ENGINEERING, PROCUREMENT AND CONSTRUCTION AGREEMENT
Lone Star Battery Storage Project 50 MW / 200 MWh Battery Energy Storage System Ector County, Texas
Between
LONE STAR STORAGE I, LLC (Owner)
and
MERIDIAN POWER CONSTRUCTION, INC. (Contractor)
Dated as of December 1, 2022
EXECUTION VERSION
This Agreement has been prepared by Calderwood & Harkness LLP on behalf of Owner.
ENGINEERING, PROCUREMENT AND CONSTRUCTION AGREEMENT
This ENGINEERING, PROCUREMENT AND CONSTRUCTION AGREEMENT (this "Agreement") is entered into as of December 1, 2022 (the "Effective Date"), by and between:
LONE STAR STORAGE I, LLC, a Texas limited liability company, with its principal office at 2200 West Commerce Street, Suite 1400, Houston, Texas 77002 (hereinafter referred to as "Owner");
and
MERIDIAN POWER CONSTRUCTION, INC., a Texas corporation, with its principal office at 8700 Shoal Creek Boulevard, Suite 300, Austin, Texas 78757 (hereinafter referred to as "Contractor").
Owner and Contractor are referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Owner is Lone Star Storage I, LLC, a Texas limited liability company and a wholly owned subsidiary of Calloway-Briggs Renewables Inc., a Texas corporation ("CBR"), and Owner's manager is CBR, headquartered at 2200 West Commerce Street, Suite 1400, Houston, Texas 77002;
WHEREAS, Owner desires to develop, construct, and operate a 50 MW / 200 MWh lithium iron phosphate (LFP) battery energy storage system (the "Project" or the "Lone Star Battery Storage Project") on an approximately fifteen (15)-acre site in Ector County, Texas, located at 4800 West University Boulevard, Odessa, Texas 79764, more particularly described as a portion of Survey No. 42, Block 42, T-1-S, T&P RR Co. Survey, Ector County, Texas (the "Site");
WHEREAS, the Project will interconnect to the Electric Reliability Council of Texas ("ERCOT") grid at the Western Permian 138 kV Substation operated by Aldermere & Co. ("Oncor"), via an approximately 1.2-mile 138 kV generation-tie line (the "Gen-Tie Line"), and has been assigned ERCOT Interconnection Queue No. INR-22-03347 and pending ERCOT Resource ID: LSBESS_01;
WHEREAS, Contractor is Meridian Power Construction, Inc., a Texas corporation with its principal office at 8700 Shoal Creek Boulevard, Suite 300, Austin, Texas 78757, with extensive experience in the design, engineering, procurement, construction, testing, and commissioning of energy storage and renewable energy facilities, having completed in excess of 2 GW of renewable energy installations interconnected within the ERCOT market;
WHEREAS, Owner desires to engage Contractor to perform the design, engineering, procurement, construction, testing, commissioning, and start-up of the Project on a fixed-price, date-certain, turnkey basis, and Contractor desires to perform such services and work in accordance with the terms and conditions set forth herein;
WHEREAS, the Project is being financed, in part, by a Twenty-Six Million Dollar ($26,000,000) construction-to-term loan facility provided by Brazos River National Bank, N.A. ("Lender"), as administrative agent and lender under that certain Credit Agreement of even date herewith among Owner, Lender, and the other parties thereto (the "Credit Agreement"), and Owner's rights under this Agreement will be collaterally assigned to Lender as security for Owner's obligations under the Credit Agreement pursuant to that certain Collateral Assignment of Project Contracts dated as of December 1, 2022 (the "Collateral Assignment"); and
WHEREAS, Owner has entered into that certain Equipment Supply Agreement dated as of December 1, 2022 (the "Equipment Supply Agreement" or "ESA") with Harmon-Dietrich Energy Solutions, LLC (the "Equipment Supplier") for the procurement of the BESS Equipment (as defined herein), and Contractor will receive, install, and integrate such Owner-furnished BESS Equipment as part of the Work (as defined herein).
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1 — DEFINITIONS AND INTERPRETATION
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined herein shall have the meanings ascribed to them elsewhere in this Agreement. Terms used in the singular include the plural and vice versa.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise.
"Agreement" or "EPC Agreement" means this Engineering, Procurement and Construction Agreement, including all Exhibits, Appendices, and Schedules attached hereto or incorporated herein by reference, as the same may be amended, modified, or supplemented from time to time in accordance with the terms hereof.
"Aggregate LD Cap" has the meaning set forth in Section 11.3.
