Tangshan Rongfeng Iron & Steel Co., Ltd.

CDQ Power Generation

 

EMC Cooperation Agreement

 

Item 1 General

 

Party A: Tangshan Rongfeng Iron & Steel Co., Ltd.

Party B: Xi’an TCH Energy Technology Co., Ltd.,

 

Based on the principle of win-win cooperation, after friendly duly negotiation,
both parties agree to cooperate in energy-saving through Energy Management
Contract. In compliance with Contract Law of People’s Republic of China, on the
basis of truly and duly consideration, both parties enter into following
agreement.

 

Item 2 Terms and Definitions

The two parties agreed: The relevant terminology and technical terms involved in
this agreement and related accessories are defined and explained as follows:

 

2.1 Project Description:

Party B has an annual production capacity of 1.4 million tons of coking coal.
Party B will invest and build a coke dry quenching (“CDQ”) facility and a waste
heat power plant based upon the coking process of Party A. The power generated
is the energy saving benefit, which will be shared by both parties.

The construction schedule for the phase Ⅱ of the CDQ facility and waste heat
power plant will be determined upon the specific situation.

 

2.2 Completion: construction and installation are completed according to Party
B’s design and the system operates properly for consecutive 72 hours.

 

2.3 Force majeure: natural disasters and other can't be controlled events
according to the law.

 

Item 3 Energy Services and Requirements

3.1 Party A appoints Party B for energy services as follows:

 

3.1.1 Objective: Based on Party A’s annual production capacity of 1.4 million
tons of coke and its energy saving requirement, Party B shall build a CDQ
facility and a waste heat power plant. The power generated is the energy saving
benefit, which will be shared by both parties.

The design of CDQ facility, CDQ waster heat power generation system, technical
performance and technical specifications shall be arranged after both parties’
agreement.

 

3.1.2 Content:

1. CDQ body: CDQ auxiliary, hot coke loading equipment, equipment for recovery
of coke powder, cold coke discharging equipment, speed and control system for
hoist, speed control system for fan, electrical control and equipment, PLC
control system, and inspection instrumentation.

 

 

 

 

 

 

 

2. Supporting facilities: dust removal system, auxiliary machine room, main
control building, belt conveyor system, and water pump house.

 

3. Power generation facilities: waste heat boiler, boiler auxiliary, waste gas
unit, steam turbine, and power generator.

 

4. Nitrogen manufacturing facilities and water treatment, exclude special
building foundation treatment and dismantlement or transformation of original
equipment. Fresh water and waste water treatment plant will be shared by with
Party A. Party A is responsible for connecting the water to the CDQ area, and
waste water will be discharged into the waste water treatment facility built by
Party A.

 

3.1.3 Method: Party B is responsible for the investment, design, construction
(include civil construction) and operation. Party A is responsible for providing
new water and electricity during the project construction period as well as the
water for the operation. The settlement price for such utilities will be done
according to the internal settlement price of Party A. The energy saving
benefits will be shared as agreed by both parties.

 

3.2 Party B shall provide energy saving services according to the following
requirements:

3.2.1 Locations: plant area of Tangshan Rong Feng.

 

3.2.2 Term and schedule:

(1) The agreement becomes effective on the date when the agreement is signed and
sealed by the parties;

 

(2) Construction period: 18 months after the agreement becomes effective and
construction conditions are ready. The first and second months are the
preparation period to apply and receive all the permits and get the design and
technical confirmation. The third to the fifth months are equipment tendering
and bidding period. The sixth to the eighteenth months are the project
construction period.

 

(3) The start date for the energy saving benefit sharing will be the date when
the waste heat power station successfully passes 72 consecutive hour test run.

 

(4) Power generated and related revenue during commissioning belong to Party B.

 

(5) The energy saving sharing term is 20 years, and at the end of the term, the
property will be transferred from Party B to Party A at the price of RMB 1.

 

 

Item 4 Energy Saving Sharing Method

 

4.1 Party B is responsible for the investment, design, equipment procurement,
and construction. The investment is RMB 150 million (subject to the technical
proposal).

