SEAL
Republic of Honduras
 
 
OPERATION CONTRACT FOR THE GENERATION OF ELECTRIC POWER AND ENERGY BETWEEN THE
MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT AND A CORPORATION CALLED ROTA
INVERSIONES S.A. DE C.V.

Us: DARIO CARDONA ROBERTO VALLE, of legal age. married, Doctor in Laws, a
Honduran identity card number 1401-1970-00160 residing in this city, acting as
Sub Secretary of Natural Resources and Energy, according to agreement  No.
201-2010 dated April 12 two thousand and ten, who from now on and for the
purposes of this AGREEMENT be known as "the ministry" and MARCO ANTONIO
RODRlGUEZ CALDERON, of legal age, married, engineer, of Honduran nationality,
identity card No. 0801-4967-06118, speaking on behalf of the Corporation called
ROTA INVESTMENTS S.A.  de C.V., registered under No. 42 Volume 518 of the Land
Registry and Commercial lnmueble of Tegucigalpa, acting as general manager and
with sufficient administrative power, and thereafter for the purposes of this
contract be known as the "OPERATOR" who, subsequently may be appointed jointly
as Parties "or individually as" Party, have agreed to celebrate as we welcome
the effect this Operating Contract under the terms and conditions as follows:
 
FIRST: AUTHORIZING AND CONDITIONS:
 
Section 1.1: AUTHORIZATION: The Generating Company represented by the operator
has done all the studies for the construction of a hydroelectric plant on an
exclusive basis on the site whose coordinates are described in Annex 1 which is
an integral part of this contract and has the installed capacity of five
thousand twenty-two point seventy-nine kilowatts (kW 5022.79.) of power and an
estimated annual energy production of twenty-four point eighty Gigawatts (24,80
GWh) based on which the GENERATING COMPANY proposed the MINISTRY this OPERATION
CONTRACT, reason why in application of Article 66 of the Law Framework of the
Sub Electrical Sector opinion was requested from the NATIONAL COMMISSION OF
ENERGY as technical advisor, who gave a favorable opinion for the signing of the
Operation Contract. The parties acknowledge it is necessary to operate the edge
of the water hydroelectric plant known as CHILIGATORO HYDROELECTRIC PROJECT
located in the Municipality of Intibucá, department of Intibucá whose facilities
are described in Annex No. 1 Project Facilities, subject to the provisions of
the existing legal and regulatory framework for the electricity subsector and
its future updates, as well as conditions set forth in this Agreement, with
quality and cost-effectively, securely and reliably, in order to increase
efficiency, use the resource potential and  meet the growing demand for
electricity by means of the production of this renewable energy. Any extension
beyond these powers require authorization from THE MINISTRY, who granted after
verification of the technical capacity of the Generating Company to operate the
expanded facilities.
 
Section 1.2: TERMS OF THE AUTHORIZATION. 
 
Section 1.2.1 GENERAL CONDITIONS: the operating license granted to the
Generating Company by this Operation Contact, is subject to compliance by the
Generating Company of the provisions of existing legal and regulatory framework
for the electricity subsector and its future updates.
 
Section 1.2.2. CONDITIONS FOR FACILITIES: The Generating Company agrees to build
and have their facilities in service within a period not exceeding thirty (30)
months from the effective date of this contract. The Generating Company
facilities shall meet the applicable standards relating to equipment
specifications in order not to disturb the smooth operation of the National
Interconnected System. The Generating Company may not reduce the capacity of its
facilities except authorized by the Ministry in exceptional cases previously
determined by the National Energy Commission.
 
Section 1.2.3. OPERATION CONDITIONS.
 
The Generating Company shall have the right to investigate, study, develop,
construct, own, operate and maintain the FACILITIES described in Annex 1 and its
future extensions for power generation and electricity; performing environmental
impact studies, field studies and sampling, generate, sell and convey the
generated energy, have licenses and / or temporary or permanent permits for
access and use of national areas, take samples, perform activities required for
project development having permission of the respective institution, open
quarries and extract and / or depositing rock, soil, sand and building
materials, using underground water and surface water, use of ambient air,
emission of gases into the environment;
 

 
 
 

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request competent authority the imposition of servitude; build transmission and
communication lines, build temporary or permanent roads, rights of way, improve
roads, build temporary and / or permanent bridges as required for the transport
of machinery, equipment and heavy vehicles, other activities related to the
research, study, development, construction, ownership, operation, management,
monitoring and maintenance of the PLANT ; transmit energy to the POINT OF
DELIVERY, export energy through the SIN through tolls, collect tolls for their
use of other transmission facilities, pay toll to use third-party transmission,
hiring agents, companies, workers or equipment for both domestic and foreign
origin.
 
