Loading...
HomeMy WebLinkAbout20070205 - VIII-A-2VIII-A-2 MEMO To: Honorable Mayor and City Council From: Tom Montgomery Date: January 30, 2007 Re: Approve Hydro Green Power Purchase Agreement In (ktober of 2006, Council approved the concept plan for Hydro Green Energy, Inc. to install a floating kinetic energy hydropower facility in the tailrace of the City's hydropower plant. The proposed kinetic energy hydropower facility would feed the energy it generates through the City's hydropower plant to the Xcel Energy grid. The Council's concept plan approval included a provision to split Hydro Green Energy's revenues with the City, and noted that a formal agreement between the City and Hydro Green would need to be approved before final approval of the facility installation would be granted. There are still a number of issues remaining to be resolved over installation, operations and maintenance of the Hydro Green facility which will be covered by future agreements. However, Hydro Green has requested adoption of a power purchase agreement to solidify their funding arrangements. The power purchase agreement would split revenues generated by the Hydro Green facility evenly between the City and Hydro Green. As the Hydro Green facility will be feeding its generated electricity through the City's hydropower plant to the Xcel Energy meter and grid, the City's power payment from Xcel will include the revenues generated from the Hydro Green facility. The enclosed power purchase agreement will compute Hydro Green's revenue as 50% of the ratio of electricity generated by the Hydro Green facility divided by the total electricity measured by the Xcel Energy meter at the point where the City's transmission line joins the Xcel Energy grid. As there are still a large number of details to work out with the proposed Hydro Green Energy hydropower facility installation, the enclosed power purchase agreement includes a provision allowing for termination of the agreement if an agreement cannot be reached on the remaining outstanding issues. COUNCIL ACTION REQUESTED Council is requested to approve the enclosed Power Purchase Agreement with Hydro Green Energy, LLC. =,,,.r ._ \. CITY OF HASTUi6S CONDITIONAL CONCEPT AGREEMENT THIS CONDITIONAL CONCEPT AGREEMENT is made this _ day of __, 2007, by and between the City of Hastings, a Minnesota Municipal Corporation ("City") and Hydro Green Energy, LLC, a Texas limited liability company ("Hydro Green") BACKGROUND A. City owns and operates a hydro power electric generating facility ("Facility") located on the Mississippi River at Lock and Dam No. 2 in the City of Hastings, Minnesota. B. City operates the Facility under a license issued by the Federal Energy Regulatory Commission ("FERC") and under agreement with the Anny Corps of Engineers. C. City sells electricity generated by the Facility to Xcel Energy under an amended power purchase agreement dated October 8, 1996. D. Hydro Green proposes to install a Prototype kinetic energy hydro power turbines ("Prototype") on a floating plant behind the tailrace of the City's Facility. Hydro Green would use this Prototype to determine the feasibility of developing similar type of systems for use elsewhere. E• Hydro Green proposes to anchor its Prototype kinetic energy hydro power turbines to the Mississippi River bottom and tether it to the City's Facility. F. Both parties would like to enter into a conceptual agreement whereby they would outline how they would propose to share any revenue from the sale of the electricity generated by Hydro Green's Prototype. G. The parties both recognize there remain many items that still need to be agreed upon before this entire project can proceed. The parties however would like at this time to document their conceptual agreement on how the revenues from the sale of electricity generated by the Prototype would be shared in the even[ both parties can reach subsequent agreement on the remaining required terms necessary for this entire agreement to be finalized. H. The parties are making this conceptual agreement on the revenue sharing concepts conditional upon both parties reaching an agreement on the rest of the required terms. 1. Both parties understand and agree if an agreement cannot be reached between the parties on all of the other remaining terms necessary to carry out this project, this revenue sharing concept agreement shall be of no effect. NOW, THEREFORE, it is agreed by the parties as follows: ~. Conditional ConceotAareement City and Hydro Green agree that the provisions of this Concept Agreement shall be contingent upon both parties reaching a final agreement on all terms necessary to carry out this project in its entirety, including but not limited to, further detailing the required terms of the purchase of power generated by Hydro Green; developing maintenance, operations, spill prevention, liability responsibilities and procedures; and acquisition of all necessary permits and approvals from the U.S. Army Corps of Engineers and Federal Energy Regulatory Commission (FERC) and any other agency or entity that needs to approve any part of this project. Both parties agree that by entering into this Conditional Concept Agreement, neither party is obligated in any way to reach an agreement on any of the other many remaining terms. The parties are entering into this Conditional Concept Agreement so that Hydro Green can proceed with additional engineering and planning for its Prototype in order to facilitate the parties' discussions on the remaining matters to be resolved in conjunction with the proposed power production and sale from the Prototype. 