 

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4.2 During the benefit sharing period, as for CDQ waste heat power generation,
Party A shall pay Party B the energy saving service fee as:

Energy saving service fee = quantity of power supply x settlement price

 

From the 1st year to the 10th year (including the 10th year), the settlement
price = RMB 0.582/kWh (including TAX)

 

From the 11th year to the 20th year (including the 20th year), the settlement
price = RMB 0.432/kWh (including TAX)

 

If the power price, where Party A is located, is adjusted, the settlement price
will be adjusted same as the local power grid price.

 

4.3 Energy saving service fee is paid in installments by Party A to Party B, the
specific timing and amount of payments are as follows:

 

4.3.1 After the power plant is put into operation, Party A shall pay Party B
once a month. The 25th day of each month is the closing day for the billing
circle of that month. Fees shall be paid before the 5th day of next month. The
energy saving service fee is calculated based on the actual quantity of
generated power and the price.

 

4.3.2 Party A will install power generation measurement instrument
independently. Party B shall report the reading of the instrument and Party A
shall confirm.

 

4.3.3 Party A shall pay Party B the energy saving service fee according to power
supply data reported by Party B. The payment shall be made as described in
4.3.4. Party B shall provide invoice for the energy saving service fee.

 

4.3.5 The payment shall be made by Party A in wire transfers.

 

Item 5 Obligations of Party A

 

In addition to other requirements in the agreement, Party A shall fulfill the
following obligations:

5.1 Within 30 days after the agreement is signed, 1) Party A and its parent
company shall provide Party B with the performance guarantee or commitment; 2)
Party A shall provide approved materials to Party B as required.

 

5.2 Without interfering normal operation, Party A shall provide temporary
offices, canteen, accommodation, and transportation for assigned employees of
Party B.

 

5.3 Provide necessary information; and coordinate Party B to carry out energy
saving measurement and verification.

  

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5.4 Coordinate Party B with maintenance, inspection, and repair of equipment and
facilities, and make sure Party B could use equipment and facilities of the
project.

 

5.5 Party A shall complete the project establishment, environmental assessment,
and approval application for construction land, national grid connection without
transmitting electricity to the national grip quickly after the agreement is
signed. Party B shall provide assistance. Relevant costs shall be paid in
advance by Party A, and will be deducted from subsidies, rewards, or other
applicable grants from the government, institutions or organizations for the
project as described in 5.8. If the power plant could not be put into operation
because Party A did not complete the above procedures, the lost or delayed time
shall be borne by Party A.

 

5.6 As for waste heat provided by Party A required by boiler of the waste heat
power station according to the normal CDQ process of Party B, the waste heat
supply shall be no less than 8,000 hours annually, and the temperature shall be
no lower than 950 Celsius. If the time and number cannot be reached, the
cooperation period shall be prolonged accordingly.

 

5.7 Provide assistance on project execution and management.

 

5.8 Assist Party B in applying for subsidies, awards, or other applicable grants
from the government or organizations. The grants received shall be shared
between two parties as 50% for each, and relevant costs and expenses shall be
borne by both parties.

 

5.9 Party A shall fully participate in the design, equipment tendering and
procurement and give technical advices to Party B regarding the design and
equipment utilization.

 

Item 6 Obligations of Party B

 

In addition to other requirements in the agreement, Party B shall fulfill the
following obligations:

6.1 Party B shall mobilize construction personnel and start construction after
the construction plan is approved by Party A. The construction personnel shall
abide by rules and regulations of Party A. Party B is responsible for the
safety. The project shall be completed on schedule unless the delay is caused by
Party A or force majeure.

 

6.2 Assist Party A in energy saving measurement and verification on the 5th day
of each month.

 

6.3 Deliver all drawings, construction plans, training materials, equipment
lists to Party A within 30 days before the commencement of construction.

 

6.4 Equipment installation and adjustment and test shall comply with the design
and meet designed power generation and other technical indexes (mainly on
handling quantity of dry coke, coke loss, steam quantity per ton of coke, power
generation per ton of coke, power consumption per ton of coke). Power generated
by Party B shall comply with the national standard.