THE GENERATING COMPANY will be able to develop the activity of power generation
and electricity by putting all uncommitted available capacity for self
consumption and private physical contracts permitted by law, under the orders of
the System Operator reliably and efficiently, managing, operating, monitoring,
and properly maintaining the facilities and assets assigned to that activity,
observing this effect, "Good Operating Practices", meaning those methods and
standard practices and safety performance that are applied at national and
international levels, and in compliance with the provisions of the Operation
Rules of the National Interconnected System.
 
While the Operation Rules of the National Interconnected System have not been
issued officially, the Generating Company shall apply the rules and procedures
of operation established for the National Interconnected System by the  National
Company of Electrical Energy.
 
In particular, the Generating Company shall make available to the System
Operator the total available capacity of power generation of the project that is
not engaged in physical contracts with individuals.
 
For purposes of this contract, the System Operator means the body responsible
for the  Operation of the National Interconnected System. To the signing of this
contract, this organism is the Center of Load dispatch of the National Company
of Electric Energy. The Generating Company shall be required to construct the
production of support services for the National Interconnected System, in
particular, participate in the frequency regulation tasks, supply or absorb
reactive power, operation in emergency situations and restoration of power,
where appropriate, accepting such instructions given by the System Operator. Any
capacity and energy the Generating Company  want to allocate to export, shall
propose it first to the System Operator, who has the preferential right of
purchase.
 
In carrying out its activities, the Generating Company shall refrain from any
anti-competitive practices, in accordance with the current legislation. Whereas
THE MINISTRY through this contract gives the GENERATING COMPANY the
authorization of the use of the corresponding area where the renewable natural
resource and project development is according to the coordinates detailed in
ANNEX 1, those future concessions sought out by third parties to any agency or
ministry of the State which are in the areas of influence and area of the
proposed development of the GENERATING COMPANY project shall arrange and / or
harmonize with the GENERATING COMPANY their exploitation of resources to be
grantees while ensuring THE GENERATING COMPANY free and secure use of area and
renewable resources used for electricity generation and the future
concessionaire must additionally demonstrate the feasibility of conducting their
operations in harmony without interference to the project. "Furthermore, the
State may implement management programs of watersheds to prevent erosion,
conserve ground water, improve the climate, rehabilitate the area, and purify
the atmosphere.
 
The State may assist the GENERATING COMPANY, its agents and contractors in the
obtaining the government and local approvals necessary for the operation of the
FACILITIES. All of this without prejudice to the laws governing any of the
activities mentioned.
 
Section 1.2.4. BEGINNING OF OPERTATIONCS.
 
The Generating Company shall inform the MINISTRY, the date of commencement of
commercial operation of the plant  at least fifteen (15) days in advance.
 
Section 1.2.5. CONDITIONS RELATING TO THE SUPERVISION.
 
For the purpose of monitoring by the State, the Generating Company is obliged to
allow access to their facilities to accredited agents of the Ministry of the
National Energy Commission (NEC).
 
The Ministry and the NEC shall give notice of first visit, except in
extraordinary or emergency situations, in which case no advance notice is
necessary.
 
Likewise, the Generating Company shall be required to submit to the Ministry a
quarterly report in the format that is indicated, and to provide the Ministry
and  NCE all requested information for monitoring purposes, including technical
information about the installation, operation records and statistics, and
accounting and financial information.
 
 
 
 

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SECOND: USE, DURATION, RENOVATION OR PROROGUE, CESSION.- This Contract shall
enter into force once approved by National Congress and from its publication in
the Official Gazette.
 
