Document:

exv10wxsy

Exhibit 10(s)

EXECUTION COPY

SECURITIES PURCHASE AGREEMENT

by and among

CMS INTERNATIONAL VENTURES, L.L.C.,

CMS CAPITAL, L.L.C.,

CMS GAS ARGENTINA COMPANY

and

CMS ENTERPRISES COMPANY

and

PACIFIC ENERGY LLC.

together with

EMPRESA NACIONAL DE ELECTRICIDAD S.A.

Dated as of July 11, 2007

 

 

	 	 	 	 	 	 	 
	ARTICLE I

SALE AND PURCHASE OF SHARES AND NOTES
	 	 
	 
	 	 	 	 	 	 
	1.1	 	Sale and Purchase of Shares	 	2
	1.2	 	[Intentionally Omitted.]	 	2
	1.3	 	Sale and Purchase of Notes	 	2
	1.4	 	Purchase Price	 	3
	1.5	 	Closing	 	3
	1.6	 	Closing Deliveries	 	3
	1.7	 	Purchase Agreement Fee	 	4
	 
	 	 	 	 	 	 
	ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER AND NOTE HOLDERS
	 	 
	 
	 	 	 	 	 	 
	2.1	 	Representations and Warranties of Seller	 	4
	 
	 	2.1.1	 	Organization and Qualification	 	4
	 
	 	2.1.2	 	Title to Shares	 	4
	 
	 	2.1.3	 	Authority; Non-Contravention; Approvals	 	5
	 
	 	2.1.4	 	Organization and Qualification of Companies
and CMS-Inversiones; Capitalization	 	5
	 
	 	2.1.5	 	Brokers and Finders	 	6
	 
	 	2.1.6	 	Financial Distress of Companies Subsidiaries	 	6
	 
	 	2.1.7	 	No Other Representations and Warranties	 	6
	2.2	 	Representations and Warranties of the Note Holders	 	7
	 
	 	2.2.1	 	Organization and Qualification	 	7
	 
	 	2.2.2	 	Title to Notes	 	7
	 
	 	2.2.3	 	Authority; Non-Contravention; Approvals	 	7
	 
	 	2.2.4	 	Brokers and Finders	 	8
	 
	 	2.2.5	 	Financial Distress of Companies Subsidiaries	 	8
	 
	 	2.2.6	 	No Other Representations and Warranties	 	8
	 
	 	 	 	 	 	 
	ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER WITH RESPECT TO THE COMPANIES SUBSIDIARIES
	 	 
	 
	 	 	 	 	 	 
	3.1	 	Capitalization and Title	 	9
	 
	 	3.1.1	 	Description	 	9
	 
	 	3.1.2	 	No Consents to Liens	 	9
	3.2	 	Financial Statements	 	9
	3.3	 	Tax Matters	 	9
	3.4	 	Compliance with Laws	 	9
	3.5	 	Certain Contracts	 	10
	3.6	 	Operating Company Notes	 	10
	3.7	 	Financial Distress of Companies Subsidiaries	 	10

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	3.8	 	No Other Representations and Warranties	 	10
	 
	 	 	 	 	 	 
	ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 	 
	 
	 	 	 	 	 	 
	4.1	 	Organization and Qualification	 	11
	4.2	 	Authority; Non-Contravention; Approvals	 	11
	4.3	 	Financing	 	12
	4.4	 	Investment Intention; Sufficient Investment
Experience; Independent Investigation; Financial
Distress of Companies Subsidiaries	 	12
	4.5	 	Brokers and Finders	 	13
	4.6	 	No Knowledge of Seller or Note Holders Breach	 	13
	 
	 	 	 	 	 	 
	ARTICLE V

COVENANTS
	 	 
	 
	 	 	 	 	 	 
	5.1	 	Notification to the CNDC and ENARGAS; Negative
Antitrust and ENARGAS Decision; Transfer of Shares to
a Third Purchaser	 	13
	5.2	 	Access	 	15
	5.3	 	Publicity	 	16
	5.4	 	Fees and Expenses	 	16
	5.5	 	[Intentionally Omitted.]	 	17
	5.6	 	Further Assurances	 	17
	5.7	 	Preservation of Records	 	17
	5.8	 	Change of Name	 	17
	5.9	 	Resignations of Certain Officers and Directors	 	18
	5.10	 	Releases of Certain Guarantees	 	18
	5.11	 	[Intentionally Omitted.]	 	18
	 
	 	 	 	 	 	 
	ARTICLE VI

CONDITIONS TO CLOSING
	 	 
	 
	 	 	 	 	 	 
	6.1	 	Condition to the Obligations of the Parties—No Injunction	 	18
	6.2	 	Conditions to the Obligation of Purchaser	 	19
	6.3	 	Conditions to the Obligation of Seller	 	19
	 
	 	 	 	 	 	 
	ARTICLE VII

TERMINATION
	 	 
	 
	 	 	 	 	 	 
	7.1	 	Termination	 	20
	7.2	 	Effect of Termination	 	21

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	ARTICLE VIII

LIMITS OF LIABILITY; PARENT GUARANTEE
	 	 
	 
	 	 	 	 	 	 
	8.1	 	Non-Survival of Representations, Warranties, Covenants and Agreements	 	22
	8.2	 	Parent Guarantee	 	23
	 
	 	 	 	 	 	 
	ARTICLE IX

DEFINITIONS AND INTERPRETATION
	 	 
	 
	 	 	 	 	 	 
	9.1	 	Defined Terms	 	24
	9.2	 	Definitions	 	25
	9.3	 	Interpretation	 	29
	 
	 	 	 	 	 	 
	ARTICLE X

GENERAL PROVISIONS
	 	 
	 
	 	 	 	 	 	 
	10.1	 	Notices	 	30
	10.2	 	Binding Effect	 	31
	10.3	 	Assignment; Successors; Third-Party Beneficiaries	 	31
	10.4	 	Amendment; Waivers; etc.	 	31
	10.5	 	Entire Agreement	 	32
	10.6	 	Severability	 	32
	10.7	 	Counterparts	 	32
	10.8	 	Governing Law	 	32
	10.9	 	Arbitration	 	32
	10.10	 	Limitation on Damages	 	33
	10.11	 	Enforcement	 	33
	10.12	 	No Right of Set-Off	 	33
	10.13	 	Several Liability	 	33

EXHIBITS

	 	 	 
	Exhibit A

	 	Seller Disclosure Letter
	Exhibit B

	 	Note Holders Disclosure Letter

SCHEDULES TO THE DISCLOSURE LETTERS APPENDED AS EXHIBITS

	 	 	 
	Seller Disclosure Letter
	Schedule 2.1.2

	 	Title to Shares
	Schedule 2.1.3(d)

	 	Other Approvals
	Schedule 3.1.1

	 	Title and Capitalization
	Schedule 3.3

	 	Tax Matters
	Schedule 3.4

	 	Compliance with Laws
	Schedule 3.5

	 	Certain Contracts

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SCHEDULES TO THE DISCLOSURE LETTERS APPENDED AS EXHIBITS

	 	 	 
	Note Holders Disclosure Letter
	Schedule 2.2.2

	 	Title to Notes

ADDITIONAL SCHEDULES TO STOCK PURCHASE AGREEMENT

	 	 	 
	Schedule 5.9

	 	Resignations of Certain Officers and Directors
	Schedule 5.10

	 	Releases of Certain Guarantees
	Schedule 9.2(a)

	 	Purchaser Knowledge Group
	Schedule 9.2(b)

	 	Seller Knowledge Group

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SECURITIES PURCHASE AGREEMENT

     This SECURITIES PURCHASE AGREEMENT (hereinafter also referred to as this “Agreement”),
dated as of July 11, 2007 (the “Effective Date”), is entered into by and among (i) CMS
International Ventures, L.L.C., a limited liability company organized and existing under the laws
of the State of Michigan (“Seller”), (ii) CMS Capital, L.L.C., a limited liability company
organized and existing under the laws of the State of Michigan (“CMS-Capital”), CMS Gas
Argentina Company, a company organized and existing under the laws of the Cayman Islands
(“CMS-Cayman”), and, CMS Enterprises Company, a corporation organized and existing under
the laws of the State of Michigan (“CMS-Enterprises”; each of the Seller, CMS-Capital,
CMS-Cayman, and CMS-Enterprises is also referred to herein as a “Note Holder” and,
collectively, the “Note Holders”), (iii) Pacific Energy LLC., a limited liability company
organized and existing under the laws of the State of Delaware (“Purchaser”) and (iv)
Empresa Nacional de Electricidad S.A., a company organized and existing under the laws of Chile
(“Parent”), solely for purposes of Section 8.2 and the beneficial owner of all of
the shares of Purchaser. Each of Purchaser, Seller and the Note Holders are sometimes referred to
individually herein as a “Party” and collectively as the “Parties”. Certain other
terms are defined throughout this Agreement and in Section 9.2.

WITNESSETH:

     WHEREAS Seller owns all the issued and outstanding Equity Interests of (i) CMS Gas
Transmission del Sur Company, a Cayman Islands company (“CMS-Gas”) and (ii) CMS Generation
Investment Company V, a Cayman Islands company (“CMS-Generation”; each of CMS-Gas and
CMS-Generation are sometimes referred to individually herein as a “Company” and
collectively as the “Companies”, and all the issued and outstanding Equity Interests of the
Companies are collectively referred to as the “Shares”);

     WHEREAS CMS-Gas owns (i) 13.94% of the Equity Interests in Inversiones GasAtacama Holding
Limitada, a Chilean limited company (the “Governing Company”); and (ii) 99% of the issued
and outstanding Equity Interests of Compañía de Inversiones CMS Energy Chile Limitada, a Chilean
limited liability entity (“CMS-Inversiones”);

     WHEREAS CMS-Generation currently owns 1% of the Equity Interest of CMS Inversiones;

     WHEREAS CMS-Inversiones owns (i) 36.06% of the Equity Interests in the Governing Company, (ii)
0.001% of the Equity Interests in GasAtacama S.A., a Chilean closed corporation (the “Holding
Company”) and (iii) 0.05% of the Equity Interests in each of the following Chilean closed
corporations: GasAtacama Generación S.A., Gasoducto Atacama Chile S.A., and Gasoducto Atacama
Argentina S.A.;

     WHEREAS Holding Company owns (i) 99.9% of the Equity Interests in GasAtacama Generación S.A.,
(ii) 99.9% of the Equity Interests in Gasoducto Atacama Chile S.A., and (iii) 99.9% of the Equity
Interests in Gasoducto Atacama Argentina S.A.;

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     WHEREAS Governing Company owns 99.9% of the Equity Interests in Atacama Finance Co.;

     WHEREAS Holding Company owns 0.1% of the Equity Interests in Atacama Finance Co.; and

     WHEREAS on March 15, 2006, Atacama Finance Co., a corporation incorporated and existing under
the laws of the Cayman Islands, issued as promissor the following promissory notes (i) to Seller
for fifty-four million sixty-five thousand five hundred ninety-four dollars and forty-nine cents
(U.S.$54,065,594.49) (the “Seller Note”), (ii) to CMS-Capital for eighty-seven million
three hundred seventy-two thousand six hundred seventy-six dollars and twenty-three cents
(U.S.$87,372,676.23) (the “CMS-Capital Note”), (iii) to CMS-Cayman for seven million seven
hundred thirty-four thousand forty dollars and twenty-four cents (U.S.$7,734,040.24) (the
“CMS-Cayman Note”), and (iv) to CMS Enterprises Investment Company I, which subsequently
transferred and assigned to CMS-Enterprises a note for twenty-six million ninety-nine thousand
eight hundred sixty-eight dollars (U.S.$26,099,868.00) (the “CMS-Enterprises Note”; each of
the Seller Note, the CMS-Capital Note, the CMS-Cayman Note and the CMS-Enterprises Note is
individually referred to as a “Note” and, collectively, as the “Notes”);

     NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and
warranties made in this Agreement and of the mutual benefits to be derived therefrom, the Parties
hereby agree as follows:

ARTICLE I

SALE AND PURCHASE OF SHARES AND NOTES

          1.1 Sale and Purchase of Shares. Upon the terms and subject to the conditions of this
Agreement, and simultaneously with the payment of the Purchase Price in accordance with Section 1.6
of this Agreement, at the Closing, Purchaser shall purchase from Seller, and Seller shall sell to
Purchaser, good and valid title, free and clear of any Liens except those created by Purchaser
arising out of ownership of the Shares by Purchaser, all of the Shares (the “Shares
Transaction”).

          1.2 [Intentionally Omitted.]

          1.3 Sale and Purchase of Notes. Upon the terms and subject to the conditions of this
Agreement, and simultaneously with the payment of the Purchase Price in accordance with Section 1.6
of this Agreement, at the Closing (a) Purchaser shall purchase from Seller, and Seller shall sell
to Purchaser, the Seller Note (inclusive of all accrued and unpaid interest prior to the Closing
Date); (b) Purchaser shall purchase from CMS-Capital, and CMS-Capital shall sell to Purchaser, the
CMS-Capital Note (inclusive of all accrued and unpaid interest prior to the Closing Date); (c)
Purchaser shall purchase from CMS-Cayman, and CMS-Cayman shall sell to Purchaser, the CMS-Cayman
Note (inclusive of all accrued and unpaid interest prior to the Closing Date); and (d) Purchaser
shall purchase from CMS-Enterprises (inclusive of all accrued and unpaid interest prior to the
Closing Date), and CMS-Enterprises shall sell to Purchaser, the CMS-Enterprises Note (inclusive of
all accrued and unpaid interest prior to the Closing Date).

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The transactions with respect to the
Notes contemplated by this Section 1.3 are collectively referred to as the “Notes
Transaction”, and together with the Shares Transaction, the “Transactions”).

          1.4 Purchase Price. The consideration to be paid by Purchaser in respect of the
Shares and the Notes shall be an aggregate amount in cash equal to Eighty Million dollars
(US$80,000,000) in the legal currency of the United States of America (the “Purchase
Price”).

          1.5 Closing. The closing of the Transactions (the “Closing”) shall take place
in New York, New York, at 10:00 a.m., local time, on the second Business Day immediately following
the date on which the last of the conditions contained in Article VI are fulfilled or
waived (except for those conditions which by their nature can only be fulfilled at the Closing, but
subject to the fulfillment or waiver of such conditions), but in any event not before August 1,
2007 or later than August 28, 2007, or at such other place, time and date (the “Closing
Date”) as the Parties may agree.