"Applicable Law" means all federal, state, and local laws, statutes, ordinances, codes, rules, regulations, judgments, decrees, injunctions, writs, orders, permits, and governmental approvals applicable to the Work, the Project, the Site, or either Party's obligations under this Agreement, including, without limitation, the ERCOT Protocols, the rules and regulations of the Public Utility Commission of Texas ("PUCT"), the National Electrical Code ("NEC"), the National Fire Protection Association ("NFPA") standards (including NFPA 855), the Occupational Safety and Health Act ("OSHA"), and all environmental laws and regulations of the State of Texas, including those administered by the Texas Commission on Environmental Quality ("TCEQ").
"Applicable Permits" means all permits, licenses, approvals, authorizations, consents, registrations, and certifications required under Applicable Law for the performance of the Work and the construction, commissioning, and operation of the Project, including, without limitation, Ector County Building Permit No. BP-2022-04517, TCEQ Stormwater General Permit No. TXR150000 and the associated Stormwater Pollution Prevention Plan ("SWPPP"), and any and all other permits, licenses, or approvals identified in this Agreement or required hereafter.
"Availability Guarantee" means the guarantee by Contractor that the Project shall achieve an availability of not less than ninety-seven percent (97%) during Year 1 following COD, as measured in accordance with the methodology set forth in Exhibit E.
"Battery Energy Storage System" or "BESS" means the 50 MW / 200 MWh lithium iron phosphate (LFP) battery energy storage system comprising battery modules, power conversion systems, battery management system, thermal management systems, container enclosures, and all associated balance-of-plant equipment, as more particularly described in Exhibit A.
"BESS Equipment" means the Owner-furnished equipment to be provided under the Equipment Supply Agreement, including the Model HD-LFP-200E battery modules, ten (10) 5 MW PCS inverters, battery management system, HVAC and thermal management systems, and container enclosures, as further described in Exhibit L.
"BMS" means the battery management system that monitors and manages the performance, safety, and state of charge of the battery modules within the BESS.
"Builder's Risk Insurance" means the all-risk builder's risk insurance policy required under Article 13, with a policy limit of not less than Forty-Two Million Dollars ($42,000,000), as more particularly described in Section 13.2 and Exhibit I.
"Business Day" means any day other than a Saturday, Sunday, or any other day on which commercial banks in Houston, Texas are authorized or required by Applicable Law to close.
"CBR" means Calloway-Briggs Renewables Inc., a Texas corporation, the sole member and manager of Owner.
"Certificate of Final Completion" has the meaning set forth in Section 8.5.
"Certificate of Substantial Completion" has the meaning set forth in Section 8.2.
"Change Order" means a written amendment to this Agreement that modifies the Scope of Work, Contract Price, Project Schedule, or Performance Guarantees, duly executed by both Parties in accordance with Article 10, substantially in the form attached hereto as Exhibit H.
"COD" or "Commercial Operation Date" means the date on which the Project achieves Commercial Operation in accordance with Section 8.3.
"Collateral Assignment" means the Collateral Assignment of Project Contracts dated as of December 1, 2022, between Owner and Lender, pursuant to which Owner has assigned its rights under this Agreement and certain other Project contracts to Lender as security for Owner's obligations under the Credit Agreement.
"Completion Guarantee" means the limited recourse completion guarantee provided by CBR to Lender in connection with the Credit Agreement, guaranteeing Owner's obligations to achieve completion of the Project in accordance with the terms of the financing documents.
"Contract Price" means Thirty-One Million Two Hundred Thousand Dollars ($31,200,000), as such amount may be adjusted from time to time pursuant to Change Orders issued in accordance with Article 10.
"Contractor" means Meridian Power Construction, Inc., a Texas corporation, and its permitted successors and assigns.
"Contractor-Caused Delay" means any delay in the performance of the Work or the achievement of any milestone that is attributable to the acts, omissions, negligence, or default of Contractor, its Subcontractors, or their respective employees or agents, and that does not constitute an Excusable Delay.
"Contractor Indemnified Parties" means Contractor and its Affiliates and their respective officers, directors, employees, agents, representatives, and Subcontractors.
"Contractor's Representative" means the individual designated by Contractor under Section 3.3 as having authority to act on behalf of Contractor with respect to all matters arising under this Agreement.
"Credit Agreement" means the Credit Agreement dated as of December 1, 2022, among Owner, as Borrower, Brazos River National Bank, N.A., as Administrative Agent and Lender, and the other parties thereto, providing for a Twenty-Six Million Dollar ($26,000,000) construction-to-term loan facility.
"Delay Liquidated Damages" means the liquidated damages payable by Contractor to Owner in the amount of Twenty-Five Thousand Dollars ($25,000) per day for each day after the Guaranteed COD (as extended by any Excusable Delay and the cure period set forth in Section 8.4) that Substantial Completion has not been achieved, subject to the Delay LD Cap.