Its duration will be for thirty (30) years counted from the entrance into force
of this Contract, being able to be renewed or extended upon its expiration.- The
Generating Company shall apply for the renovation or extension at least one year
before expiration.
 
The renovations will be approved by the MINISTRY or competent authority in that
moment, at least one hundred eighty (180) days before the expiration of the
contract.
 
It is understood that failure of Generating Company of the contracted
obligations hereunder shall constitute cause for denial of the renewal or
extension, on the advice of the NEC.
 
The Generating Company may assign this contract, after approval by the Ministry,
to any commercial company which proves to have sufficient technical and
financial capacity to continue operations.
 
THIRD: GROUNDS FOR INTERVENTION BY THE STATE.
 
In case, THE GENERATING COMPANY cannot operate in compliance with the terms of
this Contract, the MINISTRY previous opinion by the NCE, shall notify the nature
of the breach to THE GENERATING COMPANY who will have to correct the breach
within six (6) months.
 
If in this time the breaches are not remedied by cause attributable to the
GENERATING COMPANY,  THE STATE may intervene and temporarily operate its
facilities in accordance with the provisions of the existing legal framework of
the electricity subsector.
 
If within six (6) months from the date of such intervention THE GENERATING
COMPANY  cannot resume operation on its own, it will proceed to the termination
of this Contract and to cease intervention.
 
This, without prejudice to the rights that correspond to THE GENERATING COMPANY
to generate further administrative and judicial claims.
 
FOURTH: ANTICIPATED TERMINATION AND CANCELLATION.
 
The Ministry may terminate the Operation Contract unilaterally by the causes
mentioned in Article 72 of the Electric Subsector Framework Law, and also for
the following reasons:
 
a) Start construction work of the project without environmental license;
b) The inability of the Generating Company to rehabilitate the project after an
event of force majeure or fortuitous case within a reasonable time trial of the
National Energy Commission;
c) The suspension of payments or bankruptcy of the Generating Company, declared
by competent authority;
d) The inability of the Generating Company to resume normal operations after a
temporary intervention by the State.
e) The mutual agreement of the parts.
 
For all the above cases mentioned in this clause, provides that the
administrative act declaring the termination of the contract or early unilateral
termination must be based on an opinion prepared by the NATIONAL ENERGY
COMMISSION notifying personally the Legal Representative of the GENERATING
COMPANY.
 
Against the act the resources provided under the Administrative Procedure Act
and the Law on Administrative Jurisdiction shall be applied.
 
FIFTH: OBLIGATIONS OF THE PARTIES IN CASE OF TERMINATION OF CONTRACT.
 
If at the termination of the Operation Contract, THE GENERATING COMPANY decides
not to renew as provided for in Article 71 of the Law Framework of the Sub
Electrical Sector or in case of early termination of the Operation Contract for
any justified or significant cause, provided in this Operation Contract or in
Article 72 of the Law Framework of the Sub Electrical Sector and in addition it
is considered by opinion of the State that the facility is necessary for the
Operation of the National Interconnected System, the rule of mutual agreement
with THE GENERATING COMPANY, can buy their goods identified in the Operation
Contract by the institution concerned and through the recognition and payment to
THE GENERATING COMPANY of the market value of facilities and equipment.
 
The market value will be determined by mutual agreement, and if this agreement
is not reached within three (3) months after the completion of Operation
Contract, the parties will submit to arbitration as provided in the Arbitration
and Conciliation Act, contained in Decree 161-2000 dated October 17, 2000 and
published in the Official Gazette on February 14, 2001.
 
SIX RESERVE FUND:  Section 6.1. AMOUNT.
 
The amount of the reserve fund that the Generating Company shall provide for the
fulfillment of the obligations contained in article 44 of the Law Framework of
the Sub Electrical Sector shall be: SEVEN THOUSAND TWO HUNDRED SEVENTY-FIVE
DOLLARS OF THE UNITED STATES OF AMERICA (US$7,275.00) per year, or
alternatively, to contract insurance policies that cover their responsibilities.
 
In case capacity increases, the amount of the reserve fund or the value of
insurance policies, will be increased to the value indicated in proportion to
the increase of the average annual energy production.
 
 
 
 

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Section 6.2. VERIFICATION.
 
