA Section 203(a)(3)(B) service. The initial payment upon resumption shall include the payment scheduled to occur in the calendar month when payments resume and any amounts withheld during the period between the cessation of ERISA Section 203(a)(3)(B) service and the resumption of payments.
5.11 Increase in Retirement Income of retired Employees
Retirement Income payable on and after January 1, 1996 to an Employee (or to the Provisional Payee of an Employee) who retired under the Prior Plans at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date on or before January 1, 1996 will be recalculated to increase the amount thereof by an amount ranging from a minimum of one and one-half percent (1.5%) to a maximum of seven and one-half percent (7.5%) in accordance with the following schedule:
Year in which Percentage
retirement occurred increase
------------------- ----------
1995 1.5%
1994 3.0%
1993 4.5%
1992 6.0%
1991 and prior years 7.5%
|
A similar adjustment, based on the date of the commencement of Retirement Income payments to the Employee's Provisional Payee, rather than the Employee's Retirement Date, will be made in respect of Retirement Income which is payable on or after January 1, 1996 where a Provisional Payee election was in effect, or was deemed to be in effect, when an Employee died while in service prior to January 1, 1996 and prior to his retirement.
A similar adjustment will be made in respect of Retirement Income which is payable on or after January 1, 1996 for a former Employee who is not eligible to retire but who is vested in a benefit (or the Provisional Payee of such former Employee) for which payments have commenced on or before January 1, 1996 in accordance with the terms of the Prior Plans, except for Employees whose Retirement Income has been cashed-out pursuant to the terms of the Prior Plans.
For purposes of determining the applicable percentage increase under this Section 5.11, the year of retirement includes retirement where the last day of employment was December 31 of such year. An Employee whose Deferred Retirement Date is on or before January 1, 1988 and who did not retire at his Normal Retirement Date shall be deemed to have retired at his Normal Retirement Date for purposes of determining the increase in his Retirement Income payable at his Deferred Retirement Date.
This Section 5.11 shall not apply with respect to an Employee who has not retired, but for whom the distribution of Retirement Income has commenced pursuant to Section 5.9 of the Plan.
5.12 Special provisions relating to the treatment of absence of an Employee from the service of an Employing Company to serve in the Armed Forces of the United States5.12 Special provisions relating to the treatment of absence of an Employee from the service of an Employing Company to serve in the Armed Forces of the United States.
(a) Notwithstanding any other provisions of the Plan to the contrary, contributions, benefits, and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code.
(b) Service to be credited to any Employee in accordance with this
Section 5.12 may be conditioned by the Retirement Board upon its receipt of (1)
such information pertaining to absence of an Employee or former Employee to
serve in the Armed Forces of the United States as it may request and (2) such
form of receipt and release as it may determine to be appropriate in the
circumstances.
Article VIArticle VI
Limitations on Benefits
6.1 Maximum Retirement Income shall be subject to the provisions of Article VI.
(a) The maximum annual amount of Retirement Income payable with respect to an Employee in the form of a straight life annuity without any ancillary benefits after any adjustment for a Provisional Payee designation shall be the lesser of the dollar limitation determined under Code Section 415(b)(1)(A) as adjusted under Code Section 415(d), or Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5, subject to the following provisions of Article VI. With respect to any former Employee who has Accrued Retirement Income under the Plan or his Provisional Payee, the maximum annual amount shall also be subject to the adjustment under Code Section 415(d), but only those adjustments occurring before September 1, 1996.
(b) For purposes of Section 6.1, the term "average compensation for his high three (3) years" shall mean the period of consecutive calendar years (not more than three) during which the Employee was both an active participant in the Plan and had the greatest aggregate compensation from an Employing Company or, if he is also entitled to receive a pension from a defined benefit plan of an Affiliated Employer or if assets and liabilities attributable to the pension of the Employee from a defined benefit plan of an Affiliated Employer have been transferred to this Plan, the greatest aggregate compensation from the Employer and the Affiliated Employer during such high three (3) years. The limitation described in Section 6.1(a) shall also apply in the case of the payment of an Employee's Retirement Income with a Provisional Payee designation.
(c) For purposes of Article VI, the term "compensation" means an Employee's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with any Affiliated Employer (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), and excluding the following:
(1) Affiliated Employer contributions to a plan of deferred compensation which are not included in the Employee's gross income for the taxable year in which contributed or Affiliated Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation;
(2) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or contributions made by an Affiliated Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Employee).
Compensation for any Limitation Year is the compensation actually paid or includible in gross income during such year.
(d) The foregoing limitations regarding the maximum Retirement Income shall not apply with respect to an Employee if the Retirement Income payable under the Plan and under any other defined benefit plans of any Affiliated Employer does not exceed $10,000 for the calendar year or for any prior calendar year, and any Affiliated Employer has not at any time maintained a defined contribution plan in which the Employee has participated. The terms "defined benefit plan" and "defined contribution plan" shall have the meanings set forth in Section 415(k) of the Code.
6.2 Adjustment to Defined Benefit Dollar Limitation for Early or Deferred Retirement6.2
(a) If the retirement benefit of an Employee commences before the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be reduced in accordance with Code Section 415(b)(2)(C) as prescribed by the Secretary of the Treasury. The reduction shall be made in such manner as the Secretary of the Treasury may prescribe which is consistent with the reduction for old-age insurance benefits commencing before the Social Security Retirement Age under the Social Security Act.
(b) If the retirement benefit of an Employee commences after the Employee's Social Security Retirement Age, the Defined Benefit Dollar Limitation shall be adjusted in accordance with Code Section 415(b)(2)(D) as prescribed by the Secretary of the Treasury, based on the lesser of the interest rate assumption under the Plan or on an assumption of five percent (5%) per year.
6.3 Adjustment of limitation for Years of Service or participation
(a) If an Employee has completed less than ten (10) years of participation, the Employee's accrued benefit shall not exceed the Defined Benefit Dollar Limitation as adjusted by multiplying such amount by a fraction, the numerator of which is the Employee's number of years (or part thereof) of participation in the Plan, and the denominator of which is ten (10).
(b) If an Employee has completed less than ten (10) Years of Service
with any Affiliated Employer, the limitations described in Sections
415(b)(1)(B), 415(b)(4), and 415(e) of the Code shall be adjusted by multiplying
such amounts by a fraction, the numerator of which is the Employee's number of
years of service (or part thereof), and the denominator of which is ten (10).
(c) In no event shall paragraphs (a) and (b) above reduce the limitations provided under Sections 415(b)(1), 415(b)(4), and 415(e) of the Code to an amount less than one-tenth (1/10) of the applicable limitation (as determined without regard to this Section 6.3).
(d) This Section 6.3 shall be applied separately with respect to each change in the benefit structure of the Plan, except as is or may be limited by Revenue Procedure 92-42.
6.4 Limitation on benefits from multiple plans
(a) In the case of an Employee who is also a participant in any other defined benefit plan of any Affiliated Employer or in any defined contribution plan of any Affiliated Employer, the Retirement Income provided by the Plan shall be limited to the extent necessary to prevent the sum of Fractions A and B below, computed as of the end of the Plan Year, from exceeding 1.0.
Fraction A
(numerator) Projected annual benefit of the Employee under the Plan and any other defined benefit plan of any Affiliated Employer (determined as of the close of the Plan Year).
(denominator) The lesser of (1) the product of 1.25 multiplied by the Defined Benefit Dollar Limitation (or such higher accrued benefit as of December 31, 1982), or (2) 1.4 multiplied by the amount determined under Code Section 415(b)(1)(B) as adjusted under Treasury Regulation Section 1.415-5.
Fraction B
(numerator) The sum of all Annual Additions to the account of the Employee under any defined contribution plan of any Affiliated Employer as of the close of the Plan Year.
(denominator) The sum of the lesser of the following amounts, determined for such Plan Year and for each prior Plan Year in which the Employee has a Year of Service, (1) 1.25 multiplied by the Defined Contribution Dollar Limitation determined under Code Section 415(c)(1)(A), or (2) 1.4 multiplied by twenty-five percent (25%) of the Employee's compensation for the year.
6.5 Special rules for plans subject to overall limitations under Code
Section 415(e)6.5 Special rules for plans subject to overall limitations under
Code Section 415(e).
(a) For purposes of computing the defined contribution plan fraction of
Section 415(e)(1) of the Code, "Annual Addition" shall mean the amount allocated
to an Employee's account during the Limitation Year as a result of:
(1) employer contributions,
(2) employee contributions,
(3) forfeitures, and
(4) amounts described in Sections 415(1)(1) and 419(A)
(d)(2) of the Code.
(b) The Annual Addition for any Limitation Year beginning before January 1, 1987 shall not be recomputed to treat all Employee contributions as an Annual Addition.
(c) If the sum of Fractions A and B exceeds 1.0 as of December 31, 1982, the numerator of Fraction B shall be reduced by an amount which does not exceed the numerator, so that the sum of Fraction A and Fraction B does not exceed 1.0.
(d) If the Plan satisfied the applicable requirements of Section 415 of the Code as in effect for all Limitation Years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under Section 415(e)(1) of the Code (as revised by this Article VI) does not exceed 1.0 for such Limitation Year.
(e) The defined contribution plans and the other defined benefit plans of Affiliated Employers include, respectively, (1) The Southern Company Employee Savings Plan, The Southern Company Employee Stock Ownership Plan, The Southern Company Performance Sharing Plan, and any other defined contribution plan (as defined in Section 415(k) of the Code) and (2) any other qualified pension plan in which the Employee participates in accruing benefits maintained by any Affiliated Employer.
6.6 Combination of Plans6.6 Combination of Plans. Notwithstanding any
provisions contained herein to the contrary, in the event that an Employee
participates in a defined contribution plan or defined benefit plan required to
be aggregated with this Plan under Code Section 415(g) and the combined benefits
with respect to an Employee exceed the limitations contained in Code Section
415(e), corrective adjustments shall first be made under this Plan. However, if
an Employee's Retirement Income under this Plan has already commenced,
corrections shall first be made under The Southern Company Employee Stock
Ownership Plan, if possible; second, correction shall next be made under The
Southern Company Performance Sharing Plan, if possible; and if not possible,
then correction shall be made to the Employee's Accrued Retirement Income under
this Plan.
6.7 Incorporation of Code Section 4156.7 Incorporation of Code Section
415. Notwithstanding anything contained in this Article to the contrary, the
limitations, adjustments and other requirements prescribed in this Article shall
at all times comply with the provisions of Code Section 415 and the regulations
thereunder, the terms of which are specifically incorporated herein by
reference.
Article VIIArticle VII
Provisional Payee
7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee7.1 Adjustment of Retirement Income to provide for payment to Provisional Payee. An Employee who desires to have his Accrued Retirement Income adjusted in accordance with the provisions of this Article VII to provide a reduced amount of Retirement Income payable to him for his lifetime commencing on his Early Retirement Date, his Normal Retirement Date, or his Deferred Retirement Date, as the case may be, may elect subject to Section 7.11, in accordance with the provisions of this Article VII, at his option, either:
(a) that an amount of Retirement Income be payable to him for his lifetime which is equal to eighty percent (80%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that the same amount will be continued after his death to his Provisional Payee until the death of such Provisional Payee, or
(b) that an amount of Retirement Income be payable to him for his lifetime which is equal to ninety percent (90%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount payable to the Employee will be continued after his death to his Provisional Payee until the death of such Provisional Payee, or
(c) that an amount of Retirement Income be payable to him for his
lifetime which is equal to seventy-five percent (75%) of the Retirement Income
which would otherwise be payable to him, but for such election (taking into
account any reduction required in accordance with Sections 7.3 and 7.4(a)), with
the provision that the same amount will be continued after his death to his
Provisional Payee until the death of such Provisional Payee, or, if such
Provisional Payee predeceases the Employee, the Employee's Retirement Income
automatically increases to a monthly amount equal to the Retirement Income which
would be payable to him had he not elected the form of benefit described in this
Section 7.1(c) and instead had elected the single life annuity form of benefit,
or
(d) that an amount of Retirement Income be payable to him for his lifetime which is equal to eighty-eight percent (88%) of the Retirement Income which would otherwise be payable to him, but for such election (taking into account any reduction required in accordance with Sections 7.3 and 7.4(a)), with the provision that one-half (1/2) of the amount payable to the Employee will be continued after his death to his Provisional Payee until the death of such Provisional Payee, or, if such Provisional Payee predeceases the Employee, the Employee's Retirement Income automatically increases to a monthly amount equal to the Retirement Income which would be payable to him had he not elected the form of benefit described in this Section 7.1(d) and instead had elected the single life annuity form of benefit.
7.2 Form and time of election and notice requirements
(a) An election of payment and designation of a Provisional Payee in accordance with Section 7.1 shall be made in writing at the same time on a prescribed form delivered to the Retirement Board (or its delegee). The election and designation shall specify its effective date which shall not be sooner than the date received by the Retirement Board (or its delegee) or the Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the date of commencement of payments in accordance with this Article VII.
Notwithstanding the preceding paragraph, an election under Section 7.1(c) or (d) is subject to Section 7.11, must be in the form of a written Qualified Election, and shall not become effective until the commencement of Retirement Income payments under the Plan.
(b) An election of payment to be made in accordance with paragraph (a),
(b), (c), or (d) of Section 7.1 may be changed by an Employee, provided the
written election of the change specifies an effective date which shall not be
sooner than the date received by the Retirement Board (or its delegee) or the
Employee's fifty-fifth (55th) birthday, whichever is later, nor later than the
date of commencement of payments in accordance with this Article VII.
Notwithstanding the preceding sentence, an election under Section 7.1(c) or (d)
is subject to Section 7.11, must be in the form of a written Qualified Election,
and shall not become effective until the commencement of Retirement Income
payments under the Plan. To the extent that the new method of payment shall
afford the Employee changed protection in the event of his death after the
effective date of the new election and prior to retirement, his Accrued
Retirement Income shall be adjusted pursuant to Section 7.4(a) to reflect such
changed protection.
(c) With respect to Sections 7.5 and 7.6, within the period not less than thirty (30) days and not more than ninety (90) days prior to the anticipated commencement of benefits, the Employee shall be furnished, by mail or personal delivery, a written explanation of: (1) the terms and conditions of the reduced Retirement Income payable as provided in Section 7.1; (2) the Employee's right to make, and the effect of, an election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation; (3) the rights of the Employee's Provisional Payee; and (4) the right to make, and the effect of, a revocation of a previous election to waive the payment of reduced Retirement Income pursuant to a Provisional Payee designation. Notwithstanding the preceding sentence, such written explanation may be furnished after an Employee's Early, Normal or Deferred Retirement date, as applicable, if in the discretion of the Retirement Board the circumstances so warrant, provided the Employee shall have at least thirty (30) days after being furnished the written explanation to elect payment in accordance with paragraph (a) above.
Within thirty (30) days following an Employee's written request received by the Retirement Board (or its delegee) during the election period, but within sixty (60) days from the date the Employee is furnished all of the information prescribed in the immediately preceding sentence, the Employee shall be furnished an additional written explanation, in terms of dollar amounts, of the financial effect of an election by him not to receive such reduced Retirement Income. If an Employee makes such request, the election period herein prescribed shall end not earlier than sixty (60) calendar days following the day of the mailing or personal delivery of the additional explanation to the Employee. Except that if an election made as provided in Section 7.5 or 7.6 is revoked, another election under that Section may be made during the specified election period.
7.3 Circumstances in which election and designation are inoperative7.3
Circumstances in which election and designation are inoperative. An election and
designation made pursuant to this Article shall be inoperative and the regular
provisions of the Plan shall again become applicable as if a Provisional Payee
had not been designated if, prior to the commencement of any payment in
accordance with this Article VII: a) an Employee's Provisional Payee shall die,
(b) the Employee and the Provisional Payee shall be divorced under a final
decree of divorce, or (c) the Retirement Board (or its delegee) shall have
received the written Qualified Election of the Employee to rescind his election
of payment and designation of a Provisional Payee in order to receive a single
life annuity form of benefit. If such a Qualified Election to rescind is made by
the Employee, his Accrued Retirement Income shall be reduced to reflect the
protection afforded the Employee by any Provisional Payee designation during the
period from its effective date to the date of the Retirement Board's (or its
delegee's) receipt of the Employee's Qualified Election to rescind if the option
as to payments of reduced Retirement Income was in accordance with either
Section 7.1(a), 7.6(a), or 7.6(b). If an Employee remarries subsequent to the
death or divorce of his Provisional Payee and prior to the commencement of
payments in accordance with this Article VII, then he shall be entitled to
designate a new Provisional Payee in the manner set forth in Section 7.2.
7.4 Pre-retirement death benefit7.4 Pre-retirement death benefit. If prior to his Normal Retirement Date (or his Deferred Retirement Date, if applicable), an Employee shall die while in the service of an Employing Company (or while in the service of an Affiliated Employer to which his employment had been transferred) and is survived by his spouse to whom he shall be married at the time of his death, there shall be payable to his surviving spouse (whom he shall be deemed to have designated as his Provisional Payee) Retirement Income determined in accordance with paragraph (a) or paragraph (c) of this Section 7.4, as applicable. Subject to Section 7.10(b), such Retirement Income shall commence on the first day of the month following the death of the Employee or the first day of the month following the date on which he would have attained his fifty-fifth (55th) birthday if he were still alive, whichever is later, and shall cease with the last payment preceding the death of his Provisional Payee.
(a) The amount of Retirement Income payable to the Provisional Payee of
a deceased Employee who prior to his death had attained his fifty-fifth (55th)
birthday shall be equal to the amount payable to the Provisional Payee as
calculated in Section 7.1(b) determined on the basis of his Accredited Service
to the date of his death, or if the Employee shall have attained his fifty-fifth
(55th) birthday and so elected prior to his death, such Retirement Income shall
be equal to the amount set forth in Section 7.1(a) determined on the basis of
his Accredited Service to the date of his death reduced as provided in the next
sentence. If such election shall be made by the Employee, the Retirement Income
which shall be payable to the Employee if he lives to his Early Retirement Date
or the first day of the month following his attainment of age sixty-five (65),
if later, shall be reduced by three-fourths of one percent (0.75%) for each year
(prorated for a fraction of a year from the first day of the month following the
effective date of the election) which has elapsed from the effective date of his
election to the earlier of (1) the commencement of Retirement Income on or after
his Early Retirement Date or the first day of the month following his attainment
of age sixty-five (65), if later, or (2) the revocation of such election. If he
shall die before the commencement of Retirement Income on or after his Early
Retirement Date or the first day of the month following his attainment of age
sixty-five (65), if later, his Accrued Retirement Income to the date of his
death shall be reduced by three-quarters of one percent (0.75%) for each year
(prorated for a fraction of a year from the first day of the month following the
effective date of the election) between the effective date of his election and
the first day of the month following his attainment of age sixty-five (65). No
reduction in the Employee's Retirement Income shall be made for the period
during which the election is in effect after the first day of the month
following his attainment of age sixty-five (65).
(b) Retirement Income shall not be payable under paragraph (a) of this
Section 7.4 to the Provisional Payee of a deceased Employee if at the time of
his death there was in effect a Qualified Election made after August 22, 1984
under this paragraph (b) that no Retirement Income shall be paid to his
Provisional Payee in the event of his death while in the service of an Employing
Company (or while in the service of an Affiliated Employer to which his
employment had been transferred) as provided in paragraph (a), provided the
Employee had received at least one hundred eighty (180) days prior to his
fifty-fifth (55th) birthday a written explanation of: (1) the terms and
conditions of the Retirement Income payable to his Provisional Payee as provided
in paragraph (a); (2) the Employee's right to make, and the effect of, an
election to waive the payment of Retirement Income to his Provisional Payee; (3)
the rights of the Employee's Provisional Payee; and (4) the right to make, and
the effect of, a revocation of a previous election to waive the payment of
Retirement Income to the Employee's Provisional Payee.
A revocation of a prior Qualified Election may be made by the Employee
without the consent of the Employee's Provisional Payee at any time before the
commencement of benefits. An election under this paragraph (b) may be made and
such election may be revoked by an Employee during the period commencing ninety
(90) days prior to the Employee's fifty-fifth (55th) birthday and ending on the
date of the Employee's death.
Notwithstanding the above provisions of this paragraph (b), such Employee shall not be entitled on or after September 1, 1996 to waive payment of Retirement Income to his Provisional Payee as provided in this Section 7.4. Any such election to waive payment of Retirement Income in effect on August 31, 1996 shall remain in effect unless subsequently revoked by the Employee.
(c) Subject to Section 7.10(c), for an Employee who dies while in the
service of an Employing Company (or while in the service of an Affiliated
Employer to which his employment had been transferred) prior to his fifty-fifth
(55th) birthday after completing five (5) Vesting Years of Service, the amount
of such Retirement Income payable to the Provisional Payee shall be calculated
as provided in Section 7.1(b) determined on the basis of his Accredited Service
to the date of his death. The payment of such Retirement Income to the
Provisional Payee shall begin on the first day of the month following the date
on which such deceased Employee would have attained his fifty-fifth (55th)
birthday.
7.5 Post-retirement death benefit - qualified joint and survivor annuity7.5 Post-retirement death benefit - qualified joint and survivor annuity. If at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, as the case may be, an Employee is married and he has not: (a) designated a Provisional Payee in accordance with Section 7.1 in respect of payments to be made commencing on his Early, Normal, or Deferred Retirement Date or (b) made, subject to Section 7.4(b) a Qualified Election that payment be made to him in the mode of a single life annuity, he shall nevertheless be deemed to have made an effective designation of a Provisional Payee under this Section 7.5 and to have specified the payment of a benefit as provided in Section 7.1(b).
7.6 Election and designation by former Employee entitled to Retirement
Income in accordance with Article VIII7.6 Election and designation by former
Employee entitled to Retirement Income in accordance with Article VIII. If a
former Employee is entitled to receive in accordance with Section 8.1 Retirement
Income commencing at Normal Retirement Date, or sooner in accordance with
Section 8.2, he may, on or after his fifty-fifth (55th) birthday, designate his
spouse as his Provisional Payee and elect, subject to Section 7.11, to have his
Accrued Retirement Income at the date of termination of his service actuarially
adjusted to provide, at his option, in the event of the commencement of payment
prior to his Normal Retirement Date either:
(a) a reduced amount payable to him for his lifetime with the provision that such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee; or
(b) a reduced amount payable to him for his lifetime with the provision that one-half (1/2) of such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee; or
(c) a reduced amount payable to him for his lifetime with the provision that such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee, or, if such Provisional Payee predeceases the former Employee, the former Employee's Retirement Income automatically increases to a monthly amount equal to the Retirement Income which would be payable to him had he not elected the form of benefit described in this Section 7.6(c) and instead had elected the single life annuity form of benefit; or
(d) a reduced amount payable to him for his lifetime with the provision that one-half (1/2) of such reduced amount will be continued after his death to his spouse as Provisional Payee until the death of such Provisional Payee, or, if such Provisional Payee predeceases the former Employee, the former Employee's Retirement Income automatically increases to a monthly amount equal to the Retirement Income which would be payable to him had he not elected the form of benefit described in this Section 7.6(d) and instead had elected the single life annuity form of benefit.
A former Employee's election and designation of his Provisional Payee
made in accordance with this Section 7.6 shall be in writing on a prescribed
form delivered to the Retirement Board (or its delegee) and shall become
effective not sooner than the date received or the former Employee's fifty-fifth
(55th) birthday, whichever is later, nor later than the date of commencement of
payment in accordance with this Section 7.6. Notwithstanding the preceding
sentence, an election under Section 7.6(c) or (d) is subject to Section 7.11,
must be in the form of a written Qualified Election, and shall not become
effective until commencement of Retirement Income payments under the Plan.
If the former Employee dies prior to his Normal Retirement Date but
after the effective date of his Provisional Payee designation, there will be
payable to his Provisional Payee for life commencing on the first day of the
calendar month after the former Employee's death Retirement Income in a reduced
amount in accordance with the former Employee's election of payments to be made
to his Provisional Payee after the death of the former Employee under paragraph
(a), (b), (c), or (d) as the case may be, of this Section 7.6. Notwithstanding
the preceding sentence, an election under Section 7.6(c) or (d) is subject to
Section 7.11, must be in the form of a written Qualified Election, and shall not
become effective until commencement of Retirement Income payments under the
Plan. However, if prior to the former Employee's death, the Retirement Board (or
its delegee) has not received such election, payment of a reduced amount of
Retirement Income will be made in accordance with paragraph (b) of this Section
7.6 to his surviving spouse to whom he is married at the time of his death,
unless (1) at the time of his death there is in effect a Qualified Election by
the former Employee that reduced Retirement Income shall not be paid to his
surviving spouse in accordance with this Section 7.6 should he die between his
fifty-fifth (55th) birthday and his Normal Retirement Date without having
elected that payment be made to a Provisional Payee and (2) at least one hundred
eighty (180) days prior to his fifty-fifth (55th) birthday a written explanation
is provided to the former Employee of: (A) the terms and conditions of the
Retirement Income payable to his Provisional Payee as provided in this Section
7.6; (B) the former Employee's right to make, and the effect of, an election to
waive the payment of Retirement Income to his Provisional Payee; (C) the rights
of a former Employee's spouse; and (D) the right to make, and the effect of, a
revocation of a previous election to waive the payment of Retirement Income to
his Provisional Payee.
If the former Employee is entitled to receive payment of Retirement
Income in accordance with Section 8.2 after his fifty-fifth (55th) birthday and
prior to his Normal Retirement Date and elects to do so, a reduced amount of
Retirement Income determined in accordance with this Section 7.6, subject to
Section 7.11, based upon his Accrued Retirement Income at the date of
termination of his service (actuarially reduced in accordance with Section 8.2)
will be payable to him commencing on the date on which payments commence prior
to Normal Retirement Date in accordance with Section 8.2 with payments in the
same or reduced amount to be continued to his Provisional Payee for life after
the former Employee's death in accordance with his election under paragraph (a),
(b), (c), or (d), as the case may be, of this Section 7.6. However, if the
former Employee is married and he has not designated a Provisional Payee in
respect of payments to commence to him prior to his Normal Retirement Date or
elected that payment be made to him in the mode of a single life annuity
pursuant to a Qualified Election, he shall be deemed to have designated a
Provisional Payee pursuant to this Section 7.6 and thereby specified that a
reduced Retirement Income shall be paid to him during his lifetime as provided
in paragraph (b) of this Section 7.6 and continued after his death to his
Provisional Payee as provided in paragraph (b) of this Section 7.6.
If the former Employee is alive on his Normal Retirement Date and is
married and payment of Retirement Income has not sooner commenced, the
provisions of Section 7.5 shall be applicable to the payment of his Retirement
Income, unless he shall elect, subject to Section 7.11, at his Normal Retirement
Date to receive payment of his Retirement Income pursuant to Section 7.1(a),
(b), (c), or (d). However, if an election and designation in accordance with
this Section 7.6 was in effect prior to his Normal Retirement Date, the former
Employee's Accrued Retirement Income at his Normal Retirement Date shall be
actuarially adjusted for the period the election and designation was in effect.
7.7 Death benefit for Provisional Payee of former Employee7.7 Death
benefit for Provisional Payee of former Employee. If an Employee, whose service
with the Employing Company terminates on or after January 1, 1989, shall die
after such termination of employment, and prior to his death (a) shall have not
attained his fifty-fifth (55th) birthday, (b) shall have completed at least five
(5) Vesting Years of Service, and (c) shall be survived by his spouse to whom he
shall be married at his death, then there shall be payable to his surviving
spouse (whom he shall be deemed to have designated as his Provisional Payee)
Retirement Income determined in accordance with this Section 7.7. Such
Retirement Income shall be equal to one-half of the reduced amount, as
actuarially adjusted to provide for the payment of such Retirement Income
beginning as of the first day of the month following the date on which such
deceased former Employee would have attained his fifty-fifth (55th) birthday and
to provide for the determination of such Retirement Income on a joint and fifty
percent (50%) survivor basis of the former Employee's Accrued Retirement Income,
determined on the basis of his Accredited Service to the date of his death.
Subject to Section 7.10(b) and (c), the Provisional Payee shall be eligible to
commence receipt of such Retirement Income on the first day of the month
following the date on which the former Employee would have attained his
fifty-fifth (55th) birthday if he were still alive, or the first day of any
subsequent month preceding what would have been the former Employee's Normal
Retirement Date, and shall cease with the last payment preceding the death of
his Provisional Payee. In any event, the Provisional Payee shall commence
receipt of such Retirement Income no later than what would have been the former
Employee's Normal Retirement Date.
7.8 Limitations on Employee's and Provisional Payee's benefits
(a) With respect to an Employee who does not elect a single life annuity, the limitation on benefits imposed under Article VI shall be applied as if such Employee had elected a benefit in the form of a single life annuity.
(b) With respect to a Provisional Payee, the limitations on benefits imposed under Article VI shall be applied consistent with paragraph (a) above prorated to provide a limitation equal to or one-half of the Employee's limitation as appropriate in accordance with annuity form of benefit elected by the Employee.
7.9 Effect of election under Article VII7.9 Effect of election under Article VII. An election of payment or a deemed election of payment in accordance with this Article VII shall be in lieu of any other form or method of payment of Retirement Income.
7.10 Effects of change in retirement at Early Retirement Date7.10 Effects of change in retirement at Early Retirement Date.
(a) Notwithstanding any other provision of this Article VII with the exception of paragraphs one and two of Section 7.4(c), with respect to Employees who have an Hour of Service on or after January 1, 1996 and who (1) are not covered by the terms of a collective bargaining agreement or (2) are covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)."
(b) Notwithstanding Sections 7.4 and 7.7 and subject to paragraph (a) above, if an Employee who has an Hour of Service on or after January 1, 1996 and who (1) is not covered by the terms of a collective bargaining agreement or (2) is covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan and (3) dies after attaining his fiftieth (50th) birthday but before attaining his fifty-fifth (55th) birthday, his Provisional Payee shall commence receipt of Retirement Income on or after January 1, 1997, provided the Employee's Provisional Payee is alive and proof of the Employee's death satisfactory to the Retirement Board (or its delegee) is received. Notwithstanding the preceding sentence, with respect to Section 7.7, the Provisional Payee may elect to defer receipt of Retirement Income to the first day of any month following the date the Employee would have attained his fiftieth (50th) birthday but not beyond what would have been such Employee's Normal Retirement Date.
(c) Subject to paragraph (a) above except for the requirement that an Employee have an Hour of Service on or after January 1, 1996, the Provisional Payee of any Employee described in Section 7.4(c) or in Section 7.7 who (1) is not covered by the terms of a collective bargaining agreement or (2) is covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan shall commence receipt of Retirement Income upon the first day of the month after the Employee would have attained his fiftieth (50th) birthday. For purposes of the preceding sentence only, the requirement in Section 7.7 that a former Employee terminate service with the Employing Company on or after January 1, 1989 should be disregarded to allow the Provisional Payee of any former Employee to be eligible to commence receipt of Retirement Income as provided in such sentence.
7.11 Commencement of new optional forms of payment7.11 Commencement of new optional forms of payment. The options for payment described in Sections 7.1(c) and (d) and Sections 7.6(c) and (d) may be elected only for Employees who have an Hour of Service on or after January 1, 1996 and who (a) are not covered by the terms of a collective bargaining agreement or (b) are covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan.
7.12 Special form of benefit for former Employees
(a) With respect to any Employee who has an Hour of Service on or after January 1, 1996 and who (1) is not covered by the terms of a collective bargaining agreement or (2) is covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan (3) terminates employment with such Employing Company in 1996 and (4) has attained his fiftieth (50th) birthday but not his fifty-fifth (55th) birthday as of his termination of employment, such Employee shall be eligible to elect the special form of benefit described in the next following paragraph which election must be made in the form of a written Qualified Election.
(b) This special form of benefit shall only commence on January 1, 1997 and shall be comprised of two components consisting of a lump sum and a single life annuity as described in paragraphs (1) and (2) below.
(1) Annuity Component: A reduced amount of Retirement Income payable to the former Employee for his lifetime determined as if he had elected to retire as of the first of the month following the date such former Employee terminated from employment.
(2) Lump Sum Component: A lump sum payment equal to the difference between paragraphs (A) and (B) below:
(A) the lump sum amount which is the Actuarial Equivalent of a single life annuity payable to the former Employee determined as if the former Employee had elected such single life annuity to commence as of January 1, 1997, and
(B) the lump sum amount which is the Actuarial Equivalent of the payment described in paragraph (1) above.
(3) With respect to paragraph (1) above, if the annuity component is payable to the former Employee for his lifetime, he may elect to have his Retirement Income adjusted upwards in an amount which will make his Retirement Income payable up to age sixty-five (65) equal, as nearly as may be, to the amount of his Federal primary Social Security benefit (primary old age insurance benefit) estimated to become payable after age sixty-five (65), computed as of the first of the month following the date the former Employee terminated employment, plus a reduced amount, if any, of Retirement Income actuarially determined to be payable after age sixty-five (65). The Federal primary Social Security benefit used in calculating the former Employee's Retirement Income payable under the Plan shall be determined by using the salary history of the former Employee during his employment with any Affiliated Employer, as calculated in accordance with Section 5.4.
(c) Notwithstanding paragraph (b) above, with respect to this form of benefit, a former Employee may elect, in lieu of receiving the annuity component as a single life annuity, to receive his benefit in a manner similar to the forms of payment described in Section 7.1(a), (b), (c), or (d). If one of these alternatives is elected, the annuity and lump sum component will be adjusted as follows:
(1) Alternative 1
(A) Annuity Component: The form of payment
described in Section 7.1(a) but which is
calculated based on eighty percent (80%) of
the single life annuity provided in
paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to
eighty percent (80%) of the amount
provided in paragraph (b)(2) above.
(2) Alternative 2
(A) Annuity Component: The form of payment
described in Section 7.1(b) but which is
calculated based on ninety percent (90%) of
the single life annuity provided in
paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to
ninety percent (90%) of the amount
|
provided in paragraph (b)(2) above.
(3) Alternative 3
(A) Annuity Component: The form of payment described in Section 7.1(c) but which is calculated based on seventy-five percent (75%) of the single life annuity provided in paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to seventy-five percent (75%) of the amount provided in paragraph (b)(2) above.
(4) Alternative 4
(A) Annuity Component: The form of payment described in Section 7.1(d) but which is calculated based on eighty-eight percent (88%) of the single life annuity provided in paragraph (b)(1) above.
(B) Lump Sum Component: A lump sum equal to eighty-eight percent (88%) of the amount provided in paragraph (b)(2) above.
Article VIII
Termination of Service
8.1 Vested interest8.1 Vested interest. If an Employee included in the Plan terminates for any reason other than death or retirement as provided by Article III, and if such Employee has had at least five (5) Vesting Years of Service with any Affiliated Employer, whether or not Accredited Service, he will be entitled to receive, commencing at Normal Retirement Date (except as provided in Section 8.2 and subject to the provisions of Section 7.6) Retirement Income equal to his Accrued Retirement Income at the date of the termination of such service, provided that he makes application to the Retirement Board (or its delegee) for the payment of such Retirement Income. If proper application for payment of Retirement Income shall not be received by the Retirement Board (or its delegee) by the April 1 of the calendar year following the calendar year in which the Employee attains age 70 1/2 and the whereabouts of the Employee cannot be determined by the Retirement Board (or its delegee), Retirement Income shall be paid to the Employee's Provisional Payee, if any, and if surviving and the whereabouts known to the Retirement Board (or its delegee), or applied in such other manner as the Retirement Board shall deem appropriate. The payment of Retirement Income pursuant to this provision shall completely discharge all liability of the Retirement Board (or its delegee), the Employer, and the Trustee or other payor to the extent of the payments so made. If such Employee terminates with less than five (5) Vesting Years of Service with any Affiliated Employer, he shall immediately forfeit any Accrued Retirement Income under the Plan based upon his service prior to such termination.
8.2 Early distribution of vested benefit8.2 Early distribution of
vested benefit. If an Employee terminates from service before his fifty-fifth
(55th) birthday and is entitled to receive in accordance with Section 8.1
Retirement Income commencing at his Normal Retirement Date and at the time his
service terminated he had at least ten (10) Years of Accredited Service, he may,
in lieu of receiving payment of such Retirement Income commencing at Normal
Retirement Date, elect to receive such Retirement Income commencing as of the
first day of any month after his fifty-fifth (55th) birthday but preceding his
Normal Retirement Date in an amount equal to his Accrued Retirement Income at
the date of termination of his service actuarially reduced in accordance with
reasonable actuarial assumptions adopted by the Retirement Board. An election
pursuant to this Section 8.2 to have Retirement Income commence prior to Normal
Retirement Date shall be made on a prescribed form and shall be filed with the
Retirement Board (or its delegee) at least thirty (30) days before Retirement
Income is to commence.
Effective for Employees who have an Hour of Service on or after January 1, 1996 and who (a) are not covered by the terms of a collective bargaining agreement or (b) are covered by the terms of a collective bargaining agreement but where the bargaining unit representative and an Employing Company have mutually agreed to participation in the Plan, the term "fiftieth (50th)" shall replace "fifty-fifth (55th)" in the preceding paragraph. If any such Employee commences receipt of his Retirement Income after attaining age fifty (50) but before attaining age fifty-five (55), the Employee's Retirement Income shall be determined as in the preceding paragraph including an additional reduction of one-third of one percent (0.33%) for each calendar month by which the commencement date precedes the first day of the month following such Employee's attainment of his fifty-fifth (55th) birthday.
8.3 Years of Service of reemployed Employees8.3 Years of Service of reemployed Employees. If an Employee whose service terminates is again employed by an Affiliated Employer as an Employee, his Years of Service with any Affiliated Employer and his Accredited Service immediately prior to the termination of his service shall be treated as provided in this Section 8.3, subject to the provisions of Section 8.4.
(a) If at the time of his reemployment he has not incurred a One-Year Break in Service, his Years of Service with an Affiliated Employer and his Accredited Service will be restored whether or not he is entitled to receive Retirement Income in accordance with Section 8.1.
(b) If at the time of termination of his service he is entitled to receive Retirement Income in accordance with the provisions of Section 8.1, upon his reemployment his Years of Service with an Affiliated Employer immediately prior to the termination of his service shall be restored whether or not he has incurred a One-Year Break in Service.
(c) If at the time of reemployment he is not entitled to receive
Retirement Income in accordance with Section 8.1 and he (1) has incurred less
than five (5) consecutive One-Year Breaks in Service or (2) has incurred five
(5) or more consecutive One-Year Breaks in Service, but his Years of Service
prior to such One-Year Breaks in Service exceeded the consecutive One-Year
Breaks in Service, then upon the completion of one Eligibility Year of Service
following his reemployment, provided that if his reemployment date is on or
after January 1, 1995, no such Eligibility Year of Service shall be required,
his Years of Service with an Affiliated Employer and his Accredited Service
prior to the first One-Year Break in Service shall be restored, disregarding any
Years of Service with an Affiliated Employer which are not required to be taken
into account by reason of any previous One-Year Breaks in Service.
(d) Years of Service and Accredited Service restored to an Employee in accordance with this Section 8.3 shall be aggregated with Years of Service and Accredited Service to which the Employee may be entitled after his reemployment. If, however, the Minimum Retirement Income so determined for the Employee upon his subsequent retirement or termination of service shall be less than the aggregate of: (1) his Minimum Retirement Income, if any, determined in respect of the period ending with his prior termination of service, and (2) his Minimum Retirement Income determined in respect of the period after his reemployment, the aggregate of such Minimum Retirement Incomes shall be deemed to be his Minimum Retirement Income upon such subsequent retirement or termination of service. In any event, his Retirement Income, however computed, shall be reduced by the Actuarial Equivalent of any Retirement Income he received with respect to his prior period of employment.
8.4 Cash-out and buy-back8.4 Cash-out and buy-back. (a) Notwithstanding any other provision of this Plan, if the present value of Accrued Retirement Income of an Employee whose service terminates for any reason other than transfer to an Affiliated Employer or retirement under Article III is not more than $3,500 (or such greater amount as permitted by the regulations prescribed by the Secretary of the Treasury), the present value of the Employee's Accrued Retirement Income shall be paid in a lump sum, in cash, to such terminated Employee. The present value of the Accrued Retirement Income shall be calculated as of the date of distribution of the lump sum applying the Applicable Interest Rate as defined in Section 8.5(c). For purposes of this Section 8.4, if the present value of the Employee's vested Accrued Retirement Income is zero, the Employee shall be deemed to have received a distribution of such vested Retirement Income.
(b) A terminated Employee who has been paid a lump sum of the present value of his Accrued Retirement Income in accordance with paragraph (a) above shall not be entitled to repay this amount to the Trust. If such terminated Employee is subsequently reemployed and attains his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, or terminates service for any reason subject to the requirements of Section 8.1 or 8.2, the Employee shall receive Retirement Income based on all Accredited Service, including Accredited Service earned prior to reemployment, but reduced by the Actuarial Equivalent of the lump sum payment made in accordance with paragraph (a).
8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits8.5 Calculation of present value for cash-out of benefits and for determining amount of benefits.
(a) This Section 8.5 shall apply to all distributions from the Plan and from annuity contracts purchased to provide Accrued Retirement Income other than distributions described in Section 1.417-1T(e)(3) of the income tax regulations issued under the Retirement Equity Act of 1984.
(b) (1) For purposes of determining whether the present value of (A) an Employee's vested accrued benefit; (B) a qualified joint and survivor annuity, within the meaning of Section 417(b) of the Code; or (C) a qualified preretirement survivor annuity within the meaning of Section 417(c)(1) of the Code exceeds $3,500, the present value of such benefits or annuities shall be calculated by using an interest rate no greater than the Applicable Interest Rate.
(2) In no event shall the present value of any such benefit or annuity determined under this Section 8.5(b) be less than the present value of such benefits or annuities determined using the Applicable Interest Rate.
(3) In no event shall the amount of any benefit or annuity determined under this Section 8.5 exceed the maximum benefit permitted under Section 415 of the Code.
(c) For purposes of this Section 8.5, "Applicable Interest Rate" shall be calculated by using the annual rate of interest on 30-year Treasury securities for the month of November in the Plan Year which precedes the Plan Year in which such present value is determined and by using the prevailing commissioners' standard table used to determine reserves for group annuity contracts in effect on the date as of which the present value is being determined.
8.6 Retirement Income under Prior Plans8.6 Retirement Income under Prior Plans. Any person entitled to receive Retirement Income as a former Employee under the Prior Plans shall only be entitled to receive Retirement Income in accordance with the provisions of such Prior Plan in effect at the time his service was terminated, except that any such person whose service terminated prior to January 1, 1976:
(a) with at least twenty (20) years of Accredited Service may elect to receive Retirement Income commencing prior to his Normal Retirement Date in accordance with Section 8.2;
(b) who shall have returned to the employment of an Employing Company, whether before or after January 1, 1976, and shall be an Employee who is entitled to receive Retirement Income in respect of his Accredited Service after January 1, 1976, his years of Accredited Service under the Prior Plans with respect to his service before January 1, 1976, shall, for the purpose of calculating his Minimum Retirement Income, be aggregated with his years of Accredited Service after his reemployment. His Accrued Retirement Income to the date of termination of his service payable in accordance with the Prior Plans as a former Employee shall be treated as Prior Plan Retirement Income and his Years of Service prior to the date of termination of his service shall be restored to his credit. It shall be a condition of the treatment provided for in this paragraph (b) that: (1) the Employee rescind any election of payment and designation of a Provisional Payee which he shall have made under the Prior Plan and which shall be in effect at the time of his return to the employment of an Employing Company and (2) if he is receiving Retirement Income, his Retirement Income shall cease during his period of employment and any Retirement Income payable upon his subsequent retirement shall be reduced by the Actuarial Equivalent of any Retirement Income he received prior to his reemployment.
8.7 Requirement for Direct Rollovers8.7Requirement for Direct Rollovers. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article VIII, a Distributee may elect on a prescribed form to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
(a) Definitions
(1) Eligible Rollover Distribution
An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include:
(A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's spouse, or for a specified period of 10 years or more;
(B) any distribution to the extent such distribution is required under Code Section 401(a)(9); and
(C) the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities).
(2) Eligible Retirement Plan
An Eligible Retirement Plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a) that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution for a Provisional Payee, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity.
(3) Distributee
A Distributee includes an Employee or former Employee. In addition, a Distributee includes the Employee's or former Employee's spouse who is an alternate payee under a qualified domestic relations order, as defined in Code Section 414(p).
(4) Direct Rollover
A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.
Article IXArticle IX
Contributions
9.1 Contributions generally9.1Contributions generally. All contributions necessary to provide the Retirement Incomes under the Plan will be made from time to time by or on behalf of the Employing Companies and no contributions will be required of the Employees. All contributions shall be made to the Trustee under the Trust Agreement provided for in Article XI, and if a group annuity contract shall be entered into with a life insurance company ("contract with an insurance company"), contributions may also be made to the insurance company.
The minimum amount of contributions to be made by or on behalf of the
Employing Companies for any Plan Year of the Plan shall be such amount as is
required to meet the minimum funding standards of ERISA and any regulations in
respect thereto. However, the Employing Companies are under no obligation to
make any contributions under the Plan after the Plan is terminated, whether or
not Retirement Income accrued or vested prior to the date of termination has
been fully funded. All contributions are expressly conditioned upon the
deductibility of such contributions by the Employing Companies pursuant to
Section 404 of the Code.
9.2 Return of Employing Company contributions9.2 Return of Employing Company contributions. All contributions made pursuant to the Plan shall be held by the Trustee in accordance with the terms of the Trust Agreement for the exclusive benefit of those Employees who are participants under the Plan, including former Employees and their beneficiaries, and shall be applied to provide benefits under the Plan and to pay expenses of administration of the Plan and Trust, to the extent that such expenses are not otherwise paid. At no time prior to the satisfaction of all liabilities with respect to such Employees and their beneficiaries shall any part of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of such Employees and their beneficiaries. However, notwithstanding the provisions of this Section 9.2:
(a) If a contribution is conditioned upon the deductibility of the contributions under Section 404 of the Code, then, to the extent the deduction is disallowed, the Trustee shall upon written request of an Employing Company, return the contribution (to the extent disallowed) to such Employing Company within one year after the date the deduction is disallowed.
(b) If a contribution or any portion thereof is made by an Employing Company by a mistake of fact, the Trustee shall, upon written request of such Employing Company, return the contribution or such portion to the Employing Company within one year after the date of payment to the Trustee.
The amount which may be returned to an Employing Company under this
Section 9.2, is the excess of (a) the amount contributed over (b) the amount
that would have been contributed had there not occurred a mistake of fact or a
mistake in determining the deduction. Earnings attributable to the excess
contribution shall not be returned to such Employing Company, but losses
attributable thereto shall reduce the amount to be so returned.
(c) If permitted under Federal common law, the Employing Company may recover any other contributions to the Plan or payments to any other entity to the extent such contributions or payments unjustly enrich or otherwise gratuitously benefit such entity.
9.3 Expenses9.3 Expenses. Prior to termination of the Plan, all investment expenses (including brokerage costs, transfer taxes, shipping expenses, and charges of correspondent banks of the Trustee) and any taxes which may be levied against the Trust shall be charged to the Trust. All other expenses prior to the termination of the Plan shall either be paid by the Employing Companies or charged to or reimbursed by the Trust, as determined in the discretion of The Southern Company Pension Fund Investment Review Committee. After the termination of the Plan, all expenses shall be levied against the Trust and shall be charged to the Trust.
Article X
Administration of Plan
10.1 Retirement Board The general administration of the Plan shall be placed in a Retirement Board of six (6) members who shall be appointed from time to time by the Board of Directors to serve at the pleasure of the Board of Directors.
10.2 Organization and transaction of business of Retirement Board10.2 Organization and transaction of business of Retirement Board. Any person appointed a member of the Retirement Board shall signify his acceptance by filing written acceptance with the Board of Directors. Any member of the Retirement Board may resign by delivering his written resignation to the Board of Directors, and such resignation shall become effective at delivery or at any later date specified therein.
The members of the Retirement Board shall elect a Chairman from their number, and a Secretary who may be but need not be one of the members of the Retirement Board, and shall designate an actuary to act in actuarial matters relating to the Plan. They may appoint from their number such committees with such powers as they shall determine, may authorize one or more of their number or any agent to make any payment in their behalf, or to execute or deliver any instrument except that a requisition for funds from the Trustee shall be signed by two (2) members of the Retirement Board unless the Retirement Board determines in writing to delegate such requisition authority.
The Retirement Board shall hold meetings upon such notice, at such place or places, and at such time or times as they may from time to time determine.
A majority of the members of the Retirement Board at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Retirement Board at any meeting shall be by the vote of a majority of the Retirement Board at the time in office. Any determination or action of the Retirement Board may be made or taken without a meeting by a resolution or written memorandum concurred upon by a majority of the members then in office.
No member of the Retirement Board who is also an Employee of an Employing Company shall receive any compensation from the Plan for his service as such. No bond or other security need be required of any member in any jurisdiction except as may be required by ERISA.
10.3 Administrative responsibilities of Retirement Board The Retirement Board, in addition to the functions and duties provided for elsewhere in the
Plan, shall have exclusive discretionary authority for the following:
(a) construing and interpreting the Plan;
(b) determining all questions affecting the eligibility of any Employee, retired Employee, former Employee, Provisional Payee, or alternate payee;
(c) determining all questions affecting the amount of the benefit payable hereunder;
(d) ascertaining the persons to whom benefits shall be payable under the provisions hereof;
(e) to the extent provided in the Plan, authorizing and directing disbursements of benefits from the Plan;
(f) making final and binding determinations in connection with any questions of fact which may arise regarding the operation of the Plan;
(g) making such rules and regulations with reference to the operation of the Plan as it may deem necessary or advisable, provided that such rules and regulations shall not be inconsistent with the express terms of the Plan or ERISA;
(h) prescribing such procedures and adopting such forms as it determines necessary under the terms of the Plan; and
(i) reviewing such denials of claims for benefits as may arise.
Any action by the Retirement Board under this Section 10.3 shall be binding and conclusive. To the extent that the Retirement Board delegates any of the foregoing duties or functions to another party, the Retirement Board retains the ultimate authority to act in accordance with this Section 10.3.
10.4 Retirement Board, the "Administrator"10.4 Retirement Board, the "Administrator. For the purposes of compliance with the provisions of ERISA, the Retirement Board shall be deemed the "administrator" of the Plan as that term is defined in ERISA, and the Retirement Board shall be, with respect to the Plan, a "named fiduciary" as that term is defined in ERISA. For the purpose of carrying out its duties, the Retirement Board may, in its discretion, allocate responsibilities under the Plan among its members and may, in its discretion, designate in writing, as set forth in the records of the Retirement Board, persons other than members of the Retirement Board to carry out such responsibilities of the Retirement Board under the Plan as it may see fit.
10.5 Fiduciary responsibilities10.5 Fiduciary responsibilities. It is intended, that to the maximum extent permitted by ERISA, each person who is a "fiduciary" with respect to the Plan as that term is defined in ERISA shall be responsible for the proper exercise of his own powers, duties, responsibilities, and obligations under the Plan and the Trust or other funding medium, as shall each person designated by any fiduciary to carry out any fiduciary responsibility with respect to the Plan, the Trust or other funding medium and no fiduciary or other person to whom fiduciary responsibilities are allocated shall be liable for any act or omission of any other fiduciary or of any other person delegated to carry out any fiduciary or other responsibility under the Plan or the Trust or other funding medium.
Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan and any fiduciary with respect to the Plan may serve as a fiduciary with respect to the Plan in addition to being an officer, employee, agent, or other representative of a "party in interest" as that term is defined in ERISA.
10.6 Employment of actuaries and others10.6 Employment of actuaries and others. The Retirement Board may employ such "enrolled actuaries" and independent "qualified public accountants" as such terms are defined in ERISA, legal counsel (who may be of counsel to an Employing Company), other specialists, and other persons as the Retirement Board deems necessary or desirable in connection with the administration of the Plan. The Retirement Board and any person to whom it may delegate any duty or power in connection with the administration of the Plan, an Employing Company, and the officers and directors thereof shall be entitled to rely conclusively upon and shall be fully protected in any action omitted, taken, or suffered by them in good faith in reliance upon any enrolled actuary, independent qualified public accountant, counsel, or other specialist or other person selected by the Retirement Board or in reliance upon any tables, evaluations, certificates, opinions, or reports which shall be furnished by any of them or by the Trustee or any insurance company. Any action so taken, omitted, or suffered in accordance with the provisions of this Section 10.6 shall be conclusive upon each Employee, former Employee, and Provisional Payee covered under the Plan.
10.7 Accounts and tables10.7 Accounts and tables. The Retirement Board
shall maintain accounts showing the fiscal transactions of the Plan, and shall
keep in convenient form such data as may be necessary for actuarial valuations
with respect to the operation and administration of the Plan. The Retirement
Board shall annually report to the Board of Directors and provide a reasonable
summary of the financial condition of the Trust and the operation of the Plan
for the past year, and any further information which the Board of Directors may
require. In addition, the Retirement Board shall annually report to the
Compensation and Management Succession Committee of The Southern Company Board
of Directors and provide a reasonable summary about significant matters
concerning the operation of the Plan and the adoption of any amendments not
otherwise required to be recommended by such Committee in accordance with
Section 13.1.
The Retirement Board may, with the advice of an enrolled actuary, adopt from time to time mortality and other tables as it may deem necessary or appropriate for use in calculating benefits under the Plan.
10.8 Indemnity of members of Retirement Board10.8 Indemnity of members of Retirement Board. To the extent not compensated for by any applicable insurance, the Employing Companies shall indemnify and hold harmless each member of the Retirement Board and each Employee of the Employing Companies designated by the Retirement Board to carry out any fiduciary responsibility with respect to the Plan from any and all claims, loss, damages, expense (including counsel fees approved by the Board of Directors) and liability (including any amount paid in settlement with the approval of the Board of Directors) arising from any act or omission of such member or Employee designated by the Retirement Board in connection with the Plan or the Trust, except where the same is determined by the Board of Directors or is judicially determined to be due to a failure to act in good faith or is due to the gross negligence or willful misconduct of such member or Employee. No assets of the Plan may be used for any such indemnification.
10.9 Areas in which the Retirement Board does not have responsibility10.9 Areas in which the Retirement Board does not have responsibility. The Retirement Board shall not have responsibility with respect to control or management of the assets of the Plan. The Trustee or an insurance company, if funds of the Plan shall be held by an insurance company, shall have the sole responsibility for the administration of the assets of the Plan as provided in the Trust Agreement or contract with an insurance company, except to the extent that an "Investment Manager," as that term is defined in ERISA, appointed by the Board of Directors upon recommendation of the Pension Fund Investment Review Committee of The Southern Company System shall have responsibility for the management of the assets of the Plan, or some part thereof, including the power to acquire and dispose of the assets of the Plan, or some part thereof.
The responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA shall be that of the Pension Fund Investment Review Committee of The Southern Company System.
10.10 Claims procedures10.10 Claims Procedures. Consistent with the requirements of ERISA and the regulations thereunder of the Secretary of Labor from time to time in effect, the Retirement Board (or its delegee) shall:
(a) provide adequate notice in writing to any Employee, former Employee, retired Employee, or Provisional Payee (each being hereinafter in the paragraph referred to as "participant") whose claim for benefit under the Plan has been denied, setting forth specific reasons for such denial, written in a manner calculated to be understood by such participant; and
(b) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review of the decision denying the claim.
Article XIArticle XI
Management of Trust
11.1 Trust1
All assets of the Plan shall be held as a special trust for use in accordance with the Plan.
The funds of the Plan shall be held by a Trustee in trust or held by a life insurance company in accordance with the provisions of a contract with such insurance company entered into by the Trustee or the Employer. The Trust Agreement and contract with an insurance company may from time to time be amended in the manner therein provided.
11.2 Disbursement of the Trust Fund11.2 Disbursement of the Trust Fund. Subject to the provisions of the Trust Agreement or contract with an insurance company the Retirement Board shall determine the manner in which the funds of the Plan shall be disbursed pursuant to the Plan, including the form of voucher or warrant to be used in making disbursements and the due qualification of persons authorized to approve and sign the same. The responsibility for the retention and investment of funds held by the Trustee shall lie with the Trustee and not with the Retirement Board, and the responsibility for the retention and investment of funds held by an insurance company shall lie with the insurance company and not with the Retirement Board. However, if in accordance with a Trust Agreement forming a part of the Plan (including any pooled trust agreement in which a trust forming a part of the Plan participates) a contract with an insurance company shall be held by the Trustee as an investment of the Trust, directions may be given from time to time to the Trustee by the Board of Directors or such committee, person, or persons as may be specified in the Trust Agreement to transfer funds of the Trust to the life insurance company which issued such contract or to transfer funds from the life insurance company to the Trustee, as the case may be.
11.3 Rights in the Trust11.3 Rights in the Trust. Under no circumstances shall amounts of money or other things of value contributed by the Employing Companies to the Plan, or any part of the corpus or income of the Trust held by the Trustee under the Plan, be recoverable by the Employing Companies from the Trustee or from any Employee, retired Employee, former Employee, or Provisional Payee, or be used for, or diverted to, purposes other than for the exclusive benefit of the Employees, retired Employees, former Employees, and Provisional Payees covered hereunder; provided, however, that, if after satisfaction of all liabilities of the Trust with respect to Employees, retired Employees, former Employees, and Provisional Payees under the Plan, there is any balance remaining, the Trustee shall return such balance to the Employing Companies. Notwithstanding the above, upon the approval of the Internal Revenue Service or the enactment or promulgation of any laws or regulations by any governmental authority, the Employing Companies shall be authorized to rededicate all or a portion of the assets allocated to fund Retirement Income under the Plan to the separate account to fund medical benefits under Article XV of the Plan.
11.4 Merger of the Plan11.4 Merger of the Plan. The Plan shall not be merged or consolidated with, or any of its assets or liabilities transferred to, any other plan, unless each Employee included in the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan then terminated).
Article XIIArticle XII
Termination of the Plan
12.1 Termination of the Plan12.1 Termination of the Plan. The Plan may be terminated at any time by action of the Board of Directors in accordance with the amendment procedures provided in Section 13.1. Upon such termination or partial termination all Accrued Retirement Income of Employees to the date of such termination, to the extent then funded, shall become nonforfeitable and the assets of the Plan which have not previously been allocated to provide Retirement Income shall then be paid out to Employees, retired Employees, former Employees, and Provisional Payees in accordance with the applicable requirements of ERISA and regulations thereunder governing termination of "employee pension benefit plans" as defined in ERISA. If after satisfaction of all liabilities, as provided above, there is any balance remaining in the Trust, the Trustee shall return such balance to the Employing Companies.
To the extent permitted by law, subject to the foregoing limitations,
such remaining assets shall be allocated among all persons in the following
categories for whom such Retirement Income or other benefits have not previously
been provided, namely, (a) Employees who have been retired under the Plan, (b)
Employees who at the date of termination of the Plan are included in the Plan,
(c) former Employees who at the date of the termination of their employment were
entitled to payment of Retirement Income in accordance with Article VIII, and
(d) former Employees who have transferred to an Affiliated Employer. Retirement
Income already purchased under any contract with an insurance company will be
payable in accordance with the provisions of that contract.
12.2 Limitation on benefits for certain highly paid employees12.2 Limitation on benefits for certain highly paid employees.
(a) The annual payments to an Employee described in paragraph (b) below shall not exceed an amount equal to the payments that would be made to or on behalf of such Employee under a single life annuity that is the Actuarial Equivalent of the sum of the Employee's Accrued Retirement Income and the Employee's other benefits under this Plan (other than a Social Security supplement) and any Social Security supplement that the restricted Employee is entitled to receive. The restrictions in this paragraph (a) do not apply, however, if:
(1) after payment to an Employee described in paragraph (b) of all benefits payable to such Employee under this Plan, the value of this Plan's assets equals or exceeds 110% of the value of current liabilities, as defined in Code Section 412(c)(7), or
(2) the value of the benefits payable to such Employee under this Plan for an Employee described in paragraph (b) below is less than 1% of the value of current liabilities before distribution.
(b) The Employees whose benefits are restricted on distribution include
all highly compensated employees and highly compensated former employees (as
such terms are defined in Treasury Regulation Section 1.401(a)(4)-12); provided,
however, that Employees whose benefits are subject to restriction under this
Section 12.2 shall be limited to only those Employees who in the current or in
any previous Plan Year were one of the 25 non-excludable Employees of the
Affiliated Employers with the greatest compensation from such Affiliated
Employers.
Article XIIIArticle XIII
Amendment of the Plan
13.1 Amendment of the Plan
(a) The Plan may be amended or modified at any time by the Board of Directors pursuant to its written resolutions to among other things (but without limiting the scope of the Board of Directors' authority) implement collectively bargained agreements, provide non-collectively bargained Employees those benefits granted collectively bargained Employees or such other benefits not granted collectively bargained Employees, change plan distribution options and the timing of distributions, provide for administrative efficiency, make any changes necessary or desirable to make the contributions to the Trust eligible for tax deductions, make the income of the Trust exempt from taxation, or bring the Plan into conformity or compliance with ERISA, the Code, or with other governmental regulations. Notwithstanding the foregoing, amendments or modifications which substantially increase on an on-going basis the contributions required under Article IX for any Employing Company or which significantly increase or decrease the future opportunity for Accrued Retirement Income for Employees of any Employing Company will be made by the Board of Directors, only after recommendation to and approval by the Compensation and Management Succession Committee of The Southern Company Board of Directors.
(b) Notwithstanding paragraph (a) above, no amendment shall be made which has the effect of decreasing the Accrued Retirement Income of any Employee, retired Employee, former Employee, or Provisional Payee as provided under the limitations of Section 411(d)(6) of the Code.
Article XIV
Special Provisions
14.1 Exclusive benefit14.1 Exclusive benefit. The Employing Companies intend that the Plan (including the Trust forming a part thereof) be a pension plan maintained for the exclusive benefit of its Employees and their beneficiaries subject to Section 11.3, as provided for in Section 401 of the Code, and as may be provided for in any similar provisions of subsequent revenue laws, and that the Trust shall qualify as an employees' trust which shall be exempt under Section 501(a) of the Code, and any similar provisions of subsequent revenue laws, as a trust forming part of such a plan.
14.2 Assignment or alienation14.2 Assignment or alienation. No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment (either at law or in equity), pledge, encumbrance, charge, garnishment, levy, execution, or other legal or equitable process and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, levy, execute, or enforce other legal or equitable process against the same shall be void, nor shall any such benefit be in any manner liable for or subject to the debts, contracts, liabilities, engagements, or torts of the person entitled to such benefit.
If any Employee, former Employee, or retired Employee, or any Provisional Payee under the Plan is adjudicated bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge any benefit under the Plan or if any action shall be taken which is in violation of the provisions of the immediately preceding paragraph, then such benefit shall cease and terminate and in that event the Retirement Board shall hold or apply the same or any part thereof to or for the benefit of such Employee, former Employee, retired Employee, or Provisional Payee in such manner as the Retirement Board may think proper.
Notwithstanding the above, the Retirement Board and Trustee shall comply with any "domestic relations order" (as defined in Section 414(p)(1)(B) of the Code) which is a "qualified domestic relations order" satisfying the requirements of Section 414(p) of the Code. The Retirement Board shall establish procedures for (a) notifying Employees and alternate payees who have or may have an interest in benefits which are the subject of domestic relations orders, (b) determining whether such domestic relations orders are qualified domestic relations orders under Section 414(p) of the Code, and (c) distributing benefits which are subject to qualified domestic relations orders.
14.3 Voluntary undertaking14.3 Voluntary undertaking. This Plan is strictly a voluntary undertaking on the part of the Employing Companies and shall not be deemed to constitute a contract between the Employing Companies or any other company and any Employee or to be a consideration for, or an inducement or condition of, the employment of any Employee. Nothing contained in this Plan shall be deemed to give any Employee the right to be retained in the service of an Employing Company or to interfere with the right of the Employing Companies to discharge any Employee at any time. Inclusion under the Plan will not give any Employee or Provisional Payee any right or claim to a Retirement Income except to the extent such right is specifically fixed under the terms of the Plan and there are funds available therefor in the hands of the Trustee or of any insurance company which may hold funds of the Plan.
14.4 Top-Heavy Plan requirements14.4 Top-Heavy Plan requirements. For any Plan Year the Plan shall be determined to be a Top-Heavy Plan, the Plan shall provide the following:
(a) the minimum benefit requirement of Section 14.6; and
(b) the vesting requirement of Section 14.7.
14.5 Determination of Top-Heavy status
(a) The Plan shall be determined to be a "Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any Plan of an Aggregation Group.
(b) The Accrued Retirement Income of a Non-Key Employee shall be determined under the accrual method under the Plan.