"Delay LD Cap" means One Million Five Hundred Sixty Thousand Dollars ($1,560,000), being five percent (5%) of the Contract Price ($31,200,000 × 5%).
"Effective Date" means December 1, 2022.
"Equipment" means all materials, machinery, equipment, apparatus, tools, supplies, and other items to be furnished by Contractor and incorporated into the Project as part of the Work, together with the Owner-furnished BESS Equipment to the extent such equipment is being installed and integrated by Contractor, but excluding the procurement of the BESS Equipment itself, which is Owner's responsibility under the ESA.
"Equipment Supplier" means Harmon-Dietrich Energy Solutions, LLC, the supplier of the BESS Equipment under the Equipment Supply Agreement.
"Equipment Supply Agreement" or "ESA" means the Equipment Supply Agreement dated as of December 1, 2022, between Owner and Harmon-Dietrich Energy Solutions, LLC, for the supply of the BESS Equipment.
"ERCOT" means the Electric Reliability Council of Texas, or any successor entity responsible for the management and operation of the electric grid in the ERCOT region of Texas.
"ERCOT Protocols" means the protocols, operating guides, planning guides, and other binding documents adopted by ERCOT from time to time, as applicable to the Project.
"Excusable Delay" means a delay in the performance of the Work or the achievement of any milestone caused by (a) a Force Majeure Event, (b) an Owner-Caused Delay, or (c) a change in Applicable Law occurring after the Effective Date, in each case to the extent satisfying the notice and documentation requirements of Section 9.2.
"Final Completion" means the satisfaction by Contractor of all conditions set forth in Section 8.5.
"Financial Close" means the date on which the conditions precedent to the initial disbursement under the Credit Agreement have been satisfied or waived and the initial disbursement has occurred or is available to be made. The expected Financial Close date is February 10, 2023.
"Force Majeure Event" has the meaning set forth in Section 14.1.
"Gen-Tie Line" means the approximately 1.2-mile 138 kV overhead transmission line to be constructed by Contractor from the Project Site to the Point of Interconnection at the Western Permian 138 kV Substation, as more particularly described in the Scope of Work (Exhibit A).
"Good Industry Practice" means the practices, methods, techniques, standards, and procedures generally accepted and followed by prudent, experienced, and qualified engineering, procurement, and construction contractors in the battery energy storage and electric power generation industries in the United States, exercising the degree of skill, diligence, prudence, and foresight that would reasonably and ordinarily be expected from a skilled and experienced contractor engaged in the same type of undertaking under the same or similar circumstances.
"Ground Lease" means the Ground Lease Agreement dated as of December 1, 2022, between Permian Basin Land Holdings, LP, as Lessor, and Lone Star Storage I, LLC, as Lessee, for the lease of the Site.
"Guaranteed Capacity" means the guaranteed energy storage capacity of the BESS, being 50 MW / 200 MWh (subject to a tolerance of plus or minus two percent (±2%)).
"Guaranteed COD" means September 1, 2023, as such date may be extended by Excusable Delays in accordance with Article 9.
"HVAC" means the heating, ventilation, and air conditioning and thermal management systems for the BESS containers and associated equipment enclosures.
"Independent Engineer" means Norgate Technical Advisors, Inc., retained by Lender to provide independent technical review and monitoring services in connection with the Project and the Credit Agreement, with Dr. Phillip S. Reardon, P.E., serving as the lead technical advisor.
"Interconnection Agreement" means the Interconnection Agreement effective as of December 1, 2022, between Owner and Aldermere & Co., governing the terms and conditions of the Project's interconnection to the ERCOT transmission grid at the Point of Interconnection.
"Lender" means Brazos River National Bank, N.A., in its capacity as Administrative Agent and Lender under the Credit Agreement, and its successors and assigns in such capacity.
"LFP" means lithium iron phosphate, the battery chemistry utilized in the BESS.
"Milestone Payment Schedule" means the schedule of progress payments set forth in Exhibit D, establishing the payment milestones and corresponding payment amounts for the Work.
"Minimum Round-Trip Efficiency" means the minimum round-trip energy efficiency of the BESS, guaranteed by Contractor to be not less than eighty-seven percent (87%), as measured in accordance with the Testing Protocol set forth in Exhibit E.
"NEC" means the National Electrical Code (NFPA 70), as adopted and amended in the State of Texas.
"Network Upgrades" means the upgrades, modifications, additions, or reinforcements to the transmission system at or beyond the Point of Interconnection that are required for the Project's interconnection, with estimated costs of Two Million Eight Hundred Thousand Dollars ($2,800,000), which costs are payable by Owner.
