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Exhibit 10.32
Department of Energy
Oak Ridge Operations
P.O. Box 2001
Oak Ridge, Tennessee 37831
March 31, 1999
Mr. ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
President
Ohio Valley Electric Corporation
P.O. Box 16631
Columbus, Ohio 43216
Dear ▇▇. ▇▇▇▇▇▇:
LETTER SUPPLEMENT TO CONTRACT NO. DE-AC05-76OR01530
This letter supplement will confirm the understanding reached
between Ohio Valley Electric Corporation (OVEC) and the United
States Department of Energy (DOE) with respect to Power Agreement
No. DE-AC05-76OR01530 (Agreement) to reduce the DOE Contract Demand
(as that term is defined in the Agreement) and obtain reasonably
priced power for the OVEC Sponsoring Companies and the Paducah
Uranium Enrichment Plant during the summer of 1999.
We understand from our discussions with representatives of OVEC
that the OVEC Sponsoring Companies would be able to utilize the
capacity, and the energy related thereto, which DOE offers to
release during the periods set forth in Schedule A below.
Accordingly, we understand that OVEC, with the concurrence of its
Sponsoring Companies, is willing to agree pursuant to Paragraph 1
of Section 2.05 and Section 7.11 of the Agreement to waive for such
periods any requirement that the DOE contract demand during such
period be higher than the following stated Net Demand for each
referenced period:
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Mr. ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. -2- March 31, 1999
Schedule A
----------------------------------------------------------------------
Period Base Demand Reduction Net Demand
----------------------------------------------------------------------
May 1, 1999
through
May 31, 1999 1902 MW Less 200 MW 1702 MW
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June 1, 1999
through
June 30, 1999 1902 MW Less 700 MW 1202 MW
----------------------------------------------------------------------
July 1, 1999
through
July 31, 1999 1902 MW Less 700 MW 1202 MW
----------------------------------------------------------------------
August 1, 1999
through
August 31, 1999 1902 MW Less 700 MW 1202 MW
----------------------------------------------------------------------
September 1, 1999
through
September 30, 1999 1902 MW Less 700 MW 1202 MW
----------------------------------------------------------------------
October 1, 1999
through
October 31, 1999 1902 MW Less 200 MW 1702 MW
----------------------------------------------------------------------
Furthermore, we understand that OVEC, with the concurrence of its
Sponsoring Companies, is willing pursuant to Section 7.11 to waive
partially (i) the requirements under Section 3.06 and 3.07 of the
Agreement that DOE pay 100 percent of the costs of Additional
Facilities and Replacements (AFR) and (ii) if appropriate, the
requirements under Sections 3.04.4 and 3.04.5 of the Agreement that
the adjustments of demand charges shall be made on the basis that
the average DOE capacity in effect equaled unity as to amounts, if
any, specified in Section 3.04.3 with respect to the costs of AFR.
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Mr. ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. -3- March 31, 1999
We further understand that OVEC, with the concurrence of its
Sponsoring Companies, agrees to take further action pursuant to
Paragraph 1 of Section 2.05 of the Agreement to waive any
requirement which would preclude a further reduction of the monthly
DOE contract demand below the Net Demand levels set forth in
Schedule A, in amounts to be determined by DOE in its sole
discretion for the months of June through September 1999. This
would be designed to assist DOE in its goal to obtain reasonably
priced power for the Paducah Uranium Enrichment Plant during the
summer of 1999, since the transmission required to transfer OVEC
power to Paducah on a firm basis may not be available, and the
credit to DOE's power bill for such released power will make
available the funds necessary to purchase power at locations closer
to the Paducah plant.
Furthermore, we understand that if transmission capacity can be
secured and DOE gives two business days' notice to OVEC that DOE
wishes to transfer to its Paducah facility for any month from June
through August 1999 up to 200 MW of the OVEC power and energy
remaining after the previously referenced reductions of the
contract demand, OVEC is willing to waive its right, under
Paragraph 3 of Section 2.05 of the Agreement, to dispose of such
power and energy. DOE will reimburse OVEC pursuant to such
paragraph for any transmission charges incurred by OVEC in
connection with such transfer. Such transmission charges shall be
in accordance with the applicable tariffs or other authority of the
transmission providers.
