Document:

EX-10.2 SUBORDINATED CAPITAL NOTE

Exhibit 10.2

THIS NOTE IS NOT A DEPOSIT AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY GOVERNMENT AGENCY.

THIS NOTE IS UNSECURED, AND IS JUNIOR AND SUBORDINATE IN RIGHT OF PAYMENT TO ALL SENIOR DEBT OF THE
COMPANY, WHETHER NOW EXISTING OR HEREAFTER CREATED, WHICH SENIOR DEBT INCLUDES ALL INDEBTEDNESS
OWED BY THE COMPANY TO ITS SECURED CREDITORS, ITS GENERAL CREDITORS AND DEPOSITORS. THIS NOTE IS
INELIGIBLE AS COLLATERAL FOR ANY LOAN OR EXTENSION OF CREDIT BY THE COMPANY OR ITS SUBSIDIARIES.
ANY HOLDER THAT IS A DEPOSITORY INSTITUTION WAIVES ALL RIGHTS OF SETOFF IT MAY HAVE AGAINST THE
COMPANY UNDER THIS NOTE.

THIS NOTE (OR ITS PREDECESSOR) IS EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND IS BEING ISSUED IN A TRANSACTION NOT SUBJECT TO
REGISTRATION UNDER THE SECURITIES ACT OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE OR OTHER
JURISDICTION. ACCORDINGLY, THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT, AND HAS NOT
BEEN REGISTERED OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES OR BLUE SKY LAWS.

THIS NOTE MUST BE ISSUED IN MINIMUM DENOMINATIONS OF $250,000 AND MAY NOT BE EXCHANGED OR
TRANSFERRED FOR NOTES OR DEBENTURES OF THE COMPANY IN SMALLER DENOMINATIONS.

PINNACLE NATIONAL BANK

SUBORDINATED CAPITAL NOTE

SERIES 2008-1

DATED AS OF AUGUST 5, 2008

			
	 	 	 
	U.S. $15,000,000.00
	 	No.-001-

     FOR VALUE RECEIVED, Pinnacle National Bank, a national bank (the “Company”), hereby
promises to pay to SunTrust Bank (“SunTrust”) at its offices at 303 Peachtree Street,
Atlanta, GA 30308 or to any Holder or Holders at any other place as SunTrust or such other

 

 

Holders may from time to time designate the principal amount of FIFTEEN MILLION DOLLARS
($15,000,000) on September 30, 2015 (the “Maturity Date”) and to pay interest thereon in
arrears on each of March 31, June 30, September 30, and December 31 of each year, including the
Maturity Date, or if any such day is not a Business Day, on the next succeeding Business Day (each,
an “Interest Payment Date, beginning on September 30, 2008), as provided below.

     1. Interest.

     (a) The Interest Rate for the initial interest period from the date of original issuance as of
August 5, 2008 to September 30, 2008 shall be 6.29813% per annum. Thereafter, interest on the
outstanding principal amount of this Note and any successor Note or Notes (the “Notes”) at
the rate equal to three-month LIBOR, as in effect for each Interest Reset Period, plus 3.50% per
annum from September 30, 2008 until the Maturity Date. Interest will be computed and paid on the
basis of a 360-day year and the actual number of days elapsed in the relevant interest period.
Interest on the Notes will accrue from the most recent date to which interest has been paid or, if
no interest has been paid, from the date of original issuance. Interest shall also be due and
payable when these Notes shall become due and payable (whether at maturity or otherwise). The
Company shall pay interest on overdue principal and premium, if any, and interest to the extent all
obligations of the Borrower hereunder are not paid in full at maturity of this Note, to the extent
lawful and then permitted by Federal Reserve rules then applicable to subordinated capital notes
includible within Tier 2 capital, at a rate per annum equal to the Interest Rate applicable from
time to time plus 2.00% per annum (“Default Interest”). All Default Interest shall be
payable on demand. For purposes of payment of interest by the Company, three-month LIBOR in
respect of each Interest Payment Date shall be determined by SunTrust in accordance with the
provisions of this Note.

     (b) The “LIBOR Determination Date” is the second London business day prior to the
“Interest Reset Date”, which shall be the same date as each interest payment date. On each
LIBOR Determination Date, SunTrust as calculation agent hereunder (the “Calculation Agent”)
will determine LIBOR for the period (the “Interest Reset Period”) beginning on such
Interest Reset Date through the day immediately preceding the next succeeding Interest Reset Date,
as follows: SunTrust, as the Calculation Agent will determine the offered rates for three-month
U.S. Dollar deposits in the London interbank deposit market, commencing on such Interest Reset
Date, which are specified on Reuters Screen LIBOR01 Page (or any successor page), or such similar
service as determined by the Bank that displays British Bankers’ Association interest settlement
rates for deposits in U.S. Dollars, as of 11:00 A.M. (London, England time) two (2) London business
days prior to the Original Issue Date and each Interest Reset Date; provided, that if no such
offered rate appears on such page, the rate used will be the per annum rate of interest determined
by SunTrust, as the Calculation Agent to be the rate at which deposits in U.S. Dollars for a
three-month period are offered to SunTrust in the London interbank deposit market as of 10:00 A.M.
(Atlanta, Georgia time), on the day which is 2 Business Days prior to each Interest Reset Date. If
Reuters Screen LIBOR01 is replaced by another page, or if the Reuters service is replaced by a
successor service, then LIBOR means the replacement page or service selected by SunTrust to display
the London interbank offered rates of major banks.

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     Rates quoted must be based on a principal amount of at least U.S. $1,000,000. If fewer than
three New York City banks selected by SunTrust are quoting rates, LIBOR for such Interest Reset
Period will be determined as of the last Business Day preceding the Interest Determination Date on
which three-month LIBOR can be determined from the Reuters Screen LIBOR01 Page.

     The foregoing provisions of Section 1 notwithstanding, and regardless of whether SunTrust is a
Holder any of or all the Notes and prior to any Interest Reset Date, SunTrust, as the Calculation
Agent shall have determined (which determination shall be conclusive and binding upon the Company)
that (a) by reason of circumstances affecting the relevant London interbank deposit market,
adequate means do not exist for ascertaining LIBOR, or (b) LIBOR does not adequately and fairly
reflect the cost to SunTrust of maintaining the funding for the Notes, SunTrust, as the Calculation
Agent shall give written notice (or telephonic or facsimile notice, promptly confirmed in writing)
to the Company and the other Holders of Notes, if any, as soon as practicable thereafter. Until
SunTrust notifies the Borrower that the circumstances giving rise to such notice no longer exist
(which notice shall be promptly sent by SunTrust), interest on the Subordinated Term Loan shall be
calculated at the Base Rate, as in effect from time to time, plus 1.30% per annum.

     (c) If any change in Law shall:

     (i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit extended by,
SunTrust hereunder, including the full principal amount of the Note and any accrued but
unpaid interest and Default Interest, if any; or

     (ii) impose on SunTrust or the eurodollar interbank market any other condition
affecting this Note and the result of the foregoing is to increase the cost to SunTrust of
maintaining the full amount provided to the Company hereunder or to reduce the amount
received or receivable by SunTrust hereunder (whether of principal, interest or any other
amount), then the Company shall promptly pay, upon written notice from and demand by
SunTrust, for and on behalf of itself and any other Holder, within 5 Business Days after the
date of such notice and demand, such additional amount or amounts sufficient to compensate
SunTrust for such additional costs incurred or reduction suffered.

     If SunTrust as a Holder or as Calculation Agent shall have determined that on or after the
date of this Agreement any Change in Law regarding capital requirements has or would have the
effect of reducing the rate of return on SunTrust’s capital (or on the capital of any parent
company of SunTrust) as a consequence of its obligations hereunder to a level below that which
SunTrust or any SunTrust parent company corporation could have achieved but for such Change in Law
(taking into consideration the policies of SunTrust and its parent companies with respect to
capital adequacy) then, from time to time, within 5 Business Days after receipt by the Borrower of
written demand by SunTrust, the Company shall pay to SunTrust and the other Holders, if any, such
additional amounts as will compensate SunTrust for any such reduction suffered.

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     A certificate of SunTrust setting forth the amount or amounts necessary to compensate SunTrust
shall be delivered to the Borrower and shall be conclusive, absent manifest error. The Borrower
shall pay SunTrust such amount or amounts within 15 days. Any failure or delay on the part of the
SunTrust to demand compensation pursuant to this Section shall not constitute a waiver of
SunTrust’s right to receive, and the Company’s obligation hereunder to pay, such compensation. Any
additional compensation due hereunder as a result of this Section shall be paid to SunTrust and to
any other Holder of Notes pro rata to the principal amount of Notes held by each of them

     (d) In no event shall the amount of interest due or payable hereunder or any other fees or
charges exceed the maximum rate of interest allowed by applicable law, and in the event any such
payment is inadvertently paid by the Company or inadvertently received by the Holder, then the
Holder promptly upon such determination shall return such excess sum. It is the express intent
hereof that the Company not pay and the Holder not receive, directly or indirectly, in any manner
whatsoever, interest in excess of that which may be lawfully paid by the Company under applicable
law.

     2. Method of Payment. The Company will pay interest on the Notes, except as to
Default Interest, to SunTrust and any other Holders, at the close of business on the day
immediately preceding the Interest Payment Date, even if such Notes are canceled after the related
Record Date and on or before such Interest Payment Date, and as provided herein with respect to
Default Interest. The Notes will be payable as to principal, premium, and interest, if any, by
wire transfer of immediately available funds with respect to principal of, and premium and
interest, if any, on all Notes the Holders of which have $5,000,000 or more principal amount of
such Notes and who have provided appropriate wire transfer instructions to the Company. Such
payment shall be in such lawful coin and currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts. All payments on this Note shall
be applied first to accrued interest and the balance, if any, to principal. The Company’s
obligations to pay the principal of, and interest (including Default Interest) on, this Note shall
be evidenced by this Note and the records of SunTrust. The calculations of the interest rate and
entries made in such records shall be prima facie evidence of the existence and amounts of the
obligations of, and payments by, the Company therein recorded; provided, that the failure or delay
of SunTrust in maintaining or making such records or any error therein shall not in any manner
affect the obligation of the Borrower to pay the principal of, and interest (including Default
Interest) in accordance with the terms of this Note.

     3. Form and Dating. The Notes may have notations, legends or endorsements required by
law and agreements to which the Company is subject or usage. The Notes shall be issued initially
in minimum denominations of $250,000 and integral multiples thereof, and may be transferred only in
minimum denominations of $250,000 and integral multiples thereof.

     4. Redemption. The Company shall have the option, but not the obligation, to redeem
the Notes in full, but not in part, on any Interest Payment Date upon not less than 30 days’ prior
notice to SunTrust and the other Holders at any time prior to September 30, 2015, subject to prior
OCC approval or any approval required by its then applicable regulators, if such approval is then
required.

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     5. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner
for all purposes. The Notes or any interest therein may be assigned or otherwise transferred by
the registered Holder(s) thereof, provided any such transfer shall be made in a manner that does
not require the Company to register the Notes under the Securities Act or any applicable state
securities or blue sky laws. The Company shall register any assignment or transfer of the Notes
promptly upon direction of such transfer, and confirmation from, a registered Holder of compliance
herewith.

     6. Amendment, Supplement and Waiver. Subject to certain exceptions hereinafter set
forth, the Notes may be amended or supplemented with the consent of the Company and Holders of at
least a majority in principal amount of the then outstanding Notes (including consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing
Default or Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest, if any, on the Notes, except a payment default
resulting from an acceleration that has been rescinded) or compliance with any provision of the
Notes may be waived with the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a purchase of or tender offer or
exchange for Notes). Without the consent of any Holder of a Note (but with the consent of the
Company), the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide
for the assumption of the Company’s obligations to the Holders of the Notes in the case of a
merger, consolidation or sale of all or substantially all of the assets of the Company, or to make
any change that would provide any additional rights or benefits to the Holders of the Notes or that
does not adversely affect the legal rights under the Notes of any such Holder.

     7. Subordination.

     (a) This Note is unsecured, and is junior and subordinate in right of payment to all Senior
Debt of the Company, whether now existing or hereafter created, which Senior Debt includes all
indebtedness owed by the Company to its secured creditors, its general creditors and depositors.

     (b) Upon or in the event of any distribution to creditors of the Company (i) in a total or
partial liquidation or dissolution of the Company; (ii) in a bankruptcy, reorganization,
insolvency, receivership, conservatorship or similar proceeding relating to the Company or its
property; (iii) in an assignment for the benefit of creditors of the Company; or (iv) in any
marshalling of the Company’s assets and liabilities:

     (i) holders of Senior Debt shall be entitled to receive payment in full in cash of all
Obligations due or to become due in respect of such Senior Debt (including interest after
the commencement of any such proceeding at the rates specified in the applicable Senior
Debt) before the Holders of Notes shall be entitled to receive any payment or distribution
with respect to the Notes or on account of any Claim; and

     (ii) until all Obligations with respect to Senior Debt (as provided in the immediately
preceding paragraph (i)) are paid in full in cash, any payment or distribution

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(including any payment or distribution that may be payable or deliverable by reason of
the payment of any other Indebtedness of the Company being subordinated to the payment of
the Notes) to which the Holders of Notes would be entitled but for this Section 7 shall be
made to holders of Senior Debt;

except that, in either case, Holders of Notes may receive payments and other distributions made
from any fund held in trust for the benefit of Holders of the Notes.

     (c) The Company may not make any payment or distribution (including any payment or
distribution that may be payable or deliverable by reason of the payment of any other Indebtedness
of the Company being subordinated to the payment of the Notes) to any Holder of Notes in respect of
Obligations or Claims with respect to the Notes and may not acquire from any Holder of Notes any
Notes for cash or property (except that Holders of Notes may receive payments and other
distributions made from any funds held in trust for the benefit of Holders of the Notes), until all
principal, interest and other Obligations with respect to the Senior Debt have been paid in full in
cash if:

     (i) a default occurs in the payment when due of the principal of, interest on, or any
other Obligation with respect to, any Senior Debt;

     (ii) a default, other than a payment default, occurs and is continuing with respect to
any Senior Debt that permits the holders of Senior Debt as to which such default relates to
accelerate its maturity and the Company receives a notice of such default (a “Payment
Blockage Notice”) from the Representative of any Senior Debt.

The Company may and shall, upon any required Office of the Comptroller of the Currency (the
“OCC”) approval, if any, resume payments on, and distributions in respect of, the Notes and
may acquire them upon:

     (x) in the case of a default referred to in Section 7(c)(i), hereof, the date on which
such default is cured or waived in accordance with the terms of such Senior Debt; or

     (y) in the case of a default referred to in Section 7(c)(ii) hereof, the earlier of (1)
the date on which such default is cured or waived in accordance with the terms of such
Senior Debt, or (2) 179 days after the date on which the applicable Payment Blockage Notice
is received by the Holders, unless the maturity of any Senior Debt has been accelerated.

If the Holders receive any such Payment Blockage Notice, no new Payment Blockage Notice shall be
delivered pursuant to this Section 7 unless and until:

     (i) 360 days shall have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice; and

     (ii) all scheduled payments of principal of, premium, if any, and interest on the Notes
that have come due have been paid in full in cash.

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Further, no nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Holders shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been cured or waived for a period of not less than
90 days.

     (d) If payment of the Notes is accelerated because of the occurrence of an Event of Default,
then the Company shall cooperate to promptly notify each Representative, or if there is no
Representative, each Holder of Senior Debt of the acceleration; provided, however, that so long as
any Senior Debt is outstanding, any such acceleration shall not become effective, and the Company
shall not make, and the Holders of Notes may not accept or receive, any payment with respect to the
Notes until the day which is five Business Days after the receipt by Representatives of Senior Debt
of written notice of acceleration. Thereafter, the Company may make payments with respect to the
Note in accordance with the terms of this Note.

     (e) In the event that any Holder of Notes receives any payment or distribution with respect to
the Notes at a time when such Holder, as applicable, has actual knowledge that such payment or
distribution is prohibited by Section 7 hereof, such payment or distribution shall be held by such
Holder, in trust for the benefit of, and shall be segregated from other funds and property of such
Holder of Notes and be paid forthwith over and delivered in the same form as received (with any
necessary endorsement), upon written request, to, the trustee of the Senior Debt or the related
Holders or their Representatives, as their respective interests may appear, for application to the
payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to
pay such Obligations in full in accordance with their terms, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Debt.

     (f) With respect to the holders of Senior Debt, the Holders (and each Trustee or
Representative, if any, on behalf of such Holders) undertake to perform only such obligations on
the part of the Holders as are specifically set forth in this Section 7, and no implied covenants
or obligations with respect to the holders of Senior Debt shall be construed or implied into this
Note against the Holders of Notes. The Holders of Notes shall not be deemed to owe any fiduciary
or other duty to the holders of Senior Debt, and shall not be liable to any such holders for any
payment or distribution to or on behalf of Holders of Notes or the Company or any other Person
money or assets to which any holders of Senior Debt shall be entitled by virtue of this Section 7,
except if such payment is made as a result of the willful misconduct or gross negligence of the
Holder.

     (g) The Company shall promptly notify the Holders of any facts known to an Officer of the
Company that would cause a payment of any Obligations with respect to the Notes or of any Claim to
violate this Section 7, but failure to give such notice shall not affect the subordination of the
Notes and all Claims of the Senior Debt as provided in Section 7.

     (h) After all Senior Debt is paid in full in cash and until the Notes are paid in full in
cash, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness that is
pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions
applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of
Notes have been applied to the payment of Senior Debt. A distribution made under this Section

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9 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders of Notes, a payment by the Company on the Notes.

     (i) This Section 7 defines the relative rights of Holders of the Notes and holders of Senior
Debt. Nothing in this Note shall:

     (i) impair, as between the Company and Holders of Notes, the obligation of the Company,
which is absolute and unconditional, to pay principal of, premium and interest, including
Default Interest, if any, on the Notes in accordance with their terms;

     (ii) affect the relative rights of Holders of Notes and creditors of the Company other
than their rights in relation to holders of Senior Debt; or

     (iii) prevent any Holder of Notes from exercising its available remedies upon a Default
or Event of Default, subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders of Notes.

     (j) Whenever a distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to their Representatives. Upon any payment or
distribution of assets of the Company referred to in this Section 7, the Holders of Notes shall be
entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or other Person making
any distribution to the Holders of Notes for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Section 7.

     8. Certain Covenants. The Company covenants and agrees with the Holders that:

     (a) The Company will not declare, pay or make any dividends or distributions on or in respect
of, and will not authorize or call, redeem, repurchase or retire, any Company or Subsidiary
securities or indebtedness ranking pari passu or junior to the Notes, including any Company junior
subordinated debt, capital stock and equity securities, at any time when an Event of Default exists
and is continuing hereunder or under the Note Purchase/Loan Agreement or where such action would
result in such an Event of Default

     (b) The Company may, without the prior written consent of the Holders, enter into agreements
with respect to and consummate any mergers, consolidations, sales, leases or transfers of all or
substantially all its business or assets, or any spin-off, split-off or restructuring, provided
that, if the Company is not the surviving entity in the transaction, the successor entity is a
corporation or other entity that is a bank or savings association that is an Insured Depository
Institution organized under the laws of the United States or any state thereof or the District of
Columbia, and which expressly assumes by supplemental written instrument the due and punctual
payment of the principal and interest and other additional amounts on this Note, and the due and
punctual performance and observance of all the covenants and conditions contained herein and in
each of the Company’s indentures, indebtedness and loan agreements; and provided further, that
immediately after giving effect to the transaction, there is no event of default under the other
indentures, indebtedness and loan agreements of the Company or an

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Event of Default hereunder and no event, which, after notice or the lapse of time or both,
would become an event of default under the other indentures, indebtedness and loan agreements, or
an Event of Default hereunder. Notwithstanding any other provisions of this Note, it is expressly
understood and agreed that the OCC or any receiver or conservator of the Company appointed by the
OCC shall have the right in the performance of its legal duties, and as part of liquidation
designed to protect or further the continued existence of the Company or the rights of any parties
or agencies with an interest in, or claim against, the Company or its assets, to transfer or direct
the transfer of the obligations of this Note to any bank or bank holding company selected by such
official which shall expressly assume the obligation of the due and punctual payment of the unpaid
principal, and interest and premium, if any, on the Note and the due and punctual performance of
all covenants and conditions hereunder; and the completion of such transfer and assumption shall
serve to supersede and void any default, acceleration or subordination which may have occurred, or
which may occur due or related to such transaction, plan, transfer or assumption, pursuant to the
provisions of this Note, and shall serve to return the Holder to the same position, other than for
substitution of the obligor, it would have occupied had no default, acceleration or subordination
occurred; except that any interest and principal previously due, other than by reason of
acceleration, and not paid shall, in the absence of a contrary agreement by the Holder, be deemed
to be immediately due and payable as of the date of such transfer and assumption, together with the
interest from its original due date at the rate provided for herein.

     (c) The Company will do all things necessary to preserve and keep in full force and effect its
legal existence, and all material rights and franchises in full force and effect to the extent that
a failure to do so would reasonably be expected to have a Material Adverse Effect, and to maintain
its properties in good condition.

     (d) Except as would not be disadvantageous to the Holders of the Notes, the Company will pay
or discharge or cause to be paid and discharged before they become delinquent, all taxes,
assessments and governmental charges levied upon it or any of its Subsidiaries or upon the income,
profits or property of any of them; provided that the Company will not be required to pay or
discharge or cause to be paid or discharged any tax, assessment, charge or claim the amount
applicability or validity of which are being contested in good faith by appropriate proceedings and
for which appropriate reserves have been established on the books and records of the Company or its
Subsidiaries.

     9. Defaults and Remedies. Events of Default include: (i) default which continues for
30 days in the payment when due of interest on the Notes; (ii) default in payment when due of the
principal of or premium, if any, on the Notes; (iii) failure by the Company for 30 days after
receipt of notice from Holders of at least 25% in principal amount of the then outstanding Notes to
comply with any of its other agreements or obligations in the Notes or the related Note
Purchase/Loan Agreement with respect to the Notes; and (iv) the bankruptcy, insolvency,
receivership or conservatorship with respect to the Company or any subsidiary or group of
subsidiaries that, taken together, would constitute a Significant Subsidiary. The Holders of the
Notes may not accelerate the maturity of the Notes upon any Event of Default except in the case of
an Event of Default arising as the result of the bankruptcy, insolvency, receivership,
conservatorship or reorganization of the Company.

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     10. Miscellaneous.