"NFPA" means the National Fire Protection Association.
"NFPA 855" means NFPA Standard 855, Standard for the Installation of Stationary Energy Storage Systems, as amended from time to time.
"Notice to Proceed" or "NTP" means the written notice issued by Owner to Contractor authorizing the commencement of the Work, substantially in the form to be agreed upon by the Parties prior to issuance.
"Oncor" means Aldermere & Co., a Texas limited liability company, the transmission and distribution utility operating in the area of the Project.
"OSHA" means the Occupational Safety and Health Administration of the United States Department of Labor and all regulations promulgated thereunder.
"Owner" means Lone Star Storage I, LLC, a Texas limited liability company, and its permitted successors and assigns.
"Owner-Caused Delay" means any delay in the performance of the Work or the achievement of any milestone caused by (a) Owner's failure to provide Contractor with access to the Site in accordance with Section 2.1, (b) Owner's failure to deliver or cause to be delivered Owner-furnished BESS Equipment on the schedule set forth in the ESA and Section 2.4, (c) Owner's failure to obtain or maintain Owner-Responsible Permits, (d) Owner's issuance of a change in instructions or a suspension of Work directive, or (e) any other act or omission of Owner or its agents (other than Contractor) that directly and demonstrably delays the critical path of the Work.
"Owner Indemnified Parties" means Owner, CBR, Ridgepoint Capital Partners, LP, Lender, and their respective Affiliates, officers, directors, members, managers, partners, employees, agents, and representatives.
"Owner-Responsible Permits" means the Applicable Permits identified in Section 2.2 as being the responsibility of Owner to obtain and maintain, including Ector County Building Permit No. BP-2022-04517, TCEQ Stormwater General Permit No. TXR150000 and the associated SWPPP, the Interconnection Agreement, and any utility-side permits.
"Owner's Representative" means the individual designated by Owner under Section 2.5 as having authority to act on behalf of Owner with respect to matters arising under this Agreement.
"Party" means Owner or Contractor, as the context requires, and "Parties" means both Owner and Contractor.
"Payment Bond" means the payment bond in the amount of Thirty-One Million Two Hundred Thousand Dollars ($31,200,000), being one hundred percent (100%) of the Contract Price, issued by Ironclad Surety Corporation in favor of Owner, substantially in the form attached hereto as Exhibit G.
"PCS" or "Power Conversion System" means the power conversion system for the BESS, consisting of ten (10) 5 MW inverters to be supplied as part of the BESS Equipment under the ESA and installed by Contractor as part of the Work.
"Performance Bond" means the performance bond in the amount of Thirty-One Million Two Hundred Thousand Dollars ($31,200,000), being one hundred percent (100%) of the Contract Price, issued by Ironclad Surety Corporation in favor of Owner (and Lender as co-obligee), substantially in the form attached hereto as Exhibit F.
"Performance Guarantees" means, collectively, the Guaranteed Capacity, the Minimum Round-Trip Efficiency, and the Availability Guarantee, as set forth in this Agreement and further detailed in Exhibit E.
"Performance Liquidated Damages" means the liquidated damages payable by Contractor to Owner in the amount of Four Thousand Dollars ($4,000) per MWh for each MWh of energy storage capacity below 200 MWh (subject to the ±2% tolerance described in Section 11.2), as determined through performance testing in accordance with Exhibit E, subject to the Performance LD Cap.
"Performance LD Cap" means One Million Five Hundred Sixty Thousand Dollars ($1,560,000), being five percent (5%) of the Contract Price ($31,200,000 × 5%).
"Person" means any natural person, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, governmental authority, or other entity.
"Point of Interconnection" or "POI" means the point at which the Project's Gen-Tie Line interconnects with the ERCOT transmission grid, located at the Western Permian 138 kV Substation, Ector County, Texas.
"Project" means the Lone Star Battery Storage Project, a 50 MW / 200 MWh LFP battery energy storage system to be constructed on the Site, including all associated infrastructure, the Gen-Tie Line, and all other improvements as described in the Scope of Work.
"Project Schedule" means the schedule of Work milestones set forth in Exhibit C, as such schedule may be updated or revised from time to time in accordance with the terms of this Agreement.
"PUCT" means the Public Utility Commission of Texas.
"Punch List" means the list of minor, non-critical items of Work remaining to be completed or corrected after Substantial Completion has been achieved, which items do not materially impair the use, operation, or safety of the Project, as mutually agreed upon by the Parties in accordance with Section 8.2.
