Energy Service Agreement

Energy Service Agreement

Pareto Energy LTD and City of Stamford

ENERGY SERVICE AGREEMENT

THIS ENERGY SERVICE AGREEMENT ("Agreement") is entered into as of the ___th day of ______2009, by and between Pareto Energy Ltd. (“Selling Company”), a Corporation created under the laws of Washington, D.C. ("Seller"), and The City of Stamford, Connecticut ("Buyer").

WITNESSETH:

WHEREAS, Seller is engaged in the business of designing, financing, and arranging for the building and operation of systems for electrical, heating, and cooling energy; and

WHEREAS, Buyer owns and operates the City of Stamford Government Center (“Buyer’s Facilities”); and

WHEREAS, Buyer desires to purchase from Seller and Seller desires to sell to Buyer the Buyer's electricity, heating, and cooling energy requirements for Buyer's Facilities; and

WHEREAS, Seller desires to obtain the exclusive right to design, build, operate and maintain the electricity, steam, and chilled water production facilities located on-site at Buyer's Facilities in order to sell to Buyer the Buyer's heating and cooling energy requirements for Buyer's Facilities; and

WHEREAS, Buyer is willing to allow Seller to design, build and operate and maintain the electricity, steam, and chilled water production facilities located on-site at Buyer's Facilities on an exclusive basis under the terms and conditions set forth in this agreement

NOW, THEREFORE, in consideration of the premises and mutual covenants, conditions and agreements hereinabove and hereinafter set forth and such other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller, each intending to be legally bound, do hereby agree as follows:

1. DEFINITIONS

Except as otherwise expressly provided herein, all capitalized terms used in this Agreement shall have the respective meanings as set forth below:

(a)“Electric Capacity” shall be based on the design capabilities of the following generating equipment:

United Technologies Purecell 400:400kW

General Electric Jenbacher JS-316:672kW

Existing back-up diesel generator:300kW

(Note: The diesel generator is only permitted for operation during ISO-declared grid conditions or similar emergencies)

(b)"Electricity" shall mean electrical energy as measured in kilowatt-hours (kWh) provided to Buyer at Buyer's Facilities in accordance with the Electric Capacity

(c)“Thermal Capacity” shall be based on the thermal outputs of the following equipment:

Chilling capacity:130 tons

Heating capacity:3.1 MMBtu/hr

(d)"Thermal Energy" shall mean, as the context requires, quantities of heating and cooling energy as measured in MMBtu's and ton-hrs., respectively, extracted from the circulating flows of the steam, hot water, condensate and chilled water provided to Buyer at Buyer's Facilities in accordance with the delivery specifications set forth in this Agreement.

(e)"Electricity Generating Facilities" shall mean, the natural gas fired generators and fuel cells, motors, pumps, heat exchangers, piping, valves, day tanks and starters ("Generator Sets") and electric switchgear and transfer switches necessary to start and operate the Generator Sets, and all appurtenant equipment thereto, together with any and all parts, supplies, meters and equipment installed or added thereto, which constitute the emergency electric generating facilities located at Buyer's Facilities, including but not limited to those more specifically identified on Attachment A attached hereto and made a part hereof.

(f)"Thermal Energy Production Facilities" shall mean the chillers, boilers, cooling towers, pumps, heat recovery, and all appurtenant equipment thereto, together with any and all parts, supplies and equipment installed or added thereto, and all improvements, additions or replacements made thereto (on the primary side) which constitute the steam and chilled water production facilities located at Buyer's Facilities, and shall include Buyer Owned Thermal Energy Production Facilities and Seller Owned Thermal Energy Production Facilities, all as more specifically identified on Attachment B, attached hereto and made a part hereof.

(g)"Combined Facilities" shall mean jointly, the Electric Generating Facilities and the Thermal Energy Production Facilities.

(h)“Major Component” shall mean any piece of specially ordered equipment required for the provision of Electricity and/or Thermal Energy and used or to be used in the Combined Facilities, which cannot be acquired ‘off the shelf.’

(i)"Points of Delivery" shall mean the physical point where Electricity and Thermal Energy is delivered to Buyer. Steam point of delivery is defined as the point of connection to the existing steam or hot water piping system located in Buyer's Facilities. Metering of steam usage will occur within 10 yards of that location. Chilled water point of delivery is defined as the point of connection to the existing chilled water supply piping system located in Buyer's Facilities. Metering of chilled water usage will occur within 10 yards of that location. Electricity point of deliver is defined as the point of exit from the electricity meter. Metering of Electricity shall be at the output of the inverter onto the 480V AC bus.

(j)"Points of Return" shall mean the physical point where Seller is anticipated to receive the chilled water return and condensate from Buyer. Condensate point of return will be at the point of entry into the boiler mechanical room of the condensate piping system located in Buyer's Facilities. Chilled water point of return will be at the point of entry into the chiller mechanical room of the chilled water return piping system located in Buyer's Facilities.