(c) The Plan shall be determined to be a "Super Top-Heavy Plan," if, as of the Determination Date, (1) the Present Value of Accrued Retirement Income of Key Employees or (2) the sum of the Aggregate Accounts of Key Employees under this Plan and any plan in an Aggregation Group, exceeds ninety percent (90%) of the Present Value of Accrued Retirement Income or the Aggregate Accounts of all Employees entitled to participate in this Plan and any plan of an Aggregation Group.
For purposes of Sections 14.5(a) and 14.5(b), if any Employee is a Non-Key Employee for any Plan Year, but such Employee was a Key Employee for any prior Plan Year, such Employee's Present Value of Accrued Retirement Income and/ or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top-Heavy Group). In addition, if an Employee or former Employee has not performed any services for an Employing Company or any Affiliated Employer maintaining the Plan or Prior Plans at any time during the five (5) year period ending on the Determination Date, the Aggregate Account and/or Present Value of Accrued Retirement Income for such Employee or former Employee shall not be taken into account for purposes of determining whether this Plan is a Top-Heavy or Super Top-Heavy Plan.
(d) An Employee's "Aggregate Account" as of the Determination Date shall be determined under applicable provisions of the defined contribution plan used in determining Top-Heavy status.
(e) An "Aggregation Group" shall mean either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Affiliated Employers in which a Key Employee is a participant, and each other plan of the Affiliated Employers which enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, will be required to be aggregated. Such group shall be known as a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the group will be considered a Top-Heavy Plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a Top-Heavy Plan if the Aggregation Group is not a Top-Heavy Group.
(2) Permissive Aggregation Group: The Affiliated Employers may
also include any other plan not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a whole,
would continue to satisfy the provisions of Code Sections 401(a)(4) or
410. Such group shall be known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is a Top-Heavy Group. A plan that is not part of the Required Aggregation Group but that has nonetheless been aggregated as part of the Permissive Aggregation Group will not be considered a Top-Heavy Plan even if the Permissive Group is a Top-Heavy Group.
(3) Only those plans of the Affiliated Employers in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top-Heavy Plans.
(f) The "Determination Date" shall mean with respect to any Plan Year, the last day of the preceding Plan Year, or in the case of the first Plan Year, the last day of such Plan Year.
(g) A "Key Employee" shall mean any Employee or former Employee (and his beneficiaries) who, at any time during the Plan Year or any of the four (4) preceding Plan Years, is:
(1) an officer of the Affiliated Employers having an annual
compensation from the Affiliated Employers greater than fifty percent
(50%) of the amount in effect under Code Section 415(b)(1)(A) for any
such Plan Year. For purposes of this Section 14.5(g)(1), only those
employers which are incorporated shall be considered as having
officers, and no more than fifty (50) Employees (or, if lesser, the
greater of three (3) or ten percent (10%) of the Employees) shall be
treated as officers. Annual compensation means compensation as defined
in Section 415(c)(3) of the Code, but including amounts contributed by
the Affiliated Employers pursuant to a salary reduction agreement which
are excludable from the Employee's gross income under Section 125,
Section 402(a)(8), Section 402(h), or Section 403(b) of the Code.
(2) one of the ten (10) Employees (A) having annual compensation from the Affiliated Employers greater than the limitation in effect under Code Section 415(c)(1)(A) and (B) owning (or considered as owning within the meaning of Code Section 318) the largest interests in the Affiliated Employers. For purposes of this Section 14.5(g)(2), if two (2) Employees have the same interest in the Affiliated Employers, the Employee having the greater annual compensation from the Affiliated Employers shall be treated as having a larger interest.
(3) a "five-percent owner" of the Affiliated Employers. The term "five-percent owner" shall mean any person who owns (or is considered as owning within the meaning of Code Section 318) more than five percent (5%) of the outstanding stock of the Affiliated Employers or stock possessing more than five percent (5%) of the total combined voting power of all stock of the Affiliated Employers. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), and (m) shall be treated as separate employers.
(4) a "one-percent owner" of the Affiliated Employers having
an annual compensation from the Affiliated Employers of more than
$150,000. The term "one-percent owner" shall mean any person who owns
(or is considered as owning within the meaning of Code Section 318)
more than one percent (1%) of the outstanding stock of the Affiliated
Employers or stock possessing more than one percent (1%) of the total
combined voting power of all stock of the Affiliated Employers. In
determining percentage ownership hereunder, employers that would
otherwise be aggregated under Code Sections 414(b), (c), and (m) shall
be treated as separate employers. However, in determining whether an
individual has compensation of more than $150,000, compensation from
each employer required to be aggregated under Code Sections 414(b),
(c), and (m) shall be taken into account.
(h) A "Non-Key Employee" shall mean any Employee who is not a Key Employee as defined in Section 14.5(g).
(i) An Employee's "Present Value of Accrued Retirement Income" shall mean as of the Determination Date, the sum of the following:
(1) the Present Value of his Accrued Retirement Income as of the most recent valuation occurring within a twelve (12) month period ending on the Determination Date.
(2) any Plan distributions made within the Plan Year that includes the Determination Date or within the four (4) preceding Plan Years. However, in the case of distributions made after the valuation date and prior to the Determination Date, such distributions are not included as distributions for Top-Heavy purposes to the extent that such distributions are already included in the Employee's Present Value of Accrued Retirement Income as of the valuation date. Notwithstanding anything herein to the contrary, all distributions, including distributions made prior to January 1, 1984, and distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group, will be counted.
(3) any Employee contributions, whether voluntary or mandatory. However, amounts attributable to qualified deductible employee contributions shall not be considered to be a part of the Employee's Present Value of Accrued Retirement Income.
(4) with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall always consider such rollover or plan-to-plan transfer as a distribution for the purposes of this Section. If this Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers accepted after December 31, 1983 as part of the Employee's Present Value of Accrued Retirement Income. However, rollovers or plan-to-plan transfers accepted prior to January 1, 1984 shall be considered as part of the Employee's Present Value of Accrued Retirement Income.
(5) with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), if this Plan provides for rollovers or plan-to-plan transfers, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Employee's Present Value of Accrued Retirement Income, irrespective of the date on which such rollover or plan-to-plan transfer is accepted.
(j) A "Top-Heavy Group" shall mean an Aggregation Group in which, as of the Determination Date, the sum of:
(1) the Present Value of Accrued Retirement Income of Key Employees under all defined benefit plans included in that group, and
(2) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds sixty percent (60%) of a similar sum determined for all Employees.
14.6 Minimum Retirement Income for Top-Heavy Plan Years14.6 Minimum Retirement Income for Top-Heavy Plan Years. Notwithstanding anything herein to the contrary, for any Top-Heavy Plan Year, the minimum Accrued Retirement Income derived from Affiliated Employer contributions for each Non-Key Employee, including benefits accrued in years in which the Plan is not a Top-Heavy Plan, shall equal a percentage of such Non-Key Employee's highest average compensation not less than the lesser of: (a) two percent (2%) multiplied by the Employee's number of Years of Service with the Affiliated Employers, or (b) twenty percent (20%). For purposes of the minimum benefit, an Employee's Years of Service shall exclude (a) Plan Years in which the Plan is not a Top-Heavy Plan, and (b) Years of Service completed prior to January 1, 1984. The minimum benefit required by this Section 14.6 shall be calculated using the Employee's total compensation and expressed in the form of a single life annuity (with no ancillary benefits) beginning at such Employee's Normal Retirement Date. An Employee's average compensation shall be based on the five (5) consecutive years for which the Employee had the highest compensation.
Notwithstanding the foregoing, in any Plan Year in which a Non-Key Employee is an Employee in both this Plan and a defined contribution plan, and both such plans are Top-Heavy Plans, the Affiliated Employers shall not be required to provide a Non-Key Employee with both the full separate minimum defined benefit and the full separate minimum defined contribution plan allocation. Therefore, if a Non-Key Employee is participating in a defined contribution plan maintained by the Affiliated Employers and the minimum allocation under Code Section 416(c)(2) is allocated to the Non-Key Employee under such defined contribution plan, the minimum Accrued Retirement Income provided for above shall not be applicable, and no minimum benefit shall accrue on behalf of the Non-Key Employee. Alternatively, the Affiliated Employers may satisfy the minimum benefit requirement of Code Section 416(c)(1) for the Non-Key Employee by providing any combination of benefits and/or contributions that satisfy the safe harbor rules of Treasury Regulation Section 1.416-1(m-12).
14.7 Vesting requirements for Top-Heavy Plan Years14.7 Vesting requirements for Top-Heavy Plan Years. Notwithstanding the provisions of Section 8.1, for any Top-Heavy Plan Year, the vested portion of an Employee's Accrued Retirement Income shall be determined on the basis of the Employee's Vesting Years of Service according to the following schedule:
Years of Service Vested Percentage
less than 2 0
2 20
3 40
4 60
5 80
6 or more 100
|
The minimum Retirement Income for any Top-Heavy Plan Year shall not be forfeited during any period for which the payment of the Employee's Retirement Income is required to be suspended under Section 5.10 of the Plan.
If in any subsequent Plan Year, the Plan ceases to be a Top-Heavy Plan, the Retirement Board may, in its sole discretion, elect to (a) continue to apply this vesting schedule in determining the vested percentage of an Employee's Accrued Retirement Income or (b) revert to the vesting schedule in effect before the Plan became a Top-Heavy Plan. Any such reversion shall be treated as a Plan amendment pursuant to the terms of the Plan. No decrease in an Employee's nonforfeitable percentage may occur in the event the Plan's status as a Top-Heavy Plan changes for any Plan Year.
14.8 Adjustments to maximum benefits for Top-Heavy Plans
(a) In the case of an Employee who is a participant in a defined benefit plan and a defined contribution plan maintained by the Affiliated Employers, and such plans as a group are determined to be Top-Heavy for any limitation year beginning after December 31, 1983, "1.0" shall be substituted for "1.25" in each place it appears in the denominators of Fractions A and B, as set forth in Section 6.5 of the Plan, unless the extra minimum benefit is provided pursuant to Section 14.8(b). Super Top-Heavy Plans shall be required at all times to substitute "1.0" for "1.25" in the denominator of each plan fraction.
(b) If a Key Employee is a participant in both a defined benefit plan and a defined contribution plan that are both part of a Top-Heavy Group (but neither of such plans is a Super Top-Heavy Plan), the defined benefit and defined contribution fractions set forth in Section 6.5 shall remain unchanged, provided that in Section 14.6 above, "three percent (3%)" shall be substituted for "two percent (2%)" and "twenty percent (20%)" shall be increased by one (1) percentage point (but not more than ten (10) percentage points) for each Year of Service included in the computations under Section 14.6.
(c) For purposes of this Section 14.8, if the sum of the defined benefit plan fraction and the defined contribution fraction shall exceed 1.0 in any Plan Year for any Employee in this Plan, the Affiliated Employers shall eliminate any amounts in excess of the limits set forth in Section 6.5, pursuant to Section 6.7 of the Plan.
Article XVArticle XV
New Pension Program
15.1 Eligibility The following Employees shall be subject to the provisions of this Article XV:
(a) Employees who (1) are actively employed by an Employing Company on December 31, 1996 but who will not attain their fortieth (40th) birthday on or before January 1, 2002, or (2) are not members of an eligible class of Employees on December 31, 1996 and have not previously participated in the Prior Plans;
(b) Employees who are actively employed by an Employing Company on December 31, 1996 and elect in accordance with uniform procedures established by the Retirement Board to be subject to the provisions of this Article XV; and
(c) Employees who (1) are employed or reemployed by an Employing Company on or after January 1, 1997, or (2) rescind a waiver of participation under Section 2.7 on or after January 1, 1997 that was in effect on December 31, 1996.
(d) Notwithstanding paragraphs (a) through (c) of this Section 15.1, Employees covered by the terms of a collective bargaining agreement shall not participate in the provisions of Article XV unless the bargaining unit representative and the Employing Company have mutually agreed to such participation.
(a) The monthly Retirement Income payable as a single life annuity to an Employee (or his Provisional Payee) included in the Plan who retires from the service of an Employing Company at his Normal Retirement Date or Deferred Retirement Date (before adjustment for a Provisional Payee designation, if any) after January 1, 1997, subject to the limitations in Article VI, shall be the greater of (1) and (2) below:
(1) 1.0% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service, without application of the limitation described in Section 4.2(e), to his Normal Retirement Date or Deferred Retirement Date; or
(2) $25 multiplied by his years (and fraction of a year) of Accredited Service, without application of the limitation described in Section 4.2(e), to his Normal Retirement Date or Deferred Retirement Date.
(b) Notwithstanding paragraph (a) above, with respect to an Employee who is actively employed on December 31, 1996, if the Retirement Income provided under Article V as of the earlier of his retirement or termination of employment with an Employing Company or December 31, 2001 would be greater, such Employee shall be entitled to receive such greater Retirement Income upon his retirement or termination of employment with an Employing Company.
(c) For purposes of paragraph (a) above, with respect to Employees described in Section 15.1(c) the term "Average Monthly Earnings" shall have the same meaning, as provided in Section 1.5 except that the term "five (5) highest Plan Years of participation" shall replace the term "three (3) highest Plan Years of participation" wherever it appears.
(d) Notwithstanding paragraphs (a) and (b) above, Retirement Income determined with respect to an Employee who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income which would have been payable with respect to such Employee commencing on his Early Retirement Date had (1) the Employee retired on his Early Retirement Date which would have resulted in the greatest Retirement Income and (2) such Retirement Income commencing on such Early Retirement Date been payable in the same form as his Retirement Income commencing on his Normal Retirement Date or Deferred Retirement Date.
15.3 Early Retirement Reduction15.3 Early Retirement Reduction. With respect to Employees described in Section 15.1(a) and (b) who retire before their Normal Retirement Date, the monthly amount of Retirement Income provided in Section 15.2 shall be reduced in accordance with Section 5.5. With respect to Employees described in Section 15.1(c), the monthly amount of Retirement Income provided in Section 15.2 shall be reduced in accordance with Section 5.5 except that the term "five-tenths of one percent (0.5%)" shall replace the term "three-tenths of one percent (0.3%)" where it appears in the first paragraph thereof.
15.4 Transfers from Savannah Electric and Power Company15.4 Transfers from Savannah Electric and Power Company. With respect to an Employee of Savannah Electric and Power Company ("SEPCO") who transfers to an Employing Company in 1997 and who would otherwise be eligible to participate as provided in Section 15.1 except for the fact that he was employed by SEPCO on December 31, 1996, the provisions of this Article XV shall apply.
15.5 Effect on other Plan provisions15.5Effect on other Plan provisions. To the extent not inconsistent with the provisions of this Article XV, all provisions of the Plan are applicable to Employees described in Section 15.1.
Article XVIArticle XVI
Special Provisions Concerning Certain Employees of Southern Electric International, Inc.
16.1 Eligibility and Recognition of Service for Former Employees of Scott Paper Company
(a) Effective January 1, 1995, notwithstanding any other provision of the Plan to the contrary, with respect to a former, non-collective bargaining unit employee of Scott Paper Company who was employed by Southern Electric International, Inc. as of December 17, 1994 as set forth on Schedule 2.1 of the Employee Transition Agreement entered into by and among Mobile Energy Services Company, Inc., Southern Electric International, Inc. and Scott Paper Company (hereinafter referred to in this Article XVI as the "Scheduled Employee"),
(1) Such Scheduled Employee shall be eligible to participate in the Plan effective January 1, 1995.
(2) Such Scheduled Employee, if and when he attains his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, or terminates service for any other reason subject to the requirements of Section 8.1 or 8.2, shall be entitled to receive Retirement Income based on both his Accredited Service with an Employing Company and the service accrued under the Scott Paper Company Pension Plan for Salaried Employees (the "Scott Salaried Plan") which shall be treated as if Accredited Service under this Plan. To calculate such Scheduled Employee's Retirement Income, the Scheduled Employee's Accrued Retirement Income, as determined in accordance with Section 5.1, shall first be reduced by the Employee's accrued benefit in the Scott Salaried Plan, determined as if he retired from Scott Paper Company at his normal retirement age, as that term is defined in the Scott Salaried Plan on December 17, 1994. Thereafter, such Employee's Retirement Income shall be subject to applicable reductions, if any, in accordance with Article V, Section 8.1 and Section 8.2, as appropriate.
(3) For purposes of calculating such Scheduled Employee's
Social Security Offset under Section 5.4, the Social Security Offset
shall be determined by using the actual salary history of the Scheduled
Employee during his employment with any Affiliated Employer, and Scott
Paper Company. If the actual salary history is not available from Scott
Paper Company, such history shall be estimated in accordance with
Section 5.4.
(4) For vesting purposes, such Scheduled Employee shall be entitled to receive Vesting Years of Service as provided in Section 1.41 and, in addition, shall be entitled to vesting service equal to the sum of the years of vesting service accrued under each defined benefit pension plan maintained by Scott Paper Company in which such Scheduled Employee participated.
IN WITNESS WHEREOF, the Board of Directors of Southern Company Services, Inc. through its authorized officer has adopted The Southern Company Pension Plan this day of , 1996, to be effective January 1, 1997.
SOUTHERN COMPANY SERVICES, INC.
By: _____________________________________________________
C. Alan Martin
Vice President
By: _____________________________________________________
Tommy Chisholm
Secretary
[CORPORATE SEAL]
APPENDIX A
THE SOUTHERN COMPANY PENSION PLAN
EMPLOYING COMPANIES AS OF JANUARY 1, 1997
Alabama Power Company;
Georgia Power Company;
Gulf Power Company;
Mississippi Power Company;
Southern Communications Services, Inc.;
Southern Company Services, Inc.;
Southern Development and Investment Group, Inc.;
Southern Energy, Inc.; and
Southern Nuclear Operating Company, Inc.
Schedules
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Southern Company Services, Inc.
Southern Nuclear Operating Company, Inc.
FIRST AMENDMENT TO
THE SOUTHERN COMPANY
PENSION PLAN
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") heretofore adopted The Southern Company Pension Plan, as amended and restated (the "Plan"), effective January 1, 1997; and
WHEREAS, the Company wishes to amend the Plan to merge the Employees' Retirement Plan of Savannah Electric and Power Company as amended and restated effective January 1, 1997 and to make other miscellaneous and technical changes; and
WHEREAS, the Company is authorized pursuant to Section 13.1 of the Plan to amend the Plan at any time.
NOW, THEREFORE, effective January 1, 1998, the Company hereby amends the Plan as follows:
1.
Section 1.1 is amended by deleting it in its entirety and replacing it with the following:
"Accrued Retirement Income" means with respect to any Employee at any particular date, the Retirement Income, determined pursuant to Section 5.1 as may be modified by Article XV or XVII, commencing on his Normal Retirement Date which would be payable to such Employee in the form of a single life annuity on the basis of his Accredited Service to the date as of which the computation of Retirement Income is made.
2.
Section 1.16 is amended by adding to the end thereof the following:
Notwithstanding the preceding, "Employee" shall not mean any person who is classified by an Employing Company as an independent contractor or a temporary employee (unless such temporary employee is grandfathered pursuant to Section 2.6 of the Plan and 3.07 of the SEPCO Plan) regardless of whether such classification is in error.
3.
Section 4.2(e) is amended by deleting it in its entirety and replacing it with the following:
Notwithstanding the above, the maximum number of years of Accredited Service with respect to any Employee participating in the Plan shall not exceed forty-three (43), except with respect to Employees eligible under Section 15.1 whose Accredited Service shall not be limited to any maximum number where their benefit is calculated under Section 15.2.
4.
Section 4.4 shall be amended by adding the following new paragraph to the end thereof:
(f) Notwithstanding any other provisions of this
Section 4.4, any Employee who (1) has an initial date of
disability on or after January 1, 1998, and (2) is not covered
by the terms of a collective bargaining agreement or (3) is
covered by the terms of a collective bargaining agreement but
where the bargaining unit representative and an Employing
Company have mutually agreed to this provision, shall be
ineligible for a Disability Leave under this Section 4.4 or
such Employee's Disability Leave shall terminate if the
Employee has already become eligible if such Employee accepts
a benefit under an Employing Company's "career transition
plan" or such other severance plan or agreement where such
other plan or agreement stipulates that the Employee is
ineligible or ceases to be on Disability Leave under this
Plan.
5.
The second paragraph of Section 5.2 is amended by deleting it in its entirety and replacing it with the following:
Any provisions of this Article V to the contrary notwithstanding, Retirement Income determined in accordance with this Article V with respect to an Employee who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income which would have been payable with respect to such Employee commencing on an earlier Retirement Date which would have resulted in the greatest Retirement Income if such Retirement Income had been payable in the same form as his Retirement Income commencing on his Normal Retirement Date or Deferred Retirement Date.
6.
Section 6.1(c)(1) is amended by deleting it in its entirety and replacing it with the following:
(1) Affiliated Employer contributions under Code
Section 402(g)(3) and any amount contributed by an Employing
Company on behalf of an Employer under any Code Section 125
and 457 arrangement prior to January 1, 1998 which are not
included in the Employee's gross income for the taxable year
in which contributed or Affiliated Employer contributions
under a simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
7.
The first sentence of Section 8.4(a) is deleted in its entirety and replaced with the following:
(a) Notwithstanding any other provision of this Plan, if the present value of Accrued Retirement Income of an Employee whose service terminates for any reason other than transfer to an Affiliated Employer or retirement under Article III is not more than $3,500 for distributions prior to January 1, 1998 or is not more than $5,000 for distributions on or after January 1, 1998 (or such greater amount as permitted by the regulations prescribed by the Secretary of the Treasury), the present value of the Employee's Accrued Retirement Income shall be paid in a lump sum, in cash, to such terminated Employee.
8.
Section 14.2 shall be amended to add to the end of the third paragraph thereof the following:
In addition, the Retirement Board and Trustee shall permit alienation, assignment or other attachment where otherwise permitted under Code Section 401(a)(13).
9.
Section 15.2(d) shall be deleted in its entirety and replaced with the following:
(a) Notwithstanding paragraphs (a) and (b) above, Retirement Income determined with respect to an Employee who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income which would have been payable with respect to such Employee commencing on his earlier Retirement Date had (1) the Employee retired on his earlier Retirement Date which would have resulted in the greatest Retirement Income and (2) such Retirement Income commencing on such earlier Retirement Date been payable in the same form as his Retirement Income commencing on his Normal Retirement Date or Deferred Retirement Date.
10.
Section 16.1 shall be deleted in its entirety and replaced with the following:
Article XVI
Special Provisions Concerning Certain Employees of Southern Energy, Inc.
16.1 Eligibility and Recognition of Service for Former Employees.
(a) Former Scott Paper Company Employees. Effective January 1, 1995, notwithstanding any other provision of the Plan to the contrary, with respect to a former, non-collective bargaining unit employee of Scott Paper Company who was employed by Southern Electric International, Inc. as of December 17, 1994 as set forth on Schedule 2.1 of the Employee Transition Agreement entered into by and among Mobile Energy Services Company, Inc., Southern Electric International, Inc. and Scott Paper Company (hereinafter referred to in this Section 16.1(a) as the "Scott Scheduled Employee"),
(1) Such Scott Scheduled Employee shall be eligible to participate in the Plan effective January 1, 1995.
(2) Such Scott Scheduled Employee, if and when he attains his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, or terminates service for any other reason subject to the requirements of Section 8.1 or 8.2, shall be entitled to receive Retirement Income based on both his Accredited Service with an Employing Company and the service accrued under the Scott Paper Company Pension Plan for Salaried Employees (the "Scott Salaried Plan") which shall be treated as if Accredited Service under this Plan. To calculate such Scott Scheduled Employee's Retirement Income, the Scott Scheduled Employee's Accrued Retirement Income, as determined in accordance with Section 5.1, shall first be reduced by the Employee's accrued benefit in the Scott Salaried Plan, determined as if he retired from Scott Paper Company at his normal retirement age, as that term is defined in the Scott Salaried Plan on December 17, 1994. Thereafter, such Employee's Retirement Income shall be subject to applicable reductions, if any, in accordance with Article V, Section 8.1 and Section 8.2, as appropriate.
(3) For purposes of calculating such Scott
Scheduled Employee's Social Security Offset under
Section 5.4, the Social Security Offset shall be
determined by using the actual salary history of the
Scott Scheduled Employee during his employment with
any Affiliated Employer, and Scott Paper Company. If
the actual salary history is not available from Scott
Paper Company, such history shall be estimated in
accordance with Section 5.4.
(4) For vesting purposes, such Scott Scheduled Employee shall be entitled to receive Vesting Years of Service as provided in Section 1.41 and, in addition, shall be entitled to vesting service equal to the sum of the years of vesting service accrued under each defined benefit pension plan maintained by Scott Paper Company in which such Scott Scheduled Employee participated.
(b) Former Commonwealth Edison of Indiana Employees. Effective January 1, 1998, notwithstanding any other provision of the Plan to the contrary, with respect to a former employee of Commonwealth Edison of Indiana ("ComEd") who was employed by Southern Energy, Inc. as set forth on a schedule of employees acknowledged by the Retirement Board (hereinafter referred to in this Section 16.1(b) as "ComEd Scheduled Employee"),
(1) Such ComEd Scheduled Employee shall be eligible to participate in the Plan effective January 1, 1998.
(2) Such ComEd Scheduled Employee, if and when he attains his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, or terminates service for any other reason subject to the requirements of Section 8.1 or 8.2, shall be entitled to receive Retirement Income based on both his Accredited Service with an Employing Company and the service accrued under the Commonwealth Edison Company of Indiana Service Annuity System Plan (the "ComEd Plan") which shall be treated as if Accredited Service under this Plan. To calculate such ComEd Scheduled Employee's Retirement Income, the ComEd Scheduled Employee's Accrued Retirement Income, as determined in accordance with Section 5.1, shall first be reduced by the Employee's accrued benefit in the ComEd Plan, determined as if he retired from ComEd at his normal retirement age, as that term is defined in the ComEd Plan on December 31, 1997. Thereafter, such Employee's Retirement Income shall be subject to applicable reductions, if any, in accordance with Article V, Section 8.1 and Section 8.2, as appropriate.
(3) For purposes of calculating such ComEd
Scheduled Employee's Social Security Offset under
Section 5.4, the Social Security Offset shall be
determined by using the actual salary history of the
ComEd Scheduled Employee during his employment with
any Affiliated Employer, and ComEd. If the actual
salary history is not available from ComEd, such
history shall be estimated in accordance with Section
5.4.
(4) For vesting purposes, such ComEd Scheduled Employee shall be entitled to receive Vesting Years of Service as provided in Section 1.41 and, in addition, shall be entitled to vesting service equal to the sum of the years of vesting service accrued under the ComEd Plan.
11.
The Plan shall be amended to add Article XVII as set forth below:
Article XVII
17.1 Definition of Terms Used in this Article XVII and the SEPCO Schedule.
(a) "SEPCO" shall mean Savannah Electric and Power Company.
(b) "SEPCO Plan" shall mean the Employees' Retirement Plan of Savannah Electric and Power Company, as amended and restated January 1, 1997.
(c) "SEPCO Schedule" shall mean the Schedule attached to the Plan and made apart thereof containing the provisions of the SEPCO Plan as merged into the Plan effective January 1, 1998 which shall apply to SEPCO Employees and Covered SEPCO Employees.
(d) "SEPCO Employee" shall mean an Employee as defined in the SEPCO Plan having an Hour of Service under the SEPCO Plan on or after January 1, 1997. This shall include persons represented by a collective bargaining agent where such agent and SEPCO have mutually agreed to participate in the Plan. This shall not include employees who are hired or rehired at SEPCO after December 31, 1997, rescind a waiver of participation under Section 3.8 of the SEPCO Plan or SEPCO Schedule on or after January 1, 1998 that was in effect on December 31, 1997, or are Covered SEPCO Employees.
(e) "Covered SEPCO Employee" shall mean an Employee as defined in the SEPCO Plan having an Hour of Service under the Plan on or after January 1, 1998 who is represented by a collective bargaining agent where such agent and SEPCO have not mutually agreed to participate in the Plan but have agreed to participate in the SEPCO Schedule.
17.2 Covered SEPCO Employees. On and after January 1, 1998, Covered SEPCO Employees shall be subject to and receive an Allowance in accordance with the provisions set forth in the SEPCO Schedule.
17.3 SEPCO Employees Eligibility in the New Pension Program
(a) The following SEPCO Employees shall be subject to this
Section 17.3 of the Plan:
(1) SEPCO Employees who are actively employed by SEPCO on January 1, 1997 but who will not attain their fortieth (40th) birthday on or before January 1, 2002, or
(2) SEPCO Employees who are not members of an eligible class of SEPCO Employees on or after January 1, 1997 and have not previously participated in the SEPCO Plan.
(b) The monthly Retirement Income payable as a single life annuity to a SEPCO Employee (or his Provisional Payee) who retires from the service of SEPCO or another Employing Company at his Normal Retirement Date or Deferred Retirement Date (before adjustment for a Provisional Payee designation, if any) after January 1, 1997, subject to the limitations in Article VI, shall be the greater of (1) and (2) below:
(1) 1.0% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service, without application of the limitation described in Section 4.2(e), to his Normal Retirement Date or Deferred Retirement Date; or
(2) $25 multiplied by his years (and fraction of a year) of Accredited Service, without application of the limitation described in Section 4.2(e), to his Normal Retirement Date or Deferred Retirement Date.
(c) Notwithstanding paragraph (b) above, if the Allowance of a SEPCO Employee determined under the SEPCO Schedule as of the earlier of his retirement or termination of employment with SEPCO or December 31, 2001 would be greater, such SEPCO Employee shall be entitled when eligible to receive payments such greater Allowance upon his retirement or termination of employment with SEPCO or another Employing Company.
(d) Notwithstanding paragraphs (b) and (c) above, Retirement Income or Allowance, as the case may be, determined with respect to a SEPCO Employee under this Article XVII who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income or Allowance which would have been payable with respect to such SEPCO Employee commencing on his earlier Retirement Date had (1) the SEPCO Employee retired on his earlier Retirement Date which would have resulted in the greatest Retirement Income and (2) such Retirement Income or Allowance commencing on such earlier Retirement Date been payable in the same form as his Retirement Income or Allowance commencing on his Normal Retirement Date or Deferred Retirement Date.
(e) With respect to SEPCO Employees described in this
Section 17.1 who retire before their Normal Retirement Date,
the monthly amount of Retirement Income provided in paragraph
(b) above shall be reduced in accordance with Section 5.5.
17.4 SEPCO Employees Not Described in 17.2 or 17.3. SEPCO Employees not described in Section 17.2 or 17.3 above shall be eligible for a benefit under the Plan as described in this Section 17.4 notwithstanding any other provision of the Plan or SEPCO Schedule to the contrary.
(a) A SEPCO Employee shall be eligible to participate in the Plan and receive Retirement Income thereunder as determined under the Plan's terms and this Article XVII. Notwithstanding the preceding sentence, if such SEPCO Employee's Allowance determined as of the earlier of his retirement or termination of employment with SEPCO or December 31, 2001 would be greater, such SEPCO Employee shall be entitled when eligible to commence payments such greater Allowance upon his retirement or termination of employment with SEPCO or another Employing Company.
(b) Notwithstanding paragraph (a) above, only with respect to SEPCO Employees who have attained age fifty (50) and have ten (10) Years of Credited Service or who have attained age 55 on or before January 1, 1997, such SEPCO Employees shall be entitled to receive the greater of their Allowance or Retirement Income upon retirement.
17.5 Special Transition Rules. Notwithstanding any other
provisions in the Plan to the contrary, SEPCO Employees who participate in the Plan shall be subject to the following transition rules. |
(a) In determining the greater benefit as required under Sections 17.3 and 17.4, the form of payment and any early retirement reductions with respect to the payment of Retirement Income as set forth in Articles V and VII of the Plan and of an Allowance as set forth in Articles 5 and 7 of the SEPCO Schedule shall be considered. For purposes of making the preceding determination, (1) the applicable Allowance shall first be converted to a monthly payment, and (2) the Retirement Annuities described in Article 2 of the SEPCO Schedule shall be taken into account consistent with Section 5.01 of the SEPCO Schedule.
(b) With respect to eligibility to participate in the Plan, all SEPCO Employees employed by SEPCO on December 31, 1997 who are not already eligible to participate in the Plan shall be immediately eligible to participate in the Plan.
(c) SEPCO Employees eligible to participate in the SEPCO Plan on December 31, 1997 shall have their Vesting Year of Service determined as if their anniversary date of hire is January 1. All SEPCO Employees who participate in the Plan shall be credited with Vesting Years of Service based upon the terms of the Plan for periods of service on and after January 1, 1998, and based upon the Continuous Service such SEPCO Employees accrued under the SEPCO Plan prior to January 1, 1998.
(d) (1) For periods of service on and after January 1, 1998, Accredited Service for SEPCO Employees shall be determined in accordance with the Plan.
(2) For periods of service on and after January 1, 1998, with respect to any Allowance a SEPCO Employee may be entitled to under the SEPCO Schedule, such Allowance shall be determined using Accredited Service in place of Credited Service.
(3) For periods of service prior to January 1, 1998, the Credited Service of a SEPCO Employee shall be used to determine such SEPCO Employee's Allowance and Retirement Income accrued prior to January 1, 1998.
(4) When calculating a SEPCO Employee's Retirement Income, the maximum amount of Accredited Service and Credited Service that will be considered is forty-three (43).
(e) For purposes of calculating Retirement Income for a SEPCO Employee, Compensation determined under the SEPCO Plan excluding unused accrued vacation shall be used in place of Earnings for periods of service prior to January 1, 1998.
(f) The Normal Retirement Date of a SEPCO Employee shall always be determined in accordance with the SEPCO Plan prior to January 1, 1998 and the SEPCO Schedule on and after January 1, 1998.
(g) (1) A SEPCO Employee may retire if he has either
attained age fifty-five (55) or attained age fifty
(50) and has at least ten (10) Years of Accredited
Service as determined under this Article XVII. A
SEPCO Employee who retires because he has attained
age fifty (50) and has ten (10) Years of Accredited
Service may not commence receipt of his Retirement
Income or Allowance until on or after January 1,
1998.
(2) A SEPCO Employee that retires under
paragraph (1) above having at least ten (10) Years of
Accredited Service shall be entitled to the greater
of his (A) Retirement Income determined under Section
5.5 (excluding the third paragraph thereof) and this
Article XVII or (B) Allowance determined under this
Article XVII and in addition applying a reduction of
one-third of one percent ([OBJECT OMITTED]%) for each
calendar month by which the commencement date
precedes the first day of the month following any
such Employee's attainment of his fifty-fifth (55th)
birthday.
(3) A SEPCO Employee that retires or terminates under paragraph (1) above having less than ten (10) Years of Accredited Service shall be entitled to the greater of his (A) Retirement Income determined under Section 8.2 (without regard to the ten (10) Years of Accredited Service requirement) and this Article XVII or (B) Allowance determined under this Article XVII.
(h) On and after January 1, 1998, the Provisional Payees of SEPCO Employees shall only be entitled to benefits as provided in Article VII of the Plan.
(i) With respect to the accrual of Retirement Income or an Allowance during a period of total disability, SEPCO Employees incurring a disability on and after January 1, 1998 shall only be subject to the provisions of Section 4.4 of the Plan.
(j) (1) The options for payment described in Sections 7.1(c) and (d) and Sections 7.6(c) and (d) may be elected by SEPCO Employees who retire or terminate on or after January 1, 1998.
(2) Notwithstanding Section 17.3, SEPCO Employees who terminate or retire in 1997 and commence receipt of an Allowance shall not be eligible to change the form of benefit elected under the SEPCO Plan even if such SEPCO Employees are entitled to receive Retirement Income under this Article XVII.
(3) Notwithstanding Section 7.07(a)(Option
ii) of the SEPCO Schedule, SEPCO Employees shall not
be eligible to elect a 75% joint and survivor
annuity.
(k) SEPCO Employees may elect in accordance with the SEPCO Schedule to have their benefit, whether paid as Retirement Income or an Allowance, adjusted to take into account their old-age insurance benefit under Title II of the Social Security Act. In the event that a SEPCO Employee's Retirement Income is greater than his Allowance under Section 17.3 or 17.4, the old age insurance benefit used to compute such Retirement Income shall be used to determine the amount payable under Section 5.04 of the SEPCO Schedule.
(l) Notwithstanding anything in this Article XVII to the contrary, the Accrued Benefit of any SEPCO Employee shall not be less than the Accrued Benefit such SEPCO Employee derived under the SEPCO Plan as of the earlier of retirement, termination or December 31, 1997.
(a) With respect to a transfer of employment from an Employing Company other than SEPCO to SEPCO, (1) occurring prior to January 1, 1998, the person will be treated as a SEPCO Employee under this Article XVII or (2) occurring on or after January 1, 1998, the person will be treated as an Employee under the terms of the Plan.
(b) With respect to a transfer of employment from
SEPCO to an Employing Company, (1) occurring prior to January
1, 1997, the person will be treated like an Employee under
Sections 4.6(a), (c) and (d) of the Plan provided that any
Retirement Income or Allowance payable to the Employee shall
be determined in accordance with Section 17.5(a), (g), (j) and
(k) or (2) occurring on or after January 1, 1997, the person
will be treated as a SEPCO Employee under this Article XVII.
17.7 Application of Plan to SEPCO Employees. To the extent not inconsistent with the provisions of this Article XVII, all the provisions of the Plan are applicable to SEPCO Employees and Covered SEPCO Employees.
12.
The Plan shall be amended to add the SEPCO Schedule as set forth below:
SEPCO SCHEDULE
Effective January 1, 1998
TABLE OF CONTENTS
Page No.
ARTICLE 1 DEFINITIONS...........................................................................12
ARTICLE 2 RETIREMENT ANNUITIES PURCHASED UNDER
GROUP ANNUITY CONTRACT AND CHANGE OF
FUNDING...............................................................................18
ARTICLE 3 MEMBERSHIP............................................................................18
ARTICLE 4 SERVICE...............................................................................20
4.01 Continuous Service....................................................................20
4.02 Credited Service......................................................................20
4.03 Breaks in Service.....................................................................21
4.04 Disabled Members......................................................................22
4.05 Service with Certain Other Employers..................................................22
ARTICLE 5 BENEFITS..............................................................................23
5.01 Normal and Late Retirement............................................................23
5.02 Early Retirement......................................................................25
5.03 Termination of Employment.............................................................26
5.04 Adjustment of Retirement Allowance for Social Security
Benefits.........................................................................27
5.05 Restoration of Retired Member or Former Member to Service.............................27
5.06 Additional Monthly Benefit............................................................30
5.07 Written Application...................................................................31
ARTICLE 6 LIMITATIONS ON BENEFITS...............................................................31
6.01 Maximum Benefits......................................................................31
ARTICLE 7 DISTRIBUTION OF BENEFITS..............................................................36
7.01 Surviving Spouse Benefit..............................................................36
7.02 Qualified Joint and Survivor Annuity..................................................36
7.03 Qualified Preretirement Survivor Annuity..............................................36
7.04 Definitions...........................................................................39
7.05 Notice Requirements...................................................................40
7.06 Transitional Rules....................................................................41
7.07 Alternative Forms of Distribution.....................................................41
7.08 Cash-Out of Annuity Benefits..........................................................42
7.09 Commencement of Benefits..............................................................43
7.10 Requirement for Direct Rollovers......................................................44
ARTICLE 8 RETIREE MEDICAL BENEFITS..............................................................44
8.01 Definitions...........................................................................44
8.02 Medical benefits......................................................................48
8.03 Termination of coverage...............................................................48
8.04 Contributions or Qualified Transfers to fund medical benefits.........................49
8.05 Pensioned Employee Contributions......................................................50
8.06 Amendment of Article 8................................................................50
8.07 Termination of Article 8..............................................................50
8.08 Reversion of Assets upon Termination..................................................51
|
Effective January 1, 1998, the Employees' Retirement Plan of Savannah Electric and Power Company, as amended and restated effective January 1, 1997, (the "SEPCO Plan") is merged into The Southern Company Pension Plan. The SEPCO Plan as merged is now set forth as the "SEPCO Schedule" and incorporated into The Southern Company Pension Plan. This SEPCO Schedule must be read in conjunction with and is limited by Article XVII of the Plan.
ARTICLE 1 - DEFINITIONS
The foregoing definitions will be applicable to the provisions of this SEPCO Schedule only, unless otherwise expressly indicated. Defined terms in this Schedule shall also be set forth in Articles I and XVII of the Plan.
1.01 "Accrued Benefit" shall mean the amount of retirement Allowance computed at a specific date, in accordance with Article 5 of the SEPCO Schedule, based on Compensation and Credited Service to such date.
1.02 "Affiliated Company" shall mean Affiliated Employer as defined in the Plan.
1.03 "Allowance" shall mean payments made in accordance with Article 5 and Article 7 of the SEPCO Schedule.
1.04 "Annuity Starting Date" shall mean the first day of the first period for which an amount is paid as an annuity or in any other form.
1.05 "Board of Directors" shall mean the Board of Directors of Southern Company Services, Inc..
1.06 "Break in Service" shall mean a period which constitutes a break in an Employee's Continuous Service, as provided in Section 4.03 of the SEPCO Schedule.
1.07 "Code" means the Internal Revenue Code of 1986, as amended from time to time.
1.08 "Company" shall mean for purposes of this SEPCO Schedule only Savannah Electric and Power Company or any successor by merger, purchase or otherwise.
1.09 "Compensation" shall mean the actual remuneration paid to an employee for services rendered to the Company, determined prior to any pre-tax contributions under a "qualified cash or deferred arrangement" (as defined under Code ss. 401(k) and its applicable regulations) or under a "cafeteria plan" (as defined under Code ss. 125 and its applicable regulations), including payments made under any short term disability plan maintained by the Company which shall equal the rate of Compensation of the Member at the time of disability, but excluding any bonuses, pay for overtime, compensation deferred under any deferred compensation plan or arrangement, separation pay, imputed income and relocation pay, and excluding the Company's cost for any public or private employee benefit plan, including this Plan and SEPCO Schedule, under rules uniformly applicable to all employees similarly situated, provided further, effective as of January 1, 1989, any workers' compensation received by an employee shall be excluded from "compensation" for purposes of determining his benefit under the SEPCO Schedule.
For purposes of this Section 1.09, actual remuneration means regular straight time pay, straight time differential pay, substitution straight time pay, substitution flat rate pay, earned vacation pay and the difference between military pay and regular straight time pay a Member would have been paid if such Member had been working for the Company.
Notwithstanding the foregoing, effective as of January 1, 1989, compensation taken into account for any purpose under the SEPCO Schedule shall not exceed $200,000 per year, provided that the imposition of the limit on compensation shall not reduce a Member's Accrued Benefit below the amount of Accrued Benefit determined as of December 31, 1988. As of January 1 of each calendar year on and after January 1, 1990, the applicable limitation as determined by the Commissioner of the Internal Revenue Service for that calendar year shall become effective as the maximum compensation to be taken into account for SEPCO Schedule purposes for that calendar year in lieu of the $200,000 limitation set forth in the preceding sentence.
In addition to other applicable limitations set forth in the SEPCO Schedule, and notwithstanding any other provision of the SEPCO Schedule to the contrary, for Plan Years beginning on or after January 1, 1994, the annual compensation of each Employee taken into account under the SEPCO Schedule shall not exceed the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93") annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Code ss. 401(a) (17) (B). The cost of living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this SEPCO Schedule to the limitation under Code ss.
401(a) (17) shall mean the OBRA '93 annual compensation limit set
forth in this provision.
If compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year, the compensation for that prior determination period is subject to the OBRA '93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning on or after January 1, 1994, the OBRA '93 annual compensation limit is $150,000.
1.10 "Computation Year" shall mean the calendar year.
1.11 "Continuous Service" shall mean service recognized for purposes of determining eligibility for membership in the Plan and SEPCO Schedule and eligibility for certain benefits under the SEPCO Schedule, determined as provided in Section 4.01 of the SEPCO Schedule.
1.12 "Credited Service" shall mean service recognized for
purposes of computing the amount of any benefit under the SEPCO Schedule, determined as provided in Section 4.02 of the SEPCO Schedule. |
1.13 "Effective Date of the SEPCO Plan" as amended, shall mean April 1, 1959. The "Amendment and Restatement Effective Date" shall mean January 1, 1997.
1.14 "Employee" shall mean any person regularly employed by the Company who receives regular stated salary, or wages paid directly by the Company as (a) a regular full-time employee, (b) a regular part-time employee, (c) a cooperative education employee or (d) a temporary employee paid directly or indirectly by the Company. Notwithstanding the preceding sentence, on and after January 1, 1998, "Employee" shall be limited to Covered SEPCO Employees as defined in Article XVII of the Plan. For purposes of this Section 1.14, temporary employee means a full-time or part-time employee who provides services to the Company for a stated period of time after which period such employee will be terminated from employment. The term Employee shall also include Leased Employees within the meaning of Code ss. 414(n) (2). Notwithstanding the foregoing, if such Leased Employees constitute less than twenty percent (20%) of the Employer's non-highly compensated workforce within the meaning of Code ss. 414(n)(5)(C)(ii), the term Employee shall not include those Leased Employees covered under the SEPCO Schedule described in Code ss. 414(n)(5). The term Employee for participation purposes shall not include any individual who is classified by the Company as an independent contractor or temporary employee (unless with respect to a temporary employee who is grandfathered under this SEPCO Schedule) regardless of whether such classification is in error.
1.15 "Equivalent Actuarial Value" shall mean equivalent value when computed at 6 per centum per annum on the basis of the 1971 Group Annuity Mortality Table (Male) for Members, and 1971 Group Annuity Mortality Table (Female) for contingent annuitants under optional forms of Allowances.
1.16 "Fund" shall mean the "Trust" as defined in the Plan.
1.17 "Group Annuity Contract" shall mean Group Annuity Contract No. AC 766 issued by The Equitable Life Assurance Society of the United States to Savannah Electric and Power Company.
1.18 "Hour of Service" means, with respect to any applicable computation period:
(a) each hour for which the Employee is paid or entitled to payment for the performance of duties for the Company or an Affiliated Company;
(b) each hour for which an Employee is paid or entitled to payment by the Company or an Affiliated Company on account of a period during which no duties are performed, whether or not the employment relationship has terminated, due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence, but not more than 501 hours for any single continuous period;
(c) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Company or an Affiliated Company, excluding any hour credited under (a) or (b), which shall be credited to the computation period or periods to which the award, agreement or payment pertains, rather than to the computation period in which the award, agreement or payment is made; and
(d) solely for purposes of determining whether an
Employee has incurred a Break in Service under the SEPCO
Schedule, each hour for which an Employee would normally be
credited under Paragraphs (a) or (b) above during a period
|
of Parental Leave but not more than 501 hours for any single
continuous period. However, the number of hours credited to
an Employee under this Paragraph (d) during the computation
period in which the Parental Leave began, when added to the
hours credited to an Employee under Paragraphs (a) through
(c) above during that computation period, shall not exceed
501. If the number of hours credited under this Paragraph
(d) for the computation period in which the Parental Leave
began is zero, the provisions of this Paragraph (d) shall
apply as though the Parental Leave began in the immediately
following computation period.
No hours shall be credited on account of any period during which the Employee performs no duties and receives payment solely for the purpose of complying with unemployment compensation, workers' compensation or disability insurance laws. The Hours of Service credited shall be determined as required by Title 29 of the Code of Federal Regulations, ss.ss. 2530.200b-2(b) and (c).
1.19 "Leased Employee" means any person as so defined in Code ss. 414(n). In the case of a person who is a Leased Employee immediately before or after a period of service as an Employee, the entire period during which he has performed services for the Company as a Leased Employee shall be counted as Continuous Service for purposes of determining eligibility for participation and vesting, to the extent such service would be recognized with respect to other employees under the SEPCO Schedule; however, he shall not, by reason of that status, be eligible to become a Member of the Plan.
1.20 "Member" shall mean any person included in the membership of the Plan pursuant to the SEPCO Schedule as provided in Article 3 of the SEPCO Schedule.
1.21 "Normal Retirement Date" shall mean the first day of the calendar month next following the 65th anniversary of an Employee's birth.
1.22 "Parental Leave" means a period in which the Employee is absent from work because of the pregnancy of the Employee, the birth of a child of the Employee or the placement of a child with the Employee in connection with adoption proceedings, or for purposes of caring for that child for a period beginning immediately following such birth or placement.
1.23 "Plan" shall mean The Southern Company Pension Plan as amended and restated January 1, 1997.
1.24 "Plan Year" shall mean the 12-month period from January 1 to December 31.
1.25 "Qualified Joint and Survivor Annuity" shall mean an annuity of Equivalent Actuarial Value to the Allowance otherwise payable, providing for a reduced Allowance payable to the Member during his life, and after his death providing that one-half of that reduced Allowance will continue to be paid during the life of, and to, the spouse to whom he was married at his Annuity Starting Date.
1.26 "Qualified Preretirement Survivor Annuity" shall mean annuity for the
life of a Surviving Spouse calculated in accordance with Section 7.03 of the
SEPCO Schedule.
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1.27 "Retirement Annuity" shall mean the amount of the annuity purchased under the Group Annuity Contract as provided by that Contract at actual retirement date, at or after the attainment of age 65, prior to any conversion to a contingent annuity.
1.28 "Retirement Committee" shall mean the Retirement Board as defined in the Plan.
1.29 "Social Security Benefit" shall mean the annual primary old-age insurance benefit which the Member is entitled to receive under Title II of the Social Security Act as in effect on the date he retires or otherwise terminates employment, or would be entitled to receive if he did not disqualify himself by receiving the same by entering into covered employment or otherwise. In the case of early retirement, the Social Security Benefit shall be computed on the assumption that he will receive no income after early retirement and before age 65 which would be treated as wages for purposes of the Social Security Act. In the case of vested retirement, the Social Security Benefit shall be computed on the assumption that he will continue to receive compensation until age 65 which would be treated as wages for purposes of the Social Security Act at the same rate as in effect on his termination of service.
In computing any Social Security Benefit, no wage index adjustment or cost-of-living adjustment shall be assumed with respect to any period after the end of the calendar year before the year in which the Member retires or terminates service. The Member's Social Security Benefit shall be determined on the basis of the Employee's actual earnings, where available from Company records, in conjunction with a salary increase assumption based on the actual yearly change in national average wages as determined by the Social Security Administration for all other years prior to retirement or other termination of employment with the Company where actual earnings are not so available. If, within three months after the later of the date of retirement or other termination of employment or the date on which a Member is notified of the Allowance to which he is entitled, the Member provides documentation as to his actual earnings history with respect to those prior years, his Allowance shall be redetermined using the actual earnings history, if the recalculation would result in an increased benefit. Any adjustment to Allowance payments shall be made retroactively.
1.30 The term "Spouse or Surviving Spouse" shall mean the spouse or surviving spouse of a Member, provided that a former Spouse will be treated as the spouse or surviving spouse and a current spouse will not be treated as the spouse or surviving spouse to the extent provided under a qualified domestic relations order as described in Code ss. 414(p).
1.31 "Suspendible Month" means a month in which the Member completes at least 40 hours of service with the Company.
1.32 "Trustee" shall mean the Trustee as defined in the Plan.
ARTICLE 2 - RETIREMENT ANNUITIES PURCHASED UNDER GROUP ANNUITY CONTRACT AND
CHANGE OF FUNDING
All Retirement Annuities payable under the SEPCO Plan as in effect prior to April 1, 1959 with respect to service thereunder prior to such date, have been purchased from The Equitable Life Assurance Society of the United States pursuant to the terms of Group Annuity Contract No. AC 766.
Effective as of April 1, 1959, the purchase of Retirement Annuities under the Group Annuity Contract was discontinued in accordance with the terms and provisions of such Contract. Subject to the provisions of the SEPCO Schedule, with respect to service under the SEPCO Plan from and after April 1, 1959, and as a supplement to the Retirement Annuities purchased under the Group Annuity Contract for service prior to April 1, 1959, retirement Allowances will be provided as described in the SEPCO Plan, this SEPCO Schedule or the Plan, as the case may be. Such retirement Allowances or Retirement Income will be in addition to Retirement Annuities purchased as described in the preceding paragraph with respect to services prior to April 1, 1959.
The rights of Members of the Retirement Annuities purchased for them under the Group Annuity Contract with respect to service prior to April 1, 1959 will not be adversely affected by the discontinuance of such purchases and such Retirement Annuities will be payable by The Equitable Life Assurance Society of the United States in accordance with the terms, conditions and provisions of the Group Annuity Contract.
ARTICLE 3 - MEMBERSHIP
3.01 Every Employee in Company service on January 1, 1997, who was a Member on December 31, 1996, shall continue to be a Member of the SEPCO Plan or Plan, as the case may be, on and after January 1, 1997, provided he remains eligible under the terms of the SEPCO Plan or SEPCO Schedule, as the case may be.
3.02 Subject to Article XVII of the Plan, every other Employee on January 1, 1997, and every person becoming an Employee after that date shall become a Member of the SEPCO Plan or Plan, as the case may be, on the first day of the calendar month, beginning with January 1, 1997, coincident with or next following (i) the date he completes one year of Continuous Service or (ii) the 21st anniversary of his birth, whichever is later. For this purpose, a year of Continuous Service shall be a 12-month period during which an Employee completes at least 1,000 hours commencing with the date of employment, or if in such period he has not completed at least 1,000 hours, commencing with the first day of the Computation Year after the date of his employment. If an Employee has incurred a one-year Break in Service prior to becoming eligible for membership, any Continuous Service prior to the break shall be disregarded in determining eligibility for membership unless he shall complete at least one year of Continuous Service following the Break in Service; provided that an Employee's Continuous Service prior to the break shall not be recognized for purposes of determining his eligibility for membership if his consecutive number of one-year Breaks in Service equal or exceed the greater of (i) five or (ii) his aggregate years of Continuous Service prior to the Break in Service.
3.03 An Employee who is represented by a collective bargaining agent may participate in the Plan and SEPCO Schedule if the representative(s) of his bargaining unit and the Company mutually agree to participation in the Plan and SEPCO Schedule provided such participation is consistent with such agreement.
3.04 An Employee's membership in the Plan shall terminate
only if he dies or his employment with the Company
terminates other than by reason of retirement or
termination with vested benefits. Membership shall be
continued during a period while on leave of absence
from service without pay approved by the Company, but
no benefit credit shall be allowed with respect to
such period unless credit is allowed for service in
the Armed Forces of the United States as provided in
Section 4.03(c) of the SEPCO Schedule. Membership
shall be continued during a period of disability for
which Continuous Service is granted as provided in
Section 4.04 of the SEPCO Schedule.
3.05 In the event a Member ceases to participate because he enters an ineligible class under Article III and becomes ineligible to participate, but has not incurred a break in service under Section 4.03(a) of the SEPCO Schedule, such Employee will participate as of the first day of the month coinciding with or next following his return to an eligible class of Employees. If such Employee incurs a break in service under Section 4.03(a) of the SEPCO Schedule, eligibility will be determined under Section 3.02 of the SEPCO Schedule. In the event an Employee who is not in an eligible class to participate enters an eligible class, such Employee will participate as of the first day of the month coinciding with or next following his employment if he has satisfied Section 3.02 of the SEPCO Schedule and would have otherwise previously been eligible to participate in the Plan pursuant to the SEPCO Schedule.
3.06 Subject to Section 3.05 of the SEPCO Schedule, if an Employee's membership in the Plan terminates and he again becomes an Employee, he shall be considered a new Employee for all purposes of the Plan, except as provided in Section 5.05 of the SEPCO Schedule.
3.07 Notwithstanding any other provision of this Article 3, Leased Employees shall not be eligible to participate. In addition, temporary employees as defined in Section 1.14 of the SEPCO Schedule who were not participating in the SEPCO Plan as temporary employees prior to October 13, 1994, shall not be eligible to participate in the Plan.
3.08 An Employee may, subject to the approval of the Retirement Committee, elect voluntarily not to participate in the Plan. The election not to participate must be communicated in writing and acknowledged by the Retirement Committee (or its delegee) and shall be effective on the date set forth in such written waiver.
ARTICLE 4 - SERVICE
4.01 Continuous Service
(a) Effective January 1, 1997, except as hereinafter provided, all service performed as an Employee of the Company or an Affiliated Company shall be Continuous Service for SEPCO Plan and SEPCO Schedule purposes. If an Employee completes at least 1,000 Hours of Service in any Computation Year, he shall receive credit for a full year of Continuous Service. If an Employee completes fewer than 1,000 Hours of Service in any Computation Year, no Continuous Service shall be recognized for such Computation Year.
(b) Any person employed by the Company on December 31, 1996 shall receive Continuous Service for service performed before that date equal to the Credited Service recognized through December 31, 1996 under the SEPCO Plan.
4.02 Credited Service
(a) Credited Service shall be calculated based on Periods of Service.
A "Period of Service" shall mean twelve (12) month periods of employment as a Member, or fractions thereof, running from the date that a Member commences participation under the SEPCO Plan or SEPCO Schedule, as the case may be, and terminates on his first severance from service date. A severance from service shall occur as of the earlier of the date a Member quits, retires, is discharged or dies, or the first anniversary of absence for any other reason. Thereafter, subject to 4.03(b), if a Member becomes reemployed, his Period of Service for each subsequent period shall commence with the reemployment commencement date, which is the first date following a one year period of severance on which a Member performs an Hour of Service and shall terminate on his next severance from service.
In the case of an Employee who transfers from a class of employees whose service is determined on the basis of Hours of Service to a class of employees whose service is determined under this Paragraph (a), such Employee shall receive credit for a Period of Service consisting of (i) a number of years equal to the number of years of service credited to the Employee before the computation period during which the transfer occurs and (ii) the greater of (1) the Period of Service that would be credited to the Employee under this Paragraph (a) during the entire computation period in which the transfer occurs or (2) the service taken into account under the Hours of Service method as of the date of the transfer.
In addition, the Employee shall receive credit for Periods of Service subsequent to the transfer commencing on the day after the last day of the computation period in which the transfer occurs.
In the case of an Employee who transfers from a class of employees whose service is determined pursuant to this Paragraph (a) to a class of employees whose service is determined on the basis of Hours of Service (i) the Employee shall receive credit, as of the date of transfer, for the numbers of Years of Service equal to the number of one year Periods of Service credited to the Employee as of the date of the transfer and (ii) the Employee shall receive credit in the computation period which includes the date of the transfer, for a number of Hours of Service determined by applying the equivalency set forth in 29 C.F.R. ss. 2530.200b-3(e)(l)(i) to any fractional part of a year credited to the Employee under this Section as of the date of the transfer.
4.03 Breaks in Service
(a) There shall be a Break in Service of one year for any Computation Year after the year in which a person first becomes employed during which he does not complete more than 500 Hours of Service. If an Employee terminates his service with the Company and is reemployed after incurring a Break in Service, his service before the Break in Service shall be excluded from his Continuous Service, except as provided in Section 5.05 of the SEPCO Schedule.
(b) For purposes of calculating Credited Service only, there shall be a one year Period of Severance if during the 12 consecutive month period after a severance from service date, as defined in Section 4.02(a) of the SEPCO Schedule the Employee fails to perform an Hour of Service. If an Employee terminates his service with the Company and is reemployed after incurring a one year Period of Severance, his service before the Period of Severance shall be excluded unless he thereafter completes a one year Period of Service. In the case of a non-vested member, the Period of Service accrued prior to a one year Period of Severance shall not be taken into account if at such time the consecutive Period of Severance equals or exceeds the greater of 5 or the number of one year Periods of Service, whether or not consecutive.
(c) Notwithstanding any provision of the SEPCO Schedule to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code ss. 414(u).
4.04 Disabled Members
If a Member is eligible for and continuously
receiving disability benefits under the long-term disability
plan provided by the Company, he shall continue to be a Member
and shall continue to accrue service until he retires in the
same amount and manner as though he had continued in the
active employment of the Company and he shall be deemed to
receive Compensation during such period based upon his rate of
Compensation at the time of disability. In the event that a
Member no longer qualifies for benefits under the long-term
disability plan before his Normal Retirement Date and he does
not resume active employment with the Company, he shall be
eligible to receive a vested retirement Allowance as provided
in Section 5.03 of the SEPCO Schedule or to retire on an early
retirement Allowance as provided in Section 5.02 of the SEPCO
Schedule, if otherwise eligible for such Allowance as of the
date of such disqualification. In either case, the Allowance
shall be computed on the basis of his Compensation and
Credited Service at the date of such disqualification. In the
event that a Member does not qualify for disability benefits
under the Social Security Act, the Allowance accrued under
Section 5.01(c)(i)(A) of the SEPCO Schedule for purposes of
this Section 4.04 for Credited Service during such period of
nonqualification shall be increased by 5/6 per centum of the
part of each year's Compensation which is not in excess of
$3,600 per annum.
4.05 Service with Certain Other Employers
(a) An Employee hired prior to November 9, 1989, who becomes a Member and continues as a Member without a break in membership, shall receive Continuous Service and Credited Service for all service not otherwise recognized, in the employ of another electric utility company or a company or corporation furnishing advisory or consulting service to the Company, provided that such service would be recognized if it had been rendered to the Company and provided that any benefit payable under the Plan on account of such service, so recognized, shall be reduced by the amount of benefit provided under the pension or retirement plan of such other company with respect to the same period. The Retirement Committee shall calculate such service based on actual employment records where available, but if such records are not available, the Retirement Committee shall request that the Employee obtain information from the Social Security Administration which documents the Employee's Social Security eligible compensation or from such other entity as the Retirement Committee deems appropriate. Based on such documents, the Retirement Committee shall calculate the Employee's service and Compensation for purposes of this Section 4.05. In the event no such documentation can be obtained, the Retirement Committee shall make its best effort to estimate such service and Compensation.
(b) An Employee hired on or after November 9, 1989, who becomes a Member and continues as a Member without a break in membership, shall receive Continuous Service and Credited Service for all service not otherwise recognized, in the employ of an Affiliated Company, provided that such service would be recognized if it had been rendered to the Company and provided that any benefit payable under the Plan on account of such service, so recognized shall be reduced by the amount of benefit provided under the pension or retirement plan of such other Affiliated Company with respect to the same period.
ARTICLE 5 - BENEFITS
5.01 Normal and Late Retirement
(a) The right of a Member to his normal retirement Allowance shall be non-forfeitable upon attaining age 65. A Member may retire from service on a normal retirement Allowance upon reaching his Normal Retirement Date or he may postpone his retirement and remain in service after his Normal Retirement Date. During any such deferment the Member shall be retired from service on a normal retirement Allowance on the first day of the calendar month next following receipt by the Retirement Committee of written application therefor made by the Member.
(b) Subject to the provisions of Section 5.01(e) below, the annual normal retirement Allowance payable upon retirement on the Normal Retirement Date shall be computed pursuant to Paragraphs (c) and (d) below. The annual retirement Allowance payable upon retirement after a Member's Normal Retirement Date shall be equal to (i) the amount determined in accordance with Paragraphs (c) and (d) below, based on the Member's Credited Service and average annual Compensation as of his late retirement date or, if greater, (ii) the amount of Allowance to which the Member would have been entitled under Paragraphs (c) and (d) below as of his Normal Retirement Date increased by an amount of Equivalent Actuarial Value to the monthly payments which would have been payable with respect to each month during the postponement period which is not a Suspendible Month, with any such monthly payment amount determined as if the Member had retired as of the first day of the Plan Year during which payment would have been made or, if later, his Normal Retirement Date.
(c) The normal retirement Allowance shall be computed as an annuity payable for the life of the Member and shall consist of:
(i) For service credited while a Member on or after April 1, 1969, an Allowance equal to 1-1/6 per centum of the part of each year's Compensation which is not in excess of $3,600 per annum plus 2 per centum of the part of such Compensation in excess of $3,600 per annum; and
(ii) For service credited between the effective date of the SEPCO Plan and March 31, 1969, an Allowance equal to 1 per centum of the part of each year's Compensation which is not in excess of $3,000 per annum plus 2 per centum of the part of such Compensation in excess of $3,000 per annum; and
(iii) For service credited prior to the Effective Date of the SEPCO Plan, an Allowance which, when added to his Retirement Annuity, shall be equal to 1 per centum of the part of the Member's average annual Compensation for the three calendar years (1956, 1957 and 1958) which is not in excess of $3,000 plus 1 1/2per centum of the part of such Compensation in excess of $3,000, multiplied by the number of years of his Credited Service to the Effective Date of the SEPCO Plan.
(d) The benefit determined in Paragraph (c) above, when added to a Member's Retirement Annuity, if any, shall not be less than:
(i) 1-2/3 per centum of his average annual Compensation, multiplied by his years of Credited Service not in excess of 36 years, reduced by
(ii) 1 1/2 per centum of his primary Social Security Benefit multiplied by his years of Credited Service, the product not to exceed 50 per centum of his primary Social Security Benefit, where average annual Compensation is calculated during the 36 highest consecutive months within the 120 months preceding retirement.