          1.6 Closing Deliveries. At the Closing:

               (a) Purchaser shall pay, or cause to be paid, to Seller (or any Affiliate designated by Seller
prior to the Closing) an amount in cash equal to the Purchase Price (after application of the
Deposit previously delivered to Seller pursuant to Section 1.7) for the Shares and Notes so
delivered by Seller and the Note Holders, as applicable, by wire transfer of immediately available
funds to the bank account or accounts designated by Seller prior to the Closing.

               (b) Seller shall deliver to Purchaser (i) one or more instruments of transfer in respect of
the Shares, duly executed in proper form for transfer and (ii) evidence of approval by the
directors of each Company for entry in the “Register of Members” of each Company approving the
transfer of the Shares to the respective transferee designated by Purchaser.

               (c) Each Note Holder, as applicable, shall deliver to Purchaser its respective Note, duly
indorsed “Without Recourse” (or accompanied by an instrument duly indorsed “Without Recourse”) in
blank for transfer.

               (d) Seller shall deliver to Purchaser all of the Companies and CMS-Inversiones accounting,
tax, corporate and commercial books and records that are located in Seller’s headquarters offices
in Michigan.

               (e) Empresa Nacional de Electricidad S.A. and CMS-Enterprises shall execute and deliver to
each other an instrument pursuant to which both parties shall terminate the Consortium Agreement
with full releases by each party of any subsequent claims against the other thereunder.

               (f) Each Party shall deliver the certificates, agreements, instruments and other documents
required to be delivered by it pursuant to Article VI.

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          1.7 Purchase Agreement Fee. On July 3, 2007, the Parent wire transferred in favor of
CMS Enterprises Company Fifteen Million Dollars (US$15,000,000) (the “Deposit”) in cash (the
aggregate of such amount, plus any interest deemed earned thereon at the Specified Rate from (and
including) July 3, 2007 to (but excluding) the date of early termination of the Agreement (except
pursuant to Section 7.1(f)), being referred to as the “Purchase Agreement 
Fee”).. The Purchase Agreement Fee will be deemed to earn interest at the Specified
Rate. Notwithstanding any provision to the contrary contained herein, the Purchase Agreement Fee
shall be nonrefundable by Seller; provided, however, the Purchase Agreement Fee
shall be refundable in the event that this Agreement is terminated in accordance with Article VII,
except Section 7.1(f), in which event Seller shall pay to the Parent, no later than five
(5) Business Days following the effective date of such termination, an amount equal to the Purchase
Agreement Fee received by it pursuant to this Section 1.7 by wire transfer of immediately
available funds in United States dollars to the bank account or accounts designated by the Parent.
The Deposit shall be credited against the Purchase Price payable at Closing to Seller or any
Affiliate designated by Seller. If this Agreement is terminated (other than pursuant to
Section 7.1(a), the Purchase Agreement Fee shall be credited against the Damages, if any,
owed by Purchaser to Seller arising out of breach of this Agreement by Purchaser. The Purchase
Agreement Fee shall not be deemed to be a liquidated damages payment for any breach by Purchaser of
this Agreement. If Seller fails to refund the Purchase Agreement Fee within five (5) Business Days
of Seller becoming obligated hereunder to make such a refund, the amount thereof shall bear default
interest at a rate equal to LIBOR plus two per cent (2%) per annum.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER AND NOTE HOLDERS

          2.1 Representations and Warranties of Seller. Except as otherwise disclosed in the
Seller Disclosure Letter attached hereto as Exhibit A (the “Seller Disclosure
Letter”), Seller represents and warrants, as to itself only, and in connection with the Shares
Transaction only, to Purchaser, as follows in this Section 2.1:

               2.1.1 Organization and Qualification. Seller is a limited liability company duly
formed and validly existing under the laws of the State of Michigan, and has full power and
authority to own, lease and operate its assets and properties and to conduct its business as
presently conducted, except where the failure to have such power and authority would not reasonably
be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.

               2.1.2 Title to Shares. As of the Closing Date, Seller will be the lawful record and
beneficial owner of the Shares set forth opposite its name in Schedule 2.1.2 of the Seller
Disclosure Letter, free and clear of any and all Liens, except for Liens created by this Agreement.
The Shares constitute all of the issued and outstanding Equity Interests in the Companies. The
transfer of the Shares to Purchaser in the manner contemplated under Article I,
simultaneously with the payment by Purchaser of the Purchase Price to Seller, shall transfer to
Purchaser valid beneficial and legal title to the Shares. There are no outstanding options,
warrants or other rights of any kind to acquire from Seller or any of its Affiliates any Shares or
securities convertible into or exchangeable for, or which otherwise confer on the holder thereof

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any right to acquire from Seller any Shares, nor is Seller committed to issue any such option,
warrant, right or security.

               2.1.3 Authority; Non-Contravention; Approvals.

               (a) Authority. As of the Effective Date Seller has full power and authority to enter
into this Agreement and, to consummate the transactions to be effected by Seller as contemplated
hereby. As of the Effective Date the execution, delivery and performance by Seller of this
Agreement and the consummation by Seller of the transactions to be effected by Seller as
contemplated hereby shall have been duly and validly authorized by all requisite action on the part
of Seller, and no other proceedings or approvals on the part of Seller shall thereafter be
necessary to authorize this Agreement or to consummate the transactions to be effected by Seller as
contemplated hereby. As of the Effective Date this Agreement shall have been duly executed and
delivered by Seller and, assuming the due authorization, execution and delivery hereof by
Purchaser, shall thereafter constitute the legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as limited by applicable Law
affecting the enforcement of creditors’ rights generally or by general equitable principles.

               (b) Non-Contravention. Except for matters arising with respect to the regulatory or
corporate status of Purchaser, the execution and delivery of this Agreement by Seller do not, and
the consummation of the transactions contemplated hereby will not, result in any violation or
breach of or default (with or without notice or lapse of time or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation under (any such violation,
breach, default, right of termination, cancellation or acceleration is referred to herein as a
“Violation”), or result in the creation of any Lien upon any of the properties or assets of
Seller pursuant to any provision of (i) the Organizational Documents of Seller; (ii) any lease,
mortgage, indenture, note, bond, deed of trust, or other written instrument or agreement of any
kind to which it or any of its Affiliates is a party or by which it or any of its Affiliates may be
bound; or (iii) any Law, Permit or Governmental Order applicable to it or any of its Affiliates,
other than in the case of clauses (i), (ii) and (iii) any such Violation or Lien which would not
reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.

               (c) Approvals. Except for the filings or approvals as may be required due to the
regulatory or corporate status of Purchaser, no Consent of any Person is required to be made or
obtained by Seller in connection with the execution and delivery of this Agreement or the
consummation by Seller of the transactions to be effected by Seller as contemplated hereby, except
those which the failure to make or obtain would not reasonably be expected to have, individually or
in the aggregate, a Seller Material Adverse Effect. Schedule 2.1.3(d) sets forth other material
consents, approvals, filings and notices that may be necessary, advisable or appropriate in
connection with the transactions contemplated by this Agreement.

               2.1.4 Organization and Qualification of Companies and CMS-Inversiones; Capitalization.

               (a) Each Company and CMS-Inversiones has been duly formed, is validly existing and is in good
standing (to the extent such concepts are recognized under

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applicable Law) under the laws of the
jurisdiction of its formation, with full corporate power and authority to own or lease and to
operate its properties and to conduct its business as presently conducted and is duly qualified to
do business in all jurisdictions in which such qualification is
necessary under applicable Law as a result of the conduct of its business or the operation of
its properties.

               (b) The authorized capital stock of the Companies consists of (i) for CMS-Gas, 50,000 ordinary
shares, $1.00 par value, of which 100 shares are issued and outstanding, and (ii) for
CMS-Generation, 50,000 ordinary shares, $1.00 par value, of which 100 shares are issued and
outstanding. CMS-Inversiones was initially formed with subscribed capital of CLP 187,650,000,000.

               (c) Except as provided for in the Organizational Documents of the Companies and of
CMS-Inversiones, there are no subscriptions, options, warrants, calls, conversion, exchange,
purchase right or other written contracts, rights, agreements or commitments of any kind
obligating, directly or indirectly, the Companies or CMS-Inversiones to issue, transfer, sell or
otherwise dispose of, or cause to be issued, transferred, sold or otherwise disposed of, any Equity
Interests of the Companies or CMS-Inversiones or any securities convertible into or exchangeable
for any such Equity Interests.

               (d) None of the Companies or CMS-Inversiones has any material third party debt as of the date
of this Agreement. As of the Closing Date, the only assets of the Companies and CMS-Inversiones
will be the Equity Interests set forth on Schedule 3.1.1.

               2.1.5 Brokers and Finders. Neither Seller nor any of its Affiliates has entered into
any written agreement or arrangement entitling any agent, broker, investment banker, financial
advisor or other firm or Person to any broker’s or finder’s fee or any other commission or similar
fee payable by Seller, its Affiliates or the Companies in connection with any of the transactions
contemplated by this Agreement, except J.P. Morgan Securities Inc.

               2.1.6 Financial Distress of Companies Subsidiaries. The business, operations and
financial condition of the Companies Subsidiaries are subject to considerable distress, and the
bankruptcy of one or more of the Companies Subsidiaries is a material probability or likelihood.
To the extent that Seller or its Affiliates reasonably believes upon the advice of counsel such
action to be required from a legal standpoint, a bankruptcy filing for one or more Companies
Subsidiaries shall not constitute a breach of this Agreement or an event that constitutes a failure
of condition to Closing or that gives rise to a right to terminate this Agreement. For the
avoidance of doubt, under no circumstances shall Seller be required or expected to provide any
equity or debt financing to any of the Operating Companies.

               2.1.7 No Other Representations and Warranties.

               EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE II (INCLUDING
THE DISCLOSURE SCHEDULES), THE SELLER MAKES NO EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY, AND
THE SELLER HEREBY DISCLAIMS ANY SUCH REPRESENTATION OR WARRANTY WITH RESPECT TO THE EXECUTION AND
DELIVERY OF THIS AGREEMENT AND

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THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

          2.2 Representations and Warranties of the Note Holders. Except as otherwise disclosed
in the Note Holders Disclosure Letter attached hereto as Exhibit B (the “Note Holders
Disclosure Letter”), each Note Holder severally and not jointly represents and warrants, as to
itself only, and in connection with the Notes Transaction only, to Purchaser, as follows in this
Section 2.2:

               2.2.1 Organization and Qualification. Each Note Holder is a legal entity duly formed
and validly existing under the laws of the jurisdictions of its formation, and has the power and
authority to own, lease and operate its assets and properties and to conduct its business as
presently conducted, except where the failure to have such power and authority would not reasonably
be expected to have, individually or in the aggregate, a Seller Material Adverse Effect.

               2.2.2 Title to Notes. Each Note Holder is the lawful record and beneficial owner of
each Note set forth opposite its name in Schedule 2.2.2 of the Note Holders Disclosure Letter, free
and clear of any and all Liens. A true and correct copy of each Note, as amended from time to time
through the date of this Agreement, has been made available to Purchaser prior to the date hereof.
From December 31, 2006 through the date of this Agreement, none of the Note Holders have consented
to any waiver of any of its rights under the applicable Notes.

               2.2.3 Authority; Non-Contravention; Approvals.

               (a) Authority. As of the Effective Date, each Note Holder has full power and
authority to enter into this Agreement and to consummate the transactions to be effected by the
Note Holder as contemplated hereby. As of the Effective Date, the execution, delivery and
performance by each Note Holder of this Agreement and the consummation by each Note Holder of the
transactions to be effected by the Note Holder as contemplated hereby shall have been duly and
validly authorized by all requisite action on the part of each Note Holder, and no other
proceedings or approvals on the part of a Note Holder shall thereafter be necessary to authorize
this Agreement or to consummate the transactions to be effected by the Note Holder as contemplated
hereby. As of the Effective Date, this Agreement shall have been duly executed and delivered by
the Note Holders and, assuming the due authorization, execution and delivery hereof by Purchaser,
shall thereafter constitute the legal, valid and binding obligation of each Note Holder,
enforceable against the Note Holders in accordance with its terms, except as limited by applicable
Law affecting the enforcement of creditors’ rights generally or by general equitable principles.

               (b) Non-Contravention. Except for matters arising with respect to the regulatory or
corporate status of Purchaser, the execution and delivery of this Agreement by the Note Holders do
not, and the consummation of the transactions contemplated hereby will not, result in any
Violation, or result in the creation of any Lien upon any of the properties or assets of the Note
Holders pursuant to any provision of (i) the Organizational Documents of the Note Holders; (ii) any
lease, mortgage, indenture, note, bond, deed of trust, or other written instrument

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or agreement of
any kind to which the Note Holders are a party or by which they may be bound; or (iii) any Law,
Permit or Governmental Order applicable to it, subject to obtaining the Note Holders Required
Approvals; other than in the case of clauses (i), (ii) and (iii) any such Violation
or Lien which would not reasonably be expected to have, individually or in the aggregate, a
Seller Material Adverse Effect.

               (c) Approvals. Except for the filings or approvals as may be required due to the
regulatory or corporate status of Purchaser, no Consent of any Person is required to be made or
obtained by any Note Holder in connection with the execution and delivery of this Agreement or the
consummation by the Note Holders of the transactions to be effected by Note Holders as contemplated
hereby, except those which the failure to make or obtain would not reasonably be expected to have,
individually or in the aggregate, a Seller Material Adverse Effect.

               2.2.4 Brokers and Finders. Neither the Note Holders nor any of their Affiliates have
entered into any written agreement or arrangement entitling any agent, broker, investment banker,
financial advisor or other firm or Person to any broker’s or finder’s fee or any other commission
or similar fee payable by any of the Note Holders or their Affiliates in connection with any of the
transactions contemplated by this Agreement, except J.P. Morgan Securities Inc.

               2.2.5 Financial Distress of Companies Subsidiaries. Purchaser acknowledges that the
business, operations and financial condition of the Companies Subsidiaries are subject to
considerable distress, and the bankruptcy of one or more of the Companies Subsidiaries is a
material probability or likelihood. To the extent that Seller or its Affiliates reasonably
believes upon the advice of counsel such action to be required from a legal standpoint, a
bankruptcy filing for one or more Companies Subsidiaries shall not constitute a breach of this
Agreement or an event that constitutes a failure of a condition to Closing or that gives rise to a
right to terminate this Agreement. For the avoidance of doubt, under no circumstances shall Seller
be required or expected to provide any equity or debt financing to any of the Operating Companies.