Accordingly, DOE and OVEC agree as follows:
(a) The contract demand under the Agreement for the
purposes of Clause (A) of Paragraph 1 of Section 2.05
thereunder shall be deemed to equal the reduced amounts
set forth in Schedule A for the periods referenced
therein except to the extent that DOE exercises its
right under paragraph (c) below to reduce further the
DOE contract demand;
(b) DOE will be relieved of twenty-eight percent (28%) of
the AFR costs incurred by OVEC from May 1, 1999,
through October 31, 1999 as well as the gross-up to
cover estimated income taxes, if any, associated with
that amount, provided, that DOE will continue to pay
amounts due each year to a trustee for purchasers of
OVEC notes pursuant to assignments, consents to
assignment and notices of assignment dated on or about
June 9, 1993, related to the financing of
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Mr. ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. -4- March 31, 1999
the Clifty Creek Coal Switch Project. DOE will be entitled to
audit such AFR costs in accordance with Section 7.04 of the
Agreement;
(c) The monthly DOE contract demand under the Agreement may
be reduced below the levels set forth in Schedule A in
amounts to be determined by DOE in its sole discretion
for the months of June through September 1999,
provided, that on or before two business days after the
execution of this Letter Supplement by both parties
(the "Exercise Date") DOE shall exercise its one-time
option by notifying OVEC and each Sponsor, by facsimile
on or before 4:00 p.m. E.S.T., of all monthly (June
through September 1999) optional contract demand
reductions;
(d) OVEC will credit DOE's power bills in an amount equal
to the DOE contract demand reduction below the levels
set forth in Schedule A (above) for each of the months
of June through September 1999 times 80 percent of the
NYMEX monthly into Cinergy, firm, futures on-peak (5 x
16) for such month determined as of market closing on
March 5, 1999 times the number of on-peak hours during
such month, minus (a) the demand charges which DOE
avoids by reason of such monthly reductions in contract
demand and (b) charges for energy in amounts equal to
the reductions in contract demand times the number of
on-peak hours during such month times OVEC's energy rate
per MWH. The above-referenced March 5, 1999 NYMEX
closing prices were $59.25/MWH for June 1999; $120/MWH
for July 1999; $113/MWH for August 1999 and $36.50/MWH
for September 1999. No later than April 1, 1999, OVEC
will issue a credit memorandum to DOE setting forth the
estimated total credits due DOE under this paragraph.
Such credit memorandum will indicate that the credits
are subject to receipt of all required governmental
approvals in form and substance satisfactory to OVEC.
Such credits will be deducted from bills rendered by
OVEC to DOE after receipt of all such governmental
approvals pursuant to the following schedule: July -
$10,000,000; August - $10,000,000; September -
remaining balance. In the event that governmental
approvals are delayed beyond July 1999, the credits
previously due pursuant to the above schedule will
become immediately effective upon the receipt of the
last of such approvals. Any credit amounts in excess of
any monthly bill shall be applied to
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Mr. ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. -5- March 31, 1999
the following monthly bill. Monthly true-ups of any estimates will
also be reflected in such bills.
(e) The Parties acknowledge that the credits to ▇▇▇'▇ power
bills pursuant to paragraph (d) are subject to approval
by the Public Utilities Commission of Ohio. Likewise,
such credits are subject to execution by the Sponsoring
Companies, and regulatory approval, of an amendment to
the Inter-Company Power Agreement in form and substance
satisfactory to OVEC providing for payments to OVEC by
the Sponsoring Companies sufficient to reimburse OVEC
for the credits to the DOE power bills. The parties
further acknowledge that the credits to DOE's power
bills are subject to acceptance by the Federal Energy
Regulatory Commission and approval by the Virginia
State Corporation Commission of such amendment to the
Inter-Company Power Agreement. OVEC will use its best
efforts to obtain all required regulatory approvals,
including those referenced herein, as expeditiously as
possible, and request such approvals to be
effective April 1, 1999.
(f) In addition, if transmission capacity can be secured
and DOE gives two business days' notice to OVEC that
DOE wishes to transfer for any month from June through
August 1999 up to 200 MW of the remaining OVEC power
and energy to its Paducah facility, OVEC will waive its
right, under Paragraph 3 of Section 2.05 of the
Agreement, to dispose of such power and energy. DOE
will reimburse OVEC pursuant to such paragraph for any
transmission charges incurred by OVEC in connection
with such transfer. Such transmission charges shall be
in accordance with the applicable tariffs or other
authority of the transmission providers.
(g) Neither DOE nor OVEC will assert that a failure by any
other Party to enforce rights it may have under the
OVEC/DOE Power Agreement or the Inter-Company Power
Agreement constitutes, nor shall such failure to
enforce such rights constitute, a waiver or
relinquishment, explicit or implicit, of any provision
of either agreement.
If OVEC agrees to the matters described above, please execute a
copy of this letter at the place designated for your signature.
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Mr. ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇. -6- March 31, 1999
Sincerely,
/s/ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇
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for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Assistant Manager for
Project and Technical Services
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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Authorized Contracting Officer
March 31, 1999
OVEC hereby agrees to the
provisions herein described.
OHIO VALLEY ELECTRIC CORPORATION
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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Date: March 31, 1999
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