"Retainage" means the ten percent (10%) of each progress payment withheld by Owner in accordance with Section 7.3 as security for Contractor's performance.
"Ridgepoint Capital Partners, LP" means the equity investor in Owner's parent, CBR, with offices at 1200 Smith Street, Suite 2800, Houston, Texas 77002.
"SCADA" means supervisory control and data acquisition, the system used to monitor, control, and communicate with the BESS and associated Project equipment.
"Scope of Work" means the description of all Work to be performed by Contractor under this Agreement, as set forth in Article 4 and in greater detail in Exhibit A.
"Site" means the approximately fifteen (15)-acre parcel of land described in the Ground Lease, located at 4800 West University Boulevard, Odessa, Texas 79764, being a portion of Survey No. 42, Block 42, T-1-S, T&P RR Co. Survey, Ector County, Texas, as more particularly described in Exhibit M.
"Step-Up Transformer" means the on-site power transformer that steps up the voltage from 34.5 kV (the medium-voltage level of the Project's collection system) to 138 kV for delivery to the Gen-Tie Line and POI.
"Subcontractor" means any Person or entity engaged directly or indirectly by Contractor to perform any portion of the Work, including sub-subcontractors, material suppliers, and vendors retained by Contractor (but excluding the Equipment Supplier under the ESA, which has a direct contractual relationship with Owner).
"Substantial Completion" means the satisfaction by Contractor of all conditions set forth in Section 8.2.
"Surety" means Ironclad Surety Corporation, an Illinois corporation, the issuer of the Performance Bond and Payment Bond.
"SWPPP" means the Stormwater Pollution Prevention Plan filed by Owner under TCEQ Stormwater General Permit No. TXR150000.
"TCEQ" means the Texas Commission on Environmental Quality.
"Testing Protocol" means the commissioning and performance testing procedures set forth in Exhibit E.
"Warranty Period" means the period commencing on the date of Substantial Completion and ending on the second (2nd) anniversary thereof, subject to extension pursuant to Section 12.5 with respect to corrective work.
"Work" means all design, engineering, procurement, construction, installation, testing, commissioning, start-up, training, and other services, labor, materials, and obligations to be performed or provided by Contractor under this Agreement, as described in the Scope of Work (Article 4 and Exhibit A) and elsewhere in this Agreement.
Section 1.2 — Rules of Interpretation
(a) References in this Agreement to any Article, Section, Exhibit, Appendix, or Schedule are references to the Articles, Sections, Exhibits, Appendices, or Schedules of this Agreement unless otherwise specified.
(b) The use of any gender includes each other gender, and the use of the singular includes the plural and vice versa, as the context requires.
(c) The headings of Articles and Sections are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement.
(d) The word "including" (and its grammatical variants, such as "includes" and "include") means "including, without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
(e) The words "herein," "hereof," "hereunder," and words of similar import refer to this Agreement as a whole and not to any particular Article, Section, or provision.
(f) Terms defined in the ERCOT Protocols shall have the meanings given therein unless otherwise defined in this Agreement.
(g) All references to currency are to the lawful currency of the United States of America.
(h) All references to days mean calendar days unless specifically stated to be Business Days.
(i) This Agreement shall be interpreted and construed in accordance with the laws of the State of Texas, as specified in Section 24.1.
Section 1.3 — Order of Precedence
In the event of any conflict, inconsistency, or ambiguity between or among the various provisions of this Agreement, the following order of precedence shall apply, with the first-listed document controlling over the later-listed documents:
(1) Change Orders, in reverse chronological order (with the most recent Change Order controlling over earlier Change Orders);
(2) The body of this Agreement (Articles 1 through 24 and the Recitals);
(3) Exhibit A (Scope of Work and Technical Specifications);
(4) All other Exhibits, Appendices, and Schedules attached hereto.
Notwithstanding the foregoing, in the event that any Change Order expressly states that it is intended to supersede a specific provision in the body of this Agreement, such Change Order shall control with respect to the subject matter expressly addressed therein.
ARTICLE 2 — OWNER'S OBLIGATIONS
Section 2.1 — Site Access
(a) Owner shall provide Contractor with access to the Site on and after the date of issuance of the Notice to Proceed. Such access shall be provided in accordance with and subject to the terms and conditions of the Ground Lease between Permian Basin Land Holdings, LP and Owner. Contractor acknowledges that it has reviewed the Ground Lease and agrees to comply with all restrictions, conditions, and requirements set forth therein, including, without limitation, any restrictions on the use of access roads, hours of operation, and environmental protection measures.
(b) Owner shall maintain the Ground Lease in full force and effect throughout the term of the Work and through Final Completion. Owner shall promptly notify Contractor of any default or threatened termination under the Ground Lease that could affect Contractor's access to or use of the Site.