               2.2.6 No Other Representations and Warranties.

               EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE II (INCLUDING
THE DISCLOSURE SCHEDULES), NONE OF THE NOTE HOLDERS MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR
WARRANTY, AND EACH NOTE HOLDER HEREBY DISCLAIMS ANY SUCH REPRESENTATION OR WARRANTY WITH RESPECT TO
THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT.

8

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER WITH RESPECT

TO THE COMPANIES SUBSIDIARIES

     Except as disclosed in the Seller Disclosure Letter, Seller represents and warrants to
Purchaser, as follows in this Article III (provided that each representation and
warranty made by Seller in this Article III is made solely to the Knowledge of Seller).:

          3.1 Capitalization and Title.

               3.1.1 Description. Set forth on Schedule 3.1.1 of the Seller Disclosure Letter for
each of the Companies Subsidiaries and CMS-Inversiones is (i) its jurisdiction of formation; (ii)
its authorized Equity Interests; (iii) the number of its issued and outstanding Equity Interests;
and (iv) the names of the owners of its issued and outstanding Equity Interests.

               3.1.2 No Consents to Liens. From December 31, 2006 through the date of this
Agreement, none of Seller, the Governing Company or the Holding Company has consented to the
creation of any Liens on the Equity Interests of any of the Companies Subsidiaries.

          3.2 Financial Statements. The audited balance sheet as at December 31, 2006 and the
related audited statements of income and of cash flows for the year then ended for each Companies
Subsidiary (individually, a “Company Subsidiary Financial Statement” and, collectively, the
“Companies Subsidiaries Financial Statements”) have been provided to Purchaser prior to the
date of this Agreement. As of the respective dates thereof, each Companies Subsidiary Financial
Statement fairly presents in all material respects the financial position of the respective
Companies Subsidiary as of December 31, 2006, and the results of such Companies Subsidiary’s
operations and cash flows for the period indicated (except for normal and recurring year-end
adjustments) in conformity with Chilean GAAP in accordance with the terms thereof);
provided that no representation is made by Seller with respect to whether any write-off or
other adjustment of asset values would have been appropriate as of any such dates. From December
31, 2006 through the date of this Agreement, Seller has not approved the incurrence of any third
party debt by any of the Companies Subsidiaries, nor is Seller aware of any such incurrence during
such period.

          3.3 Tax Matters. Except as set forth in Schedule 3.3 of the Seller Disclosure Letter,
each of the Companies Subsidiaries has, or, in each case, a Person acting on its behalf has as of
the date of this Agreement filed with the appropriate Governmental Entity all material Tax Returns
required to have been filed by it. No material audits or other proceedings are pending, as of the
date hereof, with regard to any material Taxes or Tax Returns.

          3.4 Compliance with Laws. Except as set forth in Schedule 3.4 of the Seller
Disclosure Letter, as of the date of this Agreement none of the Company, any Companies Subsidiary
or CMS-Inversiones has received written notice of or has been charged with any violation of, nor is
it under investigation with respect to any violation of, any applicable Law (including any
applicable foreign corrupt practices Law) or applicable Governmental Order,

9

 

except in each case for violations which would not reasonably be expected to have,
individually or in the aggregate, a Companies Material Adverse Effect. 

          3.5 Certain Contracts. Purchaser has been provided with a true and correct copy of
each contract identified in Schedule 3.5 of the Seller Disclosure Letter. As of the date of this
Agreement, no party to the contracts identified in Schedule 3.5 of the Seller Disclosure Letter is
in breach or default thereunder, except in each case for any breach or default that would not
reasonably be expected to have, individually or in the aggregate, a Companies Material Adverse
Effect.

          3.6 Operating Company Notes. Purchaser has been provided with a true and correct copy
of each promissory note issued by any Operating Company in favor of Atacama Finance Co. as in
effect as of the date hereof (the “Operating Company Notes”). From December 31, 2006
through the date of this Agreement, the Seller has not consented to any waiver of any rights of
Atacama Finance Co. under any of the Operating Company Notes nor is Seller aware of any such waiver
during such period.

          3.7 Financial Distress of Companies Subsidiaries. THE BUSINESS, OPERATIONS AND
FINANCIAL CONDITION OF THE COMPANIES SUBSIDIARIES ARE SUBJECT TO CONSIDERABLE DISTRESS, AND THE
BANKRUPTCY OF ONE OR MORE OF THE COMPANIES SUBSIDIARIES IS A MATERIAL PROBABILITY OR LIKELIHOOD.
TO THE EXTENT THAT SELLER OR ITS AFFILIATES REASONABLY BELIEVES UPON THE ADVICE OF COUNSEL SUCH
ACTION TO BE REQUIRED FROM A LEGAL STANDPOINT, A BANKRUPTCY FILING FOR ONE OR MORE COMPANIES
SUBSIDIARIES SHALL NOT CONSTITUTE A BREACH OF THIS AGREEMENT OR AN EVENT THAT CONSTITUTES A FAILURE
OF CONDITION TO CLOSING OR THAT GIVES RISE TO A RIGHT TO TERMINATE THIS AGREEMENT. FOR THE
AVOIDANCE OF DOUBT, UNDER NO CIRCUMSTANCES SHALL SELLER BE REQUIRED OR EXPECTED TO PROVIDE ANY
EQUITY OR DEBT FINANCING TO ANY OF THE OPERATING COMPANIES.

          3.8 No Other Representations and Warranties. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS ARTICLE III (INCLUDING THE DISCLOSURE SCHEDULES), THE SELLER MAKES NO
EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO THE COMPANIES SUBSIDIARIES, AND THE
SELLER HEREBY DISCLAIMS ANY SUCH REPRESENTATION OR WARRANTY WITH RESPECT TO THE COMPANIES
SUBSIDIARIES.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

     Purchaser represents and warrants to Seller and to the Note Holders as follows in this
Article IV:

          4.1 Organization and Qualification. Purchaser is a limited liability company, duly
formed, validly existing and in good standing under the laws of the State of Delaware. Purchaser
has full power and authority to own, lease and operate its assets and properties and to conduct its
business as presently conducted. Purchaser is duly qualified to do business and in good standing
as a foreign limited liability company in all jurisdictions in which such qualification is
necessary under applicable Law as a result of the conduct of its business or the ownership of its
properties, except for those jurisdictions where failure to be so qualified or in good standing
would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material
Adverse Effect.

          4.2 Authority; Non-Contravention; Approvals.

               (a) Authority. Purchaser has full power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery and performance by
Purchaser of this Agreement and the consummation by Purchaser of the transactions contemplated
hereby have been duly and validly authorized by all requisite action on the part of Purchaser, and
no other proceedings or approvals on the part of Purchaser are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Purchaser and, assuming the due authorization, execution and delivery
hereof by each other Party, constitutes the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except as limited by applicable Law
affecting the enforcement of creditors’ rights generally or by general equitable principles.

               (b) Non-Contravention. The execution and delivery of this Agreement by Purchaser do
not, and the consummation of the transactions contemplated hereby will not, result in any Violation
or result in the creation of any Lien upon any of the respective properties or assets of Purchaser
pursuant to any provision of (i) the Organizational Documents of Purchaser, as the case may be;
(ii) any lease, mortgage, indenture, note, bond, deed of trust, or other written instrument or
agreement of any kind to which Purchaser is a party or by which Purchaser may be bound; or (iii)
any Law, Permit or governmental order applicable to Purchaser; other than in the case of clauses
(i), (ii) and (iii) for any such Violation or Lien that would not reasonably be expected to have,
individually or in the aggregate, a Purchaser Material Adverse Effect.

               (c) Approvals. Except for the filings or approvals as may be required due to the
regulatory or corporate status of Seller or any Company, no Consent of any Governmental Entity is
required to be made or obtained by Purchaser in connection with the execution and delivery of this
Agreement or the consummation by Purchaser of the transactions

11

 

contemplated hereby, except those which the failure to make or obtain would not reasonably be
expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect.

          4.3 Financing. Purchaser has, and will have at the Closing, available cash and/or
credit capacity, either in its accounts, through binding and enforceable credit arrangements or
borrowing facilities or otherwise, (i) to pay the Purchase Price at the Closing, (ii) to pay all
fees and expenses required to be paid by Purchaser in connection with the transactions contemplated
by this Agreement, and (iii) to perform all of its other obligations hereunder.

          4.4  Investment Intention; Sufficient Investment Experience; Independent Investigation;
Financial Distress of Companies Subsidiaries.

               (a) Purchaser understands that the purchase of the Shares and Notes pursuant to the terms of
this Agreement involves substantial risk. Purchaser has such knowledge and experience in financial
and business matters that it is capable of evaluating the Companies, the Companies Subsidiaries and
the Notes and the merits and risks of an investment in the Shares and the Notes Purchaser
acknowledges and affirms that it has completed its own independent investigation, analysis and
evaluation of the Companies and the Companies Subsidiaries and the Notes and that it has made all
such reviews and inspections of the business, assets, results of operations and condition
(financial or otherwise) of the Companies and the Companies Subsidiaries as it has deemed necessary
or appropriate, and that in making its decision to enter into this Agreement and to consummate the
transactions contemplated hereby it has relied on its own independent investigation, analysis, and
evaluation of the Companies and the Companies Subsidiaries and the Notes and the representations
and warranties of the Seller and the Note Holders set forth in Articles II and III,
as applicable. Purchaser acknowledges and agrees that in its or its Affiliates’ capacity as voting
members of the boards of directors or other governing bodies of the Companies Subsidiaries and as
shareholder or owner of an interest in each of the Companies Subsidiaries it is deemed to have
knowledge of the information made available in the data room, through management presentations and
site visits, and that no such information shall form the basis for a breach or inaccuracy of any
representation or warranty of Seller or the Note Holders set forth in this Agreement.

               (b) Purchaser acknowledges that the business operations and financial condition of the
Companies Subsidiaries are subject to considerable distress, and that the bankruptcy of one or more
of the Companies Subsidiaries is a material probability or likelihood. Purchaser further
acknowledges that it has had a full opportunity to investigate the business and affairs of the
Companies Subsidiaries with respect to these issues and understands the risks of their financial
failure. Purchaser and its Affiliates have acknowledged and agreed to take all risk of insolvency
and/or bankruptcy of the Companies and the Companies Subsidiaries, including without limitation, a
filing for insolvency by any Company or any of the Companies Subsidiaries or a declaration of
insolvency, or similar Governmental Order, by any Governmental Entity. Any such declaration or
Governmental Order shall, with respect to Seller or any Note Holder, under no circumstance
constitute a breach of any obligation, representation, warranty, covenant or condition to Closing,
nor shall otherwise constitute an event giving rise to the right of Purchaser to modify or
terminate its obligations to close the Transaction pursuant to the Agreement. Purchaser further
agrees that prior to the Closing, to the extent that Seller or its

12

 

Affiliates reasonably believes upon the advice of counsel such action to be required from a
legal standpoint, Seller and its Affiliates shall have the right to effect a bankruptcy filing for
one or more Companies Subsidiaries in their sole discretion after consultation with Purchaser, and
that such bankruptcy filings shall not constitute a breach of this Agreement or an event that
constitutes a failure of condition to Closing or an event that gives rise to a right to terminate
this Agreement. For the avoidance of doubt, under no circumstances shall Seller be required or
expected to provide any equity or debt financing to any of the Operating Companies.

          4.5 Brokers and Finders. Purchaser has not entered into any written agreement or
arrangement entitling any agent, broker, investment banker, financial advisor or other firm or
Person to any broker’s or finder’s fee or any other commission or similar fee in connection with
any of the transactions contemplated by this Agreement.

          4.6 No Knowledge of Seller or Note Holders Breach. Neither Purchaser nor any of its
Affiliates has Knowledge of any breach or inaccuracy, or of any facts or circumstances which may
constitute or give rise to a breach or inaccuracy, of any representation or warranty of Seller or
the Note Holders set forth in this Agreement.

ARTICLE V

COVENANTS

          5.1 Notification to the CNDC and ENARGAS; Negative Antitrust and ENARGAS Decision;
Transfer of Shares to a Third Purchaser.

               (a) Notification of the Transactions to the CNDC and ENARGAS. No later than seven (7)
days from the Closing Date, and at any subsequent date that may be required by instruction of the
CNDC and/or ENARGAS, Seller and Purchaser shall (i) cooperate with one another and file all
notifications, applications, registrations, filings, declarations and reports required under the
Antitrust Law and the Gas Law relating to the Transactions, and (ii) use their reasonable efforts
to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable to obtain the Argentine Transaction Approvals.

               (b) Negative Antitrust Decision and/or Negative ENARGAS Decision.

          (i) Purchaser hereby expressly acknowledges and undertakes that the entire risk as to a
Negative Antitrust Decision and/or Negative ENARGAS Decision and/or the issuance of any
resolution, decree, judgment, injunction or other order, whether temporary, preliminary or
permanent, oral or in writing, in each case pursuant to Antitrust Law and/or Gas Law, as the
case may be, that may prohibit, prevent or restrict the consummation of the Transactions
rests exclusively with Purchaser.

          (ii) Purchaser shall be the sole responsible party to perform any and all actions
required by the Negative Antitrust Decision and/or Negative ENARGAS Decision including, but
not limited to, (x) a divesture of Purchaser’s businesses, product lines or assets in favor
of a third party, at its own risk, cost and expense; and (y) appointment of the management
of the Companies following directives by the CNDC or other antitrust authority.
Notwithstanding anything contained herein to the contrary,

13

 

none of Seller or its Affiliates shall be required to (A) divest any of its respective
businesses, product lines or assets that are not transferred to Purchaser or (B) take or
agree to take any other action or agree to any limitation that could reasonable be expected
to (1) result in a adverse effect on its business, assets, condition (financial or
otherwise) or (2) deprive Seller or any Note Holder, or any Affiliate of any of them, of any
benefit of the Transactions

          (iii) Each Party shall promptly give to the other Party notice of all information in
its possession regarding the Negative Antitrust Decision and/or the Negative ENARGAS
Decision or its consequences and promptly transmit to the other Party a copy of all
documents received or sent in that respect. Each Party shall also respond promptly to any
reasonable request for information from the other Party with respect to a Negative Antitrust
Decision and/or Negative ENARGAS Decision or its consequences.

          (iv) In furtherance of the foregoing, Seller shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions, as Purchaser may reasonably deem necessary to
permit Purchaser to have complete control of the Companies as from the date hereof.

               (c) Waiver by Purchaser. None of the Seller, its Affiliates or any of their
respective officers, directors or employees shall be held liable for any loss or damage arising out
of any of the events provided for in Section 5.1(b) hereof.

               (d) [Intentionally Omitted.]

               (e) Indemnification.