(iii) Effective January 1, 1994 for purposes of determining a Member's average annual Compensation under this paragraph (d), the determination of the 36 highest consecutive months within the 120 months preceding retirement shall only include those months in which the Member receives Compensation.
(e) If the Member is married on his Annuity Starting Date and if he has not elected an optional form of benefit as provided in Section 7.07 of the SEPCO Schedule, the retirement Allowance shall be payable in the form of a Qualified Joint and Survivor Annuity.
(f) Notwithstanding any other provision of the SEPCO Schedule, each Member's normal retirement Allowance is the greater of
(i) the sum of:
(A) the normal retirement Allowance determined under this
Section 5.01 as of December 31, 1993, plus
(B) the normal retirement Allowance determined under this
Section 5.01 based on Credited Service and Compensation after
December 31, 1993 (with Credited Service used in this paragraph
(f) (i) (B) being added to the Credited Service used in paragraph
(f) (i) (A) for purposes of determining whether paragraph (d) (i)
36-year limit and (d) (ii) 50 per centum offset limit have been
exceeded); or
(ii) the normal retirement Allowance determined under this
Section 5.01 as applied to all Credited Service and Compensation.
5.02 Early Retirement
(a) A Member who has not reached his Normal Retirement Date but who has reached the 55th anniversary of his birth shall be retired from service on an early retirement Allowance on the first day of the calendar month next following receipt by the Retirement Committee of written application thereof or made by the Member.
(b) At the time of retirement the Member may elect to
receive either (i) a deferred early retirement Allowance
commencing on the Member's Normal Retirement Date which shall be
computed as a normal retirement Allowance, in accordance with
Section 5.01(b) of the SEPCO Schedule, on the basis of his
Compensation and Credited Service at the time of early retirement
or (ii) an immediate early retirement Allowance beginning on the
first day of any month before his Normal Retirement Date which
shall be computed in accordance with Sections 5.01(c) and (d) of
the SEPCO Schedule and shall be reduced by 1/12 of 5% for each
month by which the date the Member's early retirement Allowance
begins precedes age 62.
(c) If the Member is married on the date his retirement Allowance commences, the early retirement Allowance shall be computed on the same basis as in Paragraph (b) above, in accordance with Section 5.01(e) of the SEPCO Schedule.
5.03 Termination of Employment
(a) A Member shall be 100% vested in, and have a non-forfeitable right to, his Accrued Benefit upon completion of five years of Continuous Service since the first day of the Computation Period in which the 18th anniversary of his birth occurs. If the Member's employment with the Company is subsequently terminated for reasons other than retirement or death, he shall be eligible for a vested Allowance upon application therefor. If a Member's employment with the Company terminates before completion of five (5) years of Continuous Service or before becoming eligible for an early retirement or normal retirement Allowance, such Member's Accrued Benefit shall be forfeited upon termination of employment subject to restoration under Section 5.05 of the SEPCO Schedule.
(b) The vested Allowance shall be a deferred Allowance commencing on the former Member's Normal Retirement Date and shall be determined by computing a normal retirement Allowance, in accordance with Section 5.01 of the SEPCO Schedule, on the basis of his Compensation and Credited Service at his date of termination and the benefit formula in effect on that date.
(c) Instead of deferring his Allowance to his Normal Retirement Date, the Member can elect to receive a reduced Allowance commencing on the first day of any month next following his attainment of age 55 but prior to his Normal Retirement Date. The reduction shall be 1/12 of 5% for each month by which his Annuity Starting Date precedes his Normal Retirement Date, provided that such reduction shall be made prior to the application of the maximum limitation provided under Article 6 of the SEPCO Schedule and such reduced Allowance shall be subject to such limitation.
5.04 Adjustment of Retirement Allowance for Social Security Benefits
When an Allowance commences prior to the attainment of age 65, the Member may elect to convert the Allowance otherwise payable to him into an Allowance of Equivalent Actuarial Value of such amount that, with his Retirement Annuity, if any, and his old-age insurance benefit under Title II of the Social Security Act, he will receive, so far as possible, the same amount each year before and after such benefit commences.
5.05 Restoration of Retired Member or Former Member to Service
(a) If a Member in receipt of an Allowance is restored to service as an Employee on or after his Normal Retirement Date, the following shall apply, except with respect to temporary employees:
(i) His Allowance shall be suspended for each month during the period of restoration which is a Suspendible Month.
(ii) Upon the death of the Member during the period of restoration, any Allowance that would have been payable to his surviving Spouse had he not been restored to service shall be payable or, alternatively, any payments under optional benefit, if one has been elected and becomes effective, shall begin.
(iii) Upon later retirement, payment of the Member's Allowance shall resume no later than, the third month after the latest Suspendible Month during the period of restoration, and shall be adjusted, if necessary, in compliance with Title 29 of the Code of Federal Regulations, ss. 2530.203-3 in a consistent and nondiscriminatory manner.
(b) If a Member in receipt of an Allowance is restored to service as an Employee before his Normal Retirement Date, the following shall apply, except with respect to temporary employees:
(i) His Allowance shall cease and any election of an optional benefit in effect shall be void.
(ii) Any Continuous and credited Service to which he was entitled when he retired or terminated service shall be restored to him.
(iii) Upon later retirement or termination, his Allowance shall be based on the benefit formula then in effect and his Compensation and Credited Service before and after the period when he was not in the service of the Company, reduced by an amount of Equivalent Actuarial Value to the benefits, if any, he received before the date of his restoration to service.
(iv) The part of the Member's Allowance upon later retirement payable with respect to Credited Service rendered before his previous retirement or termination of service shall never be less than the amount of his previous Allowance modified to reflect any option in effect on his later retirement.
(c) If a Member not in receipt of an Allowance or a former Member is restored to service without having had a Break in Service, his Continuous Service shall be determined as provided in Section 4.01 of the SEPCO Schedule, and, if applicable, he shall again become a Member as of his date of restoration to service.
(d) If a vested Member not in receipt of an Allowance or a former Member who received a lump sum settlement in lieu of his Allowance is restored to service with the Company after having had a Break in Service, the following shall apply:
(i) Upon completion of one year of Continuous Service following the Break in Service, the Continuous Service to which he was previously entitled shall be restored to him, and, if applicable, he shall again become a Member as of his date of restoration to service.
(ii) If a Member has received a distribution of his Allowance and the Member is restored to service with the Company, the Member shall have the right to restore his or her Accrued Benefit to the extent forfeited upon the repayment to the Plan of the full amount of the distribution plus interest, compounded annually from the date of distribution at the rate determined for purposes of Codess. 411(c)(2)(C). Such repayment must be made before the earlier of five (5) years after the first date on which the Member is subsequently reemployed by the Company, or the date the Member incurs five (5) consecutive one year Breaks in Service following the date of distribution.
If a Member has been deemed to receive a distribution under the Plan, and the Member is restored to service with the Company, upon the reemployment of such Member, the Accrued Benefit will be restored to the amount of such Accrued Benefit on the date of deemed distribution.
(iii) Upon later termination or retirement of a Member whose
previous Credited Service has been restored under this Paragraph
(d), his Allowance shall be based on the benefit formula then in
effect and his Compensation and Credited Service before and after
the period when he was not in the service of the Company.
(e) If any other former Member is restored to service with the Company after having had a Break in Service, the following shall apply:
(i) Upon completion of one year of Continuous Service following the Break in Service, he shall again become a Member as of his date of restoration to service.
(ii) Upon becoming a Member in accordance with (i) above, the Continuous Service to which he was previously entitled shall be restored to him, if the total number of consecutive one-year Breaks in Service does not equal or exceed the greater of (a) five, or (b) the total number of years of his Continuous Service before the Break in Service, determined at the time of the Break in Service, excluding any Continuous Service disregarded under this Paragraph (e) by reason of any earlier Break in Service.
(iii) Any Credited Service to which the Member was entitled at the time of his termination of service which is included in the Continuous Service so restored shall be restored to him.
(iv) Upon later termination or retirement of a Member whose previous Credited Service has been restored under this Paragraph (e), his Allowance, if any, shall be based on the benefit formula then in effect and his Compensation and Credited Service before and after the period when he was not in the service the Company.
5.06 Additional Monthly Benefit
(a) In addition to other benefits provided in this Article 5, the following monthly benefits are payable as a life annuity to eligible Members as defined in Paragraph (b) or (c) below, as applicable.
The "additional monthly amount" is calculated as (i) a percentage of the Member's first $300 of monthly Allowance set forth below, multiplied by (ii) the number of years the Member was retired (A) prior to January 1, 1990, and (B) prior to January 1, 1995 but after January 1, 1990, as applicable in any event, for both the additional monthly amount effective June 1, 1991 and June 1, 1996, the minimum additional monthly amount to be added to a Member's Allowance shall equal $25.00 per month.
Effective June 1, 1991, the percentage increases and the years of retirement for which they are applicable are as follows:
Percentage
Years of Increase for
Retirement all Prior Years
------
as of 1/1/90
Less than 5 3.75%
5 to 10 4.0%
10 to 15 4.5%
15 or more 5.0%
Effective June 1, 1996, the percentage
increases and the years of retirement for
which they are applicable are as follows:
Percentage
Increase for
Years of Each Year of
Retirement Retirement
as of 1/1/95 Since 1/1/90
------------ ------------
Less than 5 3.5%
5 to 9 4.0%
10 to 14 4.5%
15 or more 5.0%
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(b) Members eligible for the additional monthly amount made effective as of June 1, 1991 are those retired Members who retired directly from active status on or before June 1, 1991.
(c) Members eligible for the additional monthly amount made effective June 1, 1996 are those Members who retired directly from active status before January 1, 1994.
(d) If an adjustment of retirement Allowance for Social Security benefits option was elected pursuant to Section 5.04 of the SEPCO Schedule, the additional monthly benefit shall be calculated on the Allowance before such adjustment.
(e) Upon the death of a Member eligible for an additional monthly amount, such amount shall be paid to the Member's Spouse regardless of the method of distribution elected by a Member. With regard to the additional monthly amount made effective June 1, 1996, it shall be determined (i) based on the Allowance being paid as of June 1, 1996, or (ii) if no allowance is being paid but the Member's Spouse is receiving an additional monthly amount in accordance with the preceding sentence, based on the amount such Spouse is receiving as of June 1, 1996.
5.07 Written Application
Each Member, before any benefit shall be payable to him or his account under the Plan, shall file with the Retirement Committee such information as it shall require to establish his rights and benefits.
ARTICLE 6 - LIMITATIONS ON BENEFITS
6.01 Maximum Benefits
(a) The maximum annual retirement Allowance payable to a
Member under the SEPCO Schedule, when added to any retirement
Allowance attributable to contributions of the Company or an
Affiliated Company provided to the Member under any other
qualified defined benefit plan, shall be equal to the lesser of
(1) $90,000, as adjusted under Code Section 415(d), or (2) the
Member's average annual remuneration during the three consecutive
calendar years in his Credited Service as a Member affording the
highest such average, or during all of the years in his Credited
Service as a Member, if less than three years, subject to the
following adjustments:
(i) If the Member has not been a Member under the SEPCO Plan and SEPCO Schedule for at least 10 years, the maximum annual retirement Allowance in clause (1) above shall be multiplied by the ratio which the number of years of his membership in the Plan bears to 10. This adjustment shall be applied separately to the amount of the Member's retirement Allowance resulting from each change in the benefit structure of the Plan, with the number of the years of membership in the Plan being measured from the effective date of each such change.
(ii) If the Member has not completed 10 years of Continuous Service, the maximum annual retirement Allowance in clause (2) above shall be multiplied by the ratio which the number of years of his Continuous Service bears to 10.
(iii) If the retirement Allowance begins before the Member's social security retirement age (as defined below), but on or after his 62nd birthday, the maximum retirement Allowance in clause (1) above shall be reduced by 5/9 of 1% for each of the first 36 months plus 5/12 of 1% for each additional month by which the Member is younger than the social security retirement age at the date his retirement Allowance begins. If the retirement Allowance begins before the Member's 62nd birthday, the maximum retirement Allowance in clause (1) above shall be of Equivalent Actuarial Value to the maximum benefit payable to age 62 as determined in accordance with the preceding sentence.
(iv) If the retirement Allowance begins after the Member's social security retirement age (as defined below), the maximum retirement Allowance in clause (1) above shall be of Equivalent Actuarial Value, based on an interest rate of 5% per year in lieu of the interest rate otherwise used in the determination of Equivalent Actuarial Value, to that maximum benefit payable at the social security retirement age.
(v) If the Member's retirement Allowance is payable as a joint and survivor Allowance with his Spouse as the contingent annuitant, the modification of the retirement Allowance for that form of payment shall be made before the application of the maximum limitation, and, as so modified, shall be subject to the limitation.
(b) As of January 1 of each calendar year on or after January 1, 1988, the
dollar limitation as determined by the Commissioner of Internal Revenue for that
calendar year shall become effective as the maximum permissible dollar amount of
retirement Allowances payable under the Plan and SEPCO Schedule during that
calendar year, including retirement Allowances payable to Members who retired
prior to that calendar year, in lieu of the dollar amount in (1) of Paragraph
(a) above.
(c) For limitation years beginning before January 1, 2000, in the case of a Member who is also a Member of a defined contribution plan of the Company or an Affiliated Company, his maximum benefit limitation shall not exceed an adjusted limitation computed as follows:
(i) Determine the defined contribution fraction.
(ii) Subtract the result of (i) from 1.0.
(iii) Multiply the dollar amount in (1) of Paragraph (a) above by 1.25.
(iv) Multiply the amount described in (2) of Paragraph (a) above by 1.4.
(v) Multiply the lesser of the result of (iii) or the result of
(iv) by the result of (ii) to determine the adjusted maximum benefit
limitation applicable to a Member.
(d) For purposes of this Section:
(i) the defined contribution fraction for a Member who is a Member of one or more defined contribution plans of the Company or an Affiliated Company shall be a fraction the numerator of which is the sum of the following:
(A) the Company's and Affiliated Companies' contributions credited to the Member's accounts under the defined contribution plan or plans.
(B) with respect to calendar years beginning before 1987, the lesser of the part of the Member's contributions in excess of 6% of his Compensation or one-half of his total contributions to such plan or plans, and with respect to calendar years beginning after 1986, all Member's contributions to such plan or plans, and
(C) any forfeitures allocated to his accounts under such plan or plans, but reduced by any amount permitted by regulations promulgated by the Commissioner of Internal Revenue; and the denominator of which is the lesser of the following amounts determined for each year of the Member's Continuous Service.
(D) 1.25 multiplied by the maximum dollar amount allowed by law for that year; or
(E) 1.4 multiplied by 25% of the Member's remuneration for that year.
At the direction of the Retirement Committee, the portion of the denominator of that fraction with respect to calendar years before 1983 shall be computed as the denominator for 1982, as determined under the law as then in effect, multiplied by a fraction of the numerator of which is the lesser of:
(F) $51,875, or
(G) 1.4 multiplied by 25% of the Member's remuneration for 1981; and the denominator of which is the lesser of:
(H) $41,500, or
(I) 25% of the Member's remuneration for 1981;
(ii) a defined contribution plan means a pension plan which provides for an individual account for each Member and for benefits based solely upon the amount contributed to the Member's account, and any income, expenses, gains and losses, and any forfeitures of accounts of other Members which may be allocated to that Member's accounts, subject to (iii) below; and
(iii) a defined benefit plan means any pension plan which is not a defined contribution plan; however, in the case of a defined benefit which is based partly on the balance of the separate account of a Member, that plan shall be treated as a defined contribution plan to the extent benefits are based on the separate account of a Member and as a defined benefit plan with respect to remaining portion of the benefits under the plan.
(iv) the term "remuneration" with respect to any Member shall mean the wages, salaries and other amounts paid in respect of such Member by the Company or an Affiliated Company for personal services actually rendered, and shall include, but not by way of limitation, bonuses, overtime payments, commissions and, for limitation years beginning on and after January 1, 1998, any elective deferrals as defined in Code Section 402(g)(3) and any amount contributed by an Employer on behalf of the Employee under any Code Section 125 or 457 arrangement, and shall exclude other deferred compensation, stock options and other distributions which receive special tax benefits under the Code; and
(v) the term "social security retirement age" shall mean age 65 with respect to a Member who was born before January 1, 1938; age 66 with respect to a Member who was born after December 1, 1937 and before December 1, 1955; and age 67 with respect to a Member who was born after December 31, 1954.
(e) Notwithstanding the preceding paragraphs of this Section, a Member's annual retirement Allowance payable under this SEPCO Schedule, prior to any reduction required by operation of Paragraph (c) above, shall in no event be less than:
(i) the benefit that the Member had accrued under the SEPCO Plan as of the end of the Plan Year beginning in 1982, with no changes in the terms and conditions of the SEPCO Plan on or after July 1, 1982 taken into account in determining that benefit, or
(ii) the benefit that the Member had accrued under the SEPCO Plan as of the end of the Plan Year beginning in 1986, with no changes in the terms and conditions of the SEPCO Plan on or after May 5, 1986 taken into account in determining that benefit.
(f) Notwithstanding any provisions contained
herein to the contrary, in the event that,
for limitation years beginning before
January 1, 2000, a Member participates in a
defined contribution plan or defined benefit
plan required to be aggregated with this
Plan under Code Section 415(g) and the
combined benefits with respect to a Member
exceed the limitations contained in Code
Section 415(e), corrective adjustments shall
be as provided under Article VI of the Plan.
(g) Notwithstanding anything contained in this Article of the SEPCO Schedule to the contrary, the limitations, adjustments and other requirements prescribed in this Article shall at all times comply with the provisions of Code ss. 415 and the regulations thereunder, the terms of which are specifically incorporated herein by reference.
ARTICLE 7 - DISTRIBUTION OF BENEFITS
7.01 Surviving Spouse Benefit
On and after August 23, 1984, if a married Member:
(a) dies in active service prior to his Annuity Starting Date after having met the requirements for an Allowance, or
(b) dies after retiring on any Allowance or after terminating service on or after August 23, 1984, with entitlement to a vested Allowance, but in either case before his Annuity Starting Date, or
(c) dies after he is credited with at least one Hour of Service with the Company on or after August 23, 1984 but prior to his Annuity Starting Date, there shall be payable to his Surviving Spouse a Qualified Preretirement Survivor Annuity as provided in Section 7.03 below.
7.02 Qualified Joint and Survivor Annuity
Provided an optional form of benefit as set forth in
Section 7.07 below is not elected pursuant to a Qualified
Election within the 90-day period ending on the Annuity
Starting Date, a married Member's Accrued Benefit will be paid
in the form of a Qualified Joint and Survivor Annuity and an
unmarried Member's Accrued Benefit will be paid in the form of
an annuity for his lifetime.
7.03 Qualified Preretirement Survivor Annuity
(a) Provided that a Member and his or her Spouse have been married throughout the one-year period ending on his or her date of death and provided an optional form of benefit as set forth in Section 7.07 below has not been elected by a Member eligible to waive the Qualified Preretirement Survivor Annuity within the Election Period pursuant to a Qualified Election, if a Participant dies before the Annuity Starting Date, the Member's Accrued Benefit shall be payable as an annuity for the life of the Surviving Spouse in accordance with this Section 7.03.
(b) The Qualified Preretirement Survivor Annuity shall commence on what would have been the Member's Normal Retirement Date or, on the first day of the month following the death of the Member, if later, and shall cease with the last monthly payment prior to the death of the Spouse. However:
(i) if the Member dies in active service after having met the requirements for early retirement, after having completed twenty years of service, or after retiring early but before payments commence, the Spouse may elect to begin receiving payments as of the first day of the month following the Member's date of death; and
(ii) in the case of the death of any other Member, the Spouse may elect to begin receiving payments as of the first day of any month following what would have been the Member's Earliest Retirement Age which is his 55th birthday.
(c) Before reduction in accordance with Paragraph (d) below, the Qualified Preretirement Survivor Annuity shall be equal to:
(i) in the case of a Member who dies while in active service after having met the requirements for early retirement, after having completed twenty years of service, or after retiring early but before payments commence, the following per centum of a normal retirement Allowance computed as provided in Section 5.01(c) and 5.01(d) of the SEPCO Schedule on the basis of the deceased Member's Compensation and Credited Service prior to his death, provided that if the Spouse was born more than 60 months after the deceased Member, the Qualified Preretirement Survivor Annuity so determined shall be reduced by 1/6 of 1% for each month in excess of 60 by which her date of birth followed the deceased Member's date of birth.
Age Member
Would Have Been
At Commencement Per Centum
40 to 45 40%
46 41%
47 42%
48 43%
49 44%
50 45%
51 46%
52 47%
53 48%
54 49%
55 or over 50%
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(ii) in the case of any other Member, 50% of the amount of vested Allowance to which the Member would have been entitled at his Normal Retirement Date, reduced as follows:
- reduction for a 50% joint and survivor annuity option (based on the Member's age and his Spouse's age had the Member survived to the date benefits commence), and
- reduction to reflect early commencement, if applicable, of payments in accordance with Section 5.03(c) of the SEPCO Schedule.
(iii) If within the 90 day period prior to his Annuity Starting Date a Member has elected Option (ii) under Section 7.07 below naming his spouse as contingent annuitant, the amount payable to his spouse under this Section 7.03 as a Qualified Preretirement Survivor Annuity shall be the amount that would have been payable to his spouse under Option (ii) if such amount is greater than the amount of the Qualified Preretirement Survivor Annuity otherwise payable under subparagraphs (c)(i) or (c)(ii) above, as applicable.
(d) The Allowance subsequently payable to a Member whose Spouse would have been entitled to a Qualified Preretirement Survivor Annuity under this Section 7.03 had the Member's death occurred, or the Qualified Preretirement Survivor Annuity payable to his Spouse after his death, whichever is applicable, shall be reduced by the applicable percentage shown in the following table for the period, or periods, that the provisions of this Section 7.03 are in effect with respect to the Member. No such reduction shall be made with respect to:
(i) coverage during active employment, or
(ii) any period before the commencement of the election period specified in Paragraph (e) below.
Annual Reduction for Spouse's coverage after Retirement or Other Termination
of Service
Age Reduction
Under 35 0%
35 -39 2/10 of 1%
40 -49 3/10 of 1%
50 -54 4/10 of 1%
55 -59 5/10 of 1%
60 and over 1%
(e) The Retirement Committee shall furnish to each married Member within
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the one year period commencing on the date he terminates service a written explanation in non-technical language which describes (1) the terms and conditions of the Qualified Preretirement Survivor Annuity, (2) the Member's right to make, and the effect of, an election to waive the Qualified Preretirement Survivor Annuity, (3) the rights of the Member's Spouse and (4) the right to make, and the effect of, a revocation of such election.
7.04 Definitions
For purposes of this, Article 7, the following definitions shall apply:
(a) The term "Election Period" shall mean the period which begins on the first day of the Plan Year in which a Member attains age 35 and ends on the date of the Member's death. If a Member separates from service prior to the first day of the Plan Year in which age 35 is attained, with respect to the Accrued Benefit as of the date of separation, the Election Period shall begin on the date of separation.
(b) The term "Earliest Retirement Age" shall mean the earliest date on which, under the SEPCO Schedule, the Member could elect to receive retirement benefits.
(c) The term "Qualified Election" shall mean waiver of a Qualified Joint
and Survivor Annuity or a Qualified Preretirement Survivor Annuity. Any waiver
of a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor
Annuity shall not be effective unless: (a) the Member's Spouse consents in
writing to the election; (b) the election designates a contingent annuitant,
which may not be changed without spousal consent (or the Spouse expressly
permits designations by the Participant without any further spousal consent);
(c) the Spouse's consent acknowledges the effect of the election; and (d) the
Spouse's consent is witnessed by a Plan representative designated by the
Retirement Committee or notary public. Additionally, a Member's waiver of the
Qualified Joint and Survivor Annuity shall not be effective unless the election
designates a form of benefit payment which may not be changed without spousal
consent (or the Spouse expressly permits designations by the Member without any
further spousal consent). If it is established to the satisfaction of a the
Retirement Committee that there is no Spouse or that the Spouse cannot be
located, a waiver without spousal consent will be deemed a Qualified Election.
Any consent by a Spouse obtained under this provision (or establishment that the consent of a Spouse may not be obtained) shall be effective only with respect to such Spouse. A consent that permits designations by the Member without any requirement of further consent by such Spouse must acknowledge that the Spouse has the right to limit consent to a specific Beneficiary, and a specific form of benefit where applicable, and that the Spouse voluntarily elects to relinquish both of such rights. A revocation of a prior waiver may be made by a Member without the consent of the Spouse at any time before the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Member has received notice as provided in Section 7.05 below.
7.05 Notice Requirements
(a) In the case of a Qualified Joint and Survivor Annuity or a single life annuity, the Retirement Committee shall provide, no less than 30 days and no more than 90 days prior to the Annuity Starting Date, each Member with a written explanation of: (1) the terms and conditions of a Qualified Joint and Survivor Annuity or single life annuity; (2) the Member's right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity or single life annuity form of benefit; (3) the rights of a Member's Spouse; and (4) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity or single life annuity.
(b) In the case of a Qualified Preretirement Survivor Annuity, the Retirement Committee shall provide each Member within the applicable period for such Member a written explanation of the Qualified Preretirement Survivor Annuity in such terms and in such manner as would be comparable to the explanation provided for meeting the requirements of Paragraph (a) above applicable to a Qualified Joint and Survivor Annuity or a single life annuity.
The applicable period for a Member is whichever of the following periods
ends last: (1) the period beginning with the first day of the Plan Year in which
the Member attains age 32 and ending with the close of the Plan Year preceding
the Plan Year in which the Member attains age 35; (2) a reasonable period ending
after the individual becomes a Member; (3) a reasonable period ending after the
Member's Qualified Preretirement Survivor Annuity ceases to be fully subsidized;
(4) a reasonable period ending after this Article first applies to the Member.
Notwithstanding the foregoing, notice must be provided within a reasonable
period ending after separation from service in the case of a Member who
separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in (2), (3) and (4) is the end of the two-year period beginning one year prior to the date the applicable event occurs, and ending one year after that date. In the case of a Member who separates from service before the Plan Year in which age 35 is attained, notice shall be provided within the two-year period beginning one year prior to separation and ending one year after separation. If such a Member thereafter returns to employment with the employer, the applicable period for such Member shall be redetermined.
7.06 Transitional Rules
Any living Member not receiving benefits on August 23, 1984, who would otherwise not receive the benefits prescribed by the previous Sections of this Article must be given the opportunity to elect to have the prior Sections of this Article apply if such Member is credited with at least one Hour of Service under this SEPCO Schedule or SEPCO Plan in a Plan Year beginning on or after January 1, 1976, and such Member is entitled to a vested Allowance.
7.07 Alternative Forms of Distribution
(a) Any Member may, subject to the election procedures applicable to Qualified Joint and Survivor Annuities and Qualified Preretirement Survivor Annuities, elect to convert his retirement Allowance into an optional benefit of Equivalent Actuarial Value determined as of the Annuity Starting Date, in accordance with one of the options named below:
Option (i) a retirement Allowance payable for the Member's life, with no Allowance payable after his death; or
Option (ii) a modified retirement Allowance payable during the Member's life with the provision that after his death either a 50%, 75% or a 100% joint and survivor annuity shall be paid during the life of, and to, the contingent annuitant nominated by him.
(b) The election of an optional form of benefit shall become effective as follows:
(i) If the Member retired on his Normal Retirement Date, or if he retires on an early retirement Allowance or a vested retirement Allowance deferred to commence on his Normal Retirement Date, the election shall become effective on his Normal Retirement Date.
(ii) If the Member retires on an early retirement Allowance commencing prior to his Normal Retirement Date, the election shall become effective on the due date of the first monthly installment.
(iii) If the Member continues in service as an Employee after his Normal Retirement Date and the notice of his election is received by the Retirement Committee prior to his Normal Retirement Date, election shall become effective on his Normal Retirement Date, or if the notice of the election is received by the Retirement Committee after the Member's Normal Retirement Date, the election shall become effective on the date it is received by the Retirement Committee. In the event of the death of a Member in service as an Employee on or after his Normal Retirement Date and after his election has become effective, payments of the benefit under the option shall commence on the first day of the month next following the month of death if the contingent annuitant designated under the option is then living; or, upon the retirement of such a Member, the amount under the option shall be payable to the Member, but no payments shall commence or accrue to him until the date of retirement.
7.08 Cash-Out of Annuity Benefits
(a) Although Allowances shall normally be payable in monthly
installments, a lump sum payment of Equivalent Actuarial Value shall be
made in lieu thereof if the present value of a Member's Allowance upon
termination of employment is less than or equal to $3,500 (and if the
present value of such Member's Allowance never exceeded $3,500) for
distributions before January 1, 1998, or if the present value of a Member's
Allowance upon termination of employment is less than or equal to $5,000
(and if the present value of such Member's Allowance never exceeded $5,000)
for distributions on or after January 1, 1998. The lump sum payment shall
be made as soon as practicable on or after the date the Member terminates
employment. Notwithstanding the foregoing, if the present value of the
Member's vested Allowance is zero, the Member shall be deemed to have
received a distribution of such Member's Accrued Benefit.
(b) This Section 7.08(b) shall apply to all distributions from the Plan pursuant to the SEPCO Schedule and from annuity contracts purchased to provide benefits other than distributions described in Section 1.417-1T(e)(3) of the income tax regulations issued under the Retirement Equity Act of 1984. For purposes of determining whether the present value of (A) a Member's vested accrued benefit; (B) a qualified joint and survivor annuity, within the meaning of Section 417(b) of the Code; or (C) a qualified preretirement survivor annuity within the meaning of Section 417(c)(1) of the Code exceeds $3,500 for distributions before January 1, 1998, or $5,000 for distributions on or after January 1, 1998, the present value of such benefits or annuities shall be calculated by using an interest rate no greater than the Applicable Interest Rate and in no event shall the present value of any such benefit or annuity determined under this Section 7.08(b) be less than the present value of such benefits or annuities determined using the Applicable Interest Rate. "Applicable Interest Rate" for this purpose shall be calculated by using the annual rate of interest on 30-year Treasury securities for the month of November in the Plan Year which precedes the Plan Year in which such present value is determined and by using the prevailing commissioners' standard table used to determine reserves for group annuity contracts as in effect on the date as of which the present value is being determined. In no event shall the amount of any benefit or annuity determined under this Section 7.08(b) exceed the maximum benefit permitted under Section 415 of the Code.
7.09 Commencement of Benefits
An Allowance under this SEPCO Schedule shall be paid in accordance with Section 5.9 of the Plan.
7.10 Requirement for Direct Rollovers
An Allowance paid in a lump sum shall be subject to
Section 8.7 of the Plan.
ARTICLE 8 - RETIREE MEDICAL BENEFITS
8.01 Definitions.
The following words and phraseology as used herein shall have the following meanings unless a different meaning is plainly required by the context:
(a) "Pensioned Employee" means effective September 15, 1993, a Member who retires and is receiving a distribution from the SEPCO Plan pursuant to Sections 5.01 and 5.02 of the SEPCO Schedule or a retired Member who is entitled to receive a distribution under the Plan pursuant to Sections 5.01 or 5.02 of the SEPCO Schedule after retirement will be eligible for reimbursement or payment of covered medical expenses, as hereinafter described, provided the Member (1) was covered by the Georgia Power Company Medical Benefits Plan immediately before retirement; (2) is not eligible as a spouse or dependent or otherwise for coverage under the Georgia Power Company Medical Benefits Plan; and (3) continues to satisfy the eligibility requirements applicable to retired employees as set forth in the provisions of the Georgia Power Company Medical Benefits Plan, which is attached hereto as Exhibit A and incorporated herein by reference and may be changed in accordance with the terms of the Georgia Power Company Medical Benefits Plan. Notwithstanding the foregoing, a former employee who was a "key employee" as defined in the Plan on the date of his retirement shall not be eligible to receive any benefits under this Article 8.
(b) "Dependents" means the spouses and dependents of retired Members who are eligible for reimbursement or payment of covered medical expenses pursuant to paragraph (a) and who were covered under the Georgia Power Company Medical Benefits Plan immediately prior to the Member's retirement are also eligible for reimbursement or payment of covered medical expenses to the extent, if any, provided in the Georgia Power Company Medical Benefits Plan, a copy of which is attached as Exhibit A. Notwithstanding the foregoing, a spouse or dependent who is eligible for coverage under the "active employee" portion of the Georgia Power Company Medical Benefits Plan shall not be eligible for reimbursement of medical expenses or payment of premiums hereunder.
(c) "Qualified Transfer" means a transfer of Excess Pension Assets of
the Plan to a Health Benefits Account after December 31, 1990, but before
December 31, 2000, which satisfies the requirements set forth in paragraphs
(1) through (6) below.
(1) No more than 1 transfer per Plan Year may be treated as a Qualified Transfer.
(2) The amount of Excess Pension Assets which may be transferred in a Qualified Transfer shall not exceed a reasonable estimate of the amount the Company will pay (directly or through reimbursement) out of the Health Benefits Accounts for Qualified Current Retiree Health Liabilities during the Plan Year of the transfer.
(3) (A) Any assets transferred to a Health Benefits Account in a Qualified Transfer (and any income allocated thereto) shall only be used to pay Qualified Current Retiree Health Liabilities (whether directly or through reimbursement).
(B) Any assets transferred to a Health Benefits Account in a Qualified Transfer (and any income allocable thereto) which are not used as provided in Section 8.01(c)(3)(A) above shall be transferred from the Health Benefits Account back to the Plan.
(C) For purposes of this Section 8.01(c)(3), any amount transferred from a Health Benefits Account shall be treated as paid first out of the assets and income described in Section 8.01(c) (3)(A) above.
(4) The Accrued Benefit of any Pensioned Employee or Dependent under the SEPCO Schedule shall become nonforfeitable in the same manner which would be required if the Plan had terminated immediately before the Qualified Transfer (or in the case of a Pensioned Employee who terminated service during the 1 year period ending on the date of the Qualified Transfer, immediately before such termination).
(5) Effective for Qualified Transfers occurring on or before December 8, 1994, the Applicable Company Cost for each Plan Year during the Cost Maintenance Period shall not be less than the higher of the Applicable Company Cost for each of the two Plan Years immediately preceding the Plan Year of the Qualified Transfer. Effective for Qualified Transfers occurring after December 8, 1994, the medical benefits plan set forth in Exhibit A shall provide that the Applicable Health Benefits provided by the Company during each Plan Year during the Benefit Maintenance Period shall be substantially the same as the Applicable Health Benefits provided by the Company during the Plan Year immediately preceding the Plan Year of the Qualified Transfer. Notwithstanding any other provision to the contrary in this Section 8.01(c)(5), the Company may elect at any time during the Plan Year to have this Section 8.01(c)(5) applied separately with respect to Pensioned Employees eligible for benefits under Title XVIII of the Social Security Act and with respect to Pensioned Employees which are not so eligible.
(6) For purposes of this Section 8.01(c), the following words and phraseology shall have the following meanings unless a different meaning is plainly required by the context:
(A) "Applicable Company Cost" means, with respect to any Plan Year, the amount determined by dividing
(i) the Qualified Current Retiree Health Liabilities of the Company for such Plan Year determined (I) without regard to any reduction under Section 8.01(c)(6)(G), and (II) in the case of a Plan Year in which there was no Qualified Transfer in the same manner as if there had been such a transfer at the end of the Plan Year, by
(ii) the number of individuals to whom coverage for Applicable Health Benefits was provided during such Plan Year.
(B) "Applicable Health Benefits" means health benefits or coverage which are provided to Pensioned Employees who immediately before the Qualified Transfer are eligible to receive such benefits and their Dependents.
(C) "Benefit Maintenance Period" means the period of five (5) Plan Years beginning with the Plan Year in which the Qualified Transfers occurs.
(D) "Cost Maintenance Period" means the period of five (5) Plan Years beginning with the taxable year in which the Qualified Transfer occurs. If a Plan Year is in two (2) or more overlapping Cost Maintenance periods, this Section 8.01(c)(6)(D) shall be applied by taking into account the highest Applicable Company Cost required to be provided under Section 8.01(c)(6)(A) above for such Plan Year.
(E) "Excess Pension Assets" means the excess, if any, of
(i) the amount determined under Code Section
412(c)(7)(A)(ii), over
(ii) the greater of: (I) the amount determined under Code
Section 412(c)(7)(A)(i), or (II) 125 percent of current liability
(as defined in Code Section 412(c)(7)(B)).
The determination under this paragraph shall be made as of the most recent valuation date of the Plan preceding the Qualified Transfer.
(F) "Health Benefits Account" means an account established and maintained under Code Section 401(h).
(G) "Qualified Current Retiree Health Liabilities" means, with respect to any Plan Year, the aggregate amounts, including administrative expenses, which would have been allowable as a deduction to the Company for payment of Applicable Health Benefits provided during the Plan Year assuming such Applicable Health Benefits were provided directly by the Company and the Company used the cash receipts and disbursements method of accounting. For purposes of the preceding sentence, the rule of Code Section 419(c)(3)(B) shall apply.
Effective for Qualified Transfers occurring on or before December 8, 1994, the amount determined in the paragraph above shall be reduced by any amount previously contributed to a Health Benefits Account or welfare benefit fund, as defined in Code Section 419(e)(1), to pay for the Qualified Current Retiree Health Liabilities. Effective for Qualified Transfers occurring after December 8, 1994, the amount determined under the preceding paragraph shall be reduced by the amount which bears the same ratio to such amount as the value (as of the close of the Plan Year preceding the year of the Qualified Transfer) of the assets in all Health Benefits Accounts or welfare benefit funds, as defined in Code Section 419(e)(1), set aside to pay the Qualified Current Retiree Health Liability, bears to the present value of the Qualified Current Retiree Health Liabilities for all Plan Years determined without regard to this paragraph.
(d) "Georgia Power Medical Benefits Plan" means that Plan or any successor thereto.
8.02 Medical Benefits
Medical benefits under the Plan shall be provided through the Georgia Power Company Medical Benefits Plan by the payment of premiums thereunder, or through reimbursement to the Company for its payment to Pensioned Employees or their Dependents of medical expenses in accordance with the terms and conditions of the Georgia Power Company Medical Benefits Plan attached hereto as Exhibit A. Medical benefits shall be provided under the Plan only to the extent there are sufficient funds to provide such benefits. In no event shall any benefits be paid under the Plan to the extent the same benefits are payable under any other plan, program or arrangement of the Company. The Retirement Committee may establish claims procedures and administrative rules relating to the provision of medical benefits hereunder to the extent that the claims procedures and administrative rules under the applicable group medical plan do not apply.
8.03 Termination of Coverage.
(a) Coverage of any Pensioned Employee shall cease as follows:
(1) when this Article 8 is amended, terminated, or discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any required contribution; or
(3) as otherwise provided in Exhibit A.
(b) Coverage of any Dependent shall cease as follows:
(1) when this Article 8 is amended, terminated, or discontinued in accordance with its terms; or
(2) when the Pensioned Employee fails to make when due any required contribution; or
(3) as otherwise provided in Exhibit A.
8.04 Contributions or Qualified Transfers to Fund Medical Benefits.
(a) Any contributions which the Company deems necessary to provide the medical benefits under Article 8 will be made from time to time by or on behalf of the Company, and contributions shall be required of the Pensioned Employees to the Company's medical benefit plan in amounts determined in the sole discretion of the Company from time to time. All Company contributions shall be made to the Trustee and shall be allocated to a separate account maintained solely to fund the medical benefits provided under this Article 8. The Company shall designate that portion of any contribution to the plan allocable to the funding of medical benefits under this Article 8. In the event that a Pensioned Employee's interest in an account, or his Dependents', maintained pursuant to this Article 8 is forfeited prior to termination of the plan, the forfeited amount shall be applied as soon as possible to reduce Company contributions made under this Article 8. In no event at any time prior to the satisfaction of all liabilities under this Article 8 shall any part of the corpus or income of such separate account be used for, or diverted to, purposes other than for the exclusive purpose of providing benefits under this Article 8.
The amount of contributions to be made by or on behalf of the Company for any Plan Year, if any, shall be reasonable and ascertainable and shall be determined in accordance with any generally accepted actuarial method which is reasonable in view of the provisions and coverage of this Article 8, the funding medium, and any other applicable considerations. However, the Company is under no obligation to make any contributions under this Article 8 after Article 8 is terminated, except to fund claims for medical expenses incurred prior to the date of termination.
The medical benefits provided under this Article 8, when added to any life insurance protection provided under the Plan, shall be subordinate to the retirement benefits provided under the Plan.
Anything in the Plan and SEPCO Schedule to the contrary notwithstanding, the aggregate amount of the actual contributions made pursuant to this Article 8 may not exceed 25% of the total actual contributions to the Plan for all benefits under the Plan (exclusive of contributions that may be made to fund past service credits) on and after September 15, 1993.
(b) Effective September 15, 1993, the Company shall have the right, in its sole discretion, to make a Qualified Transfer of all or a portion of any Excess Pension Assets contributed to fund Retirement Income or Allowance under the Plan to the Health Benefits Accounts to fund medical benefits under this Article 8.
8.05 Pensioned Employee Contributions.
It shall be the sole responsibility of the Pensioned Employee to notify the Company promptly in writing when a change in the amount of the Pensioned Employee's contribution is in order because a Dependent has become ineligible for coverage under this Article 8. No person shall become covered under this Article 8 for whom the Pensioned Employee has not made the required contribution. Any contribution paid by a Pensioned Employee for any person after such person shall have become ineligible for coverage under this Article 8 shall be returned upon written request but only provided such written request by or on behalf of the Pensioned Employee is received by the Company within ninety (90) days from the date coverage terminates with respect to such ineligible person.
8.06 Amendment of Article 8.
The Board of Directors reserves the right to amend Article 8 (including Exhibit A) without the consent of any Pensioned Employee, or his Dependents, provided, however, that no amendment of this Article or the Trust shall cancel the payment or reimbursement of expenses for claims already incurred by a Pensioned Employee or his Dependent prior to the date of any amendment, nor shall any such amendment increase the duties and obligations of the Trustee except with its consent. This Article 8, as set forth in the SEPCO Schedule, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Dependents. The Board of Directors makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the Plan and SEPCO Schedule or under the terms of any other employee benefit plan maintained by the Company shall not confer upon any Pensioned Employee or Dependents any right to continued benefits under this Article 8.
8.07 Termination of Article 8.
Although it is the intention of the Board of Directors that this Article shall be continued and the contribution shall be made regularly thereto each year, the Board of Directors may terminate this Article 8 or permanently discontinue contributions at any time in its sole discretion. This Article 8, as set forth in the SEPCO Schedule, is not a contract and non-contributory benefits hereunder are provided gratuitously, without consideration from any Pensioned Employee or his Dependents. The Board of Directors makes no promise to continue these benefits in the future and rights to future benefits will never vest. In particular, retirement or the fulfillment of the prerequisites for a retirement benefit pursuant to the terms of the SEPCO Schedule or under the terms of any other employee benefit Plan maintained by the Company shall not confer upon any Pensioned Employee or his Dependents any right to continued benefits under this Article 8.
8.08 Reversion of Assets upon Termination. Upon the termination of this Article 8 and the satisfaction of all liabilities under this Article 8, all remaining assets in the separate account described in this Article 8 shall be returned to the Company in accordance with the terms of the Fund.
IN WITNESS WHEREOF, Southern Company Services, Inc. through its duly authorized officer, has adopted this First Amendment to The Southern Company Pension Plan this ____ day of _________________, 1997, to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By: ___________________________
Title:__________________________
ATTEST:
By: _________________________________________________________
Title:________________________________________________________
SECOND AMENDMENT TO
THE SOUTHERN COMPANY
PENSION PLAN
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") heretofore adopted The Southern Company Pension Plan, as amended and restated (the "Plan"), effective January 1, 1997; and
WHEREAS, the Company desires to amend the Plan to clarify the grant of prior service credit to certain employees formerly employed by Commonwealth Edison of Indiana; and
WHEREAS, the Company also desires to amend the Plan to discontinue eligibility under the Plan for employees classified as temporary employees and to cease the accrual of benefits of any temporary employees who may be participating in the Plan effective as of August 31, 1998; and
WHEREAS, the Company also desires to amend the Plan to reflect the corporate name change of certain Employing Companies; and
WHEREAS, the Company also desires to amend the Plan to make certain other technical and miscellaneous corrections; and
WHEREAS, the Company is authorized pursuant to Section 13.1 of the Plan to amend the Plan at any time.
NOW, THEREFORE, the Company hereby amends the Plan as follows to be effective as provided herein:
1.
Effective January 1, 1998, Section 1.16 of the Plan, as amended by the First Amendment to the Plan, is further amended by deleting the last sentence of such Section and substituting the following in lieu thereof:
Notwithstanding the preceding, "Employee" shall not mean any person who is classified by an Employing Company as an independent contractor regardless of whether such classification is determined to be in error.
2.
Effective September 1, 1998, Section 2.5 of the Plan is amended by adding the following sentence to the end of the first paragraph thereof:
Notwithstanding the foregoing, the exclusion set forth in Section 2.6 shall apply with respect to any temporary employee effective as of September 1, 1998.
3.
Effective September 1, 1998, Section 2.6 of the Plan is amended by deleting such subsection in its entirety and substituting the following in lieu thereof:
2.6 Exclusion of certain categories of employees. Notwithstanding any other provision of this Article II, leased employees and, effective September 1, 1998, any individuals classified by an Employing Company as temporary employees, regardless of whether either such classification is determined to be in error, shall not be eligible to participate in the Plan. Notwithstanding the preceding sentence, temporary employees, defined as Employees in Section 1.16 and participating in the Plan prior to July 1, 1991, are eligible to participate in the Plan up through and including August 31, 1998.
4.
Effective January 1, 1998, Section 16.1(b) of the Plan as amended by
the First Amendment to the Plan is further amended by deleting such subsection
(b) in its entirety and substituting the following in lieu thereof:
(b) Former Commonwealth Edison of Indiana Employees. Effective January 1, 1998, notwithstanding any other provision of the Plan to the contrary, any former employee of Commonwealth Edison of Indiana ("ComEd") who was employed by Southern Energy Resources, Inc. on or before December 31, 1997 and is set forth on a schedule of employees acknowledged by the Retirement Board (hereafter "January 1 ComEd Employees") shall be eligible to participate in the Plan effective January 1, 1998. In addition, any former employee of ComEd who becomes employed by Southern Energy Resources, Inc. on or after January 1, 1998 but prior to April 1, 1998 (hereafter "Date of Employment") and is set forth on the schedule of employees acknowledged by the Retirement Board (hereafter "Pre-April 1 ComEd Employees") shall become a Participant as of the first day of the month coincident with or next following such employee's Date of Employment. The following provisions of this subparagraph (b) shall also apply with respect to all January 1 ComEd Employees and Pre-April 1 ComEd Employees (hereafter jointly referred to as "ComEd Scheduled Employees"):
(1) Such ComEd Scheduled Employee, if and when he attains his
Early Retirement Date, Normal Retirement Date, or Deferred Retirement
Date, or terminates service for any reason subject to the requirements
of Section 8.1 or 8.2, shall be entitled to receive Retirement Income
based on both his Accredited Service with an Employing Company and the
service accrued under the Commonwealth Edison Company of Indiana
Service Annuity System Plan (the "ComEd Plan") which shall be treated
as if Accredited Service under this Plan. To calculate such ComEd
Scheduled Employee's Retirement Income, the ComEd Scheduled Employee's
Accrued Retirement Income, as determined in accordance with Section
5.1, shall first be reduced by the Employee's accrued benefit in the
ComEd Plan, determined as if he retired from ComEd at his normal
retirement age, as that term is defined in the ComEd Plan on December
31, 1997. Thereafter, such Employee's Retirement Income shall be
subject to applicable reductions, if any, in accordance with Article V,
Section 8.1 and Section 8.2, as appropriate.
(2) For purposes of calculating such ComEd Scheduled Employee's Social Security Offset under Section 5.4, the Social Security Offset shall be determined by using the actual salary history of the ComEd Scheduled Employee during his employment with any Affiliated Employer, and ComEd. If the actual salary history is not available from ComEd, such history shall be estimated in accordance with Section 5.4.
(3) For vesting purposes, such ComEd Scheduled Employee shall be entitled to receive Vesting Years of Service as provided in Section 1.41 and, in addition, shall be entitled to vesting service equal to the sum of the years of service accrued under the ComEd Plan.
5.
Effective September 1, 1998, Section 17.1 (d) is amended by adding the following sentence to the end thereof:
Notwithstanding the preceding, in the event a SEPCO Employee is classified as a temporary employee and is eligible to participate in the Plan as such in accordance with this Article XVII, such SEPCO Employee shall be ineligible to participate in the Plan on and after September 1, 1998.
6.
Effective January 1, 1998, Section 1.14 of the SEPCO Schedule which is incorporated in the Plan by the First Amendment thereto, is amended by deleting the last sentence of such section and substituting the following in lieu thereof:
Notwithstanding the preceding, "Employee" shall not mean any person who is classified by the Company as an independent contractor regardless of whether such classification is determined to be an error.
7.
Effective September 1, 1998, Section 3.07 of the SEPCO Schedule which is incorporated into the Plan by the First Amendment thereto, is amended by deleting such section in its entirety and substituting the following in lieu thereof:
Section 3.07 Notwithstanding any other provision of this Article 3 of the SEPCO Schedule, Leased Employees and, effective September 1, 1998, any individuals classified by the Company as temporary employees, regardless of whether either such classification is determined to be an error, shall not be eligible to participate in the Plan. Notwithstanding the preceding sentence, temporary employees as defined in Section 1.14 of the SEPCO Schedule who were participating in the SEPCO Plan as temporary employees prior to October 13, 1994, shall be eligible to participate in the Plan up to and including August 31, 1998.
8.
Effective July 1, 1998, Appendix A of the Plan is amended by deleting such Appendix in its entirety and substituting the following in lieu thereof:
APPENDIX A
THE SOUTHERN COMPANY PENSION PLAN
EMPLOYING COMPANIES AS OF JULY 1, 1998
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company
Southern Communications Services, Inc.
Southern Company Energy Solutions, Inc.
Southern Company Services, Inc.
Southern Energy Resources, Inc.
Southern Nuclear Operating Company, Inc.
9.
Except as amended herein by this Second Amendment, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly authorized officer, has adopted this Second Amendment to The Southern Company Pension Plan pursuant to resolutions of the Board of Directors of Southern Company Services, Inc. this ____ day of __________, 1998, to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By: ________________________
Its: ________________________
0361408.doc
THIRD AMENDMENT TO
THE SOUTHERN COMPANY
PENSION PLAN
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") heretofore adopted The Southern Company Pension Plan, as amended and restated (the "Plan"), effective January 1, 1997; and
WHEREAS, the Company desires to amend the Plan to modify the definition of Earnings for appliance salespersons to include certain nonproductive pay earnings types; and
WHEREAS, the Company desires to amend the Plan to grant prior service credit to certain employees formerly employed by Commonwealth Energy Systems ("CES") and to provide for an offset of the CES retirement benefit; and
WHEREAS, the Company desires to amend the Plan to grandfather certain employees of Southern Company Energy Marketing L.P. who are rehired by an Employing Company; and
WHEREAS, the Company desires to clarify Plan language concerning the Retirement Board's responsibility for controlling and managing Plan assets and to clarify the calculation of the level income form of payment with respect to Alternate Payees; and
WHEREAS, the Company is authorized pursuant to Section 13.1 of the Plan to amend the Plan at any time.
NOW, THEREFORE, the Company hereby amends the Plan as follows to be effective as provided herein:
1.
Effective July 1, 1998, Subsection 1.13(b) of the Plan shall be amended by adding the following new language to the end thereof:
Effective as of July 1, 1998, "Earnings" shall also include, for appliance salespersons, certain nonproductive pay earnings types as determined from time to time by the Board of Directors and set forth on Appendix B to the Plan, which Appendix may be updated from time to time.
2.
Effective January 1, 1998, Section 5.5 of the Plan shall be amended by deleting the last sentence thereof and by adding the following new language:
The Federal primary Social Security benefit used in calculating an Employee's Retirement Income and adjustment described in the preceding sentence shall be determined by using the salary history of the Employee during his employment with any Affiliated Employer, as calculated in accordance with Section 5.4. Notwithstanding the preceding sentence with respect to an Alternate Payee, the adjustment described in this paragraph shall be determined by using the Alternate Payee's actual Social Security salary history and estimated age 65 Social Security benefit provided that the Alternate Payee secures this information for the Retirement Board.
3.
Effective January 1, 1999, Article XVI of the Plan shall be amended by adding the following to the end thereof:
(1) Effective January 1, 1999, notwithstanding any other provision of the Plan to the contrary, any former employees of Commonwealth Energy System ("CES") who were employed by Southern Energy Resources, Inc. and are set forth on a schedule of employees acknowledged by the Retirement Board (hereinafter "CES Employees") shall be eligible to become a Participant as of the first day of the month coincident with or next following the later of the CES Employee's employment date or the date on which he first completes an Eligibility Year of Service as provided in Paragraph (5) below.
(2) CES Employees who (A) were actively employed by CES on January 1, 1997 and (B) attain their fortieth (40th) birthday on or before January 1, 2002 shall not be subject to provisions of Article XV of the Plan.
(3) If and when a CES Employee attains his Early Retirement
Date, Normal Retirement Date, or Deferred Retirement Date, or
terminates service for any reason subject to the requirements of
Section 8.1 or 8.2, he shall be entitled to receive Retirement Income
based on both his Accredited Service with an Employing Company and the
Credited Service as defined under The Pension Plan for Employees of
Commonwealth Energy System and Subsidiary Companies (the "CES Plan")
which shall be treated as if Accredited Service under this Plan.
However, prior to adjustment for forms of payment, a CES Employee's
Retirement Income will be reduced by the Actuarial Equivalent as
defined in Appendix D of the applicable amounts set forth in Appendix
C. Thereafter, such Employee's benefit shall be subject to applicable
reductions, if any, in accordance with Article V, Section 8.1 and
Section 8.2, as appropriate.
(4) For purposes of calculating Retirement Income, such CES Employee's actual salary history with CES shall be included. With respect to determining the Social Security Offset, if the actual salary history is not available from CES, such history shall be estimated in accordance with Section 5.4.
(5) For vesting and participation purposes, such CES Employee shall be entitled to receive Vesting and Eligibility Years of Service as provided under the Plan and, in addition, shall be entitled to vesting and eligibility service equal to the sum of the Years of Service as defined and accrued under the CES Plan.
(6) Notwithstanding any provision in this Plan to the contrary, prior to the offset described in Paragraph 3 above, a CES Employee will be entitled to his Retirement Income or his Retirement Allowance or vested benefit determined under Appendix D as of the earlier of his retirement, termination of employment, or December 31, 2001 whichever has the greater Actuarial Equivalent value as defined in Appendix D. Such determination will be made prior to any adjustment for forms of payments.
4.
Effective February 11, 1999, Section 10.9 of the Plan shall be amended by deleting such section in its entirety and replacing it with the following:
Section 10.9 Areas in which the Retirement Board does not have responsibility. The Retirement Board shall not have responsibility with respect to control or management of the assets of the Plan insofar as such control or management is assigned under the Trust Agreement to a Person, including but not limited to an Asset Manager, as those terms are defined under the Trust Agreement.
The responsibility for providing a procedure for establishing and carrying out a funding policy and method for the Plan consistent with the objectives of the Plan and the requirements of Title I of ERISA shall be that of The Southern Company Pension Fund Investment Review Committee.
5.
Effective January 1, 1999, Section 15.1 of the Plan shall be amended by adding the following new language to the end thereof:
(e) Notwithstanding paragraph (c) of this Section 15.1, employees that
have been previously employed by an Employing Company, transferred to
Southern Company Energy Marketing, L.P., subsequently transfer back to
an Employing Company, and are not described in paragraph (a) of this
Section 15.1, shall not be subject to this Article XV but shall be
subject to eligibility to participate in the Plan in accordance with
the provisions of Article II.
6.
Except as amended herein by this Third Amendment, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly authorized officer, has adopted this Third Amendment to The Southern Company Pension Plan pursuant to resolutions of the Board of Directors of Southern Company Services, Inc. this ____ day of __________, 1999, to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By: ________________________
Its: ________________________
APPENDIX B
Nonproductive Pay Earnings Types
Earnings Code Earnings Description 003 Salesperson - Hourly 092 Holiday Taken 093 Meetings 095 Meetings - Safety 096 Disability 100% 100 Disability Extended Approval 106 Leave - Death 108 Occupational Injury 111 Jury Duty 112 Training 113 Safety Training 115 Vacation 116 Vacation Special Circumstances 117 Vacation FMLA Employee 118 Vacation FMLA Family Care 119 Time Off With Pay 125 Holiday Banked - Taken 127 Vacation In Lieu Of Disability 442 DISABILITY FMLA EMPLOYEE |
FOURTH AMENDMENT TO
THE SOUTHERN COMPANY
PENSION PLAN
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") heretofore adopted The Southern Company Pension Plan (the "Plan"), as amended and restated effective January 1, 1997;
WHEREAS, the Company desires to amend the Plan to grant prior service credit to certain employees formerly employed by Pacific Gas and Electric Company ("PG&E") and to provide for an offset of the PG&E retirement benefit;
WHEREAS, the Company desires to amend the Plan to grant prior service and benefit credit to certain employees formerly employed by Orange and Rockland Utilities, Inc. ("O&R") and to provide for an offset of the O&R retirement benefit;
WHEREAS, the Company also desires to make certain clarifying changes to the Plan; and
WHEREAS, the Company is authorized pursuant to Section 13.1 of the Plan to amend the Plan at any time.
NOW, THEREFORE, the Company hereby amends the Plan as follows to be effective as provided herein:
1.
Effective January 1, 1997, Section 15.2(d) of the Plan shall be amended by replacing the term "Early Retirement Date" with the term "earlier Retirement Date" in each place where such term appears.
2.
Effective January 1, 1997, Section 15.3 of the Plan is amended by deleting such Section in its entirety and replacing it with the following:
(a) With respect to Employees described in Section 15.1(a) and
(b) who retire before their Normal Retirement Date, the monthly amount
of Retirement Income provided in Section 15.2 shall be reduced in
accordance with Section 5.5. With respect to Employees described in
Section 15.1(c), the monthly amount of Retirement Income provided in
Section 15.2 shall be reduced in accordance with Section 5.5 except
that the term "five-tenths of one percent (0.5%)" shall replace the
term "three-tenths of one percent (0.3%)" where it appears in the first
paragraph thereof.
(b) Notwithstanding paragraph (a) above, if a former Employee subject to Section 15.1(c)(1) who is eligible to receive Retirement Income is reemployed by an Affiliated Employer, his Retirement Income accrued prior to his original termination from service shall be determined in accordance with the terms of the Plan in effect as of such termination. In the event that an Employee described in the preceding sentence accrues additional Retirement Income in accordance with Section 15.2 after his reemployment, such Retirement Income shall be subject to Sections 15.2(c) and the second sentence of Section 15.3(a).
3.
Effective January 1, 1995, Section 16.1(a)(3) of the Plan shall be amended to read as follows:
(3) With respect to determining the Social Security Offset and the
level income option set forth in the last paragraph of Section 5.5, the
actual salary history of the Scheduled Employee during his employment
with any Affiliated Employer and with Scott Paper Company shall be
utilized. If the actual salary history is not available from Scott
Paper Company, such history shall be estimated in accordance with
Section 5.4.
4.
Effective January 1, 1999, Section 16.1(c)(1) of the Plan shall be amended by replacing the phrase "eligible to become a Participant" with the phrase "included in the Plan" and Section 16.1(c)(4) shall be amended to read as follows:
(4) For purposes of calculating Retirement Income, such CES Employee's actual salary history with CES shall be included. With respect to determining the Social Security Offset and the level income option set forth in the last paragraph of Section 5.5, if the actual salary history is not available from CES, such history shall be estimated in accordance with Section 5.4.
5.
Effective April 1, 1999, Article XVI of the Plan shall be amended by adding the following to the end thereof:
(1) Effective April 1, 1999, notwithstanding any other provision of the Plan to the contrary, any former employees of Pacific Gas and Electric Company ("PG&E") who were employed by Southern Energy Resources, Inc. and are set forth on a schedule of employees acknowledged by the Retirement Board (hereinafter "PG&E Employees") shall be included in the Plan as of the first day of the month coincident with or next following the later of the PG&E Employee's employment date or the date on which he first completes an Eligibility Year of Service as provided in Paragraph (5) below.
(2) PG&E Employees who (A) were actively employed by PG&E on January 1, 1997 and (B) attain their fortieth (40th) birthday on or before January 1, 2002 shall not be subject to provisions of Article XV of the Plan.
(3) If and when a PG&E Employee attains his Early Retirement
Date, Normal Retirement Date, or Deferred Retirement Date, or
terminates service for any reason subject to the requirements of
Section 8.1 or 8.2, he shall be entitled to receive Retirement Income
based on both his Accredited Service with an Employing Company and his
service for benefit purposes as defined and accrued under the Pacific
Gas and Electric Company Retirement Plan (the "PG&E Plan") which shall
be treated as if Accredited Service under this Plan. To calculate such
PG&E Employee's Retirement Income, the PG&E Employee's Accrued
Retirement Income, as determined in accordance with Section 5.1, shall
first be reduced by the Employee's accrued benefit in the PG&E Plan,
determined as if he retired from PG&E on his Normal Retirement Date, as
defined in the PG&E Plan on April 1, 1999. Thereafter, such PG&E
Employee's Retirement Income shall be subject to applicable reductions,
if any, in accordance with Article V, Section 8.1 and Section 8.2, as
appropriate.
(4) For purposes of calculating Retirement Income, such PG&E Employee's actual salary history with PG&E shall be included. With respect to determining the Social Security Offset and the level income option set forth in the last paragraph of Section 5.5, if the actual salary history is not available from PG&E, such history shall be estimated in accordance with Section 5.4.
(5) For vesting and participation purposes, such PG&E Employee shall be entitled to receive Vesting and Eligibility Years of Service as provided under the Plan and, in addition, shall be entitled to vesting and eligibility service equal to such service as defined and accrued under the PG&E Plan.
6.
Effective July 1, 1999, Article XVI of the Plan shall be amended by adding the following to the end thereof:
(1) Effective July 1, 1999, notwithstanding any other provision of the Plan to the contrary, any former employees of Orange and Rockland Utilities, Inc. ("O&R") who were employed by Southern Energy Resources, Inc. and are set forth on a schedule of employees acknowledged by the Retirement Board (hereinafter "O&R Employees") shall be included in the Plan as of the first day of the month coincident with or next following the later of the O&R Employee's employment date or the date on which he first completes an Eligibility Year of Service as provided in Paragraph (8) below.
(2) Notwithstanding anything in the Plan to the contrary, the monthly Retirement Income payable to an O&R Employee shall be a monthly Retirement Income determined as a single life annuity commencing on his Normal Retirement Date equal to (A) the Allowance payable to such O&R Employee as defined under the Employees' Retirement Plan of Orange and Rockland Utilities, Inc. ("O&R Plan") on June 30, 1999 ("Closing Date") and as accrued under the O&R Plan for periods prior to the Closing Date ("O&R Benefit") and (B) one-twelfth (1/12) of two percent (2%) of the O&R Employee's Earnings received during each year of Accredited Service under the Plan for periods beginning on and after the Closing Date. In addition, for purposes of (B) above, immediately prior to an O&R Employee's separation from the service of an Employing Company, such O&R Employee shall be credited with two additional years of Accredited Service, with Earnings credited during each of these two additional years of Accredited Service equal to his Earnings at the time he separates from service.
(3) Notwithstanding anything in the Plan to the contrary, the Early Retirement Date of an O&R Employee under the Plan shall be the first day of the month following the date such O&R Employee retires on or after his fifty-fifth (55th) birthday, provided such O&R Employee has accrued ten (10) or more years of Accredited Service. For such purpose, the O&R Employee's Credited Service for periods prior to April 8, 1999, and Eligible Service for periods on and after April 8, 1999 and prior to the Closing Date, as such service is defined and accrued under the O&R Plan, shall be treated as Accredited Service under this Plan. The amount of such O&R Employee's Retirement Income shall be determined in accordance with Paragraph (2) above, reduced by one-third of one-percent (.333%) for each complete calendar month by which the commencement date precedes the first day of the month following the O&R Employee's sixtieth (60th) birthday. The reduction in the preceding sentence shall be in lieu of the reduction described in Section 5.5. No reduction of an O&R Employee's Retirement Income shall be made, however, if the sum of such O&R Employee's number of years of Accredited Service (including his Eligible Service under the O&R Plan prior to the Closing Date) and his age as of his Early Retirement Date equals or exceeds eighty-five (85).