Before operation starts, and at any time after the request of the Ministry, the
Generating Company shall ensure that it has formed the reserve fund or
contracted the insurance policies by the amount specified amount.
 
Section 6.3. MODALITIES.
 
The reserve fund may take the form of a Bank Guarantee, a line of credit, bond,
or a bank deposit account intended only to direct or indirect payment of
compensation referred to in Article 44 of the Law Framework of the Sub
Electrical Sector.
 
SEVENTH: SANCTIONS FOR BREACH.
 
Section 7.1. SANCTIONS.
 
If the Generating Company fails to fulfill the obligations established in the
present Operation Contract, it shall be subject to sanctions imposed by the NCE
through the Ministry, in accordance with what is established in the applicable
legislation.
 
Section 7.2. EXCEPTIONS BY GREATER FORCE OR ACT OF GOD.
 
The Generating Company shall have no liability if, for Force majeure, duly
verified, cannot meet its obligations under this Contract.
 
However, the Generating Company will make every reasonable effort to mitigate
the effects of the events of force majeure.
 
The Generating Company shall notify the Ministry of every Force Majeure or act
of God, within the next seventy-two (72) hours of the event and will also send,
within ten (10) days of the initial notification, a second notification that
describes the event in detail providing all kinds of tests and give an estimate
of the time it will take to overcome the incident. The Ministry may draw a
reasonable time for the rehabilitation of the Project. When overcoming the
effects of Force Majeure or act of God, Ia Generating Company will make a third
notification to the Ministry, informing him of the termination of the period
during which its performance was affected by the event.
 
Section 7.3. EMERGENCIES AND SAFETY.
 
THE GENERATIN COMPANY will write down the orders and instructions on a temporary
basis, by the strictly necessary time, for reasons of general interest, national
emergency, emergency in the national interconnected system, or safety of people,
is imparted by the MINISTRY and / or the Center of Load Dispatch of ENEE .- As
soon as such circumstances disappear, the relationship should again be governed
by the contractual clauses described in this Operation Contract.
 
If during the timeliness any loss would have been caused to the GENERATING
COMPANY, the State must indemnify.
 
In case of disagreement on the calculation of compensation, the pinion of the
National Energy Commission shall be requested, and if no agreement is reached
even with this opinion, the Party concerned may seek for arbitration within
ninety (90) days from which the temporary condition ceases exist undergoing the
procedure defined in the Conciliation and Arbitration Act contained in
Legislative Decree N0. 151-2000 dated October 17, 2000,  published on February
14, 2001.
 
EIGHT: PROPERTY SUBJECT TO PURCHASE BY THE MINISTRY.
 
For the purposes set out in Article 74 of the Law Framework of the Sub
Electrical Sector, the Ministry designates the following properties of the
Generating Company, who reserves the right to acquire at the termination of the
Contract for any cause, project facilities, including water works,
electromechanical equipment, lift substation, transmission line for connection
to the mains, tools and maintenance equipment and all facilities necessary
annexed for the normal operation in electrical power generation and its
injection to the transmission network.
 
The value of these assets will be determined in accordance with the provisions
of Article 74 of the Law Framework of the Sub Electrical Sector, as amended by
Decree 1970-2007.
 
 
 
 

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NINE: GENERAL PROVISIONS.
 
Section 9.1. AMENDMENT.
 
This Operation Contract for Power Generation and Electricity may be extended,
amended or modified by agreement and will of the parties and in accordance with
the applicable laws.
 
In the specific case of changes in the installed capacity they must have a
favorable opinion of Ministry.
 
Section 9.2. LOAD DISPATCH CENTER.
 
It is understood that the Load Dispatch Center (LDC) will have the following
obligations:
 
a) coordinate, supervise, monitor and analyze the operation of the NIS,
including international interconnections;
b) Coordinate the scheduling of preventive maintenance of the NIS installations;
c) Obtain and process information necessary to fulfill their duties, and to
produce monthly reports to be presented to companies in the sector and the NEC,
regarding the operation and projected view of the SIN;
d) Maintain the SIN operation within prudent operational limits of engineering
practices.
 