     (a) The transfer of Notes may be registered and Notes may be exchanged on the Company’s books
and records. The Company may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents, and may require a Holder to pay any transfer taxes and fees
required by law. The Company need not exchange or register the transfer of any Note or portion of
a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in
part.

     (b) All parties now or hereafter liable with respect to this Note, whether the Company, any
guarantor, endorser, any Successor or any other Person, hereby waive diligence, presentment for
payment, demand, notice of non-payment or dishonor, protest and notice of protest, or any other
notice of any kind with respect thereto. No delay or omission on the part of the Holder in the
exercise of any right or remedy hereunder or under the related Note Purchase/Loan Agreement, or at
law or in equity, shall constitute a waiver thereof in that or any subsequent instance, and no
single or partial exercise by the Holder of any right or remedy hereunder, under the related Note
Purchase/Loan Agreement, or at law or in equity, shall preclude or estop another or further
exercise thereof or the exercise of any other right or remedy.

     (c) Time is of the essence for all purposes of this Note.

     (d) This Note is ineligible as collateral for any loan or extension of credit by the Company
or its Subsidiaries. Any Holder that is a depository institution waives all rights of setoff it
may have against the Company under this Note.

     (e) The Company shall pay (i) all out-of-pocket expenses of the Holder, including, without
limitation, reasonable fees and charges of counsel actually incurred for the Holder in connection
with the preparation, administration and/or enforcement of this Note, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder, and (ii) if a
Default occurs, all out-of-pocket expenses actually incurred by the Holder, including, without
limitation, reasonable fees and charges of counsel actually incurred in connection with such
Default and the collection and other enforcement proceedings resulting therefrom.

     (f) Any notice or communication by the Company or the Holders to be effective shall be in
writing and shall be delivered by hand or reliable overnight courier service, mailed by certified
or registered mail or sent by telecopy, as follows:

	 	 	 
	To the Company:

	 	Pinnacle National Bank
	 

	 	211 Commerce Street
	 

	 	Suite 300
	 

	 	Nashville, Tennessee 37201
	 
	 	 
	 

	 	Attn: Harold R. Carpenter
	 

	 	Telephone Number: (615) 744-3742
	 

	 	Fax Number: (615) 744-3842
	 

	 	Email: harold.carpenter@pnfp.com

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	To the Holder:

	 	SunTrust Bank
	 

	 	303 Peachtree Street, 3rd Floor
	 

	 	Atlanta, Georgia 30308
	 
	 	 
	 

	 	Attn: Christopher M. Houck
	 

	 	Telephone Number: (404) 588-7788
	 

	 	Fax Number: (404) 581-1775
	 

	 	Email: chris.houck@suntrust.com

Notices sent by hand or reliable overnight courier service, or mailed by certified or registered
mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed
to have been given when sent (except that, if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the next Business Day
for the recipient).

Any party hereto may change its address or telecopy number for notices and other communications
hereunder by notice to the other parties hereto. All such notices and other communications shall,
when transmitted by overnight delivery, or faxed, be effective when delivered for overnight
(next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if
mailed, upon the third Business Day after the date deposited into the mails or if delivered, upon
delivery; provided, that notices delivered to the Holder shall not be effective until actually
received by the Holder at its address specified in this Section 10(f). With respect to any
communications delivered or furnished by electronic communication under Section 10(f), such
communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt requested” function, as
available, return e-mail or other written acknowledgement); provided, that if such communications
are not sent during the normal business hours of the recipient, such communications shall be deemed
to have been sent at the opening of business on the next Business Day for the recipient, and (ii)
communications posted to an internet website shall be deemed received upon the deemed receipt by
the intended recipient at its e-mail address as described in the foregoing clause (i) of
notification that such communication is available and identifying the website address therefor.

Any agreement of the Holder herein to receive certain notices by telephone or facsimile is solely
for the convenience and at the request of the Company. The Holder shall be entitled to rely on the
authority of any Person purporting to be a Person authorized by the Company to give such notice and
the Holder shall not have any liability to the Company or other Person on account of any action
taken or not taken by the Holder in reliance upon such telephonic or facsimile notice.

     (g) This Note may not be used to interpret any other indenture, note, loan or debt agreement
of the Company or its Subsidiaries or of any other Person. Any such indenture, note, loan or debt
agreement may not be used to interpret this Note.

     (h) All agreements of the Company in this Note shall bind its successors.

     (i) In case any provision in this Note shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in any way be affected

- 11 -

 

or impaired thereby. Each covenant or obligation set forth herein shall be independent of the
others and any waiver or consent to departure with respect to one covenant shall not be deemed or
construed to be a waiver or consent to departure with respect to any other covenant.

     (j) The Headings and Sections of this Note have been provided for convenience of reference
only, are not to be considered a part of this Note and shall in no way modify or restrict any of
the terms or provisions hereof.

     (k) Nothing in this Note, express or implied, shall give to any Person, other than the
Holders, any benefit or any legal or equitable right, remedy or claim under this Note.

     (l) Certain defined terms used herein shall have the meanings and interpretations provided in
Exhibit 1 hereto and incorporated herein by this reference. Customary abbreviations may be
used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants
in common), CUST (= custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

     (m) This Note is the Note referred to in the Note Purchase/Loan Agreement, and is entitled to
the benefits of such Note Purchase/Loan Agreement.

     (n) THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE NOTES
WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES.

[Signature Page Follows]

- 12 -

 

          IN WITNESS WHEREOF, the party hereto has caused this Note to be duly executed under seal.

	 	 	 	 	 
	 	PINNACLE NATIONAL BANK

 	 
	 	By:  	/s/ M.
Terry Turner	 
	 	 	Name: 	 M. Terry Turner	 
	 	 	Title:  	President & Chief Executive Officer	 
	 

[SEAL]

- 13 -

 

ASSIGNMENT FORM

     To assign this Note, fill in the form below1:

(I) or (we) assign and transfer this Note to

 

(Insert assignee’s Soc. Sec. or tax I.D. no.)

 

 

 

(Print or type assignee’s name, address and zip code)

and irrevocably appoint ___ to transfer this Note on the books of the Company. The agent may
substitute another to act for him.

 

Date:                                         

Your Signature:                                        

(Sign exactly as your name appears on the face of

this Note)

Signature Guarantee2:

[Exhibit 1 follows]

 

			
	1	 	Subject to restriction on transfer. See Section 5 of
the Note.
	 
	2	 	Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor acceptable to the Paying Agent
or Trustee, if any).

 

 

EXHIBIT 1

Certain Defined Terms and Interpretative Provisions

Defined Terms

     “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 purposes of this definition, “control,” as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided, however, that beneficial ownership of 10% or more of the Voting
Stock of a Person shall be deemed to be control. For purposes of this definition, the terms
“affiliated,” “controlling,” “controlled by” and “under common control
with” shall have correlative meanings.

     “Agent” means any Registrar, Paying Agent or co-registrar or any successor thereto.

     “Bankruptcy Law” means Title 11, U.S. Code or any other applicable federal or state
bankruptcy, insolvency or similar law for the relief of debtors, and any federal or state law
pertaining to the appointment of a receiver, conservator, liquidator, assignee, custodian, trustee
or similar official.

     “Base Rate” means the higher of (i) the per annum rate which SunTrust publicly
announces from time to time to be its prime lending rate, as in effect from time to time, and
(ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%).
SunTrust’s prime lending rate is a reference rate and does not necessarily represent the lowest or
best rate charged to customers. SunTrust may make commercial loans or other loans at rates of
interest at, above or below SunTrust’s prime lending rate. Each change in SunTrust’s prime lending
rate shall be effective from and including the date such change is publicly announced as being
effective.

     “Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5
under the Exchange Act, except that in calculating the beneficial ownership of any particular
“person” (as such term is used in Section 13(d)(3) of the Exchange Act), such “
person” shall be deemed to have beneficial ownership of all securities that such
“person” has the right to acquire, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition.

     “Board of Directors” means the board of directors (or other body having similar
management functions) or any committee thereof duly authorized to act on behalf of such board.
Except as expressly forth herein, any reference to the Board of Directors shall be a reference to
the Board of Directors of the Company.

     “Board Resolution” means, with respect to any Person, a copy of a resolution certified
by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of

E-1

 

Directors of such Person and to be in full force and effect on the date of such certification,
and delivered to the Paying Agent or Trustee (if any).

     “Business Day” means any day other than a Legal Holiday, and further, with respect to
Notes that bear interest based on LIBOR, any day in which dealings in deposits in U.S. Dollars are
transacted in the London interbank market (a “LIBOR Business Day”).

     “Capital Lease Obligation” means, at the time any determination thereof is to be made,
the amount of the liability in respect of a capital lease that would at that time be required to be
capitalized on a balance sheet in accordance with GAAP.

     “Capital Stock” means:

     (i) in the case of a corporation, corporate stock;

     (ii) in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate stock;

     (iii) in the case of a partnership or limited liability company, partnership or
membership interests (whether general or limited); and

     (iv) any other interest or participation that confers on a Person the right to receive
a share of the profits and losses of, or distributions of assets of, the issuing Person.

     “Claim” means any claim arising from rescission of the purchase or sale of the Notes,
for damages arising from the purchase or sale of the Notes or for reimbursement or contribution on
account of such a claim.

     “Closing Date” means the date of this Note.

     “Currency Agreement” means in respect of a Person any foreign exchange contract,
currency swap agreement, currency spot or futures or options agreements or other similar agreement
to which such Person is a party or beneficiary.

     “Default” means any event that is, or with the passage of time or the giving of notice
or both would be, an Event of Default.

     “Depositary” means, with respect to the Notes issuable or issued in whole or in part
in global form, DTC as the Depositary with respect to the Notes, until a successor shall have been
duly appointed and qualified to become such and, thereafter, “Depositary” shall mean or
include such successor.

     “DTC” means The Depository Trust Company, New York, New York.

     “Event of Default” has the meaning provided in Section 9.

E-2

 

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and all rules
and regulations of the SEC promulgated thereunder.

     “FDIC” means the Federal Deposit Insurance Corporation and any successor thereto.

     “FDI Act” means the Federal Deposit Insurance Act and any successor thereto.

     “Federal Reserve” means the Board of Governors of the Federal Reserve System or its
delegee.

     “GAAP” means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants, statements and pronouncements of the Financial Accounting Standards Board, the Public
Company Accounting Oversight Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in effect from time to
time.

     “Governmental Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, self-regulatory authority, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or administrative
powers or functions of or pertaining to government, including the Federal Reserve, the OCC, the
FDIC and any other federal or state agency charged with the supervision or regulation of depositary
institutions or holding companies of depositary institutions (including any trust company
subsidiaries whether or not they take deposits), or any court, administrative agency, arbitral
authority, self-regulatory authority or commission or other governmental agency, authority or
instrumentality having supervisory or regulatory authority.

     “Guarantee” means a guarantee or other assurance of Indebtedness of another Person,
whether as an obligor, guarantor or otherwise, other than by endorsement of negotiable instruments
for collection in the ordinary course of business, direct or indirect, and in any manner including,
by way of a pledge of assets or other security or collateral or through letters of credit or
reimbursement agreements in respect thereof, of all or any part of any Indebtedness.

     “Hedging Obligations” means, with respect to any Person, the obligations of such
Person under Currency Agreements and Interest Rate Agreements.

     “Holder,” “Noteholder” and “Holder of Note” mean a Person in whose
name a Note is registered.

     “incur” shall mean, with respect to any Indebtedness or other Obligation, to directly
or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to such Indebtedness or other Obligation.

     “Indebtedness” means, with respect to any specified Person, any Obligations of such
Person in respect of:

     (i) borrowed money;

E-3

 

     (ii) debt securities, bonds, notes, debentures or similar instruments, letters of
credit, securities purchase facilities and reimbursement agreements in respect thereof;

     (iii) banker’s acceptances;

     (iv) Capital Lease Obligations;

     (v) the deferred and unpaid balance of the purchase price of any property, all
obligations of that Person under any conditional sale or title retention agreement, except
any such balance that constitutes an accrued expense or trade payable; or

     (vi) any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in
accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of
others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is
assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by such
Person of any Indebtedness of any other Person. The incurrence of Indebtedness Guaranteed by the
specified Person shall, for purposes of this Note, be the incurrence of Indebtedness by such
specified Person.

     The amount of any Indebtedness outstanding as of any date shall be:

     (i) the accreted value thereof, in the case of any Indebtedness issued with original
issue discount;

     (ii) the principal amount thereof, together with any accrued but unpaid interest
thereon, in the case of any other Indebtedness, and premium, if any; and

     (iii) the amount of Indebtedness of such specified Person arising by reason of a
Guarantee of Indebtedness.

     “Interest Rate Agreement” means in respect of a Person any interest rate swap
agreement, interest rate cap agreement, interest rate floor agreement, interest rate futures or
option contracts, or other financial agreement or arrangement designed to protect such Person
against fluctuations in interest rates.

     “Issue Date,” with respect to any Notes, means the date on which such Notes are
originally issued.

     “Junior Subordinated Debt” means the Company’s Trust Preferred Securities and the
related Guarantees and Junior Subordinated Debentures, any Indebtedness that is subordinate to or
on a parity with any of the foregoing Indebtedness, and any Indebtedness that is by its terms
subordinate to the Indebtedness incurred under this Note.

E-4

 

     “Law” means any law, rule, regulation or published interpretation by any Governmental
Authority, or order, guideline, directive, or request made by a Governmental Authority to SunTrust
or to any SunTrust or parent company.

     “Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in
the City of New York or Atlanta, Georgia are authorized or obligated by law, regulation or
executive order to remain closed. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal Holiday.

     “Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law, including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to sell or give a
security interest in such asset, and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

     “Note Purchase/Loan Agreement” means each of (i) the Note Agreement, dated as of
August 5, 2008, by and between the Company and SunTrust, and (ii) any other similar agreement
relating to Additional Notes, as each may be amended, modified, or supplemented from time to time.

     “Obligations” means any obligation, direct or indirect, contingent or non-contingent,
matured or unmatured, to pay principal, interest, penalties, fees, indemnifications,
reimbursements, damages, accounts payable and other liabilities of any kind whatsoever, including
any guarantee by the Company for the repayment of Indebtedness, whether or not evidenced by bonds,
debentures, notes or other written instruments, and any deferred obligation for the payment of the
purchase price of property or assets.

     “OCC” means the Office of the Comptroller of the Currency and any successor thereto.

     “Officer” means, with respect to any Person, the Chief Executive Officer, the
President, the Chief Financial Officer, any Vice President whose principal duties relate to
financial matters, the Treasurer or the Secretary of such Person.

     “Officers’ Certificate” means a certificate signed on behalf of a Person by the
principal executive officer, the principal financial officer or the principal accounting officer of
such Person.

     “Payment Blockage Notice” has the meaning ascribed in Section 7 of this Note.

     “Person” means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, limited liability company, unincorporated organization or government or
agency or political subdivision thereof (including any subdivision or ongoing business of any such
entity or substantially all of the assets of any such entity, subdivision or business).

     “Representative” means the indenture trustee or other trustee, agent or representative
in respect of any Indebtedness; provided, however, that if, and for so long as, any Indebtedness
lacks such a representative, then the Representative for such Indebtedness shall at all times

E-5

 

constitute the holders of a majority in outstanding principal amount of such Indebtedness in
respect of any Indebtedness.

     “SEC” means the United States Securities and Exchange Commission (or any successor
federal regulatory body having similar jurisdiction).

     “Securities Act” means the Securities Act of 1933, as amended, and all rules and
regulations of the SEC promulgated thereunder.

     “Senior Debt” means

     (i) any of the Company’s Indebtedness that, by its terms, is senior, or has a higher
priority, in right of payment to the Notes,

     (ii) any of the Company’s Indebtedness or other Obligations with respect to Hedging
Obligations and commodity contracts,

     (iii) any guarantees, endorsements (other than by endorsement of negotiable instruments
for collection in the ordinary course of business) or other similar Obligations in respect
of Obligations of others of a type described in clauses (i), (ii) and (iii), whether or not
such Obligation is classified as a liability on the balance sheet prepared in accordance
with GAAP, and

     (iv) Obligations owed to general creditors, including Obligations to the Federal
Reserve Bank, FDIC, and any rights acquired by the FDIC as a result of loans made by the
FDIC to the Company or the purchase or guarantee of any of its assets by the FDIC pursuant
to the provisions of 12 U.S.C. § 1823(c), (d) or (e), whether now outstanding or hereafter
incurred, and Obligations owed to depositors of the Company,

in each case whether outstanding on the date of execution of this Note or thereafter incurred,
other than Subordinated Debt and Junior Subordinated Debt, including the Company’s Trust Preferred
Securities Guarantees and the related Junior Subordinated Debentures.

     “Significant Subsidiary” means any Subsidiary that would be a “significant subsidiary”
as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act,
as such Regulation was in effect on the Closing Date.

     “Stated Maturity” means, with respect to any installment of interest or principal on
any series of Indebtedness, the date on which such payment of interest or principal was scheduled
to be paid in the original documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.

     “Subordinated Debt” means any Debt of the Company (whether outstanding on the Closing
Date or thereafter incurred) that is subordinate or junior in right of payment to all Senior Debt
pursuant to a written agreement to that effect.

E-6

 

     “Subsidiary” means, with respect to any Person:

     (i) any corporation, association or other business entity of which more than 50% of the
Voting Stock is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person (or a combination thereof); and

     (ii) any partnership (A) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person, or (B) the only general partners of
which are such Person or of one or more Subsidiaries of such Person (or any combination
thereof).

     “Trustee” means the party, if any, named as such, to hold payments on the Notes during
the continuance of a Default.

     “Trust Preferred Securities Guarantees” shall mean the guarantees issued by the
Company in connection with any trust preferred securities issued by an Affiliate to purchase Junior
Subordinated Debt issued by the Company and any Guarantee now or hereafter entered into by the
Company in respect of any preferred or preference stock that is by its terms subordinated to or on
a parity with the Junior Subordinated Debt.

     “Voting Stock” of any Person as of any date means the Capital Stock of such Person
that is at the time entitled to vote in the election of the Board of Directors of such Person.

     “Wholly Owned Subsidiary” of any Person means a Subsidiary of such Person all of the
outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying
shares) shall at the time be owned by such Person and/or by one or more Wholly Owned Subsidiaries
of such Person.

Interpretative Provisions

     Unless the context otherwise requires, for purposes of this Note:

     (i) a term has the meaning assigned to it;

     (ii) an accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;

     (iii) “or” is not exclusive;

     (iv) words in the singular include the plural, and in the plural include the singular
and any reference to gender includes all genders;

     (v) provisions apply to successive events and transactions;

     (vi) references to sections of or rules under the Securities Act shall be deemed to
include substitute, replacement or successor sections or rules adopted by the SEC from time
to time;

E-7

 

     (vii) the terms “include,” “included,” and “including,” and
words of similar meaning, shall be deemed to be without limitation, whether by enumeration
or otherwise;

     (viii) in computing periods of time from a specified date to a later specified date,
the word “from” means “from and including” and the word “to” means “to but excluding”;

     (ix) unless otherwise specified (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such agreement,
instrument or other document as it was originally executed or as it may from time to time be
amended, supplemented or otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth herein);

     (x) any reference herein to any Person shall be construed to include such Person’s
successors and permitted assigns; and

     (xi) the words “hereof”, “herein” and “hereunder” and words of similar import shall be
construed to refer to this Note as a whole and not to any particular provision hereof.

E-8EX-10(A)

EXHIBIT 10(a)

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

	 	 	 	 	 
	In the matter of the application of Midland

	)	 	 	 
	Cogeneration Venture Limited Partnership

	)	 	 	 
	for the Commission to eliminate the

	)	 	 	Case No. U-15320
	“availability caps” which limit Consumers

	)	 	 	 
	Energy Company’s recovery of capacity

	)	 	 	 
	payments with respect to its power purchase

	)	 	 	 
	agreement with Midland Cogeneration

	)	 	 	 
	Venture Limited Partnership

	)	 	 	 
	 

	)	 	 	 
	 

	 	 	 	 

 SETTLEMENT AGREEMENT

          Pursuant to MCL 24.278 and Rule 333 of the Rules of Practice and Procedure before the Michigan
Public Service Commission (“MPSC” or “Commission”), the undersigned parties agree as follows:

          WHEREAS, on May 30, 2007 Midland Cogeneration Venture Limited Partnership (“MCV”) filed an
application requesting the Commission to eliminate the “availability caps” which limit Consumers
Energy Company’s (“Consumers Energy”) recovery of capacity payments made to MCV pursuant to a Power
Purchase Agreement dated July 17, 1986, as amended (“PPA As Amended”), between Consumers Energy and
MCV, for capacity and energy supplied from the MCV generating facility located in Midland, Michigan
(“MC-Facility”).

          WHEREAS, public notice of this proceeding was provided throughout Consumers Energy’s electric
service territory.

          WHEREAS, pursuant to Notice of Hearing, the Commission commenced proceedings in this Case No.
U-15320. The parties to the case are the Commission Staff, MCV,

1

 

Consumers Energy, Attorney General Michael A. Cox (“Attorney General”), the Association of
Businesses Advocating Tariff Equity (“ABATE”), Michigan Environmental Council and Public Interest
Research Group in Michigan (“MEC/PIRGIM”), Dow Corning Corporation, and New Covert Generating
Company. No other person or party sought leave to intervene.

          The parties have engaged in discussions, and, subject to Commission approval, have agreed upon
a full settlement as set forth herein. The undersigned parties agree as follows:

          1. The terms of the PPA As Amended will be amended and restated as stated in Attachment A to
this Settlement Agreement (Attachment A is hereinafter referred to as the “Amended and Restated
PPA”). In summary, the payment terms of the Amended and Restated PPA provide for:

          (i) A capacity price of $10.14 per megawatthour (MWh) (1.014 cents per kilowatthour (KWh)) for
all Commercial Energy up to and including 1240 megawatts (MW), determined on an hourly basis,

          (ii) A fixed energy price calculated in the manner described in the Amended and Restated PPA,
for all Commercial Energy up to and including 1240 MW, determined on an hourly basis,

          (iii) A variable energy price for all delivered Commercial Energy that will reflect MCV’s
cost of production, calculated as stated in the Amended and Restated PPA.