2. Production of Electricity Hydro Green's Prototype kinetic energy Facility is expected to generate electricity. The electricity generated from Hydro Green's Prototype will be connected to the City's electrical distribution lines that are connected to the Xcel Energy meter located by the Lock and Dam Road. 3• Meters. The parties anticipate that Hydro Green will install a meter that measures the amount of electricity that is produced by its Prototype before the power is transmitted to the Facility's power distribution line. Hydro Green will ensure that any meter it installs will be designed so that the City can receive Hydro Green's meter readings by telemetry. The City will also meter the power that its Facility generates before Hydro Green's generated power is added to the transmission line. The existing Xcel meter at Lock and Dam Road will measure the amount of electricity going into Xcel Energy's transmission line. This Xcel meter will measure the amount of electricity generated by Hydro Green's Prototype plus the electricity generated by the City's Facility minus any electricity produced by the City and used by the City used to operate its Facility. 4• Revenue Sharing. The City has a Power Purchase Agreement with Xcel Energy whereby Xce( Energy purchases electricity generated by City's Facility. Xcel Energy pays City for such power based on the formula set forth in the Power Purchase Agreement. City and Hydro Green agree that 50% of the revenue received by the City from Xcel Energy pursuant to the Power Purchase Agreement for the sale of Hydro Green's generated electricity shall be kept by the City and the remaining 50% shall be paid to Hydro Green. Many factors go into the formula to determine how much the City receives from Xcel Energy for the electricity produced at the Facility. Accordingly, City and Hydro Green agree that the amount of revenue to be allocated to Hydro Green's produced electricity will be a ratio of the number of kilowatt-hours produced by Hydro Green compared to the total killowatt-hours of electricity going through the Xcel Energy meter, multiplied by the amount paid by Xcel Energy for that time period. This resulting number will be divided equally between City and Hydro Green. Since Xcel Energy will be making payment to City, City will forward to Hydro Green its 50% share as determined by this formula within 30 days from City's receipt of payment from Xcel Energy. 5. Taxes. It is unknown whether any revenue sharing agreement between the City and Hydro Green or any other part of a subsequent agreement between the two parties would result in a tax liability of any type to any county, state or federal government. If this Conditional Concept Agreement or any subsequent agreement between City and Hydro Green results in any type of tax liability, Hydro Green agrees to be responsible for all taxes. Any such taxes to be paid by Hydro Green shall be paid from its 50% share of the revenue generated by the Prototype. 6. Termination. Both parties reserve all rights to terminate this Conditional Concept Agreement at any time and for any reason, or no reason, by giving the other party 30 days written notice. In the event this Conditional Concept Agreement is terminated, neither party shall be obligated to the other party for any costs. 7. No Partnershin or Joint Denture Created Nothing in this Conditional Concept Agreement shall be construed to create a partnership or joint venture relationship between City and Hydro Green. Hydro Green agrees not to represent to any third party that there is any type of partnership or joint venture between the City and Hydro Green. Dated this day of , 2007. CITY OFAASTINGS, A MINNESOTA Mi7MCIPAL CORPORATION By: Paul J. Hicks, Mayor (SEAL) By: Melanie Mesko Lee, Assistant City Administrator/City Clerk Dated this day of , 2007. HYDRO GREEN ENERGY, LLC, a Texas Limited Liability Company By: By: ACKNOWLEDGMENT STATE OFMINNESOTA ) ss. COUNTYOFDAKOTA ) The foregoing instrument was acknowledged before me this _, 2007 by Paul J. Hicks and Melanie Mesko Lee the Mayor and Asi tant City Administrator/City Clerk of the City of Hastings, Hastings, Minnesota. NOTARY PUBLIC ACKNOWLEDGMENT STATE OF, ~ ss. COUNTY OF ) The foregoing instrument was acknowledged before me this _, 2007 by and day of and ,the of Hydro Green Energy, LLC, a Texas limited liability company. NOTARY PUBLIC