 

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6.5 Party B shall send experts on site to check the project operation regularly
or from time to time based upon the project operation conditions.

 

Item 7 Project acceptance

 

7.1 The following standards and methods are agreed by the two parties to be used
to inspect the functional completion of the construction:

 

7.1.1 Functional completion indicator for Party B:

CDQ waste heat power generation: the power station can produce electricity
normally;

 

7.1.2 Functional completion acceptance criteria: refer to design criterion;

 

7.1.3 Acceptance measures for functional completion: Party B is responsible for
the examination and acceptance for the constructional engineering and
installation engineering involved into the project as well as assumes related
expenses. Party A is responsible for the specialized and government inspection
and acceptance and assumes related expenses, including environmental protection,
fire fighting, industrial hygiene, records, pressure vessel (boiler detection),
electrical equipment, anti-thunder and hoisting equipment.

 

7.1.4 Inspection and acceptance time, date and personnel: within 15 days after
Party B informs Party

A that the power station is qualified for acceptance, both parties negotiate the
place and personnel.

 

7.2 Party A cooperates with Party B to organize the construction agreementor for
project inspection and acceptance. If the equipment works 72 hours continually
and the project is under stable operation, the project passes acceptance
inspection. The project acceptance report shall be signed by the supervisors and
technicians of the both parties that participate the acceptance inspection as
well as seals on the report by all entities participated in the acceptance
inspection. The acceptance report should indicate the operational instrument
data, operation state and instant effects.

 

7.3 The execution date of the acceptance report will be regarded as the date
when the project is under stable operation state. Since then, the produced
electricity will be considered officially supplying to Party A.

 

Item 8 Ownership

 

During the term of the agreement, Party B possesses the assets of the project
(including equipment and facilities, tangible assets like proposal and drawings,
and intangible assets like technology secrets and operation management, etc.).
After the agreement expires, item 3.2.2 (5) will be executed.

 

Item 9 Liability for Breach of Agreements

 

9.1 Party A’s liability for breach of agreement

 

9.1.1 After the agreement becomes effective and before the beginning of the
benefit sharing date, if Party A didn’t perform its obligation under the
agreement due to its own fault, Party A shall pay Party B’s actual expenses
regarding implementing the project including engineering design, equipment
purchase price, installation cost, transportation, etc. and a penalty equivalent
to 20% of such total expenses.

 

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9.1.2 If Party A didn’t pay Party B the energy-saving service fee according to
item 4.4.1 of the agreement, Party A shall pay penalty for overdue payment on
the daily basis of each day overdue equivalent to 1‰ of total due service fee.

 

9.1.3 If the project stops operating due to Party A’s reason, Party A shall
undertake the energy-saving service fee during the shutdown (equivalent to
12-month average power supply volume before shutdown × unit price of the
electricity). If the shutdown period is more than 6 months, Party A shall take
responsibility according to item 9.1.1.

 

9.2 Party B’s Responsibility for Breach of the Agreement

 

9.2.1 After the agreement becomes effective and before the beginning of the
benefit sharing date, if Party B fails to perform its obligation due to its own
fault or cannot fund the project construction under the agreement, Party B shall
pay Party A’s actual expenses regarding implementing the project including
project construction and preparation fee, etc. as well as a penalty equivalent
to 20% of such total expenses.

 

9.2.2 Party B shall be responsible for the technical proposal and designing
scheme.

 

9.3 If any party breaches the agreement, the other party shall take appropriate
remedial measures according to the written notice from the breaching party to
prevent the increase of losses. Otherwise, the enlarged loss or reasonable
expense for the remedial measures cannot be reimbursed.

 

9.4 Remediation for the breach of the agreement

 

9.4.1 Remedies for Party A’s breach of the agreement: if Party A breaches the
agreement, Party B has the right to terminate the agreement or seek judicial
arbitration directly to recollect its due payment or losses. Party B has the
right to request Party A paying its incurred expenses. In addition, Party B has
the right to dismantle the equipment on Party A’s production site if Party B
makes advance written notice to Party A.