          Other terms in the Amended and Restated PPA include the following:

          (iv) The Amended and Restated PPA will become effective when both of the following events
have occurred: (a) issuance of a Commission order approving this Settlement Agreement without
modification, and (b) the commercial operation date of at least four supplemental boilers to be
installed by MCV,

2

 

          (v) A procedure to measure the availability of the MC-Facility,

          (vi) Revised fuel assurance provisions,

          (vii) The primary term of the Amended and Restated PPA continues through March 15, 2025, with
Consumers Energy having the option, at the conclusion of the primary term, to purchase the
MC-Facility at fair market value as determined by a mutually acceptable appraisal of the facility,
or to extend the term of the Amended and Restated PPA at a reduced capacity price.

          2. The capacity available pursuant to the Amended and Restated PPA will
initially be offered into the Midwest Independent Transmission System Operator (“MISO”)
energy market by Consumers Energy based upon the variable energy charge (cost of production)
described in paragraph 1, and dispatched by MISO based upon the variable energy charge (cost
of production) or to meet reliability requirements. Pursuant to the Amended and Restated PPA,
MCV will have the option, subject to Commission approval of the necessary amendment, to
assume the responsibility of offering this capacity into the MISO energy market.

          3. All MPSC jurisdictional costs incurred by Consumers Energy as a result of
implementing this Settlement Agreement, including all MPSC jurisdictional capacity and energy
payments made by Consumers Energy under the Amended and Restated PPA, shall be fully
recoverable by Consumers Energy. The parties anticipate that such recovery will be
accomplished through the power supply cost recovery (PSCR) process governed by 1982 PA
304, as amended. When approved by the Commission without modification, this Settlement
Agreement provides assurance of such cost recovery to Consumers Energy during the term of the
Amended and Restated PPA, including approvals pursuant to 1909 PA 300, as amended; 1909
PA 106, as amended, 1939 PA 3, as amended; 1982 PA 304, as amended, and 1987 PA 81, as

3

 

amended. Approval pursuant to 1987 PA 81 shall not be effective until recertification of the
MC-Facility as a Qualifying Facility by the Federal Energy Regulatory Commission. Notwithstanding
the preceding, discretionary decisions made during the course of the administration of the
Settlement Agreement or the Amended and Restated PPA are, to the extent such decisions affect
power supply costs, subject to review and Commission approval for reasonableness and prudence in
PSCR proceedings. The parties agree that this Settlement Agreement does not address or resolve the
treatment in PSCR reconciliation proceedings of costs incurred prior to the effective date of the
Amended and Restated PPA.

          4. The Amended and Restated PPA represents and establishes negotiated prices under 18 CFR
§292.301 (b) and under the Public Utility Regulatory Policies Act, 16 USC §791a, et seq. MCV
agrees that, by negotiating these price terms, it waives all claims to compensation at avoided
cost rates.

          5. MCV agrees to contribute $5 million annually to the Renewable Resources Program Fund, with
such payment to be collected as set forth in the Amended and Restated PPA. The Renewable Resources
Program Fund is part of the Renewable Resources Program approved by the Commission in Cases No.
U-13843, U-12915, U-14031 and U-15433 and is described in Consumers Energy’s electric tariffs in
Rule C10. If the Renewable Resources Program is terminated or modified in a manner that eliminates
the need for the Renewable Resources Program Fund, MCV shall contribute the $5 million to support
the development of renewable resources in a manner permitted by law. In such event, all parties
shall have the opportunity to propose how the $5 million should be utilized.

          6. MCV agrees to (i) install at least four supplemental boilers for the purpose of supplying
steam to The Dow Chemical Company, the generation of electric energy and to allow

4

 

greater flexibility in the dispatch of the MC-Facility including the 1240 MW of Contract Capacity
to Consumers Energy, and (ii) to take the actions necessary to allow the MC-Facility to achieve the
“ramping” standards set forth in the operating practices applicable to the Amended and Restated
PPA. MCV will provide notice to the Commission and all parties when the Michigan Department of
Environmental Quality issues permit(s) for the installation of the supplemental boilers, and of the
commercial operation date of such boilers.

          7. If this Settlement Agreement is approved by the Commission without modification, MCV
agrees (i) not to contest Consumers Energy’s exercise of the “regulatory-out” provision set forth
in Section 10(c) of the PPA As Amended with respect to all periods prior to the effective date of
the Amended and Restated PPA where Consumers Energy has exercised such provision, and (ii) to
relinquish all rights which MCV may have under the PPA As Amended to terminate the PPA As Amended
or to reduce the amount of capacity committed to Consumers Energy as a result of Consumers
Energy’s exercise of the “regulatory-out” provision set forth in Section 10(c) of the PPA As
Amended.

          8. If this Settlement Agreement is approved by the Commission without modification, the
parties agree that the Resource Conservation Plan (RCP) approved by the Commission in Case No.
U-14031 should be terminated, effective with the date that the Amended and Restated PPA becomes
effective. The parties agree that MCV and Consumers Energy should take all actions necessary to
terminate the RCP, including the termination of the Resource Conservation Agreement and the
Reduced Dispatch Agreement between MCV and Consumers Energy.

          9. This settlement is entered into for the sole and express purpose of reaching a
compromise among the parties. All offers of settlement and discussions relating to this

5

 

settlement are, and shall be considered, privileged under MRE 408. If the Commission approves this
Settlement Agreement without modification, neither the parties to this Settlement Agreement nor
the Commission shall make any reference to, or use, this Settlement Agreement or the order
approving it, as a reason, authority, rationale, or example for taking any action or position or
making any subsequent decision in any other case or proceeding; provided, however, such references
may be made to enforce or implement the provisions of this Settlement Agreement and the order
approving it.

          10. This Settlement Agreement is intended for the final disposition of Case No.
U-15320, including applications for leave to appeal now pending before the Commission. So
long as the Commission approves this Settlement Agreement without modification, the parties
agree not to appeal, challenge, or otherwise contest the Commission Order Approving
Settlement
Agreement, this Settlement Agreement, or the Amended and Restated PPA and agree to be
bound by them during the term of the Amended and Restated PPA. Except as otherwise set forth
herein, the parties agree and understand that this Settlement Agreement does not limit any
party’s right to take new and/or different positions on similar issues in other
administrative
proceedings, or appeals related thereto.

          11. This Settlement Agreement is not severable. Each provision of the Settlement Agreement is dependent upon all other provisions
of this Settlement Agreement.
Failure to comply with any provision of this Settlement Agreement constitutes failure to
comply
with the entire Settlement Agreement.

          12. If the Commission rejects this Settlement Agreement or any provision of
the Settlement Agreement, this Settlement Agreement shall be deemed to be withdrawn, shall not

6

 

constitute any part of the record in this proceeding or be used for any other purpose, and shall
be without prejudice to the pre-negotiation positions of the parties.

          13. The Staff agrees that approval of this Settlement Agreement by the
Commission would be reasonable and in the public interest.

          14. The parties agree to waive Section 81 of the Administrative Procedures Act
of 1969 (MCL 24.281), as it applies in this proceeding, if the Commission approves this
Settlement Agreement without modification.

          15. For the convenience of the Commission, the parties have attached, as Attachment B, a
proposed form of order. The parties respectfully request the Commission to issue an order in
substantially the form of Attachment B.

          16. Capitalized terms appearing in this Settlement Agreement that are not otherwise defined
herein have the meanings ascribed to them in the Amended and Restated PPA.

          17. Attachment C to this Settlement Agreement is a copy of the Affidavit of
James M. Rajewski, Chief Financial Officer, Vice President and Controller of MCV, and of a
letter signed by Howard E. Lubow, President of Overland Consulting.

7

 

          WHEREFORE, the undersigned parties respectfully request the Commission to approve this
Settlement Agreement and the Amended and Restated PPA and make them effective in accordance with
their terms by final order.

	 	 	 	 	 
	MICHIGAN PUBLIC SERVICE COMMISSION STAFF	 	 
	 
	 	 	 	 
	By:

	 	/s/ Vincent J. Leone	 	 
	 

	 	 	 	 
	 

	 	Vincent J. Leone (P24093)	 	 
	 

	 	Assistant Attorney General 	 	 
	 

	 	Public Service Division 

6545 Mercantile Way, Suite 15 	 	 
	 

	 	Lansing, MI 48911	 	 
	 
	 	 	 	 
	MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP	 	 
	 
	 	 	 	 
	By:

	 	/s/ Gary B. Pasek	 	 
	 

	 	 	 	 
	 

	 	Gary B. Pasek (P54099)	 	 
	 

	 	Vice President, General Counsel and Secretary	 	 
	 

	 	Midland Cogeneration Venture Limited Partnership	 	 
	 

	 	100 Progress Place	 	 
	 

	 	Midland, Michigan 48640	 	 
	 
	 	 	 	 
	CONSUMERS ENERGY COMPANY	 	 
	 
	 	 	 	 
	By:

	 	/s/ Jon R. Robinson	 	 
	 

	 	 	 	 
	 

	 	Jon R. Robinson (P27953)

 Raymond E. McQuillan (P24100) 	 	 
	 

	 	Attorneys for Consumers Energy 	 	 
	 

	 	One Energy Plaza	 	 
	 

	 	Jackson, MI 49201	 	 
	 
	 	 	 	 
	ATTORNEY GENERAL	 	 
	MICHAEL A. COX	 	 
	 
	 	 	 	 
	By:

	 	/s/ Donald E. Erickson	 	 
	 

	 	 	 	 
	 

	 	Donald E. Erickson (P13212)	 	 
	 

	 	 Assistant Attorney General 	 	 
	 

	 	 Tobacco & Special Litigation Division

 P.O. Box 30212	 	 
	 

	 	Lansing, MI 48909	 	 

8

 

	 	 	 	 	 
	ASSOCIATION OF BUSINESSES ADVOCATING TARIFF EQUITY	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas E. Maier	 	 
	 

	 	 	 	 
	 

	 	Thomas E. Maier (P34526)	 	 
	 

	 	Robert A.W. Strong (P27724)	 	 
	 

	 	Clark Hill PLC	 	 
	 

	 	Attorneys for Association of Businesses Advocating	 	 
	 

	 	Tariff Equity	 	 
	 

	 	255 S. Old Woodward Ave.	 	 
	 

	 	Third Floor	 	 
	 

	 	Birmingham, MI 48009-6179	 	 
	 
	DOW CORNING CORPORATION	 	 
	 
	 	 	 	 
	By:

	 	/s/ David E. S. Marvin	 	 
	 

	 	 	 	 
	 

	 	David E. S. Marvin (P26564)	 	 
	 

	 	Fraser Trebilcock Davis & Dunlap PC	 	 
	 

	 	Attorney for Dow Corning Corporation	 	 
	 

	 	124 West Allegan St., Suite 100	 	 
	 

	 	Lansing, Michigan 48933	 	 
	 
	 	 	 	 
	MICHIGAN ENVIRONMENTAL COUNCIL/PUBLIC INTEREST 

RESEARCH GROUP IN MICHIGAN	 	 
	 
	 	 	 	 
	By:

	 	/s/ Don L. Keskey	 	 
	 

	 	 	 	 
	 

	 	Don L. Keskey (P23003)	 	 
	 

	 	Clark Hill PLC	 	 
	 

	 	Attorney for Michigan Environmental Council and Public Interest	 	 
	 

	 	Research Group in Michigan	 	 
	 

	 	212 East Grand River Ave.	 	 
	 

	 	Lansing, Michigan 48906	 	 

9

 

	 	 	 	 	 
	NEW COVERT GENERATING COMPANY, LLC	 	 
	 
	 	 	 	 
	By:

	 	See attached Statement of
Non-Objection	 	 
	 

	 	 	 	 
	 

	 	Jon D. Kreutcher (P46133)	 	 
	 

	 	Howard & Howard Attorneys PC	 	 
	 

	 	Attorney for New Covert Generating Company, LLC	 	 
	 

	 	39400 Woodward Avenue. Suite 101	 	 
	 

	 	Bloomfield Hills, Michigan 48304-5151	 	 

10

 

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

*****

	 	 	 	 	 
	In the matter of the application of Midland

	)	 	 	 
	Cogeneration Venture Limited Partnership

	)	 	 	 
	for the Commission to eliminate the

	)	 	 	 
	“availability caps” which limit Consumers

	)	 	 	Case No. U-15320
	Energy Company’s recovery of capacity

	)	 	 	 
	payments with respect to its power purchase

	)	 	 	 
	agreement with Midland Cogeneration Venture

	)	 	 	 
	Limited Partnership

	)	 	 	 
	 

	)	 	 	 
	 

	 	 	 	 

STATEMENT OF NON-OBJECTION

     NOW COMES New Covert Generating Company LLC (“New Covert”), by and through its attorneys
Howard and Howard Attorneys P.C., and states as follows:

	 	1.	 	On Friday, June 6, 2008, Consumers Energy Company distributed a Settlement Agreement
(together with Exhibits A, B, and C thereto), an Amended and Restated Power Purchase
Agreement (together with Exhibits A, B, C, D and E thereto), a Supplemental Affidavit, a
Letter from Overland Consulting, and a draft Commission Order (collectively, the
Settlement Documents”) to the parties to this proceeding. The Settlement Documents were
submitted pursuant to MCL 24.278(2) and MPSC Rule 333.
	 
	 	2.	 	Pursuant to MPSC Rule 333(3), a party to a proceeding in which a settlement is
proposed shall be permitted fourteen (14) days to consider the settlement. Nevertheless,
extensive settlement discussions have previously occurred, and a request has been made
that all parties identify their position with respect to the Settlement Documents not
later than by 10 a.m., Monday, June 9, 2008.
	 
	 	3.	 	Petitioner Midland Cogeneration Limited Partnership and Consumers Energy Company have
also requested that any party which files a statement of non-

 

 

	 	 	 	objection to the Settlement Documents include a commitment that the non-objecting
party will not appeal or seek a rehearing of an order by the Commission which approves
the Settlement Documents without modification.

	 	4.	 	As requested by the aforesaid parties, and while not required by MPSC Rule
333, New Covert does nevertheless hereby:

	 	A.	 	Waive the requirement of MPSC Rule 333(3) that fourteen (14) days be
permitted for the consideration of any settlement;
	 
	 	B.	 	Declare that it does not object to the Commission’s approval of the
Settlement Documents, if approved without modification;
	 
	 	C.	 	Waive the right to a reasonable opportunity to present evidence and
arguments in opposition to the Settlement Documents, as would otherwise
be permitted pursuant to MPSC Rule 333(5)(a); and
	 
	 	D.	 	Waive the right to seek a rehearing or appeal of a Commission order
which approves the Settlement Documents as presented.

	 	 	 	 	 
	DATED: June 6, 2008	 	Respectfully submitted,
	 
	 	 	 	 
	 	 	NEW COVERT GENERATING COMPANY LLC
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Jon D. Kreucher 
	 

	 	 	 	 
	 	 	Howard & Howard Attorneys, P.C.

Rodger A. Kershner (P26049)

Jon D. Kreucher (P46133)

39400 Woodward Ave., STE 101

Bloomfield Hills, MI 48304

(248) 645-1483

Page 2 of 2

 

ATTACHMENT A

 

 

AMENDED AND RESTATED

POWER PURCHASE AGREEMENT

BETWEEN CONSUMERS ENERGY COMPANY

AND

MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP

 

 

AMENDED AND RESTATED

POWER PURCHASE AGREEMENT

BETWEEN

CONSUMERS ENERGY COMPANY

AND

MIDLAND COGENERATION VENTURE LIMITED PARTNERHSIP

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 
	 	Section	 	 	Page	 
	 	1.	 	Definitions
	 	 	2	 
	 	 	 	 
	 	 	 	 
	 	2.	 	Effective Date and Term
	 	 	5	 
	 	 	 	 
	 	 	 	 
	 	3.	 	Capacity and Energy Sold by Seller to Consumers
	 	 	5	 
	 	 	 	 
	 	 	 	 
	 	4.	 	Character of Energy
	 	 	6	 
	 	 	 	 
	 	 	 	 
	 	5.	 	Metering
	 	 	6	 
	 	 	 	 
	 	 	 	 
	 	6.	 	Fuel Security
	 	 	7	 
	 	 	 	6(a) Purpose and Interpretation
	 	 	7	 
	 	 	 	6(b) Seller’s Assurance of Secure Fuel Supplies
	 	 	7	 
	 	 	 	6(c)  Seller’s Continuing Assurances of Secure Fuel Supplies
	 	 	8	 
	 	 	 	6(d) Escrow of Capacity Payments
	 	 	9	 
	 	 	 	6(e)  Restoration and Refund of Capacity Payments
	 	 	10	 
	 	 	 	 
	 	 	 	 
	 	7.	 	Operation of MC-Facility
	 	 	10	 
	 	 	 	7(a) Scheduling of Deliveries
	 	 	10	 
	 	 	 	7(b) Seller’s Right to Schedule
	 	 	11	 
	 	 	 	7(c)  Communications
	 	 	12	 
	 	 	 	7(d) Outages of Generating Equipment
	 	 	12	 
	 	 	 	7(e)  Emergency Operation
	 	 	14	 
	 	 	 	7(f)  Operating Characteristics
	 	 	14	 
	 	 	 	7(g) Available Capacity
	 	 	15	 
	 	 	 	7(h) Load Frequency Control
	 	 	16	 
	 	 	 	7(i)  Records
	 	 	17	 

 

 

AMENDED AND RESTATED

POWER PURCHASE AGREEMENT

BETWEEN

CONSUMERS ENERGY COMPANY

AND

MIDLAND COGENERATION VENTURE LIMITED PARTNERHSIP

TABLE OF CONTENTS

(Continued)

	 	 	 	 	 	 	 	 
	Section	 	 	 	Page	 
	 	8.	 	Renewable Energy Support
	 	 	17	 
	 	 	 	 
	 	 	 	 
	 	9.	 	Compensation for Commercial Energy
	 	 	18	 
	 	 	 	9(a) Capacity Payment
	 	 	18	 
	 	 	 	9(b)  Energy Payment
	 	 	18	 
	 	 	 	9(c)  Administrative Disallowances by the Michigan Public Service
Commission
	 	 	19	 
	 	 	 	9(d)  Obligation to Support and Defend
	 	 	19	 
	 	 	 	9(e) Form of Invoice
	 	 	19	 
	 	 	 	9(f)  Negotiated Rates
	 	 	19	 
	 	 	 	 
	 	 	 	 
	 	10.	 	Administrative Charge
	 	 	20	 
	 	 	 	 
	 	 	 	 
	 	11.	 	Early Termination
	 	 	20	 
	 	 	 	 
	 	 	 	 
	 	12.	 	Annual Inspection
	 	 	20	 
	 	 	 	 
	 	 	 	 
	 	13.	 	Administrative Committee
	 	 	21	 
	 	 	 	 
	 	 	 	 
	 	14.	 	Force Majeure
	 	 	21	 
	 	 	 	14(a)  Definition 
	 	 	21	 
	 	 	 	14(b)  Obligations Under Force Majeure
	 	 	22	 
	 	 	 	14(c)  Continued Payment Obligation
	 	 	22	 
	 	 	 	 
	 	 	 	 
	 	15.	 	Liability
	 	 	22	 
	 	 	 	 
	 	 	 	 
	 	16.	 	Disagreements
	 	 	22	 
	 	 	 	16(a)  Administrative Committee Procedure
	 	 	22	 

 

 

AMENDED AND RESTATED

POWER PURCHASE AGREEMENT

BETWEEN

CONSUMERS ENERGY COMPANY

AND

MIDLAND COGENERATION VENTURE LIMITED PARTNERHSIP

TABLE OF CONTENTS

(Continued)

	 	 	 	 	 	 	 	 
	 	Section 	 	 	Page	 
	 	 	 	16(b) Arbitration
	 	 	23	 
	 	 	 	16(c) Obligations to Perform Pending Dispute Resolution
	 	 	23	 
	 	 	 	 
	 	 	 	 
	 	17.	 	Exculpation
	 	 	24	 
	 	 	 	 
	 	 	 	 
	 	18.	 	Billing
	 	 	24	 
	 	 	 	 
	 	 	 	 
	 	19.	 	Purchase Option/Contract Extension
	 	 	24	 
	 	 	 	 
	 	 	 	 
	 	20.	 	Service Contract
	 	 	25	 
	 	 	 	 
	 	 	 	 
	 	21.	 	Successors and Assigns
	 	 	25	 
	 	 	 	 
	 	 	 	 
	 	22.	 	Governing Law
	 	 	25	 
	 	 	 	 
	 	 	 	 
	 	23.	 	Headings
	 	 	25	 
	 	 	 	 
	 	 	 	 
	 	24.	 	Notice to Parties
	 	 	26	 
	 	 	 	 
	 	 	 	 
	 	25.	 	Compliance With Rules and Regulations
	 	 	26	 
	 	 	 	 
	 	 	 	 
	 	26.	 	Mobile-Sierra
	 	 	26	 
	 	 	 	 
	 	 	 	 
	 	27.	 	Entire Agreement and Amendments
	 	 	27	 

 

 

AMENDED AND RESTATED

POWER PURCHASE AGREEMENT

BETWEEN CONSUMERS ENERGY COMPANY

AND

MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP

          AMENDED AND RESTATED POWER PURCHASE AGREEMENT, herein termed “Agreement,” dated as of June 9,
2008, between CONSUMERS ENERGY COMPANY, a Michigan corporation, One Energy Plaza, Jackson,
Michigan, 49201 herein termed “Consumers,” and, Midland Cogeneration Venture Limited Partnership,
herein termed “Seller.” Consumers and Seller are herein sometimes referred to individually as
“Party” and collectively as “Parties,” where appropriate.

W I T N E S S E T H:

          WHEREAS, Consumers owns electric facilities and is engaged in the generation, purchase,
distribution and sale of electric energy in the State of Michigan, and

          WHEREAS, Seller operates a gas fired cogeneration plant, known as the MC-Facility, with
generator design capacity nameplate ratings of approximately 1560 MW, which also supplies steam and
electric energy to The Dow Chemical Company (herein termed “DOW”), and

          WHEREAS, Seller desires to deliver and sell and Consumers desires to receive and purchase
hereunder Commercial Energy from the MC-Facility, and

          WHEREAS, Consumers desires to schedule its purchases of Commercial Energy from the
MC-Facility, and

          WHEREAS, the Parties entered into a Power Purchase Agreement dated July 17, 1986, which has
been amended from time to time (hereinafter referred to as the Original Power Purchase Agreement),
and

          WHEREAS, Seller will obtain recertification by the Federal Energy Regulatory Commission
(“FERC”) for the MC-Facility as a qualifying cogeneration facility configured with the Boilers and
obtain financing for such qualifying cogeneration facility, and

- 1 -

 

          WHEREAS, Seller has on file with the FERC a Market-Based Rate Tariff filed March 15, 2006,
which commenced April 5, 2006 in Docket Number ER06-733-000 (“Tariff”) and this Agreement is
entered into pursuant to such Tariff and represents negotiated prices under 18 CFR §292.301(b), and

          WHEREAS, subject to the terms and conditions herein the Parties desire to supersede and
replace the Original Power Purchase Agreement with this Amended and Restated Power Purchase
Agreement.