          (i) Subject only to the terms and limitations set forth in this Section 5.1, Purchaser
shall indemnify, defend and hold harmless Seller or any of its Affiliates and their
respective directors, officers, employees, successors, permitted assigns, advisors, agents,
or representatives (whether or not also indemnified by any other Person under any other
document) from and against any penalties, fines, administrative sanctions, costs and
expenses (including reasonable attorneys’ fees as provided in Section 5.1(e)(ii) below)
which directly relate to, or arise out of, any of the events provided for in Section 5.1(b),
including fines, penalties and/or administrative sanctions imposed, or handed down, by the
CNDC, ENARGAS, the Secretariat of Internal Trade and/or any other agency, tribunal or court
because the Transactions is ultimately deemed to breach the Antitrust Law and/or the Gas Law
(a “Claim”).

          (ii) Within five (5) days following the receipt by Seller of a Claim, Seller shall
promptly give notice of such Claim to Purchaser in writing. Purchaser shall assume and
control the defense of a Claim with counsel of their own choice it being understood,
however, that Seller may retain, at its own cost, separate co-counsel and participate fully
in the defense of the Claim with full access to all relevant information.

14

 

          (iii) If a Claim involves a fine, penalty and/or an administrative sanction to Seller,
then at Seller’s option Purchaser and Parent shall be jointly and severally liable to (i)
pay the amount of the relevant fine, penalty and/or an administrative sanction; or (ii)
deposit in escrow at Seller’s satisfaction the amount of the relevant fine, penalty and/or
an administrative sanction. If Purchaser fails to timely pay or deposit the relevant amount
of the fine, penalty and/or an administrative sanction, the outstanding amount thereof shall
bear default interest at a rate equal to LIBOR plus two per cent (2%) per annum.

          (iv) Notwithstanding Section 5.1(e)(iii), any and all expenses and/or costs incurred by
Seller pursuant to Sections 5.1(b) and 5.1(e) (including, but not limited to, fines,
penalties and/or an administrative sanctions) shall be reimbursed by Purchaser upon request
by Seller within five (5) Business Days from the date of the request. If Purchaser fails to
timely reimburse the expenses and/or costs incurred by Seller, the outstanding amount
thereof shall bear default interest at a rate equal to LIBOR plus two per cent (2%) per
annum.

          (v) If Seller and Purchaser are found jointly liable of any Claim, Purchaser shall be
the sole responsible for the payment and/or settlement of said Claim and Purchaser hereby
waives any right of contribution or other right of recovery it may have against any Seller.

          (vi) This Section 5.1 shall exclusively govern all Claims. For the avoidance of doubt,
survival limitations contemplated in Section 8.1 hereof shall not apply to the indemnity
undertakings assumed by Purchaser in this Section 5.1 regarding any Claim.

               (f) Fees, Costs and Expenses. Except for Purchaser’s obligation to pay all fees, costs
and expenses (including, without limitation, reasonable legal fees) incurred by the parties in
connection with any Claim, each of the parties shall pay all fees, costs and expenses (including,
without limitation, reasonable legal fees) incurred by it in connection with the filings made with
the CNDC and ENARGAS in order to obtain the Antitrust Approval and the ENARGAS Approval.

          5.2 Access. After the date hereof and prior to the Closing, Seller shall exercise the
voting, governance and contractual powers available to it to request (subject to any legal,
contractual, fiduciary, legal or similar obligation of Seller or any of its Affiliates, any
director, officer or employee of Seller or any Seller Affiliate) the Operating Companies to permit
Purchaser and its executive officers, managers, counsel, accountants and other representatives to
have reasonable access, upon reasonable advance notice, during regular business hours, to the
assets, employees, properties, books and records, businesses and operations relating to the
Operating Companies as Purchaser may reasonably request including cooperating with Purchaser
accounting personnel seeking to prepare U.S. GAAP financials for the Operating Companies;
provided, however, that in no event shall Seller be obligated to provide any access
or information if Seller determines, in good faith after consultation with counsel, that providing
such access or information may be inconsistent with or otherwise violate applicable Law (including
without limitation with respect to bankruptcy or insolvency, or applicable Law affecting creditors’
rights

15

 

generally or general equitable principles), cause Seller or any Operating Company to breach a
confidentiality obligation to which it is bound, or jeopardize any recognized privilege available
to Seller or any Operating Company. Purchaser agrees to indemnify and hold Seller, any Seller
Affiliate and any director, officer or employee of Seller or any Seller Affiliate harmless from any
and all claims and liabilities, including costs and expenses for loss, injury to or death of any
representative of Purchaser and any loss, damage to or destruction of any property owned by Seller,
any Affiliate of Seller or the Operating Companies or others (including claims or liabilities for
loss of use of any property) resulting directly or indirectly from the action or inaction of any of
the employees, counsel, accountants, advisors and other representatives of Purchaser during any
visit to the business or property sites of the Operating Companies prior to the Closing Date,
whether pursuant to this Section 5.2 or otherwise. During any visit to the business or property
sites of the Operating Companies, Purchaser shall, and shall cause its employees, counsel,
accountants, advisors and other representatives accessing such properties to, comply with all
applicable Laws and all of the Operating Companies’ safety and security procedures and conduct
itself in a manner that could not be reasonably expected to interfere with the operation,
maintenance or repair of the assets of the Operating Companies. Neither Purchaser nor any of its
representatives shall conduct any environmental testing or sampling on any of the business or
property sites of the Operating Companies prior to the Closing Date.

          5.3 Publicity. Except as may be required by applicable Law or by obligations pursuant
to any listing agreement with or rules or regulations of any national securities exchange, prior to
the Closing none of Seller, the Note Holders, Purchaser nor any of their respective Affiliates
shall, without the express written approval of Seller and Purchaser, make any press release or
other public announcements concerning the transactions contemplated by this Agreement, except as
and to the extent that any such Party shall be so obligated by applicable Law or pursuant to any
such listing agreement or rules or regulations of any national securities exchange, in which case
the other Parties shall be advised and the Parties shall use reasonable efforts to cause a mutually
agreeable release or announcement to be issued.

          5.4 Fees and Expenses.

               (a) Except as provided in paragraph (b) below and Section 5.1 of this Agreement, whether or
not the Closing occurs, all costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement (including, without limitation, any fees and expenses
of investment bankers, brokers, finders, counsel, advisors, experts or other agents, in each case,
incident to or in connection with the negotiation, preparation, execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby (whether payable
prior to, at or after the Closing Date)) shall be paid by the Party incurring such expense.

               (b) Notwithstanding anything to the contrary set forth in this Agreement, Purchaser shall pay
(i) any Tax (other than capital gains or general income tax) imposed with respect to the
transactions contemplated by this Agreement and (ii) any out-of-pocket fees, costs and expenses
incurred in connection with obtaining all Argentine Transaction Approvals (other than the Parties’
legal fees and expenses which are the subject of paragraph (a) above).

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          5.5 [Intentionally Omitted.]

          5.6 Further Assurances. Subject to Section 5.1 of this Agreement, each of Seller and
the Note Holders, as applicable, and Purchaser agrees that, from time to time before and after the
Closing Date, they shall execute and deliver, and take, or cause their respective Affiliates to
take, such other action, as may be reasonably necessary to carry out the purposes and intents of
this Agreement (including without limitation Seller requesting Seller’s Cayman counsel and Chilean
counsel to provide Purchaser the accounting, tax, corporate and commercial books and records of the
Companies and CMS-Inversiones). Purchaser, the Note Holders and Seller agree to use reasonable
efforts to refrain from taking any action which could reasonably be expected to materially delay
the consummation of the Transactions.

          5.7 Preservation of Records. Purchaser acknowledges and agrees that Seller may, from
time to time, in the normal course of investigating, prosecuting and/or defending various ongoing
matters which may relate to the Companies Subsidiaries or the businesses thereof, and will continue
to have, a need (i) to refer to, and to use as evidence, certain books, records and other data,
including electronic data maintained in computer files, relating to the Companies Subsidiaries
and/or their businesses and (ii) for the support and cooperation of present or former employees of
the Companies Subsidiaries in the event that such Persons’ assistance or participation is needed to
aid in the defense or settlement of the such matters. Purchaser agrees that it shall, at its own
expense, preserve and keep the records held by it relating to the respective businesses of the
Companies Subsidiaries that could reasonably be required after the consummation of the transaction
contemplated in this Agreement by Seller for a period of five (5) years; provided,
however, that upon expiration of such period, as applicable, Purchaser shall give written
notice to Seller if it or the custodian of such books and records proposes to destroy or dispose of
the same. Seller shall have the opportunity for a period of thirty (30) days after receiving such
notice to elect to have some or all of such books and records delivered, at Seller’s expense and
risk, to a location chosen by Seller. In addition, Purchaser shall make such records available to
Seller as may reasonably be required by Seller in connection with, among other things, any
insurance claim, legal proceeding or governmental investigation relating to the respective
businesses of Seller and its Affiliates, including the Companies Subsidiaries. Seller agrees to
maintain the confidentiality of all information provided by Purchaser or the Companies Subsidiaries
hereunder.

          5.8 Change of Name.

               (a) Notwithstanding anything to the contrary contained herein, within sixty (60) Business Days
after the Closing Date, Purchaser shall have caused the Companies and all entities in which the
Companies directly or indirectly holds an interest that have “CMS” or any similar derivations
thereof in their name to be renamed without reference to “CMS” or any similar derivations thereof.
On or after the Closing Date, Purchaser and its Affiliates shall not use existing or develop new
stationery, business cards and other similar items that bear the name or mark of “CMS” or any
similar derivation thereof in connection with the businesses of the Company or any of the Companies
Subsidiaries.

               (b) The Parties acknowledge that any damage caused to Seller or any of its respective
Affiliates by reason of the breach by Purchaser or any of its Affiliates of Section 

17

 

5.8(a), in each case would cause irreparable harm that could not be adequately
compensated for in monetary damages alone; therefore, each Party agrees that, in addition to any
other remedies, at law or otherwise; Seller and any of its respective Affiliates shall be entitled
to an injunction issued by a court of competent jurisdiction restraining and enjoining any
violation by Purchaser or any of its Affiliates of Section 5.8(a), and Purchaser further
agrees that it (x) will stipulate to the fact that Seller or any of its respective Affiliates, as
applicable, have been irreparably harmed by such violation and not oppose the granting of such
injunctive relief and (y) waive any requirement that Seller post any bond or similar requirement in
order for Seller to obtain the injunctive relief contemplated by this Section 5.8(b).

          5.9 Resignations of Certain Officers and Directors. Upon the written request of
Purchaser, the Seller shall cause, to the extent allowed by its voting power or any applicable
organizational document, the resignations or removals at the Closing Date of the officers and
directors and other persons set forth on Schedule 5.9 from their position as officer or
director, or other management or employment position, of the Companies, the Companies Subsidiaries
or CMS-Inversiones set forth opposite the name of such officer, director or person on Schedule
5.9 of the Seller Disclosure Letter.

          5.10 Releases of Certain Guarantees. Purchaser and Seller shall cooperate to procure
at or prior to the Closing the release by the applicable counterparty of any continuing obligation
of Seller or its Affiliates with respect to any guarantee as set forth on Schedule 5.10
(“Guarantees”); provided that to the extent a release shall not have been obtained
at the time of Closing with respect to any such Guarantee, Purchaser shall provide an indemnity (in
form and substance satisfactory to Seller) to secure the obligations of Seller or its Affiliates
with respect to each such Guarantee; provided, further, that any such indemnity
with Seller, as beneficiary, shall remain in full force and effect for the same period from and
after the Closing as any such corresponding Guarantee shall remain in place.

          5.11 [Intentionally Omitted.]

ARTICLE VI

CONDITIONS TO CLOSING

          6.1 Condition to the Obligations of the Parties—No Injunction. The obligations of
the Parties to effect the Closing shall be subject to the satisfaction or waiver (to the extent
permitted by Law) by Purchaser and Seller, or the Note Holders as applicable, on or prior to the
Closing Date, of the following condition precedent: except for the Antitrust Approval and the
ENARGAS Approval, no statute, rule or regulation shall have been enacted or promulgated by any
Governmental Entity which prohibits the consummation of the transactions contemplated hereby and
there shall be no order or injunction of a court of competent jurisdiction in effect precluding or
prohibiting the consummation of the transactions contemplated hereby; provided,
however, that should any such order or injunction be entered into or in effect, the Parties
shall use reasonable efforts to have any order or injunction vacated or lifted.

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          6.2 Conditions to the Obligation of Purchaser. The obligations of Purchaser to effect
the Closing shall be subject to the satisfaction or waiver by Purchaser on or prior to the Closing
Date of each of the following conditions:

               (a) Performance of Obligations of Seller and the Note Holders. Each of Seller and the
Note Holders shall have performed in all material respects its respective agreements and covenants
contained in or contemplated by this Agreement which are required to be performed by them at or
prior to the Closing.

               (b) Representations and Warranties. The respective representations and warranties of
Seller and the Note Holders set forth in this Agreement shall be true and correct (i) on and as of
the date hereof and (ii) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of a specific date or time which need
only be true and correct as of such date or time) except in each of cases (i) and (ii) for such
failures of representations and warranties to be true and correct (without giving effect to any
materiality qualification or standard contained in any such representations and warranties) that
would not reasonably be expected to have, individually or in the aggregate, a Seller Material
Adverse Effect.

               (c) Officer’s Certificate. Purchaser shall have received a certificate from an
authorized officer of Seller and one certificate from an authorized officer of each Note Holder
other than the Seller, dated as of the Closing Date, to the effect that, to each of such officers’
knowledge, the conditions set forth in Sections 6.2(a) and 6.2(b) have been
satisfied.

               (d) Closing Deliverables. Purchaser shall have received all documents and other items
required to be delivered by Seller and the Note Holders to Purchaser pursuant to Section
1.6.

          6.3 Conditions to the Obligation of Seller. The obligation of Seller and the Note
Holders to effect the Closing shall be subject to the satisfaction or waiver by Seller, or the Note
Holders as applicable, on or prior to the Closing Date of each of the following conditions:

               (a) Performance of Obligations of Purchaser. Purchaser shall have performed in all
material respects its respective agreements and covenants contained in or contemplated by this
Agreement which are required to be performed by it at or prior to the Closing.