(c) Contractor shall coordinate all access requirements with Owner's Representative and shall ensure that all persons entering the Site on behalf of Contractor, including Subcontractors, vendors, and visitors, comply with all applicable Site access rules and security protocols established by Owner.
Section 2.2 — Permits (Owner-Responsible)
(a) Owner shall be responsible for obtaining and maintaining the following permits, licenses, and approvals (collectively, the "Owner-Responsible Permits"):
(i) Ector County Building Permit No. BP-2022-04517, which was obtained by Owner on October 28, 2022;
(ii) TCEQ Stormwater General Permit No. TXR150000 and the associated Stormwater Pollution Prevention Plan (SWPPP), which were filed by Owner in November 2022;
(iii) The Interconnection Agreement with Aldermere & Co.; and
(iv) Any and all utility-side permits, approvals, and authorizations required for the interconnection of the Project to the ERCOT transmission grid at the Point of Interconnection.
(b) Owner shall provide Contractor with copies of all Owner-Responsible Permits within five (5) Business Days following issuance of the Notice to Proceed. To the extent that any Owner-Responsible Permit contains conditions or requirements that affect the manner in which Contractor performs the Work, Owner shall promptly inform Contractor of such conditions, and Contractor shall comply therewith.
(c) Owner shall use commercially reasonable efforts to maintain all Owner-Responsible Permits in good standing throughout the term of the Work and shall promptly notify Contractor of any revocation, suspension, modification, or threatened action with respect to any Owner-Responsible Permit.
Section 2.3 — Interconnection and Grid Connection
(a) Owner shall be responsible for the execution and maintenance of the Interconnection Agreement with Aldermere & Co., which governs the terms and conditions under which the Project will be interconnected to the ERCOT transmission grid at the Western Permian 138 kV Substation.
(b) Owner shall be responsible for the payment of all Network Upgrade costs required for the Project's interconnection, currently estimated at Two Million Eight Hundred Thousand Dollars ($2,800,000). Contractor shall have no responsibility for the cost of Network Upgrades on the utility side of the Point of Interconnection.
(c) Contractor shall be responsible for the design, engineering, procurement, and construction of the Gen-Tie Line (approximately 1.2 miles of 138 kV overhead transmission line from the Site to the Point of Interconnection) and the Step-Up Transformer (34.5 kV to 138 kV), as part of the Scope of Work and at Contractor's cost within the Contract Price.
(d) Owner shall coordinate with Oncor and ERCOT regarding the energization schedule for the Project. The currently expected energization date is July 15, 2023. Owner shall keep Contractor informed of the energization schedule and any changes thereto, and shall use commercially reasonable efforts to ensure that energization occurs in a manner consistent with the Project Schedule.
(e) Contractor shall cooperate with Owner, Oncor, and ERCOT in connection with all interconnection-related activities, including witnessing of utility-side testing, coordination of energization procedures, and provision of technical data and documentation required for interconnection.
Section 2.4 — Equipment Supply Agreement Coordination
(a) Owner has entered into the Equipment Supply Agreement with Harmon-Dietrich Energy Solutions, LLC, having a contract value of Eighteen Million Four Hundred Thousand Dollars ($18,400,000), for the procurement and delivery of the BESS Equipment. The BESS Equipment to be furnished by Owner under the ESA includes the Model HD-LFP-200E battery modules, ten (10) 5 MW PCS inverters, battery management system (BMS), HVAC and thermal management systems, and container enclosures, as further described in Exhibit L.
(b) The BESS Equipment is scheduled to be delivered FOB Site in four (4) shipments between March 15, 2023 and June 1, 2023, as set forth in the delivery schedule included in Exhibit L. Owner shall use commercially reasonable efforts to ensure that the Equipment Supplier delivers the BESS Equipment in accordance with such schedule and shall promptly notify Contractor of any anticipated delays in delivery.
(c) Contractor shall be responsible for the receipt, unloading, inspection, storage, installation, and integration of the Owner-furnished BESS Equipment in accordance with the Project Schedule. Contractor shall coordinate with the Equipment Supplier regarding the delivery schedule, unloading procedures, temporary storage requirements, and any special handling instructions for the BESS Equipment.
(d) Risk of loss for Owner-furnished BESS Equipment shall pass from Owner to Contractor upon Contractor's receipt and acceptance of such equipment at the Site. Contractor shall inspect all BESS Equipment upon arrival and shall notify Owner within three (3) Business Days of any damage, deficiency, or discrepancy observed. Pending installation, Contractor shall store all BESS Equipment in a secure manner consistent with the Equipment Supplier's storage requirements and Good Industry Practice.