          NOW, THEREFORE, in consideration of the mutual covenants and agreements herein set
forth, the Parties hereto agree as follows:

     1. Definitions

          Terms used in this Agreement shall have the following meanings:

     1(a) “Available Capacity” - That total electric generating capacity that
the MC-Facility is capable of providing after deducting that electric generating capacity
(a) required for the supply of electric energy (i) for the operation and maintenance of the
MC-Facility, (ii) to DOW and (iii) to Permissible Purchasers, if any, and (b) associated
with scheduled outages, scheduled unforeseen outages, forced outages and derates of
equipment. In accordance with practices and procedures to be agreed upon by the Parties,
such total electric generating capacity shall include the electric generating capacity of
equipment (a) which is connected to the Transmission Owner’s system and capable of being
loaded by Seller and (b) which is not connected to the Transmission Owner’s system but is
capable of being started, connected and loaded by Seller.

     1(b) “Boilers” - Up to six boilers Seller plans to install to generate steam and
electric energy, each having a capability of producing 250,000 pounds of steam per hour, as
such boilers may be modified or replaced from time to time.

     1(c) “Commercial Energy” - The maximum amount of electric energy
determined hourly which could be generated by the lower of Contract Capacity and Available
Capacity, whether delivered or not. The determination of such amount of electric energy
shall, whether delivered or not, reflect an adjustment to account for electric losses in the
transmission lines between the Point of Delivery and the 345kV bus at the Tittabawassee
Substation.

- 2 -

 

     1(d) “Commercial Operation Date” – The date upon which at least four Boilers are
commercially operable to generate steam and electric energy.

     1(e) “Commercial Pricing Node” – Has the meaning ascribed to such term by MISO.

     1(f) “Consulting Engineer” - The consulting engineering firm retained by Seller
pursuant to Section 12.

     1(g) “Contract Capacity” - 1240 megawatts of electric capacity.

     1(h) “Contract Capacity Factor” - The Contract Capacity Factor shall be
calculated by dividing the total megawatthours of Commercial Energy for which Consumers has paid
capacity payments in any calendar year, by (a) the product of the Contract Capacity and the number
of hours in such calendar year minus (b) the total megawatt hours of Commercial Energy available to
be scheduled during the cumulative duration, exceeding 24 hours, of all Emergencies in such
calendar year. For purposes of this definition, only Emergencies which exceed one minute and
prevent Consumers from receiving Commercial Energy shall be considered.

     1(i) “Cost of Production” or “COP” – Has the meaning specified in Exhibit
B, which is attached hereto and made a part hereof.

     1(j) “Designated Network Resource” - Has the meaning ascribed to such term by
MISO.

     1(k) “DOW Site” - The site of the DOW complex located in Midland County,
Bay County and Saginaw County, Michigan.

     1(l) “Emergency or Emergencies” – A condition or conditions on the Transmission
Owner’s system which in the Transmission Owner’s or Transmission Provider’s reasonable judgment
either has or is likely to result in significant imminent disruption of service to customers, or
imminent endangerment of life or property.

     1(m) “Fuel Supply Capacity” - The Fuel Supply Capacity is the amount of firm fuel
delivery and/or fuel storage service required to be obtained by Seller for the months of June, July
and August of each year to deliver Contract Capacity pursuant to Section 6.

     1(n) “Fuel Supply Energy” - For the first two (2) calendar years following the
Effective Date of this Agreement, the Fuel Supply Energy is 2.0 million megawatt hours per year.
Beginning with the third (3rd) calendar year after the Effective Date

- 3 -

 

of this Agreement and each calendar year thereafter, the Fuel Supply Energy shall equal eighty
percent (80%) of the average annual megawatthours of Commercial Energy delivered during the two (2)
previous calendar years.

     1(o) “Legal Holidays” - New Years Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

     1(p) “Locational Marginal Price” or “LMP” - Has the meaning ascribed to such term
by MISO.

     1(q) “MC-Facility” - The Midland Cogeneration Facility located in Midland County,
Michigan. The MC-Facility is deemed to consist of existing and future equipment, including, but not
limited to: generating equipment, including auxiliary and back-up, capable of generating a minimum
of approximately 1560 MW of electric energy and an annual average of 629,000 lbs/hour of 188 psig
process steam; transformers; electric and steam delivery facilities; pipelines and fuel handling
equipment; administrative structures; the Boilers; and such other necessary or related facilities,
equipment and structures associated with the generation of electricity and steam.

     1(r) “MISQ” – The Midwest Independent Transmission System Operator, Inc.,
including any successor thereto and subdivisions thereof.

     1(s) “Off-Peak Hours” - All hours other than On-Peak Hours.

     1(t) “On-Peak Hours” - All hours between 7:00 AM and 11:00 PM eastern standard
time, Monday through Friday except Legal Holidays.

     1(u) “Permissible Purchasers” - Other entities to which Seller may sell up to a
cumulative total of 22 MW of electric energy; provided that, any entity receiving electric
energy directly from Seller that is not a partner in the Midland Cogeneration Venture Limited
Partnership or an owner of the MC-Facility shall have its facilities requiring such electric
energy on the DOW Site or on a site contiguous to the DOW Site or the site of the MC-Facility.

     1(v) “Point of Delivery” - The billing meters used for financial settlement with
MISO.

     1(w) “RCP” - The Resource Conservation Plan approved by the Michigan Public Service
Commission (“MPSC”) in MPSC Case No. 

U-14031.

- 4 -

 

     1(x) “Transmission Owner” – The entity or entities that owns the electricity
transmission facilities used to transmit electric energy to Consumers at and from the Point
of Delivery.

     1(y) “Transmission Provider” – The entity or entities transmitting or
transporting the electric energy to be purchased by Consumers hereunder on behalf of
Consumers at and from the Point of Delivery.

     2. Effective Date and Term

          2(a) This Agreement shall be effective (the “Effective Date”) commencing
at 12:01 AM on the second day following the later of the date both of the following have occurred:
(a) the MPSC has issued an order approving the Settlement Agreement (“Settlement Agreement”) in
Case No. U-15320 on terms acceptable to the parties to the Settlement Agreement, and (b) the
Commercial Operation Date.

          2(b) Unless terminated as provided in this Agreement, this Agreement shall continue in
effect through March 15, 2025. Thereafter, and subject to Section 19, this Agreement shall continue
in effect unless and until terminated by mutual agreement or by either Party giving the other Party
at least one year’s written notice of termination to be effective on March 15, 2025, or at the end
of any calendar year thereafter.

          As of the Effective Date, the Original Power Purchase Agreement shall be replaced and
superseded with this Agreement. If the Effective Date does not occur for any reason, then the
Original Power Purchase Agreement shall remain in effect in accordance with its terms; provided,
however, that Seller shall have 120 days from the date the MPSC rejects the Settlement Agreement,
to give written notice pursuant to Section 10(d)(ii) of the Original Power Purchase Agreement or,
if the MPSC approves the Settlement Agreement with modifications unacceptable to either Party, then
Seller shall have 120 days from the date either Party notifies the other Party that such
modifications are unacceptable, to give written notice pursuant to Section 10(d)(ii) of the
Original Power Purchase Agreement.

     3. Capacity and Energy Sold by Seller to Consumers

                     Subject to the terms and conditions hereof, Seller shall sell to
Consumers, and Consumers shall purchase from Seller, Commercial Energy. The supply of electric
energy by Seller to the MC-Facility, DOW and to Permissible Purchasers, if any, shall have priority
over the supply of Commercial Energy to Consumers and the supply of Commercial Energy to Consumers
shall have priority over the supply of all other electric

- 5 -

 

energy sales by Seller to third parties. Compensation for such Commercial Energy is to be in
accordance with Section 9. This Agreement does not obligate Seller to sell, or Consumers to
purchase, any capacity or energy other than Commercial Energy, and Seller shall have the right,
other than with respect to Commercial Energy, to sell any and all capacity and energy that might be
available from the MC-Facility to any third party or into any market.

               In the event that Consumers’ performance with respect to meeting electric capacity reserve
requirements (“Reserve Requirements”) is evaluated using Generating Availability Data System
(“GADS”) (or any successor) data, Seller shall submit the required data to the entity (or entities)
that establishes Consumers’ Reserve Requirements so that that portion of Consumers’ Reserve
Requirements that is based on the electric capacity sold by Seller hereunder to Consumers is based
on the GADS data associated with the MC-Facility.

     4. Character of Energy

          All electric energy, which Seller shall sell and deliver to Consumers
hereunder shall be alternating current, three phase and 60 Hertz.

     5. Metering

          All electric energy delivered by Seller to Consumers hereunder shall be
metered at the billing meter installations that measure electric energy deliveries from the
MC-Facility to the Transmission Owner’s and/or Transmission Provider’s system. To determine the
amounts of electric energy delivered, the metered values shall be adjusted for transmission line
losses between the Point of Delivery and the 345 kV bus at the Tittabawassee Substation.

          If any test of the billing meters by the Transmission Owner or Transmission Provider discloses
an inaccuracy of more than 1% fast or 1% slow, a billing adjustment shall be made to correct for
the inaccuracy. For purpose of the billing adjustment, unless otherwise known, it shall be assumed
that the error has existed for a period equal to one-half of the time elapsed since the meter was
installed or one-half of the time since the last meter test, whichever is later. At Consumers’ or
Seller’s option and expense, back-up meters may be installed. Such back-up meters shall be used, in
accordance with practices and procedures established by the Parties, for billing adjustments of
disclosed billing meter inaccuracies. At any metering location, should the billing and back-up
meters at any time

- 6 -

 

both fail to register, the Commercial Energy delivered at the corresponding point of delivery shall
be determined by Consumers from the best available data, unless Seller objects within 30 days. Such
disagreements shall be resolved pursuant to Section 16, save that Seller shall have the burden of
disputing Consumers’ determination.

     6. Fuel Security

          6(a) Purpose and Interpretation

          The Parties recognize the need for secure fuel supplies for the MC-Facility if it
is to fulfill its crucial role as a source of a substantial block of long-term capacity and energy
for Consumers and its customers over the term of this Agreement. To that end the Parties have
conceived the concept of continuing assurances of sufficient, secure fuel supplies which are set
forth in this Section 6. It is further the Parties’ intent that satisfaction by the Seller of the
terms of this Section 6 be judged on the basis of substantial compliance or functionally equivalent
compliance with the elements set forth in Subsection 6(b) as such elements have been interpreted
and applied by the Parties during the term of the Original Power Purchase Agreement. These elements
are set forth with specificity to provide Seller a “safe harbor” if it can substantially comply
with those specified elements.

          Prior to Seller executing any fuel supply agreement, Seller may submit such agreement to
Consumers for Consumers’ evaluation as to whether such agreement satisfies this Section 6.
Consumers shall indicate within 30 days of receipt of such agreement whether or not the agreement
is so satisfactory.

          6(b) Seller’s Assurance of Secure Fuel Supplies

          Seller shall be deemed to have provided adequate assurance when it
substantially complies with the following elements:

	 	(i)	 	For portions of the Fuel Supply Capacity and Fuel Supply
Energy that are owned by Seller, Seller shall supply evidence to Consumers that
it has sufficient proven and potential reserves, including rights or options to
extract such reserves, and the technical capability to produce such fuel;
	 
	 	(ii)	 	For portions of the Fuel Supply Capacity and Fuel Supply
Energy that are contracted from suppliers, Seller shall supply evidence to
Consumers that it has an agreement with one or more suppliers and that such
supplier or suppliers have sufficient dedicated reserves, or the agreement
contains adequate covenants of the supplier concerning

- 7 -

 

	 	 	 	deliverability or limiting future sales of pooled reserves available for sale
under the contract, or otherwise dedicating or giving Seller access to the
supplier’s future reserve additions; and
	 
	 	(iii)	 	Seller shall supply evidence to Consumers that it has an agreement or agreements which
provide for firm delivery, or if not firm delivery, sufficient storage service under contracts
which warrant delivery, of the expected fuel needs of the MC-Facility, including firm delivery
and/or storage service sufficient to demonstrate Fuel Supply Capacity.

          
Seller may also provide
adequate assurance by providing functional equivalents to any of the above elements, which shall be
evaluated according to the same standards that applied during the term of the Original Power
Purchase Agreement.
 

          6(c)  Seller’s Continuing Assurances of Secure Fuel Supplies

          Once a year during any calendar year after 2008, Consumers may make a
written request to Seller to provide, within 90 days, adequate continuing assurances to Consumers
that Seller will be able to meet, as a minimum, the expected fuel needs of the MC-Facility to
supply the Fuel Supply Capacity and Fuel Supply Energy for the then current calendar year plus the
next calendar year, but not beyond the term of this Agreement. Seller shall be deemed to have
provided such adequate continuing assurances when it has established the elements set forth in
Subsection 6(b). Consumers’ evaluation of agreements which were previously deemed satisfactory in
connection with the provision of adequate continuing assurances (including agreements so deemed
satisfactory under the Original Power Purchase Agreement) shall be limited to a review of whether
then existing circumstances support a determination that performance under such agreement will
continue to be satisfactory. In addition, the Parties agree that Consumers’ evaluations of Seller’s
continuing assurances of secure fuel supplies pursuant to this Subsection 6(c) shall be consistent
with the course of performance and standards of interpretation that were used in applying the
elements in Subsection 6(b) during the term of the Original Power Purchase Agreement.

          If Seller has failed to supply any evidence of assurance by the required date or if, in
Consumers’ reasonable opinion, such continuing assurances as have been provided by Seller are
inadequate, Consumers shall provide, within 20 days after the required date or the date of
submission, whichever is applicable, written notice to Seller. Such notice shall

- 8 -

 

specify in detail the basis for Consumers’ determination that adequate continuing assurances have
not been provided and shall indicate the percentage of the expected fuel delivery/storage needs
and/or fuel supply needs to supply the Fuel Supply Capacity and/or Fuel Supply Energy for which
Consumers deems Seller has not provided adequate continuing assurances. Within 180 days of such
written notice by Consumers, Seller must provide plans and initiate activities, including
commitments and expenditures, to provide such adequate continuing assurances. Such plans and
activities shall include any feasible means of providing such assurances and must include, if
necessary: (i) construction and operation of facilities for the use of alternate fuels and (ii)
execution of contracts for delivery, storage or supplies of alternate fuels so as to establish the
same elements set forth in Subsection 6(b).

          6(d) Escrow of Capacity Payments

          If Seller is unable to provide Consumers with adequate continuing
assurances for some percentage of the expected fuel delivery/storage needs and/or fuel supply needs
to supply the Fuel Supply Capacity and/or Fuel Supply Energy as required in Subsection 6(c), then,
beginning with the first calendar month which commences at least 190 days after Consumers’ written
notice, required by Subsection 6(c), and continuing each month thereafter until Seller provides
such adequate continuing assurances, Consumers shall withhold, in an interest-bearing escrow
account with an independent escrow agent, a portion of the capacity payments which it would
otherwise pay each month to Seller. Such portion shall be equal to the product of the percentage of
the expected fuel delivery/storage needs and/or fuel supply needs to supply the Fuel Supply
Capacity and/or Fuel Supply Energy for which Consumers deems Seller has not provided adequate
continuing assurance and a factor based upon the number of consecutive months that capacity
payments have been withheld pursuant to the following table:

	 	 	 
	Consecutive	 	 
	Months That Capacity	 	 
	Payments Are	 	 
	Withheld	 	Factors
	1 – 12
	 	.05
	13 – 24  
	 	.15
	25 – 36  
	 	.40
	37 and thereafter
	 	.70

- 9 -

 

          Further, at any time following the 48th consecutive month for which capacity payments have
been withheld, Consumers shall have the right, effective upon written notice to Seller, to
terminate this Agreement. In the event of such termination, Seller shall pay to Consumers an amount
determined in accordance with Exhibit A, which is attached hereto and made a part hereof. Funds in
the escrow account at the time of termination shall first be used toward satisfying such amount.

          6(e) Restoration and Refund of Capacity Payments

          The percentage of the expected fuel delivery/storage needs and/or fuel
supply needs to supply the Fuel Supply Capacity and/or Fuel Supply Energy for which Consumers
deemed Seller had not provided adequate continuing assurances which is used in the computation of
escrow payments set forth in Subsection 6(d) shall be decreased whenever Seller provides Consumers
with adequate continuing assurances justifying such a decrease. Such decrease shall be effective
commencing with the calendar month during which such assurances are provided. The corresponding
capacity payments withheld by Consumers pursuant to Subsection 6(d) shall be refunded to Seller
within ten days of provision of such assurances. All interest earned in the escrow account shall be
divided equally between Consumers and Seller and paid at the time of such refund.

     7. Operation of MC-Facility

          7(a) Scheduling of Deliveries

     It is the intent of the Parties, consistent with the safe
and prudent operation of the MC-Facility, that Consumers shall schedule Seller’s deliveries of
electric energy to Consumers. Seller will provide personnel and necessary equipment at the
MC-Facility to permit such scheduling and to
provide operating information relating to the MC Facility. The Parties shall cooperate to maintain
Designated Network Resource status of the MC-Facility for Consumers.

     Notwithstanding Section 9(b)
with respect to variable energy payments, if for any hour Seller delivers more than the bandwidth
limit above (the amount that is more than the bandwidth limit above being the “Excess Amount”) or
below (the amount that is more than the bandwidth limit below being the “Deficiency Amount”) the
schedule provided by Consumers to Seller for such hour, then the following shall apply:

               (1) If during the applicable hour the MC-Facility is ramping up to meet the schedule
provided by Consumers and such ramping requires the starting of one or more gas turbines, then in
such event the bandwidth limit shall equal 40 MW for such hour. The bandwidth limit shall equal 20
MW for all other hours.

- 10 -

 

               (2) For each megawatt hour of Commercial Energy delivered associated with the Excess
Amount, Consumers shall pay Seller the lower of (a) COP (in $/megawatt hours) divided by two
and (b) the real-time LMP (in $/megawatt hours) at the Commercial Pricing Node for Consumers’
load.

               (3) For each megawatt hour of Commercial Energy that was not
delivered associated with the Deficiency Amount, Seller shall pay Consumers the higher of (a) COP
(in $/megawatt hours) divided by two and (b) the difference between the real-time LMP (in
$/megawatt hours) at the Commercial Pricing Node for Consumers’ load and COP (in $/megawatt hours).

          7(b) Seller’s Right to Schedule

          Seller shall have the right pursuant to this subparagraph to assume the
scheduling obligations of deliveries of electric energy from Consumers, upon prior written notice
to Consumers. Upon the effective date of Seller’s exercise of the foregoing right, Subsection 7(a)
shall not apply (except that the Parties shall continue to cooperate to maintain Designated Network
Resource status of the MC-Facility for Consumers) and Seller shall be responsible for the charges
assessed and payments made by MISO with respect to the asset owner of the Commercial Pricing Node
associated with electric energy deliveries under this Agreement. The effective date of Seller’s
exercise of the foregoing right shall be the first date upon which all the following conditions
precedent have been satisfied:

	(1)	 	This Agreement and associated operating practices shall have been amended to
incorporate the following:

	 	(i)	 	Seller’s obligation to schedule electric energy deliveries to Consumers
shall use the same scheduling parameters with respect to offers into the MISO Day-Ahead
Energy Market (as such term is defined by MISO) that are in effect as of the date
immediately preceding Seller’s notice exercising the above right.
	 
	 	(ii)	 	Seller’s deliveries of Commercial Energy under this Agreement shall be
measured and effectuated by Financial Bilateral Transactions (as such term is
defined by MISO, “FBT”), settled in the Day-Ahead Energy Market, between the
Parties. The hourly energy quantities contained in such FBTs shall equal MISO’s
published Day-Ahead Energy Market schedule for the MC-Facility, as modified

- 11 -

 

	 	 	 	by Seller to reflect the MC-Facility operating constraints identified in Operating
Practice 4.

	 	(iii)	 	Consumers’ and Seller’s obligation to cooperate to maintain Designated
Network Resource status of the MC-Facility for Consumers shall continue.
	 
	 	(iv)	 	Any other changes to this Agreement, which are required to
effectuate the transfer of the scheduling obligations from Consumers to Seller.

	(2)	 	The Commercial Pricing Node associated with this Agreement as of the date immediately
preceding Seller’s notice exercising the above right shall have been transferred from
Consumers to Seller or a new Commercial Pricing Node shall have been established, as
applicable and/or necessary to enable Seller to perform the scheduling obligations
hereunder.
	 
	(3)	 	The Commercial Pricing Node specified in (2) above shall have been incorporated into the MISO
commercial model.
	 
	(4)	 	The Parties shall have obtained MPSC approval of the above amendment to this Agreement.

          7(c) Communications

          The Parties shall provide for the installation of a communications link between
Seller and Consumers, which shall be used by Seller and Consumers to exchange any necessary
operating information with respect to the MC-Facility and to implement the scheduling of
Seller’s deliveries of electric energy to Consumers.

          7(d) Outages of Generating Equipment

          The Parties recognize that information regarding outages of generating
capacity is required by Consumers in order to properly operate its electric system. Seller shall
provide to Consumers all information relating to outages of generating capacity at the MC-Facility,
which would affect Seller’s ability to deliver Commercial Energy.

- 12 -

 

          7(d)(i) Scheduled Outages

          A scheduled outage of generating capacity is an outage that is planned several months to one
year in advance of the expected occurrence. Seller shall use its best efforts to plan scheduled
outages of generation capacity to accommodate the requirements or obligations of Consumers. A
proposed schedule of generating capacity outages planned by Seller for a calendar year shall be
submitted to Consumers in writing by August 1st of the prior calendar year. Consumers shall respond
to such proposed schedule within 30 days of receipt and may request modifications in such proposed
schedule. Seller shall use its best efforts to attempt to comply with such requested modifications.
If Consumers fails to respond within 30 days, such schedule shall be deemed acceptable. At least
one week prior to any scheduled outage, Seller shall orally notify Consumers of the expected start
date of such scheduled outage, the amount of generating capacity that will not be available to
Consumers during such scheduled outage, and the expected completion date of such scheduled outage.
Seller shall orally notify Consumers of any subsequent changes in such generating capacity not
available or any subsequent changes in the scheduled outage completion date. As soon as
practicable, all such oral notifications shall be confirmed in writing.