               (b) Representations and Warranties. The representations and warranties of Purchaser
set forth in this Agreement shall be true and correct (i) on and as of the date hereof and (ii) on
and as of the Closing Date with the same effect as though such representations and warranties had
been made on and as of the Closing Date (except for representations and warranties that expressly
speak only as of a specific date or time which need only be true and correct as of such date or
time) except in each of cases (i) and (ii) for such failures of representations and warranties to
be true and correct (without giving effect to any materiality qualification or standard contained
in any such representations and warranties) that

19

 

would not reasonably be expected to have, individually or in the aggregate, a Purchaser
Material Adverse Effect.

               (c) [Intentionally Omitted.]

               (d) Officer’s Certificate. Seller shall have received a certificate from an
authorized officer of Purchaser, dated as of the Closing Date, to the effect that, to the best of
such officer’s knowledge, as applicable, the conditions set forth in Sections 6.3(a) and
6.3(b) have been satisfied.

               (e) [Intentionally Omitted.]

               (f) Releases of Certain Guarantees. The releases by the applicable counterparty of
any continuing obligation of Seller or any of its Affiliates with respect to each Guarantee shall
have been obtained in accordance with Section 5.10; provided that to the extent a
release shall not have been obtained at Closing with any such Guarantee, Seller shall have received
an indemnity (in form and substance satisfactory to Seller) to secure the obligations of Seller or
its Affiliates with respect to each such Guarantee; provided, further, that any such indemnity with
Seller, as beneficiary, shall remain in full force and effect for the same period from and after
the Closing as any such corresponding Guarantee shall remain in place.

               (g) Closing Deliverables. Seller shall have received all documents and other items
required to be delivered by Purchaser to Seller pursuant to Section 1.6.

ARTICLE VII

TERMINATION

          7.1 Termination. This Agreement may be terminated at any time prior to the Closing
Date:

               (a) by the mutual written agreement of Purchaser, the Note Holders and Seller;

               (b) by Purchaser or Seller, if (i) a statute, rule, regulation or executive order shall have
been enacted, entered or promulgated prohibiting the consummation of the transactions contemplated
hereby or (ii) an order, decree, ruling or injunction shall have been entered permanently
restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated
hereby, and such order, decree, ruling or injunction shall have become final and non-appealable and
the party seeking to terminate this Agreement pursuant to this Section 7.1(b)(ii) shall
have used reasonable efforts to remove such order, decree, ruling or injunction;

               (c) by Purchaser or Seller, if (i) a statute, rule, regulation or executive order shall have
been enacted, entered or promulgated prohibiting the consummation of the transactions contemplated
hereby or (ii) an order, decree, ruling or injunction shall have been entered permanently
restraining, enjoining or otherwise prohibiting the consummation of the

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transactions contemplated
hereby, and such order, decree, ruling or injunction shall have become
final and non-appealable and the party seeking to terminate this Agreement pursuant to this
Section 7.1(c)(ii) shall have used reasonable efforts to remove such order, decree, ruling
or injunction;

               (d) by Seller, by written notice to Purchaser, if the Closing Date shall not have occurred on
or before August 28, 2007 provided, that the right to terminate this Agreement under this
Section 7.1(d) shall not be available to Seller if it has failed to fulfill any obligation
of Seller or the Note Holders under this Agreement and such failure shall have caused or resulted
in the failure of the Closing Date to occur on or before such date;

               (e) by Purchaser, so long as Purchaser is not then in material breach of any of its
representations, warranties, covenants or agreements hereunder, by written notice to Seller, if
there shall have been a material breach of any representation or warranty of Seller or the Note
Holders, or a material breach of any covenant or agreement of Seller or the Note Holders hereunder,
which breaches would be reasonably expected to have, individually or in the aggregate, a Seller
Material Adverse Effect, and such breach shall not have been remedied within thirty (30) days after
receipt by Seller or the Note Holders, as applicable, of notice in writing from Purchaser (a
“Breach Notice”), specifying the nature of such breach and requesting that it be remedied
or Purchaser shall not have received adequate assurance of a cure of such breach within such
thirty-day period; or

               (f) by Seller, so long as Seller or the Note Holders are not then in material breach of any of
their representations, warranties, covenants or agreements hereunder, by written notice to
Purchaser, if there shall have been a material breach of any representation or warranty, or a
material breach of any covenant or agreement of Purchaser hereunder, which breaches would
reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse
Effect, and such breach shall not have been remedied within thirty (30) days after receipt by
Purchaser of notice in writing from Seller, specifying the nature of such breach and requesting
that it be remedied or Seller shall not have received adequate assurance of a cure of such breach
within such thirty-day period.

          7.2 Effect of Termination. No termination of this Agreement pursuant to Section
7.1 shall be effective until notice thereof is given to the non-terminating Parties specifying
the provision hereof pursuant to which such termination is made. Subject to Section 1.7,
if validly terminated pursuant to Section 7.1, this Agreement shall, subject to Section
8.1, become wholly void and of no further force and effect without liability to any Party or to
any Affiliate, or its respective members or shareholders, directors, officers, employees, agents,
advisors or representatives, and following such termination no Party shall have any liability under
this Agreement or relating to the transactions contemplated by this Agreement to any other Party;
provided that no such termination shall (i) relieve the Parties from liability for fraud or
any willful or intentional breach of any provision of this Agreement prior to such termination or
(ii) relieve Purchaser from any liability for any breach of Purchaser’s representations or
warranties contained in Section 4.3 (whether or not such breach is fraudulent, willful or
intentional). If this Agreement is terminated as provided in Section 7.1, Purchaser shall
redeliver to Seller or the Note Holders, as the case may be, and shall cause its agents to
redeliver to Seller or the Note Holders, as the case may be, all documents, workpapers and other

21

 

materials of Seller, the Companies and the Companies Subsidiaries and the Note Holders relating to
any of them and the
transactions contemplated hereby, whether obtained before or after the execution hereof, and
Purchaser shall comply with all of its confidentiality obligations to Seller and the Note Holders
under all applicable agreements.

ARTICLE VIII

LIMITS OF LIABILITY; PARENT GUARANTEE

          8.1 Non-Survival of Representations, Warranties, Covenants and Agreements.

               (a) Except as expressly provided in Section 8.1(b), none of the representations,
warranties, covenants or agreements of Purchaser, the Note Holders or Seller in this Agreement
shall survive the Closing, and no claim of any sort or on any basis may be made by any Party in
respect of any breach of any such representation, warranty, covenant or agreement after the
Closing, and no breach thereof shall confer any right of rescission of this Agreement. Except in
respect of the representations, warranties, covenants and agreements referred to in Section
8.1(b) that survive the Closing and except as otherwise provided for in this Agreement, the
sole remedy that a Party may have for a breach of any representation, warranty, covenant or
agreement of Purchaser, the Note Holders or Seller in this Agreement shall be to terminate this
Agreement to the extent provided for under, and in accordance with the terms of, this Agreement.

               (b) The representations, warranties, covenants or agreements of Purchaser, Note Holders or
Seller in this Agreement shall survive as follows:

               (i) the representations and warranties of Seller contained in Sections 2.1.2
(Title to Shares) and 2.1.3(a) (Authority) shall survive for one year from the
Closing Date;

               (ii) the representations and warranties of the Note Holders contained in Sections
2.2.2 (Title to Notes) and 2.2.3(a) (Authority) shall survive for six months
from the Closing Date;

               (iii) the representations and warranties of Purchaser contained in Section
4.2(a) (Authority) shall survive for one year from the Closing Date;

               (iv) the representations and warranties of Purchaser contained in Sections 4.4
(Investment Intention; Sufficient Investment Experience; Independent Investigation;
Financial Distress) and 4.6 (No Knowledge of Seller or Note Holders Breach) shall
survive indefinitely; and

               (v) the covenants and agreements of the Parties contained in Sections 5.1
(Notification to the CNDC and ENARGAS; Negative Antitrust and ENARGAS Decision; Transfer of
Shares to a Third Purchaser), 5.4 (Fees and Expenses), 5.6 (Further
Assurances), 5.7 (Preservation of Records), 5.8 (Change of Name),
5.10

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(Release of Certain Guarantee) and 7.2 (Effect of Termination),
Article VIII (Limits of Liability) and Article X (General Provisions) shall
survive indefinitely.

No claim or cause of action arising out of the inaccuracy or breach of any representation,
warranty, covenant or agreement of Seller, the Note Holders or Purchaser may be made following the
termination of the applicable survival period referred to in this Section 8.1(b). The
Parties intend to shorten any statutory limitations applicable to the assertion of claims with
respect to this Agreement, and agree that, after the Closing Date, with respect to Seller, the Note
Holders and Purchaser, any claim or cause of action against any of the Parties, or any of their
respective directors, officers, employees, Affiliates, successors, permitted assigns, advisors,
agents, or representatives based upon, directly or indirectly, any of the representations,
warranties, covenants or agreements contained in this Agreement, or any other written agreement,
document or instrument to be executed and delivered in connection with this Agreement, may be
brought only as expressly provided in this Article VIII.

               (c) The liability of any Party in respect of which a notice of claim is given under this
Agreement shall be (if such claim has not been previously satisfied, settled or withdrawn)
absolutely determined and any claim made therein be deemed to have been withdrawn (and no new claim
may be made in respect of the facts, event, matter or circumstance giving rise to such withdrawn
claim) unless an action in respect of such claim in accordance with the terms contained herein
shall have been commenced within six (6) months of the date of service of such notice (or such
other period as may be agreed by the relevant Parties) and for this purpose actions shall not be
deemed to have commenced unless they shall have been properly issued and validly served upon the
relevant Party.

          8.2 Parent Guarantee.

               (a) For value received, Parent hereby fully, unconditionally and irrevocably guarantees to
Seller (the “Parent Guarantee”) (x) the prompt and punctual payment of any amount Purchaser
is required to pay under this Agreement, when and as the same shall become due and payable, subject
as to such payment obligations to the terms and conditions of this Agreement, including, without
limitation, the payment of the Purchase Price as provided by Section 1.6, and (y) the prompt and
full performance when due by Purchaser of its obligations up to and through Closing under this
Agreement. Parent’s guarantee obligations include the principal, interest, fines, fees, costs and
other amounts that may be due and payable by Purchaser under this Agreement.

               (b) The Parent Guarantee is a first demand guarantee and shall constitute an autonomous and
independent obligation of Parent not being ancillary to the obligations of Purchaser under this
Agreement. Parent hereby agrees to cause any such payment or performance to be made as if such
payment or payment were made by Purchaser.

               (c) Parent hereby waives diligence, presentment, demand of payment, filing of claims with a
court in the event of a merger or bankruptcy of Purchaser, any right to require a proceeding first
against Purchaser, protest or notice with respect to any amount payable by Purchaser under this
Agreement and all demands whatsoever, and covenants that the Parent Guarantee will not be
discharged except by (i) termination of this Agreement according to its

23

 

terms, (ii) payment in full
of all amounts due and payable under this Agreement, (iii) performance in full of all obligations
due under this Agreement and (iv) payment of any Damages.

               (d) The applicability of the Parent Guarantee shall not be affected or impaired by any of the
following: (i) any extension of time, forbearance or concession given to Purchaser; (ii) any
assertion of, or failure to assert, or delay in asserting, any right, power or remedy against
Purchaser; (iii) any amendment of the provisions of this Agreement; (iv) any failure of Purchaser
to comply with any requirement of any Law; (v) the dissolution, liquidation, reorganization or any
other alteration of the legal structure of Purchaser; (vi) any invalidity or unenforceability of
any provision of this Agreement; or (vii) any other circumstance (other than complete payment by
Purchaser or Parent) which might otherwise constitute a legal or equitable discharge or defense of
a surety or a guarantor.

               (e) Parent shall be subrogated to all rights of Purchaser against Seller based on and to the
extent of any amounts paid to Seller by Parent pursuant to the provisions of the Parent Guarantee.

ARTICLE IX

DEFINITIONS AND INTERPRETATION

          9.1 Defined Terms. The following terms are defined in the corresponding Sections of
this Agreement:

	 	 	 
	Defined Term	 	Section Reference
	 
	 	 
	Agreement
	 	Preamble
	Arbitration Expenses
	 	Section 10.9
	Breach Notice
	 	Section 7.1(e)
	Closing
	 	Section 1.5
	Closing Date
	 	Section 1.5
	CMS-Capital
	 	Preamble
	CMS-Cayman
	 	Preamble
	CMS-Gas
	 	Recitals
	CMS-Generation
	 	Recitals
	CMS-Inversiones
	 	Recitals
	Claim
	 	Section 5.1(e)(i)
	Company/Companies
	 	Recitals
	Companies Subsidiaries Financial Statements
	 	Section 3.2
	Deposit
	 	Section 1.7
	Dispute
	 	Section 10.9
	Effective Date
	 	Preamble
	Governing Company
	 	Recitals
	Guarantees
	 	Section 5.10
	Holding Company
	 	Recitals
	ICC
	 	Section 10.9

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	Defined Term	 	Section Reference
	 
	 	 
	Note/Notes
	 	Recitals
	Note Holders Disclosure Letter
	 	Section 2.2
	Note Holders
	 	Preamble
	Notes Transaction
	 	Section 1.3
	Operating Company Notes
	 	Section 3.6
	Panel
	 	Section 10.9
	Parent
	 	Preamble
	Party/Parties
	 	Preamble
	Prior Agreement
	 	Recitals
	Purchase Agreement Fee
	 	Section 1.7
	Purchase Price
	 	Section 1.4
	Purchaser
	 	Preamble
	Rules
	 	Section 10.9
	Seller
	 	Preamble
	Seller Disclosure Letter
	 	Section 2.1
	Seller Termination Date
	 	Section 7.1(d)
	Shares
	 	Recitals
	Shares Transaction
	 	Section 1.1
	Transactions
	 	Section 1.3
	Violation
	 	Section 2.1.3(b)

          9.2 Definitions. Except as otherwise expressly provided in this Agreement, or unless
the context otherwise requires, whenever used in this Agreement, the following terms will have the
meanings indicated below:

     “Argentine Transaction Approvals” means the Antitrust Approval and the ENARGAS
Approval.

     “Affiliate” means, with respect to any Person or group of Persons, a Person
that directly or indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with such Person or group of Persons.

     “Antitrust Approval” is the approval of the Transactions without undertakings
by the Republic of Argentina Secretariat of Internal Trade, or any agency or tribunal that
may replace it in the future or that may be declared by a res judicata judgment to be
empowered to issue a final decision on the Transactions, approving the same under the
Antitrust Law.

     “Antitrust Law” as regards the Republic of Argentina means Law No. 25,156 (as
amended), Decree No. 89/2001, Resolution No. 40/2001 of the former Secretariat of
Competition and Consumer Defense, Resolution No. 164/2001 of the former Secretariat of
Competition, Deregulation and Consumer Defense, Resolution No. 26/2006 of the former
Secretariat of Technical Coordination and any other law or regulation, administrative
resolution and judicial decision addressing competition issues, including

25

 

but not limited to the competition clearance of mergers, acquisitions or other business
combinations.