(4) In addition to the other benefits described herein, an O&R Employee who retires from service after his Early Retirement Date and whose Retirement Income commences after his sixtieth (60) birthday and before his sixty-second (62nd) birthday shall receive a supplemental payment of six hundred dollars ($600.00) for each month beginning on the date his Retirement Income commences. Such supplemental payments shall cease after payment is made for the month which includes such O&R Employee's sixty-second (62nd) birthday or the month during which the O&R Employee dies, whichever is earlier. This supplemental payment shall not be paid as an optional form of payment under the Plan and shall not be payable to any Provisional Payee. Notwithstanding the foregoing, in any event, the supplemental payment shall not be paid under this Plan to the extent that a supplemental payment is payable under the O&R Plan.
(5) The Retirement Income payable to an O&R Employee who is entitled to receive Retirement Income in accordance with Article VIII shall be determined in accordance with paragraph (2). Such O&R Employee may elect to receive his vested Retirement Income as of the first day of any month after his fifty-fifth (55th) birthday provided such O&R Employee has accrued ten (10) or more years of Accredited Service or as of his Normal Retirement Date. For such purpose, the O&R Employee's Credited Service for periods prior to April 8, 1999, and Eligible Service for periods on and after April 8, 1999 and prior to the Closing Date, as such service is defined and accrued under the O&R Plan, shall be treated as Accredited Service under this Plan. Such Retirement Income shall be reduced by one-half of one-percent (.5%) for each calendar month by which the commencement date precedes the first day of the month following the O&R Employee's sixty-fifth (65th) birthday. The reduction in the preceding sentence shall be in lieu of the reduction described in Section 8.2.
(6) For purposes of calculating the level income option set forth in the last paragraph of Section 5.5 , the actual pay history of an O&R Employee with O&R shall be utilized. If the actual pay history is not available from O&R, such history shall be estimated in accordance with Section 5.4.
(7) If and when an O&R Employee attains his Early Retirement
Date, Normal Retirement Date, or Deferred Retirement Date, or
terminates service for any reason subject to the requirements of
Section 8.1 or 8.2, his Retirement Income shall be offset by the
largest O&R Benefit payable under the O&R Plan as of (A) the Closing
Date, (B) the date such O&R Employee's benefits commence under this
Plan or (C) any date during the period beginning on the Closing Date
and ending on the date such O&R Employee's benefits commence under this
Plan. Notwithstanding the preceding sentence, in the event that an O&R
Employee is not eligible to receive an O&R Benefit prior to his
sixty-fifth (65th) birthday, the amount of the offset shall (A) in the
event that the O&R Employee's Retirement Income commences prior to his
sixty-fifth (65th) birthday, be reduced when he attains his sixty-fifth
(65th) birthday by the largest O&R Benefit payable to such O&R
Employee, regardless of whether such O&R Benefit actually commences
when he attains his sixty-fifth (65th) birthday, or (B) in the event
that the O&R Employee's Retirement Income commences on or after he
attains his sixty-fifth (65th) birthday, be reduced by the amount of
the O&R Benefit payable to such O&R Employee at the time his Retirement
Income commences, regardless of whether his O&R Benefit commences at
such time. Any reduction described above shall be made after an O&R
Employee's Retirement Income is adjusted in accordance with Article V,
or Section 8.1 and Section 8.2, as appropriate. The offsets set forth
in this Paragraph shall be further described in an Offset Summary
adopted by the Retirement Board, which shall be used as a reference to
calculate the amount of the O&R Plan offsets.
(8) For purposes of vesting and participation, an O&R Employee shall accrue service as provided under the Plan and, in addition, shall be entitled to service credit for these purposes equal to his Eligible Service as defined and accrued under the O&R Plan prior to the Closing Date.
(9) For purposes of Paragraph (2) above, Earnings shall have the same meaning as set forth in Section 1.13 of the Plan modified as follows: (A) during a Plan Year in which an O&R Employee is employed, Earnings shall include the rate of salary or wages actually paid to such O&R Employee, plus actual annual incentive payments made to the O&R Employee for which he is eligible; (B) for the two year period credited in accordance with the last sentence of Paragraph (2), Earnings shall have the same meaning as set forth in (A) above, except that it shall be based on such O&R Employee's rate of salary or wages in effect as of his separation from service.
7.
Effective January 1, 1997, Section 1.14(a) of the Georgia Power Company Schedule and Section 1.13(a) of the Southern Nuclear Operating Company, Inc. Schedule shall be amended by replacing the term "nuclear plan premium" with the term "nuclear plant premium" in each place where such term appears.
8.
Except as amended herein by this Fourth Amendment, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly authorized officer, has adopted this Fourth Amendment to The Southern Company Pension Plan pursuant to resolutions of the Board of Directors of Southern Company Services, Inc. this ____ day of ___________________, 1999, to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By: ________________________
Its: ________________________
FIFTH AMENDMENT TO
THE SOUTHERN COMPANY
PENSION PLAN
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") heretofore adopted The Southern Company Pension Plan, as amended and restated (the "Plan"), effective January 1, 1997; and
WHEREAS, the Company desires to amend the Plan to clarify offset provisions applicable to the benefits provided to former Scott Paper Company employees; and
WHEREAS, the Company desires to amend the Plan to clarify offset provisions applicable to the benefits provided to certain employees formerly employed by Commonwealth Energy System; and
WHEREAS, the Company desires to amend the Plan to clarify the benefit and offset provisions applicable to certain employees formerly employed by Commonwealth Edison of Indiana; and
WHEREAS, the Company is authorized pursuant to Section 13.1 of the Plan to amend the Plan at any time.
NOW, THEREFORE, the Company hereby amends the Plan as follows to be effective as provided herein:
1.
Effective January 1, 1995, Section 16.1(a) of the Plan shall be amended by deleting such subsection (a) in its entirety and substituting the following in lieu thereof:
(a) Former Scott Paper Company Employees. Effective January 1, 1995, notwithstanding any other provision of the Plan to the contrary, with respect to a former, non-collective bargaining unit employee of Scott Paper Company who was employed by Southern Electric International, Inc. as of December 17, 1994 as set forth on Schedule 2.1 of the Employee Transition Agreement entered into by and among Mobile Energy Services Company, Inc., Southern Electric International, Inc. and Scott Paper Company (hereinafter referred to in this Section 16.1(a) as the "Scott Scheduled Employee"):
(1) Such Scott Scheduled Employee shall be eligible to participate in the Plan effective January 1, 1995.
(2) Such Scott Scheduled Employee, if and when he attains his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, or terminates service for any other reason subject to the requirements of Section 8.1 or 8.2, shall be entitled to receive Retirement Income based on both his Accredited Service with an Employing Company and the service accrued under the Scott Paper Company Pension Plan for Salaried Employees (the "Scott Salaried Plan") which shall be treated as if Accredited Service under this Plan. To calculate such Scott Scheduled Employee's Retirement Income, the Scott Scheduled Employee's Accrued Retirement Income, as determined in accordance with Section 5.1, shall first be reduced by the applicable reductions, if any, set forth in Article V, Section 8.1 and Section 8.2, as appropriate. Thereafter, such Scott Salaried Employee's Accrued Retirement Income shall be reduced by such Employee's accrued benefit in the Scott Salaried Plan, as set forth in Schedule A attached hereto (the "Scheduled Benefit"). Prior to the subtraction of the Scheduled Benefit from the Scott Scheduled Employee's Accrued Retirement Income, the Scheduled Benefit will be reduced to reflect the age at which the Employee's Retirement Income is scheduled to commence (the "Southern Commencement Date") in accordance with the applicable reduction factors set forth in Schedule A.
(3) For purposes of calculating the Social Security
Offset and the level income option set forth in the last
paragraph of Section 5.5, the actual salary history of a Scott
Scheduled Employee with Scott Paper Company shall be included.
If the actual salary history is not available from Scott Paper
Company, such history shall be estimated in accordance with
Section 5.4.
(4) For vesting purposes, such Scott Scheduled Employee shall be entitled to receive Vesting Years of Service as provided in Section 1.41 and, in addition, shall be entitled to vesting service equal to the sum of the years of vesting service accrued under each defined benefit pension plan maintained by Scott Paper Company in which such Scott Scheduled Employee participated.
2.
Effective January 1, 1998, Section 16.1(b) of the Plan, as amended by the First Amendment and Second Amendment to the Plan, is further amended by deleting such subsection (b) in its entirety and substituting the following in lieu thereof:
(b) Former Commonwealth Edison of Indiana Employees. Effective January 1, 1998, notwithstanding any other provision of the Plan to the contrary, any former employee of Commonwealth Edison of Indiana ("ComEd") who was employed by Southern Energy Resources, Inc. on or before December 31, 1997 and is set forth on a schedule of employees acknowledged by the Retirement Board (hereafter "January 1 ComEd Employees") shall be eligible to participate in the Plan effective January 1, 1998. In addition, any former employee of ComEd who becomes employed by Southern Energy Resources, Inc. on or after January 1, 1998 but prior to April 1, 1998 (hereafter "Date of Employment") and is set forth on the schedule of employees acknowledged by the Retirement Board (hereafter "Pre-April 1 ComEd Employees") shall become a participant as of the first day of the month coincident with or next following such employee's Date of Employment. The following provisions of this subparagraph (b) shall also apply with respect to all January 1 ComEd Employees and Pre-April 1 ComEd Employees (hereafter jointly referred to as "ComEd Scheduled Employees"):
(1) Such ComEd Scheduled Employee, if and when he attains his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, or terminates service for any reason subject to the requirements of Section 8.1 or 8.2, shall be entitled to receive the greater of A or B below:
(A) Retirement Income based on both his Accredited Service with an Employing Company and the service accrued under the Commonwealth Edison Company of Indiana Service Annuity System Plan (the "ComEd Plan") which shall be treated as if Accredited Service under this Plan. To calculate such ComEd Scheduled Employee's Retirement Income under this subsection (A), the ComEd Scheduled Employee's Accrued Retirement Income, as determined in accordance with Section 5.1, subject to the provisions of Article XV of the Plan, shall first be reduced by the Employee's accrued benefit in the ComEd Plan, determined as if he retired from ComEd at his normal retirement age, as that term is defined in the ComEd Plan on December 31, 1997 and as set forth on Schedule B attached hereto (the "ComEd Reduction Amount"). For each full year of Accredited Service with an Employing Company earned by a ComEd Scheduled Employee, up to a maximum of 10 years, the ComEd Reduction Amount shall be reduced by 5% with the maximum reduction equal to 50% of the original ComEd Reduction Amount. Thereafter, such Employee's Retirement Income shall be subject to applicable reductions, if any, in accordance with Article V (subject to the provisions in Article XV), Section 8.1 and Section 8.2, as appropriate.
(B) Retirement Income based on his Accredited Service with an
Employing Company and disregarding any service accrued under the ComEd
Plan, subject to applicable reductions, if any, in accordance with
Article V (subject to the provisions in Article XV), Section 8.1 and
Section 8.2, as appropriate.
(2) For purposes of calculating the level income option set forth in the last paragraph of Section 5.5, the actual salary history of a ComEd Scheduled Employee with ComEd shall be included. If the actual salary history is not available from ComEd, such history shall be estimated in accordance with Section 5.4.
(3) For vesting purposes, such ComEd Scheduled Employee shall be entitled to receive Vesting Years of Service as provided in Section 1.41 and, in addition, shall be entitled to vesting service equal to the years of service accrued under the ComEd Plan.
3.
Effective January 1, 1999, Section 16.1(c) of the Plan, as added by the Third Amendment to the Plan and amended by the Fourth Amendment to the Plan, shall be amended by deleting such subsection (c) in its entirety and substituting the following in lieu thereof:
(1) Effective January 1, 1999, notwithstanding any other provision of the Plan to the contrary, any former employees of Commonwealth Energy System ("CES") who were employed by Southern Energy Resources, Inc. and are set forth on Schedule C attached hereto (hereinafter "CES Employees") shall be included in the Plan as of the first day of the month coincident with or next following the later of the CES Employee's employment date or the date on which he first completes an Eligibility Year of Service as provided in Paragraph (5) below.
(2) CES Employees who (A) were actively employed by CES on January 1, 1997 and (B) attain their fortieth (40th) birthday on or before January 1, 2002 shall not be subject to provisions of Article XV of the Plan.
(3) If and when a CES Employee attains his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date, or terminates service for any reason subject to the requirements of Section 8.1 or 8.2, he shall be entitled to receive Retirement Income based on both his Accredited Service with an Employing Company and the Credited Service as defined under The Pension Plan for Employees of Commonwealth Energy System and Subsidiary Companies (the "CES Plan") which shall be treated as Accredited Service under this Plan. However, after applicable reductions for early commencement as provided in Article V, Section 8.1 and Section 8.2, as appropriate, but prior to adjustments for forms of payment, a CES Employee's Accrued Retirement Income will be reduced by the benefit attributable to Credited Service accrued by a CES Employee under the CES Plan as set forth in Schedule C attached hereto (the "Scheduled Benefit"). Prior to the Scheduled Benefit being subtracted from a CES Employee's Retirement Income, it will be reduced to reflect the age at which the CES Employee's Retirement Income is scheduled to commence (the "Southern Commencement Date"). Such early retirement reductions shall be determined (A) for a CES Employee who is at least age 55 but not yet 65 on his Southern Commencement Date, by applying the factors set forth in the definition of Actuarial Equivalent contained in Section 8 of Schedule D attached hereto for each calendar month by which the Southern Commencement Date precedes his sixty-fifth (65th) birthday; and (B) for a CES Employee who is under age 55 on his Southern Commencement Date, by first applying the reduction factors in (A) for ages 55 to 65 and then applying an additional reduction equal to one-third of one-percent (.333%) for each calendar month by which the Southern Commencement Date precedes his fifty-fifth (55th) birthday. Notwithstanding the above, the Scheduled Benefit of CES Employees who are specifically designated on Schedule C to have 75 points shall not be subject to the early retirement reductions described in (A) above but shall be subject to those reductions described in (B) above (relating to those CES Employees with a Commencement Date that precedes their fifty-fifth (55th) birthday), if applicable.
(4) For purposes of calculating Retirement Income, such CES Employee's actual salary history with CES shall be included. With respect to determining the Social Security Offset and the level income option set forth in the last paragraph of Section 5.5, if the actual salary history is not available from CES, such history shall be estimated in accordance with Section 5.4.
(5) For vesting and participation purposes, such CES Employee shall be entitled to receive Vesting and Eligibility Years of Service as provided under the Plan and, in addition, shall be entitled to vesting and eligibility service equal to the years of service as defined and accrued under the CES Plan.
(6) Notwithstanding any provision in this Plan to the contrary, a CES Employee's Retirement Income will not be less than the greater of (A) his Retirement Allowance or (B) his vested benefit, as described in Schedule D attached hereto which summarizes the benefit provisions provided by the CES Plan on December 31, 1998, as of the earlier of his retirement, termination of employment, or December 31, 2001. Such determination will be made prior to any adjustment for forms of payments.
(7) For purposes of this 16.1(c), Earnings shall mean the following:
(A) With respect to Paragraph (3) above, for periods on and after January 1, 1999, Earnings is defined in Paragraph 1.13 and for periods before January 1, 1999, Earnings shall have the same meaning as the term "Compensation" as provided under the CES Plan during the applicable period.
(B) With respect to determining the minimum benefit provided in Paragraph (6) above, Earnings shall have the same meaning as Compensation as provided under the CES Plan prior to January 1, 1999 and from the period January 1, 1999 to December 31, 2001 shall mean the authorized basic rate of compensation at Southern Energy Resources, Inc. ("SERI") as in effect on January 1 each year, converted to an annual basis, exclusive of all compensation in the form of pay for overtime, commissions, bonuses and the like; but inclusive of amounts deferred under a salary reduction agreement for that year. Notwithstanding anything contained herein to the contrary, a CES Employee's Compensation for any Plan Year as determined under the preceding sentence shall not exceed $150,000.00 (or such higher limit as determined by the Secretary of the Treasury under Section 401(a)(17) of the Code).
IN WITNESS WHEREOF, Southern Company Services, Inc., through its duly authorized officer, has adopted this Fifth Amendment to The Southern Company Pension Plan pursuant to resolutions of the Board of Directors of Southern Company Services, Inc. this ____ day of , 2000, to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By:
By: ________________________
Its: ________________________
SIXTH AMENDMENT TO
THE SOUTHERN COMPANY
PENSION PLAN
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") heretofore adopted The Southern Company Pension Plan, as amended and restated (the "Plan"), effective January 1, 1997;
WHEREAS, Southern Energy, Inc. ("SEI"), an Employing Company under the Plan, will through a subsidiary become the employer of certain individuals currently employed by Southern Company Energy Marketing, L.P. ("SCEM") following a reorganization of SCEM;
WHEREAS, The Southern Company ("Southern") anticipates that in 2001 it will distribute pro rata to the Southern shareholders all of the stock of SEI held by Southern pursuant to a tax-free spin-off under Section 355 of the Internal Revenue Code;
WHEREAS, in connection with such transaction, Southern and SEI have entered into an Employee Matters Agreement ("Agreement") to allocate between them assets, liabilities and responsibilities with respect to certain employee compensation, benefit plans, and programs, and certain employment matters;
WHEREAS, the Company desires to amend the Plan to exclude the former SCEM employees from participation in the Plan by virtue of their employment with SEI;
WHEREAS, the Company desires to amend the Plan to address the spin-off of SEI from Southern, including making such changes as are pursuant to the Agreement;
WHEREAS, the Company desires to amend the Plan to authorize participation by employees represented by the International Brotherhood of Electrical Workers Local 1208 and Office and Professional Employees International Union Local 455, pursuant to negotiated collective bargaining agreements;
WHEREAS, the Company desires to amend the Plan to clarify the Accredited Service awarded under the Prior Plans;
WHEREAS, the Company desires to amend the Plan to make certain technical changes and to reflect recent changes in the law; and
WHEREAS, the Company is authorized, pursuant to Section 13.1 of the Plan, to amend the Plan at any time.
NOW, THEREFORE, the Company hereby amends the Plan as follows, effective as of January 1, 1997, unless indicated otherwise below:
1.
The first paragraph of Section 1.36, "Social Security Offset," shall be amended, effective January 1, 1998, to read as follows:
1.36 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary Social
Security benefit (primary old age insurance benefit) to which it is
estimated that an Employee will become entitled in accordance with the
Social Security Act in force as provided in subparagraphs (a) through
(e) below which shall exceed $168 per month on and after January 1,
1989, $250 per month on and after January 1, 1991, for Employees who
(a) are not covered by the terms of a collective bargaining agreement
or (b) are covered by the terms of a collective bargaining agreement
but where the bargaining unit representative and an Employing Company
have mutually agreed to participation in the Plan as amended, $325 per
month on and after January 1, 1996, and for Employees who are covered
under a collective bargaining agreement with IBEW Local 1208, $350 per
month on and after January 1, 1998, multiplied by a fraction not
greater than one, the numerator of which shall be the Employee's total
Accredited Service, and the denominator of which shall be such total
Accredited Service plus the Accredited Service the Employee could have
accumulated if he had continued his employment from the date he
terminates service with any Affiliated Employer until his Normal
Retirement Date. For purposes of determining the estimated Federal
primary Social Security benefit used in the Social Security Offset, an
Employee shall be deemed to be entitled to receive Federal primary
Social Security benefits after retirement or death, if earlier,
regardless of the fact that he may have disqualified himself to receive
payment thereof. In addition to the foregoing, the calculation of the
Social Security benefit shall be based on the salary history of the
Employee as provided in Section 5.4 and shall be determined pursuant to
the following, as applicable:
2.
Article II, "Eligibility," shall be amended by adding the following new
Section 2.8 to the end:
2.8 Exclusion of Certain Employees of Southern Energy Resources, Inc. Notwithstanding any other provision of this Article II, the following Employees who would otherwise be eligible to participate in the Plan by virtue of their employment by Southern Energy Resources, Inc. ("SERI") shall not be eligible to participate in the Plan:
(a) individuals employed by Southern Company Energy Marketing, L.P. ("SCEM") on December 22, 2000;
(b) Employees hired by SERI on or after December 23, 2000, who are employed in the Americas Group and whose job function is listed on Attachment A attached hereto. 3.
Section 2.8, "Exclusion of Certain Employees of Southern Energy Resources, Inc.," shall be amended to read as follows, effective as of the Group Status Change Date as defined in the Agreement:
2.8 Exclusion of Certain Employees of Southern Energy, Inc. Notwithstanding any other provision of this Article II, Employees who are eligible to participate in the Plan by virtue of their employment by Southern Energy, Inc. or any subsidiary or affiliate thereof shall not be eligible to participate in the Plan.
4.
Section 4.1, "Accredited Service pursuant to Prior Plan," shall be deleted in its entirety and replaced with the following:
4.1 Accredited Service pursuant to Prior Plan.
-----------------------------------------
(a) Each Employee who participated in the Prior Plans shall
be credited with such Accredited Service, if any, earned under
such Prior Plans as of December 31, 1996.
(b) In addition to any Accredited Service credited under
Section 4.1(a), an Employee shall be entitled to Accredited
Service determined under the Prior Plans, without regard to the
age requirement for eligibility to participate in the Prior
Plans, in excess of the Accredited Service determined under the
Prior Plans (including the age requirement for eligibility to
participate in the Prior Plans). Such Accredited Service shall be
considered Accredited Service after December 31, 1985 for
purposes of calculating an Employee's Retirement Income under
Articles V, XV or XVII.
5.
Section 4.4, "Accrual of Retirement Income during period of total
|
disability," shall be amended by adding the following new subsection (e) (and redesignating the current subsection (e) as subsection (f)):
(e) (i) If an Employee's Disability Leave terminates on or after his Normal Retirement Date and he fails to return to the employment of an Employing Company within sixty (60) days after the termination of such leave, his service shall be deemed to have terminated upon the termination of his Disability Leave and such termination of service shall be deemed to constitute his retirement under Section 3.3.
(ii) An Employee whose Disability Leave continues beyond his Normal Retirement Date based on entitlement to long-term disability benefits under a long-term disability plan of an Employing Company shall have payment of his Retirement Income suspended pursuant to Code Section 411(a)(3)(B) until he is no longer eligible under a long-term disability plan of an Employing Company. Such Employee shall then receive Retirement Income determined as of the date such eligibility ends. However, if the Employee's Disability Leave continues after the date the Employee ceases to be eligible for the long-term disability plan of an Employing Company based on entitlement to Social Security Disability benefits, his Retirement Income for the period after his Normal Retirement Date shall be determined under Subsection (iii).
(iii) An Employee whose Disability Leave continues for any period after his Normal Retirement Date based solely on his entitlement to Social Security Disability benefits shall receive Retirement Income as of his Deferred Retirement Date. However, if his Deferred Retirement Date occurs in a Plan Year subsequent to the Plan Year in which occurs his Normal Retirement Date, his Retirement Income shall not be less than his Retirement Income adjusted for commencement after his Normal Retirement Date. For the Plan Year following the Plan Year in which occurs the Employee's Normal Retirement Date, his adjusted Retirement Income shall be equal to the greater of his Retirement Income determined as of such date or the Actuarial Equivalent of his Retirement Income computed as of his Normal Retirement Date. For the next Plan Year, his adjusted Retirement Income shall be equal to the greater of his Retirement Income determined as of such Plan Year or the Actuarial Equivalent of his adjusted Retirement Income computed as of the end of the prior Plan Year. This process shall be repeated each Plan Year until the termination of his Disability Leave.
6.
Section 5.7, "Payment of Retirement Income," shall be amended, effective January 1, 2000, by adding the following to the end of the second paragraph:
However, if an Employee fails to make an election pursuant to this
Section 5.7 within the thirty (30) day period immediately preceding his
Retirement Date, his Retirement Income shall be determined as of his
Retirement Date and payment thereof shall commence as soon as
administratively feasible following his election to retire, provided
his election occurs not more than ninety (90) days after his Retirement
Date. If the election is made more than ninety (90) days following an
Employee's Retirement Date, his benefits shall commence as soon as
administratively feasible and his Retirement Income shall be determined
as of the first day of the month following submission of his election.
7.
Subsection (3) of Section 5.9(b), "Required minimum distributions," shall be deleted in its entirety and replaced with the following:
(3) With respect to an Employee who retires after attaining age
70-1/2 and who has not previously commenced receipt of his
Retirement Income pursuant to this Section 5.9(b) while an
Employee of an Affiliated Employer, the amount of his
Retirement Income shall be computed as of the end of the Plan
Year the Employee attains age 70-1/2 and shall be recomputed
as of the close of each Plan Year thereafter and preceding his
Deferred Retirement Date. With respect to each Plan Year
following the Plan Year the Employee attains age 70-1/2, his
Retirement Income shall equal the greater of his Retirement
Income determined as of such Plan Year or the Actuarial
Equivalent of his Retirement Income computed as of the end of
the Plan Year he attains age 70-1/2. For the next Plan Year,
his adjusted Retirement Income shall be equal to the greater
of his Retirement Income determined as of such Plan Year or
the Actuarial Equivalent of his adjusted Retirement Income
computed as of the end of the prior Plan Year. This process
shall be repeated each Plan Year until his Deferred Retirement
Date.
8.
Section 5.9(b), "Required minimum distributions," shall be amended by
adding a new subsection (4) as follows:
(4) If a former Employee who is receiving Retirement Income shall
be reemployed by any Affiliated Employer as an Employee and
his Retirement Income is suspended in accordance with Section
5.10(b), the Retirement Income payable upon his subsequent
retirement shall be adjusted in accordance with Section
5.9(b)(3) if his subsequent retirement occurs after he attains
age 70-1/2, but shall be reduced by the Actuarial Equivalent
of any Retirement Income he received prior to his reemployment
in accordance with Section 5.10(b).
9.
Section 5.10, "Suspension of Retirement Income for reemployment," shall
|
be renamed "Suspension of Retirement Income," and shall be amended to read as follows:
(a) The Retirement Income of an Employee who remains
in active service after his Normal Retirement Date
shall be suspended for each calendar month after his
Normal Retirement Date during which he completes
forty (40) or more Hours of Service, pursuant to
ERISA Section 203(a)(3)(B) ("ERISA Section
203(a)(3)(B) Service").
(b) If a former Employee who is receiving Retirement Income shall be reemployed by any Affiliated Employer as an Employee and shall not elect to waive his right to participate under the Plan or the pension plan of the Affiliated Employer, whichever applies, his Retirement Income shall be suspended for each calendar month after his reemployment during which he is employed in ERISA Section 203(a)(3)(B) Service. The Retirement Income payable upon his subsequent retirement shall be reduced by the Actuarial Equivalent of any Retirement Income he received prior to his reemployment.
(c) No payment shall be suspended by the Plan pursuant to this Section 5.10 unless the Plan notifies the Employee by personal delivery or first class mail during the first calendar month in which the Plan withholds payments that his Retirement Income is suspended.
(d) If the payment of Retirement Income has been suspended, payments shall resume no later than the first day of the third calendar month after the calendar month in which the Employee ceases to be employed in ERISA Section 203(a)(3)(B) service. The initial payment upon resumption shall include the payment scheduled to occur in the calendar month when payments resume and any amounts withheld during the period between the cessation of ERISA Section 203(a)(3)(B) service and the resumption of payments.
10.
Effective for plan years beginning on or after January 1, 2000, Section 6.4, "Limitation on benefits from multiple plans," Section 6.5, "Special rules for plans subject to overall limitations under Code Section 415(e)," and Section 6.6, "Combination of plans," shall be deleted in their entirety and replaced with the following (and Section 6.7 shall be renumbered as Section 6.5):
(a) For purposes of the limitations described in
Section 6.1 of the Plan and Section 415 of the Code,
all defined benefit plans (whether or not terminated)
maintained by an Affiliated Employer shall be treated
as one defined benefit plan.
(b) Notwithstanding any provisions contained herein
to the contrary, in the event that an Employee
participates in another defined benefit plan required
to be aggregated with this Plan under Code Section
415(g) and the combined benefits with respect to an
Employee exceed the limitations contained in Code
Section 415(b), corrective adjustments shall first be
made under this Plan.
11.
Subsection (c) of Section 8.5, "Calculation of present value for cash-out of benefits and for determining amount of benefits," shall be deleted in its entirety and replaced with the following, effective as of January 1, 2001:
(c) For purposes of this Section 8.5, "Applicable Interest Rate" shall be calculated by using the annual rate of interest on 30-year Treasury securities for the month of August in the Plan Year which precedes the Plan Year in which such present value is determined and by using the prevailing commissioners' standard table used to determine reserves for group annuity contracts in effect on the date as of which the present value is being determined. Notwithstanding the foregoing, for the Plan Year beginning January 1, 2001, the Applicable Interest Rate shall be calculated using the annual rate of interest on 30-year Treasury securities for the month of August, or for the month of November, in the Plan Year which precedes such Plan Year, whichever month produces the greater amount.
12.
Effective on and after the date this amendment is adopted, Article XVII of the Plan shall be amended in its entirety to read as set forth below:
Article XVII
17.1 Definition of Terms Used in this Article XVII and the SEPCO Schedule.
(a) "SEPCO" shall mean Savannah Electric and Power Company.
(b) "SEPCO Plan" shall mean the Employees' Retirement Plan of Savannah Electric and Power Company, as amended and restated January 1, 1997.
(c) "SEPCO Schedule" shall mean the Schedule attached to the Plan and made a part thereof containing the provisions of the SEPCO Plan as merged into the Plan effective January 1, 1998 which shall apply to SEPCO Employees and Covered SEPCO Employees.
(d) "SEPCO Employee" shall mean an Employee as defined in the SEPCO Plan having an Hour of Service under the SEPCO Plan on or after January 1, 1997. This shall include persons represented by a collective bargaining agent where such agent and SEPCO have mutually agreed to participate in the Plan. This shall not include employees who are hired or rehired at SEPCO after December 31, 1997 or rescind a waiver of participation under Section 3.8 of the SEPCO Plan or SEPCO Schedule on or after January 1, 1998 that was in effect on December 31, 1997. Notwithstanding anything to the contrary above, Covered SEPCO Employees shall be considered SEPCO Employees unless otherwise provided in this Article XVII or otherwise required by law.
(e) "Covered SEPCO Employee" shall mean an Employee or former Employee who is or was represented by the International Brotherhood of Electrical Workers ("IBEW") Local 1208 or the Office and Professional Employees International Union ("OPEIU") Local 455, who has an Hour of Service under the SEPCO Plan or SEPCO Schedule on or after January 1, 1997. An Employee who is represented by IBEW Local 1208 and is hired or re-hired on or after January 1, 1999 or who is represented by OPEIU Local 455 and is hired or re-hired on or after January 1, 2000 shall not be considered a Covered SEPCO Employee. Rather, such Employee shall be treated only as an Employee under the Plan.
17.2 [RESERVED]
17.3 SEPCO Employees Eligibility in the New Pension Program
(a) The following SEPCO Employees shall be subject to this Section 17.3 of the Plan:
(1) SEPCO Employees, including Covered SEPCO Employees, who are actively employed by SEPCO on January 1, 1997 but who will not attain their fortieth (40th) birthday on or before January 1, 2002, or
(2) SEPCO Employees, including Covered SEPCO Employees, who are hired or re-hired by SEPCO after January 1, 1997, or
(3) SEPCO Employees who are not members of an eligible class of SEPCO Employees on or after January 1, 1997 and have not previously participated in the SEPCO Plan.
(b) The monthly Retirement Income payable as a single
life annuity to a SEPCO Employee described in Section
17.3(a) (or his Provisional Payee) who retires from the
service of SEPCO or another Employing Company at his Normal
Retirement Date or Deferred Retirement Date (before
adjustment for a Provisional Payee designation, if any)
after January 1, 1997, subject to the limitations in Article
VI, shall be the greater of (1) and (2) below:
(1) 1.0% of his Average Monthly Earnings
multiplied by his years (and fraction of a
year) of Accredited Service, without
application of the limitation described in
Section 4.2(e), to his Normal Retirement
Date or Deferred Retirement Date; or
(2) $25 multiplied by his years (and fraction of a year) of Accredited Service, without application of the limitation described in Section 4.2(e), to his Normal Retirement Date or Deferred Retirement Date.
(c) Notwithstanding paragraph (b) above, if the Allowance of a SEPCO Employee determined under the SEPCO Schedule as of the earlier of his retirement or termination of employment with SEPCO or December 31, 2001 would be greater, such SEPCO Employee shall be entitled when eligible to receive payments of such greater Allowance upon his retirement or termination of employment with SEPCO or another Employing Company.
(d) Notwithstanding paragraphs (b) and (c) above, Retirement Income or Allowance, as the case may be, determined with respect to a SEPCO Employee under this Article XVII who retires on his Normal Retirement Date or Deferred Retirement Date shall not be less than the Retirement Income or Allowance which would have been payable with respect to such SEPCO Employee commencing on his earlier Retirement Date had (1) the SEPCO Employee retired on his earlier Retirement Date which would have resulted in the greatest Retirement Income or Allowance and (2) such
Retirement Income or Allowance commencing on such earlier Retirement Date been payable in the same form as his Retirement Income or Allowance commencing on his Normal |
Retirement Date or Deferred Retirement Date.
(e) With respect to SEPCO Employees described in this
Section 17.3 who retire before their Normal Retirement Date,
the monthly amount of Retirement Income provided in
paragraph (b) above shall be reduced in accordance with
Section 5.5.
(f) With respect to Covered SEPCO Employees described
in this Section 17.3 (or their Provisional Payees), the
monthly amount of Retirement Income provided in paragraphs
(b) through (e) above shall become payable as of the later
of (i) the first of the month following the Covered SEPCO
Employee's retirement, or (ii) January 1, 1998.
(g) Covered SEPCO Employees who retired or terminated employment prior to (i) July 1, 1999 for Covered SEPCO
Employees represented by IBEW and (ii) February 9, 2000 for Covered SEPCO Employees represented by OPEIU, and who commenced payment of an Allowance under the SEPCO Schedule |
shall receive a lump sum payment which is the actuarial equivalent of the difference, if any, between the Retirement Income payable pursuant to paragraphs (b) through (e) above and the Allowance they have previously received determined from their date of retirement to the earlier of their date of death or the date payment under this paragraph (g) is made. Such lump sum payments shall be made as soon as administratively feasible following adoption of these provisions. The monthly payments pursuant to paragraphs (b) through (e), if greater than the Covered SEPCO Employee's Allowance, shall be made thereafter.
(h) The Provisional Payees of Covered SEPCO Employees
described in Section 17.3 who died prior to (i) July 1, 1999
for Covered SEPCO Employees represented by IBEW and (ii)
February 9, 2000 for Covered SEPCO Employees represented by
OPEIU, after having commenced payment of an Allowance under
the SEPCO Schedule, shall receive a lump sum payment that is
the actuarial equivalent of the difference, if any, between
the survivor benefits under the Plan and the survivor
benefits under the SEPCO Schedule that the Provisional
Payees have previously received determined from the date of
the Covered SEPCO Employee's death through the earlier of
(i) the Provisional Payee's date of death, or (ii) the date
payment is made under this paragraph (h) to the Provisional
Payee. Thereafter, monthly payments shall be made to the
Provisional Payee in accordance with Section 17.5(h) of this
Article XVII.
(i) For purposes of subsections (g) and (h) of this
Section 17.3, actuarial equivalent shall mean the
value of such lump sum payment determined as of the
date of distribution of the lump sum applying the
Applicable Interest Rate as defined in Section 8.5(c)
of the Plan and using the prevailing commissioners'
standard table used to determined reserves for group
annuity contracts in effect on the date as of which
the present value is being determined.
17.4 SEPCO Employees Not Described in 17.2 or 17.3. SEPCO Employees not described in Section 17.2 or 17.3 above shall be eligible for a benefit under the Plan as described in this Section 17.4, notwithstanding any other provision of the Plan or SEPCO Schedule to the contrary.
(a) A SEPCO Employee shall be eligible to participate in the Plan and receive Retirement Income thereunder as determined under the Plan's terms and this Article XVII. Notwithstanding the preceding sentence, if such SEPCO Employee's Allowance determined as of the earlier of his retirement or termination of employment with SEPCO or December 31, 2001 would be greater, such SEPCO Employee shall be entitled when eligible to commence payments of such greater Allowance upon his retirement or termination of employment with SEPCO or another Employing Company.
(b) Notwithstanding paragraph (a) above, only with respect to
SEPCO Employees who have attained age fifty (50) and have ten
(10) or more years of Credited Service on or before January 1,
1997 or who have attained age 55 on or before January 1, 1997,
such SEPCO Employees shall be entitled to receive the greater
of their Allowance or Retirement Income upon retirement.
(c) Covered SEPCO Employees who are described in this Section
17.4 (or their Provisional Payees) shall receive the monthly
benefit described in paragraph (a) for months beginning on the
later of (i) the first of the month following their
retirement, or (ii) January 1, 1998.
(d) A Covered SEPCO Employee who retires or terminates
employment prior to (i) July 1, 1999 for Covered SEPCO
Employees represented by IBEW and (ii) February 9, 2000 for
Covered SEPCO Employees represented by OPEIU, and who
commences payment of an Allowance under the SEPCO Schedule
before such date shall receive a lump sum payment which is the
actuarial equivalent of the difference, if any, between the
benefits payable pursuant to paragraph (a) above and the
Allowance they have previously received determined from their
date of retirement to the earlier of their date of death or
the date a lump sum payment is made pursuant to this paragraph
(d). Such lump sum payments shall be made as soon as
administratively feasible following adoption of these
provisions. The monthly payments pursuant to paragraph (a)
shall be made thereafter.
(e) The Provisional Payee of a Covered SEPCO Employee
described in this Section 17.4 who died prior to (i) July 1,
1999 for Covered SEPCO Employees represented by IBEW, and (ii)
February 9, 2000 for Covered SEPCO Employees represented by
OPEIU, after having commenced payment of an Allowance under
the SEPCO Schedule shall receive a lump sum payment that is
the actuarial equivalent of the difference, if any, between
the survivor benefits under the Plan and the survivor benefits
under the SEPCO Schedule that the Provisional Payee has
previously received determined from the date of the Covered
SEPCO Employee's death through the earlier of (i) the
Provisional Payee's date of death, or (ii) the date payment is
made to the Provisional Payee under this paragraph (e).
Thereafter, monthly payments shall be made in accordance with
Section 17.5(h) of this Article XVII.
(f) For purposes of subsections (d) and (e) of this Section
17.4, actuarial equivalent shall mean the value of such lump
sum payment determined as of the date of distribution of the
lump sum applying the Applicable Interest Rate as defined in
Section 8.5(c) of the Plan and using the prevailing
commissioners' standard table used to determined reserves for
group annuity contracts in effect on the date as of which the
present value is being determined.
17.5 Special Transition Rules. Notwithstanding any other provisions in the Plan to the contrary, SEPCO Employees who participate in the Plan shall be subject to the following transition rules.
(a) In determining the greater benefit as required under Sections 17.3 and 17.4, the form of payment and any early retirement reductions with respect to the payment of Retirement Income as set forth in Articles V and VII of the Plan and of an Allowance as set forth in Articles 5 and 7 of the SEPCO Schedule shall be considered. For purposes of making the preceding determination, (1) the applicable Allowance shall first be converted to a monthly payment, and (2) the Retirement Annuities described in Article 2 of the SEPCO Schedule shall be taken into account consistent with Section 5.01 of the SEPCO Schedule.
(b) With respect to eligibility to participate in the Plan, all SEPCO Employees employed by SEPCO on December 31, 1997 who are not already eligible to participate in the Plan shall be immediately eligible to participate in the Plan.
(c) SEPCO Employees who were eligible to participate in the SEPCO Plan on December 31, 1997 shall have their Vesting Years of Service determined as if their anniversary date of hire is January 1. All SEPCO Employees who participate in the Plan shall be credited with Vesting Years of Service based upon the terms of the Plan for periods of service on and after January 1, 1998, and based upon the Continuous Service such SEPCO Employees accrued under the SEPCO Plan prior to January 1, 1998.
(d) (1) For SEPCO Employees (other than Covered SEPCO Employees):
(A) For periods of service on and after January 1, 1998, Accredited Service for SEPCO Employees shall be determined in accordance with the Plan.
(B) For periods of service on and after January 1, 1998, with respect to any Allowance a SEPCO Employee may be entitled to under the SEPCO Schedule, such Allowance shall be determined using Accredited Service in place of Credited Service.
(C) For periods of service prior to January 1, 1998, the Credited Service of a SEPCO Employee shall be used to determine such SEPCO Employee's Allowance and Retirement Income accrued prior to January 1, 1998.
(D) When calculating a SEPCO Employee's Retirement Income prior to June 1, 2000, the maximum amount of Accredited Service and Credited Service that will be considered is forty-three (43) years.
(2) For Covered SEPCO Employees:
(A) For periods of service on and after January 1, 2001, Accredited Service for Covered SEPCO Employees shall be determined in accordance with the Plan.
(B) For periods of service on and after January 1, 2001, with respect to any Allowance a Covered SEPCO Employee may be entitled to under the SEPCO Schedule, such Allowance shall be determined using Accredited Service in place of Credited Service.
(C) For periods of service prior to January 1, 2001, the Credited Service of a Covered SEPCO Employee shall be used to determine such Covered SEPCO Employee's Allowance and Retirement Income accrued prior to January 1, 2001. Such Credited Service shall count as Accredited Service to determine eligibility for retirement at age fifty pursuant to paragraph (g) below.
(D) When calculating a Covered SEPCO
Employee's Retirement Income under
Section 17.4 prior to June 1, 2000,
the maximum amount of Accredited
Service and Credited Service that
will be considered is forty-three
(43) years.
(e) For purposes of calculating Retirement Income for a SEPCO Employee, Compensation determined under the SEPCO Plan, excluding unused accrued vacation, shall be used in place of Earnings for periods of service prior to January 1, 1998.
(f) The Normal Retirement Date of a SEPCO Employee shall always be determined in accordance with the SEPCO Plan prior to January 1, 1998 and the SEPCO Schedule on and after January 1, 1998.
(g) (1) A SEPCO Employee may retire if he has
either attained age fifty-five (55) or
attained age fifty (50) and has at least ten
(10) years of Accredited Service as
determined under this Article XVII. A SEPCO
Employee who retires because he has attained
age fifty (50) and has ten (10) years of
Accredited Service may not commence receipt
of his Retirement Income or Allowance until
on or after January 1, 1998.
(2) A SEPCO Employee who retires under
paragraph (1) above having at least ten (10)
years of Accredited Service shall be
entitled to the greater of his (A)
Retirement Income determined under Section
5.5 (excluding the third paragraph thereof)
and this Article XVII or (B) Allowance
determined under this Article XVII and in
addition applying a reduction of one-third
of one percent ([OBJECT OMITTED]%) for each
calendar month by which the commencement
date precedes the first day of the month
following any such Employee's attainment of
his fifty-fifth (55th) birthday. However,
effective for SEPCO Employees who retire on
or after June 1, 2000, the term three-tenths
of one percent (0.3%) shall replace
one-third of one percent ([OBJECT OMITTED]%)
in the preceding sentence.
(3) A SEPCO Employee who retires or
terminates under paragraph (1) above after
attaining age 55 having less than ten (10)
years of Accredited Service shall be
entitled to the greater of his (A)
Retirement Income determined under Section
8.2 (without regard to the ten (10) years of
Accredited Service requirement) and this
Article XVII or (B) Allowance determined
under this Article XVII.
(h) On and after January 1, 1998, the Provisional Payees of SEPCO Employees who are not Covered SEPCO Employees shall only be entitled to benefits as provided in Article VII of the Plan. On or after January 1, 1998 but on or before December 31, 2000, Provisional Payees of Covered SEPCO Employees shall be entitled to benefits equal to the greater of (i) the benefits provided for in Article VII of the Plan, or (ii) the benefits provided for in Article 7 of the SEPCO Schedule. Provisional Payees of Covered SEPCO Employees who retire, terminate employment or die on or after January 1, 2001 shall only be entitled to benefits as provided in Article VII of the Plan.
(i) With respect to the accrual of Retirement Income or an Allowance during a period of total disability, SEPCO Employees incurring a disability on and after January 1, 1998 shall only be subject to the provisions of Section 4.4 of the Plan.
Notwithstanding the above, a Covered SEPCO Employee who incurs a disability on or after January 1, 1998 but on or before December 31, 2000 shall accrue Retirement Income or an Allowance equal to the greater of : (i) his Retirement Income determined under Section 4.4 of the Plan, or (ii) his Allowance determined under the SEPCO Schedule. Covered SEPCO Employees who become disabled on or after January 1, 2001 shall only be entitled to benefits as provided in Section 4.4 of the Plan.
(j) (1) The options for payment described in Sections 7.1(c) and (d) and Sections 7.6(c) and (d) may be elected by SEPCO Employees who are not Covered SEPCO Employees and who retire or terminate on or after January 1, 1998 and by Covered SEPCO Employees who retire or terminate on or after (i) July 1, 1999 for Covered SEPCO Employees represented by IBEW, and (ii) February 9, 2000 for Covered SEPCO Employees represented by OPEIU.
(2) Notwithstanding Section 17.3, SEPCO Employees who terminate or retire in 1997 and Covered SEPCO Employees who terminate or retire prior to January 1, 2001 and commence receipt of an Allowance shall not be eligible to change the form of benefit elected under the SEPCO Plan even if such SEPCO Employees are entitled to receive Retirement Income under this Article XVII.
(3) Notwithstanding Section 7.07(a)(Option
ii) of the SEPCO Schedule, SEPCO Employees
who are not Covered SEPCO Employees shall
not be eligible to elect a 75% joint and
survivor annuity. Covered SEPCO Employees,
however, shall be allowed to elect a 75%
joint and survivor annuity pursuant to
Section 7.07(a)(Option ii) before January 1,
2001.
(k) SEPCO Employees may elect in accordance with the SEPCO Schedule to have their benefit, whether paid as Retirement Income or an Allowance, adjusted to take into account their old-age insurance benefit under Title II of the Social Security Act. In the event that a SEPCO Employee's Retirement Income is greater than his Allowance under Section 17.3 or 17.4, the old age insurance benefit used to compute such Retirement Income shall be used to determine the amount payable under Section 5.04 of the SEPCO Schedule.
(l) Notwithstanding anything in this Article XVII to the contrary, the Accrued Benefit of any SEPCO Employee shall not be less than the Accrued Benefit such SEPCO Employee derived under the SEPCO Plan as of the earlier of retirement, termination or December 31, 1997.
(a) With respect to a transfer of employment from an Employing Company other than SEPCO to SEPCO, (1) occurring prior to January 1, 1998, the person will be treated as a SEPCO Employee under this Article XVII or (2) occurring on or after January 1, 1998, the person will be treated as an Employee under the terms of the Plan. Notwithstanding the foregoing, a person transferring to SEPCO as a Covered SEPCO Employee on or after January 1, 1998 will be treated as a SEPCO Employee. Only persons transferring to SEPCO as a Covered SEPCO Employee on or after January 1, 2001 will be treated as an Employee.
(b) With respect to a transfer of employment from SEPCO to an
Employing Company, (1) occurring prior to January 1, 1997, the
person will be treated like an Employee under Sections 4.6(a),
(c) and (d) of the Plan provided that any Retirement Income or
Allowance payable to the Employee shall be determined in
accordance with Section 17.5(a), (g), (j) and (k) or (2)
occurring on or after January 1, 1997, the person will be
treated as a SEPCO Employee or Covered SEPCO Employee,
whichever is applicable, under this Article XVII.
17.7 Application of Plan to SEPCO. To the extent not inconsistent with the provisions of this Article XVII, all the provisions of the Plan are applicable to SEPCO Employees and Covered SEPCO Employees.
13.
Section 1.14 of the SEPCO Schedule, the definition of "Employee," shall be deleted in its entirety and replaced with the following new definition:
1.14 "Employee" shall mean any person regularly employed by
the Company who receives regular stated salary, or wages paid
directly by the Company as (a) a regular full-time employee,
(b) a regular part-time employee, (c) a cooperative education
employee or (d) a temporary employee paid directly or
indirectly by the Company. Notwithstanding the preceding
sentence, on and after January 1, 1998 but before January 1,
2001, "Employee" shall be limited to Covered SEPCO Employees
as defined in Article XVII of the Plan. Thereafter, no person
employed by the Company shall be an "Employee" under this
SEPCO Schedule. For purposes of this Section 1.14, temporary
employee means a full-time or part-time employee who provides
services to the Company for a stated period of time after
which period such employee will be terminated from employment.
The term Employee shall also include Leased Employees within
the meaning of Code ss. 414(n) (2). Notwithstanding the
foregoing, if such Leased Employees constitute less than
twenty percent (20%) of the Employer's non-highly compensated
workforce within the meaning of Code ss. 414(n)(5)(C)(ii), the
term Employee shall not include those Leased Employees covered
under the SEPCO Schedule described in Code ss. 414(n)(5). The
term Employee for participation purposes shall not include any
individual who is classified by the Company as an independent
contractor or temporary employee (unless with respect to a
temporary employee who is grandfathered under this SEPCO
Schedule) regardless of whether such classification is in
error.
14.
Southern Energy, Inc. shall be removed as an Employing Company in Appendix A of the Plan, effective as of the "Group Status Change Date," as defined in the Agreement.
15.
Except as amended herein by this Sixth Amendment, the Plan shall remain in full force and effect as amended and restated by the Company prior to the adoption of this Sixth Amendment.
IN WITNESS WHEREOF, Southern Company Services, Inc. through its duly authorized officer, has adopted this Sixth Amendment to The Southern Company Pension Plan this ____ day of _________________, 2000, to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By: ______________________________
Title:____________________________
ATTEST:
By: _________________________________________________________
Title:________________________________________________________
SEVENTH AMENDMENT TO
THE SOUTHERN COMPANY
PENSION PLAN
WHEREAS, the Board of Directors of Southern Company Services, Inc. (the "Company") heretofore adopted The Southern Company Pension Plan, as amended and restated effective as of January 1, 1997 (the "Plan");
WHEREAS, pursuant to Section 13.1 of the Plan, the Company is authorized to amend the Plan at any time.
WHEREAS, the Company desires to amend the Plan to enhance the benefits of employees who are not covered by the terms of a collective bargaining agreement and employees who are covered by the terms of a collective bargaining agreement with OPEIU Local 455, IBEW Local 1208 or SPFPA Local 576; and
WHEREAS, the Company desires to amend the Plan to enhance the benefits payable to retirees.
NOW, THEREFORE, the Company hereby amends the Plan as follows, effective as of June 1, 2000, unless otherwise indicated below:
1.
The first paragraph of Section 1.36, "Social Security Offset," shall be amended to read as follows:
1.36 "Social Security Offset" shall mean an amount equal to
one-half (1/2) of the amount, if any, of the Federal primary
Social Security benefit (primary old age insurance benefit) to
which it is estimated that an Employee will become entitled in
accordance with the Social Security Act in force as provided
in subparagraphs (a) through (e) below which shall exceed:
$168 per month on and after January 1, 1989; $250 per month on
and after January 1, 1991; for Employees who (i) are not
covered by the terms of a collective bargaining agreement or
(ii) are covered by the terms of a collective bargaining
agreement but where the bargaining unit representative and an
Employing Company have mutually agreed to participation in the
Plan as amended, $325 per month on and after January 1, 1996;
for Employees who are covered by the terms of a collective
bargaining agreement with IBEW Local 1208, $350 per month on
and after January 1, 1998; and for Employees who perform an
Hour of Service on or after May 1, 2000 and who (i) are not
covered by the terms of a collective bargaining agreement or
(ii) are covered by the terms of a collective bargaining
agreement with OPEIU Local 455 or SPFPA Local 576, $350 per
month on and after May 1, 2000, multiplied by a fraction not
greater than one, the numerator of which shall be the
Employee's total Accredited Service, and the denominator of
which shall be such total Accredited Service plus the
Accredited Service the Employee could have accumulated if he
had continued his employment from the date he terminates
service with any Affiliated Employer until his Normal
Retirement Date. For purposes of determining the estimated
Federal primary Social Security benefit used in the Social
Security Offset, an Employee shall be deemed to be entitled to
receive Federal primary Social Security benefits after
retirement or death, if earlier, regardless of the fact that
he may have disqualified himself to receive payment thereof.
In addition to the foregoing, the calculation of the Social
Security benefit shall be based on the salary history of the
Employee as provided in Section 5.4 and shall be determined
pursuant to the following, as applicable:
2.
Section 2.4, "Employees reemployed," shall be deleted in its entirety and replaced with the following new Section 2.4, effective as of April 2, 2001:
(a) With respect to an Employee not described in subsection
(b), any Employee whose service terminates at any time and who
is reemployed as an Employee, unless excluded under Section
2.6, will be included in the Plan as provided in Section 2.1
unless:
(1) prior to termination of his service he had completed at least one Year of Service; and
(2) upon his reemployment, to the extent provided in
Section 8.3 without regard to Section 8.4, he is entitled to
restoration of his Years of Service, in which case he will be
included in the Plan as of the date of his reemployment.
For purposes of determining Years of Service of an Employee who is reemployed by an Affiliated Employer subsequent to a One-Year Break in Service, a Year of Service subsequent to his reemployment shall be computed on the basis of the twelve (12) consecutive month period commencing on his date of reemployment or an anniversary thereof.
(b) With respect to an Employee whose benefits transferred to the Mirant Services Pension Plan following Mirant Services (f/k/a Southern Energy Resources, Inc.) ceasing to be an Affiliated Employer on April 2, 2001 and who is later reemployed by an Employing Company, such Employee's Accredited Service shall not be restored following his reemployment, notwithstanding the provisions of Sections 8.3, 8.4 or any other provision of the Plan. However, such Employee's Eligibility Years of Service and Vesting Years of Service shall be restored to the extent provided in Section 8.3, without regard to Section 8.4 and subsection (a) above.
3.
Subsection (e) of Section 4.2, "Accredited Service," shall be amended by adding the following sentence to the end:
Notwithstanding the above, on and after May 1, 2000, for Employees who perform an Hour of Service on or after May 1, 2000 and who (i) are not covered by the terms of a collective bargaining agreement, or (ii) are covered by the terms of a collective bargaining agreement with OPEIU Local 455, IBEW Local 1208 or SPFPA Local 576, the above limit on years of Accredited Service shall no longer apply.
With respect to the Employees described above, any references in the Plan or any Schedule to the limitation under Section 4.2(e) shall be disregarded.
4.
Section 5.2, "Minimum Retirement Income payable upon retirement at Normal Retirement Date or Deferred Retirement Date," shall be amended by adding two new paragraphs immediately following the first paragraph. The current second paragraph shall become the fourth paragraph. The new paragraphs shall read as follows:
The monthly Minimum Retirement Income to an Employee who performs an Hour of Service on or after May 1, 2000, who is not covered by the terms of a collective bargaining agreement or is covered by the terms of a collective bargaining agreement with OPEIU Local 455, IBEW Local 1208 or SPFPA Local 576, and who retires from the service of an Employing Company at his Normal Retirement Date or his Deferred Retirement Date (before adjustment for Provisional Payee designation, if any) shall receive the greater benefit of (i) the monthly Minimum Retirement Income calculated in the preceding paragraph, or (ii) monthly Minimum Retirement Income in an amount equal to 1.25% of his Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Normal Retirement Date or Deferred Retirement Date, without a Social Security Offset.
For purposes of item (ii) above, Average Monthly Earnings shall be calculated using the Employee's Earnings, as defined in Section 1.13, increased by any cash payments made during any given Plan Year from an annual group incentive plan. "Annual group incentive plan" shall mean each plan designated as such and approved and ratified for each Plan Year by the manager of the Southern Company Compensation Administration department pursuant to procedures established by the Retirement Board. The Executive Productivity Improvement Plan shall be considered an "annual group incentive plan" only with regard to amounts earned in 1999 or a prior Plan Year and/or with regard to amounts which became payable in 2000 or a prior Plan Year.
5.
Section 5.3, "Minimum Retirement Income upon retirement at Early Retirement Date or upon termination of service by reason of death or otherwise prior to retirement," shall be deleted in its entirety and replaced with the following new Section 5.3:
5.3 Minimum Retirement Income upon retirement at
Early Retirement Date or upon termination of service by reason
of death or otherwise prior to retirement. The monthly Minimum
Retirement Income payable to an Employee (or his Provisional
Payee), if he shall retire on his Early Retirement Date, or if
his service shall terminate by reason of death or otherwise
prior to retirement, shall be determined in accordance with
the following provisions:
(a) Upon retirement at Early Retirement Date, his Minimum
Retirement Income (before adjustment for Provisional Payee
designation, if any) shall be an amount determined in the
manner described in Section 5.2 as of the Employee's Early
Retirement Date.
(b) Upon termination of service by reason of the death of the
Employee prior to retirement and after the effective date
of his Provisional Payee designation or deemed
designation, the Minimum Retirement Income for the purpose
of determining the Employee's Accrued Retirement Income
upon which payment to his Provisional Payee in accordance
with Section 7.4 shall be based shall be an amount
determined in the manner described in Section 5.2 as of
the date of the Employee's death.
(c) For an Employee who terminates his service with an
Employing Company with entitlement to receive Retirement
Income in accordance with Section 8.1, upon retirement at
his Early Retirement Date or Normal Retirement Date, his
Minimum Retirement Income (before adjustment for
Provisional Payee designation, if any) shall be an amount
determined in the manner described in Section 5.2 as of
the date of the Employee's termination of service.
(d) Upon termination of service by reason of disability (as
defined in Section 4.4) of the Employee prior to
retirement, provided such Employee does not return to the
service of an Employing Company prior to his Retirement
Date, his Minimum Retirement Income shall be an amount
determined in the manner described in Section 5.2 as of
the Employee's Retirement Date.
6.
The second paragraph of Section 5.5, "Early Retirement Income," shall
|
be amended by adding the following new sentence to the end:
Notwithstanding the preceding sentence, Retirement Income for
Employees other than Employees described in Section 15.1(c)
who perform an Hour of Service on or after May 1, 2000 and who
(i) are not covered by the terms of a collective bargaining
agreement or (ii) are covered by the terms of a collective
bargaining agreement with OPEIU Local 455, IBEW Local 1208 or
SPFPA Local 576, the term three-tenths of one percent (0.3%)
shall replace the term one-third of one percent ([OBJECT
OMITTED]%) in the preceding sentence.
7.
Subsection (d) of Section 5.9, "Required distributions," shall be deleted in its entirety and replaced with the following new subsection (d), effective as of January 1, 2001:
(d) Determining required minimum distributions
With respect to distributions under the Plan made in calendar years beginning on or after January 1, 2001, the Plan will apply the minimum distribution requirements of section 401(a)(9) of the Internal Revenue Code in accordance with the regulations under section 401(a)(9) that were proposed in January 2001, notwithstanding any provision of the Plan to the contrary. This amendment shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under section 401(a)(9) or such other date specified in guidance published by the Internal Revenue Service.
8.
Effective January 1, 2001, Section 5.11, "Increase in Retirement Income of retired Employees," shall be deleted in its entirety and replaced with the following new Section 5.11:
5.11 Increase in Retirement Income of retired Employees
(a) 1996 Increase.
(1) Retirement Income payable on and after January 1, 1996 to an Employee (or to the Provisional Payee of an Employee) who retired under the Prior Plans at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date on or before January 1, 1996 will be adjusted to increase the amount thereof by an amount ranging from a minimum of one and one-half percent (1.5%) to a maximum of seven and one-half percent (7.5%) in accordance with the following schedule:
Year in which Percentage
retirement occurred increase
------------------- ----------
1995 1.5%
1994 3.0%
1993 4.5%
1992 6.0%
1991 and prior years 7.5%
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(2) A similar adjustment, based on the date of the commencement of Retirement Income payments to the Employee's Provisional Payee, rather than the Employee's Retirement Date, will be made in respect of Retirement Income which is payable on or after January 1, 1996 where a Provisional Payee election was in effect, or was deemed to be in effect, when an Employee died while in service prior to January 1, 1996 and prior to his retirement.
(3) A similar adjustment will be made in respect of Retirement Income which is payable on or after January 1, 1996 for a former Employee who is not eligible to retire but who is vested in a benefit (or the Provisional Payee of such former Employee) for which payments have commenced on or before January 1, 1996 in accordance with the terms of the Prior Plans, except for Employees whose Retirement Income has been cashed-out pursuant to the terms of the Prior Plans.
(4) For purposes of determining the applicable percentage increase under this Section 5.11(a), the year of retirement includes retirement where the last day of employment was December 31 of such year. An Employee whose Deferred Retirement Date is on or before January 1, 1988 and who did not retire at his Normal Retirement Date shall be deemed to have retired at his Normal Retirement Date for purposes of determining the increase in his Retirement Income payable at his Deferred Retirement Date.
(5) This Section 5.11(a) shall not apply with respect to an Employee who has not retired, but for whom the distribution of Retirement Income has commenced pursuant to Section 5.9 of the Plan.
(b) 2001 Increase.
(1) Retirement Income payable on and after January 1, 2001 to an Employee (or to the Provisional Payee of an Employee) who retired under the Plan or the Prior Plans at his Early Retirement Date, Normal Retirement Date, or Deferred Retirement Date on or before January 1, 2001 will be adjusted to increase the amount thereof by an amount ranging from a minimum of one and one-half percent (1.5%) to a maximum of seven and one-half percent (7.5%) in accordance with the following schedule:
Pension Benefit Commencement Dates
Increase
From Through Percentage
February 1, 2000 January 1, 2001 1.5%
February 1, 1999 January 1, 2000 3.0%
February 1, 1998 January 1, 1999 4.5%
February 1, 1997 January 1, 1998 6.0%
Before February 1, 1997 7.5%
|
An Employee whose Deferred Retirement Date is on or before January 1, 1988 and who did not retire at his Normal Retirement Date shall be deemed to have retired at his Normal Retirement Date for purposes of determining the increase in his Retirement Income payable at his Deferred Retirement Date.
(2) (A) The adjustment provided in Section 5.11(b)(1) will be made in respect of Retirement Income which is payable on or after January 1, 2001 to a Provisional Payee, pursuant to Section 7.1 of the Plan, based on the Employee's pension benefit commencement date under the Plan or the Prior Plans.
(B) The adjustment provided in Section 5.11(b)(1)
will be made in respect of Retirement Income which is
payable on or after January 1, 2001 to a Provisional
Payee, pursuant to Section 7.4 of the Plan, due to
the death of an Employee while in the service of an
Employing Company based on the Provisional Payee's
pension benefit commencement date under the Plan or
the Prior Plans.
(3) A similar adjustment will be made in respect of Retirement Income which is payable on or after January 1, 2001 for a former Employee who is not eligible to retire but who is vested in a benefit (or the Provisional Payee of such former Employee) for which payments have commenced on or before January 1, 2001 in accordance with the terms of the Plan or Prior Plans, except for Employees whose Retirement Income has been cashed-out pursuant to the terms of the Plan or Prior Plans.
(4) Retirement Income payable to an Employee pursuant to the
last paragraph of Section 5.5 (i.e., the Social Security level
payment option) shall be adjusted for the increase provided in
Section 5.11(b)(1) by applying the percentage increase
separately to the portion of the Employee's Retirement Income
payable before age 65, if still being paid, and his Retirement
Income received or to be received after he attains age 65.
(5) The increased benefits provided for in Section 5.11(b)(1) shall not apply to the portion of an Employee's Retirement Income payable as a Social Security bridge payment to an Employee who retired subject to the terms of an early retirement window and who is receiving Social Security "bridge" payments pursuant to such early retirement window.
(6) This Section 5.11(b) shall not apply with respect to an Employee who has not retired, but for whom the distribution of Retirement Income has commenced pursuant to Section 5.9 of the Plan.
(7) The adjustment provided in Section 5.11(b)(1) will be made in respect of an Allowance which is payable on or after January 1, 2001 to a SEPCO Employee or a former SEPCO Employee, as defined in the SEPCO Schedule to the Plan, based on the Employee's pension benefit commencement date under the Plan, the Prior Plans or the Employees' Retirement Plan of Savannah Electric and Power Company ("SEPCO Plan"). An Allowance payable to a SEPCO Employee or former SEPCO Employee pursuant to Section 5.04 of the SEPCO Schedule (i.e., the Social Security level payment option) shall be adjusted for the increase provided in Section 5.11(b)(1) by applying the percentage increase separately to the portion of the SEPCO Employee's Allowance payable before age 62 or 65 (whichever is applicable), if still being paid, and his allowance received or to be received after he attains age 62 or 65, whichever is applicable. A SEPCO Employee (or his Provisional Payee) whose Allowance consists entirely of an amount payable pursuant to Retirement Annuities described in Article 2 of the SEPCO Schedule or SEPCO Plan, whichever is applicable, shall not receive the adjustment provided in Section 5.11(b)(1). A SEPCO Employee (or his Provisional Payee) whose Allowance consists partially of an amount payable pursuant to Retirement Annuities described in Article 2 of the SEPCO Schedule or SEPCO Plan, whichever is applicable, and partially of amounts accrued pursuant to Article 5 of the SEPCO Schedule or SEPCO Plan, whichever is applicable, shall have his Allowance adjusted in accordance with Section 5.11(b)(1) based on his total Allowance under both such Articles with such adjustment being paid entirely from the Trust.