The GENERATING COMPANY when it is affected by the decisions of the Load Dispatch
Center, you can challenge them before the authorities of LOAD DISPATCH CENTER
who hear the opinion of the NCE.
 
The decision of the authorities of the CDC can be subject to the resources of
law and the procedures agreed between the parties.
 
THE GENERATING COMPANY should provide in a timely manner all the technical
information requested by the CDC for proper operation of the NIS.
 
Section 9.3. RISK OF LOSS OF THE COMPANY GENERATING.
 
The GENERATING COMPANY, will be responsible and bear the risk of any loss or
damage to the plant, the interconnection facilities of the owner of the plant if
it was not him, or any other property located on the side of the GENERATING
COMPANY seen from the point of delivery (including transformer and metering
equipment).
 
Section 9.4. Cession or transfer.
 
THE GENERATING COMPANY may assign, after authorization by the Ministry, in whole
or in part the rights and obligations under this contract to any corporation
with technical and financial capacity, except for governments or foreign
official corporations, who must meet all requirements of the assigning
GENERATING COMPANY and that shall be subrogated in all rights and obligations of
the assignor.
 
THE GENERATING COMPANY has the right to assign, without the prior consent of the
Ministry, the benefits and rights granted and the MINISTRY that were set forth
in this Contract to any financier or financiers other than a public entity, as
security for any loan or loans that THE GENERATING COMPANY may want  to obtain.
 
Section 9.5. BENEFITS.
 
This contract may be incorporated into the benefits granted under new Iaws,
interpretations or amendments and future contracts with the simple application
of the GENERATING MINISTRY who will deliver its respective opinion .
 
Section 9.6. ANNEX:
 
Annex 1: Project Facilities are declared an integral part of this Contract.
 
Section 9.7. APPLICABLE LAW:
 
The rights and obligations of the parties under or pursuant to this Operation
Contract shall be governed by the laws of Honduras and the parties undertake to
abide by, comply with and be subject to those laws, especially but without
limit, to the legal ordering in administrative matter, electricity and
environment.
 
None of the clauses of Operation Contract shall be construed as contradicting
principles and specific provisions contained in the rules governing the Electric
Sub-Sector and the General Environmental Act and its regulations, which prevail
in case of ambiguity or obscurity of any clause in the Operation Contract and
shall apply to regulate all situations not covered by the same.
 
Section 9.8. RESOURCES OF THE PARTIES IN CASE OF VIOLATION OF CONTRACT.
 
Any dispute, controversy or claim arising out of this Contract or violation,
termination or invalidity thereof (hereafter dispute or disputes) will be
resolved under the Settlement Act and Arbitration Decree N0. 161-2000, published
on February 14, 2001.
 
TENTH: NOTIFICATIONS.
 
Any notification that a party has to make to the other in connection with this
Contract, shall be in writing and be directed to the care person who follows and
be delivered directly or sent by registered mail, email, duly signed and sealed,
scanned and sent in PDF format, or by fax.
 
The notitlcaciones sent by fax require confirmation in writing and delivered as
indicated before, to the Ministry: Ministry of Natural Resources and Environment
100 meters south of the National Stadium, opposite the Campo Birichiche,
Tegucigalpa M.D.C. Attention Secretary of State. Phone (504) 232-1386 Fax: (504)
232-6250, e-mail: sdespacho@serna.gob.hn; to the Generating Company: ROTA
INVESTMENTS SA. de CV, Col. Palmira, Paseo Republica de Argentina N ° 2203,
Phone (504) 232-6607, (504) 232-0041 Tegucigalpa, Attention: General Management.
Changes in people and addresses should be reported in a similar way. In
testimony which the parties signed this Contract in triplicate in the city of
Tegucigalpa, Central District, Republic of Honduras, the 5th day of the month of
June, 2010.

DR. DARIO ROBERTO CARDONA V.                 ING. MARCO ANTONIO RODRIGUEZ C.
DR. DARIO ROBERTO CARDONA V.                                        ING. MARCO
ANTONIO RODRIGUEZ C.
SUB SECRETARY OF NATURAL                                               GENERAL
MANAGER
RESOURCES AND ENVIORMENT                                             ROTA
INVESTMENTS, S.A. DE C.V.

 
 

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