 

9.4.2 Remedies for Party B’s breach of the agreement: if Party B breaches the
agreement, Party A has the right to terminate the agreement or seek judicial
arbitration directly to recollect its losses. Party A has the right to require
Party B undertaking Party A’s all related expenses.

 

Item 10 Projects Risks and Responsibility

 

10.1 The improvement of the project shall comply with following condition and
responsibilities:

 

10.1.1 The improvement of equipment. During the term of the agreement, Party B
has the right to improve the equipment or modify the operational program to
enhance economic returns with Party A’s written consent.

 

10.2 The change of the project shall comply with following conditions and
responsibilities:

if any party thinks it necessary to make any change to the equipment, the party
shall get the other party’s written approval before it makes changes.

 

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10.3 The removal of the project shall comply with following conditions and
responsibilities:

 

Without party B’s written consent, Party A cannot remove the equipment or make
any substantial change to the equipment. Otherwise, Party B has the right to
terminate the agreement immediately. Party A shall pay all compensation
according to the item 9.1.1 and 9.1.2 of the agreement.

 

10.4 Large-scale reconstruction of the project should comply with following
conditions and responsibilities:

 

10.4.1 Without Party B’s written consent, Party A cannot reconstruct the project
on a large scale. During the term of the agreement, if both parties agree to
reconstruct the project to improve the energy-saving efficiency, the two parties
should make written agreement first and revise the related items of this
agreement before reconstruct the project.

 

10.5 Turn off or close the project shall comply with following conditions and
responsibilities:

 

10.5.1 Party A shall inform Party B and obtain Party B’s written consent before
turn off or shut down any equipment under this agreement at least 7 days in
advance. In an emergency situation, Party A shall report Party B as soon as
possible.

 

10.6 The utilization and change of equipment and facilities owned by Party A
shall comply with following conditions and responsibilities:

 

10.6.1 Party A should ensure its equipment related to this agreement can operate
normally. If there is any malfunction of such equipments affect the normal
operation of the project and results in the energy-saving amount decrease, the
fee charging period will be postponed according to the item 4.3 of the
agreement.

 

10.6.2 If Party A intends to modify its equipment or production plan which may
affect the energy-saving amount of the project, Party A shall make written
notice to Party B at least 7 days in advance. If the energy-saving amount
declined, Party A should assume the economic loss of Party B.

 

10.7 If Party B has any losses caused by Party A’s production safety accidents,
Party A would take full responsibility; If Party A has any losses caused by
Party B’s production safety accidents, Party B would take full responsibilities.

 

10.8 Other risks and responsibilities of the project are as follows:

Neither party would take any responsibility for the risks caused by unforeseen
objective reason. The two parties shall negotiate and agree the responsibilities
of the wrongdoers accordingly first, then such party shall assume the
liabilities.

 

10.9 Special arrangements for the risk control are as follows:

In order to prevent investment risk and ensure Party B’s expected earnings, the
risk control arrangements are as follows:

 

10.9.1 If Party A breaches the agreement and cannot provide Party B with related
enterprise information and normal production data or necessary basis material
such as feasibility research report, environmental appraisal report, safety
appraisal report of the waste heat power generation project, or cannot deliver
site to Party B before scheduled date, Party B can postpone its performance term
accordingly.

 

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10.9.2 Party A shall guarantee its production operates normally. Total heat
supply time in the first ten years is no less than 80,000 hours. Otherwise, the
second phrase will be postponed until the heat supply time reaches 80,000 hours.
If Party A makes large-scale reconstruction to its equipment which affects Party
B’s due benefits under the agreement, Party A need to inform Party B to
negotiate to handle the related issue.

 

Item 11 Modification, cancellation and termination of the agreement

 

11.1 If any party wants to amend, supplement this agreement, it shall be
discussed and agreed by both parties and sign a supplement agreement. The
supplement agreement shall have the same legal affect to this agreement.