(8) With respect to any Employee of an Employing Company who is described in Article XVI of the Plan, the adjustment provided in Section 5.11(b)(1) shall apply to such Employee's accrued benefit determined after applying any offset provided for in Article XVI (i.e., the adjustment in Section 5.11(b)(1) shall apply to such Employee's net accrued benefit, not his total service benefit).
9.
Subsection (c) of Section 6.1, "Maximum Retirement Income," shall be amended by adding the following new paragraph immediately following subsection (4):
For Limitation Years beginning on and after January 1, 2001, for purposes of applying the limitations described in Section 6.1 of the Plan, compensation paid or made available during such Limitation Years shall include elective amounts that are not includable in the gross income of the Employee by reason of Code Section 132(f)(4).
10.
Subsection (e) of Section 15.1, "Eligibility," shall be deleted in its entirety, effective as of April 2, 2001.
IN WITNESS WHEREOF, Southern Company Services, Inc. through its duly authorized officer, has adopted this Seventh Amendment to The Southern Company Pension Plan this ____ day of _________________, 2001, to be effective as stated herein.
SOUTHERN COMPANY SERVICES, INC.
By: ________________________________________
Title:______________________________________
ATTEST:
By: _________________________________________________________
Title:________________________________________________________
Exhibit 10.33
THE SOUTHERN COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200 Bank of America Plaza
Atlanta, Georgia 30308-2216
(404) 885-3000
Amended and Restated Effective May 1, 2000
THE SOUTHERN COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I - PURPOSE AND ADOPTION OF PLAN
1.1 Adoption: Southern Company Services, Inc. hereby adopts The Southern Company Supplemental Executive Retirement Plan as amended and restated effective May 1, 2000 (the "Plan"). The Plan was initially established effective January 1, 1997, and was subsequently amended from time to time thereafter. The Plan shall be an unfunded deferred compensation arrangement under which benefits shall be paid solely from the general assets of the Company.
1.2 Purpose: The Plan provides deferred compensation primarily to a select group of management or highly compensated employees to supplement such employees' accrued benefits under The Southern Company Pension Plan ("Pension Plan"). The supplement under this Plan is generally intended to make up the difference, if any, between each such employee's actual accrued benefit under the Pension Plan and the benefit he would have accrued under such plan if certain incentive pay were included in Earnings when determining Average Monthly Earnings for all methods of calculating Retirement Income under the Pension Plan.
The Plan, as amended and restated herein, is intended to benefit only employees who complete an Hour of Service on or after May 1, 2000. Any employees or former employees who ceased to participate in the Plan for any reason prior to May 1, 2000 shall be governed by the Plan as in effect on the date their participation ceased.
ARTICLE II - DEFINITIONS
2.1 "Administrative Committee" shall mean the committee referred to in
Section 3.1 hereof.
2.2 "Affiliated Employer" shall mean any corporation which is a member of the controlled group of corporations of which Southern Company is the common parent corporation which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of any of them. The Affiliated Employers are set forth in Appendix A to the Plan, as amended from time to time.
2.3 "Beneficiary" shall mean any person, estate, trust or organization entitled to receive any payment under the Plan upon the death of a Participant.
2.4 "Board of Directors" shall mean the Board of Directors of the Company.
2.5 "Change in Control Benefit Plan Determination Policy" shall mean the Change in Control Benefit Plan Determination Policy, as approved by the Southern Board, as it may be amended from time to time in accordance with the provisions therein.
2.6 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
2.7 "Company" shall mean Southern Company Services, Inc.
2.8 "Effective Date" of this amendment and restatement shall mean May 1, 2000.
2.9 "Employee" shall mean any person who is employed by an Affiliated Employer excluding any persons represented by a collective bargaining agent.
2.10 "Incentive Pay" shall mean all awards earned while an Employee under any annual group incentive plans, as defined in Section 5.2 of the Pension Plan, provided such incentive award was earned on or after January 1, 1994. Alternatively, if it produces a greater benefit to the Participant, Incentive Pay shall mean all awards paid or that would have been paid but for an election to defer such incentive award under The Southern Company Deferred Compensation Plan, under any annual group incentive plan, as defined in Section 5.2 of the Pension Plan, provided such incentive award was paid or deferred on or after January 1, 1995. If a person was formerly represented by a collective bargaining agent with respect to any corporation which is a member of the controlled group of corporations of which Southern Company is the common parent and such person subsequently becomes an Employee, incentive awards described in the preceding sentence shall include awards earned on and after January 1, 1994 while represented by such collective bargaining agent.
2.11 "Participant" shall mean an Employee or former Employee of an Affiliated Employer who is eligible and participates in the Plan pursuant to Sections 4.1 and 4.2.
2.12 "Pension Plan" shall mean The Southern Company Pension Plan, as amended from time to time.
2.13 "Plan" shall mean The Southern Company Supplemental Executive Retirement Plan, as amended from time to time.
2.14 "Plan Year" shall mean the calendar year.
2.15 "SERP Benefit" shall mean the benefit described in Section 5.1.
2.16 "Southern Board" shall mean the board of directors of Southern Company.
2.17 "Supplemental Pension Benefit" shall mean the pension benefit, if any, that is payable to a Participant under a group and/or individual supplemental benefit plan of an Affiliated Employer (as such term is defined therein).
2.18 "Trust" shall mean the Southern Company Deferred Compensation Trust.
Where the context requires, the definitions of all terms set forth in the Pension Plan shall apply with equal force and effect for purposes of interpretation and administration of the Plan, unless said terms are otherwise specifically defined in the Plan. The masculine pronoun shall be construed to include the feminine pronoun and the singular shall include the plural, where the context so requires.
ARTICLE III - ADMINISTRATION OF PLAN
3.1 Administrator. The general administration of the Plan shall be placed in the Administrative Committee. The Administrative Committee shall consist of the Senior Vice President, Human Resources of The Southern Company, the Vice President, System Compensation and Benefits of The Southern Company and the Comptroller of The Southern Company or any other position or positions that succeed to the duties of the foregoing positions. Any member may resign or may be removed by the Board of Directors and new members may be appointed by the Board of Directors at such time or times as the Board of Directors in its discretion shall determine. The Administrative Committee shall be chaired by the Senior Vice President, Human Resources of The Southern Company and may select a Secretary (who may, but need not, be a member of the Administrative Committee) to keep its records or to assist it in the discharge of its duties. A majority of the members of the Administrative Committee shall constitute a quorum for the transaction of business at any meeting. Any determination or action of the Administrative Committee may be made or taken by a majority of the members present at any meeting thereof, or without a meeting by resolution or written memorandum concurred in by a majority of the members.
3.2 Powers. The Administrative Committee shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan more particularly set forth herein. The Administrative Committee shall have the discretionary authority to interpret the Plan and shall determine all questions arising in the administration, interpretation and application of the Plan. Any such determination by it shall be conclusive and binding on all persons. It may adopt such regulations as it deems desirable for the conduct of its affairs. It may appoint such accountants, counsel, actuaries, specialists and other persons as it deems necessary or desirable in connection with the administration of this Plan, and shall be the agent for the service of process.
(a) The Administrative Committee is responsible for the daily administration of the Plan. It may appoint other persons or entities to perform any of its fiduciary functions. The Administrative Committee and any such appointee may employ advisors and other persons necessary or convenient to help it carry out its duties, including its fiduciary duties. The Administrative Committee shall have the right to remove any such appointee from his position. Any person, group of persons or entity may serve in more than one fiduciary capacity.
(b) The Administrative Committee shall maintain accurate and detailed records and accounts of Participants and of their rights under the Plan and of all receipts, disbursements, transfers and other transactions concerning the Plan. Such accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by persons designated by the Administrative Committee.
(c) The Administrative Committee shall take all steps necessary to ensure that the Plan complies with the law at all times. These steps shall include such items as the preparation and filing of all documents and forms required by any governmental agency; maintaining adequate Participants' records; recording and transmission of all notices required to be given to Participants and their Beneficiaries; the receipt and dissemination, if required, of all reports and information received from an Affiliated Employer; securing of such fidelity bonds as may be required by law; and doing such other acts necessary for the proper administration of the Plan. The Administrative Committee shall keep a record of all of its proceedings and acts, and shall keep all such books of account, records and other data as may be necessary for proper administration of the Plan.
3.4 Indemnification. The Company shall indemnify the Administrative Committee against any and all claims, losses, damages, expenses and liability arising from an action or failure to act, except when the same is finally judicially determined to be due to gross negligence or willful misconduct. The Company may purchase at its own expense sufficient liability insurance for the Administrative Committee to cover any and all claims, losses, damages and expenses arising from any action or failure to act in connection with the execution of the duties as Administrative Committee. No member of the Administrative Committee shall receive any compensation from the Plan for his service as such.
ARTICLE IV - ELIGIBILITY
4.1 Eligibility Requirements. All Employees who are determined to be eligible to participate in the Plan in accordance with Section 4.2 whose benefits under the Pension Plan are limited by the exclusion of Incentive Pay from Earnings when determining Average Monthly Earnings thereunder (or their spouses, as the case may be) shall be eligible to receive benefits under the Plan provided such Employees are (a) participating in the Plan at the time they terminate from an Affiliated Employer and are retirement eligible or (b) die while in active service while with an Affiliated Employer provided each such Employee's spouse is eligible to receive a survivor benefit under Article VII of the Pension Plan at each eligible Employee's death. Notwithstanding the foregoing sentence, any former Employee who is rehired by an Affiliated Employer on or after January 1, 1997, shall also be required to complete one (1) year of continuous paid service with an Affiliated Employer before being eligible to participate in the Plan.
4.2 Determination of Eligibility. The Administrative Committee shall determine which Employees are eligible to participate. Upon becoming a Participant, an Employee shall be deemed to have assented to the Plan and to any amendments hereafter adopted. The Administrative Committee shall be authorized to rescind the eligibility of any Participant if necessary to ensure that the Plan is maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees under the Employee Retirement Income Security Act of 1974, as amended.
If an Employee who was employed by Mirant Corporation (f/k/a Southern Energy, Inc.) ("Mirant") or an affiliate thereof on or after April 2, 2001 is employed by an Affiliated Employer, he shall be treated as a new hire and none of his service with Mirant shall be considered as Accredited Service under Article V.
ARTICLE V - BENEFITS
5.1 SERP Benefit.
(a) Subject to the terms of the Pension Plan, a Participant shall be entitled to a monthly SERP Benefit equal to:
(1) the greater of (A) or (B) below, if applicable:
(A) 1.70% of the Participant's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Retirement Date, death or other termination of service, including a Social Security Offset. However, if applicable under the Pension Plan, 1.70% shall be changed to 1.0% and no Social Security Offset shall apply.
(B) 1.25% of the Participant's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Retirement Date, death or other termination of service. However, this paragraph (B) shall only apply to Participants who are subject to the 1.70% formula above;
less
(2) such Participant's Retirement Income that is payable under the Pension Plan; less
(3) such Participant's Supplemental Pension Benefit.
The benefit determined in subsection (1) above shall be adjusted, if necessary, under the terms of the Pension Plan for commencement prior to the Participant's Normal Retirement Date. This adjustment shall be made before the amounts described in subsections (2) and (3) are subtracted from such benefit.
(b) For purposes of Section 5.1(a)(1), the Participant's Average Monthly Earnings shall be calculated based on the Participant's Earnings that are considered under the Pension Plan in calculating his Retirement Income, but without regard to the limitation of Section 401(a)(17) of the Code, and including the following additional amounts:
(1) any portion of such Participant's base pay that he may have elected to defer under The Southern Company Deferred Compensation Plan, but excluding Incentive Pay he deferred under such plan; and
(2) any Incentive Pay as of the applicable Plan Year in excess of 15% of the Participant's corresponding base pay for the applicable Plan Year determined under this Section 5.1(b).
In addition, to determine the Plan Years which produce the highest monthly average to calculate Average Monthly Earnings under the Plan, a Participant's Earnings should include those additional amounts provided for in Section 5.1(b).
(c) For purposes of Section 5.1(a)(1), the Participant's years of Accredited Service shall include any deemed Accredited Service provided under the terms of any agreement concerning supplemental pension payments between the Participant and an Affiliated Employer.
(d) To the extent that a Participant's Retirement Income under the Pension Plan is recalculated as a result of an amendment to the Pension Plan, the Participant's SERP Benefit shall also be recalculated in order to properly reflect such adjustment under the Pension Plan in determining payments of the Participant's SERP Benefit made on or after the effective date of such Pension Plan recalculation.
(e) To the extent that a Participant's Supplemental Pension Benefit is recalculated as a result of an amendment to the Pension Plan, the Participant's SERP Benefit shall also be recalculated in order to properly reflect such Supplemental Pension Benefit recalculation in determining payments of the Participant's SERP Benefit on or after the effective date of such Supplemental Pension Benefit recalculation.
(a) The SERP Benefit, as determined in accordance with Section 5.1, shall be payable in monthly increments on the first day of the month concurrently with the Participant's Retirement Income under the Pension Plan. The form in which the SERP Benefit is paid will be the same as elected by the Participant under the Pension Plan except that the amount of the monthly benefit will be modified at the appropriate time based on the commencement of payments as follows. Payments shall be adjusted to include three components:
(1) The amount necessary to pay the tax due
under the Federal Insurance Contributions
Act with respect to the accrued SERP Benefit
determined upon retirement (or such other
appropriate "resolution date" as defined
under Treasury Regulation Section
31.3121(v)-2) calculated in accordance with
Section 5.1;
(2) The amount estimated to pay the federal and state income tax withholding liability due on the amount paid under paragraph (1) above; and
(3) An adjusted monthly benefit determined on an actuarially equivalent basis in accordance with the terms of the Pension Plan which takes into account the amounts paid under paragraph (1) and (2) above and taking into account the form of benefit elected by the Participant under the Pension Plan.
Upon adjustment, the remaining monthly payments shall equal the amount described in paragraph (3) above. The Beneficiary of a Participant's Pension Benefit shall be the same as the Provisional Payee, if any, of the Participant's Retirement Income under the Pension Plan.
5.3 Allocation of SERP Benefit Liability. In the event that a
Participant eligible to receive a SERP Benefit has been employed at more than
one Affiliated Employer, the SERP Benefit liability shall be apportioned so that
each such Affiliated Employer is obligated in accordance with Section 5.4 to
cover the percentage of the total SERP Benefit as determined below. Each
Affiliated Employer's share of the SERP Benefit liability shall be calculated by
multiplying the SERP Benefit by a fraction where the numerator of such fraction
is the base rate of pay, as defined by the Administrative Committee, received by
the Participant at the respective Affiliated Employer on his date of termination
of employment or transfer, as applicable, multiplied by the Accredited Service
earned by the Participant at the respective Affiliated Employer and where the
denominator of such fraction is the sum of all numerators calculated for each
respective Affiliated Employer by which the Participant has been employed. In
the event that a Participant receives additional Accredited Service in
accordance with Section 5.1(c), for purposes of determining liability under this
Section 5.3, such Accredited Service shall be allocated to each Affiliated
Employer which has contracted with the Participant in accordance with such
contract and this allocation will be utilized to adjust the appropriate
components of the fraction in the preceding sentence in determining each
Affiliated Employer's share of the SERP Benefit liability.
Notwithstanding the preceding paragraph, the SERP Benefit liability attributable to any Participant employed on April 2, 2001 by Mirant or any affiliate thereof shall not be paid from this Plan, but rather shall be a liability of Mirant in accordance with the Employee Matters Agreement entered into by and between Mirant and Southern Company. However, the portion of any SERP Benefit payable to a Participant employed by an Affiliated Employer on April 2, 2001 which is attributable to service with Mirant prior to April 2, 2001 (as determined using the fraction described above) shall be a liability of Southern Company.
5.4 Funding of Benefits. Except as expressly limited under the terms of the Trust, the Company shall not reserve or otherwise set aside funds for the payment of its obligations under the Plan. In any event, such obligations shall be paid or deemed to be paid solely from the general assets of the Company. Participants shall only have the status of a general, unsecured creditor of the Company. When a Participant becomes entitled to payment of a SERP Benefit, the Company may, in its sole discretion, elect to purchase an annuity from a reputable third party annuity provider to secure payment of all or any portion of the Participant's SERP Benefit, pursuant to a uniform annuitization program adopted by the Administrative Committee.
5.5 Withholding. There shall be deducted from the payment of any SERP Benefit due under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of the Participant or Beneficiary entitled to such payment.
5.6 Recourse Against Deferred Compensation Trust. In the event a Participant who is employed on or after January 1, 1999 with an "Employing Company" (as defined in the Change in Control Benefit Plan Determination Policy) disputes the calculation of his SERP Benefit, the Participant has recourse against the Company, the Employing Company by which the Participant is employed, if different, the Plan, and the Trust for payment of benefits to the extent the Trust so provides.
5.7 Change in Control. The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control or preliminary change in control of Southern Company or an Employing Company, the benefits to be provided hereunder and the funding of the Trust in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein.
ARTICLE VI - MISCELLANEOUS
6.1 Assignment. Neither the Participant, his Beneficiary nor his legal representative shall have any rights to sell, assign, transfer or otherwise convey the right to receive the payment of any SERP Benefit due hereunder, which payment and the right thereto are expressly declared to be nonassignable and nontransferable. Any attempt to assign or transfer the right to payment under the Plan shall be null and void and of no effect.
6.2 Amendment and Termination. Except for the provisions of Section 5.7 hereof, which may not be amended following a "Southern Change in Control" or "Subsidiary Change in Control" (as defined in the Change in Control Benefit Plan Determination Policy), the Plan may be amended or terminated at any time by the Board of Directors, provided that no amendment or termination shall cause a forfeiture or reduction in any benefits accrued as of the date of such amendment or termination.
6.3 No Guarantee of Employment. Participation hereunder shall not be construed as creating any contract of employment between an Affiliated Employer and a Participant, nor shall it limit the right of an Affiliated Employer to suspend, terminate, alter or modify, whether or not for cause, the employment relationship between the Affiliated Employer and a Participant.
6.4 Construction. This Plan shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent such laws are not otherwise superseded by the laws of the United States.
IN WITNESS WHEREOF, the amended and restated Plan has been executed by duly authorized officers of Southern Company Services, Inc. pursuant to resolutions of the Board of Directors of Southern Company Services, Inc. this day of , 2001.
SOUTHERN COMPANY SERVICES, INC.
By:_____________________________
By:_____________________________
Its:____________________________
Attest:
By: ______________________________
Its: ______________________________
APPENDIX A
THE SOUTHERN COMPANY SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
AFFILIATED EMPLOYERS AS OF MAY 1, 2000
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company Southern Communications Services, Inc. Southern Company Energy Solutions, Inc. Southern Company Services, Inc. Southern Energy Resources, Inc. (through April 1, 2001) Southern Nuclear Operating Company, Inc.
Exhibit 10.34
THE SOUTHERN COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200 Bank of America Plaza
Atlanta, Georgia 30308-2216
(404) 885-3000
Amended and Restated Effective May 1, 2000
THE SOUTHERN COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I - PURPOSE AND ADOPTION OF PLAN
1.1 Adoption: Southern Company Services, Inc. hereby adopts The Southern Company Supplemental Executive Retirement Plan as amended and restated effective May 1, 2000 (the "Plan"). The Plan was initially established effective January 1, 1997, and was subsequently amended from time to time thereafter. The Plan shall be an unfunded deferred compensation arrangement under which benefits shall be paid solely from the general assets of the Company.
1.2 Purpose: The Plan provides deferred compensation primarily to a select group of management or highly compensated employees to supplement such employees' accrued benefits under The Southern Company Pension Plan ("Pension Plan"). The supplement under this Plan is generally intended to make up the difference, if any, between each such employee's actual accrued benefit under the Pension Plan and the benefit he would have accrued under such plan if certain incentive pay were included in Earnings when determining Average Monthly Earnings for all methods of calculating Retirement Income under the Pension Plan.
The Plan, as amended and restated herein, is intended to benefit only employees who complete an Hour of Service on or after May 1, 2000. Any employees or former employees who ceased to participate in the Plan for any reason prior to May 1, 2000 shall be governed by the Plan as in effect on the date their participation ceased.
ARTICLE II - DEFINITIONS
2.1 "Administrative Committee" shall mean the committee referred to in
Section 3.1 hereof.
2.2 "Affiliated Employer" shall mean any corporation which is a member of the controlled group of corporations of which Southern Company is the common parent corporation which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of any of them. The Affiliated Employers are set forth in Appendix A to the Plan, as amended from time to time.
2.3 "Beneficiary" shall mean any person, estate, trust or organization entitled to receive any payment under the Plan upon the death of a Participant.
2.4 "Board of Directors" shall mean the Board of Directors of the Company.
2.5 "Change in Control Benefit Plan Determination Policy" shall mean the Change in Control Benefit Plan Determination Policy, as approved by the Southern Board, as it may be amended from time to time in accordance with the provisions therein.
2.6 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
2.7 "Company" shall mean Southern Company Services, Inc.
2.8 "Effective Date" of this amendment and restatement shall mean May 1, 2000.
2.9 "Employee" shall mean any person who is employed by an Affiliated Employer excluding any persons represented by a collective bargaining agent.
2.10 "Incentive Pay" shall mean all awards earned while an Employee under any annual group incentive plans, as defined in Section 5.2 of the Pension Plan, provided such incentive award was earned on or after January 1, 1994. Alternatively, if it produces a greater benefit to the Participant, Incentive Pay shall mean all awards paid or that would have been paid but for an election to defer such incentive award under The Southern Company Deferred Compensation Plan, under any annual group incentive plan, as defined in Section 5.2 of the Pension Plan, provided such incentive award was paid or deferred on or after January 1, 1995. If a person was formerly represented by a collective bargaining agent with respect to any corporation which is a member of the controlled group of corporations of which Southern Company is the common parent and such person subsequently becomes an Employee, incentive awards described in the preceding sentence shall include awards earned on and after January 1, 1994 while represented by such collective bargaining agent.
2.11 "Participant" shall mean an Employee or former Employee of an Affiliated Employer who is eligible and participates in the Plan pursuant to Sections 4.1 and 4.2.
2.12 "Pension Plan" shall mean The Southern Company Pension Plan, as amended from time to time.
2.13 "Plan" shall mean The Southern Company Supplemental Executive Retirement Plan, as amended from time to time.
2.14 "Plan Year" shall mean the calendar year.
2.15 "SERP Benefit" shall mean the benefit described in Section 5.1.
2.16 "Southern Board" shall mean the board of directors of Southern Company.
2.17 "Supplemental Pension Benefit" shall mean the pension benefit, if any, that is payable to a Participant under a group and/or individual supplemental benefit plan of an Affiliated Employer (as such term is defined therein).
2.18 "Trust" shall mean the Southern Company Deferred Compensation Trust.
Where the context requires, the definitions of all terms set forth in the Pension Plan shall apply with equal force and effect for purposes of interpretation and administration of the Plan, unless said terms are otherwise specifically defined in the Plan. The masculine pronoun shall be construed to include the feminine pronoun and the singular shall include the plural, where the context so requires.
ARTICLE III - ADMINISTRATION OF PLAN
3.1 Administrator. The general administration of the Plan shall be placed in the Administrative Committee. The Administrative Committee shall consist of the Senior Vice President, Human Resources of The Southern Company, the Vice President, System Compensation and Benefits of The Southern Company and the Comptroller of The Southern Company or any other position or positions that succeed to the duties of the foregoing positions. Any member may resign or may be removed by the Board of Directors and new members may be appointed by the Board of Directors at such time or times as the Board of Directors in its discretion shall determine. The Administrative Committee shall be chaired by the Senior Vice President, Human Resources of The Southern Company and may select a Secretary (who may, but need not, be a member of the Administrative Committee) to keep its records or to assist it in the discharge of its duties. A majority of the members of the Administrative Committee shall constitute a quorum for the transaction of business at any meeting. Any determination or action of the Administrative Committee may be made or taken by a majority of the members present at any meeting thereof, or without a meeting by resolution or written memorandum concurred in by a majority of the members.
3.2 Powers. The Administrative Committee shall administer the Plan in accordance with its terms and shall have all powers necessary to carry out the provisions of the Plan more particularly set forth herein. The Administrative Committee shall have the discretionary authority to interpret the Plan and shall determine all questions arising in the administration, interpretation and application of the Plan. Any such determination by it shall be conclusive and binding on all persons. It may adopt such regulations as it deems desirable for the conduct of its affairs. It may appoint such accountants, counsel, actuaries, specialists and other persons as it deems necessary or desirable in connection with the administration of this Plan, and shall be the agent for the service of process.
(a) The Administrative Committee is responsible for the daily administration of the Plan. It may appoint other persons or entities to perform any of its fiduciary functions. The Administrative Committee and any such appointee may employ advisors and other persons necessary or convenient to help it carry out its duties, including its fiduciary duties. The Administrative Committee shall have the right to remove any such appointee from his position. Any person, group of persons or entity may serve in more than one fiduciary capacity.
(b) The Administrative Committee shall maintain accurate and detailed records and accounts of Participants and of their rights under the Plan and of all receipts, disbursements, transfers and other transactions concerning the Plan. Such accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by persons designated by the Administrative Committee.
(c) The Administrative Committee shall take all steps necessary to ensure that the Plan complies with the law at all times. These steps shall include such items as the preparation and filing of all documents and forms required by any governmental agency; maintaining adequate Participants' records; recording and transmission of all notices required to be given to Participants and their Beneficiaries; the receipt and dissemination, if required, of all reports and information received from an Affiliated Employer; securing of such fidelity bonds as may be required by law; and doing such other acts necessary for the proper administration of the Plan. The Administrative Committee shall keep a record of all of its proceedings and acts, and shall keep all such books of account, records and other data as may be necessary for proper administration of the Plan.
3.4 Indemnification. The Company shall indemnify the Administrative Committee against any and all claims, losses, damages, expenses and liability arising from an action or failure to act, except when the same is finally judicially determined to be due to gross negligence or willful misconduct. The Company may purchase at its own expense sufficient liability insurance for the Administrative Committee to cover any and all claims, losses, damages and expenses arising from any action or failure to act in connection with the execution of the duties as Administrative Committee. No member of the Administrative Committee shall receive any compensation from the Plan for his service as such.
ARTICLE IV - ELIGIBILITY
4.1 Eligibility Requirements. All Employees who are determined to be eligible to participate in the Plan in accordance with Section 4.2 whose benefits under the Pension Plan are limited by the exclusion of Incentive Pay from Earnings when determining Average Monthly Earnings thereunder (or their spouses, as the case may be) shall be eligible to receive benefits under the Plan provided such Employees are (a) participating in the Plan at the time they terminate from an Affiliated Employer and are retirement eligible or (b) die while in active service while with an Affiliated Employer provided each such Employee's spouse is eligible to receive a survivor benefit under Article VII of the Pension Plan at each eligible Employee's death. Notwithstanding the foregoing sentence, any former Employee who is rehired by an Affiliated Employer on or after January 1, 1997, shall also be required to complete one (1) year of continuous paid service with an Affiliated Employer before being eligible to participate in the Plan.
4.2 Determination of Eligibility. The Administrative Committee shall determine which Employees are eligible to participate. Upon becoming a Participant, an Employee shall be deemed to have assented to the Plan and to any amendments hereafter adopted. The Administrative Committee shall be authorized to rescind the eligibility of any Participant if necessary to ensure that the Plan is maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees under the Employee Retirement Income Security Act of 1974, as amended.
If an Employee who was employed by Mirant Corporation (f/k/a Southern Energy, Inc.) ("Mirant") or an affiliate thereof on or after April 2, 2001 is employed by an Affiliated Employer, he shall be treated as a new hire and none of his service with Mirant shall be considered as Accredited Service under Article V.
ARTICLE V - BENEFITS
5.1 SERP Benefit.
(a) Subject to the terms of the Pension Plan, a Participant shall be entitled to a monthly SERP Benefit equal to:
(1) the greater of (A) or (B) below, if applicable:
(A) 1.70% of the Participant's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Retirement Date, death or other termination of service, including a Social Security Offset. However, if applicable under the Pension Plan, 1.70% shall be changed to 1.0% and no Social Security Offset shall apply.
(B) 1.25% of the Participant's Average Monthly Earnings multiplied by his years (and fraction of a year) of Accredited Service to his Retirement Date, death or other termination of service. However, this paragraph (B) shall only apply to Participants who are subject to the 1.70% formula above;
less
(2) such Participant's Retirement Income that is payable under the Pension Plan; less
(3) such Participant's Supplemental Pension Benefit.
The benefit determined in subsection (1) above shall be adjusted, if necessary, under the terms of the Pension Plan for commencement prior to the Participant's Normal Retirement Date. This adjustment shall be made before the amounts described in subsections (2) and (3) are subtracted from such benefit.
(b) For purposes of Section 5.1(a)(1), the Participant's Average Monthly Earnings shall be calculated based on the Participant's Earnings that are considered under the Pension Plan in calculating his Retirement Income, but without regard to the limitation of Section 401(a)(17) of the Code, and including the following additional amounts:
(1) any portion of such Participant's base pay that he may have elected to defer under The Southern Company Deferred Compensation Plan, but excluding Incentive Pay he deferred under such plan; and
(2) any Incentive Pay as of the applicable Plan Year in excess of 15% of the Participant's corresponding base pay for the applicable Plan Year determined under this Section 5.1(b).
In addition, to determine the Plan Years which produce the highest monthly average to calculate Average Monthly Earnings under the Plan, a Participant's Earnings should include those additional amounts provided for in Section 5.1(b).
(c) For purposes of Section 5.1(a)(1), the Participant's years of Accredited Service shall include any deemed Accredited Service provided under the terms of any agreement concerning supplemental pension payments between the Participant and an Affiliated Employer.
(d) To the extent that a Participant's Retirement Income under the Pension Plan is recalculated as a result of an amendment to the Pension Plan, the Participant's SERP Benefit shall also be recalculated in order to properly reflect such adjustment under the Pension Plan in determining payments of the Participant's SERP Benefit made on or after the effective date of such Pension Plan recalculation.
(e) To the extent that a Participant's Supplemental Pension Benefit is recalculated as a result of an amendment to the Pension Plan, the Participant's SERP Benefit shall also be recalculated in order to properly reflect such Supplemental Pension Benefit recalculation in determining payments of the Participant's SERP Benefit on or after the effective date of such Supplemental Pension Benefit recalculation.
(a) The SERP Benefit, as determined in accordance with Section 5.1, shall be payable in monthly increments on the first day of the month concurrently with the Participant's Retirement Income under the Pension Plan. The form in which the SERP Benefit is paid will be the same as elected by the Participant under the Pension Plan except that the amount of the monthly benefit will be modified at the appropriate time based on the commencement of payments as follows. Payments shall be adjusted to include three components:
(1) The amount necessary to pay the tax due
under the Federal Insurance Contributions
Act with respect to the accrued SERP Benefit
determined upon retirement (or such other
appropriate "resolution date" as defined
under Treasury Regulation Section
31.3121(v)-2) calculated in accordance with
Section 5.1;
(2) The amount estimated to pay the federal and state income tax withholding liability due on the amount paid under paragraph (1) above; and
(3) An adjusted monthly benefit determined on an actuarially equivalent basis in accordance with the terms of the Pension Plan which takes into account the amounts paid under paragraph (1) and (2) above and taking into account the form of benefit elected by the Participant under the Pension Plan.
Upon adjustment, the remaining monthly payments shall equal the amount described in paragraph (3) above. The Beneficiary of a Participant's Pension Benefit shall be the same as the Provisional Payee, if any, of the Participant's Retirement Income under the Pension Plan.
5.3 Allocation of SERP Benefit Liability. In the event that a
Participant eligible to receive a SERP Benefit has been employed at more than
one Affiliated Employer, the SERP Benefit liability shall be apportioned so that
each such Affiliated Employer is obligated in accordance with Section 5.4 to
cover the percentage of the total SERP Benefit as determined below. Each
Affiliated Employer's share of the SERP Benefit liability shall be calculated by
multiplying the SERP Benefit by a fraction where the numerator of such fraction
is the base rate of pay, as defined by the Administrative Committee, received by
the Participant at the respective Affiliated Employer on his date of termination
of employment or transfer, as applicable, multiplied by the Accredited Service
earned by the Participant at the respective Affiliated Employer and where the
denominator of such fraction is the sum of all numerators calculated for each
respective Affiliated Employer by which the Participant has been employed. In
the event that a Participant receives additional Accredited Service in
accordance with Section 5.1(c), for purposes of determining liability under this
Section 5.3, such Accredited Service shall be allocated to each Affiliated
Employer which has contracted with the Participant in accordance with such
contract and this allocation will be utilized to adjust the appropriate
components of the fraction in the preceding sentence in determining each
Affiliated Employer's share of the SERP Benefit liability.
Notwithstanding the preceding paragraph, the SERP Benefit liability attributable to any Participant employed on April 2, 2001 by Mirant or any affiliate thereof shall not be paid from this Plan, but rather shall be a liability of Mirant in accordance with the Employee Matters Agreement entered into by and between Mirant and Southern Company. However, the portion of any SERP Benefit payable to a Participant employed by an Affiliated Employer on April 2, 2001 which is attributable to service with Mirant prior to April 2, 2001 (as determined using the fraction described above) shall be a liability of Southern Company.
5.4 Funding of Benefits. Except as expressly limited under the terms of the Trust, the Company shall not reserve or otherwise set aside funds for the payment of its obligations under the Plan. In any event, such obligations shall be paid or deemed to be paid solely from the general assets of the Company. Participants shall only have the status of a general, unsecured creditor of the Company. When a Participant becomes entitled to payment of a SERP Benefit, the Company may, in its sole discretion, elect to purchase an annuity from a reputable third party annuity provider to secure payment of all or any portion of the Participant's SERP Benefit, pursuant to a uniform annuitization program adopted by the Administrative Committee.
5.5 Withholding. There shall be deducted from the payment of any SERP Benefit due under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of the Participant or Beneficiary entitled to such payment.
5.6 Recourse Against Deferred Compensation Trust. In the event a Participant who is employed on or after January 1, 1999 with an "Employing Company" (as defined in the Change in Control Benefit Plan Determination Policy) disputes the calculation of his SERP Benefit, the Participant has recourse against the Company, the Employing Company by which the Participant is employed, if different, the Plan, and the Trust for payment of benefits to the extent the Trust so provides.
5.7 Change in Control. The provisions of the Change in Control Benefit Plan Determination Policy are incorporated herein by reference to determine the occurrence of a change in control or preliminary change in control of Southern Company or an Employing Company, the benefits to be provided hereunder and the funding of the Trust in the event of such a change in control. Any modifications to the Change in Control Benefit Plan Determination Policy are likewise incorporated herein.
ARTICLE VI - MISCELLANEOUS
6.1 Assignment. Neither the Participant, his Beneficiary nor his legal representative shall have any rights to sell, assign, transfer or otherwise convey the right to receive the payment of any SERP Benefit due hereunder, which payment and the right thereto are expressly declared to be nonassignable and nontransferable. Any attempt to assign or transfer the right to payment under the Plan shall be null and void and of no effect.
6.2 Amendment and Termination. Except for the provisions of Section 5.7 hereof, which may not be amended following a "Southern Change in Control" or "Subsidiary Change in Control" (as defined in the Change in Control Benefit Plan Determination Policy), the Plan may be amended or terminated at any time by the Board of Directors, provided that no amendment or termination shall cause a forfeiture or reduction in any benefits accrued as of the date of such amendment or termination.
6.3 No Guarantee of Employment. Participation hereunder shall not be construed as creating any contract of employment between an Affiliated Employer and a Participant, nor shall it limit the right of an Affiliated Employer to suspend, terminate, alter or modify, whether or not for cause, the employment relationship between the Affiliated Employer and a Participant.
6.4 Construction. This Plan shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent such laws are not otherwise superseded by the laws of the United States.
IN WITNESS WHEREOF, the amended and restated Plan has been executed by duly authorized officers of Southern Company Services, Inc. pursuant to resolutions of the Board of Directors of Southern Company Services, Inc. this day of , 2001.
SOUTHERN COMPANY SERVICES, INC.
By:_____________________________
By:_____________________________
Its:____________________________
Attest:
By: ______________________________
Its: ______________________________
APPENDIX A
THE SOUTHERN COMPANY SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
AFFILIATED EMPLOYERS AS OF MAY 1, 2000
Alabama Power Company
Georgia Power Company
Gulf Power Company
Mississippi Power Company
Savannah Electric and Power Company Southern Communications Services, Inc. Southern Company Energy Solutions, Inc. Southern Company Services, Inc. Southern Energy Resources, Inc. (through April 1, 2001) Southern Nuclear Operating Company, Inc.
Exhibit 10.36
SOUTHERN COMPANY
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PLAN
Troutman Sanders LLP
Bank of America Plaza, Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Effective July 10, 2000
SOUTHERN COMPANY
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PLAN
ARTICLE 1 - PURPOSE AND ADOPTION OF PLAN
1.1 Adoption of Plan. Southern Company Services, Inc. hereby adopts
this Southern Company Executive Change in Control Severance Plan. This Plan was
originally effective December 7, 1998; it was amended by a First Amendment also
effective December 7, 1998. This amended and restated Plan is effective July 10,
2000. The Plan shall be an unfunded "top hat" plan designed to provide certain
severance benefits to a select group of management or highly compensated
employees, to be paid solely from the general assets of the respective Employing
Companies.
1.2 Purpose. The Plan is primarily designed to provide benefits to
certain key employees of the Employing Companies, whose employment is terminated
subsequent to a change in control of Southern or their respective Employing
Company.
ARTICLE 2 - DEFINITIONS
2.1 "Administrative Committee" shall mean the Board of Directors, plus, in the event of any act necessary to be taken in connection with the Plan relative to a particular Participant, the Chief Executive Officer of the Participant's Employing Company, if such Chief Executive Officer is not already a member of the Board of Directors.
2.2 "Annual Compensation" shall mean a Participant's highest annual base salary rate for the twelve month period immediately preceding the date of the Change in Control plus target bonus.
2.3 "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act.
2.4 "Board of Directors" shall mean the board of directors of the Company.
2.5 "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern.
(a) with respect to Southern, the occurrence of any of the
following:
(i) The Consummation of an acquisition by any Person of
Beneficial Ownership of 20% or more of Southern's Voting Securities;
provided, however, that for purposes of this Section 2.6(a)(i), the
following acquisitions of Southern's Voting Securities shall not
constitute a Change in Control:
(A) any acquisition directly from Southern; (B) any acquisition by Southern;
(C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension plan or publicly held mutual fund;
(E) any acquisition by an employee of Southern or its
subsidiary or affiliate, or Group composed exclusively of such
employees; or
(F) any Business Combination which would not otherwise
|
constitute a Change in Control because of the application of clauses (A), (B) and (C) of Section 2.6(a)(iii). (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; or (iii) Consummation of a Business Combination, unless, following such Business Combination, all of the following three conditions are met:
(A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities;
(B) no Person (excluding any corporation resulting from such Business Combination, any qualified pension plan, publicly held mutual fund, Group composed exclusively of Employees or employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and
(C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination.
(b) with respect to an Employing Company, the occurrence of any of the following:
(i) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of an Employing Company; provided, however, that for purposes of this Section 2.6(b)(i), any acquisition by an employee of Southern or its subsidiary or affiliate, or Group composed entirely of such employees, any qualified pension plan, any
publicly held mutual fund or any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control; |
(ii) The Consummation of a reorganization, merger or consolidation of an Employing Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation surviving or resulting from such Employing Company Business Combination; or
(iii) The Consummation of the sale or other disposition of all or substantially all of the assets of an Employing Company to an entity which Southern does not Control.
Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of an Employing Company.
For purposes of this Section 2.6 only, SERI shall not be considered an Employing Company. 2.7 "COBRA Coverage" shall mean any continuation coverage to which a Participant or his dependents may be entitled pursuant to Code Section 4980B.
2.8 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.9 "Company" shall mean Southern Company Services, Inc., its successors and assigns.
2.10 "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies. 2.11 "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests.
2.12 "DIC Plan" shall mean the Southern Energy Resources, Inc. Deferred Incentive Compensation Plan or any successor thereto which is considered an "equitable arrangement" thereof, as such plans may be amended from time to time.
2.13 "Effective Date" shall mean the date of execution hereof.
2.14 "Employee" shall mean each regular full-time or regular part-time employee of an Employing Company of Grades 10 to 13 (or, if the Grade system is not used, $130,000 or more of annual base salary rate for the twelve month period immediately preceding the Change in Control who has not otherwise entered into a Change in Control agreement with his Employing Company and elects to receive benefits under such agreement) not covered by a collective bargaining agreement between the Employing Company and a union or other employee representative. With respect to a Change in Control of SEI, SERI Participants shall be deemed to be employed by SEI for purposes of being covered under this Plan.
2.15 "Employee Outplacement Program" shall mean the program established by the Employing Company from time to time for the purpose of assisting Participants covered by the Plan in finding employment outside of the Employing Company which provides for the following services:
(a) self assessment, career decision and goal setting;
(b) job market research and job sources;
(c) networking and interviewing skills;
(d) planning and implementation strategy;
(e) resume writing, job hunting methods and salary negotiation; and
(f) office support and job search resources.
2.16 "Employing Company" shall mean the Company, or any other Southern Subsidiary, which the Board of Directors may from time to time determine to bring under the Plan and which shall adopt the Plan, and any successor of any of them.
2.17 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
2.18 "Good Reason" shall mean, without an Employee's express written consent, after written notice to his Employing Company, and after a thirty (30) day opportunity for the Employee's Employing Company to cure, the continuing occurrence of any of the following events:
(a) Inconsistent Duties. A meaningful and detrimental alteration in the Employee's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control;
(b) Reduced Salary. A reduction of five percent (5%) or more by the Employing Company in either of the following: (i) the Employee's annual base salary rate for the twelve month period immediately preceding the date of the Change in Control ("Base Salary") (except for a less than ten percent (10%), across-the-board Base Salary reduction similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company); or (ii) the sum of the Employee's Base Salary plus target bonus under his Employing Company's short term bonus plan (e.g., either the PPP Plan or the Southern Energy, Inc. Short Term Plan, as the case may be), as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board reduction of Base Salary plus target bonus under such short term plan similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company);
(c) Compensation Plans. The failure by the Employing Company to continue in effect any "compensation plan or agreement" in which an Employee participates as of the date of the Change in Control or the elimination of the Employee's participation in any such plan, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company);
For purposes of this Section 2.18(c), the "compensation plan or agreement" shall mean any written arrangement executed by an authorized officer of the Employing Company which provides for periodic, non-discretionary compensatory payments to employees in the nature of bonuses.
(d) Relocation. A change in an Employee's work location to a location more than fifty (50) miles from the facility where the Employee was located at the time of the Change in Control, unless such new work location is within fifty (50) miles from the Employee's principal place of residence at the time of the Change in Control. The acceptance, if any, by an Employee of employment by an Employing Company at a work location which is outside the fifty mile radius set forth in this Section 2.18(d) shall not be a waiver of the Employee's right to refuse subsequent transfer by an Employing Company to a location which is more than fifty (50) miles from the Employee's principal place of residence at the time of the Change in Control, and such subsequent, unconsented transfer shall be "Good Reason" under this Agreement; or
(e) Benefits and Perquisites. The taking of any action by the Employing Company that would directly or indirectly materially reduce the benefits enjoyed by an Employee under the Employing Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which the Employee was participating immediately prior to the Change in Control, or the failure by the Employing Company to provide an Employee with the number of paid vacation days to which the Employee is entitled on the basis of years of service with the Employing Company in accordance with the Employing Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of all Employees of the Employing Company). 2.19 "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act. 2.20 "Group Health Plan" shall mean the group health plan covering the Participant, as such plan may be amended from time to time.
2.21 "Group Life Insurance Plan" shall mean the group life insurance program covering the Participant, as such plan may be amended from time to time.
2.22 "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to the Effective Date whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board.
2.23 "Month of Service" shall mean any calendar month during which a Participant has worked at least one (1) hour or was on approved leave of absence while in the employ of an Employing Company or any other Southern Subsidiary.
2.24 "Participant" shall mean an Employee who meets the eligibility requirements of Section 3.1 of this Plan.
2.25 "Pension Plan" shall mean The Southern Company Pension Plan or any successor thereto, as such plans may be amended from time to time.
2.26 "Performance Dividend Plan" or "PDP Plan" shall mean the Southern Company Performance Dividend Plan or any successor thereto which is considered an "equitable arrangement" under Section 1.25 thereof, as such plans may be amended from time to time.
2.27 "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any successor thereto which is considered an "equitable arrangement" under Section 1.31 thereof, as such plans may be amended from time to time.
2.28 "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any successor thereto which is considered an "equitable arrangement" under Section 1.33 thereof, as such plans may be amended from time to time.
2.29 "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Exchange Act.
2.30 "Plan" shall mean the Southern Company Executive Change in Control Severance Plan.
2.31 "SEI" shall mean Southern Energy, Inc., its successors and assigns.
2.32 "SERI" shall mean Southern Energy Resources, Inc., its successors and assigns.
2.33 "SERI Participant" shall mean a Participant who is employed by SERI.
2.34 "Short Term Plan" shall mean the Southern Energy Resources, Inc. Short Term Plan, as amended from time to time. 2.35 "Southern" shall mean The Southern Company, its successors and assigns.
2.36 "Southern Board" shall mean the board of directors of Southern.
2.37 "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern.
2.38 "Support Employee" shall mean an Employee of the Company (which shall continue to be such
Employee's Employing Company for purposes of this Plan) who:
(a) Is involuntarily terminated without Cause within one year of the Change in Control of an Employing Company (other than the Company) and either (i) spent at least 40% of his working time performing services for such Employing Company at the time of the Change in Control and for the six months prior thereto, or (ii) is determined by the Administrative Committee to be involuntarily terminated without Cause as a result of such Change in Control; or
(b) Voluntarily terminates with Good Reason within one year of the Change in Control of an Employing Company (other than the Company) and spent at least 40% of his working time performing services for such Employing Company at the time of the Change in Control and for the six months prior thereto. For purposes of this Section 2.38(b) only, Good Reason shall not include the provisions of Section 2.18(a), entitled "Inconsistent Duties." 2.39 "Termination for Cause" or "Cause" shall mean an Employee's termination of employment with his Employing Company upon the occurrence of any of the following:
(a) The willful and continued failure by the Employee to substantially perform his duties with his Employing Company (other than any such failure resulting from the Employee's Total Disability or from the Employee's retirement or any such actual or anticipated failure resulting from termination by the Employee for Good Reason) after a written demand for substantial performance is delivered to him by the Administrative Committee, which demand specifically identifies the manner in which the Administrative Committee believes that he has not substantially performed his duties; or
(b) The willful engaging by the Employee in conduct that is demonstrably and materially injurious to his Employing Company, monetarily or otherwise, including but not limited to any of the following:
(i) any willful act involving fraud or dishonesty in the course of an Employee's employment by his Employing Company;
(ii) the willful carrying out of any activity or the making of any statement by an Employee which would materially prejudice or impair the good name and standing of his Employing Company, Southern or any other Southern Subsidiary or would bring his Employing Company, Southern or any other Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which his Employing Company, Southern or such other Southern Subsidiary is located;
(iii) attendance by an Employee at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense;
(iv) violation of his Employing Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Employing Company's safety officer;
(v) assault or other act of violence by an Employee against any person during the course of employment; or
(vi) an Employee's indictment for any felony or any misdemeanor involving moral turpitude.
No act or failure to act by an Employee shall be deemed "willful" unless done, or omitted to be done, by the Employee not in good faith and without reasonable belief that his action or omission was in the best interest of his Employing Company.
Notwithstanding the foregoing, an Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of the majority of the Administrative Committee at a meeting called and held for such purpose (after reasonable notice to the Employee and an opportunity for him, together with counsel, to be heard before the Administrative Committee), finding that, in the good faith opinion of the Administrative Committee, the Employee was guilty of conduct set forth in Section 2.39(a) or (b) hereof and specifying the particulars thereof in detail.
2.40 "Termination Date" shall mean the date on which a Participant is separated from his Employing Company's regular payroll; provided, however, that solely for purposes of Section 3.2(c) hereof, the Termination Date of Participants who are deemed to be retired pursuant to the provisions of Section 3.3 hereof, shall be the effective date of their retirement pursuant to the terms of the Pension Plan.
2.41 "Total Disability" shall mean total disability within the meaning of the Pension Plan.
2.42 "Value Creation Plan" shall mean the Southern Energy Resources, Inc. Value Creation Plan or any replacement thereto which is considered an "equitable arrangement" under Section 1.30 thereof, as such plans may be amended from time to time. 2.43 "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors.
2.44 "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A.
2.45 "Year of Service" shall mean an Employee's Months of Service divided by twelve (12) rounded to
the nearest whole year, rounding up if the remaining number of months is seven
(7) or greater and rounding down if the remaining number of months is less than
seven (7). If an Employee has a break in his service with his Employing Company,
he will receive credit under this Plan for the service prior to the break in
service only if the break in service was less than five years and his service
prior to the break exceeds the length of the break in service.
ARTICLE 3 - SEVERANCE BENEFITS
(b) Support Employees. A Support Employee shall be entitled to participate in this Plan and receive the benefits described in Section 3.2 hereof, subject to the terms and conditions described in this Article 3.
(c) Limits on Eligibility. Notwithstanding anything to the contrary herein, an Employee or Support Employee shall not be eligible to receive benefits under this Plan if the Employee or Support Employee:
(i) is not actively at work on his Termination Date, unless such Employee or Support Employee is capable of returning to work within twelve (12) weeks of the beginning of any leave of absence from work;
(ii) voluntarily terminates his employment with his Employing Company for other than Good Reason;
(iii) is terminated by his Employing Company for Cause;
(iv) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that acquires all or substantially all of the assets of Southern, a Southern Subsidiary or his Employing Company;
(v) refuses an offer of continued employment with his Employing Company, Southern or a Southern Subsidiary, or any employer that acquires all or substantially all of the assets of Southern, a Southern Subsidiary or his Employing Company, under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment and such employer agrees to adopt this Plan as it applies to such Participant; or
(vi) elects to receive the benefits of any other voluntary or involuntary severance, separation or outplacement program, plan or agreement maintained by his Employing Company in lieu of benefits under this Plan; provided however, that the receipt of benefits under any retention plan or agreement shall not be deemed to be the receipt of benefits under any severance, separation or outplacement program for purposes of this Plan.
3.2 Benefits. Upon the Employing Company's receipt of an effective Waiver and Release, Participants shall be entitled to receive the following benefits:
(a) Employee Outplacement Services. Each Participant shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from the Participant's Termination Date.
(b) Severance Benefit. Participants shall be paid in cash an
amount equal to two times the Participant's Annual Compensation, but
not in excess of the Capped Amount. For purposes of this Section
3.2(b), the Capped Amount shall be the amount otherwise payable under
this Section 3.2(b), reduced in such amount and to such extent that no
amount of the payment under this Section 3.2(b), plus all other
"parachute payments" under Code Section 280G, would constitute an
"excess parachute payment" under Code Section 280G, but only to the
extent that if the payment under this Section 3.2(b) were increased by
one additional dollar ($1.00), a portion of the payment under this
Section 3.2(b) would be an "excess parachute payment" under Code
Section 280G. The calculation of the Capped Amount and any other
determinations relating to the applicability of Code Section 280G (and
the rules and regulations promulgated thereunder) to the payments
contemplated by this Plan shall be made by the tax department of the
independent public accounting firm then responsible for preparing
Southern's consolidated federal income tax return, and such
determinations shall be binding upon the Participants, Southern and the
Employing Company.
(ii) The extended medical coverage afforded to a Participant pursuant to this Section 3.2(c) as well as the premiums to be paid by the Participant in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by the Participant in connection with this extended coverage shall be due on the first day of each month; provided, however, that if a Participant fails to pay his premium within thirty (30) days of its due date, such Participant's extended coverage shall be terminated.
(iii) Any Group Health Plan coverage provided under this Section 3.2(c) shall be a part of and not in addition to any COBRA Coverage which a Participant or his dependent may elect. In the event that a Participant or his dependent becomes eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Employing Company's Group Health Plan available to the Participant or his dependent by virtue of the provisions of this Article 3 shall terminate, except as may otherwise be required by law, and shall not be renewed. It shall be the duty of a Participant to inform the Employing Company of his eligibility to participate in any such health plan.
(iv) Except as otherwise provided in Section 3.3 hereof, regardless of whether a Participant elects the extended coverage described in Section 3.2(a) hereof, the Employing Company shall pay to each Participant a cash amount equal to the Employing Company's and the Participant's cost of premiums for two (2) years of coverage under the Group Health Plan and Group Life Insurance Plan, as such Plans were in effect as of the date of the Change in Control. (d) Stock Option Vesting. The provisions of this Section 3.2(d) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Performance Stock Plan, the defined terms of which are incorporated in this Section 3.2(d) by reference.
(i) Any of the Participant's Options and Stock Appreciation
Rights outstanding as of the Termination Date which are not then
exercisable and vested, shall become fully exercisable and vested to
the full extent of the original grant; provided, that in the case of a
Participant holding a Stock Appreciation Right who is subject to
Section 16(b) of the Exchange Act, such Stock Appreciation Right shall
not become fully vested and exercisable at such time if such actions
would result in liability to the Participant under Section 16(b) of
the Exchange Act, provided further that any such actions not taken as
a result of the rules under Section 16(b) of the Exchange Act shall be
effected as of the first date that such activity would no longer
result in liability under Section 16(b) of the Exchange Act.
(ii) The restrictions and deferral limitations applicable to any of the Participant's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant.
(iii) The restrictions and deferral limitations and other conditions applicable to any other Awards held by the Participant under the Performance Stock Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant. (e) Performance Pay Plan. The provisions of this Section 3.2(e) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Performance Pay Plan, the defined terms of which are incorporated in this Section 3.2(e) by reference. Provided the Participant is not entitled to benefits under Article IV of the PPP Plan, if the PPP Plan is in place as of the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash in an amount equal to a prorated payout of his Incentive Pay Award under the PPP Plan for the Performance Period in which the Termination Date shall have occurred, at target performance under the PPP Plan and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date.
(f) Performance Dividend Plan. The provisions of this Section 3.2(f) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Performance Dividend Plan, the defined terms of which are incorporated in this Section 3.2(f) by reference. Provided the Participant is not entitled to benefits under Article V of the Performance Dividend Plan, if the Performance Dividend Plan is in place through the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash for each Award held as of such date based on a Payout Percentage of 50% under Section 4.1 of the Performance Dividend Plan for the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date.
(g) Value Creation Plan. The provisions of this Section 3.2(g) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the Value Creation Plan, the defined terms of which are incorporated in this Section 3.2(g) by reference. Any of the Participant's Appreciation Rights or Indexed Rights outstanding as of the Termination Date which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant. Notwithstanding anything in the Value Creation Plan to the contrary, Share Value with respect to any Appreciation Rights or Indexed Rights held by the Participant following his Termination Date shall be no less than the Share Value as of the date of the Change in Control of Southern or his Employing Company, as the case may be.
(h) Short Term Plan. The provisions of this Section 3.2(h) shall apply to any Participant who, as of the date of the Change in Control was a Participant in the Short Term Plan, the defined terms of which are incorporated in this Section 3.2(h) by reference. Provided the Participant is not entitled to benefits under Article V of the Short Term Plan, if the Short Term Plan is in place through the Participant's Termination Date and to the extent the Participant is entitled to participate therein, the Participant shall be entitled to receive cash in an amount equal to his Award under the Short Term Plan for the Performance Period in which the Termination Date shall have occurred, at Total Target for the Participant's Job Category and prorated by the number of months which have passed since the beginning of the Performance Period until the Termination Date.
(i) Other Short Term Incentive Plans. The provisions of this
Section 3.2(i) shall apply to any Participant who, as of the date of
the Change in Control is a participant in any other "short term
incentive compensation plan" not otherwise previously referred to in
this Section 3.2. Provided the Participant is not otherwise entitled to
a plan payout under any change in control provisions of such plans, if
the "short term incentive compensation plan" is in place through the
Participant's Termination Date and to the extent the Participant is
entitled to participate therein, the Participant shall be entitled to
receive cash in an amount equal to his award under his respective
Employing Company's "short term incentive compensation plan" for the
annual performance period in which the Termination Date shall have
occurred, at the Participant's target performance level and prorated by
the number of months which have passed since the beginning of the
annual performance period until the Termination Date. For purposes of
this Section 3.2(i), the term "short term incentive compensation plan"
shall mean any incentive compensation plan or arrangement adopted in
writing by an Employing Company which provides for annual, recurring
compensatory bonuses to participants based upon articulated performance
criteria, and which have been identified by the Board of Directors and
listed on Exhibit B hereto, which may be amended from time to time to
reflect plan additions, terminations and amendments.
(j) DIC Plan. The provisions of this Section 3.2(j) shall apply to any Participant who, as of the date of the Change in Control, was a participant in the DIC Plan, the defined terms of which are incorporated into this Section 3.2(j) by reference. Provided a Participant is not entitled to benefits under Article V of the DIC Plan, if the DIC Plan is in place through Participant's Termination Date and to the extent that Participant is entitled to participate therein, any of the Participant's Awards as of the Termination Date which are not then vested shall become fully vested and Participant shall be entitled to receive cash in the amount equal to Participant's Account as of his Termination Date. Notwithstanding anything in the DIC Plan to the contrary, the investment return on the Awards determined in accordance with Section 3.1 of the DIC Plan for any Plan Year following a Change in Control of Southern or its Employing Company shall be no less than the investment return determined in accordance with Section 3.1 of the DIC Plan as of the date of such Change in Control with respect to those Accounts which are outstanding as of the date of such Change in Control. 3.3 Coordination with Retiree Medical and Life Insurance Coverage. Notwithstanding anything to the contrary above, any Participant who is otherwise eligible to retire pursuant to the terms of the Pension Plan shall be deemed to have retired for purposes of all employee benefit plans sponsored by the Employing Company of which the Participant is a participant. A Participant who is deemed to have retired in accordance with the preceding sentence shall not be eligible to receive the benefits described in Section 3.2(c) hereof if, upon his Termination Date, such Participant becomes eligible to receive the retiree medical and life insurance coverage provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan.
3.4 Payment of Benefits. The amounts due a Participant under Sections 3.2(b) and (c) hereof shall be payable in one (1) lump sum payment as soon as administratively practicable within thirty (30) days of the later of the following to occur: (a) the Participant's Termination Date, or (b) the tender to the Employing Company by the Participant of an effective Waiver and Release in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Employing Company.
3.5 Benefits in the Event of Death. In the event of the Participant's death prior to the payment of all benefits due under this Article 3, the Participant's estate shall be entitled to receive as due any amounts not yet paid under this Article 3 upon the tender by the executor or administrator of the estate of an effective Waiver and Release.
3.6 Legal Fees. In the event of a dispute between a Participant and his Employing Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in the Participant's favor, his Employing Company shall reimburse the Participant's legal fees incurred with respect to all issues in such dispute in an amount not to exceed thirty thousand dollars ($30,000).
3.7 No Mitigation. A Participant who receives benefits under Section 3.2 of this Plan shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Subsection 3.1(d) hereof, the amounts due a Participant hereunder shall not be reduced or suspended if such Participant accepts such subsequent employment.
3.8 Non-qualified Retirement and Deferred Compensation Plans.
Subsequent to a Change in Control, any claims by a Participant for benefits
under any of the Company's non-qualified retirement or deferred compensation
plans shall be resolved through binding arbitration in accordance with the
procedures and provisions set forth in Article 5 hereof and if any material
issue in such dispute is finally resolved in the Participant's favor, the
Company shall reimburse the Participant's legal fees in the manner provided in
Section 3.6 hereof.
3.9 Guarantee of SEI. Effective May 10, 2000, if SERI fails or refuses to make payments under the Plan, SERI Participants may have the right to obtain payment by SEI pursuant to the terms of the "Guarantee Agreement Concerning Southern Energy Resources, Inc. Compensation and Benefit Arrangements" entered into by SEI and SERI. A SERI Participant's right to payment is not increased as a result of this Guarantee. SERI Participants have the same right to payment from SEI as they have from SERI. Any demand to enforce this Guarantee should be made in writing and should reasonably and briefly specify the manner and the amount SERI has failed to pay. Such writing given by personal delivery or mail shall be effective upon actual receipt. Any writing given by telegram or telecopier shall be effective upon actual receipt if received during SEI's normal business hours, or at the beginning of the next business day after receipt, if not received during SEI's normal business hours. All arrivals by telegram or telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery.
ARTICLE 4 - ADMINISTRATION
4.1 Administrative Committee. The Administrative Committee shall be responsible for the general administration of the Plan and may appoint other persons or entities to perform or assist in the performance of any of its duties, subject to its review and approval. The Administrative Committee shall have the right to remove any such appointee from his position without cause upon notice.
ARTICLE 5 - ARBITRATION
5.1 General. Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Plan, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Article 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to a Participant's employment by an Employing Company or the termination thereof.
5.2 Demand for Arbitration. Arbitration shall be initiated by serving a written notice of demand for arbitration to the Participant, in the case of an Employing Company, or to the Administrative Committee, in the case of a Participant.
5.3 Law and Venue. The arbitrators shall apply the laws of the State of Georgia, except to the extent pre-empted by federal law, excluding any law which would require the use of the law of another state. The arbitration shall be held in Atlanta, Georgia.
5.4 Appointment of Arbitrators. Arbitrators shall be appointed within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by the Participant, one arbitrator shall be appointed by the Employing Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA.
5.5 Costs. The arbitration filing fee shall be paid by the Participant. All other costs of arbitration shall be borne equally by the Participant and his Employing Company, provided, however, that such Employing Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in the Participant's favor and the Participant is reimbursed legal fees under Section 3.6 hereof.
5.6 Interim and Injunctive Relief. Nothing in this Article 5 is intended to preclude, upon application of either party, any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to either party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Article 5 and nothing herein is intended to prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Article 5.
ARTICLE 6 - MISCELLANEOUS
6.1 Funding of Benefits. Unless the Board of Directors shall in its discretion determine otherwise, the benefits payable to a Participant under the Plan shall not be funded in any manner and shall be paid by the Employing Companies out of their general assets, which assets are subject to the claims of the Employing Companies' creditors.
6.2 Withholding. There shall be deducted from the payment of any benefit due under the Plan the amount of any tax required by any governmental authority to be withheld and paid over by the Employing Companies to such governmental authority for the account of the Participant entitled to such payment.
6.3 Assignment. No Participant or beneficiary shall have any rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect.
6.4 Amendment and Termination. The Plan may be amended or terminated at any time by the Board of Directors, provided, however, the Plan may not be amended in any material respect or terminated within the two (2) year period following a Change in Control nor shall any amendment or termination impair the rights of any Participant which have accrued hereunder prior to any such amendment or termination.
6.5 Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Plan, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Plan which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Plan, Pooling Accounting would be required for such Change in Control transaction.
IN WITNESS WHEREOF, this Southern Company Executive Change in Control Severance Plan has been executed by the Company through its duly authorized officers, this ____ day of ___________, 2000, to be effective as provided herein.
SOUTHERN COMPANY SERVICES, INC.
By: ______________________
exhibit 10.36.doc
Exhibit A
SOUTHERN COMPANY
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PLAN
Waiver and Release
I understand that I am entitled to receive the Severance Benefits described in Article 3 of the Southern Company Executive Change in Control Severance Plan (the "Plan") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I have elected to receive under the Plan are in excess of those I would have received from ________________________ (the "Company") if I had not elected to participate in the Plan and sign this Waiver.
I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. I understand and agree that I am obligated to keep confidential and not disclose the terms of this Waiver, including, but not limited to, the benefits under this Plan, except to my attorneys, financial advisors, or except where such disclosure is required by law. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to any vested or accrued benefits that I have under any workers' compensation laws or any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company except for programs specifically designed for participants in the Plan.
I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver.
I understand that I may take up to forty-five (45) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this __________________ day of ____________________ , in the year ______.