          7(d)(ii) Scheduled Unforeseen Outages

          A scheduled unforeseen outage of generating capacity is an outage that is neither a scheduled
outage pursuant to Subsection 7(d)(i) nor a forced outage pursuant to Subsection 7(d)(iii), but
which is generally planned several days to several months in advance of the expected occurrence to
perform unforeseen maintenance or to mitigate an operating problem or capacity deficiency at the
MC-Facility. Seller shall use its best efforts to plan such outages of generating capacity to
accommodate the requirements or obligations of Consumers. Schedules of such outages shall be
submitted to Consumers in writing if time permits, or otherwise orally. Consumers shall promptly
respond to such submitted schedules and may request modifications in such schedules. Seller shall
use its best efforts to attempt to comply with such requested modifications. Prior to any scheduled
unforeseen outage of generating capacity previously available to Consumers at the MC-Facility,
Seller shall orally notify Consumers of the expected start date of such outage, the amount of
unavailable generating capacity and the expected completion date of such outage. Such notice shall
be given at the time the need for such scheduled unforeseen

- 13 -

 

outage is determined by Seller. Seller shall orally notify Consumers of any subsequent changes in
such generating capacity not available to Consumers or any subsequent changes in such outage
completion date. As soon as practicable, all such oral notifications shall be confirmed in writing.

          7(d)(iii) Forced Outages

          Forced outages are uncontrolled losses of generating capacity previously available for
production of electric energy for Consumers at the MC-Facility. Seller shall promptly provide to
Consumers an oral report of any forced outage occurrence, the amount of generating capacity
unavailable and the expected return date of such generating capacity. Seller shall orally notify
Consumers as soon as practicable of any subsequent changes in such generating capacity not
available and any subsequent changes in the forced outage return date. As soon as practicable, all
such oral notifications shall be confirmed in writing.

          7(e) Emergency Operation

          Consumers shall not be obligated to pay capacity payments or energy
payments pursuant to Section 9 for Commercial Energy which the Seller may have available at the
MC-Facility during an Emergency occurring on the Transmission Owner’s and/or Transmission
Provider’s system which prevents Consumers from receiving such Commercial Energy, except that
Consumers shall pay capacity payments pursuant to Subsection 9(a) and energy payments associated
with fixed expense pursuant to Subsection 9(b) for Commercial Energy during an Emergency once the
cumulative duration of such Emergencies in a calendar year exceeds 144 hours.

          7(f) Operating Characteristics

          Seller has provided Consumers with information as to all of the MC-Facility’s
operating characteristics that affect the delivery of electric energy to the Transmission Owner’s
system. Any material changes in such information after the Effective Date shall promptly be
provided to Consumers. Information as to the MC-Facility’s operating characteristics shall include,
but not be limited to:

	 	(i)	 	The lead time required to increase or decrease generation to any
level of electric energy output to the Transmission Owner’s
system;

- 14 -

 

	 	(ii)	 	Any levels of electric energy output at which it would be
impractical for the MC-Facility to operate; and
	 
	 	(iii)	 	Any reduction in the available electric capacity of the MC-Facility
due to changes in ambient temperature.

            7(g) Available Capacity

            Consumers’ knowledge of the Available Capacity is imperative to the
economic and reliable operation of its electric system. Seller agrees to declare the Available
Capacity of the MC-Facility in accordance with practices and procedures to be established by the
Parties. Evaluations of Seller’s performance in achieving the declared Available Capacity shall be
made at Consumers’ option. All performance evaluations shall be conducted in accordance with the
following criteria:

	 	(i)	 	No more than 12 test periods in a calendar year will be selected
by Consumers. No tests will be conducted or continued which, in the
opinion of Seller, could result in significant degradation of the
MC-Facility.
	 
	 	(ii)	 	A test period shall consist of four consecutive hours during which
Consumers requests the declared Available Capacity to generate electric energy for
delivery to the Transmission Owner’s system. Energy generated and delivered during
such performance evaluations is Commercial Energy. Once a test period has been
initiated it must last four hours unless Consumers and the MC- Facility general
manager mutually agree to a shorter duration.
	 
	 	(iii)	 	 An hourly deficiency is that
amount by which the actual hourly
electric energy delivered to the Transmission Owner’s system is less
than that electric energy which should have been delivered from the
declared Available Capacity.
	 
	 	(iv)	 	All hourly deficiencies recorded during each such test period will
be added together and the resulting sum divided by the total number of hours in such
test period to determine an average hourly capacity deficiency.
	 
	 	(v)	 	A performance
factor will be calculated by subtracting the
average hourly capacity deficiency from the declared Available

- 15 -

 

	 	 	 	Capacity in effect at the time, and dividing such result by the
declared Available Capacity and rounding the resulting factor to the
nearest one-thousandth (.001).
	 
	 	(vi)	 	During any such calendar month in which the performance
evaluation occurs and an average hourly capacity deficiency occurs
which exceeds 1% of the declared Available Capacity, the Capacity
Price defined in Subsection 9(a) shall be redetermined by multiplying
such rate by the performance factor and rounding the result to the
nearest one-tenth of a dollar ($0.1). Such adjusted rate shall be
effective only during such month. No adjustment shall be made to
Available Capacity as a result of an average hourly capacity
deficiency.

          As an alternative to performance evaluations by testing, at Consumers’ option, no more than
once per month Seller shall permit full access by Consumers during regular business hours to all
pertinent operating records and equipment for the purposes of verifying the declared Available
Capacity and applying the provisions of subparagraphs (iii) through (vi) above. The verification of
declared Available Capacity pursuant to this paragraph shall be performed in accordance with
Operating Practice 5, the current version (as of the execution of this Agreement) of which is
attached as Exhibit D hereto and made a part hereof. The Parties reserve the right to agree to
mutually acceptable modifications of Exhibit D.

          7(h) Load Frequency Control

          Consumers’ electrical system must be operated to match generating
resources with electric system requirements. In order to maintain utility industry standards for
the matching of electric generating resources and load requirements, Consumers has installed
equipment to regulate load frequency at its own generating plants. Such equipment allows the
electrical output of the generating facility to be regulated within established limits. Consumers
may choose to require the regulation of load frequency at the MC-Facility, and any necessary
equipment and the associated expenses of installation shall be the responsibility of Consumers. If
Consumers does so choose, the operating characteristics of the MC-Facility’s electric generators
shall be incorporated into the system for regulating load frequency. Seller shall be given an
adequate period to evaluate

- 16 -

 

Consumers plans for such equipment and installation, and to suggest appropriate modifications. To
the extent practicable Consumers shall comply with such suggestions. Seller shall provide any
necessary personnel to implement load frequency regulation at the MC-Facility. If Seller assumes
the scheduling obligations pursuant to Subsection 7(b), this subsection 7(h) shall no longer apply.

          7(i) Records

          Each Party shall keep and maintain all records as may be necessary or useful
in carrying out the provisions of this Agreement or which are required to permit an audit by the
other Party. All such records created shall be retained for at least three calendar years following
the calendar year in which such records were created. Subject to the need to maintain compliance
with all applicable law or codes of conduct, each Party shall make such records available to the
other Party for inspections and copying, at the copying Party’s expense, upon reasonable notice
during regular business hours. Each Party shall have the right, upon 30-days written notice prior
to the end of an applicable three-calendar-year period to request copies of such records. The
non-requesting Party shall provide such copies, at the requesting Party’s expense, within 30 days
of receipt of such notice.

          On or before January 31 of each year, Consumers is obligated to provide to MPSC Staff the
daily scheduling parameters with respect to offers into the MISO Day-Ahead Energy Market that were
used to schedule electric energy deliveries from the MC-Facility during the prior calendar year.
Seller shall provide assistance to Consumers to satisfy the foregoing obligation.

     8. Renewable Energy Support

          Consumers’ payments to Seller shall be offset by the annual amount of
$5,000,000 (prorated by the number of calendar days this Agreement is in effect each year), which
$5,000,000 shall be used by Consumers to support renewable energy development pursuant to
Consumers’ programs that have been approved by the MPSC. This payment shall be divided by the
number of days applicable in each calendar year, aggregated by calendar month, and the resulting
monthly amounts shall be used to offset monthly amounts owed by Consumers to Seller for capacity
and energy payments hereunder. Absent such Commission approved programs for Consumers, MCV shall
contribute the above sum as directed by the Commission.

- 17 -

 

     9. Compensation for Commercial Energy 

          9(a) Capacity Payment 

          As the monthly capacity payment for capacity associated with Commercial
Energy, Consumers shall pay Seller the sum of the hourly products of $10.14 per megawatt hour (the
“Capacity Price”) and Commercial Energy.

          If for any calendar year the Contract Capacity Factor is less than 0.6, then the Capacity
Price stated in the first paragraph of this Subsection 9(a) shall be adjusted for the next calendar
year. A Capacity Price adjustment factor shall be determined by dividing such Contract Capacity
Factor by 0.75. The Capacity Price for the following calendar year shall then be determined by
multiplying the Capacity Price in the first paragraph of this Subsection 9(a) by such Capacity
Price adjustment factor and rounding the result to the nearest one-tenth of a dollar ($0.1).

          9(b) Energy Payment

          As the monthly energy payment for energy associated with Commercial
Energy, Consumers shall pay Seller as follows:

          For the energy payment associated with fixed expense, Consumers shall pay Seller the sum of
the hourly products of Commercial Energy and the Fixed Energy Price determined in accordance with
Exhibit C, which is attached hereto and made a part hereof.

          Subject to Section 7(a) and the following paragraph, for the energy payment associated with
variable expense, Consumers shall pay Seller the sum of the hourly products of Commercial Energy
generated and delivered and the Cost of Production determined in accordance with Exhibit B.

          Notwithstanding the immediately preceding paragraph, in the event that the Boilers fail to
operate, and Seller’s obligation to DOW requires a turbine start-up, and Seller’s deliveries are in
excess of the scheduled amount of energy, then during such period of turbine operation Consumers
shall pay Seller the sum of the hourly products of the excess Commercial Energy generated and
delivered and the lower of (a) the Cost of Production divided by two and (b) the real-time
Locational Marginal Price at the Commercial Pricing Node for Consumers’ load. In the event that
both this paragraph and Section 7(a) apply, this pricing provision shall apply.

- 18 -

 

          9(c) Administrative Disallowances by the Michigan Public Service Commission 

          If the Michigan Public Service Commission disallows, or states an intention to
disallow in the future, recovery of any jurisdictional costs incurred by Consumers
as a result of the administration of this Agreement based upon a finding by the
Commission that some provision of this Agreement was, or is being, improperly
administered in a manner that did or will result in jurisdictional costs incurred by
Consumers that should not be recovered from Consumers’ customers, such
administrative disallowance shall be the responsibility of Seller. To the extent
such an administrative disallowance relates to a payment previously made by
Consumers to Seller, Seller shall refund such amount to Consumers within 60 days of
the date of the Commission order imposing such administrative disallowance. To the
extent such an administrative disallowance relates to payments to be made in the
future, Consumers shall have the right to adjust its future payments to Seller to an
amount consistent with the administrative disallowance finding of the Commission. By
way of example and not limitation, an instance of an administrative disallowance
would be a circumstance where Seller and Consumers determine that Available Capacity
for a specified period is 98%, but the MPSC makes a finding that Available Capacity
is 97%, and disallows cost recovery for the amount of the difference.

          The provisions of Subsection 9(c) shall govern over any conflicting provisions of this
Agreement.

          9(d) Obligation to Support and Defend

          Consumers and Seller shall support and defend the MPSC’s order approving
the Settlement Agreement in Case No. U-15320 and the terms of this Agreement in any forum in which
they may be challenged.

          9(e) Form of Invoice

          Exhibit E to this Agreement is a pro forma invoice that is an illustrative
example of the manner in which charges incurred pursuant to this Agreement are expected to be
invoiced to Consumers Energy. The parties recognize that the form of the actual invoices may, from
time to time, vary from that shown on Exhibit E, but expect that such invoices will be in
substantially the form shown on Exhibit E.

          9(f) Negotiated Rates 

This Agreement represents and establishes negotiated prices
under 18 CFR §292.301(b)
and under the Public Utility Regulatory Policies Act, 16 USC §791a, et seq. Seller agrees

- 19 -

 

that, by negotiating these price terms, it waives all claims to compensation at avoided cost rates.

     10. Administrative Charge

          To offset administrative costs incurred by Consumers in administering this
Agreement, Seller shall pay Consumers at the rate of one dollar ($1.00) per megawatt hour for all
Commercial Energy delivered to Consumers. Such payment shall not exceed a maximum total payment of
$2,000 in any calendar month.

     11. Early Termination

          If for each of any two consecutive calendar years the Contract Capacity
Factor is less than 0.10, Consumers shall have the right to terminate this Agreement. Such right
shall be exercised by giving at least 90 days’ written notice to Seller, which notice shall be
given within 90 days of the end of the second calendar year. Within 20 days after such notice is
given, Seller shall pay to Consumers an amount determined in accordance with Exhibit A. The
provisions of this Section 11 regarding payments shall survive any termination of this Agreement by
Consumers pursuant to this Section 11.

     12. Annual Inspection

          A Consulting Engineer shall be retained by Seller. Prior to retaining the Consulting Engineer, Seller shall provide Consumers with
a list of potential consulting engineering
firms. Seller shall be entitled to select any of the consulting firms named on such list to which
Consumers does not object within ten days of receipt of such list.

          Seller shall cause the Consulting Engineer to inspect the MC-Facility at least once in each
calendar year. The annual inspection shall include, at a minimum, all equipment, structures,
operating procedures and maintenance practices necessary for the generation and delivery of
Commercial Energy. The Consulting Engineer shall promptly issue a written report of the annual
inspection (hereinafter referred to as the “Annual Inspection Report”) to Seller and Consumers. The
cost of the annual inspection and Annual Inspection Report shall be borne by Seller.

          As soon as practicable, and in no event later than 730 days after receipt of the Annual
Inspection Report, Seller shall implement all recommendations in the report that have been approved
by the MC-Facility management regarding equipment, structures, operating procedures and maintenance
practices necessary for the generation and delivery of Commercial Energy. After the issuance of
each Annual Inspection Report and prior to the issuance of each subsequent report, Seller shall
provide to Consumers a written

- 20 -

 

summary of the status of previous Annual Inspection Report recommendations and provide, upon
Consumers’ written request, verification of said status.

          If the Consulting Engineer withdraws its service, Seller shall retain a replacement Consulting
Engineer as soon as reasonably possible. In such an instance or if Seller desires to replace the
Consulting Engineer, Seller shall provide Consumers with a list of potential consulting engineering
firms. Seller shall be entitled to select any of the consulting firms named on such list to which
Consumers does not object within 10 days of receipt of such list.

     13. Administrative Committee

          From time to time various administrative and technical matters may arise in connection with the terms and conditions of this
Agreement which will require the cooperation and
consultation of the Parties and the exchange of information. As a means of providing for such
cooperation, consultation and exchange, the Parties agree that an Administrative Committee shall be
established. The purposes of the Administrative Committee shall include providing liaison between
the Parties and exchanging information with respect to significant matters of design, construction,
operation, and maintenance of the MC-Facility. Such Committee shall not diminish in any manner the
authority or responsibility of either Party as set forth in this Agreement.

     14. Force Majeure 

          14(a) Definition

          The term “Force Majeure” means acts of God, including flood, earthquake,
storm, or other natural calamity; war, insurrection, riot; curtailment, order, regulation or
restriction imposed by governmental authority; or any other cause beyond the reasonable control of
the Party affected, however, the phrase “any other cause beyond the reasonable control of the Party
affected,” shall not include:

	 	(i)	 	shortages of fuel and supplies, other than fuel shortages
occurring in time of calamity or unusual world events which are preventing major
industrial users, including the Seller, from obtaining fuel for their
operations;
	 
	 	(ii)	 	mechanical breakdown of equipment of the Party affected;
	 
	 	(iii)	 	strikes of employees of the Party affected; or,
	 
	 	(iv)	 	explosions or fires on the site of the Party affected, unless such explosions or fires are caused by
criminal acts.

- 21 -

 

          14(b) Obligations Under Force Majeure

          If either Party is rendered unable, wholly or in part, by Force Majeure, to carry
out its obligations under this Agreement, including but not limited to Seller’s ability to meet the
minimum Contract Capacity Factor set forth in Section 11, then, during the continuance of such
inability, the obligation of such Party shall be suspended. The Party relying on Force Majeure
shall give written notice of Force Majeure to the other Party as soon as practicable after such
event occurs. Upon the conclusion of Force Majeure, the Party heretofore relying on Force Majeure
shall, with all reasonable dispatch, take all necessary steps to resume the obligation previously
suspended. If Force Majeure has rendered Seller unable to meet the minimum Contract Capacity Factor
set forth in Section 11, and such inability continues beyond the conclusion of Force Majeure,
Seller may, at its option, terminate this Agreement without liability pursuant to Section 11.

          14(c) Continued Payment Obligation

          Any Party’s obligation to make payments already owing shall not be
suspended by Force Majeure.

     15. Liability

          Neither Party shall in any event be liable to the other for any special,
incidental, exemplary, punitive or consequential damages such as, but not limited to, lost profits,
revenue or good will, interest, loss by reason of shutdown or nonoperation of equipment or
machinery, increased expense of operation of equipment or machinery, loss of use of equipment or
machinery, cost of purchased or replacement power or services or claims by customers, whether such
loss is based on contract, warranty, negligence, indemnity, strict liability or otherwise. Except
for remedies specifically provided for elsewhere in this Agreement, no liability shall attach to a
Party for failure to settle any strike or other labor problem in a manner not completely
satisfactory to it.

     16. Disagreements

          16(a) Administrative Committee Procedure

          If any disagreement arises on major matters concerning this Agreement, the
disagreement shall be brought to the Administrative Committee, which shall attempt to timely
resolve the disagreement. If the Administrative Committee can resolve the disagreement, such
agreement shall be reported in writing to and shall be binding upon the Parties. If the
Administrative Committee cannot resolve the disagreement within a reasonable time, the President of
Consumers or the senior officer of Seller can, by written

- 22 -

 

notice to the members of the Administrative Committee, withdraw the matter from consideration by
the Administrative Committee and submit the same for resolution to the President of Consumers and
the senior officer of Seller. If these representatives of the Parties agree to a resolution of the
matter, such resolution shall be reported in writing to, and shall be binding upon, the Parties;
but if said senior representatives fail to resolve the matter within seven days after its
submission to them, then the matter shall proceed to arbitration as provided in Subsection 16(b).

          16(b) Arbitration

          If pursuant to Subsection 16(a), the Parties are unable to resolve a
disagreement arising on a major matter pertaining to this Agreement, such disagreement shall be
settled by arbitration and any award issued pursuant to such arbitration may be enforced in any
court of competent jurisdiction. Either Party may commence arbitration by serving written notice
thereof on the other party designating the issue(s) to be arbitrated and the specific provisions of
this Agreement under which such issues arose. Representatives from Consumers and Seller shall meet
for the purpose of jointly selecting an arbitrator within ten days after the date of such notice.
If no arbitrator has been selected within 20 days of the date of such notice, then an arbitrator
shall be selected in accordance with the procedures of the American Arbitration Association. The
decision of the arbitrator shall be final and binding upon both Parties. Any such arbitration shall
be conducted in accordance with commercial arbitration rules of the American Arbitration
Association in effect on the date of such notice other than as specifically modified herein. The
arbitrator shall be bound by the provisions of this Agreement, where applicable, and shall have no
authority to modify such provisions in any manner. The arbitrator may grant any remedy or relief he
or she deems just and equitable within the scope of this Agreement, including interest on any
award, but shall have no authority to award any remedy or relief inconsistent with Section 15.

          16(c) Obligations to Perform Pending Dispute Resolution

          If a disagreement should arise on any major matter which is not resolved by
the Administrative Committee or the senior representatives of the Parties as provided in
Subsection 16(a), then, pending the resolution of the disagreement by arbitration, Seller shall
continue to operate the MC-Facility in a manner consistent with this Agreement and

- 23 -

 

Consumers shall continue to pay all charges required in accordance with the applicable provisions
of this Agreement.

     17. Exculpation

          Notwithstanding anything to the contrary contained in this Agreement, the
liabilities and obligations of Seller arising out of, or in connection with, this Agreement or any
other agreements entered into pursuant hereto shall not be enforced by any action or proceeding
wherein damages or any money judgment or specific performance of any covenant in any such document
and whether based upon contract, warranty, negligence, indemnity, strict liability or otherwise,
shall be sought against the assets of the partners comprising Seller. By entering into this
Agreement, Consumers waives any and all right to sue for, seek or demand any judgment against such
partners and their affiliates, other than Seller, by reason of the liabilities and obligations of
Seller arising out of, or in connection with, this Agreement or any other agreements entered into
pursuant hereto, except to the extent such partners are legally required to be named in any action
to be brought against Seller.

     18. Billing

          As soon as practicable after the end of each calendar month, Seller shall
render a statement to Consumers which shall reflect any amounts owed by Consumers for Commercial
Energy during such calendar month. Such statement shall also reflect as an offset to any payments
due from Seller to Consumers pursuant to Subsection 7(a), the payment referred to in Section 8 and
the administrative charge referred to in Section 10. The net amount due Seller shall be paid by
Consumers within 20 days after the date of such statement. Any amounts not paid when due shall bear
interest until paid at the lesser of (a) the per annum rate of interest equal to the prime lending
rate as may be from time to time published in The Wall Street Journal under Money Rates on such day
(or if not published on such day on the most recent preceding day on which published), plus one
percent or (b) the maximum rate permitted by applicable law.

     19. Purchase Option/Contract Extension

          Beginning December 1, 2023, and continuing through March 15, 2024,
Consumers shall have the option to: (i) purchase the MC-Facility at the then fair market value as
determined by an appraisal mutually acceptable to the Parties, or (ii) extend this Agreement for an
additional five-year term at a Capacity Price of $5 per megawatt hour. In the event that Consumers
exercises the foregoing purchase option, the effective date of any

- 24 -

 

such exercise shall be no earlier than March 16, 2025, and the timing and means of payment will be
contained in a purchase agreement negotiated between the Parties. In the event that Consumers
exercises the foregoing extension option, the effective date of any such exercise shall be no
earlier than March 16, 2025.

     20. Service Contract

          It is the intent of the Parties that this Agreement shall be treated as a service
contract. The provisions of this Agreement shall be interpreted and applied in a manner consistent
with the treatment of this Agreement as a service contract. The Parties shall make appropriate
modifications to this Agreement in the event unanticipated events might otherwise cause this
Agreement not to be treated as a service contract, provided, however, that no such modification
shall be made without the concurrence of the Party whose rights would be affected thereby.