 

 

11.2 During performance of the agreement, if Party A intends to terminate the
agreement early, it shall send written notice 60 days in advance to the Party B.
The termination fees and compensation shall be paid to Party B in the following
manner:

 

11.2.1 If it is less than 5 years (including 5 years) into the term when Party A
requests to terminate the agreement;

Termination fees and compensation= total amount of investment by Party B +
average annual investment return * (5- number of years has been in operation)

 

11.2.2 If it is more than 5 years (excluding 5 years) into the operation when
Party A requests to terminate the agreement;

Termination fees and compensation= total amount of investment by Party B – total
amount of amortization (the amortization period is 10 year).

 

11.3 It anything happens to Party A or Party B that could affect its ability to
continue its business operation, including but not limited to bankruptcy,
closure, merger, transfer, separation, each party shall inform the each other
within 5 working days and provide relevant certified document. If the agreement
cannot be performed due to such situation, Party A or B has right to ask other
party for compensation for losses.

 

11.4 Under conditions of mutual agreement, both parties can terminate or cancel
the agreement. The parties agree that after written notice of termination
reaches to the other party, the validity period for such party to confirm the
termination of the agreement is 30 days.

 

11.5 During the term of the agreement, if Party A is closed, discontinued or
ceased to survive, conversion or merger or division with other entities, this
agreement is still valid to Party A or its successor. Party A shall inform
relevant party under such circumstance and include such condition into the new
entity. If relevant party do not accept the condition, Party A shall purchase
this project according to item 11.2 before the event. If the agreement is
terminated due to bankruptcy of Party A, Party B shall have the first priority
to be compensated during the bankruptcy procedure.

 

11.6 During the performance of the agreement, Party B has right to delegate its
subsidiaries or affiliates to undertake the investment, design, construction and
operation of the agreement. The agreement can be also directly transferred to
Party B’s subsidiary or affiliate as the main entity for the performance of this
agreement.

 

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Item 12 Transfer of Rights and Obligations

 

12.1.If Party A transfers it coking ovens, it shall guarantee that the
transferee will undertake the rights and obligations under the agreement. If the
transferee did not sign a new agreement with Party B according to the original
agreement, Party B has rights to claim compensation.

 

12.2.Before transferring obligations under the agreement, Party A shall get
approval from Party B in writing. Without approval from Party B, any transfer or
transfer of obligations from Party A are invalid.

 

12.3.Before transferring rights under the agreement, Party B shall notify Party
A in writing.

 

12.4.Before transferring obligations under the agreement, Party B shall get
approval from Party A in writing. Without approval from Party A, any transfer or
transfer of obligations from Party B are invalid.

 

Item 13 Tort and indemnification

 

13.1.For any property loss or personal injury of Party A caused by intention or
negligence of Party B or any persons employed by Party B, Party B shall
compensate the 100% of the losses caused.

 

13.2.For any property loss or personal injury of Party B caused by intention or
negligence of Party A or any persons employed by Party A, Party A shall
compensate the 100% of the losses caused.

 

13.3.The party suffered damage or loss shall also assume corresponding
responsibility according to the degree of its own fault if such party has
mistakes during the process as well and the other party's responsibilities shall
be reduced accordingly.

 

Item 14 Confidentiality

 

Both parties agree to fulfill the following obligations of confidentiality.

 

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14.1.Party A

14.1.1.Confidentiality contents: Project cooperation method and price

14.1.2.Personnel: All personnel related to the project

14.1.3.Duration: 10 years

14.1.4.Responsibilities in case of leakage: refer to confidential information
item

14.2.Party B

14.2.1.Confidentiality contents: Project cooperation method and price

14.2.2.Personnel: All personnel related to the project

14.2.3.Duration: 10 years

14.2.4.Responsibilities in case of leakage: refer to confidential information
item

 

Item 15 Force Majeure

 

15.1.When one party cannot execute the agreement due to force majeure, the party
shall notify the other party immediately. Once the party provides the valid
proof, it may postpone, partial execute, or suspend the performance of the
agreement or termination of the agreement.