Employee's signature
Employee's printed name
Acknowledged and Accepted by the Administrative Committee of the Southern Company Executive Change in Control Severance Plan.
Attachment to Exhibit A
TO: All Eligible Employees under the Southern Company Executive
Change in Control Severance Plan
FROM: _____________________
RE: ADEA Information Notice
DATE: _____________________
A severance plan known as the Southern Company Executive Change in
|
Control Severance Plan ("Plan") has been approved and established by The Southern Company, its affiliates and its direct and indirect subsidiaries (collectively the "Company"). You are eligible to participate in the Plan subject to the terms of the Plan. In accordance with the Age Discrimination in Employment Act ("ADEA"), the Company is providing you the following information pertaining to eligibility and participation in the Plan.
The purpose of the Plan is to provide benefits to certain key employees of The Southern Company and certain subsidiaries of The Southern Company ("Employing Companies") whose employment is terminated subsequent to a change in control of The Southern Company or their respective Employing Company.
Each active regular employee of an Employing Company of Grade 10
to 13 (or, if the Grade System is not used, $130,000 or more of
annual base salary rate for the 12 month period immediately
preceding the change in control) not covered by a collective
bargaining agreement is generally eligible to participate in the
Plan if, during the two year period following a change in control:
(i) his employment is involuntarily terminated for reasons other
than cause, or (ii) he voluntarily terminates employment for good
reason.
All eligible employees may receive severance benefits under the Plan by signing a Waiver and Release no later than 45 calendar days from the date it is received. The Waiver and Release will remain revocable by you for a seven day period after you sign it.
Attached is a list sorted by job title and age of each employee eligible to participate in the Plan as well as a list of the ages of all employees in the same job classification who are not eligible to participate in the Plan.
In furtherance of you making an informed decision, the Company urges you to seek a financial advisor, legal counsel and a qualified tax advisor to assist you in fully understanding your rights and benefits under the plan and the Waiver and Release that you will be required to sign to receive severance benefits under the Plan.
If you have any questions or need additional information, please call me at _______________.
Sincerely,
ADEA INFORMATION NOTICE
Job Title, Classification Age of or Category of Ineligible Employees Ineligible Employees
Exhibit B
SOUTHERN COMPANY
EXECUTIVE CHANGE IN CONTROL
SEVERANCE PLAN
Short Term Incentive Compensation Plans
Exhibit 10.37
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Company Services, Inc. (the "Company") and Mr. Henry Allen Franklin ("Mr. Franklin") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, effective and executed on July 8, 1999.
WHEREAS, Mr. Franklin is the President and Chief Operating Officer of Southern;
WHEREAS, the Parties entered into a Change in Control Agreement effective July 8, 1999 (the "July 8, 1999 Agreement") to provide to Mr. Franklin certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company;
WHEREAS, pursuant to Section 6(d) of the July 8, 1999 Agreement, the Parties may amend the July 8, 1999 Agreement by written agreement;
WHEREAS, the Parties wish to enter into this Amended and Restated
Change in Control Agreement pursuant to the provisions of such Section 6(d), to
(i) change certain references from normal market bonus to target bonus, (ii)
clarify that an initial public offering and a spin-off of the Company does not
constitute a "change in control" under the Agreement, (iii) change references
from the "Productivity Improvement Plan" to the "Executive Productivity
Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the
waiver and release attached hereto, and (v) certain other technical and
miscellaneous modifications;
NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Annual Compensation" shall mean Mr. Franklin's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus.
(b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern.
(d) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(d)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any
Southern Subsidiary;
(D) any acquisition by a qualified pension plan or
publicly held mutual fund; (E) any acquisition by a Group
composed exclusively of employees of Southern, or any
Southern Subsidiary;
(F) any acquisition by Mr. Franklin or any Group of
|
which Mr. Franklin is a party; or
(G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(d)(iii); (ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board;
(iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met:
(A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities;
(B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Franklin, any Group of which Mr. Franklin is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and
(C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination.
(iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(d)(iv), any acquisition by Mr. Franklin, any Group composed exclusively of employees of the Company, any Group of which Mr. Franklin is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control;
(v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company.
(e) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Franklin or his dependents may be entitled pursuant to Code
Section 4980B.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Company" shall mean Southern Company Services, Inc., its successors and assigns.
(h) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies.
(i) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests.
(j) "Effective Date" shall mean the date of execution of this Agreement.
(k) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services:
(i) self assessment, career decision and goal
setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv)
planning and implementation strategy; (v) resume
writing, job hunting methods and salary negotiation;
and (vi) office support and job search resources.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(m) "Executive Productivity Improvement Plan" or "Executive PIP Plan" shall mean the
Southern Company Executive Productivity Improvement Plan or replacement thereto, as such plans may be amended from time to time.
(n) "Good Reason" shall mean, without Mr. Franklin's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Franklin's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Franklin's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Franklin's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company);
(iii) Pension and Compensation Plans. The failure by the Company to continue in effect any pension or compensation plan or agreement in which Mr. Franklin participates or is a party as of the date of the Change in Control or the elimination of Mr. Franklin's participation therein, (except for across-the-board plan changes or terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); For purposes of this Paragraph 1.(n), a "pension plan or agreement" shall mean any written arrangement executed by an authorized officer of the Company which provides for payments upon retirement; and a "compensation plan or arrangement" shall mean any written arrangement executed by an authorized officer of the Company which provides for periodic, non-discretionary compensatory payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Franklin's work location to a location more than fifty (50) miles from the office where Mr. Franklin is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Franklin's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Franklin of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Franklin's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Franklin's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or
(v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Franklin under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Franklin was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Franklin with the number of paid vacation days to which Mr. Franklin is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above.
(o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act.
(p) "Group Health Plan" shall mean the group health plan covering Mr. Franklin as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Franklin as such plan may be amended from time to time.
(r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during which Mr. Franklin has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time.
(w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time.
(y) "Southern" shall mean The Southern Company, its successors and assigns.
(z) "Southern Board" shall mean the board of directors of Southern.
(aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern.
(bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Franklin's employment by the Company upon the occurrence of any of the following:
(i) The willful and continued failure by Mr. Franklin substantially to perform his duties with the Company (other than any such failure resulting from Mr. Franklin's Total Disability or from Mr. Franklin's retirement or any such actual or anticipated failure resulting from termination by Mr. Franklin for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or
(ii) The willful engaging by Mr. Franklin in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following:
(A) any willful act involving fraud or dishonesty in the course of Mr. Franklin's employment by the Company;
(B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located;
(C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense;
(D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer;
(E) assault or other act of violence against any person during the course of employment; or
(F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Franklin shall be deemed "willful" unless done, or omitted to be done, by Mr. Franklin not in good faith and without reasonable belief that his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Franklin shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Franklin and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Franklin was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail.
(cc) "Termination Date" shall mean the date on which Mr. Franklin's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(b) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan.
(dd) "Total Disability" shall mean Mr. Franklin's total disability within the meaning of the Pension Plan.
(ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors.
(ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A.
(gg) "Year of Service" shall mean Mr. Franklin's Months of Service divided by twelve (12)
rounded to the nearest whole year, rounding up if the remaining number of months is seven (7) or greater and rounding down if the remaining number of months is less than seven (7). If Mr. Franklin has a break in his service with the Company, he will receive credit under this Agreement for service prior to the break in service only if the break in service is less than five years.
(i) voluntarily terminates his employment with the Company for other than Good Reason;
(ii) has his employment terminated by the Company for Cause;
(iii) accepts the transfer of his employment to any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement.
(b) Severance Benefits. If Mr. Franklin meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Franklin an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Franklin under Code Section 280G exceeds three (3) times Mr. Franklin's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Franklin's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Franklin, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Franklin meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c).
(i) Mr. Franklin shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Franklin's Years of Service, not to exceed five (5) years. If Mr. Franklin elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Franklin's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Franklin's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan.
(A) The extended medical coverage afforded to Mr. Franklin pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Franklin in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Franklin in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated.
(B) Any Group Health Plan coverage provided under Paragraph
2.(c)(i) shall be a part of and not in addition to any COBRA Coverage
which Mr. Franklin or his dependents may elect. In the event that Mr.
Franklin or his dependents become eligible to be covered, by virtue of
re-employment or otherwise, by any employer-sponsored group health
plan or is eligible for coverage under any government-sponsored health
plan during the above period, coverage under the Company's Group
Health Plan available to Mr. Franklin or his dependents by virtue of
the provisions of Paragraph 2.(c)(i) shall terminate, except as may
otherwise be required by law, and shall not be renewed. (ii) Mr.
Franklin shall be entitled to receive cash in an amount equal to the
Company's and Mr. Franklin's cost of premiums for three (3) years of
coverage under the Group Health Plan and Group Life Insurance Plan in
accordance with the terms of such plans as of the date of the Change
in Control.
(d) Incentive Plans. If Mr. Franklin meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans:
(A) Any of Mr. Franklin's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Franklin is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Franklin under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act.
(B) The restrictions and deferral limitations applicable to any of Mr. Franklin's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant.
(C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Franklin under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant.
(ii) Performance Pay Plan. Provided Mr. Franklin is
not entitled to benefits under Article V of the PPP Plan (the
defined terms of which are incorporated in this Paragraph
2.(d)(ii) by reference), if the PPP Plan is in place through
Mr. Franklin's Termination Date and to the extent Mr. Franklin
is entitled to participate therein, Mr. Franklin shall be
entitled to receive cash in an amount equal to a prorated
payout of his Incentive Pay Awards under the PPP Plan for the
Performance Period in which the Termination Date shall have
occurred, at target performance under the PPP Plan and
prorated by the number of months which have passed since the
beginning of the Performance Period until the Termination
Date.
(iii) Executive PIP Plan. Provided Mr. Franklin is not
entitled to benefits under Article IV of the Executive PIP Plan
(the defined terms of which are incorporated in this Paragraph
2.(d)(iii) by reference), if the Executive PIP Plan is in place
through Mr. Franklin's Termination Date and to the extent Mr.
Franklin is entitled to participate therein, Mr. Franklin shall
be entitled to receive cash in an amount equal to his Award
Opportunity for the Computation Periods in which the Termination
Date shall have occurred at a target Value of Performance Unit of
$1.00, prorated for each Performance Period by the number of
months which have passed since the beginning of each of the
Computation Periods until the Termination Date.
(iv) Performance Dividend Plan. Provided Mr. Franklin is not
entitled to benefits under the Performance Dividend Plan (the
defined terms of which are incorporated in this Paragraph
2.(d)(iv) by reference), if the Performance Dividend Plan is in
place through Mr. Franklin's Termination Date and to the extent
Mr. Franklin is entitled to participate therein, Mr. Franklin
shall be entitled to receive cash for each Award held by Mr.
Franklin on his Termination Date, based on actual performance
under Section 4.1 of the Performance Dividend Plan determined as
of the most recently completed calendar quarter of the
Performance Period in which the Termination Date shall have
occurred, and the Annual Dividend declared prior to the
Termination Date.
(v) Other Short Term Incentive Plans. The provisions of this
Paragraph 2.(d)(v) shall apply if and to the extent that Mr.
Franklin is a participant in any other "short term compensation
plan" not otherwise previously referred to in this Paragraph
2.(d). Provided Mr. Franklin is not otherwise entitled to a plan
payout under any change of control provisions of such plans, if
the "short term compensation plan" is in place as of the
Termination Date and to the extent Mr. Franklin is entitled to
participate therein, Mr. Franklin shall receive cash in an amount
equal to his award under the Company's "short term incentive
plan" for the annual performance period in which the Termination
Date shall have occurred, at Mr. Franklin's target performance
level and prorated by the number of months which have passed
since the beginning of the annual performance period until his
Termination Date. For purposes of this Paragraph 2.(d)(v) the
term "short term incentive compensation plan" shall mean any
incentive compensation plan or arrangement adopted in writing by
the Company which provides for annual, recurring compensatory
bonuses based upon articulated performance criteria. (e) Payment
of Benefits. Any amounts due under this Agreement shall be paid
in one (1) lump sum payment as soon as administratively
practicable following the later of: (i) Mr. Franklin's
Termination Date, or (ii) upon Mr. Franklin's tender of an
effective Waiver and Release to the Company in the form of
Exhibit A attached hereto and the expiration of any applicable
revocation period for such waiver. In the event of a dispute with
respect to liability or amount of any benefit due hereunder, an
effective Waiver and Release shall be tendered at the time of
final resolution of any such dispute when payment is tendered by
the Company.
(f) Benefits in the Event of Death. In the event of Mr. Franklin's death prior to the payment of all amounts due under this Agreement, Mr. Franklin's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release.
(g) Legal Fees. In the event of a dispute between Mr. Franklin and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Franklin's favor, the Company shall reimburse Mr. Franklin's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Franklin shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Franklin's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Franklin for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Dalhberg's favor, the Company shall
reimburse Mr. Franklin's legal fees in the manner provided in Paragraph
2.(g) hereof.
3. Transfer of Employment. In the event that Mr. Franklin's employment by the Company is terminated during the two year period following a Change in Control and Mr. Franklin accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Franklin is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Franklin hereunder shall not be reduced or suspended if Mr. Franklin accepts such subsequent employment.
(b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Franklin, in the case of the Company, or to the Southern Board, in the case of Mr. Franklin.
(c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Franklin, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Franklin. All other costs of arbitration shall be borne equally by Mr. Franklin and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Franklin's favor and Mr. Franklin is reimbursed legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any court having
jurisdiction from issuing and enforcing in any lawful manner such
temporary restraining orders, preliminary injunctions, and other
interim measures of relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate pending the
conclusion of arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this Paragraph 5
has begun. The parties further agree that nothing herein shall prevent
any court from entering and enforcing in any lawful manner such
judgments for permanent equitable relief as may be necessary to prevent
harm to a party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this Paragraph 5.
6. Miscellaneous.
(a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Franklin under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Franklin.
(c) Assignment. Mr. Franklin shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________,
THE SOUTHERN COMPANY
By: ____________________
SOUTHERN COMPANY
SERVICES, INC.
By: ____________________
MR. FRANKLIN
Exhibit A
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Henry Allen Franklin upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement.
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Henry Allen Franklin, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Company Services, Inc. (collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____.
Henry Allen Franklin
Sworn to and subscribed to me this
____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
Exhibit 10.38
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
WHEREAS, the Parties entered into a Change in Control Agreement effective December 7, 1998 (the "Original Agreement") to provide to Mr. McCrary certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company;
WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement;
WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications;
NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. McCrary's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus.
(b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension plan or publicly held mutual fund;
(E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary;
(F) any acquisition by Mr. McCrary or any Group of which Mr. McCrary is a party; or
(G) any Business Combination which would not otherwise constitute
a change in control because of the application of clauses (A), (B) and
(C) of Paragraph 1.(e)(iii); (ii) A change in the composition of the
Southern Board whereby individuals who constitute the Incumbent Board
cease for any reason to constitute at least a majority of the Southern
Board;
(iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met:
(A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities;
(B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. McCrary, any Group of which Mr. McCrary is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and
(C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination.
(iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. McCrary, any Group composed exclusively of employees of the Company, any Group of which Mr. McCrary is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control;
(v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. McCrary or his dependents may be entitled pursuant to Code
Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Company" shall mean Southern Company Services, Inc., its successors and assigns.
(i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies.
(j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests.
(k) "Effective Date" shall mean the date of execution of this Agreement.
(l) "Employee Outplacement Program" shall mean the
program established by the Company from time to time for the
purpose of assisting participants covered by the plan in
finding employment outside of the Company which provides for
the following services: (i) self-assessment, career decision
and goal setting; (ii) job market research and job sources;
(iii) networking and interviewing skills; (iv) planning and
implementation strategy; (v) resume writing, job hunting
methods and salary negotiation; and (vi) office support and
job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(n) "Good Reason" shall mean, without Mr. McCrary's express written consent, after written notice to the Board, and after a thirty (30) day opportunity for the Board to cure, the continuing occurrence of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. McCrary's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. McCrary's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. McCrary's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. McCrary participates or is a
party as of the date of the Change in Control or the
elimination of Mr. McCrary's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company). For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. McCrary's work
location to a location more than fifty (50) miles from the
office where Mr. McCrary is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. McCrary's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
McCrary of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. McCrary's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. McCrary's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. McCrary under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. McCrary was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. McCrary with the number of paid vacation days to which Mr. McCrary is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above.
(o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act.
(p) "Group Health Plan" shall mean the group health plan covering Mr. McCrary, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. McCrary, as such plan may be amended from time to time.
(r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during which Mr. McCrary has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time.
(w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time.
(y) "Southern" shall mean The Southern Company, its successors and assigns.
(z) "Southern Board" shall mean the board of directors of Southern.
(aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern.
(bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. McCrary's employment by the Company upon the occurrence of any of the following:
(i) The willful and continued failure by Mr. McCrary substantially to perform his duties with the Company (other than any such failure resulting from Mr. McCrary's Total Disability or from Mr. McCrary's retirement or any such actual or anticipated failure resulting from termination by Mr. McCrary for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or
(ii) The willful engaging by Mr. McCrary in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following:
(A) any willful act involving fraud or dishonesty in the course of Mr. McCrary's employment by the Company;
(B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located;
(C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense;
(D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer;
(E) assault or other act of violence against any person during the course of employment; or
(F) indictment of any felony or any misdemeanor
involving moral turpitude. No act or failure to act by Mr.
McCrary shall be deemed "willful" unless done, or omitted to
be done, by Mr. McCrary not in good faith and without
reasonable belief that his action or omission was in the
best interest of the Company. Notwithstanding the foregoing,
Mr. McCrary shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative
vote of not less than three quarters of the entire
membership of the Southern Board at a meeting of the
Southern Board called and held for such purpose (after
reasonable notice to Mr. McCrary and an opportunity for him,
together with counsel, to be heard before the Southern
Board), finding that, in the good faith opinion of the
Southern Board, Mr. McCrary was guilty of conduct set forth
above in clause (i) or (ii) of this Paragraph 1.(bb) and
specifying the particulars thereof in detail. (cc)
"Termination Date" shall mean the date on which Mr.
McCrary's employment with the Company is terminated;
provided, however, that solely for purposes of Paragraph
2.(c) hereof, the Termination Date shall be the effective
date of his retirement pursuant to the terms of the Pension
Plan. (dd) "Total Disability" shall mean Mr. McCrary's total
disability within the meaning of the Pension Plan. (ee)
"Voting Securities" shall mean the outstanding voting
securities of a corporation entitling the holder thereof to
vote generally in the election of such corporation's
directors. (ff) "Waiver and Release" shall mean the Waiver
and Release attached hereto as Exhibit A. (gg) "Year of
Service" shall mean Mr. McCrary's Months of Service divided
by twelve (12) rounded to the nearest whole year, rounding
up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less
than seven (7). If Mr. McCrary has a break in his service
with the Company, he will receive credit under this
Agreement for service prior to the break in service only if
the break in service is less than five years. 2. Severance
Benefits. (a) Eligibility. Except as otherwise provided in
this Paragraph 2.(a), if Mr. McCrary's employment is
involuntarily terminated by the Company at any time during
the two year period following a Change in Control for
reasons other than Cause, or if Mr. McCrary voluntarily
terminates his employment with the Company for Good Reason
at any time during the two year period following a Change in
Control, Mr. McCrary shall be entitled to receive the
benefits described in this Agreement upon the Company's
receipt of an effective Waiver and Release. Notwithstanding
anything to the contrary herein, Mr. McCrary shall not be
eligible to receive benefits under this Agreement if Mr.
McCrary: (i) voluntarily terminates his employment with the
Company for other than Good Reason; (ii) has his employment
terminated by the Company for Cause; (iii) accepts the
transfer of his employment to Southern, any Southern
Subsidiary or any employer that succeeds to all or
substantially all of the assets of the Company, Southern or
any Southern Subsidiary; (iv) refuses an offer of continued
employment with the Company, any Southern Subsidiary, or any
employer that succeeds to all or substantially all of the
assets of the Company, Southern, or any Southern Subsidiary
under circumstances where such refusal would not amount to
Good Reason for voluntary termination of employment; or (v)
elects to receive the benefits of any other voluntary or
involuntary severance or separation program, plan or
agreement maintained by the Company in lieu of benefits
under this Agreement; provided however, that the receipt of
benefits under the terms of any retention plan or agreement
shall not be deemed to be the receipt of severance or
separation benefits for purposes of this Agreement. (b)
Severance Benefits. If Mr. McCrary meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled
to a cash severance benefit in an amount equal to three
times his Annual Compensation (the "Severance Amount"). If
any portion of the Severance Amount constitutes an "excess
parachute payment" (as such term is defined under Code
Section 280G ("Excess Parachute Payment")), the Company
shall pay to Mr. McCrary an additional amount calculated by
determining the amount of tax under Code Section 4999 that
he otherwise would have paid on any Excess Parachute Payment
with respect to the Change in Control and dividing such
amount by a decimal determined by adding the tax rate under
Code Section 4999 ("Excise Tax"), the hospital insurance tax
under Code Section 3101(b) ("HI Tax") and federal and state
income tax measured at the highest marginal rates ("Income
Tax") and subtracting such result from the number one (1)
(the "280G Gross-up"); provided, however, that no 280G
Gross-up shall be paid unless the Severance Amount plus all
other "parachute payments" to Mr. McCrary under Code Section
280G exceeds three (3) times Mr. McCrary's "base amount" (as
such term is defined under Code Section 280G ("Base
Amount")) by ten percent (10%) or more; provided further,
that if no 280G Gross-up is paid, the Severance Amount shall
be capped at three (3) times Mr. McCrary's Base Amount, less
all other "parachute payments" (as such term is defined
under Code Section 280G) received by Mr. McCrary, less one
dollar (the "Capped Amount"), if the Capped Amount, reduced
by HI Tax and Income Tax, exceeds what otherwise would have
been the Severance Amount, reduced by HI Tax, Income Tax and
Excise Tax. For purposes of this Paragraph 2.(b), whether
any amount would constitute an Excess Parachute Payment and
any other calculations of tax, e.g., Excise Tax, HI Tax,
Income Tax, etc., or other amounts, e.g., Base Amount,
Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then
responsible for preparing Southern's consolidated federal
income tax return, and such calculations or determinations
shall be binding upon the parties hereto. (c) Welfare
Benefits. If Mr. McCrary meets the eligibility requirements
of Paragraph 2.(a) hereof and is not otherwise eligible to
receive retiree medical and life insurance benefits provided
to certain retirees pursuant to the terms of the Pension
Plan, the Group Health Plan and the Group Life Insurance
Plan, he shall be entitled to the benefits set forth in this
Paragraph 2.(c). (i) Mr. McCrary shall be eligible to
participate in the Company's Group Health Plan, upon payment
of both the Company's and his monthly premium under such
plan, for a period of six (6) months for each of Mr.
McCrary's Years of Service, not to exceed five (5) years. If
Mr. McCrary elects to receive this extended medical
coverage, he shall also be entitled to elect coverage under
the Group Health Plan for his dependents who were
participating in the Group Health Plan on Mr. McCrary's
Termination Date (and for such other dependents as may be
entitled to coverage under the provisions of the Health
Insurance Portability and Accountability Act of 1996) for
the duration of Mr. McCrary's extended medical coverage
under this Paragraph 2.(c)(i) to the extent such dependents
remain eligible for dependent coverage under the terms of
the Group Health Plan. (A) The extended medical coverage
afforded to Mr. McCrary pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. McCrary in connection
with such coverage shall be determined in accordance with
the terms of the Group Health Plan and shall be subject to
any changes in the terms and conditions of the Group Health
Plan as well as any future increases in premiums under the
Group Health Plan. The premiums to be paid by Mr. McCrary in
connection with this extended coverage shall be due on the
first day of each month; provided, however, that if he fails
to pay his premium within thirty (30) days of its due date,
such extended coverage shall be terminated. (B) Any Group
Health Plan coverage provided under Paragraph 2.(c)(i) shall
be a part of and not in addition to any COBRA Coverage which
Mr. McCrary or his dependents may elect. In the event that
Mr. McCrary or his dependents become eligible to be covered,
by virtue of re-employment or otherwise, by any
employer-sponsored group health plan or is eligible for
coverage under any government-sponsored health plan during
the above period, coverage under the Company's Group Health
Plan available to Mr. McCrary or his dependents by virtue of
the provisions of Paragraph 2.(c)(i) shall terminate, except
as may otherwise be required by law, and shall not be
renewed. (ii) Mr. McCrary shall be entitled to receive cash
in an amount equal to the Company's and Mr. McCrary's cost
of premiums for three (3) years of coverage under the Group
Health Plan and Group Life Insurance Plan in accordance with
the terms of such plans as of the date of the Change in
Control. (d) Incentive Plans. If Mr. McCrary meets the
eligibility requirements of Paragraph 2.(a) hereof he shall
be entitled to the following benefits under the Company's
incentive plans: (i) Stock Option Plan. (A) Any of Mr.
McCrary's Options and Stock Appreciation Rights under the
Performance Stock Plan (the defined terms of which are
incorporated in this Paragraph 2.(d)(i) by reference) which
are outstanding as of the Termination Date and which are not
then exercisable and vested, shall become fully exercisable
and vested to the full extent of the original grant;
provided, that in the case of a Stock Appreciation Right, if
Mr. McCrary is subject to Section 16(b) of the Exchange Act,
such Stock Appreciation Right shall not become fully vested
and exercisable at such time if such actions would result in
liability to Mr. McCrary under Section 16(b) of the Exchange
Act, provided further, that any such actions not taken as a
result of the rules under Section 16(b) of the Exchange Act
shall be effected as of the first date that such activity
would no longer result in liability under Section 16(b) of
the Exchange Act. (B) The restrictions and deferral
limitations applicable to any of Mr. McCrary's Restricted
Stock as of the Termination Date shall lapse, and such
Restricted Stock shall become free of all restrictions and
limitations and become fully vested and transferable to the
full extent of the original grant. (C) The restrictions and
deferral limitations and other conditions applicable to any
other Awards held by Mr. McCrary under the Stock Performance
Plan as of the Termination Date shall lapse, and such other
Awards shall become free of all restrictions, limitations or
conditions and become fully vested and transferable to the
full extent of the original grant. (ii) Performance Pay
Plan. Provided Mr. McCrary is not entitled to benefits under
Article V of the PPP Plan, (the defined terms of which are
incorporated in this Paragraph 2.(d)(ii) by reference), if
the PPP Plan is in place through Mr. McCrary's Termination
Date and to the extent Mr. McCrary is entitled to
participate therein, Mr. McCrary shall be entitled to
receive cash in an amount equal to a prorated payout of his
Incentive Pay Awards under the PPP Plan for the Performance
Period in which the Termination Date shall have occurred, at
target performance under the PPP Plan and prorated by the
number of months which have passed since the beginning of
the Performance Period until the Termination Date. (iii)
Performance Dividend Plan. Provided Mr. McCrary is not
entitled to benefits under the Performance Dividend Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(iii) by reference), if the Performance
Dividend Plan is in place through Mr. McCrary's Termination
Date and to the extent Mr. McCrary is entitled to
participate therein, Mr. McCrary shall be entitled to
receive cash for each Award held by Mr. McCrary on his
Termination Date, based on actual performance under Section
4.1 of the Performance Dividend Plan determined as of the
most recently completed calendar quarter of the Performance
Period in which the Termination Date shall have occurred,
and the Annual Dividend declared prior to the Termination
Date. (iv) Other Short Term Incentive Plans. The provisions
of this Paragraph 2.(d)(iv) shall apply if and to the extent
that Mr. McCrary is a participant in any other "short term
compensation plan" not otherwise previously referred to in
this Paragraph 2.(d). Provided Mr. McCrary is not otherwise
entitled to a plan payout under any change of control
provisions of such plans, if the "short term compensation
plan" is in place as of the Termination Date and to the
extent Mr. McCrary is entitled to participate therein, Mr.
McCrary shall receive cash in an amount equal to his award
under the Company's "short term incentive plan" for the
annual performance period in which the Termination Date
shall have occurred, at Mr. McCrary's target performance
level and prorated by the number of months which have passed
since the beginning of the annual performance period until
his Termination Date. For purposes of this Paragraph
2.(d)(iv) the term "short term incentive compensation plan"
shall mean any incentive compensation plan or arrangement
adopted in writing by the Company which provides for annual,
recurring compensatory bonuses based upon articulated
performance criteria. (e) Payment of Benefits. Any amounts
due under this Agreement shall be paid in one (1) lump sum
payment as soon as administratively practicable following
the later of: (i) Mr. McCrary's Termination Date, or (ii)
upon Mr. McCrary's tender of an effective Waiver and Release
to the Company in the form of Exhibit A attached hereto and
the expiration of any applicable revocation period for such
waiver. In the event of a dispute with respect to liability
or amount of any benefit due hereunder, an effective Waiver
and Release shall be tendered at the time of final
resolution of any such dispute when payment is tendered by
the Company. (f) Benefits in the Event of Death. In the
event of Mr. McCrary's death prior to the payment of all
amounts due under this Agreement, Mr. McCrary's estate shall
be entitled to receive as due any amounts not yet paid under
this Agreement upon the tender by the executor or
administrator of the estate of an effective Waiver and
Release. (g) Legal Fees. In the event of a dispute between
Mr. McCrary and the Company with regard to any amounts due
hereunder, if any material issue in such dispute is finally
resolved in Mr. McCrary's favor, the Company shall reimburse
Mr. McCrary's legal fees incurred with respect to all issues
in such dispute in an amount not to exceed fifty thousand
dollars ($50,000). (h) Employee Outplacement Services. Mr.
McCrary shall be eligible to participate in the Employee
Outplacement Program, which program shall not be less than
six (6) months duration measured from Mr. McCrary's
Termination Date. (i) Non-qualified Retirement and Deferred
Compensation Plans. The Parties agree that subsequent to a
Change in Control, any claims by Mr. McCrary for benefits
under any of the Company's non-qualified retirement or
deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and
procedures set forth in Paragraph 5 hereof and if any
material issue in such dispute is finally resolved in Mr.
McCrary's favor, the Company shall reimburse Mr. McCrary's
legal fees in the manner provided in Paragraph 2.(g) hereof.
3. Transfer of Employment. In the event that Mr. McCrary's
employment by the Company is terminated during the two year
period following a Change in Control and Mr. McCrary accepts
employment by Southern, a Southern Subsidiary, or any
employer that succeeds to all or substantially all of the
assets of the Company, Southern or any Southern Subsidiary,
the Company shall assign this Agreement to Southern, such
Southern Subsidiary, or successor employer, Southern shall
accept such assignment or cause such Southern Subsidiary or
successor employer to accept such assignment, and such
assignee shall become the "Company" for all purposes
hereunder. 4. No Mitigation. If Mr. McCrary is otherwise
eligible to receive benefits under Paragraph 2 of this
Agreement, he shall have no duty or obligation to seek other
employment following his Termination Date and, except as
otherwise provided in Paragraph 2.(a)(iii) hereof, the
amounts due Mr. McCrary hereunder shall not be reduced or
suspended if Mr. McCrary accepts such subsequent employment.
5. Arbitration. (a) Any dispute, controversy or claim
arising out of or relating to the Company's obligations to
pay severance benefits under this Agreement, or the breach
thereof, shall be settled and resolved solely by arbitration
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("AAA") except as otherwise
provided herein. The arbitration shall be the sole and
exclusive forum for resolution of any such claim for
severance benefits and the arbitrators' award shall be final
and binding. The provisions of this Paragraph 5 are not
intended to apply to any other disputes, claims or
controversies arising out of or relating to Mr. McCrary's
employment by the Company or the termination thereof. (b)
Arbitration shall be initiated by serving a written notice
of demand for arbitration to Mr. McCrary, in the case of the
Company, or to the Southern Board, in the case of Mr.
McCrary. (c) The arbitration shall be held in Atlanta,
Georgia. The arbitrators shall apply the law of the State of
Georgia, to the extent not preempted by federal law,
excluding any law which would require the application of the
law of another state. (d) The parties shall appoint
arbitrators within fifteen (15) business days following
service of the demand for arbitration. The number of
arbitrators shall be three. One arbitrator shall be
appointed by Mr. McCrary, one arbitrator shall be appointed
by the Company, and the two arbitrators shall appoint a
third. If the arbitrators cannot agree on a third arbitrator
within thirty (30) business days after the service of demand
for arbitration, the third arbitrator shall be selected by
the AAA. (e) The arbitration filing fee shall be paid by Mr.
McCrary. All other costs of arbitration shall be borne
equally by Mr. McCrary and the Company, provided, however,
that the Company shall reimburse such fees and costs in the
event any material issue in such dispute is finally resolved
in Mr. McCrary's favor and Mr. McCrary is reimbursed legal
fees under Paragraph 2.(g) hereof. (f) The parties agree
that they will faithfully observe the rules that govern any
arbitration between them, they will abide by and perform any
award rendered by the arbitrators in any such arbitration,
including any award of injunctive relief, and a judgment of
a court having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is
intended to preclude upon application of either party any
court having jurisdiction from issuing and enforcing in any
lawful manner such temporary restraining orders, preliminary
injunctions, and other interim measures of relief as may be
necessary to prevent harm to a party's interests or as
otherwise may be appropriate pending the conclusion of
arbitration proceedings pursuant to this Agreement;
regardless of whether an arbitration proceeding under this
Paragraph 5 has begun. The parties further agree that
nothing herein shall prevent any court from entering and
enforcing in any lawful manner such judgments for permanent
equitable relief as may be necessary to prevent harm to a
party's interests or as otherwise may be appropriate
following the issuance of arbitral awards pursuant to this
Paragraph 5.
(a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. McCrary under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. McCrary.
(c) Assignment. Mr. McCrary shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
MR. MCCRARY
Exhibit A
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Charles Douglas McCrary upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement.
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Charles Douglas McCrary, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Company Services, Inc. (collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____.
Charles Douglas McCrary
Sworn to and subscribed to me this
____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
Exhibit 10.39
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Georgia Power Company (the "Company") and Mr. David M. Ratcliffe ("Mr. Ratcliffe") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties, originally effective and executed on February 17, 1999.
WHEREAS, Mr. Ratcliffe is the President and Chief Executive Officer of the Company;
WHEREAS, the Parties entered into a Change in Control Agreement effective February 17, 1999 (the "Original Agreement") to provide to Mr. Ratcliffe certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company;
WHEREAS, pursuant to Section 6(d) of the Original Agreement, the Parties may amend the Original Agreement by written agreement;
WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications;
NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Ratcliffe's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus.
(b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension plan or publicly held mutual fund;
(E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary;
(F) any acquisition by Mr. Ratcliffe or any Group of which Mr. Ratcliffe is a party; or
(G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board;
(iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met:
(A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities;
(B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Ratcliffe, any Group of which Mr. Ratcliffe is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and
(C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination.
(iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Ratcliffe, any Group composed exclusively of employees of the Company, any Group of which Mr. Ratcliffe is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control;
(v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Ratcliffe or his dependents may be entitled pursuant to Code
Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Company" shall mean Georgia Power Company, its successors and assigns.
(i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies.
(j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests.
(k) "Effective Date" shall mean the date of execution of this Agreement.
(l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal setting;
(ii) job market research and job sources;
(iii) networking and interviewing skills;
(iv) planning and implementation strategy;
(v) resume writing, job hunting methods and salary negotiation; and
(vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(n) "Good Reason" shall mean, without Mr. Ratcliffe's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Ratcliffe's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Ratcliffe's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Ratcliffe's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Ratcliffe participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Ratcliffe's participation therein, (except
for across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company). For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Ratcliffe's work location to a location more than fifty (50) miles from the office where Mr. Ratcliffe is located at the time of the Change in Control, unless such new work location is within fifty (50) miles from Mr. Ratcliffe's principal place of residence at the time of the Change in Control. The acceptance, if any, by Mr. Ratcliffe of employment by the Company at a work location which is outside the fifty mile radius set forth in this Paragraph 1.(n)(iv) shall not be a waiver of Mr. Ratcliffe's right to refuse subsequent transfer by the Company to a location which is more than fifty (50) miles from Mr. Ratcliffe's principal place of residence at the time of the Change in Control, and such subsequent unconsented transfer shall be "Good Reason" under this Agreement; or
(v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Ratcliffe under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Ratcliffe was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Ratcliffe with the number of paid vacation days to which Mr. Ratcliffe is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above.
(o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act.
(p) "Group Health Plan" shall mean the group health plan covering Mr. Ratcliffe, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Ratcliffe, as such plan may be amended from time to time.
(r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during which Mr. Ratcliffe has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern.
(t) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time.
(u) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time.
(v) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time.
(w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time.
(y) "Southern" shall mean The Southern Company, its successors and assigns.
(z) "Southern Board" shall mean the board of directors of Southern.
(aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern.
(bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Ratcliffe's employment by the Company upon the occurrence of any of the following:
(i) The willful and continued failure by Mr. Ratcliffe substantially to perform his duties with the Company (other than any such failure resulting from Mr. Ratcliffe's Total Disability or from Mr. Ratcliffe's retirement or any such actual or anticipated failure resulting from termination by Mr. Ratcliffe for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or
(ii) The willful engaging by Mr. Ratcliffe in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following:
(A) any willful act involving fraud or dishonesty in the course of Mr. Ratcliffe's employment by the Company;
(B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located;
(C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense;
(D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer;
(E) assault or other act of violence against any person during the course of employment; or
(F) indictment of any felony or any misdemeanor involving moral turpitude.
No act or failure to act by Mr. Ratcliffe shall be deemed "willful" unless done, or omitted to be done, by Mr. Ratcliffe not in good faith and without reasonable belief that his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Ratcliffe shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Ratcliffe and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Ratcliffe was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail.
(cc) "Termination Date" shall mean the date on which Mr. Ratcliffe's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan.
(dd) "Total Disability" shall mean Mr. Ratcliffe's total disability within the meaning of the Pension Plan.
(ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors.
(ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A.
(gg) "Year of Service" shall mean Mr. Ratcliffe's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Ratcliffe has a break in his service with the Company, he
will receive credit under this Agreement for service prior to the break
in service only if the break in service is less than five years.
(a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Ratcliffe's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Ratcliffe voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Ratcliffe shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Ratcliffe shall not be eligible to receive benefits under this Agreement if Mr. Ratcliffe:
(i) voluntarily terminates his employment with the Company for other than Good Reason;
(ii) has his employment terminated by the Company for Cause;
(iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement.
(b) Severance Benefits. If Mr. Ratcliffe meets the eligibility requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash severance benefit in an amount equal to three times his Annual Compensation (the "Severance Amount"). If any portion of the Severance Amount constitutes an "excess parachute payment" (as such term is defined under Code Section 280G ("Excess Parachute Payment")), the Company shall pay to Mr. Ratcliffe an additional amount calculated by determining the amount of tax under Code Section 4999 that he otherwise would have paid on any Excess Parachute Payment with respect to the Change in Control and dividing such amount by a decimal determined by adding the tax rate under Code Section 4999 ("Excise Tax"), the hospital insurance tax under Code Section 3101(b) ("HI Tax") and federal and state income tax measured at the highest marginal rates ("Income Tax") and subtracting such result from the number one (1) (the "280G Gross-up"); provided, however, that no 280G Gross-up shall be paid unless the Severance Amount plus all other "parachute payments" to Mr. Ratcliffe under Code Section 280G exceeds three (3) times Mr. Ratcliffe's "base amount" (as such term is defined under Code Section 280G ("Base Amount")) by ten percent (10%) or more; provided further, that if no 280G Gross-up is paid, the Severance Amount shall be capped at three (3) times Mr. Ratcliffe's Base Amount, less all other "parachute payments" (as such term is defined under Code Section 280G) received by Mr. Ratcliffe, less one dollar (the "Capped Amount"), if the Capped Amount, reduced by HI Tax and Income Tax, exceeds what otherwise would have been the Severance Amount, reduced by HI Tax, Income Tax and Excise Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Ratcliffe meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c).
(i) Mr. Ratcliffe shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Ratcliffe's Years of Service, not to exceed five (5) years. If Mr. Ratcliffe elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Ratcliffe's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Ratcliffe's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Ratcliffe pursuant to Paragraph 2.(c)(i), as
well as the premiums to be paid by Mr. Ratcliffe in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Ratcliffe in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Ratcliffe or his dependents may elect. In the event that Mr. Ratcliffe or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Ratcliffe or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed.
(ii) Mr. Ratcliffe shall be entitled to receive cash in an amount equal to the Company's and Mr. Ratcliffe's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control.
(d) Incentive Plans. If Mr. Ratcliffe meets the eligibility requirements of Paragraph 2.(a) hereof he shall be led to the following benefits under the Company's incentive plans:
(A) Any of Mr. Ratcliffe's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Ratcliffe is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Ratcliffe under Section 16(b) of
the Exchange Act, provided further, that any such
actions not taken as a result of the rules under
Section 16(b) of the Exchange Act shall be effected
as of the first date that such activity would no
longer result in liability under Section 16(b) of the
Exchange Act.
(B) The restrictions and deferral limitations applicable to any of Mr. Ratcliffe's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant.
(C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Ratcliffe under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant.
(ii) Performance Pay Plan. Provided Mr. Ratcliffe is
not entitled to benefits under Article V of the PPP Plan, (the
defined terms of which are incorporated in this Paragraph
2.(d)(ii) by reference), if the PPP Plan is in place through
Mr. Ratcliffe's Termination Date and to the extent Mr.
Ratcliffe is entitled to participate therein, Mr. Ratcliffe
shall be entitled to receive cash in an amount equal to a
prorated payout of his Incentive Pay Awards under the PPP Plan
for the Performance Period in which the Termination Date shall
have occurred, at target performance under the PPP Plan and
prorated by the number of months which have passed since the
beginning of the Performance Period until the Termination
Date.
(iii) Performance Dividend Plan. Provided Mr. Ratcliffe is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Ratcliffe's Termination Date and to the extent Mr. Ratcliffe is entitled to participate therein, Mr. Ratcliffe shall be entitled to receive cash for each Award held by Mr. Ratcliffe on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date.
(iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Ratcliffe is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Ratcliffe is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Ratcliffe is entitled to participate therein, Mr. Ratcliffe shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Ratcliffe's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria.
(e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Ratcliffe's Termination Date, or (ii) upon Mr. Ratcliffe's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr. Ratcliffe's death prior to the payment of all amounts due under this Agreement, Mr. Ratcliffe's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release.
(g) Legal Fees. In the event of a dispute between Mr. Ratcliffe and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Ratcliffe's favor, the Company shall reimburse Mr. Ratcliffe's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Ratcliffe shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Ratcliffe's Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Ratcliffe for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Ratcliffe's favor, the Company shall reimburse Mr. Ratcliffe's legal fees in the manner provided in Paragraph 2.(g) hereof.
3. Transfer of Employment. In the event that Mr. Ratcliffe's employment by the Company is terminated during the two year period following a Change in Control and Mr. Ratcliffe accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Ratcliffe is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Ratcliffe hereunder shall not be reduced or suspended if Mr. Ratcliffe accepts such subsequent employment.
(a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Ratcliffe's employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Ratcliffe, in the case of the Company, or to the Southern Board, in the case of Mr. Ratcliffe.
(c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Ratcliffe, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Ratcliffe. All other costs of arbitration shall be borne equally by Mr. Ratcliffe and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Ratcliffe's favor and Mr. Ratcliffe is reimbursed legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5.
(a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Ratcliffe under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Ratcliffe.
(c) Assignment. Mr. Ratcliffe shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000.
THE SOUTHERN COMPANY
By: __________________________
GEORGIA POWER COMPANY
By: __________________________
MR. RATCLIFFE
David M. Ratcliffe
Exhibit A
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. David M. Ratcliffe upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement.
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, David M. Ratcliffe, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Georgia Power Company (collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____.
David M. Ratcliffe
Sworn to and subscribed to me this
____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
Exhibit 10.40
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
THIS AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Company Services, Inc. (the "Company") and Mr. Gale E. Klappa ("Mr. Klappa") (hereinafter collectively referred to as the "Parties") is effective July 10, 2000. This Agreement amends and restates the Change in Control Agreement entered into by the Parties effective October 6, 1999.
WHEREAS, Mr. Klappa is Executive Vice President of the Company; WHEREAS, the Parties entered into a Change in Control Agreement effective October 6, 1999 (the "October 6, 1999 Agreement") to provide to Mr. Klappa certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company;
WHEREAS, pursuant to Section 6(d) of the October 6, 1999 Agreement, the Parties may amend the October 6, 1999 Agreement by written agreement;
WHEREAS, the Parties wish to enter into this Amended and Restated Change in Control Agreement pursuant to Section 6(d), to (i) change certain references from normal market bonus to target bonus, (ii) clarify that an initial public offering and a spin-off of the Company does not constitute a "change in control" under the Agreement, (iii) delete references to the "Productivity Improvement Plan," (iv) add Southern Energy, Inc. as a company released in the waiver and release attached hereto, and (v) certain other technical and miscellaneous modifications;
NOW, THEREFORE, in consideration of the premises, and the agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Klappa's highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus.
(b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any
Southern Subsidiary;
(D) any acquisition by a qualified pension plan or
publicly held mutual fund; (E) any acquisition by a Group
composed exclusively of employees of Southern, or any
Southern Subsidiary;
|
(F) any acquisition by Mr. Klappa or any Group of which Mr. Klappa is a party; or
(G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board;
(iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met:
(A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities;
(B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Klappa, any Group of which Mr. Klappa is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and
(C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination.
(iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Klappa, any Group composed exclusively of employees of the Company, any Group of which Mr. Klappa is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control;
(v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company.
(f) "COBRA Coverage" shall mean any continuation coverage to
which Mr. Klappa or his dependents may be entitled pursuant to Code
Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Company" shall mean Southern Company Services, Inc., its successors and assigns.
(i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies.
(j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests.
(k) "DIC Plan" shall mean the Southern Energy Resources, Inc. Deferred Incentive Compensation Plan or replacement thereto, as such plans may be amended from time to time.
(l) "Effective Date" shall mean the date of execution of this Agreement.
(m) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal setting;
(ii) job market research and job sources;
(iii) networking and interviewing skills;
(iv) planning and implementation strategy;
(v) resume writing, job hunting methods and salary negotiation; and
(vi) office support and job search resources.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(o) "Good Reason" shall mean, without Mr. Klappa's express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Klappa's position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Klappa's annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Klappa's annual base salary rate plus target bonus under the PPP Plan (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP Plan similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Klappa participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Klappa's participation therein, (except for
across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company). For purposes of this Paragraph
1.(o), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Klappa's work
location to a location more than fifty (50) miles from the
office where Mr. Klappa is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Klappa's principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Klappa of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(o)(iv) shall not be a waiver of Mr. Klappa's right to
refuse subsequent transfer by the Company to a location which
is more than fifty (50) miles from Mr. Klappa's principal
place of residence at the time of the Change in Control, and
such subsequent unconsented transfer shall be "Good Reason"
under this Agreement; or
(v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Klappa under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Klappa was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Klappa with the number of paid vacation days to which Mr. Klappa is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(o), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above.
(p) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act.
(q) "Group Health Plan" shall mean the group health plan covering Mr. Klappa, as such plan may be amended from time to time.
(r) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Klappa, as such plan may be amended from time to time.
(s) "Incumbent Board" shall mean those individuals who
constitute the Southern Board as of October 19, 1998 plus
any individual who shall become a director subsequent to
such date whose election or nomination for election by
|
Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board.
(t) "Month of Service" shall mean any calendar month during which Mr. Klappa has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern.
(u) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time.
(v) "Performance Dividend Plan" shall mean the Southern Company Performance Dividend Plan or any replacement thereto, as such plans may be amended from time to time.
(w) "Performance Stock Plan" shall mean the Southern Company Performance Stock Plan or any replacement thereto, as such plans may be amended from time to time.
(x) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(y) "Performance Pay Plan" or "PPP Plan" shall mean the Southern Company Performance Pay Plan or any replacement thereto, as such plans may be amended from time to time.
(z) "Southern" shall mean The Southern Company, its successors and assigns.
(aa) "Southern Board" shall mean the board of directors of Southern.
(bb) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern.
(cc) "Termination for Cause" or "Cause" shall mean the termination of Mr. Klappa's employment by the Company upon the occurrence of any of the following:
(i) The willful and continued failure by Mr. Klappa substantially to perform his duties with the Company (other than any such failure resulting from Mr. Klappa's Total Disability or from Mr. Klappa's retirement or any such actual or anticipated failure resulting from termination by Mr. Klappa for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or
(ii) The willful engaging by Mr. Klappa in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following:
(A) any willful act involving fraud or dishonesty in the course of Mr. Klappa's employment by the Company;
(B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is
located;
(C) attendance at work in a state of intoxication or
otherwise being found in possession at his workplace of any
prohibited drug or substance, possession of which would
amount to a criminal offense;
(D) violation of the Company's policies on drug and
alcohol usage, fitness for duty requirements or similar
policies as may exist from time to time as adopted by the
|
Company's safety officer;
(E) assault or other act of violence against any person during the course of employment; or
(F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Klappa shall be deemed "willful" unless done, or omitted to be done, by Mr. Klappa not in good faith and without reasonable belief that his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Klappa shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Klappa and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Klappa was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(cc) and specifying the particulars thereof in detail.
(dd) "Termination Date" shall mean the date on which Mr. Klappa's employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan.
(ee) "Total Disability" shall mean Mr. Klappa's total disability within the meaning of the Pension Plan.
(ff) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors.
(gg) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A
(hh) "Year of Service" shall mean Mr. Klappa's Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Klappa has a break in his service with the Company, he will
receive credit under this Agreement for service prior to the break in
service only if the break in service is less than five years.
(a) Eligibility. Except as otherwise provided in this Paragraph 2.(a), if Mr. Klappa's employment is involuntarily terminated by the Company at any time during the two year period following a Change in Control for reasons other than Cause, or if Mr. Klappa voluntarily terminates his employment with the Company for Good Reason at any time during the two year period following a Change in Control, Mr. Klappa shall be entitled to receive the benefits described in this Agreement upon the Company's receipt of an effective Waiver and Release. Notwithstanding anything to the contrary herein, Mr. Klappa shall not be eligible to receive benefits under this Agreement if Mr. Klappa:
(i) voluntarily terminates his employment with the Company for other than Good Reason;
(ii) has his employment terminated by the Company for Cause;
(iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement.
(b) Severance Benefits. If Mr. Klappa meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash
severance benefit in an amount equal to three times his Annual
Compensation (the "Severance Amount"). If any portion of the Severance
Amount constitutes an "excess parachute payment" (as such term is
defined under Code Section 280G ("Excess Parachute Payment")), the
Company shall pay to Mr. Klappa an additional amount calculated by
determining the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal determined by
adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section 3101(b) ("HI Tax") and
federal and state income tax measured at the highest marginal rates
("Income Tax") and subtracting such result from the number one (1) (the
"280G Gross-up"); provided, however, that no 280G Gross-up shall be
paid unless the Severance Amount plus all other "parachute payments" to
Mr. Klappa under Code Section 280G exceeds three (3) times Mr. Klappa's
"base amount" (as such term is defined under Code Section 280G ("Base
Amount")) by ten percent (10%) or more; provided further, that if no
280G Gross-up is paid, the Severance Amount shall be capped at three
(3) times Mr. Klappa's Base Amount, less all other "parachute payments"
(as such term is defined under Code Section 280G) received by Mr.
Klappa, less one dollar (the "Capped Amount"), if the Capped Amount,
reduced by HI Tax and Income Tax, exceeds what otherwise would have
been the Severance Amount, reduced by HI Tax, Income Tax and Excise
Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Klappa meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c).
(i) Mr. Klappa shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Klappa's Years of Service, not to exceed five (5) years. If Mr. Klappa elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Klappa's Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Klappa's extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan.
(A) The extended medical coverage afforded to Mr. Klappa pursuant to Paragraph 2.(c)(i), as well as the premiums to be paid by Mr. Klappa in connection with such coverage shall be determined in accordance with the terms of the Group Health Plan and shall be subject to any changes in the terms and conditions of the Group Health Plan as well as any future increases in premiums under the Group Health Plan. The premiums to be paid by Mr. Klappa in connection with this extended coverage shall be due on the first day of each month; provided, however, that if he fails to pay his premium within thirty (30) days of its due date, such extended coverage shall be terminated.
(B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Klappa or his dependents may elect. In the event that Mr. Klappa or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Klappa or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed. (ii) Mr. Klappa shall be entitled to receive cash in an amount equal to the Company's and Mr. Klappa's cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in Control.
(d) Incentive Plans. If Mr. Klappa meets the eligibility requirements of Paragraph 2.(a) hereof he shall be entitled to the following benefits under the Company's incentive plans:
(A) Any of Mr. Klappa's Options and Stock
Appreciation Rights under the Performance Stock Plan
(the defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Klappa is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Klappa under Section 16(b) of the
Exchange Act, provided further, that any such actions
not taken as a result of the rules under Section
16(b) of the Exchange Act shall be effected as of the
first date that such activity would no longer result
in liability under Section 16(b) of the Exchange Act.
(B) The restrictions and deferral limitations applicable to any of Mr. Klappa's Restricted Stock as of the Termination Date shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant.
(C) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Mr. Klappa under the Stock Performance Plan as of the Termination Date shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant.
(ii) Performance Pay Plan. Provided Mr. Klappa is not
entitled to benefits under Article V of the PPP Plan, (the
defined terms of which are incorporated in this Paragraph
2.(d)(ii) by reference), if the PPP Plan is in place through
Mr. Klappa's Termination Date and to the extent Mr. Klappa is
entitled to participate therein, Mr. Klappa shall be entitled
to receive cash in an amount equal to a prorated payout of his
Incentive Pay Awards under the PPP Plan for the Performance
Period in which the Termination Date shall have occurred, at
target performance under the PPP Plan and prorated by the
number of months which have passed since the beginning of the
Performance Period until the Termination Date.
(iii) Performance Dividend Plan. Provided Mr. Klappa is not entitled to benefits under the Performance Dividend Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Plan is in place through Mr. Klappa's Termination Date and to the extent Mr. Klappa is entitled to participate therein, Mr. Klappa shall be entitled to receive cash for each Award held by Mr. Klappa on his Termination Date, based on actual performance under Section 4.1 of the Performance Dividend Plan determined as of the most recently completed calendar quarter of the Performance Period in which the Termination Date shall have occurred, and the Annual Dividend declared prior to the Termination Date.
(iv) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(iv) shall apply if and to the extent that Mr. Klappa is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Klappa is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Klappa is entitled to participate therein, Mr. Klappa shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Klappa's target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(iv) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria.
(v) DIC Plan. Provided Mr. Klappa is not entitled to
benefits under Article V of the DIC Plan (the defined terms of
which are incorporated into this Paragraph 2(d)(v) by
reference), if the DIC Plan is in place through Mr. Klappa's
Termination Date and to the extent that Mr. Klappa is entitled
to participate therein, any of Mr. Klappa's Awards as of the
Termination Date which are not then vested shall become fully
vested and Mr. Klappa shall be entitled to receive cash in the
amount equal to Mr. Klappa's Account as of his Termination
Date. Notwithstanding anything in the DIC Plan to the
contrary, the investment return on the Awards determined in
accordance with Section 3.1 of the DIC Plan for any Plan Year
following a Change in Control shall be no less than the
investment return on the Awards determined in accordance with
Section 3.1 of the DIC Plan as of the date of such Change in
Control with respect to those Accounts which are outstanding
as of the date of such Change in Control.
(e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Klappa's Termination Date, or (ii) upon Mr. Klappa's tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr. Klappa's death prior to the payment of all amounts due under this Agreement, Mr. Klappa's estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release.
(g) Legal Fees. In the event of a dispute between Mr. Klappa and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Klappa's favor, the Company shall reimburse Mr. Klappa's legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Klappa shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Klappa's Termination Date.
(i) Non-qualified Ret
Retirement and Deferred Compensation Plans. The Parties agree that subsequent to a Change in Control, any claims by Mr. Klappa for benefits under any of the Company's non-qualified retirement or deferred compensation plans shall be resolved through binding arbitration in accordance with the provisions and procedures set forth in Paragraph 5 hereof and if any material issue in such dispute is finally resolved in Mr. Klappa's favor, the Company shall reimburse Mr. Klappa's legal fees in the manner provided in Paragraph 2.(g) hereof.
3. Transfer of Employment. In the event that Mr. Klappa's employment by the Company is terminated during the two year period following a Change in Control and Mr. Klappa accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Klappa is otherwise eligible to
receive benefits under Paragraph 2 of his Agreement, he shall
have no duty or obligation to seek other employment following his
Termination Date and, except as otherwise provided in Paragraph
2.(a)(iii) hereof, the amounts due Mr. Klappa hereunder shall not
be reduced or suspended if Mr. Klappa accepts such subsequent
employment.
(a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Klappa's employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Klappa, in the case of the Company, or to the Southern Board, in the case of Mr. Klappa.
(c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Klappa, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Klappa. All other costs of arbitration shall be borne equally by Mr. Klappa and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Klappa's favor and Mr. Klappa is reimbursed legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5.
(a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Klappa under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Klappa.
(c) Assignment. Mr. Klappa shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2000.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
MR. KLAPPA
Exhibit A
CHANGE IN CONTROL AGREEMENT
Waiver and Release
The attached Waiver and Release is to be given to Mr. Gale E. Klappa upon the occurrence of an event that triggers eligibility for severance benefits under the Change in Control Agreement, as described in Paragraph 2(a) of such agreement.
CHANGE IN CONTROL AGREEMENT
Waiver and Release
I, Gale E. Klappa, understand that I am entitled to receive the severance benefits described in Section 2 of the Change in Control Agreement (the "Agreement") if I execute this Waiver and Release ("Waiver"). I understand that the benefits I will receive under the Agreement are in excess of those I would have received from The Southern Company and Southern Company Services, Inc. (collectively, the "Company") if I had not elected to sign this Waiver.
I recognize that I may have a claim against the Company under the Civil Rights Act of 1964 and 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Energy Reorganization Act of 1974, as amended, the Americans with Disabilities Act or other federal, state and local laws.
In exchange for the benefits I elect to receive, I hereby irrevocably waive and release all claims, of any kind whatsoever, whether known or unknown in connection with any claim which I ever had, may have, or now have against The Southern Company, Alabama Power Company, Georgia Power Company, Gulf Power Company, Mississippi Power Company, Savannah Electric and Power Company, Southern Communication Services, Inc., Southern Company Services, Inc., Southern Energy Resources, Inc., Southern Company Energy Solutions, Inc., Southern Nuclear Operating Company, Inc., Southern Energy, Inc. and other direct or indirect subsidiaries of The Southern Company and their past, present and future officers, directors, employees, agents and attorneys. Nothing in this Waiver shall be construed to release claims or causes of action under the Age Discrimination in Employment Act or the Energy Reorganization Act of 1974, as amended, which arise out of events occurring after the execution date of this Waiver.
In further exchange for the benefits I elect to receive, I understand and agree that I will respect the proprietary and confidential nature of any information I have obtained in the course of my service with the Company or any subsidiary or affiliate of The Southern Company. However, nothing in this Waiver shall prohibit me from engaging in protected activities under applicable law or from communicating, either voluntary or otherwise, with any governmental agency concerning any potential violation of the law.
In signing this Waiver, I am not releasing claims to benefits that I am already entitled to under any workers' compensation laws or under any retirement plan or welfare benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, which is sponsored by or adopted by the Company and/or any of its direct or indirect subsidiaries; however, I understand and acknowledge that nothing herein is intended to or shall be construed to require the Company to institute or continue in effect any particular plan or benefit sponsored by the Company and the Company hereby reserves the right to amend or terminate any of its benefit programs at any time in accordance with the procedures set forth in such plans.
In signing this Waiver, I realize that I am waiving and releasing, among other things, any claims to benefits under any and all bonus, severance, workforce reduction, early retirement, outplacement, or any other similar type plan sponsored by the Company.
I have been encouraged and advised in writing to seek advice from anyone of my choosing regarding this Waiver, including my attorney, and my accountant or tax advisor. Prior to signing this Waiver, I have been given the opportunity and sufficient time to seek such advice, and I fully understand the meaning and contents of this Waiver.
I understand that I may take up to twenty-one (21) calendar days to consider whether or not I desire to enter this Waiver. I was not coerced, threatened or otherwise forced to sign this Waiver. I have made my choice to sign this Waiver voluntarily and of my own free will.
I understand that I may revoke this Waiver at any time during the seven
(7) calendar day period after I sign and deliver this Waiver to the Company. If
I revoke this Waiver, I must do so in writing delivered to the Company. I
understand that this Waiver is not effective until the expiration of this seven
(7) calendar day revocation period. I understand that upon the expiration of
such seven (7) calendar day revocation period this entire Waiver will be binding
upon me and will be irrevocable.
I understand that by signing this Waiver I am giving up rights I may have.
IN WITNESS WHEREOF, the undersigned hereby executes this Waiver this ____ day of ____________________, in the year _____.
Gale E. Klappa
Sworn to and subscribed to me this
____ day of ____________, _____.
Notary Public
My Commission Expires:
(Notary Seal)
Acknowledged and Accepted by the Company, as defined in the Waiver.
Exhibit 10.41
SOUTHERN COMPANY
DEFERRED COMPENSATION TRUST AGREEMENT
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200 Bank of America Plaza
Atlanta, Georgia 30308-2216
(404) 885-3000
Amended and Restated Effective January 1, 2001
SOUTHERN COMPANY
DEFERRED COMPENSATION TRUST AGREEMENT
TABLE OF CONTENTS
1. Purpose.....................................................................................................1
2. Trust Corpus................................................................................................1
3. Grantor Trust...............................................................................................2
4. Irrevocability of Trust.....................................................................................2
5. Change in Control and Preliminary Change in Control.........................................................3
6. Investment of Trust Assets..................................................................................4
7. Distribution of Trust Assets................................................................................6
8. Termination of the Trust and Reversion of Trust Assets.....................................................10
9. Powers of the Trustee......................................................................................11
10. Termination of Trustee.....................................................................................14
11. Resignation of Trustee and Appointment of Successor Trustee................................................15
12. Trustee Compensation.......................................................................................16
13. Trustee's Consent to Act and Indemnification of the Trustee................................................16
14. Prohibition Against Assignment.............................................................................16
15. Annual Accounting..........................................................................................16
16. Notices....................................................................................................17
17. Miscellaneous Provisions...................................................................................17
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SOUTHERN COMPANY
DEFERRED COMPENSATION TRUST AGREEMENT
This amended and restated Trust Agreement entered into this _____ day of ___________, 2001 is between the Grantors as set forth on the signature page of this Trust Agreement and Wachovia Bank, N.A. (the "Trustee"). This Trust Agreement is effective January 1, 2001 ("Effective Date") and supersedes all previous Trust Agreements.
1. Purpose. The purpose of this trust (the "Trust") is to provide a vehicle to (a) hold assets of the Grantors as a reserve for the discharge of certain of the Grantors' obligations (i) upon the occurrence of a change in control, and (ii) in accordance with paragraph 7(b), to provide added protections for certain individuals who are actively employed by a Grantor on or after January 1, 1999 entitled to receive benefits under designated plans and arrangements and (b) invest, reinvest, disburse and distribute those assets and the earnings thereon as provided hereunder. Individuals eligible for benefits in accordance with the preceding sentence shall hereinafter be referred to as "Beneficiaries" under the Trust. Subject to approval by the Administrative Committee (the "Committee"), Grantors shall designate in writing to the Trustee in Exhibit A attached hereto and made a part hereof those plans or arrangements subject to all or certain provisions of the Trust (the "Plans"). Exhibit A shall also specify which provisions of the Trust apply to the various Plans.
2. Trust Corpus. The Grantors hereby transfer to the Trustee and the Trustee hereby accepts and agrees to hold, in trust, the sum of Ten Dollars ($10.00) plus such cash and/or property, if any, transferred to the Trustee by the Grantors or on behalf of the Grantors pursuant to obligations incurred under any or all of the Plans and the earnings thereon, and such cash and/or property, together with the earnings thereon and together with any other cash or property received by the Trustee pursuant to Section 9(a) of this Trust Agreement, shall constitute the trust estate and shall be held, managed and distributed as hereinafter provided. The Grantors shall execute any and all instruments necessary to vest the Trustee with full title to the property hereby transferred.