     “Business Day” means a day other than a Saturday, a Sunday or any other day on
which banks are not required to be open or are authorized to close in New York, New York.

     “Chilean GAAP” means generally accepted accounting principles in Chile, as in
effect from time to time.

     “CLP” means Chilean pesos, the legal currency of Chile;

     “CNDC” shall mean the Argentine Comisión Nacional de Defensa de la Competencia.

     “Companies Material Adverse Effect” means any material adverse effect on the
business properties, financial condition or results of operations of any of the Companies
Subsidiaries; provided, however, that the term “Companies Material
Adverse Effect” shall not include effects that result from or are consequences of (i)
the current and prospective financial position of the Companies Subsidiaries, or the
insolvency or bankruptcy of any of the Companies Subsidiaries, or the other matters
contemplated by Section 4.4 of this Agreement, (ii) changes in financial, securities or
currency markets, changes in prevailing interest rates or foreign exchange rates, changes in
general economic conditions, changes in electricity, gas or other fuel supply and
transmission and transportation markets, including changes to market prices for electricity,
steam, natural gas or other commodities, or effects of weather or meteorological events,
(iii) changes in Law, rule or regulation of, or the effect of any actions taken by, any
Governmental Entity in Chile, Argentina or any other state or municipality in which any of
the Companies Subsidiaries operates, (iv) events or changes that are consequences of
hostility, terrorist activity, acts of war or acts of public enemies, (v) changes in
accounting standards, principles or interpretations, (vi) any delay in the receipt of, or
the failure to receive, the Argentine Transaction Approvals, (vii) breach of agreement, or
failure to perform by any third party under a contract with any of the Companies
Subsidiaries or (viii) actions taken or not taken solely at the request of Purchaser.

     “Companies Subsidiaries” means, collectively, the Governing Company, the
Holding Company and the Operating Companies.

     “Companies Subsidiary” means, individually, each of the Governing Company, the
Holding Company and each of the Operating Companies.

     “Consent” means any consent, approval, authorization, order, filing,
registration or qualification of, by or with any Person.

     “Consortium Agreement” means the agreement dated as of May 19, 1997, by and
between CMS Enterprises Company, a corporation organized and existing under the laws of the
State of Michigan, and Empresa Nacional de Electricidad S.A., a corporation

26

 

  organized and existing under the laws of the Republic of Chile, as amended from time to
time.

     “Control” (including the terms “controlled by” and “under common control with”)
means the possession, directly or indirectly, of the power to direct or cause the direction
of the management policies of a Person, whether through the ownership of voting securities
or other Equity Interests, by contract or credit arrangement, as trustee or executor, or
otherwise. Solely for the purpose of the preceding sentence, a company is “directly
controlled” by another company or companies holding shares carrying the majority of votes
exercisable at a general meeting (or its equivalent) of the first mentioned company; and a
particular company is “indirectly controlled” by a company or companies (hereinafter called
the “parent company or companies”) if a series of companies can be specified, beginning with
the parent company or companies and ending with the particular company, so related that each
company of the series except the parent company or companies is directly controlled by one
or more of the preceding companies in the series.

     “Damages” means Liabilities, demands, claims, suits, actions, or causes of
action, losses, costs, expenses, damages and judgments, whether or not resulting from third
party claims (including reasonable fees and expenses of attorneys and accountants).

     “ENARGAS Approval” is the approval of the Transactions without undertakings by
the Argentine Ente Nacional Regulador del Gas (ENARGAS), or any agency or tribunal that may
replace it in the future or that may be declared by a res judicata judgment to be empowered
to issue a final decision on the Transactions, approving the same under the Gas Law.

     “Equity Interests” means shares of capital stock or other equity interests of
any Person, as the case may be.

     “Gas Law” as regards the Republic of Argentina means Law No. 24,076 (as
amended), Decree No. 1738/1992, Resolution ENARGAS N° 1976/2000 and any other law or
regulation, administrative resolution and judicial decision addressing gas issues in
relation to the Companies.

     “Governmental Entity” means any federal, state, municipal or local governmental
or quasi-governmental or regulatory authority, agency, court, commission or other similar
entity in the United States or any non-U.S. jurisdiction.

     “Governmental Order” means any order, decree, ruling, injunction, judgment or
similar act of or by any Governmental Entity.

     “Knowledge” when used (i) with respect to Purchaser means the actual knowledge
of any fact, circumstance or condition of those officers of Purchaser or its Affiliates set
forth on Schedule 9.2(a) and to the extent set forth on Schedule 9.2(a); and
(ii) with respect to Seller, means the actual knowledge (without any obligation of inquiry

27

 

or investigation) of any fact, circumstance or condition of those employees of Seller
or its Affiliates set forth on Schedule 9.2(b), and to the extent set forth on
Schedule 9.2(b).

     “Law” means any law, statute, ordinance, regulation or rule of or by any
Governmental Entity or any arbitrator.

     “Liabilities” means any and all known liabilities or indebtedness of any nature
(whether direct or indirect, absolute or contingent, liquidated or unliquidated, due or to
become due, accrued or unaccrued, matured or unmatured, asserted or unasserted, determined
or determinable and whenever or however arising).

     “LIBOR” shall mean the one-month London interbank offered rate for deposits in
the applicable currency as published by the British Bankers Association from time to time.

     “Lien” means any lien, security interest, encumbrance or similar adverse claim.

     “Negative Antitrust Decision” shall mean a resolution by the Republic of
Argentina Secretariat of Internal Trade, or any agency or tribunal that may replace it in
the future or that may be declared by a res judicata judgment to be empowered to issue a
final decision on the Transactions, either prohibiting the Shares Transaction and/or Notes
Transaction or conditioning it and/or them to the fulfilment of any unduly burdensome
undertakings, in each case, exclusively based on the Antitrust Law.

     “Negative ENARGAS Decision” shall mean a resolution by the ENARGAS, or any
agency or tribunal that may replace it in the future or that may be declared by a res
judicata judgment to be empowered to issue a final decision on the Transactions, either
prohibiting the Shares Transaction and/or Notes Transaction or conditioning it and/or them
to the fulfilment of any unduly burdensome undertakings, in each case, exclusively based on
the Gas Law.

     “Operating Companies” means, collectively, GasAtacama Generación S.A.,
Gasoducto Atacama Chile S.A., Gasoducto Atacama Argentina S.A., Progas S.A., Gasoducto
Taltal S.A., Gasoducto Atacama Argentina S.A. (Sucursal Argentina), Atacama Finance Co.
(Cayman Is.) and Energex Co. (Cayman Is.).

     “Organizational Documents” means, with respect to any corporation, its articles
or certificate of incorporation, memorandum or articles of association and by-laws or
documents of similar substance; with respect to any limited liability company, its articles
or certificate of organization, formation or association and its operating agreement or
limited liability company agreement or documents of similar substance; with respect to any
limited partnership, its certificate of limited partnership and partnership agreement or
documents of similar substance; and with respect to any other entity, documents of similar
substance to any of the foregoing.

28

 

     “Permits” means all permits, licenses, franchises, registrations, variances,
authorizations, Consents, orders, certificates and approvals obtained from or otherwise made
available by any Governmental Entity or pursuant to any Law.

     “Person” means any natural person, firm, partnership, association, corporation,
company, joint venture, trust, business trust, Governmental Entity or other entity.

     “Purchaser Material Adverse Effect” means any material adverse effect on (a)
the business, assets, financial condition or results of operations of Purchaser and its
Subsidiaries taken as a whole or (b) the ability of Purchaser to timely consummate the
transactions contemplated by this Agreement or perform its respective obligations hereunder.

     “Seller Material Adverse Effect” means any material adverse effect on the
ability of Seller or any of the Note Holders to consummate the Transactions contemplated by
this Agreement or perform its obligations hereunder.

     “Specified Rate” means the per annum rate of interest published as the “Prime
Rate” in The Wall Street Journal determined as of the date the obligation to pay interest
arises.

     “Subsidiary” means, with respect to any Person (for the purposes of this
definition, the “parent”), any other Person (other than a natural person), whether
incorporated or unincorporated, of which at least a majority of the securities or ownership
interests having by their terms ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions is directly or indirectly owned or
controlled by the parent or by one or more of its Subsidiaries or by the parent and any one
or more of its Subsidiaries.

     “Tax” or “Taxes” means federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, environmental, stamp, franchise,
employment, payroll, withholding, alternative or add-on minimum, ad valorem, value added,
transfer or excise tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or penalty, imposed
by any Governmental Entity.

     “Tax Returns” means all tax returns, declarations, statements, reports,
schedules, forms and information returns and any amendments to any of the foregoing relating
to Taxes.

          9.3 Interpretation. In this Agreement, unless otherwise specified, the following
rules of interpretation apply:

               (a) the section and other headings contained in this Agreement are for reference purposes only
and do not affect the meaning or interpretation of this Agreement;

               (b) words importing the singular include the plural and vice versa;

29

 

               (c) references to the word “including” do not imply any limitation;

               (d) the words “hereof”, “herein” and “hereunder” and words of similar
import, when used in this Agreement, refer to this Agreement as a whole and not to any particular
provision of this Agreement;

               (e) all accounting terms not otherwise defined herein have the meanings assigned thereto under
Chilean GAAP; and

               (f) references to “US$” refer to U.S. dollars.

ARTICLE
X

GENERAL PROVISIONS

          10.1 Notices. All notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and shall be deemed to
have been duly given on if (a) delivered personally, (b) mailed by certified or registered mail
with postage prepaid, (c) sent by next-day or overnight mail or delivery, or (d) sent by fax or
telegram, as follows:

               (a)      if to Purchaser or Parent,

Empresa Nacional de Electricidad S.A.

Fax: (562) 3784780

Attention: Rafael Mateo Alcalá

with a copy to:

Empresa Nacional de Electricidad S.A.

Fax: (562) 378 4780

Attention: Carlos Martín Vergara

               (b)      if to Seller or any Note Holder,

CMS International Ventures L.L.C.

One Energy Plaza

Jackson, MI 49201

Fax: 517-788-0121

Attention: General Counsel

30

 

with a copy to:

CMS Energy

One Energy Plaza

Jackson, MI 49201

Fax: 517-788-0121

Attention: General Counsel

or, in each case, at such other address as may be specified in writing to the other Parties.

     All such notices, requests, demands, waivers and other communications shall be deemed to have
been received, if by personal delivery, certified or registered mail or next-day or overnight mail
or delivery, on the day delivered or, if by fax or telegram, on the next Business Day following the
day on which such fax or telegram was sent, provided that a copy is also sent by certified or
registered mail. For the purposes of this Section 10.1, notice to a Company shall not
constitute notice to Seller, and vice versa, and notice to a Note Holder shall not constitute
notice to any other Note Holder or to the Company, and vice versa.

          10.2 Binding Effect. This Agreement shall be binding upon and inure to the benefit of
the Parties and their respective heirs, successors and permitted assigns.

          10.3 Assignment; Successors; Third-Party Beneficiaries.

               (a) This Agreement is not assignable by any Party without the prior written consent of all of
the other Parties and any attempt to assign this Agreement without such consent shall be void and
of no effect.

               (b) This Agreement shall inure to the benefit of, and be binding on and enforceable by and
against, the successors and permitted assigns of the respective Parties, whether or not so
expressed.

               (c) This Agreement is intended for the benefit of the Parties hereto and does not grant any
rights to any third parties unless specifically stated herein.

          10.4 Amendment; Waivers; etc. No amendment, modification or discharge of this
Agreement, and no waiver under this Agreement, shall be valid or binding unless set forth in
writing and duly executed by the Party against whom enforcement of the amendment, modification,
discharge or waiver is sought. Any such waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way impair the rights of the Party
granting such waiver in any other respect or at any other time. The waiver by any of the Parties
of a breach of or a default under any of the provisions of this Agreement, or any failure or delay
to exercise any right or privilege under this Agreement, shall not be construed as a waiver thereof
or otherwise affect any of such provisions, rights or privileges under this Agreement.

31

 

          10.5 Entire Agreement.

               (a) This Agreement (including the Exhibits and the Seller Disclosure Letter, the Note Holders
Disclosure Letter and the Purchaser Disclosure Letter referred to in or delivered under this
Agreement) contains the entire agreement between the parties relating to the subject matter of this
Agreement to the exclusion of any terms implied by Law which may be excluded by contract and
supersedes all prior agreements and understandings, both written and oral, among the Parties with
respect to their subject matters. Each Party acknowledges that it has not been induced to enter
this Agreement by and, in agreeing to enter into this Agreement, it has not relied on, any
representations and warranties except as expressly stated or referred to in this Agreement.

               (b) The liability of a Party shall be limited or excluded as set out in this Agreement if and
to the extent such limitations or exclusions apply, except for fraud.

          10.6 Severability. Any term or provision of this Agreement that is held by a court of
competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction
or other authority declares that any term or provision hereof is invalid, void or unenforceable,
the Parties agree that the court making such determination, to the greatest extent legally
permissible, shall have the power to reduce the scope, duration, area or applicability of the term
or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable
term or provision with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.

          10.7 Counterparts. This Agreement may be executed and delivered (including via
facsimile) in several counterparts, each of which shall be deemed an original and all of which
shall together constitute one and the same instrument.

          10.8 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to any conflicts of law principles of
such State.

          10.9 Arbitration. Any dispute, action, claim or controversy of any kind related to,
arising from or in connection with this Agreement or the relationship of the parties under this
Agreement (the “Dispute”) whether based on contract, tort, common law, equity, statute,
regulation, order or any other source of law, shall be finally settled before the International
Chamber of Commerce (“ICC”) under the Rules of Arbitration (the “Rules”) of the ICC
by three (3) arbitrators designated by the Parties (the “Panel”). Seller, on the one hand,
and Purchaser, on the other hand, shall each designate one arbitrator to serve on the Panel. The
third arbitrator shall be designated by the two arbitrators designated by such parties. If either
party fails to designate an arbitrator within thirty (30) days after the filing of the Dispute with
the ICC, such arbitrator shall be appointed in the manner prescribed by the Rules. An arbitration
proceeding hereunder shall be conducted in New York, New York, and shall be conducted in the
English language. The decision or award of the Panel shall be in writing and shall be final and
binding

32

 

on the Parties. The Panel shall award the prevailing party all fees and expenses incurred in
connection with the arbitration, including, without limitation, attorneys’ fees and costs,
arbitration administrative fees charged by the ICC, Panel member fees and costs, and any other
costs associated with the arbitration (the “Arbitration Expenses”); provided,
however, that if the claims or defenses are granted in part and rejected in part, the Panel
shall proportionately allocate between Seller or the Note Holders, as applicable, on the one hand,
and Purchaser, on the other hand, the Arbitration Expenses in accordance with the outcomes. The
Panel may only award damages as provided for under the terms of this Agreement and in no event may
punitive, consequential and/or special damages be awarded. In the event of any conflict between
the Rules and any provision hereof, this Agreement shall govern.