(e) Contractor shall not be responsible for defects in the BESS Equipment that are attributable to the design or manufacture of such equipment by the Equipment Supplier; provided, however, that Contractor shall be responsible for any damage to BESS Equipment occurring after the transfer of risk of loss to Contractor, and for any installation or integration defects.
Section 2.5 — Owner's Representative
(a) Owner shall designate a representative ("Owner's Representative") authorized to act on Owner's behalf with respect to all day-to-day matters arising under this Agreement. The initial Owner's Representative shall be identified in a separate written notice delivered to Contractor on or before the date of issuance of the Notice to Proceed.
(b) Owner's Representative shall have the authority to: (i) approve Change Orders, subject to the dollar and schedule thresholds established by Owner from time to time and communicated to Contractor in writing; (ii) review and approve payment applications submitted by Contractor; (iii) coordinate with Lender and the Independent Engineer regarding the progress of the Work; (iv) issue day-to-day instructions to Contractor regarding the performance of the Work; and (v) take such other actions as are expressly authorized under this Agreement.
(c) Owner may change its Owner's Representative at any time by providing written notice to Contractor.
Section 2.6 — Financing Cooperation
(a) Owner shall use commercially reasonable efforts to cause Lender and the Independent Engineer (Norgate Technical Advisors, Inc., under the direction of Dr. Phillip S. Reardon, P.E.) to coordinate with Contractor in a manner that does not unreasonably interfere with or delay the performance of the Work. Owner acknowledges that Contractor's obligation to cooperate with Lender and the Independent Engineer is subject to the understanding that such cooperation shall not impose material additional costs on Contractor or delay the critical path of the Work.
(b) Contractor shall provide reasonable access to the Site and make available such information, documents, and personnel as the Independent Engineer may reasonably request for purposes of monitoring the progress of the Work, reviewing payment applications, and verifying milestone achievement. Contractor shall cooperate with the Independent Engineer during site inspections, testing, and commissioning activities.
(c) Owner has collaterally assigned its rights, title, and interest under this Agreement to Lender pursuant to the Collateral Assignment dated as of December 1, 2022. Contractor hereby acknowledges and consents to such collateral assignment. Contractor agrees that, upon receipt of written notice from Lender that Lender has exercised its rights under the Collateral Assignment, Contractor shall recognize Lender (or its designee) as the assignee of Owner's rights hereunder and shall perform its obligations in favor of Lender (or its designee) in accordance with the terms of this Agreement and the Collateral Assignment.
ARTICLE 3 — CONTRACTOR'S OBLIGATIONS
Section 3.1 — General Obligations
(a) Contractor shall perform the Work in a good and workmanlike manner, with the degree of skill, care, diligence, and judgment expected of a qualified contractor experienced in the design, engineering, procurement, construction, testing, and commissioning of battery energy storage systems of similar size, scope, and complexity, and in accordance with Applicable Law, the Scope of Work (as set forth in Article 4 and Exhibit A), the Project Schedule (as set forth in Exhibit C), the Technical Specifications, and Good Industry Practice.
(b) Contractor shall furnish all labor, supervision, materials (except Owner-furnished BESS Equipment under the ESA), tools, supplies, equipment, transportation, temporary facilities, and services necessary for the proper and complete performance of the Work, unless otherwise expressly stated herein.
(c) The Work shall be performed on a fixed-price, date-certain, turnkey basis. Contractor acknowledges that it has examined the Site and surrounding area, reviewed all available information, and satisfied itself as to the nature and scope of the Work, the conditions of the Site, and all other matters that may affect the performance of the Work, and that the Contract Price reflects Contractor's complete and informed assessment of all risks associated with the Work, except for those risks expressly allocated to Owner under this Agreement.
(d) Contractor shall at all times maintain good order and discipline among its employees and Subcontractors while on the Site and shall not employ or permit the employment of any unfit person or anyone not properly skilled in the tasks assigned to such person.
Section 3.2 — Permits (Contractor-Responsible)
(a) Contractor shall be responsible for obtaining and maintaining all construction-related permits, licenses, approvals, and authorizations required under Applicable Law for the performance of the Work that are not specifically identified in Section 2.2 as Owner-Responsible Permits. Such Contractor-Responsible Permits shall include, without limitation, all permits required for construction activities, crane operations, road closures, heavy hauling, and any other permits necessary for Contractor's means and methods of construction.
(b) Contractor shall ensure that all Work is performed in compliance with the Occupational Safety and Health Act (OSHA), the National Electrical Code (NEC), NFPA standards (including NFPA 855 for stationary energy storage systems), and all other applicable codes, standards, and regulations. Contractor shall promptly notify Owner of any citations, violations, or regulatory actions arising from the Work.