3. Grantor Trust. The Trust is intended to be a trust of which the
Grantors are treated as individual owners for federal income tax purposes in
accordance with the provisions of Sections 671 through 679 of the Internal
Revenue Code of 1986, as amended (the "Code"). If the Trustee, in its sole and
absolute discretion, deems it necessary or advisable for the Grantors and/or the
Trustee to undertake or refrain from undertaking any actions (including, but not
limited to, making or refraining from making any elections or filings) in order
to ensure that the Grantors are at all times treated as individual owners of the
Trust for federal income tax purposes, the Grantors and/or the Trustee will
undertake or refrain from undertaking (as the case may be) such actions. The
Grantors hereby irrevocably authorize the Trustee to be their attorney-in-fact
for the purpose of performing any act which the Trustee, in its sole and
absolute discretion, deems necessary or advisable in order to accomplish the
purposes and the intent of this Section 3. The Trustee shall be fully protected
in acting or refraining from acting in accordance with the provisions of this
Section 3.
4. Irrevocability of Trust. Prior to the occurrence of a "Preliminary Change in Control" (hereinafter referred to as a "Preliminary CIC"), the Trust shall be revocable and may be altered or amended in any substantive respect, or revoked or terminated by the Grantors in whole or in part provided that no such amendment may increase the duties of the Trustee without its consent. In the event of a Preliminary CIC, the Trust may not be altered or amended in any substantive respect, or revoked or terminated by the Grantor or Grantors incurring a Preliminary CIC unless a majority of the Beneficiaries, determined as of the day before such Preliminary CIC, agree in writing to such an alteration, amendment, revocation or termination provided that no such amendment may increase the duties of the Trustee without its consent. If after a Preliminary CIC occurs but fails to become a Change in Control, thereafter the Trust shall again be revocable and may be altered or amended in any substantive respect, or revoked or terminated by the Grantors in whole or in part provided that no such amendment may increase the duties of the Trustee without its consent. Notwithstanding the preceding, the Trust may be amended following a Preliminary CIC or a Change in Control without approval of the Beneficiaries to protect the tax status or ERISA status of this Trust. For purposes of this Trust, Preliminary CIC and other capitalized terms if not defined in the Trust shall have the same meaning as set forth in the Southern Company Change in Control Program Policy as may be amended from time to time.
5. Contributions to Trust. The Grantors have obligated themselves under the terms of the Plans, which are hereby incorporated by reference, to make certain contributions to the Trust upon the occurrence of a Preliminary CIC. Upon such a Preliminary CIC, the Grantors affected thereby shall account for each Beneficiary's benefit funded by contributions to the Trust in a manner determined by the Committee. The Grantors have also obligated themselves to make certain contributions to the Trust in a manner determined by the Committee to provide for the protections set forth in Section 7(b) hereof. A return of such contributions and earnings thereon may only occur under the following circumstances: (a) if, on the second anniversary of a Preliminary CIC or any time thereafter, the Southern Committee determines that a Change in Control has not been Consummated, the Trustee upon its agreement with this determination shall, upon the request of the Grantor or Grantors incurring a Preliminary CIC, return to such Grantor or Grantors property contributed to the Trust on account of the occurrence of a Preliminary CIC; (b) if, at any time, following a Preliminary CIC, the Southern Committee provides evidence satisfactory to the Trustee that the Preliminary CIC will not become a Change in Control; or (c) if the Trustee determines in its sole and absolute discretion that a Southern Change in Control has occurred, and, on the second anniversary of the date of Consummation of such Change in Control 75% of the members of the Incumbent Board on such anniversary date shall continue to serve as determined by the Southern Committee, the Trustee upon its agreement with this determination shall return to the Grantor or Grantors incurring a Change in Control, upon such Grantor's request, any such property received and earnings thereon as a result of such Change in Control; or (d) prior to Change of Control, with respect to amounts contributed to fund benefits paid in accordance with Section 7(b) hereof, if the Trust assets equal or exceed 200% of the targeted funding level as established by the Committee prior to a Change in Control, assets shall be returned by the Trustee to the Grantor or Grantors designated by the Committee to reduce total assets to 150% of the targeted funding level.
(b) The Trustee shall invest and reinvest the assets of the Trust in accordance with such investment objectives, guidelines, restrictions or directions as the Committee or its delegee may furnish to the Trustee at the time of the execution of the Trust or at any later date; provided, however, that if there is a Preliminary CIC, the Trust's investment objectives, guidelines, restrictions or directions may not be changed thereafter unless there is a return of Grantor contributions pursuant to Section 5(a), (b) or (c). Upon a Change of Control, the Trustee shall promptly contact all Beneficiaries at their last known addresses provided by the Grantors and put such Beneficiaries on notice of the funding of the Trust and the Trustee's obligations hereunder. The Committee shall promptly provide the Trustee with such information as it needs to carry out this duty.
(a) The Grantors may make payment of benefits directly to Beneficiaries as they become due under the terms of the Plan(s). Upon a Change in Control, the Grantors shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan(s), the Grantors shall make the balance of each such payment as it falls due in accordance with the Plan(s). The Trustee shall notify the Grantors where principal and earnings are not sufficient. Nothing in this Agreement shall relieve the Grantors of their liabilities to pay benefits due under the Plan(s) except to the extent such liabilities are met by application of assets of the Trust.
(b) At such time as a Beneficiary is entitled to payments under any of the Plans prior to a Change in Control, if the Grantors fail to make payment of all or a portion of the benefits to a Beneficiary under any Plan in accordance with paragraph (a) above, such Beneficiary can make application for payment in accordance with the provisions of paragraph (d)(i) below. If so requested, the Trustee shall make an independent determination in its sole and absolute discretion regarding the Beneficiary's right to payment under the Plan(s) within 60 days thereof. Such determination shall be made with advice from outside counsel independent of Southern and the Trustee. The Grantors agree to be bound by Trustee's determination and to make payment of benefits as they fall due commencing not later than 30 days following Trustee's determination regarding entitlement to benefits absent a manifest abuse of discretion by the Trustee. If Trustee determines benefits are payable to Beneficiary and Grantor fails to commence payment within 30 days following the Trustee's determination, Trustee shall make payment of such benefits and instruct Beneficiary in writing that he or she must bring suit within 180 days of the Trustee's claims determination or thereafter be barred from doing so. Trustee shall only make benefits payments until the first of the following to occur: (i) 180 days following its claims determination if the Beneficiary fails to bring a lawsuit to enforce his or her rights within this limitation period; or (ii) until there is a final adjudication or other final resolution of the Beneficiary's claim. In the event that such Beneficiary timely files a lawsuit within 180 days of Trustee's determination that Beneficiary is entitled to the disputed benefits, all reasonable costs of litigation (as determined in the sole and absolute discretion of the Trustee) shall be periodically, but no less than quarterly, advanced to the Beneficiary through the final adjudication of the claim; provided, however, that the Beneficiary shall repay such advanced costs of litigation if he or she fails to have finally resolved in the Beneficiary's favor a material issue supporting the underlying merits of the Beneficiary's claim for benefits in such dispute as determined in the sole and absolute discretion of the Trustee. Alternatively, in the event that a Beneficiary files a lawsuit to obtain benefits after the Trustee determines that such Beneficiary is not entitled to such benefits, all costs of litigation shall be borne by each party thereto; provided, however, that the Grantors, or the Trustee if the Grantors refuse, shall reimburse such reasonable costs in the event any material issue supporting the underlying merits of the Beneficiary's claim for benefits in such dispute as determined in the sole and absolute discretion of the Trustee is finally resolved in favor of the Beneficiary.
(c) Subject to the provisions of paragraph (d) of this Section 7, after a Change in Control, a Beneficiary shall receive payment from the Trust in amount equal to the accrued benefit to which he is entitled under the Plans determined as of the Change in Control, less any payments previously made to him by the Grantors pursuant to the terms of the Plan(s). The form of payment will be consistent with the forms provided under the terms of the Plan(s).
(d) (i) The commencement of payments from the Trust shall be conditioned on the Trustee's prior receipt of a written instrument from the Beneficiary in a form reasonably satisfactory to the Trustee. In addition to any other information the Trustee requires, such form should indicate the amount, if any, the Beneficiary has received from the Grantors under the Plans as of his request. All payments to a Beneficiary from the Trust shall be made in accordance with a good faith interpretation of the provisions of the applicable Plan(s). (ii) Except as provided below, the Trustee shall make or commence payment to the Beneficiary in accordance with his representations not later than 30 business days after its receipt thereof; provided, however, that before the Trustee makes or commences any such payment and not later than 7 business days after its receipt of the Beneficiary's representations, the Trustee shall request in writing the Grantors' agreement that the Beneficiary's representations are accurate with respect to the amount, fact, and time of payment to him. The Trustee shall enclose with such request a copy of the Beneficiary's representations and written advice to the Grantors that it must respond to the Trustee's request on or before the 20th business day (which date shall be set forth in such written advice) after the Beneficiary furnished such representations to the Trustee. If the Grantors in a writing delivered to the Trustee agrees with the Beneficiary's representations in all respects, or if the Grantors do not respond to the Trustee's request by the 20th-day deadline, the Trustee shall make payment in accordance with the Beneficiary's representations. If the Grantors advise the Trustee in writing on or before the 20th-day deadline that it does not agree with any or all of the Beneficiary's representations, the Trustee immediately shall take whatever steps it in its sole and absolute discretion deems appropriate, including, but not limited to, a review of any notice furnished by the Grantor pursuant to paragraph (e) hereof, to attempt to resolve the difference(s) between the Grantors and the Beneficiary. If, however, the Trustee is unable to resolve such difference(s) to its satisfaction within 60 days after its receipt of the Beneficiary's representations, the Trustee shall make an independent determination in its sole and absolute discretion with the advice of independent counsel regarding the Beneficiary's claim for benefits and commence such payment, if any, within such 60 day period. In the event Grantors do not agree with Beneficiary's right to payment of all or a portion of a benefit under any Plan(s), Grantors may bring a declaratory judgment action to clarify their rights. Trustee may rely on any final judgment concerning a declaratory judgment action with respect to the payment of benefits from the Trust.
(e) Notwithstanding any other provision of the Trust to the contrary, after a Change in Control the Trustee shall make payments hereunder before such payments are otherwise due if it determines in its sole and absolute discretion, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his delegate, a final non-appealable decision by the Internal Revenue Service addressed to a Beneficiary, a final decision by a court of competent jurisdiction involving a Beneficiary, or a closing agreement made under Code Section 7121 that is approved by the Internal Revenue Service and involves a Beneficiary, that a Beneficiary has recognized or will recognize income for federal income tax purposes with respect to amounts that are or will be payable to him under the Plans before they are paid to him. The Trustee in its sole and absolute discretion shall reimburse a Beneficiary all costs determined to be reasonable to defend any tax claims described herein which are asserted by the Internal Revenue Service against any Beneficiary, including attorney fees and cost of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by the Internal Revenue Service or by a lower court. The Trustee also shall reimburse any Beneficiary for any interest or penalties in respect of tax claims hereunder upon receipt of documentation of same.
(f) Unless (contemporaneously with his submission of the written instrument referred to in paragraph (a) hereof) a Beneficiary furnishes documentation in form and substance satisfactory to the Trustee that no withholding is required with respect to a payment to be made to him from the Trust, the Trustee may deduct from any such payment any federal, state or local taxes required by law to be withheld by the Trustee.
(g) The Trustee shall provide the Grantors with written confirmation of the fact and time of any commencement of payments hereunder within 10 business days after any payments commence to a Beneficiary. The Grantors shall notify the Trustee in the same manner of any payments it commences to make to a Beneficiary pursuant to the Plans.
(h) The Trustee shall be fully protected in making any payment or any calculations in accordance with the provisions of this Section 7.
8. Termination of the Trust and Reversion of Trust Assets. The Trust shall terminate upon the first to occur of (i) the payment by the Grantors of all amounts due the Beneficiaries under each of the Plans or the receipt by the Trustee of a valid release to that effect from each of the Beneficiaries with respect to payments made to him, or (ii) the twenty-first anniversary of the death of the last survivor of the Beneficiaries who are in being on the date of the execution of this Trust Agreement. Upon termination of the Trust, any and all assets remaining in the Trust, after the payment to the Beneficiaries of all amounts to which they are entitled and after payment of the expenses and compensation in Sections 12 and 17(i) of this Trust Agreement, shall revert to the Grantors in accordance with their separate interest as accounted for by the Committee, and the Trustee shall promptly take such action as shall be necessary to transfer any such assets to the Grantors in accordance with such interest. Notwithstanding the above, the Grantors shall be obligated to take whatever steps are necessary to ensure that the Trust is not terminated for a period of five (5) years following a Change in Control, such steps to include, but not being limited to, the transfer to the Trustee of cash or other assets pursuant to the provisions of Section 9(a) hereof.
9. Powers of the Trustee. To carry out the purposes of the Trust and subject to any limitations herein expressed, the Trustee is vested with the following powers until final distribution, in addition to any now or hereafter conferred by law affecting the trust or estate created hereunder. In exercising such powers, the Trustee shall act in a manner reasonable and equitable in view of the interests of the Beneficiaries and in a manner in which persons of ordinary prudence, diligence, discretion and judgment would act in the management of their own affairs.
(a) Receive and Retain Property. To receive and retain any property received at the inception of the Trust or at any other time, whether or not such property is unproductive of income or is property in which the Trustee is personally interested or in which the Trustee owns an undivided interest in any other trust capacity.
(b) Dispose of, Develop, and Abandon Assets. To dispose of an asset, for cash or on credit, at public or private sale and, in connection with any sale or disposition, to give such warranties and indemnifications as the Trustee shall determine; to manage, develop, improve, exchange, partition, change the character of or abandon a Trust asset or any interest therein.
(c) Borrow and Encumber. To borrow money for any Trust purpose upon such terms and conditions as may be determined by the Trustee; to obligate the Trust or any part thereof by mortgage, deed of trust, pledge or otherwise, for a term within or extending beyond the term of the Trust.
(d) Lease. To enter for any purpose into a lease as lessor or lessee, with or without an option to purchase or renew, for a term.
(e) Grant or Acquire Options. To grant or acquire options and rights of first refusal involving the sale or purchase of any Trust assets, including the power to write covered call options listed on any securities exchange.
(f) Powers Respecting Securities. To have all the rights, powers, privileges and responsibilities of an owner of securities, including, without limiting the foregoing, the power to vote, to give general or limited proxies, to pay calls, assessments, and other sums; to assent to, or to oppose, corporate sales or other acts; to participate in, or to oppose, any voting trusts, pooling agreements, foreclosures, reorganizations, consolidations, mergers and liquidations, and, in connection therewith, to give warranties and indemnifications and to deposit securities with and transfer title to any protective or other committee; to exchange, exercise or sell stock subscription or conversion rights; and, regardless of any limitations elsewhere in this instrument relative to investments by the Trustee, to accept and retain as an investment hereunder any securities received through the exercise of any of the foregoing powers.
(g) Use of Nominee. To hold securities or other property in the name of the Trustee, in the name of a nominee of the Trustee, or in the name of a custodian (or its nominee) selected by the Trustee, with or without disclosure of the Trust, the Trustee being responsible for the acts of such custodian or nominee affecting such property.
(h) Advance Money. To advance money for the protection of the Trust, and for all expenses, losses and liabilities sustained or incurred in the administration of the Trust or because of the holding or ownership of any Trust assets, for which advances, with interest, the Trustee has a lien on the Trust assets as against the Beneficiaries.
(i) Pay, Contest or Settle Claims. To pay, contest or settle any claim by or against the Trust by compromise, arbitration or otherwise; to release, in whole or in part, any claim belonging to the Trust to the extent that the claim is uncollectible. Notwithstanding the foregoing, the Trustee may only pay or settle a claim asserted against the Trust by a Grantor if it is compelled to do so by a final order of a court of competent jurisdiction.
(j) Litigate. To prosecute or defend actions, claims or proceedings for the protection of Trust assets and of the Trustee in the performance of its duties.
(k) Employ Advisers and Agents. To employ and reasonably compensate persons, corporations or associations, including attorneys, auditors, investment advisers or agents, even if they are associated with the Trustee, to advise or assist the Trustee in the performance of its administrative duties; to act without independent investigation upon their recommendations.
(l) Use Custodian. If no bank or trust company is acting as Trustee hereunder, the Trustee shall appoint a bank or trust company to act as custodian (the "Custodian") for securities and any other Trust assets. Any such appointment shall terminate when a bank or trust company begins to serve as Trustee hereunder. The Custodian shall keep the deposited property, collect and receive the income and principal, and hold, invest, disburse or otherwise dispose of the property or its proceeds (specifically including selling and purchasing securities, and delivering securities sold and receiving securities purchased) upon the order of the Trustee.
(m) Execute Documents. To execute and deliver all instruments which will accomplish or facilitate the exercise of the powers vested in the Trustee.
(n) Grant of Powers Limited. The Trustee is expressly prohibited from exercising any powers vested in it primarily for the benefit of the Grantors rather than for the benefit of the Beneficiaries. The Trustee shall not have the power to purchase, exchange, or otherwise deal with or dispose of the assets of the Trust for less than adequate and full consideration in money or money's worth.
(o) Deposit Assets. To deposit Trust assets in commercial, savings or savings and loan accounts (including such accounts in a corporate Trustee's banking department) and to keep such portion of the Trust assets in cash or cash balances as the Trustee may, from time to time, deem to be in the best interests of the Trust, without liability for interest thereon.
10. Termination of Trustee. Grantors may remove Trustee upon sixty (60) days notice or upon such shorter period of time if acceptable to Trustee; provided that upon a Preliminary CIC or subsequent Change in Control the Grantors may only remove the Trustee if a majority of the Beneficiaries approve such action.
(a) The Trustee shall have the right to resign upon 60 days' written notice to the Grantor, during which time the Grantor shall appoint a "Qualified Successor Trustee." If no Qualified Successor Trustee accepts such appointment, the resigning Trustee shall petition a court of competent jurisdiction for the appointment of a "Qualified Successor Trustee." For this purpose, a "Qualified Successor Trustee" must be a bank or trust company with a market capitalization of at least $10 billion but may not be the Grantor, any person who would be a "related or subordinate party" to the Grantor within the meaning of Section 672(c) of the Code or a corporation that would be a member of an "affiliated group" of corporations including the Grantor within the meaning of Section 1504(a) of the Code if the words "80 percent" wherever they appear in that section were replaced by the words "50 percent." Upon the written acceptance by the Qualified Successor Trustee of the trust and upon approval of the resigning Trustee's final account by those entitled thereto, the resigning Trustee shall be discharged.
(b) Upon the occurrence of a corporate transaction involving the ownership or assets of a Grantor, the affected Grantors upon written acknowledgment to the Trustee of their obligations under the Trust and Plans may in their sole discretion direct the Trustee to transfer or assign all or a portion of the assets of the Trust to a Qualified Successor Trustee. The Committee shall instruct the Trustee regarding the assets to be transferred or assigned; provided, however, that no assets shall be transferred to such a Qualified Successor Trustee until the Trustee is satisfied that contributions required under the Plans have been made prior to or concurrent with this transfer or assignment. Notwithstanding the foregoing, the Trustee shall only be permitted to transfer or assign assets from the Trust to a Qualified Successor Trustee if the transfer and assignment are consistent with the purpose and intent of the Trust.
12. Trustee Compensation. The Trustee shall be entitled to receive as compensation for its services hereunder the compensation (a) as negotiated and agreed to by the Grantors and the Trustee, or (b) if not negotiated or if the parties are unable to reach agreement, as allowed a trustee under the laws of the State of Georgia in effect at the time such compensation is payable. Such compensation shall be paid by the Grantors; provided, however, that to the extent such compensation is not paid by the Grantors, subject to the provisions of Section 17(j) hereof, it shall be charged against and paid from the Trust and, subject to Section 4 of this Trust Agreement, upon a Preliminary Change in Control, the Grantors shall reimburse the Trust for any such payment made from the Trust within 30 days of its receipt from the Trustee of written notice of such payment.
13. Trustee's Consent to Act and Indemnification of the Trustee. The Trustee hereby grants and consents to act as Trustee hereunder. The Grantors agree to indemnify the Trustee and hold it harmless from and against all claims, liabilities, legal fees and expenses that may be asserted against it, otherwise than on account of conduct of the Trustee which is found by a final judgment of a court of competent jurisdiction to be a breach of its fiduciary duty whether by reason of the Trustee's taking or refraining from taking any action in connection with the Trust, whether or not the Trustee is a party to a legal proceeding or otherwise.
14. Prohibition Against Assignment. No Beneficiary shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust before such assets are paid to the Beneficiary as provided in Section 7, and all rights created under the Trust and the Plans shall be unsecured contractual rights of the Beneficiary against the Grantor which is his employer for purposes of the Plans. No part of, or claim against, the assets of the Trust may be assigned, anticipated, alienated, encumbered, garnished, attached or in any other manner disposed of by any of the Beneficiaries, and no such part or claim shall be subject to any legal process or claims of creditors of any of the Beneficiaries.
15. Annual Accounting. The Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, and, within ninety days following the close of each calendar year, and within ninety days after the Trustee's resignation or termination of the Trust as provided herein, the Trustee shall render a written account of its administration of the Trust to the Grantors by submitting a record of receipts, investments, disbursements, distributions, gains, losses, assets on hand at the end of the accounting period and other pertinent information, including a description of all securities and investments purchased and sold during such calendar year. Trustee shall separately account for each Grantor's interest in Trust assets. Written approval of an account shall, as to all matters shown in the account, be binding upon the Grantors and shall forever release and discharge the Trustee from any liability or accountability. The Grantors will be deemed to have given their written approval if he does not object in writing to the Trustee within one hundred and twenty days (120) after the date of receipt of such account from the Trustee. The Trustee shall be entitled at any time to institute an action in a court of competent jurisdiction for a judicial settlement of its account.
16. Notices. Any notice or instructions required under any of the provisions of this Trust Agreement shall be deemed effectively given only if such notice is in writing and is delivered personally or by certified or registered mail, return receipt requested and postage prepaid, addressed to the addresses as set forth below of the parties hereto. The address of the parties are as follows:
(i) The Grantors:
Will be provided by Committee to Trustee
(ii) The Trustee:
Wachovia Bank, N.A.
Attn: Executive Services
NC 31013
P.O. Box 3099
Winston-Salem, NC 27150
The Grantors or Trustee may at any time change the address to which notices are to be sent to it by giving written notice thereof in the manner provided above.
(a) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Georgia applicable to contracts made and to be performed therein and the Trustee shall not be required to account in any court other than one of the courts of such state.
(b) The Committee may give direction to Trustee on behalf of the Grantors with regard to those matters identified in writing by the Grantors. The Trustee will be fully protected in relying on such direction by the Committee.
(c) All section headings herein have been inserted for convenience of reference only and shall in no way modify, restrict or affect the meaning or interpretation of any of the terms or provisions of this Trust Agreement.
(d) This Trust Agreement is intended as a complete and exclusive statement of the agreement of the parties hereto, supersedes all previous agreements or understandings among them and may not be modified or terminated orally.
(e) The term "Trustee" shall include any successor Trustee.
(f) If a Trustee or Custodian hereunder is a bank or trust company, any corporation resulting from any merger, consolidation or conversion to which such bank or trust company may be a party, or any corporation otherwise succeeding generally to all or substantially all of the assets or business of such bank or trust company, shall be the successor to it as Trustee or Custodian hereunder, as the case may be without the execution of any instrument or any further action on the part of any party hereto.
(g) If any provision of this Trust shall be invalid and unenforceable, the remaining provisions hereof shall subsist and be carried into effect.
(h) The Plans are by this reference expressly incorporated herein and made a part hereof with the same force and effect as if fully set forth at length. As of the date first stated above, the terms of the Plans are as set forth in Exhibit A attached hereto.
(i) The assets of the Trust shall be subject only to the claims of the
Grantor's general creditors in the event of one or more of the Grantors'
bankruptcy or insolvency. A Grantor shall be considered "bankrupt" or
"insolvent" if the Grantor is (A) unable to pay its debts when due or (B)
engaged as a debtor in a proceeding under the Bankruptcy Code, 11 U.S.C. Section
101 et seq. The Board of Directors or the chief executive officer of a Grantor
must notify the Trustee of the Grantor's bankruptcy or insolvency within three
(3) days following the occurrence of such event. Upon receipt of such a notice,
or, upon receipt of a written allegation from a person or entity claiming to be
a creditor of a Grantor that such Grantor is bankrupt or insolvent, the Trustee
shall discontinue payments to Beneficiaries. The Trustee shall, as soon as
practicable after receipt of such notice or written allegation, determine
whether such Grantor is bankrupt or insolvent. If the Trustee determines, based
on such notice, written allegation, or such other information as it deems
appropriate, that such Grantor is bankrupt or insolvent, the Trustee shall hold
the assets of the Trust for the benefit of the general creditors of the Grantor
or Grantors, and deliver any undistributed assets attributable to such Grantor
or Grantors to satisfy the claims of such creditors as a court of competent
jurisdiction may direct. The Committee in conjunction with the Trustee shall
identify the amount of assets attributable to any bankrupt or insolvent Grantor
in order to segregate such assets for the benefit of such Grantor's creditors.
The Trustee shall resume payments to Beneficiaries only after it has determined
that the Grantor in issue is not bankrupt or insolvent, is no longer bankrupt or
insolvent (if the Trustee determined that the Grantor was bankrupt or
insolvent), pursuant to an order of a court of competent jurisdiction. Unless
the Trustee has actual knowledge of the Grantor's bankruptcy or insolvency of
the Grantor or Grantors, the Trustee shall have no duty to inquire whether such
Grantor(s) is bankrupt or insolvent. The Trustee may in all events rely on such
evidence concerning the pertinent Grantor's solvency as may be furnished to the
Trustee which will give the Trustee a reasonable basis for making a
determination concerning such Grantor's solvency. If the Trustee discontinues
payment of benefits from the Trust pursuant to this Section 17(h) and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments which would
have been made to each Beneficiary less the aggregate amount of payments made to
the Beneficiary by the Grantor(s) in lieu of the payments provided for hereunder
during any such period of discontinuance. In addition, interest at a rate equal
to the average 90 day Treasury Bill rate during the period of such
discontinuance shall be paid on the amount, if any, determined to be owed in
accordance with the preceding sentence.
(j) Any and all taxes, expenses (including, but not limited to, the
Trustee's compensation) and costs of litigation relating to or concerning the
adoption, administration and termination of the Trust shall be borne and
promptly paid by the Grantors; provided, however, that, to the extent such
taxes, expenses and costs relating to the Trust are due and owing and (A) are
not paid by the Grantors, and (B) have not been paid for more than sixty (60)
days, they shall be charged against and paid from the Trust, and, subject to
Section 4 of this Trust Agreement, upon a Preliminary Change in Control, the
Grantors shall reimburse the Trust for any such payment made from the Trust
within 30 days of its receipt from the Trustee of written notice of such
payment.
(k) Any reference hereunder to a Beneficiary shall expressly be deemed to include, where relevant, the beneficiaries of a Beneficiary duly appointed under the terms of the Plans. A Beneficiary shall cease to have such status once any and all amounts due such Beneficiary under the Plan have been satisfied.
(l) Any reference hereunder to the Grantors shall expressly be deemed to include a Grantor's successor and assigns.
(m) Whenever used herein, and to the extent appropriate, the masculine, feminine or neuter gender shall include the other two genders, the singular shall include the plural and the plural shall include the singular.
IN WITNESS WHEREOF, the parties hereto have executed this amended and restated Trust Agreement as of this day of ________________, 2001.
TRUSTEE: WACHOVIA BANK, N.A.
By:
GRANTOR: ALABAMA POWER COMPANY
By:
GRANTOR: GEORGIA POWER COMPANY
By:
GRANTOR: GULF POWER COMPANY
By:
GRANTOR: MISSISSIPPI POWER COMPANY
By:
GRANTOR: SAVANNAH ELECTRIC & POWER COMPANY By: GRANTOR: SOUTHERN COMMUNICATIONS SERVICES, INC. |
By:
[Signatures continued on following page]
[Signatures continued from preceding page]
GRANTOR: SOUTHERN COMPANY ENERGY SOLUTIONS, INC.
By:
GRANTOR: SOUTHERN COMPANY SERVICES, INC.
By:
GRANTOR: SOUTHERN ENERGY, INC.
By:
GRANTOR: SOUTHERN NUCLEAR OPERATING COMPANY, INC.
By:
EXHIBIT A
Plans and Arrangements Subject to the Trust1
EXHIBIT B
Contacts and Addresses of Grantors
Exhibit 10.42
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") made and entered into by and between The Southern Company ("Southern"), Southern Company Services, Inc. (the "Company") and Mr. William Paul Bowers. ("Mr. Bowers") (hereinafter collectively referred to as the "Parties") is effective May 1, 2001.
WHEREAS, Mr. Bowers is Executive Vice President of the Company;
WHEREAS, the Company wishes to provide to Mr. Bowers certain severance benefits under certain circumstances following a change in control (as defined herein) of Southern or the Company;
NOW, THEREFORE, in consideration of the premises, and the agreements of the Parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) "Annual Compensation" shall mean Mr. Bowers' highest annual base salary rate for the twelve (12) month period immediately preceding the date of the Change in Control plus target bonus.
(b) "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act.
(c) "Board" shall mean the board of directors of the Company.
(d) "Business Combination" shall mean a reorganization, merger or consolidation of Southern or sale or other disposition of all or substantially all of the assets of Southern.
(e) "Change in Control" shall mean any of the following:
(i) The Consummation of an acquisition by any Person of Beneficial Ownership of 20% or more of Southern's Voting Securities; provided, however, that for purposes of this Paragraph 1.(e)(i), the following acquisitions of Southern's Voting Securities shall not constitute a Change in Control:
(A) any acquisition directly from Southern;
(B) any acquisition by Southern;
(C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary;
(D) any acquisition by a qualified pension plan or publicly held mutual fund;
(E) any acquisition by a Group composed exclusively of employees of Southern, or any Southern Subsidiary;
(F) any acquisition by Mr. Bowers or any Group of which Mr. Bowers is a party; or
(G) any Business Combination which would not otherwise constitute a change in control because of the application of clauses (A), (B) and (C) of Paragraph 1.(e)(iii);
(ii) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board;
(iii) Consummation of a Business Combination, provided, however, that such a Business Combination shall not constitute a Change in Control if all three (3) of the following conditions are met:
(A) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern's Voting Securities or all or substantially all of Southern's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of Southern's Voting Securities;
(B) no Person (excluding any corporation resulting from such Business Combination, any employee benefit plan (or related trust) of Southern, any Southern Subsidiary or Surviving Company, Mr. Bowers, any Group of which Mr. Bowers is a party, any Group composed exclusively of Company employees, any qualified pension plan (or related trust) or any publicly held mutual fund) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and
(C) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination.
(iv) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of the Company; provided, however, that for purposes of this Paragraph 1.(e)(iv), any acquisition by Mr. Bowers, any Group composed exclusively of employees of the Company, any Group of which Mr. Bowers is a party, any qualified pension plan (or related trust), any publicly held mutual fund, any employee benefit plan (or related trust) sponsored or maintained by Southern or any Southern Subsidiary shall not constitute a Change in Control;
(v) Consummation of a reorganization, merger or consolidation of the Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Controls the corporation or other entity surviving or resulting from such Employing Company Business Combination; or
(vi) Consummation of the sale or other disposition of all or substantially all of the assets of the Company to a corporation or other entity which Southern does not Control. Notwithstanding the foregoing, in no event shall "Change in Control" mean an initial public offering or a spin-off of the Company.
(f) "COBRA Coverage" shall mean any continuation coverage to which Mr. Bowers or his dependents may be entitled pursuant to Code Section 4980B.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Company" shall mean Southern Company Services, Inc., its successors and assigns.
(i) "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or governmental agencies.
(j) "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests.
(k) "Effective Date" shall mean the date of execution of this Agreement.
(l) "Employee Outplacement Program" shall mean the program established by the Company from time to time for the purpose of assisting participants covered by the plan in finding employment outside of the Company which provides for the following services:
(i) self-assessment, career decision and goal setting;
(ii) job market research and job sources;
(iii) networking and interviewing skills;
(iv) planning and implementation strategy;
(v) resume writing, job hunting methods and salary negotiation; and
(vi) office support and job search resources.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(n) "Good Reason" shall mean, without Mr. Bowers' express
written consent, after written notice to the Board, and after a thirty
(30) day opportunity for the Board to cure, the continuing occurrence
of any of the following events:
(i) Inconsistent Duties. A meaningful and detrimental alteration in Mr. Bowers' position or in the nature or status of his responsibilities from those in effect immediately prior to the Change in Control;
(ii) Reduced Salary. A reduction of five percent (5%) or more by the Company in either of the following: (i) Mr. Bowers' annual base salary rate as in effect immediately prior to the Change in Control (except for a less than ten percent (10%), across-the-board annual base salary rate reduction similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company); or (ii) the sum of Mr. Bowers' annual base salary rate plus target bonus under the PPP (except for a less than ten percent (10%), across-the-board reduction of annual base salary rate plus target bonus under the PPP similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company);
(iii) Pension and Compensation Plans. The failure by
the Company to continue in effect any pension or compensation
plan or agreement in which Mr. Bowers participates or is a
party as of the date of the Change in Control or the
elimination of Mr. Bowers' participation therein, (except for
across-the-board plan changes or terminations similarly
affecting at least ninety-five percent (95%) of the Executive
Employees of the Company). For purposes of this Paragraph
1.(n), a "pension plan or agreement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for payments upon retirement; and a
"compensation plan or arrangement" shall mean any written
arrangement executed by an authorized officer of the Company
which provides for periodic, non-discretionary compensatory
payments in the nature of bonuses.
(iv) Relocation. A change in Mr. Bowers' work
location to a location more than fifty (50) miles from the
office where Mr. Bowers is located at the time of the Change
in Control, unless such new work location is within fifty (50)
miles from Mr. Bowers' principal place of residence at the
time of the Change in Control. The acceptance, if any, by Mr.
Bowers of employment by the Company at a work location which
is outside the fifty mile radius set forth in this Paragraph
1.(n)(iv) shall not be a waiver of Mr. Bowers' right to refuse
subsequent transfer by the Company to a location which is more
than fifty (50) miles from Mr. Bowers' principal place of
residence at the time of the Change in Control, and such
subsequent unconsented transfer shall be "Good Reason" under
this Agreement; or
(v) Benefits and Perquisites. The taking of any action by the Company which would directly or indirectly materially reduce the benefits enjoyed by Mr. Bowers under the Company's retirement, life insurance, medical, health and accident, disability, deferred compensation or savings plans in which Mr. Bowers was participating immediately prior to the Change in Control; or the failure by the Company to provide Mr. Bowers with the number of paid vacation days to which Mr. Bowers is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect immediately prior to the Change in Control (except for across-the-board plan or vacation policy changes or plan terminations similarly affecting at least ninety-five percent (95%) of the Executive Employees of the Company).
(vi) For purposes of this Paragraph 1.(n), the term "Executive Employee" shall mean those employees of the Company of Grade Level 10 or above.
(o) "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act.
(p) "Group Health Plan" shall mean the group health plan covering Mr. Bowers, as such plan may be amended from time to time.
(q) "Group Life Insurance Plan" shall mean the group life insurance program covering Mr. Bowers, as such plan may be amended from time to time.
(r) "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998 plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998 whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board.
(s) "Month of Service" shall mean any calendar month during which Mr. Bowers has worked at least one (1) hour or was on approved leave of absence while in the employ of the Company or any affiliate or subsidiary of Southern.
(t) "Omnibus Plan" shall mean the Southern Company Omnibus Incentive Compensation Plan, and the Design and Administrative Specifications duly adopted thereunder, [as in effect on the day before the date of a Change in Control,] as may be amended from time to time.
(u) "Pension Plan" shall mean The Southern Company Pension Plan, as such plan may be amended from time to time.
(v) "Performance Dividend Program" shall mean the Performance Dividend Program under the Omnibus Plan or any replacement thereto, as such plans may be amended from time to time.
(w) "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of Act.
(x) "Performance Pay Program" or "PPP" shall mean the Performance Pay Program under the Omnibus Plan or any replacement thereto, as such plans may be amended from time to time.
(y) "Southern" shall mean The Southern Company, its successors and assigns.
(z) "Southern Board" shall mean the board of directors of Southern.
(aa) "Southern Subsidiary" shall mean any corporation or other entity Controlled by Southern.
(bb) "Termination for Cause" or "Cause" shall mean the termination of Mr. Bowers' employment by the Company upon the occurrence of any of the following:
(i) The willful and continued failure by Mr. Bowers substantially to perform his duties with the Company (other than any such failure resulting from Mr. Bowers' Total Disability or from Mr. Bowers' retirement or any such actual or anticipated failure resulting from termination by Mr. Bowers for Good Reason) after a written demand for substantial performance is delivered to him by the Southern Board, which demand specifically identifies the manner in which the Southern Board believes that he has not substantially performed his duties; or
(ii) The willful engaging by Mr. Bowers in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, including, but not limited to any of the following:
(A) any willful act involving fraud or dishonesty in the course of Mr. Bowers' employment by the Company;
(B) the willful carrying out of any activity or the making of any statement which would materially prejudice or impair the good name and standing of the Company, Southern or any Southern Subsidiary or would bring the Company, Southern or any Southern Subsidiary into contempt, ridicule or would reasonably shock or offend any community in which the Company, Southern or such Southern Subsidiary is located;
(C) attendance at work in a state of intoxication or otherwise being found in possession at his workplace of any prohibited drug or substance, possession of which would amount to a criminal offense;
(D) violation of the Company's policies on drug and alcohol usage, fitness for duty requirements or similar policies as may exist from time to time as adopted by the Company's safety officer;
(E) assault or other act of violence against any person during the course of employment; or
(F) indictment of any felony or any misdemeanor involving moral turpitude. No act or failure to act by Mr. Bowers shall be deemed "willful" unless done, or omitted to be done, by Mr. Bowers not in good faith and without reasonable belief that his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, Mr. Bowers shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Southern Board at a meeting of the Southern Board called and held for such purpose (after reasonable notice to Mr. Bowers and an opportunity for him, together with counsel, to be heard before the Southern Board), finding that, in the good faith opinion of the Southern Board, Mr. Bowers was guilty of conduct set forth above in clause (i) or (ii) of this Paragraph 1.(bb) and specifying the particulars thereof in detail.
(cc) "Termination Date" shall mean the date on which Mr. Bowers' employment with the Company is terminated; provided, however, that solely for purposes of Paragraph 2.(c) hereof, the Termination Date shall be the effective date of his retirement pursuant to the terms of the Pension Plan.
(dd) "Total Disability" shall mean Mr. Bowers' total disability within the meaning of the Pension Plan.
(ee) "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors.
(ff) "Waiver and Release" shall mean the Waiver and Release attached hereto as Exhibit A.
(gg) "Year of Service" shall mean Mr. Bowers' Months of
Service divided by twelve (12) rounded to the nearest whole year,
rounding up if the remaining number of months is seven (7) or greater
and rounding down if the remaining number of months is less than seven
(7). If Mr. Bowers has a break in his service with the Company, he will
receive credit under this Agreement for service prior to the break in
service only if the break in service is less than five years.
(i) voluntarily terminates his employment with the Company for other than Good Reason; (ii) has his employment terminated by the Company for Cause;
(iii) accepts the transfer of his employment to Southern, any Southern Subsidiary or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary;
(iv) refuses an offer of continued employment with the Company, any Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern, or any Southern Subsidiary under circumstances where such refusal would not amount to Good Reason for voluntary termination of employment; or
(v) elects to receive the benefits of any other voluntary or involuntary severance or separation program, plan or agreement maintained by the Company in lieu of benefits under this Agreement; provided however, that the receipt of benefits under the terms of any retention plan or agreement shall not be deemed to be the receipt of severance or separation benefits for purposes of this Agreement.
(b) Severance Benefits. If Mr. Bowers meets the eligibility
requirements of Paragraph 2.(a) hereof, he shall be entitled to a cash
severance benefit in an amount equal to three times his Annual
Compensation (the "Severance Amount"). If any portion of the Severance
Amount constitutes an "excess parachute payment" (as such term is
defined under Code Section 280G ("Excess Parachute Payment")), the
Company shall pay to Mr. Bowers an additional amount calculated by
determining the amount of tax under Code Section 4999 that he otherwise
would have paid on any Excess Parachute Payment with respect to the
Change in Control and dividing such amount by a decimal determined by
adding the tax rate under Code Section 4999 ("Excise Tax"), the
hospital insurance tax under Code Section 3101(b) ("HI Tax") and
federal and state income tax measured at the highest marginal rates
("Income Tax") and subtracting such result from the number one (1) (the
"280G Gross-up"); provided, however, that no 280G Gross-up shall be
paid unless the Severance Amount plus all other "parachute payments" to
Mr. Bowers under Code Section 280G exceeds three (3) times Mr. Bowers'
"base amount" (as such term is defined under Code Section 280G ("Base
Amount")) by ten percent (10%) or more; provided further, that if no
280G Gross-up is paid, the Severance Amount shall be capped at three
(3) times Mr. Bowers' Base Amount, less all other "parachute payments"
(as such term is defined under Code Section 280G) received by Mr.
Bowers, less one dollar (the "Capped Amount"), if the Capped Amount,
reduced by HI Tax and Income Tax, exceeds what otherwise would have
been the Severance Amount, reduced by HI Tax, Income Tax and Excise
Tax.
For purposes of this Paragraph 2.(b), whether any amount would
constitute an Excess Parachute Payment and any other calculations of
tax, e.g., Excise Tax, HI Tax, Income Tax, etc., or other amounts,
e.g., Base Amount, Capped Amount, etc., shall be determined by the tax
department of the independent public accounting firm then responsible
for preparing Southern's consolidated federal income tax return, and
such calculations or determinations shall be binding upon the parties
hereto.
(c) Welfare Benefits. If Mr. Bowers meets the eligibility requirements of Paragraph 2.(a) hereof and is not otherwise eligible to receive retiree medical and life insurance benefits provided to certain retirees pursuant to the terms of the Pension Plan, the Group Health Plan and the Group Life Insurance Plan, he shall be entitled to the benefits set forth in this Paragraph 2.(c).
(i) Mr. Bowers shall be eligible to participate in the Company's Group Health Plan, upon payment of both the Company's and his monthly premium under such plan, for a period of six (6) months for each of Mr. Bowers' Years of Service, not to exceed five (5) years. If Mr. Bowers elects to receive this extended medical coverage, he shall also be entitled to elect coverage under the Group Health Plan for his dependents who were participating in the Group Health Plan on Mr. Bowers' Termination Date (and for such other dependents as may be entitled to coverage under the provisions of the Health Insurance Portability and Accountability Act of 1996) for the duration of Mr. Bowers' extended medical coverage under this Paragraph 2.(c)(i) to the extent such dependents remain eligible for dependent coverage under the terms of the Group Health Plan.
(A) The extended medical coverage afforded
to Mr. Bowers pursuant to Paragraph 2.(c)(i), as well
as the premiums to be paid by Mr. Bowers in
connection with such coverage shall be determined in
accordance with the terms of the Group Health Plan
and shall be subject to any changes in the terms and
conditions of the Group Health Plan as well as any
future increases in premiums under the Group Health
Plan. The premiums to be paid by Mr. Bowers in
connection with this extended coverage shall be due
on the first day of each month; provided, however,
that if he fails to pay his premium within thirty
(30) days of its due date, such extended coverage
shall be terminated.
(B) Any Group Health Plan coverage provided under Paragraph 2.(c)(i) shall be a part of and not in addition to any COBRA Coverage which Mr. Bowers or his dependents may elect. In the event that Mr. Bowers or his dependents become eligible to be covered, by virtue of re-employment or otherwise, by any employer-sponsored group health plan or is eligible for coverage under any government-sponsored health plan during the above period, coverage under the Company's Group Health Plan available to Mr. Bowers or his dependents by virtue of the provisions of Paragraph 2.(c)(i) shall terminate, except as may otherwise be required by law, and shall not be renewed.
(ii) Mr. Bowers shall be entitled to receive cash in an amount equal to the Company's and Mr. Bowers' cost of premiums for three (3) years of coverage under the Group Health Plan and Group Life Insurance Plan in accordance with the terms of such plans as of the date of the Change in
Control.
(d) Incentive Plans. If Mr. Bowers meets the
eligibility requirements of Paragraph 2.(a) hereof he shall
be entitled to the following benefits under the Omnibus
Plan:
(i) Stock Options.
-------------
(A) Any of Mr. Bowers' Options and Stock
|
Appreciation Rights under the Omnibus Plan (the
defined terms of which are incorporated in this
Paragraph 2.(d)(i) by reference) which are
outstanding as of the Termination Date and which are
not then exercisable and vested, shall become fully
exercisable and vested to the full extent of the
original grant; provided, that in the case of a Stock
Appreciation Right, if Mr. Bowers is subject to
Section 16(b) of the Exchange Act, such Stock
Appreciation Right shall not become fully vested and
exercisable at such time if such actions would result
in liability to Mr. Bowers under Section 16(b) of the
Exchange Act, provided further, that any such actions
not taken as a result of the rules under Section
16(b) of the Exchange Act shall be effected as of the
first date that such activity would no longer result
in liability under Section 16(b) of the Exchange Act.
(B) The restrictions and deferral limitations applicable to any of Mr. Bowers' Restricted Stock and Restricted Stock Units as of the Termination Date shall lapse, and such Restricted Stock and Restricted Stock Units shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant.
(ii) Performance Pay Program. Provided Mr. Bowers is not entitled to a Cash-Based Award under the PPP, (the defined terms of which are incorporated in this Paragraph 2.(d)(ii) by reference), if the PPP is in place through Mr. Bowers' Termination Date and to the extent Mr. Bowers is entitled to participate therein, Mr. Bowers shall be entitled to receive cash in an amount equal to a prorated payout of his Cash-Based Awards under the PPP for the performance period in which the Termination Date shall have occurred, at target performance under the PPP and prorated by the number of months which have passed since the beginning of the performance period until the Termination Date.
(iii) Performance Dividend Program. Provided Mr. Bowers is not entitled to a Cash-Based Award under the Performance Dividend Program (the defined terms of which are incorporated in this Paragraph 2.(d)(iii) by reference), if the Performance Dividend Program is in place through Mr. Bowers' Termination Date and to the extent Mr. Bowers is entitled to participate therein, Mr. Bowers shall be entitled to receive cash for each such Cash-Based Award under the Performance Dividend Program held by Mr. Bowers on his Termination Date, based on actual performance under the Performance Dividend Program determined as of the most recently completed calendar quarter of the performance period in which the Termination Date shall have occurred, and the annual dividend declared prior to the Termination Date.
(iv) Other Short Term Incentives Under the Omnibus Plan. Provided Mr. Bowers is not entitled to a Performance Unit/Share award under the Omnibus Plan (the defined terms of which are incorporated in this Paragraph 2.(d)(iv) by reference), Mr. Bowers shall be entitled to receive cash in an amount equal to a prorated payout of the value of his Performance Units and/or Performance Shares for the performance period in which the Termination Date shall have occurred, at target performance and prorated by the number of months which have passed since the beginning of the performance period until the Termination Date.
(v) Other Short Term Incentive Plans. The provisions of this Paragraph 2.(d)(v) shall apply if and to the extent that Mr. Bowers is a participant in any other "short term compensation plan" not otherwise previously referred to in this Paragraph 2.(d). Provided Mr. Bowers is not otherwise entitled to a plan payout under any change of control provisions of such plans, if the "short term compensation plan" is in place as of the Termination Date and to the extent Mr. Bowers is entitled to participate therein, Mr. Bowers shall receive cash in an amount equal to his award under the Company's "short term incentive plan" for the annual performance period in which the Termination Date shall have occurred, at Mr. Bowers' target performance level and prorated by the number of months which have passed since the beginning of the annual performance period until his Termination Date. For purposes of this Paragraph 2.(d)(v) the term "short term incentive compensation plan" shall mean any incentive compensation plan or arrangement adopted in writing by the Company which provides for annual, recurring compensatory bonuses based upon articulated performance criteria.
(e) Payment of Benefits. Any amounts due under this Agreement shall be paid in one (1) lump sum payment as soon as administratively practicable following the later of: (i) Mr. Bowers' Termination Date, or (ii) upon Mr. Bowers' tender of an effective Waiver and Release to the Company in the form of Exhibit A attached hereto and the expiration of any applicable revocation period for such waiver. In the event of a dispute with respect to liability or amount of any benefit due hereunder, an effective Waiver and Release shall be tendered at the time of final resolution of any such dispute when payment is tendered by the Company.
(f) Benefits in the Event of Death. In the event of Mr. Bowers' death prior to the payment of all amounts due under this Agreement, Mr. Bowers' estate shall be entitled to receive as due any amounts not yet paid under this Agreement upon the tender by the executor or administrator of the estate of an effective Waiver and Release.
(g) Legal Fees. In the event of a dispute between Mr. Bowers and the Company with regard to any amounts due hereunder, if any material issue in such dispute is finally resolved in Mr. Bowers' favor, the Company shall reimburse Mr. Bowers' legal fees incurred with respect to all issues in such dispute in an amount not to exceed fifty thousand dollars ($50,000).
(h) Employee Outplacement Services. Mr. Bowers shall be eligible to participate in the Employee Outplacement Program, which program shall not be less than six (6) months duration measured from Mr. Bowers' Termination Date.
(i) Non-qualified Retirement and Deferred Compensation Plans.
The Parties agree that subsequent to a Change in Control, any claims by
Mr. Bowers for benefits under any of the Company's non-qualified
retirement or deferred compensation plans shall be resolved through
binding arbitration in accordance with the provisions and procedures
set forth in Paragraph 5 hereof and if any material issue in such
dispute is finally resolved in Mr. Bowers' favor, the Company shall
reimburse Mr. Bowers' legal fees in the manner provided in Paragraph
2.(g) hereof.
3. Transfer of Employment. In the event that Mr. Bowers' employment by the Company is terminated during the two year period following a Change in Control and Mr. Bowers accepts employment by Southern, a Southern Subsidiary, or any employer that succeeds to all or substantially all of the assets of the Company, Southern or any Southern Subsidiary, the Company shall assign this Agreement to Southern, such Southern Subsidiary, or successor employer, Southern shall accept such assignment or cause such Southern Subsidiary or successor employer to accept such assignment, and such assignee shall become the "Company" for all purposes hereunder.
4. No Mitigation. If Mr. Bowers is otherwise eligible to receive benefits under Paragraph 2 of this Agreement, he shall have no duty or obligation to seek other employment following his Termination Date and, except as otherwise provided in Paragraph 2.(a)(iii) hereof, the amounts due Mr. Bowers hereunder shall not be reduced or suspended if Mr. Bowers accepts such subsequent employment.
(a) Any dispute, controversy or claim arising out of or relating to the Company's obligations to pay severance benefits under this Agreement, or the breach thereof, shall be settled and resolved solely by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") except as otherwise provided herein. The arbitration shall be the sole and exclusive forum for resolution of any such claim for severance benefits and the arbitrators' award shall be final and binding. The provisions of this Paragraph 5 are not intended to apply to any other disputes, claims or controversies arising out of or relating to Mr. Bowers' employment by the Company or the termination thereof.
(b) Arbitration shall be initiated by serving a written notice of demand for arbitration to Mr. Bowers, in the case of the Company, or to the Southern Board, in the case of Mr. Bowers.
(c) The arbitration shall be held in Atlanta, Georgia. The arbitrators shall apply the law of the State of Georgia, to the extent not preempted by federal law, excluding any law which would require the application of the law of another state.
(d) The parties shall appoint arbitrators within fifteen (15) business days following service of the demand for arbitration. The number of arbitrators shall be three. One arbitrator shall be appointed by Mr. Bowers, one arbitrator shall be appointed by the Company, and the two arbitrators shall appoint a third. If the arbitrators cannot agree on a third arbitrator within thirty (30) business days after the service of demand for arbitration, the third arbitrator shall be selected by the AAA.
(e) The arbitration filing fee shall be paid by Mr. Bowers. All other costs of arbitration shall be borne equally by Mr. Bowers and the Company, provided, however, that the Company shall reimburse such fees and costs in the event any material issue in such dispute is finally resolved in Mr. Bowers' favor and Mr. Bowers is reimbursed legal fees under Paragraph 2.(g) hereof.
(f) The parties agree that they will faithfully observe the rules that govern any arbitration between them, they will abide by and perform any award rendered by the arbitrators in any such arbitration, including any award of injunctive relief, and a judgment of a court having jurisdiction may be entered upon an award.
(g) The parties agree that nothing in this Paragraph 5 is intended to preclude upon application of either party any court having jurisdiction from issuing and enforcing in any lawful manner such temporary restraining orders, preliminary injunctions, and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; regardless of whether an arbitration proceeding under this Paragraph 5 has begun. The parties further agree that nothing herein shall prevent any court from entering and enforcing in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Paragraph 5.
(a) Funding of Benefits. Unless the Board in its discretion shall determine otherwise, the benefits payable to Mr. Bowers under this Agreement shall not be funded in any manner and shall be paid by the Company out of its general assets, which assets are subject to the claims of the Company's creditors.
(b) Withholding. There shall be deducted from the payment of any benefit due under this Agreement the amount of any tax required by any governmental authority to be withheld and paid over by the Company to such governmental authority for the account of Mr. Bowers.
(c) Assignment. Mr. Bowers shall have no rights to sell, assign, transfer, encumber, or otherwise convey the right to receive the payment of any benefit due hereunder, which payment and the rights thereto are expressly declared to be nonassignable and nontransferable. Any attempt to do so shall be null and void and of no effect.
(d) Amendment and Termination. The Agreement may be amended or terminated only by a writing executed by the parties.
(e) Construction. This Agreement shall be construed in accordance with and governed by the laws of the State of Georgia, to the extent not preempted by federal law, disregarding any provision of law which would require the application of the law of another state.
(f) Pooling Accounting. Notwithstanding anything to the contrary herein, if, but for any provision of this Agreement, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Agreement which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Agreement, Pooling Accounting would be required for such Change in Control transaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ____ day of __________________, 2002.
THE SOUTHERN COMPANY
By: ____________________________________
SOUTHERN COMPANY SERVICES, INC.
By: ____________________________________
MR. BOWERS
Exhibits 10.43
SOUTHERN COMPANY
CHANGE IN CONTROL
BENEFIT PLAN DETERMINATION POLICY
Troutman Sanders LLP Bank of America Plaza, Suite 5200 600 Peachtree Street, N.E.
Atlanta, Georgia 30308
SOUTHERN COMPANY
CHANGE IN CONTROL
BENEFIT PLANS POLICY
ARTICLE I - PURPOSE AND ADOPTION OF POLICY
1.1 Adoption of Policy. Southern Company Services, Inc. hereby adopts this Southern Company Change in Control Benefit Plan Determination Policy, effective July 10, 2000
1.2 Purpose. The Policy is designed to govern the determination of a Change in Control of Southern and/or the Employing Companies, and the benefits to be provided to employees of Southern and the Employing Companies under certain employee benefit plans.
ARTICLE II - DEFINITIONS
2.1 "Administrative Committee" shall mean the Vice President of Human Resources of Southern Company, Director of System Compensation and Benefits and the Comptroller of Southern Company.
2.2 "Beneficial Ownership" shall mean beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act.
2.3 "Business Combination" shall mean a reorganization, merger or consolidation of Southern Company or sale or other disposition of all or substantially all of the assets of Southern Company.
2.4 "Change in Control" shall mean a Southern Change in Control and/or a Subsidiary Change in Control, as applicable.
2.5 "Common Stock" shall mean the common stock of Southern Company.
2.6 "Company" shall mean Southern Company Services, Inc., its successors and assigns.
2.7 "Consummation" shall mean the completion of the final act necessary to complete a transaction as a matter of law, including, but not limited to, any required approvals by the corporation's shareholders and board of directors, the transfer of legal and beneficial title to securities or assets and the final approval of the transaction by any applicable domestic or foreign governments or agencies.
2.8 "Control" shall mean, in the case of a corporation, Beneficial Ownership of more than 50% of the combined voting power of the corporation's Voting Securities, or in the case of any other entity, Beneficial Ownership of more than 50% of such entity's voting equity interests.
2.9 "Employee Benefit Plan(s)" shall mean, collectively, the Southern Company Performance Stock Plan, the Southern Company Executive Stock Plan, the Southern Company Performance Pay Plan (Shareholder Approved), the Southern Company Performance Pay Plan, the Southern Company Executive Productivity Improvement Plan, and the Southern Company Performance Dividend Plan, the Southern Company Supplemental Benefit Plan, the Southern Company Supplemental Executive Retirement Plan and the Southern Company Deferred Compensation Plan, as may be amended from time to time in accordance with their terms.
2.10 "Employing Company" shall mean the Company, or any other corporation or other entity Controlled by Southern Company, which has adopted the Change in Control Program, and any successor of any of them. With respect to a Change in Control of Southern Energy, Inc. ("SEI"), employees of Southern Energy Resources, Inc. shall be deemed to be employed by SEI for purposes of being covered under this Policy.
2.11 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
2.12 "Group" shall have the meaning set forth in Section 14(d) of the Exchange Act.
2.13 "Incumbent Board" shall mean those individuals who constitute the Southern Board as of October 19, 1998, plus any individual who shall become a director subsequent to such date whose election or nomination for election by Southern Company's shareholders was approved by a vote of at least 75% of the directors then comprising the Incumbent Board. Notwithstanding the foregoing, no individual who shall become a director of the Southern Board subsequent to October 19, 1998, whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Regulations promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Southern Board shall be a member of the Incumbent Board.
2.14 "Person" shall mean any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.
2.15 "Plan Termination" shall mean the termination of an Employee Benefit Plan by Southern Company or an Employing Company following a Southern Change in Control unless an equitable arrangement (embodied in an ongoing substitute or replacement plan) has been made with respect to the Employee Benefit Plan in connection with the Change in Control. For purposes of this Policy, an ongoing substitute or alternative plan shall be considered an "equitable arrangement" if a nationally recognized compensation consulting firm chosen by the Administrative Committee opines in writing that the post-Change in Control plan is an equitable substitute or replacement of the Employee Benefit Plan.
2.16 "Preliminary Change in Control" shall mean the occurrence of any of the following as determined by the Southern Committee.
(1) Southern Company or an Employing Company has entered into a written agreement, such as, but not limited to, a letter of intent, which, if Consummated, would result in a Southern Change in Control or a Subsidiary Change in Control, as the case may be;
(2) Southern Company, an Employing Company or any Person publicly announces an intention to take or to consider taking actions which, if Consummated, would result in a Southern Change of Control or a Subsidiary Change in Control under circumstances where the Consummation of the announced action or intended action is legally and financially possible;
(3) Any Person achieves the Beneficial Ownership of fifteen percent (15%) or more of the Common Stock; or
(4) The Southern Board or the board of directors of an Employing Company has declared that a Preliminary Change of Control has occurred.
2.17 "Southern Board" shall mean the board of directors of Southern Company.
2.18 "Southern Change in Control" shall mean any of the following:
(a) The Consummation of an acquisition by any Person of
Beneficial Ownership of 20% or more of Southern Company's Voting
Securities; provided, however, that for purposes of this subsection
(a), the following acquisitions of Southern Company's Voting Securities
shall not constitute a Change in Control:
(i) any acquisition directly from Southern Company;
(ii) any acquisition by Southern Company;
(iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Southern Company or any corporation controlled by Southern Company;
(iv) any acquisition by a qualified pension plan or publicly held mutual fund;
(v) any acquisition by an employee of Southern Company or its subsidiary of affiliate, or Group composed exclusively of such employees; or
(vi) any Business Combination which would not otherwise
constitute a Change in Control because of the application of clauses
(i), (ii) and (iii) of this Section;
(b) A change in the composition of the Southern Board whereby individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Southern Board; or
(c) Consummation of a Business Combination, unless, following such Business Combination, all of the following three conditions are met:
(i) all or substantially all of the individuals and entities who held Beneficial Ownership, respectively, of Southern Company's Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, 65% or more of the combined voting power of the Voting Securities of the corporation surviving or resulting from such Business Combination, (including, without limitation, a corporation which as a result of such transaction holds Beneficial Ownership of all or substantially all of Southern Company's Voting Securities or all or substantially all of Southern Company's assets) (such surviving or resulting corporation to be referred to as "Surviving Company"), in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Southern Company's Voting Securities;
(ii) no Person (excluding any corporation resulting from such Business Combination, any qualified pension plan, publicly held mutual fund, Group composed exclusively of Employees or employee benefit plan (or related trust) of Southern Company, its subsidiaries or Surviving Company) holds Beneficial Ownership, directly or indirectly, of 20% or more of the combined voting power of the then outstanding Voting Securities of Surviving Company except to the extent that such ownership existed prior to the Business Combination; and
(iii) at least a majority of the members of the board of directors of Surviving Company were members of the Incumbent Board at the earlier of the date of execution of the initial agreement, or of the action of the Southern Board, providing for such Business Combination.
2.19 "Southern Committee" shall mean the committee comprised of the Chairman of the Southern Board, Chief Financial Officer of Southern Company, General Counsel of Southern Company and the Chairman of the Administrative Committee.
2.20 "Southern Company" shall mean The Southern Company, its successors and assigns.
2.21 "Southern Termination" shall mean the following:
(a) The Consummation of a reorganization, merger or consolidation of Southern Company under circumstances where either (i) Southern Company is not the surviving corporation or (ii) Southern Company's Voting Securities are no longer publicly traded;
(b) The Consummation of a sale or other disposition of all or substantially all of Southern Company's assets; or
(c) The Consummation of an acquisition by any Person of Beneficial Ownership of all of Southern Company's Voting Securities such that Southern Company's Voting Securities are no longer publicly traded.
2.22 "Subsidiary Change in Control" shall mean the following:
(a) The Consummation of an acquisition by any Person of Beneficial Ownership of 50% or more of the combined voting power of the then outstanding Voting Securities of an Employing Company; provided, however, that for purposes of this Subsection 2.22, any acquisition by an employee of Southern Company or its subsidiary of affiliate, or Group composed entirely of such employees, any qualified pension plan, publicly held mutual fund or any employee benefit plan (or related trust) sponsored or maintained by Southern Company or any corporation Controlled by Southern Company shall not constitute a Change in Control;
(b) Consummation of a reorganization, merger or consolidation of an Employing Company (an "Employing Company Business Combination"), in each case, unless, following such Employing Company Business Combination, Southern Company Controls the corporation surviving or resulting from such Employing Company Business Combination, or
(c) Consummation of the sale or other disposition of all or substantially all of the assets of an Employing Company to an entity which Southern Company does not Control.
Notwithstanding the foregoing, in no event shall "Subsidiary Change in Control" mean an initial public offering or a spin-off of an Employing Company.
2.23 "Subsidiary Employee" shall mean an Employee of an Employing Company which has undergone a Subsidiary Change in Control whose employment is not immediately transferred to another Employing Company upon such Subsidiary Change in Control.
2.24 "Surviving Company" shall mean the corporation which either survives or results from any reorganization, merger or consolidation of which Southern Company is a party under circumstances where Southern Company does not survive.
2.25 "Trust" shall mean the Southern Company Deferred Compensation Trust.
2.26 "Voting Securities" shall mean the outstanding voting securities of a corporation entitling the holder thereof to vote generally in the election of such corporation's directors.
ARTICLE III - POOLING ACCOUNTING
Notwithstanding anything to the contrary herein, if, but for any provision of this Policy, a Change in Control transaction would otherwise be accounted for as a pooling-of-interests under APB No.16 ("Pooling Accounting") (after giving effect to any and all other facts and circumstances affecting whether such Change in Control transaction would use Pooling Accounting), such provision or provisions of this Policy which would otherwise cause the Change in Control transaction to be ineligible for Pooling Accounting shall automatically be void and ineffective in such a manner and to the extent that by eliminating such provision or provisions of this Policy, Pooling Accounting would be required for such Change in Control transaction and Pooling Accounting is in fact used for such Change in Control transaction.
ARTICLE IV - PERFORMANCE STOCK PLAN CHANGE IN CONTROL PROVISIONS
4.1 Application. The provisions of this Article IV apply to benefits payable under the Southern Company Performance Stock Plan (the "PSP") and the Southern Company Executive Stock Plan ("ESP"), notwithstanding any provision in the PSP or ESP to the contrary. The meaning of capitalized terms not defined herein are determined under the PSP and ESP.
4.2 Subsidiary Change in Control. In the event of a Subsidiary Change in Control:
(a) Any Options and Stock Appreciation Rights held by a Subsidiary Employee which are outstanding as of the date such Subsidiary Change in Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Subsidiary Employee holding a Stock Appreciation Right who is actually subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable unless it shall have been outstanding for at least six months as of the date such Subsidiary Change in Control is determined to have occurred.
(b) The restrictions and deferral limitations applicable to any Restricted Stock held by a Subsidiary Employee shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant.