          10.10 Limitation on Damages. No Party shall, under any circumstance, have any
liability to any other Party for any special, indirect, consequential or punitive damages claimed
by such other Party under the terms of or due to any breach or non-performance of this Agreement,
including lost profits, loss of revenue or income, cost of capital, or loss of business reputation
or opportunity.

          10.11 Enforcement. The Parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not to be performed in accordance with the terms
hereof and that the Parties shall be entitled to specific performance of the terms hereof in
addition to any other remedies at law or in equity.

          10.12 No Right of Set-Off. Purchaser, for itself and its successors and permitted
assigns, hereby unconditionally and irrevocably waives any rights of set-off, netting, offset,
recoupment, or similar rights that such Purchaser or any of its successors and permitted assigns
has or may have with respect to the payment of the Purchase Price or any other payments to be made
by Purchaser pursuant to this Agreement or any other document or instrument delivered by Purchaser
in connection herewith.

          10.13 Several Liability. Purchaser hereby acknowledges and understands that each of
the representations, warranties, covenants and agreements of Seller and each of the Note Holders
are made severally but not jointly.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

33

 

     IN WITNESS WHEREOF, the Parties have executed this SECURITIES PURCHASE AGREEMENT as of the
date first above written.

	 	 	 	 	 
	 	CMS INTERNATIONAL VENTURES, L.L.C.

 	 
	 	By:  	/s/ Sharon A. Mcilnay
 	 
	 	 	Name:  	Sharon A. McIlnay 	 
	 	 	Title:  	Vice President and General Counsel 	 
	 
	 	CMS CAPITAL, L.L.C.

 	 
	 	By:  	/s/ James E. Brunner
 	 
	 	 	Name:  	James E. Brunner 	 
	 	 	Title:  	Senior Vice President and
General Counsel 	 
	 
	 	CMS GAS ARGENTINA COMPANY

 	 
	 	By:  	/s/ Sharon A. McIlnay
 	 
	 	 	Name:  	Sharon A. McIlnay 	 
	 	 	Title:  	Vice President and General Counsel 	 
	 
	 	CMS ENTERPRISES COMPANY

 	 
	 	By:  	       /s/ Sharon A. McIlnay
 	 
	 	 	Name:  	Sharon A. McIlnay 	 
	 	 	Title:  	Vice President and General Counsel 	 

S-1

 

	 	 	 	 	 

	 	 	 	 	 
	 	PACIFIC ENERGY LLC

 	 
	 	By:  	/s/ Carlos Martín Vergara
 	 
	 	 	Name:  	Carlos Martín Vergara 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	By:  	          /s/ Manuel José Irarrázaval Aldunate
 	 
	 	 	Name:  	Manuel José Irarrázaval Aldunate 	 
	 	 	Title:  	 	 
	 
	 	EMPRESA NACIONAL DE ELECTRICIDAD S.A.

 	 
	 	By:  	/s/ Carlos Martín Vergara
 	 
	 	 	Name:  	Carlos Martín Vergara 	 
	 	 	Title:  	 	 
	 
	 	 	 
	 	By:  	                                                  /s/ Manuel José Irarrázaval Aldunate
 	 
	 	 	Name:  	Manuel José Irarrázaval Aldunate                                                       	 
	 	 	Title:  	 	 

S-2

 

	 	 	 	 	 

EXHIBIT A to 

SECURITIES PURCHASE AGREEMENT

SELLER DISCLOSURE LETTER

to

SECURITIES PURCHASE AGREEMENT

by and among

CMS INTERNATIONAL VENTURES, L.L.C.,

CMS CAPITAL, L.L.C.,

CMS GAS ARGENTINA COMPANY,

CMS ENTERPRISES COMPANY,

PACIFIC ENERGY LLC.

and

EMPRESA NACIONAL DE ELECTRICIDAD S.A.

Dated as of July 11, 2007

 

 

SELLER DISCLOSURE LETTER

to

STOCK PURCHASE AGREEMENT

by and among

CMS INTERNATIONAL VENTURES, L.L.C.,

CMS CAPITAL, L.L.C.,

CMS GAS ARGENTINA COMPANY,

CMS ENTERPRISES COMPANY,

PACIFIC ENERGY LLC.

and

EMPRESA NACIONAL DE ELECTRICIDAD S.A.

Dated as of July 11, 2007

     This Seller Disclosure Letter is being furnished by CMS International Ventures, L.L.C., a
limited liability company organized and existing under the laws of the State of Michigan
(“Seller”), to Pacific Energy LLC., a limited liability company organized and existing
under the laws of the State of Delaware (“Purchaser”) and to Empresa Nacional de
Electricidad S.A., a company organized and existing under the laws of Chile (“Parent”) in
connection with the Securities Purchase Agreement dated as of July 11, 2007 (hereinafter also
referred to as this “Agreement”) by and among Seller, CMS Capital, L.L.C., a limited
liability company organized and existing under the laws of the State of Michigan
(“CMS-Capital”), CMS Gas Argentina Company, a company incorporated and existing under the
laws of the Cayman Islands (“CMS-Cayman”), and, CMS Enterprises Company, a corporation
organized and existing under the laws of the State of Michigan (“CMS-Enterprises”; each of
the Seller, CMS-Capital, CMS-Cayman, and CMS-Enterprises is also referred to herein as a “Note
Holder” and, collectively, the “Note Holders”), Purchaser and Parent. Unless the
context otherwise requires, all capitalized terms used in this Seller Disclosure Letter shall have
the respective meanings assigned to them in the Agreement.

1

 

     The contents of this Seller Disclosure Letter are qualified in their entirety by reference to
the specific provisions of the Agreement, and are not intended to constitute, and shall not be
construed as constituting, representations or warranties of Seller, except as and to the extent
provided in the Agreement.

     Nothing in this Seller Disclosure Letter shall constitute an admission that any information
disclosed, set forth or incorporated by reference in this Seller Disclosure Letter, either
individually or in the aggregate, is material, or would result in a Seller Material Adverse Effect.
No disclosure made in this Seller Disclosure Letter (i) shall be deemed to modify in any respect
the standard of materiality or any other standard for disclosure set forth in the Agreement or (ii)
relating to any possible breach or violation of any agreement, contract, Law or Governmental Order
shall be construed as an admission or indication that any such breach or violation exists or has
actually occurred.

     Notwithstanding anything to the contrary contained in this Seller Disclosure Letter or in the
Agreement, the information and disclosures contained in each schedule hereto shall be deemed to be
disclosed and incorporated by reference in each of the other schedules hereto as though fully set
forth in such other schedules. Purchaser has informed Seller that there are no documents (or copies
of such documents) referred to in this letter as having been disclosed which the Purchaser would
like to see and which have not been supplied or made available to it. There are no matters
referred to in this letter in respect of which Purchaser require further details.

     Headings have been inserted herein for convenience of reference only and shall to no extent
have the effect of amending or changing the express description of this Seller Disclosure Letter as
contemplated by the Agreement or the express description of the Sections of the Agreement.

     This Seller Disclosure Letter shall be deemed to include, and there are incorporated into it
by way of disclosure, all information disclosed in the files and working papers of Seller,
CMS-Inversiones and the Companies Subsidiaries made available to Purchaser in the virtual data room
on Intralinks under “Project Beta” as of July 10, 2007.

2

 

Schedule 2.1.2

Shares

	 	 	 	 	 
	Seller	 	Company	 	No. of Shares
	CMS International Ventures, L.L.C.
	 	CMS Gas Transmission
Del Sur Company	 	100
	 
	 
	CMS International Ventures, L.L.C.
	 	CMS Generation
Investment Company V	 	100

3

 

Schedule 2.1.3(d)

Approvals

1. Antitrust filings that may be required under Chilean Antitrust Laws due to the participation of
the Purchaser in the Chilean energy market.

2. Antitrust approval in accordance with Argentine antitrust law.

3. ENARGAS approval in accordance with Argentine gas law.

4

 

Schedule 3.1.1

Title and Capitalization

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Issued and	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	outstanding	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Jurisdiction of	 	 	 	Equity	 	 	 	Subscribed	 	Paid	 	Paid in Capital	 	Validly	 	Good	 	Last
	Name of Company	 	Incorporation	 	Equity Interest	 	Interest	 	Owners of Equity Interest	 	Shares/Rights	 	Shares/Rights	 	(CLP)	 	Incorporated	 	Standing	 	Capitalization*
	Compañía de
	 	Chile	 	Derechos Sociales	 	100%	 	CMS Gas Transmission del Sur	 	 	99	%	 	 	99	%	 	 	50,338,783,883	 	 	Yes, 06.03.97	 	 	05.29.07	 	 	 	10.27.00	 
	Inversiones CMS
	 	 	 	(Equity Rights)	 	 	 	Company	 	 	1	%	 	 	1	%	 	 	508,472,564	 	 	 	 	 	 	 	 	 	 	 	 	 
	Energy Chile Ltda.
	 	 	 	 	 	 	 	CMS Generation Investment	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Company V	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Inversiones Gas
	 	Chile	 	Derechos Sociales	 	100%	 	Inversiones Endesa Norte S.A.	 	 	50	%	 	 	50	%	 	 	80,356,939,627	 	 	Yes, 10.01.03	 	 	04.19.07	 	 	 	02.26.04	 
	Atacama Holding Ltda.
	 	 	 	(Equity Rights)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Compañia de Inversiones CMS	 	 	36.07	%	 	 	36.07	%	 	 	57,967,438,723	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Energy Chile Ltda.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	CMS Gas Transmisión del Sur	 	 	13.93	%	 	 	13.93	%	 	 	22,389,500,904	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Company	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GasAtacama S.A.
	 	Chile	 	Ordinary Shares	 	100,000,000	 	Inversiones Gas Atacama Holding	 	 	99,997,706	 	 	 	99,997,706	 	 	 	160,709,613,426	 	 	Yes, 06.13.97	 	 	04.17.07	 	 	 	12.24.03	 
	 
	 	 	 	 	 	ordinary shares	 	Ltda	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Compañia de Inversiones CMS	 	 	1,147	 	 	 	1,147	 	 	 	1,843,382	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Energy Chile Ltda.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Empresa Nacional de	 	 	1,147	 	 	 	1,147	 	 	 	1,843,382	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Electricidad S.A.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GasAtacama Generación
	 	Chile	 	Ordinary Shares	 	10,000	 	Inversiones Endesa Norte S.A.	 	 	5	 	 	 	5	 	 	 	42,502,774	 	 	Yes, 12.19.96	 	 	04.17.07	 	 	 	12.17.03	 
	S.A.
	 	 	 	 	 	ordinary shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Compañia de Inversiones CMS	 	 	5	 	 	 	5	 	 	 	42,502,774	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Energy Chile Ltda.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	GasAtacama S.A.	 	 	9,990	 	 	 	9,990	 	 	 	84,920,542,386	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gasoducto Atacama
	 	Chile	 	Ordinary Shares	 	10,000 	 	Inversiones Endesa Norte S.A.	 	 	5	 	 	 	5	 	 	 	22,544,680	 	 	Yes, 08.21.96	 	 	04.18.07	 	 	 	12.17.03	 
	Chile S.A.
	 	 	 	 	 	ordinary shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Compañia de Inversiones CMS	 	 	5	 	 	 	5	 	 	 	22,544,680	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Energy Chile Ltda.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	GasAtacama S.A.	 	 	9,990	 	 	 	9,990	 	 	 	45,044,271,486	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gasoducto Atacama
	 	Chile	 	Ordinary Shares	 	10,000 ordinary	 	Inversiones Endesa Norte S.A.	 	 	5	 	 	 	5	 	 	 	37,099,663	 	 	Yes, 02.27.97	 	 	04.17.07	 	 	 	12.17.03	 
	Argentina S.A.
	 	 	 	 	 	shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Compañia de Inversiones CMS	 	 	5	 	 	 	5	 	 	 	37,099,663	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Energy Chile Ltda.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	GasAtacama S.A.	 	 	9,990	 	 	 	9,990	 	 	 	74,125,126,157	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gasoducto Tal Tal S.A.
	 	Chile	 	Ordinary Shares	 	100,000,000	 	Gasoducto Atacama Chile S.A.	 	 	99,877,365	 	 	 	99,877,365	 	 	 	13,819,021,726	 	 	Yes, 08.20.97	 	 	04.17.07	 	 	 	02.26.04	 
	 
	 	 	 	 	 	ordinary shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	Gasoducto Atacama Argentina S.A.	 	 	122,635	 	 	 	122,635	 	 	 	16,967,766	 	 	 	 	 	 	 	 	 	 	 	 	 
	Progas S.A.
	 	Chile	 	Ordinary Shares	 	1,000,000 ordinary	 	Gasoducto Atacama Chile S.A.	 	 	999,000	 	 	 	999,000	 	 	 	999,000	 	 	Yes, 08.30.99	 	 	04.16.07	 	 	 	08.30.99	 
	 
	 	 	 	 	 	shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	GasAtacama Generación S.A	 	 	1,000	 	 	 	1,000	 	 	 	1,000	 	 	 	 	 	 	 	 	 	 	 	 	 
	Gasoducto Atacama
	 	Argentina	 	N/A	 	N/A	 	Gasoducto Atacama Argentina S.A.	 	 	N/A	 	 	 	N/A	 	 	 	N/A	 	 	 	N/A	 	 	 	N/A	 	 	 	N/A	 
	Argentina S.A.
(Argentinean Branch)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Atacama Finance Co.
	 	Cayman Islands	 	Ordinary Shares	 	6,293,700 	 	Inversiones GasAtacama Holding	 	 	6,500,000	 	 	 	6,300,000	 	 	US$	6,300,000	 	 	Yes, 06.24.98	 	 	04.20.07	 	 	 	N/A	 
	 
	 	 	 	 	 	(99.9%)	 	Limitada	 	(authorized)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	6,300 (0.1%)	 	GasAtacama S.A.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Energex Co.
	 	Cayman Islands	 	Ordinary Shares	 	100%	 	Gasoducto Atacama Chile S.A.	 	50,000
 (authorized)	 	 	10,000	 	 	US$	10,000	 	 	Yes, 10.01.97	 	 	04.05.07	 	 	 	N/A	 

 

			
	*	 	According to Chilean Laws, the paid-in capital of all
Chilean Corporations (S.A.s) is automatically restated and adjusted at the end
of each fiscal year (December 31) so as to reflect the variation of Chilean
inflation. All capital figures are in Chilean Pesos (CLP) as of the date of
the last capitalization.