Section 3.3 — Contractor's Representative
(a) Contractor shall designate a representative ("Contractor's Representative") who shall have full authority to act on behalf of Contractor with respect to all matters arising under this Agreement. The Contractor's Representative shall be an experienced project manager with demonstrated expertise in the construction of battery energy storage systems or similar power generation facilities.
(b) Contractor's Representative shall be present at the Site during all periods in which active Work is being performed. Contractor shall not change its Contractor's Representative without the prior written consent of Owner, which consent shall not be unreasonably withheld, conditioned, or delayed. If Owner reasonably objects to the performance of the Contractor's Representative, Contractor shall replace such individual within fifteen (15) days of Owner's request.
Section 3.4 — Subcontractors
(a) Contractor may subcontract portions of the Work to Subcontractors with the prior written approval of Owner, which approval shall not be unreasonably withheld, conditioned, or delayed. Major Subcontractors (defined as Subcontractors performing Work with a value in excess of Five Hundred Thousand Dollars ($500,000)) shall be identified in Exhibit B.
(b) Contractor shall remain fully responsible for the acts, omissions, negligence, and default of all Subcontractors as if such acts, omissions, negligence, or defaults were those of Contractor. Owner's approval of any Subcontractor shall not relieve Contractor of any of its obligations or liabilities under this Agreement.
(c) Each subcontract entered into by Contractor for the performance of the Work shall contain provisions: (i) binding the Subcontractor to the terms of this Agreement to the extent applicable to the Subcontractor's work; (ii) requiring the Subcontractor to maintain insurance coverages consistent with the requirements of Article 13; (iii) requiring the Subcontractor to provide indemnification for the benefit of Owner Indemnified Parties consistent with Section 16.4; and (iv) permitting assignment of the subcontract to Owner in the event of termination of this Agreement.
(d) Contractor shall provide Owner with copies of all major subcontracts upon request. Owner and Lender shall have the right to review the terms of any subcontract that may affect Owner's rights or interests under this Agreement or the Credit Agreement.
Section 3.5 — Project Management and Reporting
(a) Contractor shall provide Owner with monthly written progress reports, which shall be delivered within five (5) Business Days following the end of each calendar month and shall include the following information:
(i) A narrative description of all Work completed during the reporting period;
(ii) The percentage of completion for each major work element and the overall Project;
(iii) An updated Project Schedule showing actual progress against planned milestones, including critical path analysis and identification of any schedule variances;
(iv) A summary of all safety incidents, near-misses, OSHA recordable injuries, and lost-time incidents occurring during the reporting period;
(v) A forecast of remaining Work, including anticipated completion dates for upcoming milestones;
(vi) Current and high-resolution photographs documenting the progress of the Work;
(vii) A summary of all Change Orders executed, pending, or anticipated;
(viii) A log of all Subcontractor activities and material deliveries;
(ix) A description of any weather delays or other events affecting the schedule; and
(x) Such other information as Owner or the Independent Engineer may reasonably request.
(b) Contractor shall participate in weekly coordination calls with Owner's Representative and shall provide such additional reports or information as Owner may reasonably request from time to time.
(c) Contractor shall provide Owner and Lender with access to Contractor's project management systems, scheduling software, and document management platforms as reasonably requested, including view-only access to Contractor's Tarrant Data Systems or equivalent scheduling tool.
Section 3.6 — Safety and Environmental Compliance
(a) Contractor shall develop, implement, and maintain a comprehensive health, safety, and environmental ("HSE") program covering all aspects of the Work. The HSE program shall comply with OSHA regulations, Applicable Law, and Good Industry Practice, and shall be submitted to Owner for review within ten (10) Business Days following NTP.
(b) Contractor shall comply with the SWPPP filed under TCEQ Stormwater General Permit No. TXR150000. Contractor shall be responsible for the installation, maintenance, and inspection of all erosion and sediment control measures during construction, including silt fencing, temporary sediment basins, stabilized construction entrances, and other best management practices as required by the SWPPP.
(c) Contractor shall implement fire safety protocols specific to LFP battery storage systems in accordance with NFPA 855, including appropriate separation distances, ventilation requirements, fire detection and suppression systems, and emergency response planning. Contractor shall coordinate with the Ector County Fire marshal's Office regarding fire safety and emergency response procedures.
(d) Contractor shall designate a full-time, qualified HSE manager who shall be present on Site during all active construction periods. Contractor shall conduct regular safety meetings, toolbox talks, and training sessions for all personnel on Site.