(c) The restrictions and deferral limitations and other conditions applicable to any other Awards held by Subsidiary Employees shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant.
(a) Any Options and Stock Appreciation Rights which are outstanding as of the date such Southern Termination is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant; provided, that in the case of a Participant holding a Stock Appreciation Right who is subject to Section 16(b) of the Exchange Act, such Stock Appreciation Right shall not become fully vested and exercisable at such time if such actions would result in liability to the Participant under Section 16(b), provided further, that any such actions not taken as a result of the rules under Section 16(b) shall be effected as of the first date that such activity would no longer result in liability under such section.
(b) The restrictions and deferral limitations applicable to any Restricted Stock shall lapse, and such Restricted Stock shall become free of all restrictions and limitations and become fully vested and transferable to the full extent of the original grant.
(c) The restrictions and deferral limitations and other conditions applicable to any other Awards under the PSP or ESP shall lapse, and such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant.
(d) Any Options, Stock Appreciation Rights or Restricted Stock which are outstanding as of the date such Southern Termination is determined to have occurred, shall be converted into or replaced by options, stock appreciation rights or restricted stock, as the case may be, in the Surviving Company, or the corporation which has acquired all of Southern Company's Common Stock or assets. In the event of such conversion or replacement, the terms of the replacement options or stock appreciation rights shall preserve with respect to each Option and each SAR the spread between the Fair Market Value of the shares subject to the Options or SARs and the Option Price or Base Value, as the case may be, as determined immediately prior to the Southern Termination. Similarly, the terms of replacement restricted stock shall preserve the Fair Market Value of each share of Restricted Stock as determined immediately prior to the Southern Termination. No replacement option, stock appreciation right or share of restricted stock received shall be subject to any terms which are less favorable than those which existed with respect to the original Option, SAR or share of Restricted Stock immediately prior to the Southern Termination.
(e) In the event that it is not possible to effect the
conversion set forth in Section 4.3(d) hereof, any and all outstanding
Options, Stock Appreciation Rights and Restricted Stock as of the date
of the Southern Termination which are not so converted shall be
terminated and the affected Participants shall receive within thirty
(30) days of the Southern Termination cash equal to the difference
between the Option Price and Fair Market Value, in the case of Options,
the Base Value and Fair Market Value, in the case of SARs and equal to
the Fair Market Value, in the case of Restricted Stock. For purposes of
this Section 4.3(e), Fair Market Value shall be determined as of the
day prior to the date of the Southern Termination.
ARTICLE V - PERFORMANCE PAY PLAN (SHAREHOLDER APPROVED)
CHANGE IN CONTROL PROVISIONS
5.1 Application. The provisions of this Article V apply to benefits payable under the Southern Company Performance Pay Plan (Shareholder Approved) (the "Executive PPP"), notwithstanding any provision in the Executive PPP to the contrary. The meaning of capitalized terms not defined herein are determined under the Executive PPP.
5.2 Southern Change in Control. In the event of a Southern Change in Control, if there is no Plan Termination with respect to the Executive PPP, payout of Incentive Pay Awards to Participants for the Performance Period in which the Southern Change in Control shall have occurred shall be the greater of actual or target performance under the Executive PPP.
5.3 Plan Termination. In the event of a Plan Termination with respect to the Executive PPP within two (2) years following a Southern Change in Control, each Participant who is an Employee on the date of such Plan Termination shall be entitled to receive within thirty (30) days of the Plan Termination, cash in an amount equal to a pro-rated payout of his Incentive Pay Award under the Executive PPP for the Performance Period in which the Plan Termination shall have occurred, at the greater of target or actual performance under the Executive PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Plan Termination.
5.4 Subsidiary Change in Control. In the event of a Subsidiary Change in Control, each Subsidiary Employee on the date of such Change in Control whose employment is not transferred upon such Subsidiary Change in Control to another Business Unit shall be entitled to receive within thirty (30) days of the Subsidiary Change in Control, cash in an amount equal to a prorated payout of his Incentive Pay Award under the Executive PPP for the Performance Period in which the Subsidiary Change in Control shall have occurred, at the greater of actual or target performance under the Executive PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Subsidiary Change in Control.
5.5 Southern Termination. In the event of a Southern Termination, each
Participant on the date of such Southern Termination shall be entitled to
receive within thirty (30) days of the Southern Termination, cash in an amount
equal to a prorated payout of his Incentive Pay Award under the Executive PPP
for the Performance Period in which the Southern Termination shall have
occurred, at the greater of actual or target performance under the Executive PPP
and prorated by the number of months which have passed since the beginning of
the Performance Period until the date of the Southern Termination. The Executive
PPP shall terminate immediately following the payments provided for in this
Section 5.5.
5.6 Pro rata Calculation. For purposes of calculating any pro rata Incentive Pay Awards under this Article V, a month shall not be considered if the determining event occurs on or before the 14th day of the month, and a month shall be considered if the determining event occurs on or after the 15th day of the month.
ARTICLE VI - PERFORMANCE PAY PLAN CHANGE IN CONTROL PROVISIONS
6.1 Application. The provisions of this Article VI apply to benefits payable under the Southern Company Performance Pay Plan (the "PPP"), notwithstanding any provision in the PPP to the contrary. The meaning of capitalized terms not defined herein are determined under the PPP.
6.2 Southern Change in Control. In the event of a Southern Change in Control, if there is no Plan Termination with respect to the PPP, payout of Incentive Pay Awards to Participants for the Performance Period in which the Southern Change in Control shall have occurred shall be the greater of actual or target performance under the PPP.
6.3 Plan Termination. In the event of a Plan Termination with respect to the PPP within two (2) years following a Southern Change in Control, each Participant who is an Employee on the date of such Plan Termination shall be entitled to receive within thirty (30) days of the Plan Termination, cash in an amount equal to a pro-rated payout of his Incentive Pay Award under the PPP for the Performance Period in which the Plan Termination shall have occurred, at the greater of target or actual performance under the PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Plan Termination.
6.4 Subsidiary Change in Control. In the event of a Subsidiary Change in Control, each Subsidiary Employee on the date of such Change in Control whose employment is not transferred upon such Subsidiary Change in Control to another Business Unit shall be entitled to receive within thirty (30) days of the Subsidiary Change in Control, cash in an amount equal to a prorated payout of his Incentive Pay Award under the PPP for the Performance Period in which the Subsidiary Change in Control shall have occurred, at the greater of actual or target performance under the PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Subsidiary Change in Control.
6.5 Southern Termination. In the event of a Southern Termination, each Participant on the date of such Southern Termination shall be entitled to receive within thirty (30) days of the Southern Termination, cash in an amount equal to a prorated payout of his Incentive Pay Award under the PPP for the Performance Period in which the Southern Termination shall have occurred, at the greater of actual or target performance under the PPP and prorated by the number of months which have passed since the beginning of the Performance Period until the date of the Southern Termination. The PPP shall terminate immediately following the payments provided for in this Section 6.5.
6.6 Pro rata Calculation. For purposes of calculating any pro rata Incentive Pay Awards under this Article VI, a month shall not be considered if the determining event occurs on or before the 14th day of the month, and a month shall be considered if the determining event occurs on or after the 15th day of the month.
ARTICLE VII - EXECUTIVE PRODUCTIVITY IMPROVEMENT PLAN
CHANGE IN CONTROL PROVISIONS
7.1 Application. The provisions of this Article VII apply to benefits payable under the Southern Company Executive Productivity Improvement Plan (the "Executive PIP"), notwithstanding any provision in the Executive PIP to the contrary. The meaning of capitalized terms not defined herein are determined under the Executive PIP.
7.2 Southern Change in Control. In the event of a Plan Termination with respect to the Executive PIP within the two (2) year period following a Southern Change in Control, each Participant who is an Executive Employee on the date of the Plan Termination shall be entitled to receive within thirty (30) days of the Plan Termination, cash in an amount equal to his Award Opportunity or Award Units, as the case may be, for the Computation Period in which the Plan Termination shall have occurred, at a target Value of Performance Unit of $1.00, prorated for each Computation Period by the number of months which have passed since the beginning of the Computation Period until the date of the Plan Termination.
7.3 Subsidiary Change in Control. In the event of a Subsidiary Change in Control, each Subsidiary Employee on the date of such Change in Control whose employment is not transferred upon such Subsidiary Change in Control to another Employing Company shall be entitled to receive within thirty (30) days of the Subsidiary Change in Control, cash in an amount equal to his Award Opportunity, or Award Units, as the case may be, for the Computation Period in which the Subsidiary Change in Control shall have occurred, at a target Value of Performance Unit of $1.00, prorated for each Computation Period by the number of months which have passed since the beginning of the Computation Period until the date of the Subsidiary Change in Control.
7.4 Southern Termination. In the event of a Southern Termination, if the Executive PIP or an equitable replacement thereto remains effective on December 31st of the Plan Year in which the Southern Change in Control shall have occurred, the Executive PIP or Replacement Plan shall operate with respect to the Performance Period then ended in accordance with its terms, but in no event shall the Value of Performance Unit under the Plan or similar factor under a replacement plan for such Performance Period be less than $1.00 or target performance, respectively.
ARTICLE VIII - PERFORMANCE DIVIDEND PLAN
CHANGE IN CONTROL PROVISIONS
8.1 Application. The provisions of this Article VIII apply to benefits payable under the Southern Company Performance Dividend Plan (the "PDP"), notwithstanding any provision in the PDP to the contrary. The meaning of capitalized terms not defined herein are determined under the PDP.
8.2 Southern Change in Control. In the event of a Plan Termination with respect to the PDP within two (2) years following a Southern Change in Control, each Participant who is an employee of his Employing Company on the date of such Plan Termination shall be entitled to receive within thirty (30) days of the Plan Termination, cash for each Award held as of such date, based on actual performance under Section 4.1 of the PDP determined as of the date of the Plan Termination, and the Annual Dividend declared prior to the date of the Plan Termination.
8.3 Subsidiary Change in Control. In the event of a Subsidiary Change in Control, each Subsidiary Employee on the date of such Change in Control whose employment is not transferred upon such Subsidiary Change in Control to another Employing Company shall be entitled to receive within thirty (30) days of the Subsidiary Change in Control, cash for each Award held as of such date, based on actual performance under Section 4.1 of the PDP determined as of the date on which the Subsidiary Change in Control shall have occurred, and the Annual Dividend declared prior to the date of the Subsidiary Change in Control.
8.4 Southern Termination. In the event of a Southern Termination, each Participant who is an employee of his Employing Company on the date of such Southern Termination shall be entitled to receive within thirty (30) days of the Southern Termination, cash for each Award held as of such date, based on actual performance under Section 4.1 of the PDP determined as of the date on which the Southern Termination shall have occurred, and the Annual Dividend declared prior to the date of the Southern Termination.
ARTICLE IX - SUPPLEMENTAL BENEFIT PLAN
CHANGE IN CONTROL AND OTHER SPECIAL PROVISIONS
9.1 Application. The provisions of this Article IX apply to benefits payable under The Southern Company Supplemental Benefit Plan (the "SBP"), notwithstanding any provision in the SBP to the contrary. The meaning of capitalized terms not defined herein are determined under the SBP.
9.2 General. Notwithstanding any other terms of the SBP to the contrary, upon a Southern Change in Control or a Subsidiary Change in Control, the provisions of this Article IX shall become operative and apply to the calculation and payment of benefits under the SBP with respect to any Subsidiary Employee who is a Participant on such date.
9.3 Funding of Trust. The Trust has been established to hold assets of the Employing Companies under certain circumstances as a reserve for the discharge of the Employing Companies' obligations under the SBP. In the event of a Preliminary Change in Control of Southern Company, all Employing Companies shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund the Pension Benefit and Non-Pension Benefit payable under the SBP, the Pension Benefit to be determined under Section 9.5 hereof, in accordance with the procedures set forth in Section 9.4 hereof. In the event of a Preliminary Change in Control of an Employing Company, such Employing Company shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund the Pension Benefit and Non-Pension Benefit payable to its Subsidiary Employees under the SBP, the Pension Benefit to be determined under Section 9.6 hereof, in accordance with the procedures set forth in Section 9.4 hereof. In addition, in order to provide the added protections for certain individuals in accordance with Paragraph 7(b) of the Trust, the Employing Companies may fund the Trust prior to a Preliminary Change in Control of Southern Company or an Employing Company. All assets held in the Trust remain subject only to the claims of the Employing Companies' general creditors whose claims against the Employing Companies are not satisfied because of the Employing Companies' bankruptcy or insolvency (as those terms are defined in the Trust). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trust before the assets are paid to the Participant and all rights created under the Trust, as under the SBP, are unsecured contractual claims of the Participant against his Employing Company.
9.4 Calculation of Trust Contribution. As soon as practicable following either a Preliminary Change in Control of Southern Company or of an Employing Company, the affected Employing Companies shall contribute an amount based upon the funding strategy adopted by the Administrative Committee with the assistance of an appointed actuary necessary to fulfill the Employing Companies' obligations pursuant to this Article IX. In the event of a dispute after a Change in Control over such actuary's determination, the respective Employing Company(ies) and any complaining Participant(s) shall refer such dispute to an independent, third-party actuarial consultant, chosen by the Employing Company and such Participant. If the Employing Company and the Participant cannot agree on an independent, third-party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the affected Employing Companies and the Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Employing Companies shall be responsible for all of the fees and expenses of the independent actuarial consultant.
9.5 Pension Benefit Upon Southern Change in Control. On the date of a Southern Change in Control, the Pension Benefit of each Participant who is an Employee of an Employing Company and who has a non-forfeitable right to Retirement Income under the Pension Plan, will be calculated based on such Participant's Earnings and Accredited Service on such date, regardless of whether such Participant is retirement eligible on such date. Each Participant, who is an Employee of an Employing Company, will be entitled to receive the amount of his Pension Benefit based on such Participant's Earnings and Accredited Service as of the date of a Southern Change in Control adjusted to take into account appropriate early reduction factors, if any, based on the Participant's commencement of benefits. Such benefit shall be paid in lump sum, upon termination of employment or retirement. Any benefits accrued under the SBP subsequent to the date of a Southern Change in Control will be calculated and distributed pursuant to the terms of the SBP, without regard to this Article IX.
9.6 Pension Benefit Upon Subsidiary Change in Control. On the date of a Subsidiary Change in Control of an Employing Company, the Pension Benefit of each Participant who is an Employee of such Employing Company and who has a non-forfeitable right to Retirement Income under the Pension Plan, will be calculated based on such Participant's Earnings and Accredited Service on such date, regardless of whether such Participant is retirement eligible on such date. Each Participant, who is an Employee of such Employing Company, will be entitled to receive the amount of his Pension Benefit based on such Participant's Earnings and Accredited Service as of the date of a Subsidiary Change in Control adjusted to take into account appropriate early reduction factors, if any, based on the Participant's commencement of benefits. Such benefit shall be paid in lump sum, upon termination of employment or retirement. Any benefits accrued under the SBP subsequent to the date of a Subsidiary Change in Control will be calculated and distributed pursuant to the terms of the SBP, without regard to this Article IX.
9.7 Non-Pension Benefit Distribution Election upon Change in Control. In the event of a Southern Change in Control or a Subsidiary Change in Control, notwithstanding anything to the contrary in the SBP, upon termination or retirement from employment, that Non-Pension Benefit of a Participant who was an Employee of an Employing Company affected by such a Change in Control shall be paid out in a lump sum if such Participant makes an election pursuant to procedures established by the Administrative Committee in its sole and absolute discretion. If no such election is made, the Participant shall receive payment of his Account solely in accordance with Article V of the SBP.
ARTICLE X - SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
CHANGE IN CONTROL AND OTHER SPECIAL PROVISIONS
10.1 Application. The provisions of this Article X apply to benefits payable under The Southern Company Supplemental Executive Retirement Plan (the "SERP"), notwithstanding any provision in the SERP to the contrary. The meaning of capitalized terms not defined herein are determined under the SERP.
10.2 General. Notwithstanding any other terms of the SERP to the contrary, upon a Southern Change in Control or a Subsidiary Change in Control, the provisions of this Article X shall become operative and apply to the calculation and payment of benefits under the SERP with respect to any Subsidiary Employee who is a Participant on such date.
10.3 Funding of Trust. The Trust has been established to hold assets of
the Employing Companies under certain circumstances as a reserve for the
discharge of the Employing Companies' obligations under the SERP. In the event
of a Preliminary Change in Control of Southern Company, all Employing Companies
shall be obligated to immediately contribute such amounts to the Trust as may be
necessary to fully fund all benefits payable under the SERP, as determined under
Section 10.5 hereof, in accordance with the procedures set forth in Section 10.4
hereof. In the event of a Preliminary Change in Control of an Employing Company,
such Employing Company shall be obligated to immediately contribute such amounts
to the Trust as may be necessary to fully fund all benefits payable to its
Subsidiary Employees under the SERP, as determined under Section 10.6 hereof, in
accordance with the procedures set forth in Section 10.4 hereof. In addition, in
order to provide the added protections for certain individuals in accordance
with Paragraph 7(b) of the Trust, the Employing Companies may fund the Trust
prior to a Preliminary Change in Control of Southern Company or an Employing
Company. All assets held in the Trust remain subject only to the claims of the
Employing Companies' general creditors whose claims against the Employing
Companies are not satisfied because of the Employing Companies' bankruptcy or
insolvency (as those terms are defined in the Trust). No Participant has any
preferred claim on, or beneficial ownership interest in, any assets of the Trust
before the assets are paid to the Participant and all rights created under the
Trust, as under the SERP, are unsecured contractual claims of the Participant
against his Employing Company.
10.4 Calculation of Trust Contribution. As soon as practicable following either a Preliminary Change in Control of Southern Company or of an Employing Company, the affected Employing Companies shall contribute an amount based upon the funding strategy adopted by the Administrative Committee with the assistance of an appointed actuary necessary to fulfill the Employing Companies' obligations pursuant to this Article X. In the event of a dispute after a Change in Control over such actuary's determination, the respective Employing Company(ies) and any complaining Participant(s) shall refer such dispute to an independent, third-party actuarial consultant, chosen by the Employing Company and such Participant. If the Employing Company and the Participant cannot agree on an independent, third-party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the affected Employing Companies and the Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Employing Companies shall be responsible for all of the fees and expenses of the independent actuarial consultant.
10.5 SERP Benefit Upon Southern Change in Control. On the date of a Southern Change in Control, the SERP Benefit of each Participant, who is an Employee of an Employing Company and who has a non-forfeitable right to Retirement Income under the Pension Plan, will be calculated based on such Participant's Earnings and Accredited Service on such date, regardless of whether such Participant is retirement eligible on such date. Each such Participant, who is an Employee of an Employing Company, will be entitled to receive the amount of his SERP Benefit based on such Participant's Earnings and Accredited Service as of the date of a Southern Change in Control adjusted to take into account appropriate early reduction factors, if any, based on the Participant's commencement of benefits. Such benefit shall be paid in lump sum, upon termination of employment or retirement. Any benefits accrued under the SERP subsequent to the date of a Southern Change in Control will be calculated and distributed pursuant to the terms of the SERP, without regard to this Article X.
10.6 SERP Benefit Upon Subsidiary Change in Control. On the date of a Subsidiary Change in Control of an Employing Company, the SERP Benefit of each Participant, who is an Employee of such Employing Company and who has a non-forfeitable right to Retirement Income under the Pension Plan, will be calculated based on such Participant's Earnings and Accredited Service on such date, regardless of whether such Participant is retirement eligible on such date. Each such Participant, who is an Employee of such Employing Company, will be entitled to receive the amount of his SERP Benefit based on such Participant's Earnings and Accredited Service as of the date of a Subsidiary Change in Control adjusted to take into account appropriate early reduction factors, if any, based on the Participant's commencement of benefits. Such benefit shall be paid in lump sum, upon termination of employment or retirement. Any benefits accrued under the SERP subsequent to the date of a Subsidiary Change in Control will be calculated and distributed pursuant to the terms of the SERP, without regard to this Article X.
ARTICLE XI - DEFERRED COMPENSATION PLAN
CHANGE IN CONTROL AND OTHER SPECIAL PROVISIONS
11.1 Application. The provisions of this Article XI apply to benefits payable under the Southern Company Deferred Compensation Plan (the "DCP"), notwithstanding any provision in the DCP to the contrary. The meaning of capitalized terms not defined herein are determined under the DCP.
11.2 Notwithstanding any other terms of the DCP to the contrary, following a Southern Change in Control or a Subsidiary Change in Control, the provisions of this Article XI shall apply to the payment of benefits under the DCP with respect to any Subsidiary Employee who is a Participant on such date.
11.3 The Trust has been established to hold assets of the Employing Companies under certain circumstances as a reserve for the discharge of the Employing Companies' obligations under the DCP. In the event of a Preliminary Change in Control of Southern, all Employing Companies shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund all benefits payable under the DCP in accordance with the procedures set forth in Section 11.4 hereof. In the event of a Preliminary Change in Control of an Employing Company, such Employing Company shall be obligated to immediately contribute such amounts to the Trust as may be necessary to fully fund all benefits payable to its Subsidiary Employees under the DCP in accordance with the procedures set forth in Section 11.4 hereof. In addition, in order to provide the added protections for certain individuals in accordance with Paragraph 7(b) of the Trust, the Employing Companies may fund the Trust prior to a Preliminary Change in Control of Southern or an Employing Company in accordance with the terms of the Trust. All assets held in the Trust remain subject only to the claims of the Employing Companies' general creditors whose claims against the Employing Companies are not satisfied because of the Employing Companies' bankruptcy or insolvency (as those terms are defined in the Trust). No Participant has any preferred claim on, or beneficial ownership interest in, any assets of the Trust before the assets are paid to the Participant and all rights created under the Trust, as under the DCP, are unsecured contractual claims of the Participant against his Employing Company.
11.4 As soon as practicable following either a Preliminary Change in Control of Southern or of an Employing Company, the affected Employing Companies shall contribute an amount based upon the funding strategy adopted by the Committee with the assistance of an appointed actuary necessary to fulfill the Employing Companies' obligations pursuant to this Article XI. In the event of a dispute over such actuary's determination, the respective Employing Company(ies) and any complaining Participant(s) shall refer such dispute to an independent, third-party actuarial consultant, chosen by the Employing Company and such Participant. If the Employing Company and the Participant cannot agree on an independent, third-party actuarial consultant, the actuarial consultant shall be chosen by lot from an equal number of actuaries submitted by the Employing Company and the Trustee. Any such referral shall only occur once in total and the determination by the third-party actuarial consultant shall be final and binding upon both parties. The Employing Companies shall be responsible for all of the fees and expenses of the independent actuarial consultant.
11.5 In the event of a Southern Change in Control or a Subsidiary Change in Control, notwithstanding anything to the contrary in the DCP, upon termination or retirement from employment, the Account of a Participant who was an Employee of an Employing Company affected by such a Change in Control shall be paid out in a lump sum if such Participant makes an election pursuant to procedures established by the Committee in its sole and absolute discretion. If no such election is made, the Participant shall receive payment of his Account solely in accordance with Article VII of the DCP.
ARTICLE XII - ADMINISTRATION
12.1 Administrative Committee. The committee designated as administrator of each of the Employee Benefit Plans shall be responsible for the general administration of this Policy as it relates to such committee's respective Employee Benefit Plan.
ARTICLE XIII - MISCELLANEOUS
13.1 Amendment and Termination. This Policy may be amended or
terminated at any time by the board of directors of Southern Company Services,
Inc. (or its successors and assigns, if applicable), provided, however, the
Policy may not be amended in any material respect or terminated within the two
(2) year period following a Change in Control nor shall any amendment or
termination impair the rights of any Participant in the Employee Benefit Plans
which have accrued hereunder prior to any such amendment or termination.
13.2 Additional Rights. Nothing in the Policy shall interfere with or limit in any way the right of the Employing Companies to terminate any employee's employment at any time, or confer upon any employee any right to continue in the employ of the Employing Companies.
IN WITNESS WHEREOF, this Southern Company Change in Control Benefit Plan Determination Policy has been executed by duly authorized officers of Southern Company Services, Inc. pursuant to resolutions of the Board of Directors of Southern Company Services, Inc. this ______ day of ________________________, 2000.
SOUTHERN COMPANY SERVICES, INC.
___________________By:________________________________________
Christopher C. Womack
Senior Vice President, Human Resources
ATTEST:
By: _________________________________________
Its: _________________________________________
Exhibit 12.1
8/22/02
SOUTHERN POWER COMPANY
----------------------
Computation of ratio of earnings to fixed charges for the
twelve months ended December 31, 2001
and the year to date June 2002
Six
Months
Ended
June
-------------------------------------------
2001 2002
---- ----
EARNINGS AS DEFINED IN ITEM 503 OF REGULATION S-K:
Income Before Interest and Income Taxes $ 11,145 $ 23,097
AFUDC - Debt funds 0 0
----------- -----------
Earnings as defined $ 11,145 $ 23,097
=========== ===========
FIXED CHARGES AS DEFINED IN ITEM 503 OF REGULATION S-K:
Interest expense $ 3,318 $ 14,631
Amort of debt disc, premium and expense, net 0 7
----------- -----------
Fixed charges as defined $ 3,318 $ 14,638
=========== ===========
RATIO OF EARNINGS TO FIXED CHARGES 3.36 1.58
==== ====
|
Exhibit 21. Subsidiaries of the Registrant.*
Southern Company - Florida LLC Delaware
* This list omits certain subsidiaries pursuant to paragraph (b)(21)(ii) of Regulation S-K, Item 601.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Southern Power Company on Form S-4 of our report on the Southern Power Company financial statements as of December 31, 2001 dated May 31, 2002 and our report on the Plant Dahlberg (a wholly owned carve-out entity of Georgia Power Company) financial statements as of December 31, 2000 dated May 31, 2002 (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the carve-out from Georgia Power Company), appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus.
/s/DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Atlanta, Georgia August 22, 2002 |
R W Beck 550 Cochituate Road P.O. Box 9344 Framingham, MA 01701-9344 508-935-1600
Exhibit 23.3
August 22, 2002
Southern Power Company
270 Peachtree Street
Suite 2000
Atlanta, Georgia 30303
Subject: Southern Power Company Registration Statement on Form S-4
Ladies and Gentlemen:
This letter is furnished relating to the exchange of unregistered 6.25% Senior Notes, Series A due July 15, 2012 in the aggregate amount of $575,000,000 (the "Original Senior Notes") for registered 6.25% Senior Notes, Series B due July 15, 2012 in the aggregate amount of $575,000,000 (the "Exchange Senior Notes"), as more fully described in the Registration Statement on Form S-4 filed by Southern Power Company ("Southern Power") on August 22, 2002 (the "Registration Statement"), and prepared in connection with the issuance of the Exchange Senior Notes.
R. W. Beck, Inc. ("Beck") was retained by Southern Power to act as the Independent Engineer in connection with the issuance of the Original Senior Notes and it prepared its Independent Engineer's Report dated June 13, 2002 (the "Report"), which is included as Annex A to the Registration Statement. Consent is given to the inclusion of the Report in the Registration Statement and to the references to Beck in the Registration Statement. Changed conditions occurring or becoming known after June 13, 2002 could affect the information presented in the Report to the extent of such changes.
This letter is not to be used, circulated, quoted or otherwise referred to within or without Southern Power for any purpose other than as specified herein in connection with the Registration Statement, including, but not limited to, the purchase or sale of the Exchange Senior Notes, nor is this letter to be referred to in whole or in part in the Registration Statement or any other document.
Very truly yours,
R.W. BECK, INC.
/s/Kenneth V. Marino Kenneth V. Marino Principal |
KVM/kvm
Exhibit 23.4
PA Consulting Group
390 Interlocken Crescent
Suite 410
Broomfield, CO 80021
Tel: +1 720 566 9920
Fax: +1 720 566 9680
www.paconsulting.com
Exhibit 23.4
August 22, 2002
Southern Power Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Re: Southern Power Company Registration Statement on Form S-4
Ladies and Gentlemen:
PA Consulting Group Inc. ("PA Consulting") hereby consents to the inclusion of its Independent Market Expert Report (the "Report") dated June 5, 2002 for the assets of Southern Power Company (the "Company") in the Company's Registration Statement on Form S-4 (the "Registration Statement") dated August 22, 2002 relating to the Company's offer to exchange an aggregate principal amount of up to $575,000,000 6.25% Senior Notes, Series B due July 15, 2012, which have been registered under the Securities Act of 1933, as amended, for an equal principal amount of the outstanding 6.25% Senior Notes, Series A due July 15, 2012. The Report is included as Appendix B to the Registration Statement. In addition, PA Consulting consents to the inclusion of the summary of the Report contained in the Registration Statement.
PA Consulting also hereby consents to all references to it in the Registration Statement.
PA Consulting's consent with regard to the foregoing matters is also granted with respect to such matters as they apply in any amendment to the Registration Statement, including any post-effective amendments thereto.
PA Consulting's consent to all matters set out in this letter is conditional upon:
* in the case of the inclusion of the Report in Appendix B of the
Registration Statement, the Report is to be included in its entirety
including the disclaimer contained on page i; and
* in the case of the inclusion of the summary of the Report in the
Registration Statement, such summary shall include, in its entirety,
the disclaimer contained on page i.
In all other respects, the position as previously agreed shall remain and the conditions set out in the certificate dated June 18, 2002 and our contract of January 24, 2002 shall continue to govern our relationship and your use of our Report.
PA CONSULTING GROUP, INC.
/s/Todd W. Filsinger By: Todd W. Filsinger Member of PA's Management Group |
Exhibit 24.1
Gale E. Klappa and Wayne Boston
Dear Sirs:
Southern Power Company proposes to file with the Securities and Exchange Commission a Registration Statement on Form S-4 filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended relating to the proposed exchange of up to $575,000,000 in aggregate principal amount of the Company's 6.25% Senior Notes, Series B due July 15, 2012 for a like principal amount of the Company's issued and outstanding 6.25% Senior Notes, Series A due July 15, 2002.
Southern Power Company and the undersigned directors and officers of Southern Power Company, individually as a director and/or as an officer of Southern Power Company, hereby make, constitute and appoint each of you our true and lawful Attorney for each of us and in each of our names, places and steads to sign and cause to be filed with the Securities and Exchange Commission in connection with the foregoing such Registration Statement and appropriate amendment or amendments (including post-effective amendments) thereto.
Yours very truly,
SOUTHERN POWER COMPANY
By /s/W. Paul Bowers
W. Paul Bowers
President and Chief Executive Officer
|
/s/W. Paul Bowers /s/David M. Ratcliffe W. Paul Bowers David M. Ratcliffe /s/H. Allen Franklin /s/Cliff S. Thrasher H. Allen Franklin Cliff S. Thrasher /s/Gale E. Klappa /s/Tommy Chisholm Gale E. Klappa Tommy Chisholm /s/Charles D. McCrary Charles D. McCrary |
Extract from unanimous written consent of the board of directors of Southern Power Company.
FURTHER RESOLVED, that each officer or director of the Corporation who may be required to execute the Exchange Registration Statement or Shelf Registration Statement or any amendment or amendments thereto to be filed with the Commission, is hereby authorized and empowered, in the name and on behalf of the Corporation, to execute a power of attorney appointing Gale E. Klappa and E. Wayne Boston his or her true and lawful attorney or attorney-in-fact and agent with the power to act, with or without the other, with full power of substitution and resubstitution, for him or her and in his or her name, place or stead, in his or her capacity as a director or officer or both, as the case may be, of the Corporation, to sign the Exchange Registration Statement or Shelf Registration Statement and any and all amendments thereto and all documents or instruments necessary, appropriate or desirable to enable the Corporation to comply with the Securities Act, other federal and state securities laws and other applicable United States and other laws in connection with the Exchange Offering, and to file the same with the Commission with full power and authority of said attorney-in-fact to do and to perform, in the name and on behalf of each such officer or director, or both, as the case may be, every act whatsoever necessary or appropriate, as fully and for all intents and purposes as such officer or director, or both, as the case may be, might or could do in person;
The undersigned officer of Southern Power Company does hereby certify that the foregoing is a true and correct copy of a resolution duly and regularly adopted by unanimous written consent of the board of directors of The Southern Company, effective June 13, 2002, and that said resolution has not since been rescinded but is still in full force and effect.
Dated August 22, 2002 SOUTHERN POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
|
Exhibit 25.1
FORM T-1
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
NEW YORK
(State of incorporation if not a U.S. national bank)
13-5160382
(I.R.S. employer identification no.)
One Wall Street, New York, New York 10286
Southern Power Company
(Exact name of obligor as specified in its charter)
DELAWARE 58-2598670
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
270 PEACHTREE STREET, NW
ATLANTA, GEORGIA 30303
(404) 506-5000
|
6.25% Senior Notes Series B due July 15, 2012
(Title of the indenture securities)
1. General Information.
-------------------
Furnish the following information as to the trustee--
(a) Name and address of each examining or supervising authority
to which it is subject.
Superintendent of Banks of the State of New York
2 Rector Street
New York, N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York
33 Liberty Plaza
New York, N.Y. 10045
Federal Deposit Insurance Corporation
Washington, D.C. 20429
New York Clearing House Association
New York, N.Y. 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
-------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3-15 Not Applicable
16. List of Exhibits.
----------------
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
(1) A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment 1 to Form T-1 filed
with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1
filed with Registration Statement No. 33-21672 and Exhibit 1 to Form
T-1 filed with Registration Statement No. 33-29637.)
|
(4) A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.)
(6) The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration No. 33-44051.)
(7) A copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority.
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Atlanta and the State of Georgia, on the 22nd day of August, 2002.
THE BANK OF NEW YORK
By: /s/ Elizabeth T. Wagner
Elizabeth T. Wagner, Agent
|
EXHIBIT 6 TO FORM T-1
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, in connection with the proposed issuance of Southern Power Company Senior Notes, The Bank of New York hereby consents that reports of examinations by Federal, State, Territorial or District Authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor.
THE BANK OF NEW YORK
By: /s/ Elizabeth T. Wagner
Elizabeth T. Wagner, Agent
|
EXHIBIT 6 TO FORM T-1
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, in connection with the proposed issuance of Southern Power Company Senior Notes, The Bank of New York hereby consents that reports of examinations by Federal, State, Territorial or District Authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor.
THE BANK OF NEW YORK
By: /s/ Elizabeth T. Wagner
------------------------
Elizabeth T. Wagner, Agent
|
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Atlanta and the State of Georgia, on the 22nd day of August, 2002.
THE BANK OF NEW YORK
By: /s/ Elizabeth T. Wagner
Elizabeth T. Wagner, Agent
|
EXHIBIT 7 TO FORM T-1
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business March 31, 2002, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
Dollar Amounts
in Thousands
ASSETS
------
Cash and balances due from
depository institutions:
Noninterest-bearing balances
and currency and coin....................................................................... $ 3,765,462
Interest-bearing balances..................................................................... 3,835,061
Securities:
Held-to-maturity securities................................................................... 1,232,736
Available-for-sale securities................................................................. 10,522,833
Federal funds sold and securities purchased under agreements to resell:
Federal funds sold in domestic offices......................................................... 1,456,635
Securities purchased under agreements to resell................................................ 498,434
Loans and lease financing receivables:
Loans and leases held for sale................................................................. 801,505
Loans and leases,
net of unearned income. . . . . 35,858,070
LESS: Allowance for loan and
lease losses. . . . . . . . . . 608,375
Loans and leases, net of unearned
income and allowance and reserve............................................................ 35,249,695
Trading assets......................................................................................... 8,132,696
Premises and fixed assets (including
capitalized leases)........................................................................... 898,980
Other real estate owned................................................................................ 911
Investments in unconsolidated
subsidiaries and associated
companies..................................................................................... 220,609
Customers' liability to this bank
on acceptances outstanding.................................................................... 574,020
Intangible assets
Goodwill ...................................................................................... 1,714,761
Other Intangible Assets ......................................................................... 49,213
Other assets........................................................................................... 5,001,308
-----------
Total assets........................................................................................... $73,954,859
===========
LIABILITIES
----------
Deposits:
In domestic offices......................................................................... $29,175,631
Noninterest-bearing . . . . . . . 11,070,277
Interest-bearing. . . . . . . . . 18,105,354
In foreign offices, Edge and
Agreement subsidiaries, and IBFs.......................................................... 24,596,600
Noninterest-bearing . . . . . . . 321,299
Interest-bearing. . . . . . . . . 24,275,301
Federal funds purchased and securities sold under agreements to repurchased:
Federal funds purchased in domestic offices................................................. 1,175,651
Securities sold under agreements to repurchase.............................................. 746,546
Trading liabilities.................................................................................. 1,970,040
Other borrowed money:
(includes mortgage indebtedness
and obligations under capitalized
leases)...................................................................................... 1,577,518
Bank's liability on acceptances
executed and outstanding................................................................... 575,362
Subordinated notes and debentures..................................................................... 1,940,000
Other liabilities..................................................................................... 5,317,831
-----------
Total liabilities..................................................................................... 67,075,179
===========
Minority interest in consolidated subsidiaries......................................................... 500,203
EQUITY CAPITAL
Common stock.......................................................................................... 1,135,284
Surplus............................................................................................... 1,055,508
Retained earnings..................................................................................... 4,227,287
Accumulated other comprehensive
income....................................................................................... (38,602)
Other equity capital components....................................................................... 0
-----------
Total equity capital................................................................................. 6,379,477
-----------
Total liabilities and equity capital................................................................. $73,954,859
===========
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I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct.
Thomas A. Renyi )
Gerald L. Hassell ) Directors
. Alan R. Griffith )
Exhibit 99.1
LETTER OF TRANSMITTAL
SOUTHERN POWER COMPANY
OFFER TO EXCHANGE
ALL OUTSTANDING
6.25% SENIOR NOTES, SERIES A DUE JULY 15, 2012
FOR 6.25% SENIOR NOTES, SERIES B DUE JULY 15, 2012
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
By hand delivery, registered or certified mail or overnight delivery:
THE BANK OF NEW YORK
Corporate Trust Operations
Reorganization Unit
101 Barclay Street - 7E
New York, New York 10286
Attention: Ms. Carolle Montreuil
By facsimile:
(212) 298-1915
For information or confirmation by telephone:
(212) 815-5920
Delivery of this Letter of Transmittal to an address other than as set forth above or transmission via a facsimile number other than the one listed above will not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus dated __________, 2002 (the "Prospectus") of Southern Power Company, a Delaware corporation (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange $1,000 in principal amount of its 6.25% Senior Notes, Series B due July 15, 2012 (the "Exchange Senior Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for each $1,000 in principal amount of the Company's issued and outstanding 6.25% Senior Notes, Series A due July 15, 2012 (the "Original Senior Notes"). Capitalized terms used but not defined herein have the meanings given to them in the Prospectus.
This Letter of Transmittal is to be used by Holders of Original Senior Notes (i) if certificates representing the Original Senior Notes are to be physically delivered herewith; or (ii) if a tender of Original Senior Notes is to be made by book-entry transfer into the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure described in the Prospectus; or (iii) if tender of Original Senior Notes is to be made according to the guaranteed delivery procedures described in the Prospectus. The term "Holder" with respect to the Exchange Offer means any person in whose name Original Senior Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder.
The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Original Senior Notes must complete this Letter of Transmittal in its entirety.
Please read the entire Letter of Transmittal and the Prospectus carefully before checking any box below. Your bank or broker can assist you in completing this form. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus and this Letter of Transmittal may be directed to the Exchange Agent.
List below the Original Senior Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and principal amounts should be listed on a separate signed schedule affixed to this Letter of Transmittal.
---------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF ORIGINAL SENIOR NOTES
----------------------------------------------------------------------------------------------------------------------
Name(s) and Addresses of Registered Certificate Aggregate Principal Amount Principal Amount
Holder(s) (Please fill in) Number(s)* Represented by Certificate(s) Tendered**
----------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Total
-------------------------------------------------------------------------------
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* Need not be completed by book-entry Holders. ** Unless otherwise indicated, the Holder will be deemed to have tendered the full aggregate principal amount represented by such Original Senior Notes. See Instruction 2.
[ ] Check here if tendered Original Senior Notes are being delivered by book-entry transfer made to an account maintained by the Exchange Agent with the Book-Entry Transfer Facility and complete the following:
[ ] Check here if tendered Original Senior Notes are being delivered pursuant to a Notice of Guaranteed Delivery previously sent to the Exchange Agent and complete the following:
If Delivered by Book-Entry Transfer:
Account Number: ------------------- Transaction Code Number: -------
| | Check here if you are a broker-dealer and wish to receive 10 additional copies of the Prospectus and 10 copies of any amendments or supplements thereto:
Name: -------------------------------------------------------------
Address: ------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of Original Senior Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Original Senior Notes tendered in accordance with this Letter of Transmittal, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all of its right, title and interest in and to the Original Senior Notes tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent the undersigned's agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company) with respect to the tendered Original Senior Notes with full power of substitution to (i) deliver certificates for such Original Senior Notes to the Company and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Company and (ii) present such Original Senior Notes for transfer on the books of the Company and receive all benefits and otherwise exercise all rights of beneficial ownership of such Original Senior Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the
Original Senior Notes tendered hereby and that the Company will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim,
when the same are acquired by the Company. The undersigned also acknowledges
that this Exchange Offer is being made in reliance on the interpretations of the
staff of the Securities and Exchange Commission (the "Commission"), as contained
in several no action letters issued to third parties. Based on such
interpretations of the staff of the Commission set forth in such no-action
letters, the Company believes that the Exchange Senior Notes issued pursuant to
the Exchange Offer in exchange for the Original Senior Notes may be offered for
resale, resold or otherwise transferred by a Holder thereof (other than any such
Holder that is a broker-dealer or an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that (i) such Exchange Senior Notes are acquired in the ordinary course of such
Holder's business, (ii) at the time of the commencement of the Exchange Offer
such Holder has no arrangement with any person to participate in a distribution
of the Exchange Senior Notes and (iii) such Holder is not engaged in, and does
not intend to engage in, a distribution of the Exchange Senior Notes. By
tendering Original Senior Notes in exchange for the Exchange Senior Notes or
executing this Letter of Transmittal, the undersigned hereby further represents:
(A) that any Exchange Senior Notes acquired in exchange for Original Senior
Notes tendered hereby will have been acquired in the ordinary course of business
of the person receiving such Exchange Senior Notes, whether or not such person
is the Holder, (B) that neither the Holder nor any such other person is engaged
in or intends to engage in or has an arrangement or understanding with any
person to participate in the distribution of such Exchange Senior Notes within
the meaning of the Securities Act and (C) that neither the Holder nor any such
other person is an "affiliate," as defined under Rule 405 of the Securities Act,
of the Company or any of its subsidiaries or, if the Holder or such other person
is an affiliate, that such Holder or other person will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Senior Notes. If the undersigned is a broker-dealer
that will receive Exchange Senior Notes for its own account in exchange for
Original Senior Notes that were acquired as a result of market-making activities
or other trading activities, the undersigned acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Senior Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. If the undersigned is
unable to make the foregoing representations, such person may not rely on the
applicable interpretations of the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction unless such sale is made
pursuant to an exemption from such requirements.
The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the assignment, transfer and purchase of the Original Senior Notes tendered hereby.
All authority conferred or agreed to be conferred in this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death, incapacity or dissolution of the undersigned.
The undersigned understands that the valid tender of Original Senior Notes pursuant to the procedures described under the caption "THE EXCHANGE OFFER--Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions set forth in the Prospectus and in this Letter of Transmittal. This tender may be withdrawn only in accordance with the procedures set forth in the Prospectus under the caption "THE EXCHANGE OFFER--Withdrawal Rights." See Instruction 10.
Unless otherwise indicated in the box entitled "Special Issuance Instructions" below, please issue the Exchange Senior Notes (and, if applicable, substitute certificates representing Original Senior Notes for any Original Senior Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Original Senior Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the Exchange Senior Notes (and, if applicable, substitute certificates representing Original Senior Notes for any Original Senior Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Original Senior Notes." The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Original Senior Notes from the name of the registered holder(s) thereof if the Company does not accept for exchange any of the Original Senior Notes so tendered.
The undersigned acknowledges that the Exchange Offer is subject to the more detailed terms set forth in the Prospectus and, in case of any conflict between the terms of the Prospectus and this Letter of Transmittal, the terms of the Prospectus shall prevail.
The undersigned, by completing the box entitled "Description of Original Senior Notes" above and signing this Letter of Transmittal, will be deemed to have tendered the Original Senior Notes as set forth in such box above.
To be completed ONLY if certificates for Original Senior Notes not exchanged and/or Exchange Senior Notes are to be issued in the name of and sent to someone other than the person or persons whose signature(s) appear(s) on this Letter of Transmittal below, or if Original Senior Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above.
Issue Exchange Senior Notes and/or Original Senior Notes to:
Name(s): ---------------------------------------------------------
---------------------------------------------------------
(Please Type or Print)
Address: ----------------------------------------------------------
----------------------------------------------------------
(Include Zip Code)
|
PLEASE ALSO COMPLETE SUBSTITUTE FORM W-9
[ ] Credit unexchanged Original Senior Notes delivered by book-entry transfer to the Book-Entry Transfer Facility Account set forth below.
To be completed ONLY if certificates for Original Senior Notes not exchanged and/or Exchange Senior Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter of Transmittal below or to such person or persons at an address other than shown in the box entitled "Description of Original Senior Notes" on this Letter of Transmittal above.
Mail Exchange Senior Notes and/or Original Senior Notes to:
IMPORTANT: This Letter of Transmittal or a facsimile hereof (together
with the certificates for Original Senior Notes or a
book-entry confirmation and all other required documents or
the Notice of Guaranteed Delivery) must be received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
|
PLEASE SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 BELOW
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
X ----------------------------------------------- --------------,2002
X
----------------------------------------------- --------------,2002
X
----------------------------------------------- --------------,2002
(Signature(s) of Owner(s)) (Date)
|
If a holder is tendering any Original Senior Notes, this Letter of Transmittal must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Original Senior Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3.
Name(s): --------------------------------------------------------------------
(Please Type or Print)
Capacity: --------------------------------------------------------------------
Address: --------------------------------------------------------------------
(Including Zip Code)
|
Employer Identification or Social Security Number: ---------------------------
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Name: -----------------------------------------------------------------------
(Please Type or Print)
Title: -----------------------------------------------------------------------
Name of Firm: -----------------------------------------------------------------
Address: ------------------------------------------------------------------
(Including Zip Code)
Dated:--------------------------------------, 2002
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Original Senior Notes; Guaranteed Delivery Procedures.
This Letter of Transmittal is to be completed by Holders of Original Senior Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in the "THE EXCHANGE OFFER--Book-Entry Transfer" section of the Prospectus. Certificates for all physically tendered Original Senior Notes, or a confirmation of book-entry transfer, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof), with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering Holder must comply with the guaranteed delivery procedures set forth below. Original Senior Notes tendered hereby must be in denominations or principal amount at maturity of $1,000 or any integral multiple thereof.
Holders whose certificates for Original Senior Notes are not immediately available or who cannot deliver their certificates and any other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Original Senior Notes pursuant to the guaranteed delivery procedures set forth in "THE EXCHANGE OFFER--Procedures for Tendering--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined below), (ii) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the Holder of Original Senior Notes and the amount of Original Senior Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Original Senior Notes in proper form for transfer, or a book-entry confirmation, as the case may be, and any other documents required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Original Senior Notes, in proper form for transfer, or a book-entry confirmation, as the case may be, and all other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter of Transmittal, the Original Senior Notes and all other required documents is at the election and risk of the tendering Holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. Instead of delivery by mail it is recommended that Holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. No Letter of Transmittal or Original Senior Notes should be sent to the Company.
See "THE EXCHANGE OFFER" section in the Prospectus.
2. Partial Tenders.
If less than all of the Original Senior Notes evidenced by a submitted certificate are to be tendered, the tendering Holder(s) should fill in the aggregate principal amount at maturity of Original Senior Notes to be tendered in the box above entitled "Description of Original Senior Notes" under "Principal Amount Tendered." A reissued certificate representing the balance of nontendered Original Senior Notes of a tendering Holder who physically delivered Original Senior Notes will be sent to such tendering Holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, promptly after the Expiration Date. All of the Original Senior Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated.
3. Signatures on this Letter of Transmittal; Bond Powers and Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered Holder of the Original Senior Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever.
If any tendered Original Senior Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Original Senior Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of certificates.
When this Letter of Transmittal is signed by the registered Holder or Holders of the Original Senior Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the Exchange Senior Notes are to be issued, or any untendered Original Senior Notes are to be reissued, to a person other than the registered Holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) or bond powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered Holder or Holders of any certificate(s) specified herein, such certificates must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered Holder or Holders appear(s) on the certificate(s) and signatures on such certificates(s) or bond powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted with this Letter of Transmittal.
Endorsements on certificates for Original Senior Notes or signatures on bond powers required by this Instruction 3 must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Program or the Stock Exchanges Medallion Program (each an "Eligible Institution" and collectively, "Eligible Institutions").
Signatures on the Letter of Transmittal need not be guaranteed by an Eligible Institution if (A) the Original Senior Notes are tendered (i) by a registered Holder of Original Senior Notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter of Transmittal, or (ii) for the account of an Eligible Institution and (B) the box entitled "Special Issuance Instructions" on this Letter of Transmittal has not been completed.
4. Special Issuance and Delivery Instructions.
Tendering Holders of Original Senior Notes should indicate in the applicable box the name and address to which Exchange Senior Notes issued pursuant to the Exchange Offer and/or substitute certificates evidencing Original Senior Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated.
Holders tendering Original Senior Notes by book-entry transfer may request that Original Senior Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such noteholder may designate hereon. If no such instructions are given, such Original Senior Notes not exchanged will be returned to the name and address of the person signing this Letter of Transmittal.
5. Taxpayer Identification Number.
Federal income tax law generally requires that a tendering Holder whose Original Senior Notes are accepted for exchange must provide the Company (as payor) with such Holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering Holder who is an individual, is his or her social security number. If the Company is not provided with the current TIN or an adequate basis for an exemption from backup withholding, such tendering Holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, the Exchange Agent may be required to withhold 30% of the amount of any reportable payments made after the exchange to such tendering Holder of Exchange Notes. If withholding results in an overpayment of taxes, a refund may be obtained.
Exempt Holders of Original Senior Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines of Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions.
To prevent backup withholding, each tendering Holder of Original Senior
Notes must provide its correct TIN by completing the Substitute Form W-9 set
forth below, certifying, under penalties of perjury, that the TIN provided is
correct (or that such Holder is awaiting a TIN) and that (i) the Holder is
exempt from backup withholding, or (ii) the Holder has not been notified by the
Internal Revenue Service that such Holder is subject to backup withholding as a
result of a failure to report all interest or dividends or (iii) the Internal
Revenue Service has notified the Holder that such Holder is no longer subject to
backup withholding. If the tendering Holder of Original Senior Notes is a
nonresident alien or foreign entity not subject to backup withholding, such
Holder must give the Exchange Agent a completed Form W-8, Certificate of Foreign
Status. These forms may be obtained from the Exchange Agent. If the Original
Senior Notes are in more than one name or are not in the name of the actual
owner, such Holder should consult the W-9 Guidelines for information on which
TIN to report. If such Holder does not have a TIN, such Holder should consult
the W-9 Guidelines for instructions on applying for a TIN, check the box in Part
2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
Checking this box and writing "applied for" on the form means that such Holder
has already applied for a TIN or that such Holder intends to apply for one in
the near future. If the box in Part 2 of the Substitute Form W-9 is checked, the
Exchange Agent will retain 30% of reportable payments made to a Holder during
the sixty (60) day period following the date of the Substitute Form W-9. If the
Holder furnishes the Exchange Agent with his or her TIN within sixty (60) days
of the Substitute Form W-9, the Exchange Agent will remit such amounts retained
during such sixty (60) day period to such Holder and no further amounts will be
retained or withheld from payments made to the Holder thereafter. If, however,
such Holder does not provide its TIN to the Exchange Agent within such sixty
(60) day period, the Exchange Agent will remit such previously withheld amounts
to the Internal Revenue Service as backup withholding and will withhold 30% of
all reportable payments to the Holder thereafter until such Holder furnishes its
TIN to the Exchange Agent.
6. Transfer Taxes.
The Company will pay all transfer taxes, if any, applicable to the transfer of Original Senior Notes pursuant to the Exchange Offer. If, however, Exchange Senior Notes and/or substitute Original Senior Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered Holder of the Original Senior Notes tendered hereby, or if tendered Original Senior Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer of Original Senior Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Original Senior Notes specified in this Letter of Transmittal.
7. Waiver of Conditions.
The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus.
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Holders of Original Senior Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Original Senior Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Original Senior Notes nor shall any of them incur any liability for failure to give any such notice.
9. Mutilated, Lost, Stolen or Destroyed Original Senior Notes.
Any Holder whose Original Senior Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions.
10. Withdrawal of Tenders.
Tenders of Original Senior Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal of a tender of Original Senior Notes to be effective, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth above prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Original Senior Notes to be withdrawn (the "Depositor"), (ii) identify the Original Senior Notes to be withdrawn (including the certificate number or numbers, if any, and principal amount of such Original Senior Notes), (iii) contain a statement that such Holder is withdrawing his election to have such Original Senior Notes exchanged, (iv) be signed by the Holder in the same manner as the original signature on this Letter of Transmittal by which such Original Senior Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Exchange Agent register the transfer of such Original Senior Notes into the name of the person withdrawing the tender, and (v) specify the name in which any such Original Senior Notes are to be registered, if different from that of the Depositor. If Original Senior Notes have been tendered pursuant to the procedure for book-entry transfer set forth in "THE EXCHANGE OFFER--Book-Entry Transfer" section of the Prospectus, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Original Senior Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company in its sole discretion, which determination shall be final and binding on all parties. Any Original Senior Notes so properly withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Original Senior Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the Holder thereof without cost to such Holder (or, in the case of Original Senior Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures set forth in "THE EXCHANGE OFFER--Book-Entry Transfer" section of the Prospectus, such Original Senior Notes will be credited to an account maintained with the Book-Entry Transfer Facility for the Original Senior Notes) as soon as practicable after withdrawal, rejection of tender, or termination of the Exchange Offer. Properly withdrawn Original Senior Notes may be retendered by following the procedures described above at any time on or prior to 5:00 p.m., New York City time, on the Expiration Date.
11. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus, this Letter of Transmittal and other related documents may be directed to the Exchange Agent, at the address and telephone number indicated above.
PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW
---------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: SOUTHERN POWER COMPANY
---------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE FORM W-9 PART 1 - TIN:----------------------
Please provide your TIN in the box at right Social Security Number or
and certify by signing and Employer Identification Number
Department of the Treasury dating below.
Internal Revenue Service
-----------------------------------------------------------------------------------------
Payor's Request for Taxpayer PART 2 - TIN Applied For [ ]
Identification Number ("TIN") and
Certification -----------------------------------------------------------------------------------------
PART 3 - CERTIFICATION. Under penalties
of perjury, I certify that:
(1) the number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me) AND
(2) I am not subject to backup withholding either because (a)
I am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup
withholding.
Signature -------------------------------------- Date--------------------
--------------------------------------------------------------------------------------------------------------------------
You must cross out Item (2) of the above certification if you have been notified by the IRS that you are subject to backup
withholding because of underreporting of interest or dividends on your tax return and you have not been notified by
the IRS that you are no longer subject to backup withholding.
--------------------------------------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
---------------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed
or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or
Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if
I do not provide a taxpayer identification number by the time of the exchange, 30% of all reportable payments made to me thereafter
will be withheld until I provide a number.
Signature --------------------------------------------------------- Date -----------------------------------------------
|
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Provide the Payor. Social Security numbers have
nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits
separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number that you should
provide to the payor.
-------------------------------------- ----------------------------------------------------------
For this type of account: Give the Social Security Number of--
-------------------------------------- ----------------------------------------------------------
1. An individual account The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined funds,
the first individual on the account (1)
3. Custodian account of a minor The minor (2)
(Uniform Gift to Minors Act)
4. (a) The usual revocable savings trust account The grantor-trustee (1)
(grantor is also trustee)
(b) So-called trust account that is not a legal The actual owner (1)
or valid trust under state law
5. Sole proprietorship The owner (3)
------------------------------------------------------ -----------------------------------------------------------
For this type of account: Give the Employer Identification Number of--
------------------------------------------------------- ----------------------------------------------------------
6. Sole proprietorship The owner (3)
7. A valid trust, estate or pension trust Legal entity (4)
8. Corporate The corporation
9. Association, club, religious, charitable, The organization
educational or other tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of Agriculture in The public entity
the name of a public entity (such as a state or
local government, school district or prison)
that receives agricultural program payments
------------------------------------------------------- -----------------------------------------------------------
|
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the individual. You may also enter the business name.
(4) List first and circle the name of the legal trust, estate or pension trust.
Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed.
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
6.25% SENIOR NOTES, SERIES A DUE JULY 15, 2012
FOR 6.25% SENIOR NOTES, SERIES B DUE JULY 15, 2012
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OF
SOUTHERN POWER COMPANY
This form must be used to accept the Exchange Offer of Southern Power Company (the "Company") made pursuant to the Prospectus dated ______________, 2002 (the "Prospectus") if certificates for the 6.25% Senior Notes, Series A due July 15, 2012 (the "Original Senior Notes") of the Company are not immediately available, or if the procedure for book-entry transfer cannot be completed on a timely basis, or if the Original Senior Notes, the Letter of Transmittal or any other documents required thereby cannot be delivered to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date (as defined in the Prospectus). This form may be delivered by hand or transmitted by facsimile transmission, overnight courier or mail to the Exchange Agent as set forth below. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus.
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
By hand delivery, registered or certified mail or overnight delivery:
THE BANK OF NEW YORK
Corporate Trust Operations
Reorganization Unit
101 Barclay Street - 7E
New York, New York 10286
Attention: Ms. Carolle Montreuil
By facsimile:
(212) 298-1915
For information or confirmation by telephone:
(212) 815-5920
Delivery of this instrument to an address, or transmission of instructions via a facsimile, other than as set forth above, will not constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal to be used to tender Original Senior Notes is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to Southern Power Company, a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which is hereby acknowledged, the aggregate principal amount of Original Senior Notes set forth below pursuant to the guaranteed delivery procedures described in "THE EXCHANGE OFFER--Procedures for Tendering--Guaranteed Delivery Procedures" section of the Prospectus.
All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
Principal Amount of Original Senior Notes Tendered (must Name(s) of Record Holder(s):
be in an integral multiple of $1,000):
$ ---------------------------------- --------------------------
Certificate No(s). for Original Senior Notes (if Address:
available):
------------------------------------------------ ----------------------------
------------------------------------------------ ----------------------------
If Original Senior Notes will be delivered by book-entry Area Code and Tel. No.:
transfer to the Depository Trust Company, provide account
number: Signature(s):---------------
Account Number: ---------------------------- ----------------------------
Dated:----------------------
|
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of the Original Senior Notes exactly as its (their) name(s) appear(s) on certificates for Original Senior Notes or on a security position listing as the owner of Original Senior Notes, or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer, or other person acting in a fiduciary or representative capacity, such person must provide the following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): ------------------------------------------------------------- Capacity: ------------------------------------------------------------- Address(es): ------------------------------------------------------------- |
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program, hereby guarantees that the certificates representing the principal amount of Original Senior Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Original Senior Notes into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "THE EXCHANGE OFFER--Procedures for Tendering--Guaranteed Delivery Procedures" section of the Prospectus, together with one or more properly and duly executed Letters of Transmittal (or facsimile thereof) and any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than three New York Stock Exchange trading days after the date of execution of this Notice of Guaranteed Delivery.
Name of Firm: ------------------------- ----------------------------
(Authorized Signature)
Address: ------------------------------ Name:-------------------------
(Zip Code) (Please Type or Print)
Title: ------------------------
Area Code and
Telephone No.:------------------------ Dated: ------------------------
|
Note: Do not send the Original Senior Notes with this form. Original Senior Notes should be sent only with a copy of your Letter of Transmittal.
Exhibit 99.3
SOUTHERN POWER COMPANY
OFFER TO EXCHANGE
ALL OUTSTANDING
6.25% SENIOR NOTES, SERIES A DUE JULY 15, 2012 FOR 6.25% SENIOR NOTES, SERIES B DUE JULY 15, 2012 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
To Our Clients:
Enclosed for your consideration is a Prospectus, dated _____________, 2002 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), concerning the offer (the "Exchange Offer") of Southern Power Company (the "Company") to exchange its 6.25% Senior Notes, Series B due July 15, 2012, which have been registered under the Securities Act of 1933, as amended (the "Exchange Senior Notes"), for its outstanding 6.25% Senior Notes, Series A due July 15, 2012 (the "Original Senior Notes"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated June 18, 2002, by and among the Company and the initial purchasers referred to therein.
This material is being forwarded to you as the beneficial owner of the Original Senior Notes held by us for your account but not registered in your name. A tender of such Original Senior Notes may only be made by us as the holder of record and pursuant to your instructions.
Accordingly, we request instructions as to whether you wish us to tender on your behalf the Original Senior Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Original Senior Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on ________________, 2002, unless extended by the Company (the "Expiration Date"). Any Original Senior Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Original Senior Notes.
2. The terms of the Exchange Senior Notes are identical in all material respects to the terms of the Original Senior Notes, except that certain transfer restrictions and registration rights applicable to the Original Senior Notes are not applicable to the Exchange Senior Notes.
3. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "THE EXCHANGE OFFER--Conditions."
4. Any transfer taxes incident to the transfer of Original Senior Notes from the holder to the Company will be paid by the Company, except as otherwise provided in the instructions in the Letter of Transmittal.
If you wish to have us tender your Original Senior Notes, please so instruct us by completing, executing and returning to us the instruction form attached to this letter. The Letter of Transmittal is furnished to you for information only and may not be used directly by you to tender Original Senior Notes.
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Southern Power Company with respect to its Original Senior Notes.
This will instruct you to tender the Original Senior Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal.
The undersigned expressly agrees to be bound by the enclosed Letter of Transmittal and that such Letter of Transmittal may be enforced against the undersigned.
[ ] Please tender the Original Senior Notes held by you for my account as indicated below:
6.25% Senior Notes, Series A due July 15, 2012: $ _________
(Aggregate Principal Amount of Original Senior Notes)
[ ] Please do not tender any Original Senior Notes held by you for my account.
Dated: ------------------- , 2002
Signature(s): ----------------------------------------------------------------
Print Name(s): ----------------------------------------------------------------
Print Address(es): -----------------------------------------------------------
Area Code and Telephone Number(s): --------------------------------------------
Tax Identification or Social Security Number(s): ------------------------------
None of the Original Senior Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Original Senior Notes held by us for your account.
Exhibit 99.4
SOUTHERN POWER COMPANY
OFFER TO EXCHANGE
ALL OUTSTANDING
6.25% SENIOR NOTES, SERIES A DUE JULY 15, 2012
FOR 6.25% SENIOR NOTES, SERIES B DUE JULY 15, 2012
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
Southern Power Company (the "Company") is offering, upon and subject to the terms and conditions set forth in the Prospectus, dated _____________, 2002 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") its 6.25% Senior Notes, Series B due July 15, 2012, which have been registered under the Securities Act of 1933, as amended, for its outstanding 6.25% Senior Notes, Series A due July 15, 2012 (the "Original Senior Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated June 18, 2002, by and among the Company and the initial purchasers referred to therein.
We are requesting that you contact your clients for whom you hold Original Senior Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Original Senior Notes registered in your name or in the name of your nominee, or who hold Original Senior Notes registered in their own names, we are enclosing the following documents:
1. Prospectus dated ______________________, 2002;
2. The Letter of Transmittal for your use and for the information of your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Original Senior Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account you hold Original Senior Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; and
5. Return envelopes addressed to The Bank of New York, the Exchange Agent for the Exchange Offer.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on ______________, 2002, unless extended by the
Company (the "Expiration Date"). Original Senior Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time before the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Original Senior Notes should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus.
If a registered holder of Original Senior Notes desires to tender, but such Original Senior Notes are not immediately available, or time will not permit such holder's Original Senior Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under the caption "THE EXCHANGE OFFER--Procedures for Tendering--Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Original Senior Notes held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all stock transfer taxes applicable to the exchange of Original Senior Notes pursuant to the Exchange Offer, except as set forth in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to The Bank of New York, the Exchange Agent for the Exchange Offer, at its address and telephone number set forth on the front of the Letter of Transmittal.
Very truly yours,
SOUTHERN POWER COMPANY
Nothing herein or in the enclosed documents shall constitute you or any person as an agent of the Company or the Exchange Agent, or authorize you or any other person to use any document or make any statements on behalf of either of them with respect to the Exchange Offer, except for statements expressly made in the Prospectus or the Letter of Transmittal.
Enclosures