     21. Successors and Assigns

          This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of the respective Parties hereto. Except as provided in this
Section 21, this Agreement shall not be assigned, transferred or otherwise alienated without the
other Party’s written consent, which consent shall not be unreasonably withheld. No such assignment
of this Agreement shall be valid unless the assignee assumes the obligation to pay Consumers any
payments to which it may become entitled pursuant to Section 11. Notwithstanding the foregoing,
Seller shall have the right, without obtaining Consumers’ consent (and without relieving itself
from liability hereunder), to assign all or a portion of its rights and/or obligations under this
Agreement to any lender(s) providing financing to Seller as collateral security for obligations
under financing documents entered into with such lender(s); provided, however, that any such
lender(s) shall agree in writing to be bound by the terms and conditions hereof associated with the
rights and/or obligations assigned.

     22. Governing Law

          This Agreement shall be deemed to be a Michigan contract and shall be
construed in accordance with and governed by the laws of Michigan.

     23. Headings

          The various headings set forth in this Agreement are for convenience only
and shall not affect the construction or interpretation of this Agreement.

- 25 -

 

     24. Notice to Parties

          Unless otherwise provided in this Agreement, any notice, consent or other
communication required to be made under this Agreement shall be in writing and shall be
delivered to the address set forth below or such other address as the receiving Party may
designate in writing:

	 	 	 
	 

	 	Consumers Energy Company
	 

	 	1945 W. Parnall Road
	 

	 	Jackson, Michigan 49201
	 

	 	Attention: John J. Dellas, Executive Manager
	 

	 	Electric Supply
	 
	 	 
	 

	 	Midland Cogeneration Venture Limited Partnership
	 

	 	100 Progress Place
	 

	 	Midland, Michigan 48640
	 

	 	Attention: Rodney E. Boulanger, President

All notices shall be effective when received. Notices of anticipated events required to be given by
this Agreement shall be revised and reissued to reflect changes in the dates of the anticipated
events. Upon notification of an assignment by Seller, Consumers shall also provide to assignee all
notices required in this Agreement.

     25. Compliance With Rules and Regulations

          In the event an operational or scheduling term(s) of this Agreement or the
practices or procedures conflict with any rule or regulation promulgated by MISO, the Federal
Energy Regulatory Commission, North American Electric Reliability Corporation, ReliabilityFirst
Corporation, Transmission Owner, or Transmission Provider, which rule or regulation applies to
either Party or the MC-Facility, and which governs the operation of the MC-Facility or the
scheduling of electric energy from the MC-Facility, the Parties shall conform this Agreement and/or
the practices and procedures to such rule or regulation and in doing so, shall modify this
Agreement to give effect to the original intent of the Parties to the extent practicable.

     26. Mobile-Sierra

          It is the intent of the Parties that the rates and all other terms and conditions
of the services provided hereunder shall not be subject to change under Sections 205 or 206 of the
Federal Power Act of 1935, as amended, 16 U.S.C. § 791 et seq. (or any successor legislation),
without the consent of both Parties. Each of the Parties hereto agrees not to unilaterally file
with the FERC a change in the rates, terms or conditions of

- 26 -

 

this Agreement. Moreover, absent agreement of the Parties to a proposed change, the standard of
review for changes to any rate, term or condition of this Agreement proposed by a non-Party or the
FERC or any other governing authority claiming jurisdiction and acting sua sponte shall be the
“public interest” standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Services
Corp., 350 U.S. 332 (1956) and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348
(1956). To the extent that the FERC adopts specific language that parties must incorporate into
agreements in order to bind FERC, third parties, governing authorities claiming jurisdiction and
themselves to a public interest standard of review, the Parties hereby incorporate such language
herein by reference.

     27. Entire Agreement and Amendments

          With respect to the subject matter hereof, this Agreement supersedes all
previous representations, understandings, negotiations and agreements either written or oral
between the Parties hereto or their representatives and constitutes the entire agreement of the
Parties. No amendments or changes to this Agreement shall be binding unless made in writing and
duly executed by both Parties.

          IN WITNESS WHEREOF, the Parties hereto have executed this Agreement.

CONSUMERS ENERGY COMPANY

By /s/ William E. Garrity          

Name: William E. Garrity

Title: Senior Vice President—Electric and Gas Supply

MIDLAND COGENERATION

  VENTURE LIMITED

  PARTNERSHIP

By /s/ Rodney E. Boulanger          

Name: Rodney E. Boulanger

Title: President and CEO

- 27 -

 

EXHIBIT A

 

 

EXHIBIT A

Page 1 of 2

AMENDED AND RESTATED

POWER PURCHASE AGREEMENT

BETWEEN CONSUMERS ENERGY COMPANY AND

MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP

PAYMENTS BY SELLER TO CONSUMERS

FOR EARLY TERMINATION OF AGREEMENT

     Payment for early termination pursuant to this Agreement shall be determined in accordance
with the following formula.

     ETP = (5256 x CC x CP x M)

Where:

	 	 	 	 	 	 	 
	 

	 	ETP
	 	=
	 	Early Termination Payment, expressed in dollars.
	 
	 	 	 	 	 	 
	 

	 	CC
	 	=
	 	Contract Capacity, expressed in megawatts, in effect at time of
termination.
	 
	 	 	 	 	 	 
	 

	 	CP
	 	=
	 	$10.14/MWh.
	 
	 	 	 	 	 	 
	 

	 	M
	 	=
	 	A factor based on the early termination year in accordance with the
following table.

A-1

 

EXHIBIT A

Page 2 of 2

	 	 	 
	Year	 	 
	In Which Early Termination Occurs	 	“M” Factor
	2008
	 	1.0000
	2009
	 	1.0000
	2010
	 	1.0000
	2011
	 	1.0000
	2012
	 	1.0000
	2013
	 	1.0000
	2014
	 	1.0000
	2015
	 	0.9167
	2016
	 	0.8333
	2017
	 	0.7500
	2018
	 	0.6667
	2019
	 	0.5833
	2020
	 	0.5000
	2021
	 	0.4166
	2022
	 	0.3333
	2023
	 	0.2500
	2024
	 	0.1667
	2025
	 	0.0833

			
	Note:	 	For example, if the Contract Capacity Factor is less than 0.10 for the years 2019 and
2020, then the factor to be used in the above stated formula is 0.4166.

A-2

 

EXHIBIT B

 

 

EXHIBIT B

AMENDED AND RESTATED

POWER PURCHASE AGREEMENT

BETWEEN CONSUMERS ENERGY COMPANY AND

MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP

COST OF PRODUCTION DETERMINATION

     Beginning with that portion of the month including and following the Effective Date and
continuing each month thereafter until this Agreement is terminated, Consumers shall, subject to
Subsections 7(a) and 9(b), pay for Commercial Energy generated and delivered in each such month at
the Cost of Production determined in accordance with this Exhibit B.

     For the energy price associated with variable expenses, Consumers shall pay on Commercial
Energy generated and delivered equal to:

     COP = Gas Price x Heat Rate + Adders

     Where COP = Cost of Production and the remaining terms in the above formula are defined below.

(a) Definitions

“Adders” means that portion of COP other than fuel by which Seller incurs a cost as a result of
generating and delivering Commercial Energy and consists of the sum of the following items: (1)
Demineralized Water Cost, (2) Maintenance Cost, and (3) NOx Cost. If new statutes are enacted or
new regulations are promulgated that result in additional variable generation costs, such costs
shall be added to the list of items above in a manner mutually agreed upon by the Parties and (or
absent such agreement) as ordered by the MPSC.

“Business Day” means a calendar day other than a Saturday, Sunday, or a North American Electric
Reliability Corporation (or any successor) holiday.

“Gas Price” means the price (in $/MMBtu and rounded to the nearest tenth of a cent) applicable to
each hour of each calendar day equal to the “Midpoint” of the “Common Range” for the Consumers
Energy city-gate location as published by Platts’ Gas Daily in the Daily Price Survey (or its
successor or substitute publication as mutually agreed to by the Parties for gas flow that begins
that same calendar day plus $0.06 per MMBtu for variable transportation. In the event that Platts
does not publish a Gas Price for gas flow that begins on a calendar day, then the Gas Price for
such a calendar day shall be the Gas Price in effect for the nearest previous calendar day.

“Demineralized Water Cost” means the COP component (updated annually and made effective April 1 of
each year) determined by the product of (1) the total annual thousands of gallons of demineralized
water consumed during the prior calendar year adjusted to exclude the demineralized water
attributable to the supply of process steam to DOW and the demineralized water attributable to the
operation of the Boilers, and (2) the rate per

1

 

EXHIBIT B

thousand gallons for the month of January as determined under the MCV/DOW Demineralized Water
Contract, divided by the total annual electric production for the prior calendar year adjusted to
exclude electric production during the prior calendar year attributable to the Boilers.

“Emission Rate” means the MC-Facility’s actual average (for the month two months prior to the month
of generation and delivery of Commercial Energy to Consumers) NOx emission rate in Ibs/MMBtu. The
NOx emission rates used for the determination of COP will be those used by Seller in Seller’s
reporting to the U.S. Environmental Protection Agency (“EPA”).

“Heat Rate” means the number of British Thermal Units (“BTU”, or, if expressed in millions of BTU,
“MMBTU”) required to produce one incremental megawatt-hour of energy (operating in combined cycle
mode) at the MC-Facility using the higher heating value of the fuel. The Heat Rate will be
determined annually pursuant to Section (b) below and made effective on April 1 of each year.

“Maintenance Cost” means the COP component (updated annually and made effective April 1 of each
year) determined by the product of (1) the total annual Gas Turbine Equivalent Operating Hours (or
EOH) accumulated during the prior calendar year and (2) the rate per EOH as determined annually
under the MCV/GE Service Agreement or any successor agreement, divided by the total annual electric
production during the prior calendar year adjusted to exclude electric production during the prior
calendar year attributable to the Boilers.

“Market Disruption Event” means, with respect to the Gas Price as published by Platts (or any
successor), any of the following events: (a) the failure of Platts to announce or publish
information necessary for determining the Gas Price at the Consumers Energy city-gate; (b) the
failure of trading to commence or the permanent discontinuation or material suspension of trading
of natural gas at the Consumers Energy city-gate; (c) the temporary or permanent discontinuance or
unavailability of the information necessary for determining the Gas Price at the Consumers Energy
city-gate; (d) the temporary or permanent closing of any exchange that supplies information to
determine the Gas Price at the Consumers Energy city-gate; or (e) a material change in the formula
for or the method of determining the Midpoint price of natural gas at the Consumers Energy
city-gate. Notwithstanding the foregoing, a Market Disruption Event shall only apply to those
calendar days that the Parties expect Gas Price information to be published.

“NOx Allowance(s)” means a right issued by the United States of America or the state of Michigan
allowing the holder to emit one ton of nitrogen oxides (“NOx”) during a particular period as more
particularly described in Michigan’s NOx State Implementation Plan (SIP) Call as administered by
the EPA and/or under the Clean Air Interstate Rule (CAIR) program due to take effect in 2009.

“NOx Allowance Price” means the estimated sale price of NOx Allowances for the SIP, the CAIR NOx
ozone season trading program and the CAIR annual trading program, as

2

 

EXHIBIT B

applicable, which is deemed to be equal to an average of at least two quotes obtained by Seller
from brokers within seven days prior to the day the monthly NOx Cost is calculated hereunder.

“NOx Cost” means the COP component (updated monthly) determined by the product of (1) Emission
Rate, (2) Heat Rate and (3) the NOx Allowance Price, divided by 2000 (i.e., NOx Cost = Emission
Rate x Heat Rate x NOx Allowance Price / 2000).

(b) MC-Facility Heat Rate Determination

The Heat Rate for the yearly period that begins April 1 of each year and ends on March 31 of the
following year will be determined in the following manner:

	 	1.	 	The Heat Rate, before adjustment for start fuel, will be a fixed standard of 8.045
MMBtu per MWh.
	 
	 	2.	 	The MC-Facility Heat Rate will be the standard Heat Rate plus the product of the number
of Gas Turbine starts for the prior calendar year excluding those starts that were not
associated with delivery of energy under the Commercial Energy schedules and 350 MMBtu per
start divided by the energy delivered to Consumers under the Commercial Energy schedules
expressed in MWhs during the prior calendar year. If the resulting calculated Heat Rate
exceeds 8.500 MMBtu per MWh, the Heat Rate will be 8.500 MMBtu per MWh.

(c) Market Disruption Event

If a Market Disruption Event has occurred and is continuing for one or more calendar days, the Gas
Price for each such day shall be determined pursuant to the Gas Price specified for the first
calendar day thereafter on which no Market Disruption Event exists; provided, however, if the Gas
Price is not so determined within three (3) Business Days after the first calendar day on which the
Market Disruption Event occurred or existed, then the Parties shall negotiate in good faith to
agree on a Gas Price (or a method for determining a Gas Price), and if the Parties have not so
agreed on or before the twelfth (12th) Business Day following the first calendar day on which the
Market Disruption Event occurred or existed, then the Gas Price shall be determined by each Party
obtaining in good faith two dealer quotes obtained from leading dealers in the relevant market that
are not an affiliate and averaging the four quotes.

(e) Rounding Conventions

	 	•	 	Heat Rate — MMBtu/MWh rounded to 3 decimal places
	 
	 	•	 	NOx emission rate — pounds/MMBtu rounded to 3 decimal places
	 
	 	•	 	Tons of NOx emissions — tons rounded to 0 decimal places
	 
	 	•	 	Value of NOx emission allowances — dollars rounded to 0 decimal places
	 
	 	•	 	MWh dispatched — MWh rounded to 3 decimal places

3

 

EXHIBIT C

 

 

EXHIBIT C

Page 1 of 10

AMENDED AND RESTATED

POWER PURCHASE AGREEMENT

BETWEEN CONSUMERS ENERGY COMPANY

AND MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP

FIXED ENERGY PRICE DETERMINATION

          Beginning with that portion of the month including and following the Effective Date and
continuing each month thereafter until this Agreement is terminated, Consumers shall pay for
Commercial Energy associated with fixed expenses in each such month at the energy price determined
by Consumers prior to such month in accordance with the following formula and as illustrated in
this Exhibit C.

          For the energy price associated with fixed expenses, the Fixed Energy Price is equal to:

          (On-Peak Hours) FEP = 1.03 (.5 OM + Fl + AG)

          (Off-Peak Hours) FEP = 0.98 (.5 OM + Fl + AG)

          Where:

	 	 	 	 	 	 	 
	 

	 	FEP
	 	=
	 	The Fixed Energy Price, in dollars per megawatthour (rounded to
the nearest one-tenth of a dollar), to be paid by Consumers to
Seller for Commercial Energy during such Month.
	 
	 	 	 	 	 	 
	 

	 	OM
	 	=
	 	The average cost in dollars per megawatthour (rounded to the
nearest one-tenth of a dollar) for operation and maintenance,
excluding fuel, at the Base Plant during the Most Recent
Calendar Year. Such average cost shall be determined from
Consumers’ total production expenses as stated in its Annual
Report of Electric Utilities (Major and Non-Major) (MPSC Form
P-521) or successor document and Consumers’ fuel related
expenses as set forth in its Power Supply Cost Recovery (PSCR)
Monthly Reports or successor documents submitted to the Michigan
Public Service Commission.

 

 

EXHIBIT C

Page 2 of 10

	 	 	 	 	 	 	 
	 

	 	FI
	 	=
	 	The average cost in dollars per megawatthour (rounded to the
nearest one-tenth of a dollar) for fuel inventory during the Most
Recent Calendar Year. For the purposes of the determination of the
fuel inventory cost, a 60 day hypothetical fuel inventory supply and
an annual fixed charge rate of sixteen percent (16%) on working
capital applicable to such fuel inventory shall be used throughout the
term of this Agreement. The fuel inventory cost shall be equal to the
product of (1) Consumers’ total fuel related expenses at the Base
Plants as set forth in its Power Supply Cost Recovery (PSCR)
Monthly Reports or successor documents submitted to the Michigan
Public Service Commission for the Most Recent Calendar Year, (2)
the ratio that sixty (60) Days bears to the number of Days in the Most
Recent Calendar Year and (3) the 16% annual fixed charge rate,
divided by the total of the net generation at the Base Plants as stated
in Consumers’ Annual Report of Electric Utilities (Major and Non-Major) (MPSC Form P-521) or successor document for such Most
Recent Calendar Year.
	 
	 	 	 	 	 	 
	 

	 	AG
	 	=
	 	The average cost in dollars per megawatthour (rounded to the
nearest one-tenth of a dollar) for the portion of administrative and
general expenses applicable to the system-wide electric operations
of Consumers for the Most Recent Calendar Year calculated for
Consumers total electric generating capacity at the Base Plant’s
composite capacity factor. Such cost shall be determined through
use of a percentage factor applied to administrative and general
salaries and employee pension and benefits’ portion of electric
operation and maintenance expenses for the Most Recent Calendar
Year as stated in Consumers’ Annual Report of Electric Utilities
(Major and Non-Major) (MPSC Form P-521) or successor document.
The percentage factor to be used shall be equal to the ratio
(expressed as a percentage) that (a) the total direct operation and

 

 

EXHIBIT C

Page 3 of 10

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	maintenance production wages bears to (b) the total direct operation and
maintenance wages less the total direct operation and maintenance
administrative and general expenses.

          Each coal-fired plant or portion of a coal-fired plant (herein referred to as Base Plant and
collectively as Base Plants) to be applicable in the determination of OM, Fl and AG in the formula
for calculating the energy payment rate shall (a) be those owned wholly or partially, directly or
indirectly by Consumers, (b) have a total net demonstrated capability of at least one hundred (100)
megawatts, and (c) have been on line during the Most Recent Calendar Year at least five thousand
five Hundred (5500) hours and have had at least a forty percent (40%) capacity factor when
connected to the electric system and generating electric energy.

          As used in this Exhibit C, the term “Most Recent Calendar Year” means: (a) when making
calculations for the Months of April through December, the prior year and (b) when making
calculations for the Months of January through March, the calendar year preceding the prior
calendar year.

          An illustrated calculation of the components of the energy charge to be paid by Consumers to
Seller for Commercial Energy is made in Tables I-V and the Fixed Energy Price determined for the
months beginning with May 2007 through April 2008 is shown below.

	 	 	 	 
	 

	FEP (On-Peak Hours)
	 	= 1.03 (0.5 x $6.9/MWh + $0.6/MWh + $1.4/MWh)
	 

	 	 	= $5.6/MWh
	 
	 	 	 
	 

	FEP (Off-Peak Hours)
	 	= 0.98 (0.5 x $6.9/MWh + $0.6/MWh + $1.4/MWh)
	 

	 	 	= $5.3/MWh

 

 

EXHIBIT C

Page 4 of 10

TABLE I

2006 Base Plant Characteristics and Costs

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	A	 	B	 	C	 	D	 	E	 	F	 	G	 	H	 	I	 	J	 	K
	 	 	 	 	 	 	Net	 	Energy	 	 	 	 	 	Capacity	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Capacity	 	Generated	 	Hours on	 	Factor	 	Total O&M	 	Fuel	 	Other O&M	 	Fuel	 	Other O&M
	 	 	Year	 	MW	 	MWh	 	Line	 	%	 	$	 	$	 	$	 	$/MWh	 	$/MWh
	 	 	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)	 	(7)	 	(8)	 	(9)	 	(10)
	Karn 1&2
	 	 	1961	 	 	 	515	 	 	 	3,586,689	 	 	 	8,743	 	 	 	80	 	 	 	102,913,477	 	 	 	79,929,000	 	 	 	22,984,477	 	 	 	22.3	 	 	 	6.4	 
	Campbell 1&2
	 	 	1967	 	 	 	620	 	 	 	4,358,221	 	 	 	8,760	 	 	 	80	 	 	 	118,215,206	 	 	 	91,869,000	 	 	 	26,346,206	 	 	 	21.1	 	 	 	6.0	 
	Campbell 3
	 	 	1980	 	 	 	765	 	 	 	3,712,157	 	 	 	5,929	 	 	 	82	 	 	 	109,361,679	 	 	 	88,505,000	 	 	 	20,856,679	 	 	 	23.8	 	 	 	5.6	 
	Whiting
	 	 	1953	 	 	 	328	 	 	 	2,378,253	 	 	 	8,638	 	 	 	84	 	 	 	66,549,266	 	 	 	49,254,000	 	 	 	17,295,266	 	 	 	20.7	 	 	 	7.3	 
	Weadock
	 	 	1958	 	 	 	310	 	 	 	1,864,625	 	 	 	8,681	 	 	 	69	 	 	 	53,824,286	 	 	 	37,837,000	 	 	 	15,987,286	 	 	 	20.3	 	 	 	8.6	 
	Cobb 4&5
	 	 	1957	 	 	 	320	 	 	 	1,843,766	 	 	 	8,348	 	 	 	69	 	 	 	55,296,613	 	 	 	37,132,000	 	 	 	18,164,613	 	 	 	20.1	 	 	 	9.9	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	 	 	 	 	2,858	(11)	 	 	17,743,711	(11)	 	 	 	 	 	 	 	 	 	 	506,160,527	(11)	 	 	384,526,000	(11)	 	 	121,634,527	(11)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Composite
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	8,760	(12)	 	 	71	(13)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	21.7	(14)	 	 	6.9	(15)
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

			
	NOTES:	 	 
	 
	1.	 	Column A lists Base Plants as defined in Exhibit C.
	 
	2.	 	Column J Composite sets forth 2006 Base Plant Fuel Costs as defined in Exhibit C.
	 
	3.	 	Column K Composite sets forth 2006 O&M Cost as defined in Exhibit C.
	 
	4.	 	The number in parenthesis beside a figure or column refers to the applicable numbered
instruction in Table V for that figure or column.

 

 

EXHIBIT C

Page 5 of 10

TABLE II

Determination of 2006 Base Plant Fuel Inventory Cost

	 	 	 	 	 	 	 
	L.	 	2006 Fuel Value (16)
	 	$	384,526,000	 
	 	 	 
	 	 	 	 
	M.	 	Base Plant Generation (17)
	 	17,743,711 MWh	 
	 	 	 
	 	 	 	 
	N.	 	Inventory Supply (18)
	 	60 Days	 
	 	 	 
	 	 	 	 
	O.	 	Fixed Charge Rate (19)
	 	 	16	%
	 	 	 
	 	 	 	 
	P.	 	Value of Inventory (20)
	 	$	63,209,753	 
	 	 	 
	 	 	 	 
	Q.	 	Annual Carrying Charges (21)
	 	$	10,113,561	 
	 	 	 
	 	 	 	 
	R.	 	Fuel Inventory Cost (22)
	 	$	0.6/MWh	 

 

			
	NOTES:	 	 
	 
	1.	 	The number in parenthesis beside a figure or column refers to the applicable numbered
instruction in Table V for that figure or column.
	 