 

15.2.If the agreement cannot be executed or the execution is postponed due to
force majeure, both parties shall be exempt from liabilities for breach of
agreement or liabilities to compensate for the damages.

 

Item 16 Settlement of Disputes

 

16.1.Any disputes arose from the execution, interpretation, breach of agreement,
or termination of the agreement shall be settled through amicable negotiations
between both parties.

 

16.2.If the negotiations fail, both parties agree to use the following methods
to settle the disputes.

(1)Submit arbitration to the arbitration commission in plaintiff location.

(2)File lawsuit to the local people’s court where Party B is located.

 

Item 17 Insurance

 

17.Both parties agree to purchase the insurance according to the followings,

 

17.1.Party B shall be responsible for project related liability insurance, life
insurance and property insurance and assume the insurance fees before its
equipment are shipped to Party A’s production or installation site. The
insurance coverage shall be no less than the actual value of the insured
properties.

 

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17.2.Party B shall be responsible for the insurance coverage and insurance fees
for the equipment from the date when it shipped to Party A’s installation site
to the date of termination of this agreement. The amount of property insurance
shall be no less than the actual value of the insured properties. The types and
amounts for life insurance and liability insurance shall be handled in
accordance with the actual needs, common practices and legal requirements.

 

17.3.The beneficiary of insurance stated in this item shall be Party B.

 

17.4.Both parties shall negotiate to avoid repeated insurance purchase.

 

Item 18 Intellectual Property Rights

 

18.1 With respect to patent use rights and technical secret license, both
parties agreed: parties shall conduct patent license procedures according to
law; For technical secrets obtained by Party B during performance of this
agreement, they belong to Party B; for technical secrets obtained by Party A
during construction and operation processes, they belongs to Party A.

 

Item 19 Appendixes

 

19.1.For the technical documents related to the performance of this agreement,
upon the execution by the parties, constitute an integral part of this
agreement:

19.1.1 Project description, item description: see appendixes;

19.1.2 List of equipment and materials: provided by Party B;

19.1.3 Technical solutions and technology agreements of this project.

 

19.2.Energy price agreement:

19.2.1 Separate electricity meter for the project shall be set up and the energy
saving service fee shall be calculated according to the meter.

19.2.2Price fluctuation: If electricity price of the local grid provide to Party
A is changed by local government, the price of power Party B sells to Party A
shall have the same adjustment.

19.3.Energy savings measurement and verification plan: the measurement device of
the power generation project shall be invested and installed by Party B. Party B
is responsible for the daily management and maintenance and relevant cost.

 

Item 20 Effectiveness of Agreement and Miscellaneous

 

20.1.After the signature of the agreement, each party shall appoint a contact
person to be responsible for coordinating the project progress. If any party
changes the contact person for the project, the party shall notify the other
party in written notice within 5 days. If the party fails to timely notify the
other party which impacts the performance of this agreement or causes any
losses, such party shall assume the responsibilities.

20.2.When sending notices via email, text, telephone or faxes, if such notice is
involving any party's rights or obligations, such notice shall also be sent via
express mail to the other party. The addresses listed in this agreement are the
postal addresses for the parties.

 

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20.3.If the content of any appendixes differs from the content of this master
agreement, this agreement prevails.

20.4.After the agreement is signed, Party B shall start to collect technology
data, design and survey work within 30 working days, and provide technical
solution within 60 working days to be confirmed by party A. The final agreement
shall be subject to technical data confirmed by both parties; the current data
are for reference only.

20.5.The agreement is made in quadruplicate. Each party holds two copies which
have the same legal effect.

20.6.As for matters not mentioned herein, both parties shall solve the matters
through amicable negotiations and reach an amendment or appendix.

 

 

 

Party A: Tangshan Rongfeng Iron & Steel Co., Ltd. (Seal)

Representative Signature:

 

Party B: Xi’an TCH Energy Technology Co., Ltd.(Seal)

Representative Signature:

 

Date:

 

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