(k)"Billing Month" shall mean any calendar month, or any portion thereof, during which Buyer receives and Seller delivers Thermal Energy to Buyer's Facilities in accordance with the terms and conditions of this Agreement.

(l)“Monthly Electricity Capacity Charge” shall mean the amount for Kilowatts of demand plus other fixed charges that the buyer would have paid to Connecticut Light & Power if it did not install the Combined Facilities and shall equal the demand and other fixed charges that would be incurred under the Buyer's current electricity provider's regulated tariff (currently Connecticut Light & Power, Large Time-Of-Day Electric Service Non-Manufacturers, Rate 58) or the successor tariff. For the purposes of this calculation, the effective efficiency of a chiller's conversion from electricity to chilled water is assumed to be 0.85kWh/ton.

(m)“Monthly Electricity Usage Charge” shall mean the amount for Kilowatt Hours of usage the buyer would have paid Connecticut Light and Power if it did not install the Combined Facilities and shall equal the usage charge that would be incurred under the Buyer's current electricity provider's regulated tariff (currently Connecticut Light & Power, Large Time-Of-Day Electric Service Non-Manufacturers, Rate 58) or the successor tariff. For the purposes of this calculation, the effective efficiency of a chiller's conversion from electricity to chilled water is assumed to be 0.85kWh/ton.

(n)"Total Monthly Electricity Charges" shall mean the total amount that the buyer would have paid Connecticut Light and Power if it did not install the Combined Facilities and is equal to the sum of the Monthly Electricity Capacity Charge and Monthly Electricity Usage Charge for each Billing Month.

(o)“Monthly Thermal Capacity Charge” shall mean the amount that the buyer would have paid Yankee Gas if it did not install the Combined Facilities and shall equal the capacity charges that would be incurred under the Buyer's current gas provider's regulated tariff (currently Yankee Gas, R30 – Large General Firm) or the successor tariff. For the purposes of this calculation, the effective efficiency of the conversion from natural gas to steam or hot water is assumed to be 80%.

(p)“Monthly Thermal Usage Charge” shall mean the amount that the buyer would have paid Yankee Gas if it did not install the Combined Facilities and shall equal the usage charges that would be incurred under the Buyer's current gas provider's regulated tariff (currently Yankee Gas, Large Volume Interruptible, Rate IS) or the successor tariff. For the purposes of this calculation, the effective efficiency of a boiler's conversion from natural gas to steam or hot water is assumed to be 80%.

(q)"Total Monthly Thermal Charges" shall mean the total amount that the buyer would have paid Yankee Gas if it did not install the Combined Facilities and is equal to the sum of the Monthly Thermal Capacity Charges and Monthly Thermal Usage Charge for Electricity each Billing Month.

(r)“Total Monthly Energy Charges” shall equal the sum of Total Monthly Electricity Charges and Total Monthly Thermal Charges.

(s)"Metering Equipment" shall mean all required meters, instruments, recording devices, and other related data logging equipment required to measure and record all charges payable by Buyer under this Agreement.

(t)"Contractual Obligation" shall mean, as to either party to this Agreement, any contract, agreement, indenture, instrument or undertaking to which such party is a party or by which any of its properties is bound or affected.

(u)"Governmental Authorities" shall mean the Federal government and/or State Government and/or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any other governmental entity with authority over any aspect of this Agreement or the performance of any of the obligations hereunder.

(v)“Regulatory Approval” means the issuance of each required approval by the Connecticut Siting Council, the Connecticut Department of Environmental Protection and the Connecticut Department of Public Utility Control of an application for a license, permit, or interconnection authority, necessary for the siting, operation and interconnection of the Combined Facilities, respectively.

(w)“Construction and Operations Subcontractor” shall mean a company selected by the Seller and approved by the Buyer to install, operate and maintain the combined facilities.

(x)“EID Board” shall mean the Board of the City of Stamford’s Energy Improvement District.

1. TERM

2.1 Term. This Agreement shall be in full force and effect and be legally binding upon the parties and their permitted successors and assigns as of the date hereof and shall remain in effect for a term of 20 years following the Service Commencement Date, unless otherwise terminated as provided herein (the "Term").

2.2 Service Commencement Date. Buyer and Seller shall mutually agree upon a Service Commencement Date upon which Seller shall first make available and deliver to Buyer's Facilities Electricity and Thermal Energy and upon which Seller’s affiliate assumes operation of Buyer's Combined Facilities as provided herein, but in no event shall the Service Commencement Date occur any later than 390 days from the date of this Agreement, unless otherwise agreed to in writing by the parties. By mutual consent of the buyer and seller, the Service Commencement Date shall be extended on a day-for-day basis due to a delay in the delivery of any Major Component or Regulatory Approval.

3. SERVICES PRIOR TO CONSTRUCTION AND OPERATION OF THE COMBINED FACILITIES

3.1 Operations and Maintenance Plan and Shared Savings Forecast for the Combined Facilities. Within 90 days of the date of this Agreement, the Seller and the Constructions and Operations Subcontractor will complete detailed engineering design of the Combined Facilities and provide and approve with the Buyer a detailed operation and maintenance plan for the combined facilities that includes forecasts of the amount of shared savings under clause 8.4 of this Agreement.