	2.	 	Line R sets forth 2006 Fuel Inventory Cost as defined in Exhibit C.

 

 

EXHIBIT C

Page 6 of 10

TABLE III

Determination of 2006 Administrative and General Cost

	 	 	 	 	 	 	 
	S.	 	Total Operation and Maintenance Production Salaries
and Wages (23)
	 	$	77,365,747	 
	 	 	 
	 	 	 	 
	T.	 	Total Operation and Maintenance A&G Salaries and
Wages (24)
	 	$	24,905,252	 
	 	 	 
	 	 	 	 
	U.	 	Total Operation and Maintenance Salaries and Wages
(25)
	 	$	192,282,877	 
	 	 	 
	 	 	 	 
	V.	 	Total Operation and Maintenance Salaries and Wages
Less A&G Salaries and Wages (26)
	 	$	167,377,625	 
	 	 	 
	 	 	 	 
	W.	 	Total Operation and Maintenance Production Salaries
and Wages as a Percentage of Total Salaries and
Wages Less A&G Salaries and Wages (27)
	 	 	46	%
	 	 	 
	 	 	 	 
	X.	 	Operation A&G Salaries (28)
	 	$	30,641,372	 
	 	 	 
	 	 	 	 
	Y.	 	Operation A&G Pension and Benefits (29)
	 	$	95,761,541	 
	 	 	 
	 	 	 	 
	Z.	 	Total Operation A&G Salaries, Pension and Benefits
(30)
	 	$	126,402,913	 
	 	 	 
	 	 	 	 
	AA.	 	Production Part of Total (31)
	 	 	46	%
	 	 	 
	 	 	 	 
	BB.	 	Production A&G Expense (32)
	 	$	58,145,340	 
	 	 	 
	 	 	 	 
	CC.	 	Capacity for all Electrical Generating Plants (33)
	 	6,644 MW	 
	 	 	 
	 	 	 	 
	DD.	 	Base Plant Composite Capacity Factor (34)
	 	 	71	%
	 	 	 
	 	 	 	 
	EE. $1.4/MWh	 	Administrative and General Cost (35)
	 	 	 	 

 

			
	NOTES:	 	 
	 
	1.	 	The number in parenthesis beside a figure or column refers to the applicable numbered
instruction in Table V for that figure or column.
	 
	2.	 	Line EE sets forth 2006 Administrative and General Cost as defined in Exhibit C.

 

 

EXHIBIT C

Page 7 of 10

TABLE IV

2006 PSCR Fuel Related Expenses

Dollars

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Base Plant	 	January	 	February	 	March	 	April	 	May	 	June	 	July	 	August	 	September	 	October	 	November	 	December	 	Total
	Karn 1&,2
	 	 	7,221,000	 	 	 	6,312,000	 	 	 	5,631,000	 	 	 	7,305,000	 	 	 	7,472,000	 	 	 	7,648,000	 	 	 	8,246,000	 	 	 	8,080,000	 	 	 	6,660,000	 	 	 	5,139,000	 	 	 	3,933,000	 	 	 	6,282,000	 	 	 	79,929,000	 
	 
	Campbell 1&2
	 	 	6,535,000	 	 	 	7,040,000	 	 	 	8,307,000	 	 	 	7,339,000	 	 	 	7,402,000	 	 	 	7,561,000	 	 	 	7,082,000	 	 	 	8,284,000	 	 	 	7,838,000	 	 	 	8,520,000	 	 	 	8,198,000	 	 	 	7,763,000	 	 	 	91,869,000	 
	 
	Campbell 3
	 	 	9,052,000	 	 	 	9,286,000	 	 	 	8,169,000	 	 	 	8,209,000	 	 	 	10,679,000	 	 	 	10,215,000	 	 	 	11,380,000	 	 	 	11,468,000	 	 	 	10,047,000	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	88,505,000	 
	 
	Whiting
	 	 	3,774,000	 	 	 	3,248,000	 	 	 	3,092,000	 	 	 	3,836,000	 	 	 	4,120,000	 	 	 	4,218,000	 	 	 	4,486,000	 	 	 	5,009,000	 	 	 	4,983,000	 	 	 	3,414,000	 	 	 	4,226,000	 	 	 	4,848,000	 	 	 	49,254,000	 
	 
	Weadock
	 	 	3,653,000	 	 	 	3,818,000	 	 	 	3,397,000	 	 	 	2,368,000	 	 	 	2,020,000	 	 	 	2,971,000	 	 	 	3,548,000	 	 	 	3,584,000	 	 	 	3,111,000	 	 	 	3,330,000	 	 	 	3,051,000	 	 	 	2,986,000	 	 	 	37,837,000	 
	 
	Cobb 4&5
	 	 	3,833,000	 	 	 	3,397,000	 	 	 	3,883,000	 	 	 	3,606,000	 	 	 	2,032,000	 	 	 	4,140,000	 	 	 	2,158,000	 	 	 	2,156,000	 	 	 	2,820,000	 	 	 	3,247,000	 	 	 	2,432,000	 	 	 	3,428,000	 	 	 	37,132,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	384,526,000	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

 

EXHIBIT C

Page 8 of 10

TABLE V

Instructions for Entry or Calculation

for Table I

	1.	 	The year the last unit at the Base Plant was installed as set forth on Line 4 of Pages
402-403 of CP-P-521.
	 
	2.	 	Net continuous plant capability (in megawatts) when not limited by condenser water as set
forth on Line 9 of Pages 402-403 of CP-P-521.
	 
	3.	 	Net generation for the calendar year exclusive of plant use (in MWh) as set forth on Line 12
of Pages 402-403 of CP-P-521.
	 
	4.	 	The number of hours the plant was connected to load for the calendar year as set forth on
Line 7 of Pages 402-403 of CP-P-521.
	 
	5.	 	(100 x Column D)/(Column C x Column E).
	 
	6.	 	Total production expenses for the calendar year as set forth on Line 34 of Pages 402- 403 of
CP-P-521.
	 
	7.	 	Fuel cost per plant for the calendar year as set forth in the PSCR Monthly Reports submitted
by Consumers for each month of the calendar year determined in a manner consistent with the
method set forth in Table V of this exhibit.
	 
	8.	 	Column G — Column H.
	 
	9.	 	Column H/Column D.
	 
	10.	 	Column I/Column D.
	 
	11.	 	Total of column.
	 
	12.	 	Total number of hours in the calendar year.
	 
	13.	 	(100 x Total of Column D)/(Composite of Column E x Total of Column C).
	 
	14.	 	Total of Column H/Total of Column D.
	 
	15.	 	Total of Column I/Total of Column D.

 

 

EXHIBIT C

Page 9 of 10

TABLE V

Instructions for Entry or Calculation

for Table II

	16.	 	Total of Column H, Table I
	 
	17.	 	Total of Column D, Table I.
	 
	18.	 	Assumption; to be used as constant during term of agreement.
	 
	19.	 	Assumption; to be used as constant during term of agreement.
	 
	20.	 	(Line L x Line N)/(Number of days in year).
	 
	21.	 	(Line P x Line O)/100.
	 
	22.	 	Line Q/Line M.

Instructions for Entry or Calculation

for Table III

	23.	 	Direct payroll for system-wide electric production for the calendar year as set forth on Line
18 (Column b) of Page 354 of CP-P-521.
	 
	24.	 	Direct payroll for system-wide electric administrative and general for the calendar year as
set forth on Line 24 (Column b) of Page 354 of CP-P-521.
	 
	25.	 	Total direct payroll for system-wide electric operation and maintenance for the calendar year
as set forth on Line 25 (Column b) of Page 354 of CP-P-521.
	 
	26.	 	Line U — Line T.
	 
	27.	 	(100 x Line S)/Line V.
	 
	28.	 	Administrative and general salaries portion of system-wide electric operation and maintenance
expenses for the calendar year as set forth on Line 151 (Column b) of Page 322 of CP-P-521.
	 
	29.	 	Employee pension and benefits portion of system-wide electric operation and maintenance
expenses for the calendar year as set forth on Line 158 (Column b) of Page 323 of CP-P-521.
	 
	30.	 	Line X + Line Y.

 

 

EXHIBIT C

Page 10 of 10

TABLE V

Instructions for Entry or Calculation

for Table III (Continued)

	31.	 	Repeat Line W.
	 
	32.	 	(Line AA x Line Z)/100.
	 
	33.	 	Sum of the following for all electrical generating plants:

	 	a.	 	Net continuous plant capability (in megawatts) when not limited by condenser
water as set forth on Line 9 (Columns A-F) of Pages 402-403 of CP-P-521;

and

	 	b.	 	Net plant capability (in megawatts) under the most favorable operating conditions
as set forth on Line 9 (Columns A-F) of Pages 406-407 of CP-P-521;

and

	 	c.	 	Net plant capability (in megawatts) as set forth on Line 7 (Column B) of Page 409
of CP-P-521;

and

	 	d.	 	Installed capacity nameplate rating (in megawatts) of all plants producing
electricity as its primary product as set forth on Page 410 (Column C) of CP-P- 521.

	34.	 	Composite for Column F, Table I.
	 
	35.	 	(100 x Line BB)/(Line CC x Line DD x Total hours in the year).

 

 

EXHIBIT D

 

 

Exhibit D

OPERATING PRACTICE 5

CONSUMERS/MCV

AMENDED AND RESTATED POWER PURCHASE AGREEMENT

AVAILABLE CAPACITY

GENERAL

Available Capacity is defined in Subsection 1(a) of the Amended and Restated Power Purchase
Agreement (the “PPA”). During periods when MCV requests Consumers to supply energy to DOW, MCV will
retain its capacity commitment to DOW and therefore, Available Capacity will be determined by
deducting MCV’s capacity commitment to DOW from the total generating capacity available. MCV will
declare to Consumers any changes to Available Capacity in advance or as soon as practical.
Consumers has the right to evaluate the ability of MCV to achieve the declared Available Capacity,
and to review documentation and test records to verify such declaration.

PROCEDURE

	1)	 	MCV will maintain and retain plant status records that Consumers can review to monitor
Available Capacity as follows:

	 	a)	 	The following records or their successor will be retained for at least the period of
time as specified in Subsection 7(i) of the PPA:

	 	i)	 	Hourly data from MCV’s model used to calculate capacity of the MC-Facility
(“CAPCALC”).
	 
	 	ii)	 	Operator logbook entries and associated equipment data which contain
information regarding equipment status and derates.
	 
	 	iii)	 	The electric and steam energy usage of DOW and others.
	 
	 	iv)	 	Sales to purchasers (as agreed by the parties)and Permissible Purchasers.

	 	b)	 	The following records or their successor will be retained for at least four
months:

	 	i)	 	Equipment work order and tagging records.
	 
	 	ii)	 	Requested Distributed Control System (DCS) data records.
	 
	 	iii)	 	Agreed upon non-DCS instrumentation data that would reflect any
potential equipment problems (e.g., thermocouple data).

	 	c)	 	Observed changes in equipment performance that impact MCV capability will be
appropriately reflected in CAPCALC.

	2)	 	The Available Capacity declared by MCV or adjusted, after the fact, for billing purposes
relating to capacity charge payments shall be based on the following:

 

 

Exhibit D

	 	a)	 	MCV will immediately enter derates or outages in CAPCALC at the time they occur or as
soon thereafter as practical and shall notify Consumers as soon thereafter as practical,
but in no event later than one hour. A generating unit will be considered unavailable if it
cannot be started and loaded within the amount of time specified in Operating Practice 4.
	 
	 	b)	 	If a unit fails to start and the cause of failure is determined and corrective action
is completed within two hours, the unit will be considered available. However, if the next
attempt to start and load the unit after such two hours fails due to the same or a related
problem, or if corrective action is not completed within such two hours, the unit will be
considered unavailable retroactive to the initial failed start.
	 
	 	c)	 	If equipment data indicates (i) that there is a reasonable likelihood that the next
attempt to start and load a unit would fail, and no corrective action is taken and (i) the
next attempt to start and load the unit fails due to the same or a related problem as
indicated by the equipment data, the unit will be considered unavailable retroactive to the
time the data initially indicated a problem existed.
	 
	 	d)	 	MCV will adjust MCV’s declared Available Capacity for derates under the following rules
governing the delivery of energy from the MC-Facility to meet dispatch orders as set out in
Operating Practice 2:

	 	i)	 	A derate of MCV’s Available Capacity shall occur if MCV’s actual energy
delivery, on an integrated hourly basis (integrated hour is defined as starting and
ending on the hour), is lower than the Final Delivery Schedule as defined in Operating
Practice 2 for more than two consecutive integrated hours.
	 
	 	ii)	 	If MCV’s actual energy delivery is lower than the Final Delivery Schedule as
defined in Operating Practice 2 for three consecutive integrated hours, the Available
Capacity will be set equal to the actual energy delivery in the third integrated
hour.
	 
	 	iii)	 	If MCV’s actual energy delivery is lower than the Final Delivery Schedule as
defined in Operating Practice 2 for more than three consecutive integrated hours, the
Available Capacity will be set equal to the actual energy delivery beginning with the
first hour the deficiency occurs until the derate is eliminated.
	 
	 	iv)	 	If a steam turbine unit is not synchronized to the electric system, MCV’s
Available Capacity shall equal that capacity which MCV can attain without the steam
turbine after due consideration of the operating characteristics specified in
Operating Practice 4.

	3)	 	Questions and clarifications on Available Capacity shall be directed to the MCV Operations
shift Supervisor.
	 
	4)	 	Consumers may audit the Available Capacity declared by MCV for billing purposes relating to
capacity charge payments.

	 	a)	 	Consumers may elect to request a performance test to determine MCV’s ability to
achieve the declared Available Capacity. Consumers shall notify MCV of such a test period
as

 

 

Exhibit D

	 	 	 	part of the rules governing scheduling and dispatch pursuant to Operating Practice 2. These
evaluations shall conform to Subsection 7(g) in the PPA.

	 	b)	 	Consumers may elect, as an alternative to testing, to review operating records logs and have
access to equipment for the purpose of verifying Available Capacity. MCV shall permit full
access by Consumers during regular business hours to all pertinent operating records and
equipment, including, but limited to:

	 	i)	 	Requested DCS data records
	 
	 	ii)	 	Operator logbook entries and associated equipment data
	 
	 	iii)	 	CAPCALC data sheets and associated documentation
	 
	 	iv)	 	Tagging and work order records

A reduction in the Capacity Payment will occur when operating records logs or equipment review
do not support the declared Available Capacity, for four (4) consecutive integrated hours, as
specified in Subsection 7(g) of the PPA.

Effective Date
                                        

	 	 	 	 	 
	 

	 	Operating Committee	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

Consumers
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

MCV
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

Signature Date
	 	 

 

 

EXHIBIT E

 

 

	 	 	 	 	 
	

INQUIRIES: Phone (989) 633-7886

Fax (989) 633-7887

	 	MIDLAND COGENERATION VENTURE

100 Progress Place

Midland, MI 48640
	 	EXHIBIT E 
PAGE 1 OF 3
	 	 
	 	 	 

CONFIDENTIAL — FOR SETTLEMENT

DISCUSSION PURPOSES ONLY

PRO FORMA BILLING 
FOR
ILLUSTRATIVE PURPOSES ONLY

	 	 	 
	INVOICE TO:

	 	REMIT TO:
	 
	 	 
	CONSUMERS ENERGY COMPANY

	 	ATTN: TREASURY
	Purchase & Interchange Power

	 	Midland Cogeneration Venture
	1945 West Parnall Road

	 	100 Progress Place
	Jackson, MI 49201

	 	Midland, MI 48640

	 	 	 	 	 	 	 
	INVOICE DATE
	 	INVOICE NO.
	 	PURCHASE ORDER NO.
	 	TERMS
	 	 	 	 	 	 	 
	5/1/2009
	 	0409-001
	 	C0056474
	 	Payment Due: 5/21/2009

	 	 	 	 	 
	DESCRIPTION	 	AMOUNT	 
	April 2009 PPA Energy Charges:
	 	 	 	 
	Capacity Charge
	 	$	8,985,358.20	 
	Fixed Energy Charge
	 	 	4,825,981.00	 
	COP Charge
	 	 	17,087,949.80	 
	RESA Credit (1/12 of $5,000,000)
	 	 	(416,666.67	)
	Administration Charge
	 	 	(2,000.00	)
	 
	 	 	 
	Total Energy Charges
	 	 	30,480,622.33	 
	 
	 	 	 
	 
	 	 	 	 
	Other Credits/Charges:
	 	 	 	 
	MISO Agency Agreement Credit for the Month of May 2009
	 	 	(1,796.26	)
	 
	 	 	 
	Total Other Credits/Charges
	 	 	(1,796.26	)
	 
	 	 	 
	 
	 	 	 	 
	 
	 	INVOICE TOTAL
	 
	 	 	 	 
	 
	 	$	30,478,826.07	 
	 
	 	 	 

	 	 	 
	WIRE REMITTANCE TO:

	 	U.S. BANK TRUST, N.A.
	 

	 	MINNEAPOLIS, MN
	 

	 	ABA      091000022
	 

	 	A/C        180121167365
	 

	 	FFC        47300017
	 

	 	FBO       MCV 76608640

 

 

	 	 	 	 	 
	 

	 	 	 	EXHIBIT E

PAGE 2 OF 3

CONFIDENTIAL — FOR SETTLEMENT

DISCUSSION PURPOSES ONLY

     HYPOTHETICAL BILLING DETAIL FOR MONTHLY PPA INVOICE

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Hour	 	 	RT-LMP	 	 	Available	 	 	Capacity	 	 	Capacity	 	 	FE	 	 	FE	 
	Date	 	Ending	 	 	CONS.CETR	 	 	MWh	 	 	Rate	 	 	Charge	 	 	Rate	 	 	Charge	 
	4/1/2009
	 	 	1	 	 	 	34.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.30	 	 	 	6,466.00	 
	4/1/2009
	 	 	2	 	 	 	34.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.30	 	 	 	6,466.00	 
	4/1/2009
	 	 	3	 	 	 	30.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.30	 	 	 	6,466.00	 
	4/1/2009
	 	 	4	 	 	 	27.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.30	 	 	 	6,466.00	 
	4/1/2009
	 	 	5	 	 	 	28.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.30	 	 	 	6,466.00	 
	4/1/2009
	 	 	6	 	 	 	37.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.30	 	 	 	6,466.00	 
	4/1/2009
	 	 	7	 	 	 	50.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.30	 	 	 	6,466.00	 
	4/1/2009
	 	 	8	 	 	 	62.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/1/2009
	 	 	9	 	 	 	60.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/1/2009
	 	 	10	 	 	 	54.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/1/2009
	 	 	11	 	 	 	60.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/1/2009
	 	 	12	 	 	 	65.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/1/2009
	 	 	13	 	 	 	66.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/1/2009
	 	 	14	 	 	 	70.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/1/2009
	 	 	15	 	 	 	69.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/1/2009
	 	 	16	 	 	 	69.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/1/2009
	 	 	17	 	 	 	74.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/1/2009
	 	 	18	 	 	 	76.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/1/2009
	 	 	19	 	 	 	76.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/1/2009
	 	 	20	 	 	 	70.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/1/2009
	 	 	21	 	 	 	76.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/1/2009
	 	 	22	 	 	 	69.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/1/2009
	 	 	23	 	 	 	52.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/1/2009
	 	 	24	 	 	 	37.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.30	 	 	 	6,519.00	 
	4/2/2009
	 	 	1	 	 	 	38.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.30	 	 	 	6,519.00	 
	4/2/2009
	 	 	2	 	 	 	31.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.30	 	 	 	6,519.00	 
	4/2/2009
	 	 	3	 	 	 	30.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.30	 	 	 	6,519.00	 
	4/2/2009
	 	 	4	 	 	 	28.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.30	 	 	 	6,519.00	 
	4/2/2009
	 	 	5	 	 	 	31.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.30	 	 	 	6,519.00	 
	4/2/2009
	 	 	6	 	 	 	34.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.30	 	 	 	6,519.00	 
	4/2/2009
	 	 	7	 	 	 	49.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.30	 	 	 	6,519.00	 
	4/2/2009
	 	 	8	 	 	 	66.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	9	 	 	 	54.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/2/2009
	 	 	10	 	 	 	59.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/2/2009
	 	 	11	 	 	 	68.00	 	 	 	1,220	 	 	 	10.14	 	 	 	12,370.80	 	 	 	5.60	 	 	 	6,832.00	 
	4/2/2009
	 	 	12	 	 	 	69.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	13	 	 	 	68.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	14	 	 	 	73.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	15	 	 	 	73.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	16	 	 	 	64.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	17	 	 	 	69.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	18	 	 	 	66.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	19	 	 	 	71.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	20	 	 	 	72.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	21	 	 	 	70.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	22	 	 	 	70.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	23	 	 	 	54.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.60	 	 	 	6,888.00	 
	4/2/2009
	 	 	24	 	 	 	41.00	 	 	 	1,230	 	 	 	10.14	 	 	 	12,472.20	 	 	 	5.30	 	 	 	6,519.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Totals for 4/1-2/08
	 	 	 	 	 	$	56.10	 	 	 	58,850	 	 	$	10.14	 	 	$	596,739.00	 	 	$	5.50	 	 	$	323,677.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Totals for Month
	 	 	 	 	 	$	51.27	 	 	 	886,130	 	 	$	10.14	 	 	$	8,985,358.20	 	 	 	5.45	 	 	$	4,825,981.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

     Dataset contains all 720 hours for the month. Only the details for the first 48 hours are printed in the example.