5

 

Schedule 3.3

Tax Matters

None.

6

 

Schedule 3.4

Compliance with Laws

None.

7

 

Schedule 3.5

Certain Contracts

1. Natural gas transport service agreement (Contrato de servicio de transporte de gas natural en
base firme integrados), between ENDESA and Gasoducto Atacama Chile Ltda., predeccessor in interest
to Gasoducto Atacama Chile S.A., dated September 6, 2002 (T1).

2. Natural gas transport service agreement (Contratos de servicio de transporte de gas natural en
base firme integrados), between ENDESA and Gasoducto Atacama Chile Ltda., predeccessor in interest
to Gasoducto Atacama Chile S.A., dated September 6, 2002 (T2).

(collectively, the “Taltal Gas Transportation Agreements”)

8

 

EXHIBIT B to 

SECURITIES PURCHASE AGREEMENT

NOTE HOLDERS DISCLOSURE LETTER

to

SECURITIES PURCHASE AGREEMENT

by and among

CMS INTERNATIONAL VENTURES, L.L.C.,

CMS CAPITAL, L.L.C.,

CMS GAS ARGENTINA COMPANY,

CMS ENTERPRISES COMPANY,

PACIFIC ENERGY LLC.

and

together with

EMPRESA NACIONAL DE ELECTRICIDAD S.A.

Dated as of July 11, 2007

 

 

NOTE HOLDERS DISCLOSURE LETTER

to

SECURITIES PURCHASE AGREEMENT

by and among

CMS INTERNATIONAL VENTURES, L.L.C.,

CMS CAPITAL L.L.C.,

CMS GAS ARGENTINA COMPANY,

CMS ENTERPRISES COMPANY,

PACIFIC ENERGY LLC.

and

together with

EMPRESA NACIONAL DE ELECTRICIDAD S.A.

Dated as of July 11, 2007

     This Note Holders Disclosure Letter is being furnished by CMS International Ventures, L.L.C.,
a limited liability company organized and existing under the laws of the State of Michigan
(“Seller”), to Pacific Energy LLC., a limited liability company organized and existing
under the laws of the State of Delaware (“Purchaser”) and to Empresa Nacional de
Electricidad S.A., a company organized and existing under the laws of Chile (“Parent”), in
connection with

1

 

the Securities Purchase Agreement dated as of July 11, 2007 (hereinafter also referred to as this
“Agreement”) by and among Seller, CMS Capital, L.L.C., a limited liability company
organized and existing under the laws of the State of Michigan (“CMS-Capital”), CMS Gas
Argentina Company, a company incorporated and existing under the laws of the Cayman Islands
(“CMS-Cayman”), and, CMS Enterprises Company, a corporation organized and existing under
the laws of the State of Michigan (“CMS-Enterprises”; each of the Seller, CMS-Capital,
CMS-Cayman, and CMS-Enterprises is also referred to herein as a “Note Holder” and,
collectively, the “Note Holders”), Purchaser and Parent. Unless the context otherwise
requires, all capitalized terms used in this Note Holders Disclosure Letter shall have the
respective meanings assigned to them in the Agreement.

     The contents of this Note Holders Disclosure Letter are qualified in their entirety by
reference to the specific provisions of the Agreement, and are not intended to constitute, and
shall not be construed as constituting, representations or warranties of Seller or the Note Holder,
except as and to the extent provided in the Agreement.

     Nothing in this Note Holders Disclosure Letter shall constitute an admission that any
information disclosed, set forth or incorporated by reference in this Note Holders Disclosure
Letter, either individually or in the aggregate, is material, or would result in a Seller Material
Adverse Effect. No disclosure made in this Note Holders Disclosure Letter (i) shall be deemed to
modify in any respect the standard of materiality or any other standard for disclosure set forth in
the Agreement or (ii) relating to any possible breach or violation of any agreement, contract, Law
or Governmental Order shall be construed as an admission or indication that any such breach or
violation exists or has actually occurred.

     Notwithstanding anything to the contrary contained in this Note Holders Disclosure Letter or
in the Agreement, the information and disclosures contained in the schedule hereto shall be deemed
to be disclosed and incorporated by reference in each of the other schedules hereto as though fully
set forth in such other schedules. Purchaser has informed the Note Holders that there are no
documents (or copies of such documents) referred to in this letter as having been disclosed which
the Purchaser would like to see and which have not been supplied or made available to it. There
are no matters referred to in this letter in respect of which Purchaser require further details.

     Headings have been inserted herein for convenience of reference only and shall to no extent
have the effect of amending or changing the express description of this Note Holders Disclosure
Letter as contemplated by the Agreement or the express description of the Sections of the
Agreement.

     This Seller Disclosure Letter shall be deemed to include, and there are incorporated into it
by way of disclosure, all information disclosed in the files and working papers of the Note
Holders, CMS-Inversiones and the Companies Subsidiaries made available to Purchaser in the virtual
data room on Intralinks under “Project Beta” as of July 10, 2007.

2

 

Schedule 2.2.2

Title to Notes

	 	 	 	 	 
	Noteholder	 	Principal Amount
	CMS International Ventures, L.L.C.
	 	US $	54,065,594.49	 
	CMS Capital, L.L.C.
	 	US $	87,372,676.23	 
	CMS Gas Argentina Company
	 	US $	7,734,040.24	 
	CMS Enterprises Company
	 	US $	26,099,868.00	 

3

 

SCHEDULES TO 

SECURITIES PURCHASE AGREEMENT

 

 

Schedule 5.9

Resignations of Certain Officers and Directors

CMS GAS TRANSMISSION DEL SUR COMPANY

Directors

Thomas Elward

David W. Joos

Officers

Thomas Elward — President

David W. Joos — Chairman of the Board/Chief Executive Officer

John M. Butler — Senior Vice President

James E. Brunner — Senior Vice President

Carlos A. Isles — Controller/Vice President

Catherine M. Reynolds — Vice President/Secretary

Sharon M. McIlnay — Vice President/General Counsel

Thomas L. Miller — Vice President

Laura L. Mountcastle — Treasurer/Vice President

Joseph P. Tomasik — Vice President

Theodore J. Vogel — Vice President/Chief Tax Counsel

Jane M. Kramer — Assistant Secretary

Beverly S. Burger — Assistant Treasurer

James L. Loewen — Assistant Treasurer

Joyce Norkey — Assistant Secretary

 

 

CMS GENERATION INVESTMENT COMPANY V

Directors

Thomas Elward

David W. Joos

Thomas J. Webb

Officers

Thomas Elward — President/Chief Executive Officer

David W. Joos — Chairman of the Board

John M. Butler — Senior Vice President

James E. Brunner — Senior Vice President

Carlos A. Isles — Controller/Vice President

Catherine M. Reynolds — Vice President/Secretary

Sharon M. McIlnay — Vice President/General Counsel

Thomas L. Miller — Vice President

Daniel B. Dexter — Vice President

Daniel E. Nally — Vice President

Laura L. Mountcastle — Treasurer/Vice President

Joseph P. Tomasik — Vice President

Michael C. Sniegowski — Vice President

Theodore J. Vogel — Vice President/Chief Tax Counsel

Jane M. Kramer — Assistant Secretary

Beverly S. Burger — Assistant Treasurer

James L. Loewen — Assistant Treasurer

Joyce Norkey — Assistant Secretary

INVERSIONES GASATACAMA HOLDING LIMITADA

	 	 	 
	Directors	 	 
	 
	 
	Regular	 	Alternate
	 
	 	 
	Tom Miller 

Francisco Mezzadri

	 	David Keyhoe

David Baughman

2

 

GASATACAMA S.A.

	 	 	 
	Directors	 	 
	 
	 
	Regular	 	Alternate
	 
	 	 
	Tom Miller 

David Baughman

	 	Thomas Elward

Sharon McIlnay

GASATACAMA GENERACION S.A.

Directors

	 	 	 
	Regular	 	Alternate
	 
	 	 
	David Baughman 

Tom Miller

	 	Sharon Mcllnay

Thomas Elward

GASODUCTO ATACAMA CHILE S.A.

Directors

	 	 	 
	Regular	 	Alternate
	 
	 	 
	David Baughman 

Tom Miller

	 	Sharon Mcllnay

Thomas Elward

GASODUCTO ATACAMA ARGENTINA S.A.

Directors

	 	 	 
	Regular	 	Alternate
	 
	 	 
	David Baughman 

Tom Miller

	 	Sharon Mcllnay

Thomas Elward

3

 

ATACAMA FINANCE CO.

Directors

David Baughman

Tom Miller

ENERGEX CO.

Directors

David Baughman

Tom Miller

4

 

Schedule 5.10

Releases of Certain Guarantees

Performance Guarantee Agreement, dated March 13, 2000, made by CMS Enterprises Company in favor of
YPF SOCIEDAD ANONIMA.

5

 

Schedule 9.2

Definitions

“Knowledge of Seller”

	1.	 	Thomas L. Miller, Vice President of Seller
	 
	2.	 	David Baughman, Executive Director Financial Advisory Services and Strategic Planning — CMS
Enterprises Company

“Knowledge of Purchaser”

	1.	 	Manuel José Irarrázabal Aldunate, Chief Financial Officer of Parent

6exv10wxty

EXHIBIT
10(t)

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

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          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

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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;

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	 	(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 B

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
Energy Company’s recovery of capacity Payments with respect to its power purchase
Agreement with Midland Cogeneration Venture Limited Partnership

Case No. U-15320

At the _____, 2008 meeting of the Michigan Public Service Commission in Lansing, 
Michigan.
PRESENT: Hon. Orjiakor N. Isiogu, Chairman

Hon. Monica Martinez, Commissioner

Hon. Steven A. Transeth, Commissioner

ORDER APPROVING SETTLEMENT AGREEMENT

On May 30, 2007, Midland Cogeneration Venture Limited Partnership (“MCV”) filed an
application, with supporting testimony and exhibits. In its application, MCV requested 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”).

Pursuant to due notice, a prehearing conference was held on September 18, 2007 before
Administrative Law Judge Daniel Nickerson (ALJ). The ALJ granted the interventions of
Attorney General Michael A. Cox, Consumers Energy, the Association of Businesses Advocating Tariff
Equity, Michigan Environmental Council and Public Interest Research Group in Michigan, Dow Corning
Corporation, and New Covert Generating Company. The Commission Staff participated in the
proceedings. The parties have submitted a Settlement Agreement resolving all issues in this case.

According to the terms of the Settlement Agreement, attached as Exhibit A, the parties
agree that the terms of the PP A As Amended between MCV and Consumers Energy should be amended and
restated (the “Amended and Restated PP A”). The terms of the Amended and Restated PPA reduce the
capacity charge from the 3.62 cents per kWh that the Commission had previously approved for cost
recovery to 1.014 cents per kWh, and change the variable energy charge from a coal-based charge to
a natural gas-based charge. Natural gas is the fuel that MCV actually uses in its facility. Other
material terms in the Amended and Restated PPA include the following:

(i) The Amended and Restated PP A will become effective upon the later of the
date both of the following 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 for purposes of enhancing MCV’s operational flexibility,

(ii) A procedure to measure the availability of the MC-Facility, as set forth more
fully in the Amended and Restated PP A,

(iii) Revised fuel assurance provisions,

(iv) The primary term of the Amended and Restated PP A 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 PP A at a reduced capacity price.

(v) Capacity available pursuant to the Amended and Restated PP A 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), and dispatched by MISO
based upon the variable energy charge (cost of production) or to meet reliability requirements. MCV
will have the option, subject to Commission approval of the necessary amendment, to assume
responsibility for offering this capacity into the MISO energy market.

(vi) The Settlement Agreement also provides that, if approved by the Commission, all jurisdictional
costs incurred by Consumers Energy as a result of implementing the Settlement Agreement 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 P A 304, as amended. The Settlement Agreement provides
that, when approved by the Commission without modification, the Settlement Agreement
provides assurance of such cost recovery to Consumers Energy during the term of the Amended and
Restated PP A, including approvals pursuant to 1909 P A 300, as amended; 1909 P A 106, as amended,
1939 PA 3, as amended; 1982 PA 304, as amended, and 1987 PA 81, as amended. Notwithstanding the
preceding, discretionary decisions made during the course of the administration of the Settlement
Agreement or the Amended and Restated PP A are, to the extent such decisions affect power supply
costs, subject to review for reasonableness and prudence in PSCR proceedings.

(vii) 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 CIO. If the Renewable Resources Program is terminated or modified
in a manner that eliminates the need for the Renewable Resources Program Fund, the Settlement
Agreement provides that 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.

The Commission FINDS that:

a. Jurisdiction is pursuant to 1909 PA 300, as amended, MCL 462.2 et seq.; 1919 PA 419, as amended,
MCL 460.51 et seq.; 1939 PA 3, as amended, MCL 460.1 et seq.; 1982 PA
304, as amended, MCL 460.6h et seq.; 1969 PA 306, as amended, MCL 24.201 et seq.; and the
Commission’s Rules of Practice and procedure, as amended, 1999 AC, R 460.17101 et seq.

 

 

b. The Settlement Agreement, including its payment terms, is just and reasonable and in the public
interest, and should be approved.

THEREFORE, IT IS ORDERED that:

A. The Settlement Agreement, attached as Exhibit A, is approved.

B. This order constitutes approval of the Amended and Restated PP A that is the
subject of the Settlement Agreement for purposes of 1982 P A 304 and 1987 P A 81, and all
jurisdictional costs incurred by Consumers Energy as a result of implementing the Settlement
Agreement shall be fully recoverable by Consumers Energy for the term of the Amended and Restated
PPA.

The Commission reserves jurisdiction and may issue further orders as necessary. Any party desiring
to appeal this order must do so in the appropriate court within 30 days after issuance and notice
of this order, pursuant to MCL 462.26.

MICHIGAN PUBLIC SERVICE COMMISSION

Chair

(SEAL)

Commissioner

Commissioner

By its action _____ 2008

Its Executive Secretary

 

 

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

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	 	•	 	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

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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

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	 	•	 	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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