3.2 Financing Plan for the Combined Facilities. Within 90 days of the execution of this Agreement by both parties, the seller will complete financing arrangements to the satisfaction of Buyer for the Combined Facilities and provide and approve with the buyer a financing plan that details the sources and uses of funds for the construction, operations and maintenance of the Combined Facilities. As part of the financing plan, the Seller will cooperate with the Buyer in submitting applications for grant financing from Government Authorities, including but not limited to State of Connecticut distributed generation and clean energy grants and the Federal incentives under the American Recovery and Reinvestment Act of 2009.

4. LICENSE AGREEMENT

4.1 Grant of License. Buyer hereby grants to Seller (i) a non-exclusive license throughout the Term of this Agreement to enter upon Buyer's Facilities in order to inspect and gain access to the Combined Facilities; (ii) an exclusive license commencing on the Service Commencement Date and continuing thereafter throughout the Term of this Agreement to use, operate and maintain the Combined Facilities to the extent and for the purposes set forth herein, which license shall be irrevocable for so long as the Agreement remains in effect; and (iii) a non-exclusive license to use, without interruption, the electrical service, makeup water lines and fire control system which support the Combined Facilities to the extent necessary in the use, operation and maintenance of the Combined Facilities; provided, however, that Seller shall at no time interfere with the business operations of Buyer's Facilities.

5. EASEMENTS AND LICENSES

5.1 Easements and Rights-Of-Way; Access. Buyer shall develop a list of all rights-of-way, access rights, easements, licenses and other rights with respect to Buyer's Facilities, and a separate list with respect to property owned or co-owned by others, as may be reasonably necessary for Seller to perform its obligations and exercise its rights hereunder. Buyer shall communicate such list to Seller to allow Seller to add or delete items as necessary. Upon Seller’s acceptance of the completeness of the list relating to Buyer’s property, Buyer shall expeditiously grant, convey and transfer such property rights, via easement, license, contract, or other appropriate legal instrument, as needed to allow Seller to perform its obligations hereunder. Buyer shall use best efforts to obtain, or cause to be obtained (in form and substance reasonably satisfactory to Seller) non-disturbance agreements or, if applicable, waivers and/or consents from each of its mortgagees or landlords with respect to all rights of way, access rights, easements, licenses and other property rights which are necessary to Seller’s performance of its obligations under this Agreement. If the Buyer must pursue condemnation to obtain the rights required under this Agreement for Seller to perform its obligations and exercise its rights hereunder, then the Buyer shall take all necessary actions to condemn said property. The Seller shall pay the attorney’s fees for attorneys of the Buyer’s choosing to represent the Buyer in any condemnation proceedings required to secure the rights under this Paragraph 5.1. Notwithstanding the foregoing, the attorneys shall be directed by Buyer’s Director of Legal Affairs.

6. COMBINED FACILITIES OPERATION AND RELATED REQUIREMENTS

6.1 Combined Facilities Operation. Seller will engineer, permit, construct, finance, operate and maintain the Combined Facilities so as to produce and deliver Electric and Thermal Energy Services to Buyer as required by this Agreement. Seller will use, operate and maintain the Combined Facilities in a manner which meets or exceeds good industry practice, and Seller shall secure and maintain, at its sole cost and expense, all permits necessary for the use, operation and maintenance of the Combined Facilities.

6.2 Combined Facilities Ownership. Except as otherwise required or permitted under this Agreement, title to the Combined Facilities shall remain with Seller and Buyer shall not remove, alter, , or permit any lien to exist on such Combined Facilities.

6.3 Combined Facilities Gas Requirements. Commencing on the Service Commencement Date and continuing throughout the Term of this Agreement, Seller shall pay for all natural gas requirements of the Combined Facilities. Seller shall maintain a separate meter to measure and record gas delivered to the Combined Facilities.

6.4 Buyer's Electric Requirements. Commencing on the Service Commencement Date and continuing throughout the Term of this Agreement, Seller shall be responsible for installing and metering the Electricity delivered to Buyer.

6.5 Buyer's Water Requirements. Commencing on the Service Commencement Date and continuing throughout the Term of this Agreement, Seller shall be responsible for measuring the make-up water associated with the water requirements of the Thermal Energy Production Facilities and Seller shall grant to Buyer a credit on a quarterly basis equal to the cost of such water usage at the currently applicable tariff rates.

6.6 Performance Penalties

(a) Seller acknowledges the importance to Buyer of the availability and quality of Thermal and Electric Energy from the Combined Facilities required to satisfy Buyer's Electric and Thermal Energy Requirements. Seller shall establish operation and maintenance procedures, undertake periodic overhauls and replacements for capital equipment, and maintain appropriate monitoring equipment, which monitoring equipment Buyer and Seller shall mutually agree upon and which Buyer shall cause Seller to install, the costs of which shall be included in the Combined Facility costs.