 

 

	 	 	 	 	 
	 

	 	 	 	EXHIBIT E

PAGE 3 OF 3

CONFIDENTIAL — FOR SETTLEMENT

DISCUSSION PURPOSES ONLY

     HYPOTHETICAL BILLING DETAIL FOR MONTHLY PPA INVOICE

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Hour	 	 	Scheduled	 	 	Delivered	 	 	 	 	 	 	Band-	 	 	Excess	 	 	Deficiency	 	 	Gas	 	 	Gas	 	 	Operating	 	 	HR Adj	 	 	Heat	 	 	Gas Price	 	 	Maint	 	 	Water	 	 	NOx	 	 	COP	 	 	Excess	 	 	Deficiency	 	 	COP	 
	Date	 	Ending	 	 	MWh	 	 	MWh	 	 	+ or -	 	 	width	 	 	Amount	 	 	Amount	 	 	Price	 	 	Trans	 	 	HR	 	 	for Starts	 	 	Rate	 	 	x HR	 	 	Adder	 	 	Adder	 	 	Adder	 	 	Rate	 	 	Rate	 	 	Rate	 	 	Charge	 
	4/1/2009
	 	 	1	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	—	 
	4/1/2009
	 	 	2	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	—	 
	4/1/2009
	 	 	3	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	30.00	 	 	 	32.13	 	 	 	—	 
	4/1/2009
	 	 	4	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	27.00	 	 	 	32.13	 	 	 	—	 
	4/1/2009
	 	 	5	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	28.00	 	 	 	32.13	 	 	 	—	 
	4/1/2009
	 	 	6	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	—	 
	4/1/2009
	 	 	7	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	—	 
	4/1/2009
	 	 	8	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	—	 
	4/1/2009
	 	 	9	 	 	 	100	 	 	 	150	 	 	 	50	 	 	 	40	 	 	 	10	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	9,316.30	 
	4/1/2009
	 	 	10	 	 	 	385	 	 	 	390	 	 	 	5	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	25,057.50	 
	4/1/2009
	 	 	11	 	 	 	575	 	 	 	580	 	 	 	5	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	37,265.00	 
	4/1/2009
	 	 	12	 	 	 	670	 	 	 	680	 	 	 	10	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	43,690.00	 
	4/1/2009
	 	 	13	 	 	 	715	 	 	 	720	 	 	 	5	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	46,260.00	 
	4/1/2009
	 	 	14	 	 	 	715	 	 	 	720	 	 	 	5	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	46,260.00	 
	4/1/2009
	 	 	15	 	 	 	690	 	 	 	690	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	44,332.50	 
	4/1/2009
	 	 	16	 	 	 	675	 	 	 	680	 	 	 	5	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	43,690.00	 
	4/1/2009
	 	 	17	 	 	 	740	 	 	 	740	 	 	 	—	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	47,545.00	 
	4/1/2009
	 	 	18	 	 	 	985	 	 	 	990	 	 	 	5	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	63,607.50	 
	4/1/2009
	 	 	19	 	 	 	1,215	 	 	 	1,220	 	 	 	5	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	78,385.00	 
	4/1/2009
	 	 	20	 	 	 	1,230	 	 	 	1,230	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	79,027.50	 
	4/1/2009
	 	 	21	 	 	 	1,055	 	 	 	1,050	 	 	 	(5	)	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	67,462.50	 
	4/1/2009
	 	 	22	 	 	 	690	 	 	 	650	 	 	 	(40	)	 	 	20	 	 	 	—	 	 	 	20	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	41,119.90	 
	4/1/2009
	 	 	23	 	 	 	225	 	 	 	230	 	 	 	5	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	14,777.50	 
	4/1/2009
	 	 	24	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.90	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.04	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.25	 	 	 	32.13	 	 	 	32.13	 	 	 	—	 
	4/2/2009
	 	 	1	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	—	 
	4/2/2009
	 	 	2	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	31.00	 	 	 	32.46	 	 	 	—	 
	4/2/2009
	 	 	3	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	30.00	 	 	 	32.46	 	 	 	—	 
	4/2/2009
	 	 	4	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	28.00	 	 	 	32.46	 	 	 	—	 
	4/2/2009
	 	 	5	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	31.00	 	 	 	32.46	 	 	 	—	 
	4/2/2009
	 	 	6	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	—	 
	4/2/2009
	 	 	7	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	—	 
	4/2/2009
	 	 	8	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	—	 
	4/2/2009
	 	 	9	 	 	 	215	 	 	 	220	 	 	 	5	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	14,280.20	 
	4/2/2009
	 	 	10	 	 	 	390	 	 	 	390	 	 	 	—	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	25,314.90	 
	4/2/2009
	 	 	11	 	 	 	580	 	 	 	590	 	 	 	10	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	38,296.90	 
	4/2/2009
	 	 	12	 	 	 	765	 	 	 	770	 	 	 	5	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	49,980.70	 
	4/2/2009
	 	 	13	 	 	 	920	 	 	 	920	 	 	 	—	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	59,717,20	 
	4/2/2009
	 	 	14	 	 	 	975	 	 	 	980	 	 	 	5	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	63,611.80	 
	4/2/2009
	 	 	15	 	 	 	890	 	 	 	900	 	 	 	10	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	58,419.00	 
	4/2/2009
	 	 	16	 	 	 	810	 	 	 	810	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	52,577.10	 
	4/2/2009
	 	 	17	 	 	 	740	 	 	 	740	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	48,033.40	 
	4/2/2009
	 	 	18	 	 	 	900	 	 	 	910	 	 	 	10	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	59,068.10	 
	4/2/2009
	 	 	19	 	 	 	1,145	 	 	 	1,150	 	 	 	5	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	74,646.50	 
	4/2/2009
	 	 	20	 	 	 	1,230	 	 	 	1,230	 	 	 	—	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	79,839.30	 
	4/2/2009
	 	 	21	 	 	 	1,110	 	 	 	1,110	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	72,050.10	 
	4/2/2009
	 	 	22	 	 	 	775	 	 	 	770	 	 	 	(5	)	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	49,980.70	 
	4/2/2009
	 	 	23	 	 	 	350	 	 	 	350	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	22,718.50	 
	4/2/2009
	 	 	24	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	6.98	 	 	 	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	 	58.71	 	 	 	4.35	 	 	 	0.67	 	 	 	1.19	 	 	 	64.91	 	 	 	32.46	 	 	 	32.46	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Totals for 4/1-2/08
	 	 	 	 	 	 	22,460	 	 	 	22,560	 	 	 	100	 	 	 	 	 	 	 	10	 	 	 	20	 	 	$	6.94	 	 	$	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	$	58.39	 	 	$	4.35	 	 	$	0.67	 	 	$	1.19	 	 	$	64.60	 	 	$	32.13	 	 	$	32.13	 	 	$	1,456,330.60	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Totals for Month
	 	 	 	 	 	 	260,390	 	 	 	262,040	 	 	 	1,650	 	 	 	 	 	 	 	10	 	 	 	20	 	 	$	7.05	 	 	$	0.06	 	 	 	8.045	 	 	 	0.294	 	 	 	8.339	 	 	$	59.27	 	 	$	4.35	 	 	$	0.67	 	 	$	1.19	 	 	$	65.48	 	 	$	31.88	 	 	$	32.74	 	 	$	17,087,949.80	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

     Dataset contains all 720 hours for the month. Only the details for the first 48 hours are printed in the example.

 

 

ATTACHMENT C

 

 

	 	 	 	 	 
	 

	 	
	 	James M. Rajewski

Chief Financial Officer,
Vice President and Controller

	 
	 	 
	 
	 	 

AFFIDAVIT

(Supplemental)

James M. Rajewski, being first duly sworn, states:

	 	1.	 	I am the Vice President, Controller and Chief Financial Officer of the
Midland
Cogeneration Venture Limited Partnership (“MCV”).
	 
	 	2.	 	I have determined that Consumers Energy’s exercising its “regulatory
out” right
under the Power Purchase Agreement between Consumer Energy and MCV
(“PPA’) will not allow MCV to remain financially viable on a long-term basis and
would necessarily result in MCV providing notice of termination of the PPA prior
to the deadline for providing such notice.
	 
	 	3.	 	I have reviewed the proposed settlement for MPSC Case No. U-15320, the
proposed Amended and Restated PPA, which is scheduled to end March 16, 2025,
and related revised documents, that have been exchanged among the parties to
U-15320.
	 
	 	4.	 	I have reviewed and modeled MCV’s likely business and economic
assumptions
and the revised terms and conditions in the proposed settlement, the Amended and
Restated PPA, and other likely facts and circumstances.
	 
	 	5.	 	I conclude the projections and conclusions used in and resulting from
my review
and modeling represent reasonable forecasts of probable consequences for MCV
from operating under the proposed settlement and related documents.
	 
	 	6.	 	MCV has not disclosed its confidential and proprietary business and
economic
assumptions to the other parties in U-15320.

100 Progress Place    Midland, MI 48640    989.633.7888    Fax 989.633.7887   E-mail: jmrajewski@midcogen.com

AMERICA’S LARGEST COGENERATION PLANT

 

 

AFFIDAVIT (Supplemental)

Page Two

	 	7.	 	For purpose of requesting the other parties in U-15320 to rely upon my
representations to settle U-15320, I represent and warrant that I expect MCV to remain
financially solvent and viable under the terms of the proposed settlement, the Amended and
Restated PPA, and related documents from the present through March 16, 2025 if the parties
agree to and the MPSC approves the proposed settlement and related documents based upon the
circumstances described in Paragraphs 1-5 above.

	 	 	 
	/s/ James M. Rajewski
 

James M. Rajewski

	 	 
	Vice President, Controller and Chief Financial Officer
	 	 
	Dated: May 9, 2008
	 	 

Subscribed and sworn to before me on this 9th day of May 2008, Midland County,
Michigan.

	 	 	 	 	 
	 	 	 
	 	                                                 /s/ Jean H. Weaver
 	 
	 	Jean H. Weaver, Notary Public  	 
	 	State of Michigan, County of Bay County 

Acting in County of Midland County

My commission expires August 15, 2013	 

 

 

	 	 	 	 	 

			
	     	 	 
	Overland Consulting
	 	10801 MASTIN

BUILDING 84, SUITE 420

OVERLAND PARK, KS 66210

913 / 599-3323 FAX 913 / 495-9909

May 9, 2008

Mr. James M. Rajewski

Midland Cogeneration Venture

100 Progress Place

Midland, MI 48640

Subject: Independent Review to Determine the Reasonableness of Statements Made by James
M. Rajewski in the Affidavit Regarding the Long-Term Financial Condition of Midland
Cogeneration Venture Limited Partnership (“MCV”)

Dear Mr. Rajewski:

Pursuant to our Engagement Letter dated February 20, 2008, and amended on May 7, 2008,
Overland Consulting (“Overland”) has completed its review of MCV financial forecasts
associated with alternative conditions generally associated with the impact of MCV’s
Purchase Power Agreement (PPA) with Consumers Energy Company (“Consumers”); namely (A)
the impact of Consumers election under Section 10(c) of the Power Purchase Agreement
(“PPA”) to adjust its payments for capacity charges (generally referred to as “Reg-Out”),
and (B) a proposed Amended and Restated Power Purchase Agreement (also referred to as the
“Tolling Agreement” or “Tolling Alternative”).

The following narrative sets forth the purpose and scope of our engagement, the
conditions under which the review was conducted, and our conclusions as a result of the
review.

Purpose and Scope of Work. Overland Consulting was retained to independently
verify the reasonableness of statements made in the Affidavit by James M. Rajewski, which
includes the following language:

	 	2.	 	I have determined that Consumers Energy’s
exercising its “regulatory out” right under the Power Purchase
Agreement between Consumer Energy and MCV (“PPA”) will not allow MCV
to remain financially viable on a long-term basis and would
necessarily result in MCV providing notice of termination of the PPA
prior to the deadline for providing such notice.

 

 

May 9, 2008

Page 2

	 	4.	 	I have reviewed and modeled MCV’s likely business and
economic assumptions and the revised terms and conditions in the
proposed settlement, the Amended and Restated PPA, and other
likely facts and circumstances.
	 
	 	5.	 	I conclude the projections and conclusions used in and
resulting
from my review and modeling represent reasonable forecasts of
probable consequences for MCV from operating under the
proposed settlement and related documents.
	 
	 	7.	 	For purposes of requesting the other parties in U-15320 to rely
upon my representations to settle U-15320, I represent and warrant that I
expect MCV to remain financially solvent and viable under the terms of the
proposed settlement, the Amended and Restated PPA, and related documents
from the present through March 16, 2025 if the parties agree to and the
MPSC approves the proposed settlement and related documents based upon the
circumstances described in Paragraphs 1-5 above.

Overland agreed to test the reasonableness of all key assumptions contained in the forecasts, as
well as other materials directly or indirectly relied upon in developing the representations
contained in the Affidavit.

Overview of the Basis for the Analysis. Subject to a Confidentiality Agreement, Overland
was provided access to documents we deemed necessary to perform our analysis. A major portion of
this review was conducted at the MCV offices in Midland. During this period, we had direct access
to MCV personnel. We conducted a number of interviews to gain an understanding of the documents
provided, and to discuss matters relevant to our review of the financial forecast.

Key documents reviewed include, but are not limited to, the following:

	 	•	 	Power Purchase Agreement Between Consumers and MCV, dated July 17, 1986.
	 
	 	•	 	Steam and Electric Power Agreement Between The Dow Chemical Company
(“Dow”) and MCV, dated January 27, 1987.
	 
	 	•	 	Resource Conservation Agreement, dated February 12, 2004.
	 
	 	•	 	Reduced Dispatch Agreement, dated July 7, 2004.
	 
	 	•	 	Maintenance Services and Parts Agreement Between G.E. International and
MCV, dated December 31, 2002.

 

 

May 9, 2008

Page 3

	 	•	 	Amended and Restated Power Purchase Agreement Between Consumers and
MCV (“PPA Settlement”).
	 
	 	•	 	Overall Lease Transaction documents, commencing 1990.
	 
	 	•	 	Master Agreement between the Owner Participants, the equity partners and MCV,
dated December 15, 2007.
	 
	 	•	 	Bank credit facilities.
	 
	 	•	 	2005 and subsequent Impairment analyses.
	 
	 	•	 	Audited financial statements dated December 31, 2007.
	 
	 	•	 	Un-audited monthly financial statements for January through March, 2008.
	 
	 	•	 	Long-term financial forecast, model logic and supporting workpapers.
	 
	 	•	 	Detail of gas supply, transportation and storage arrangements.
	 
	 	•	 	History of unit and plant planned and forced outages.
	 
	 	•	 	Historical detail of capital expenditures, including current projects.
	 
	 	•	 	Historical detail of plant operating statistics, including but not limited to:

	 	o	 	Heat rates
	 
	 	o	 	Plant availability
	 
	 	o	 	Steam production and electric generation

	 	•	 	Property tax history, including resolution of appeals and final Orders.

Aside from the documents reviewed, Overland conducted a number of interviews with MCV company
employees. In addition to these interviews, we had direct access to personnel to follow-up on
subject matters associated with our document reviews or topics that arose during the interviews
conducted. On one or more occasions, we met with the following MCV personnel:

	 	•	 	Mr. James M. Rajewski. Chief Financial Officer, Vice President & Controller
	 
	 	•	 	Mr. Gary B. Pasek. Vice President, General Counsel & Secretary
	 
	 	•	 	Mr. Robert McCue. Vice President Operations, Maintenance and Engineering
	 
	 	•	 	Mr. Kevin R. Oiling. Vice President, Energy Supply & Marketing
	 
	 	•	 	Ms. Laurie M. Valasek. Vice President & Treasurer
	 
	 	•	 	Mr. Jeffrey W. Richardson. Financial Analyst

MCV was very cooperative and helpful in supporting the requirements of our review. The Company
provided all documents requested, and made its personnel available when asked, without exception.

Technical Analysis. Based upon the purpose of the engagement, we focused on the
reasonableness of the financial forecast under the conditions identified in the Affidavit; namely
the expected financial results over the forecast period (2008 to 2025) — assuming a Consumers
Reg-Out case, and alternatively, assuming a PPA Settlement case.

 

 

May 9, 2008

Page 4

Historical results. In order to test the reasonableness of the forecast assumptions, we
reviewed historical data for elements of the cash flow forecast for a period from at least
three years, and up to the life of the plant. We performed a review of the relationship of
such historical data both to the level and trend of projected revenue and expense elements.

Projected results. Forecast assumptions were tested against historical data as identified
above. Near-term expectations were reviewed against current planning and known commitments.
Longer-term results were tested against the reasonableness of key assumptions such as trend
rates, inflation rates, gas supply and transportation prices, economic dispatch, unit
overhauls, work force levels, plant availability, etc. Sources of revenue were reviewed to
verify conformity with the Consumers and Dow Agreements.

The forecasted results were reviewed for compliance with the Lease Agreement and bank
facilities. We also tested the level of cash flows to determine adequacy in relation to gas
supply credit requirements.

In order to test the reasonableness of the projections, we constructed independent or
alternative “base cases” for the Reg-Out and Settlement alternatives under review. Overall,
our base cases were somewhat more conservative than the MCV forecasts — the expected cash
flows were lower.

Finally, we tested the sensitivity of major variables or assumptions that could materially
impact the forecast results. These variables included inflation rates, plant availability,
gas supply costs, capital expenditures, and third-party sales. From this analysis, we
developed alternative “worst case” forecasts.

Major Assumptions Contained in Long-Term Forecast. In performing our review, as generally
described above, we constructed alternate “Base Cases” for the Reg-Out and PPA Settlement
scenarios. The key assumptions contained in these forecasts, as modified by Overland, are described
below.

The Overland construction of an “Alternate Base Case” focused on the establishment of inputs for
key variables in the financial forecast that were somewhat more conservative than the MCV forecast
assumptions. These revised inputs included the following:

	 	•	 	Inflation rates: 3% for general operating costs; except salaries –
4%, and benefits and insurance – 5%.

 

 

May 9, 2008

Page 5

	 	•	 	Gas Supply: Assume an average 2008 NYMEX price of $9.71 per Mcf.
	 
	 	•	 	Property taxes — Assume 4.25% annual escalation.
	 
	 	•	 	Capital Expenditures — Assume an increase over MCV forecast of $1.0
million in 2010; escalate expenditures thereafter at an annual rate of 4.0%.

Aside from the development of a somewhat more conservative Base Case forecast, Overland also
performed sensitivity analyses of key variables under “worst case” assumptions. These “worst
case” revised conditions included the following:

	 	•	 	Inflation rates: 4% for general operating costs; except salaries –
5%, and
benefits and insurance – 6%.
	 
	 	•	 	Gas Supply: Increase in cost per Mcf at various increments up to $6
per
Mcf over December 2007 NYMEX price.
	 
	 	•	 	3rd Party Revenues (non Dow/PPA): Assume a 50% reduction
from MCV
forecast.
	 
	 	•	 	Plant Availability — Consider the impact of 1% incremental reductions.

Aside from the above items, Overland reviewed all of the key elements of the MCV forecast we deemed
necessary; found them to be reasonable, and without any specific basis or need to alter in the
Overland alternative base and sensitivity case analyses. These components of forecasted operations
included, but were not limited to:

	 	•	 	Changes in work force levels.
	 
	 	•	 	Plant outages and maintenance overhauls.
	 
	 	•	 	Dispatch — Start-ups; load duration curves; heat rate assumptions; etc.

Exposure to Material Adverse Events. As a result of the Consumers notice of intent to
exercise its regulatory-out rights under the PPA, the Owner Participants of the Lease Agreement,
with MCV and the equity owners, have entered into mutually agreed-upon revised terms and conditions
in a document referred to as the Master Agreement, dated December 15, 2007. The conditions
contained in the agreement include a payment due in June 2008. The availability of funds from
current sources available to MCV necessary to make this payment is presently uncertain. Should MCV
fail to make the required payment in June 2008, subject to its rights to remedy by December 2008,
it would represent a Material Adverse Event under the agreement. There is a high probability that
tax refunds due on or before July 17, 2008 will be received by MCV, and that such funds will be
adequate to make the payment required by the Master Agreement. In any event, should MCV be unable
to make this required payment, the equity owners may provide the necessary funds. In addition, the
Master Agreement does provide for the parties to

 

 

May 9, 2008

Page 6

this agreement to consider and agree to a restructuring of the transaction to mitigate or eliminate
a Material Adverse Event. However, there is no requirement or affirmative representation that the
required payment, or the restructuring of the transaction, will occur at this time.

Aside from the 2008 funding requirements under the Lease, additional payments are required through
2015 that may exceed cash available from operations and liquid assets on hand in excess of working
capital requirements. However, assuming that the PPA Settlement is effective, it is highly probable
that such amounts, if any, can and would be debt financed on a basis consistent within utility
institutional credit quality parameters.

Findings and Conclusions. Based upon our review, we believe that the MCV financial model
and related forecast, subject to our modifications, provides a reliable basis to consider estimates
of future financial conditions. The forecast model and results are subject to periodic review by
the Owner Participants. Any changes in the MCV forecast procedures require specific review by a
Financial Consultant (most recently Global Energy Decisions) of the Owner Participants, and are
subject to approval under terms contained in the Lease Agreement.

Generally, the results of our alternative “base cases”, and sensitivity analysis of major
assumptions contained in the financial forecast generally confirmed that the MCV financial results
would not change sufficiently to materially alter its financial viability during the forecast
period.

Gas Price Exposure. While the PPA Settlement eliminates any material financial risk associated with
gas purchases to meet Consumers requirements, MCV is exposed to gas purchase risk under its
contract with The Dow Chemical Company. While the contract provides for price escalation, MCV
cannot pass through the full effect of gas price increases. Our analysis revealed that a major
change in gas prices, on a sustained basis over current levels, could materially impact the cash
flows from operations over the forecast period. MCV has represented that it would hedge this gas
price exposure in the future, thereby mitigating any material effects on cash flow from operations.
Given that MCV has managed its gas supply efficiently to date, there is no reason to assume that it
will not do so in future periods regarding its supply needs required by the Dow contract.

In conducting our review, and in forming our findings and conclusions, we have made no attempt to
assess the financial impact of dramatic changes in economic conditions (such as a major change in
gas supply availability) or the effect of catastrophic events (such as an explosion at the plant or
a default by a major customer). Other uncertainties could also materially impact the financial
forecast such as major changes in energy policy or

 

 

May 9, 2008

Page 7

regulation; the imposition of new taxes or changes in existing tax rates; or an extended workforce
interruption.

Subject to the general uncertainties such as those addressed above that are beyond the control of
MCV, we believe that the statements made in the Affidavit are reasonable. These statements are
consistent with the documents we have reviewed, and remain so in light of our analysis based on a
more conservative financial forecast base case and sensitivity analysis of key variables and
assumptions. Regardless of the impact of the key variables and assumptions analyzed, we concur in
the representation that MCV will remain financially solvent and viable under the terms of the
Tolling Agreement for the forecast period subject to the types of uncertainties delineated above.

Sincerely,

Overland Consulting

Howard E. Lubow

President

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